How Foreign Capital Constrains The State

December 27, 2007

Speaking at a full Planning Commission meeting to approve the draft of the Eleventh Five Year Plan, prime minister Manmohan Singh expressed concern over the mounting petroleum, food and fertilizer subsidies that are expected to exceed Rs 1,00,000 crore this year. These subsidies he argued may be “shutting out” development options, since such large outgoes could mean “fewer schools, fewer hospitals, fewer scholarships, lower public investment in agriculture and poor infrastructure”. The case for reducing at least some of these subsidies, especially those on food, is controversial and bound to meet with opposition. On the other hand, the need to mobilise as much resources as possible to meet expenditures of the kind the PM refers to is unquestioned. What we need to look to are measures that would be less controversial and more acceptable. One such would be to curb the large and unwarranted flows of capital especially financial capital into India in recent times, the management of which is threatening to damage the government’s fiscal maneuverability and divert scarce resources away from critical sectors.


That India is experiencing an unprecedented surge in capital inflows is undeniable. While the current account deficit on India’s balance of payments remained almost constant in 2005-06 and 2006-07 at $9.2 billion and $9.6 billion respectively, net capital flows into the country rose from an already high $23.4 billion to $44.9 billion. What is particularly disconcerting is that this tendency has only been intensified in recent months. Net inflows of foreign institutional investments into India’s stock and debt markets that had risen significantly starting 2003, and averaged $8.8 billion a year during 2003 to 2006, has registered a sharp jump to $18.6 billion over the first 10 months of 2007.

This has also been a period when Indian corporates have been exploiting the liberalised external commercial borrowing policy and borrowing massively abroad to benefit from lower interest rates. Figures for the January to May period indicate that borrowing totalled $15.3 billion in 2007, as compared with $10.8 billion and $3.4 billion during the corresponding periods in 2006 and 2005 respectively.

While the Reserve Bank of India has been routinely liberalising rules governing capital account expenditures by domestic corporate and resident, this massive surge in capital inflows has put substantial pressure on the rupee. Rupee appreciation, especially vis-a-vis a depreciating dollar has begun to hurt exporters of goods and services. Called upon to manage the market determined exchange rate the central bank has over the years been buying up foreign currency and expanding its reserve of foreign assets to adjust domestic demand for foreign currency to the autonomously driven inflow of foreign exchange. Forex reserves that stood at $76 billion at the end of financial year 2002-03, nearly doubled to touch $151.6 billion by March-end 2006 and have risen to $199.2 billion by end-March 2007 and $266.5 billion on November 2, 2007.

This kind of accumulation of reserves obviously makes it extremely difficult for the central bank to manage money supply and conduct monetary policy as per the principles it espouses and the objectives it sets itself. An increase in the foreign exchange assets of the central bank has as its counterpart an increase in its liabilities, which in turn implies an injection of liquidity into the system. If this “automatic” expansion of liquidity is to be controlled, the Reserve Bank of India would have to retrench some other assets it holds. The assets normally deployed for this purpose are the government securities held by the central bank which it can sell as part of its open market operations to at least partly match the increase in foreign exchange assets, reduce the level of reserve money in the system and thereby limit the expansion in liquidity.


The Reserve Bank of India has for a few years now been resorting to this method of “sterilisation” of capital inflows. But two factors have eroded its ability to continue to do so. To start with, the volume of government securities held by any central bank is finite, and can prove inadequate if the surge in capital inflows is large and persistent. Second, an important component of neo-liberal fiscal and monetary reform in India has been the imposition of restrictions on the government’s borrowing from the central bank to finance its fiscal expenditures with low cost debt. These curbs were seen as one means of curtailing deficit financed public spending and as a means of preventing a fiscal policy from determining the supply of money. The net result it was argued would be an increase in the “independence” of the central bank and an increase in its ability to follow an autonomous monetary policy.

