Don't uncork the bubbly just yet

Subir Roy takes us through, the opportunities and problems for the new RBI Governor. The good news is that bank lending seems to be going up, the bad news--and old news--is that rural credit is still a problem. So is credit for small businesses. I was talking about this to a friend of mine who exports leather garments. The banks still give small businesses a hard time.

In the search for a banking system which will serve the needs of broadbased growth, attention has inevitably turned to rural credit. Dr Reddy has candidly admitted that so many institutional innovations have been tried, from bank nationalisation to supporting the cooperative credit movement, but the credit needs of the rural Indian go unmet by the organised sector.

He has been bold enough to rhetorically declare that he would happily allow the panchayats to lend if they could handle the job. Rural lending, along with support to micro credit organisations, offers a key growth opportunity to banks which have lost their prime corporate customers through the process of disintermediation.

Other than rural borrowers, smaller businesses also make up a key segment which has largely been left out of the party. Rates of interest have gone down for large companies and those seeking personal loans but not for the smaller businesses.

LINK

I am sorry that I am unable to persuade Vivek about the danger of banning of selective aborting of foetuses. This may have something to do with the whole issue of abortion in general. I have come to conclude that positions on abortion are generally deeply ingrained prejudices and reason is pitifully inadequate to alter them. One holds on to one's opinions with religious tenacity. I will try once more, in vain perhaps, to restate my argument.

Vivek writes:

Atanu sets up a false choice. Infact aborting the female foetuses and the terrible fate are two sides of the same coin. You can't get rid of one without getting rid of the other. Does Atanu truly believe that aborting the female foetus will improve the lot of the girl child?

Technically, the two sides of a coin present a dichotomous choice. Therefore if one claims that two matters are akin to two sides of a coin, one is admitting that there is a dichotomy and therefore a choice is implied: you can either have a head or a tail, but not both. Therefore, one cannot accuse me of setting up a false choice while admitting that the issues are two sides of a coin.

Now about the matter of whether aborting the female foetus will improve the lot of the girl child? Clearly, if the neglected girl child is the one which is the result of the completion of an unwanted pregnancy, then the aborting of the foetus will not result of the girl child and therefore it is an improvement in that there will not be a girl child to be abused and neglected and sold to Jat farmers and so on.

My gripe with policy of banning selective abortion is this: it does nothing to address any of the causes of problem; it merely attempts to deal with the effect. It is dangerous to attempt to supress the effect. The effect is a signal that there is an underlying fundamental set of causes and that we must do something about that if we don't want the effect. By suppressing the effect (the signal), it is possible that we lose our drive to fix the cause. If I take a headache pill and supress the effect, I will have less of an incentive to inquire into the cause. Perhaps the headache is a signal of a growing tumor. Suppressing the headache could make me ignore the cause and hasten my demise.

More on Female Infanticide

I'm afraid, I think Atanu is still wrong. As I said in my last post, I do not think even for a moment, that Atanu (or for that matter Prashant) condone discrimination against women. But I still think their argument is horribly and dangerously wrong. It is logically flawed and it ignores evidence.

In his rejoinder to my post Atanu writes:

My position is that the fact is that some people value female children less than male children. This is a lamentable fact but a fact nonetheless. I did not dictate that people value girls less. I am taking that as given and (at least for the present) unalterable fact. Breast beating may feel good but will do little to alter that fact. Altering that fact would be an end that all right-thinking people devoutly wish for. It may take a few generations. Until then, what is the most humane way to deal with the problem. Do millions of unwanted girl children have to suffer inhuman neglect? Can society protect the rights of children with as much gusto as the protection of foetuses? Which is the lesser evil: the aborting of female foetuses or the terrible fate of an unwanted girl child?

Atanu sets up a false choice. Infact aborting the female foetuses and the terrible fate are two sides of the same coin. You can't get rid of one without getting rid of the other. Does Atanu truly believe that aborting the female foetus will improve the lot of the girl child?

Well there is no evidence. The EPW article I linked to made it quite clear that the reality of gender relation in Punjabi society for the last 100 years were much more complex that Atanu is prepared to concede. He simply ignores all externalities. Also read Kaushik's post for a more complicated but more complete picture.