In practice, the liberalisation of rules regarding foreign capital inflows and the reduced taxation of capital gains made in the stock market that have accompanied these reforms, has implied that while monetary policy is independent of fiscal policy, it is driven by the exogenously given flows of foreign capital. In fact, the central bank’s “independence” from fiscal policy has damaged its ability to manage monetary policy in the context of a surge in capital flows. This is because, one consequence of the ban on the government’s borrowing from the central bank is that the central bank’s holdings of government securities are determined only by its own open market operations, which in the wake of increased inflows of foreign capital have involved net sales rather than net purchases of government securities. As the central bank’s stock of government securities declines, when they are sold to “sterilise” the effects of its rising foreign assets, the increase in money supply tends to be driven by the volume of autonomous and speculative capital flows.

The difficulties this situation creates in terms of the ability of the central bank to simultaneously manage the exchange rate and conduct its monetary policy resulted in the launch of the Market Stabilisation Scheme in April 2004. Under the scheme, the Reserve Bank of India is permitted to issue government securities to conduct sterilisation operations, the timing, volume, tenure and terms of which are at its discretion. That is, if the central bank does not have government securities to sterilise capital flows, it simply “borrows” those securities from the government and sells them in the market. The ceiling on the maximum amount of such securities that can be outstanding at any given point in time is decided periodically through consultations between the RBI and the government.

Since the securities created are treated as deposits of the government with the central bank, it appears as a liability on the balance sheet of the central bank and reduces the volume of net credit of the RBI to the central government, which has in fact turned negative. By increasing such liabilities subject to the ceiling, the RBI can balance for increases in its foreign exchange assets to differing degrees, controlling the level of its assets and, therefore, its liabilities. The money absorbed through the sale of these securities is not available to the government to finance its expenditures but is held by the central bank in a separate account that can be used only for redemption or the buy-back of these securities as part of the RBI’s operations. As far as the central government is concerned while these securities are a capital liability, its “deposits” with the central bank are an asset, implying that the issue of these securities do not make any net difference to its capital account and does not contribute to the fiscal deficit. However, the interest payable on these securities has to be met by the central government and appears in the budget as a part of the aggregate interest burden. Thus, the greater is the degree to which the RBI has to resort to sterilisation to neutralise the effects of capital inflows, the larger is the cost that the government would have to bear, by diverting a part of its resources for the purpose.

When the scheme was launched in 2004, the ceiling on the outstanding obligations under the scheme was set at Rs 60,000 crore. Over time this ceiling has been increased to cope with rising capital inflows. On November 7, 2007 the ceiling for the year 2007-08 was raised to Rs 2,50,000 crore, with the proviso that the ceiling will be reviewed in future when the sum outstanding (then placed at Rs 1,85,100 crore) touches Rs 2,35,000 crore. This was remarkable because three months earlier, on August 8, 2007, the government of India, in consultation with the Reserve Bank, had revised the ceiling for the sum outstanding under the Market Stabilisation Scheme (MSS) for the year 2007-08 to Rs 1,50,000 crore. The capital surge has obviously resulted in a sharp increase in recourse to the scheme over a short period of time.

While in the early history of the scheme, the volumes outstanding under the MSS tended to fluctuate, since end-June 2005, the rise has been almost consistent, with a dramatic increase of Rs 1,17,181 crore between March 31, 2007 and November 8, 2007. That compares with, while being additional to, the budget estimate of market borrowings of Rs 1,50,948 crore during 2007-08. This increase in the interest-bearing liability of the government while not making a difference to its capital account does increase its interest burden.


There are many ways in which this burden can be estimated or projected, given the fact that actual sums outstanding under the MSS do fluctuate over the year. One is to calculate the average of weekly sums outstanding under the scheme over the year and treat that as the average level of borrowing. On that basis, and taking the interest rate of 6.7 per cent that was implicit in recent auctions of such securities, the interest burden is significant if not large. It amounts to around Rs 5,200 crore for the year ending November 2, 2007 and Rs 2,500 crore for the year preceding that. But this is an underestimate, given the rapid increase in sums outstanding in recent months.