For example, the declining sex ratio might manifest itself in more complicated ways than Atanu imagines. There was an article in Outlook a few months ago about "brides" (read sex slaves) being bought from Eastern India by relatively wealthy Jat farmers of Haryana.

Perhaps, in some sufficiently long run the declining sex ratio would be more evenly spread accross India due to human trafficking. Therefore the price of brides would increase in Eastern India and price the Jat farmer out of the market. But by then maybe Burmese girls would be avaliable and the merry circle of life can continue. Or maybe other externalities would muddy Atanu's faith in the price mechanism.

In any case, Atanu should try and tell that to the frightened teenager whose is being sold to the Jat farmer who will use her for a few months and the chuck her out.

So do I have a dear solution. Nope but then I do not believe in dear solutions--only liberitarians do. The solution is education, empowerment, employment. To quote Mr. Rumsfeld its the, "long hard slog".

In addition, as Kaushik (and an excellent article by Prof Sen a few years ago) points out, most of the of the discrimination girls face occurs in more subtle and harder to detect forms--for example parents spend less money on their nutrition, healthcare, education etc. Outright murder is still relatively rare.

Affordable Computing


Rajesh tells us he gave a presentation on Affordable Computing, as part of the "IT and Common Man" session at the BangaloreIT.com thrash. As he says, much of his talk centred around what he's have been writing in his emergic Tech Talk series on SMEs and Technology.

He aslo draws attention to the presentation given by Ashok Jhunjhunwala, who spoke about how some of the group of companies incubated out of the Telecom and Computer Networking department at IIT-Madras are helping to realise his dream of doubling India's rural GDP from Rs 10,000 to Rs 20,000 over the next decade. As well as this fascinating presentation, Ashok has a lot more interesting material onsite, including a document entitled 'Making the Telecom and IT Revolution Work for Us'. His argument: look for big cost reductions in the price of Telecom and develop appropriate policies which enable decentralized operation

A more detailed look at costs of telecom and Internet networks around the world reveals that in the West, the cost of providing a telephone line is around $800. We use the same technology and it is not surprising that our numbers are similar. But this cost of $800 was reached in the West more than a decade back. There too, an operator needs between 35-40% of initial investment as yearly revenue to break even. However, this amounts to barely $30 per month and is affordable to over 90% of the homes. Therefore, homes in the West have been fully wired up quite some time back. Now, reducing the cost further, no longer expands the market. Their R & D focus therefore naturally shifts to the replacement market, where more and more features and services need to be provided rather than lower cost products.

However, technology at this cost is hardly affordable to a few percent in a country like India. The cost needs to be reduced by a factor of three or more for telecom (and Internet) to be widely affordable in India. Who would do this? Not the R&D efforts in the West. Naturally, this becomes the task of Indian R&D. Such cost reduction is not easy. Coming up with a disruptive technology that could reduce cost by a factor of 3 would require total mastery of current knowledge in the area and a lot of innovations. But then R&D efforts are always a challenge. The important thing is that if one achieves this, one would also become a technology leader in this area. And if it results in a production of 150 million telephone lines in India (and may be 500 million lines taking into account similar requirements of other developing countries), one would rank among the world's best product designers and largest manufacturers (150 million lines even at Rs.10,000 per line implies production of Rs.150,000 crores). A service industry that would operate and maintains 200 million connections would employ a large number of people.

But above all, such telephone and Internet connectivity can start changing the lives of people. Using Internet, resources can be deployed more efficiently. With telecom and Internet connectivity, Indian villages would have the necessary infrastructure to stand up in the world. It could make our agriculture more remunerative and give our home-based industries a potential market for their wares at fair prices.

Besides reduction of equipment cost, which reduces the investment required to provide telecom and Internet connectivity, one has to develop technologies that lead to reduction of the operation cost. Conventionally, a large initial investment (of the order of several tens of millions of rupees) is required to start providing connections. It is possible today to come up with small access systems, which could be connected to a backbone telecom network. Such access systems would require low initial investment and could be operated very much like cable head-ends. A small entrepreneur could then serve a neighborhood (either a few streets in an urban area or a few blocks in a rural area) and provide low-cost service in an accountable manner. Of course, for this to take place, one would require not only technology, but appropriate policies which would enable such decentralized operation.