A second way of estimating the interest burden is to examine the interest that would have to be paid over a year on total sums outstanding at any point of time under the MSS scheme. If the interest paid on the Rs 1,85,100 crore outstanding on November 7, 2007 is taken as the cost of permitting large capital inflows, then the annual cost to the government is Rs 12,400 crore. That is a significant amount of money when seen in the context of the fact that the total allocation for the National Rural Employment Guarantee Scheme in the 2007-08 budget was Rs 12,000 crore.

India does not need most of the capital inflows coming into the country to finance. They are not needed to finance the relatively small current account deficit on its balance of payments. And there are reasons to believe that much of this capital inflow is speculative, is directed at the secondary market or to sectors like real estate, and makes little productive contribution to the economy. Given these features, it is surprising that the government is willing to bear a burden on its fiscal to sustain these inflows rather than opt for measures to stall and reverse such flows. In the circumstances, the first effort at finding resources for the Plan should be to curb these inflows which, besides being damaging in themselves, absorb scarce resources. This is the direction in which the prime minister must push the Planning Commission, before raking up the controversial issues of subsidies.

(Article by Shri.C.P.Chandrasekharan. Courtesy: Peoples’ Democracy)

How People’s Science Movements look at Microfinance?

September 22, 2007


After Prof.Md. Yunus won the Nobel Prize there are interesting debates on micro credit Number of women from SHGs has become Panchayat representatives and every Government announces schemes for SHGs. So SHGs have become very important.
Every state Government has it’s own plan for SHGs. Andhra has the Velugu project, Kerala has Kudumbashree and Neighbourhood groups, Tamilnadu has Mahalir Thittam. But West Bengal is the only state to have a cabinet minister who is coordinating with different agencies to streamline the SHG network.

The Government of India has proposed an ACT to monitor NGOs and SHGs by NABARD which in the proposed form is being opposed by many. The main contentions are interest rates cannot be left to the market, NGOs cannot be allowed to take over the role of banks like mobilizing deposits, the legislation should include NBFCs and Sec-25 of the Companies’ Act which are involved in microfinance, and there should be wider debate before re-presenting it to the parliament. The bill has been referred to the Parliament Standing Committee on Finance to which many NGOs and Peoples Movement and the committees report is awaited.

In Andhra the Government had to ban some big NGOs for their malpractices and unscrupulous ways of collecting loans. Andra has the largest number of groups and the VELUGU project of Government. The groups increased due to government intervention and not through Micro Finance Institutions alone.

As per NABARD report there are 26 lakh SHGs credit linked to the banks as on 31st September, 2006.  Majority of the groups now are in the Southern states but in north too they are expanding. There are at least 4000 NGOs involved in mobilizing these groups.

Various studies have said that these groups work as excellent tools for mobilizing women, meet their small credit requirements and create togetherness. On the other hand studies also state that not much of empowerment is taking place and at times the debt burden is becoming a double burden on the women. The successes of micro-enterprises are also diminished because of the effects of globalization. In spite of huge powerful foreign funded NGOs like BRAC, GRAMEEN, PROSHIKA and ASA working for 30 years as parallel Governments in Bangladesh poverty still exists on a large scale. We also have a situation where in many regions, MNCs like Hindustan Lever are marketing their products through groups saying they are economically empowering them.[The sales women from SHGs are called Sakthiammas – a real abuse of the concept!!]. Now Reliance group has announced it’s plans to enter micro finance and Bharti which is bringing in Walmart through back door has also announced it’s plan to enter micro finance.
In the last 12 years the People’s Science Movements also have gained a good experience in the field and there are 22000 SHGs under PSMs in 15 states.

So it is high time to study the experiences, understand the problems and needs of these groups critically look at the Government Schemes, performance of NGOs, the perception of World Bank etc and plan strategies for action. The experience of the PSM sponsored SHGs is we hold significantly different from both government sponsored and some of the other NGO sponsored experiences and we need to study this as a distinct sub-set and build on it.

Type of SHGs

There are 6 different models of SHGs as per official records. They are

1. Grammeen model where the focus is on credit and not savings and where there are stringent rules from day one and the focus is not on empowerment or even active intervention in livelihoods.
2. The SHG –Bank linkage model where the NGO plays as an intermediary between banks and the SHGs.
3. NGO- Bank model where the NGO gets the loans and  lend to groups with a service charge.
4. Micro Finance Institution model where the MFI s are Non Banking Financial Companies which have shifted their priority from service to the poor and aim at profit. They consider Micro finance as an Industry and are against any subsidies which are also the WB vision.
5. The cooperative federation model pioneered by Cooperative Development Foundation, A.P.
6. The federation model where federations are formed with elected EC members from the members by the members and in some cases with the help of NGOs which withdraw after some time.

We classify these groups into 4 types broadly. They are

1. Groups promoted by large NGOs with foreign funds including indirect WB funds. There are more than hundred of them but only a handful is very large.
2. Groups which are directly or indirectly under the control of the State Governments through women’s development corporations which mostly try to depoliticize the groups and keep them under their control but use them for political gains of the ruling party.
3. Groups promoted by religious and communal organizations like SEVA BHARATI of RSS and many religious groups.
4. Groups promoted by Right based NGOs and People’s movements.

Pros and Cons: The Continuing debate

Many radical academic critiques assess the role of SHGs as a ploy of the World Bank and dismiss any potential of these groups for either women’s empowerment, or poverty alleviation or promotion of social change. They see these groups as a form of dominance and even of further exploitation. To support this contention they point out that credit charged by most groups are much higher rates( typically 20%) than commercial credit available from banks to industry( 9 to 14 % typically); that it promotes consumerism and indebtedness, that there has been in this period a sharp decrease – almost a drying up of rural credit flows and socially prioritized lending policies and banks are asked to operate on the principle of profitability, and also that banks enter this areas because of the good returns. They would also point out that the poorest women usually get excluded from these groups and the loan amounts are so small that no real employment generation can be based on this. The World Bank and donor groups often project SHGs as the key strategy of poverty reduction when in fact they have little impact on poverty levels.  There is also a critique that participation in such groups dissuades women from participation in struggles- something that often government run groups actively and openly promote- often discriminating financially against women who take part in protests.

Such radical critiques are often dismayed by the fact that despite the devastating nature of the arguments they have put forth not only are these groups continuing to grow and flourish, there is an increasing acceptance of working with these groups in all types of genuine peoples movements- even those who started with a very skeptical position initially. It is not World Bank which started micro credit but different agencies in developing countries like Bolivia, Indonesia and later Bangladesh, India and others. World Bank is trying to co-opt them and influence their policies.

The views of those democratic movements and progressive NGOs do not disagree with the radical critique in all aspects. The majority of such groups would agree that SHGs cannot remove poverty. They insist that the SHGs have the potential to be used as an instrument of empowerment; it could also be used for building hegemony by the dominant classes. What happens in a particular network, they would contend, depends on the approach of the NGOs. And genuine Peoples Movements and NGO groups with village level presence witness and respond to the obvious fact that on the ground their women are happy to be members of these groups- even if ideologically they remain uncomfortable with participating in SHGs and even if they are unable to explain it in classical political theory. .

Let us examine some of the reasons PSMs give for explaining their participation and defining the role of SHGs. Then we would go on to see how other sections  perceive and shape  SHGs and finally we would conclude with what the implications are for future action in participating and shaping the growth of these organizations.

SHGs As Spaces For Women’s Social Participation

• The opportunity to come together with others as part of the SHG provides an important space for women to come out of the house and participate in collective action. The logic of collective action and women’s orgnisation is that it would go beyond credit to addressing larger issues that touches women’s lives. Such addressing larger issues will proceed some distance- but neither be sustained nor very effective unless there is a more conscious democratic leadership available. If such a leadership is available then  the steps that SHGs take beyond credit have  the potential to enable women to  move on to join the larger struggles towards social and economic justice. SHGs, as the model of micro credit most popular in India, are recognized as superior to the Grameen model in that the need to use micro credit based SHGs for a more autonomous model of collectives with a mandate larger than savings and credit, and build it as a larger membership based structure is much more common in the Indian experience.  However even in India the thrust to restrict SHGs to be a collection of women working on credit rather than a collective working for justice is predominant, especially in the numerous government sponsored groups.[There are exceptions too].
• Experience from across the country also shows that the social perspective  of the sponsoring organization is an extremely significant factor in determining the nature of  of SHG network that is built up. Hence NGOs committed to social justice seek to enable SHGs to pursue this objective despite the compulsions of pace, systems and targets which micro credit tends to demand. NGOs have recognized the value of SHGs in providing a formal institutional structure to women’s collectives, which might otherwise have been more amorphous. One key element of going beyond credit to collective action on women’s rights is the process of networking into a larger organizational structure. Some NGOs, the PSMs in particular have made the process of federation of SHGs to enable them to fight for economic and gender justice related issues, the key element of their strategy. However State sponsored SHG based programmes which limit the programme to access to credit and subsidy that too for meeting specific, immediate needs of a section of poor women, almost always find larger network objectionable and insist on the lending agency dealing with each group as a separate entity. (The semantics of this is worth noting. PSMs used to call their work as building credit cooperatives –implicitly indicating a larger organizational framework- the cooperative. The government promoted name that has taken over and that we too are using in this article – is self help groups- emphasizing the atomization- ‘self help”)

• There is an absence of processes of building a collective to work towards social change. SHGs are designed to function as groups to ensure efficient transactions and repayments on a limited credit based agenda.  This works against the inclusion of issues such as domestic violence, sexual and reproductive rights and political participation. Such issues are then addressed by women `in spite of’ rather than as a legitimate agenda of SHGs. SHGs thus become spaces for monitoring and peer pressure to conform to existing rules and norms rather than collective forums for struggle and support for justice.  

In theory the state is open to the use of SHGs for educational programmes especially literacy and continued education programmes. However such educational programmes as they exist now are not providing the learning space for accessing information, undertaking analysis and reflection.   Most Continuing Education programmes of the government have become SHG promotion interventions, with a narrowly defined and poorly implemented educational dimension. There is also an absence of serious efforts to provide literacy opportunities to women members of SHGs  and this often leads to the concentration of power in the hands of the more literate, and better – off members of the group.( Intra group differentials in class and status are minimal and not as damaging to larger goals as some critiques make out. However such differentials to exist and in the lack of a conscious strategy to address them – can even grow.)


The PSMs have been conscious and made non credit dimensions a conditionality of their work on SHGs. However PSMs do recognize that success on the credit front is central to the success of the programme- irrespective of the approach on larger organization and empowerment of women. There are reasons for this and we need to understand and maximize credit flows- not speak of limiting them

• Our knowledge of women from economically marginalized sections of society shows that women do need credit.   Access to credit through SHGs has meant that women have the resources to meet crisis related needs. It has also meant a reduced dependence on moneylenders- where the usual interest rates are in the 60 to 100% usurious levels. While academic critiques emphasise the high rates of interest charged ( about 20%) as compared to what banks provide- they seldom note that poor women have no access to bank credit at all; that they are comparing it with other available sources where the rates are not only much higher and where repayments are extorted even by violence. If the lower rates of credit become available to poor women and banks change lending policies then automatically women would reduce their group rates.[MALAR in Kanyakumari has reduced the rate to 18% from 24% and for directly linked bank loans the Interest charged is 8.5% only]   Nor is it true that  by participating in SHGs, the demands for better credit policies to reach the poor is blunted. For millions of marginalized women from the weaker sections taking on a task of changing government lending policy is so far removed and unreachable a goal, that asking them to forgo an immediately available relief for what is perceived as an impossibly distant ideal- is cruel and thankfully rejected by the women themselves. Women’s organizations have started demanding lower rate of interest.[4%]

• There is also recognition on the part of the family that the women are enabling access to credit. In credit networks there is also access to a larger organizational structure. In a small way it contributes to a changed perception of women’s role in the family and outside, even when limited to credit transactions alone.

• The value of micro credit for poor women needs to be located in a context in which women struggling with poverty do not have many options for reducing their economic vulnerability.  In the struggle for survival women find themselves in an increasingly difficult macro-economic context, with the State failing in its duty to provide the necessary avenues of economic justice, including poorly conceived and unfairly implemented development schemes.  The very fact that millions of women are participating in these programmes and even after long years of participation are willingly and happily associated with these programmes, testify to the fact that despite all its limitations, given the choices available- this is one of the few avenues of coping with poverty ( as against rising above poverty) that is available to them.

• Credit however is only one of numerous components required to enable women to address their concerns related to justice and equity. Yet credit has been magnified to an extent that it is presented as the single solution to myriad problems. Exaggerated claims are made about the benefits of micro credit by the state and other players such as banks, international finance institutions and corporations. There is a superficial tinkering with the economic reality of women’s lives. Micro credit does not address the fundamental factors underlying women’s gender and economic subordination. SHGs in themselves can never be designed to enable women to understand and negotiate patriarchy, unequal distribution of resources and other forces of social, cultural and economic oppression.  These latter are inputs that a democratic force must bring in from outside to give such a character to SHGs- they are not inherent in them. [In Tamilnadu there is a close alliance between the SHG federations of TNSF and AIDWA and for local struggles the SHG women use the AIDWA platform.]

• SHGs are largely unable to impact economic status because a) the input of credit is too limited and b) because they fail to address existing livelihoods related realities.  For example, the interventions do not address issues related to land-based activities.  SHGs do not address the women as marginal farmers or as landless agricultural wage labourers working in informal tenure arrangements. The problems become more acute when the women are working as share croppers with no help from husbands, who migrate seasonally in search of work. Instead entrepreneurship is promoted without consideration of the livelihoods context and without provision of forward and backward linkages. Seldom are serious efforts made to promote collective enterprises. Promotion of entrepreneurship in fact creates greater vulnerability for these women who are near the bottom of the economic ladder, in the absence of support structures to negotiate with market forces and survive in the face of corporate invasion of rural markets.   

• The poorest of the poor are mostly excluded from the purview of SHGs because of their inability to save regularly. This has implications for the ability of SHGs to benefit dalits, tribals, migrants and other marginalized groups. This trend is even more worrying given that the insistence in government led programmes that  SHGs be small, manageable, homogenous units, often means divisions being made along the lines of caste, class and religion within the larger community of women.[Kerala’s Kudumbashree programme has launched a special scheme called ASRAYA for the disadvantaged families which is unique]

• SHGS are also not designed to address the intersection of caste and gender, and the subordination of dalit women. In mixed caste groups the position of Dalit women is weak. Exclusive Dalit groups do provide the same empowerment opportunities for women in many areas but segregation as such is not challenged.

• Even in the case of economically stronger sections, the benefits from access to credit    do not imply that women can exercise control over loans, assets etc. Though in the majority of cases women do decide or take more roles in such decisions than before, there are significant numbers in whom her name is used to access the loan, but the decisions would remain within the patriarchal order. In such instances the burden of repayment would however primarily borne by the woman. There are even reported instances of violence against women who are not seen as being able to perform their `duty’ of accessing credit sufficiently.

• It is often forgotten that without land reform, quality education, adequate healthcare and employment opportunities there will not be any major social change.

Credit and the stereo-typing of women

• There has been an argument that “Micro credit institutions view women as disciplined, docile, easily accessible clients, who operate on the principle of avoidance of shame and discipline each other”. Further it is alleged that  “ Micro credit today is fashioning yet another image of the ‘good woman’ – one who, at the cost of working even more, saves regularly, repays conscientiously and ensures that other women do too. In a context that has little to offer, women reach out to access micro credit but what it offers to them is better captured by `membership’ rather than `citizenship’. This failure to enable citizenship rights is explained by the narrow, uni-dimensional nature of strategies, which claim to provide solutions to complex, deep-rooted inequities through the single input of micro-credit”.

• In such a view it is not a coincidence that the vast majority of the recipients of micro credit the world over are women- it is the game plan itself.

• It is difficult for progressive activists working with self help groups in villages to refute such skillful phraseology of radical academics- or given the need to be truthful to their own experience accept it – leading to considerable ideological bewilderment and a state of organizational confusion where such organizations grow as organizations based on this work but yet consciously undermine its worth especially in its leadership levels. There is no doubt that Micro-credit policy made in the corridors of corporate financial institutions would seek to evolve  such a game plan of molding women into docile clients- not as a conspiracy- but in the very way that such institutions work.  However as Saldhana points out in his brilliant assessment of the literacy programmes – “the intentions of the dominant do not necessarily convert into the praxis of the sub-altern”. Corporate finance may perceive and want to shape women in such a way- but there is little evidence that women actually get so shaped. Women with membership have far greater chances of moving on to citizenship than women confined into family walls- irrespective of what big business would have them do. And indeed all the exceptions that we hear of women having to taken to anti- arrack agitation in one village, having fought domestic violence in another, having started a cooperative in a third- are in such a perception not exceptions at all- but the rule. That women are not passive substances on which others act – but they too make decisions- though not necessarily at the pace that we would desire and given time and a continuing viable programme , these exceptions would be significant enough.

•  A progressive characterization that is able to incorporate its practice into its theory would perhaps be articulated thus: “Corporate finance and policy makers had long neglected women as credit recipients preferring only to deal with the male “ head of the household.” Indeed there was and is insufficient recognition that women also contribute to family incomes. Independent of the World Bank and financial institutions some NGOs and peoples’ groups hit upon disproving these stereotypes and established that women are good credit managers and can save significant amounts. Observing these financial institutions moved in to replicate these early successes in a major way, and while doing so seek to shape these institutions to suit their perspectives. So do each of the main sectional interests (players ) do so. But eventually the women at the core of all these strategies are not passive- they do have interests and they too contribute to shaping it – and the advance that they make are real advances to them which we need to respect and help them build on – and not demolish with great intellectual sophistication.( it would be interesting to explore the forces within progressive organizations that leads to this divergences between its intellectual position and its practice).In the next  section we explore the various sectional interests that shape micro-credit policy.

Sectional Interests shaping MICRO CREDIT policy

The arena of micro credit has several powerful players; most of whom strongly claim that micro credit stands to benefit poor women.   This claim shrouds in a veil, a number of, often divergent sectional interests.  

The State

• One reason why the State wishes to promote SHGs is closely related to the larger phenomenon of the withdrawal of the State as part of neo-liberal processes of globalization. The State through its promotion of SHGs  can claim to have promoted  women’s empowerment.  SHGs also provide the State with a means to evade accountability with respect to responding to the education, health and livelihoods related needs of the poor.  The implications of such an evasion for the poor are particularly harsh given that they are already dealing with the distress unleashed by forces of globalization.

• By claiming that micro credit (fed by the meager resources of poor women) leads to women’s empowerment and poverty reduction the State  attempts at a popular level to absolve itself of the responsibility of investing in processes and services required to meet these objectives. We need to challenge the claims of the state that it is empowering women in SHGs through information. The information provided is too limited to enable women to make informed decisions on critical aspects that govern their lives.

• The second main interest for the state is that it can see self help groups as a low cost instrument for the delivery of development messages (some of which run contrary to the interests of women) and for implementing developments programmes. In fact SHGs may even subsidize the development interventions of the State and are used as easy forums for achievement of development targets of the government without the transfer of resources to the poor that is needed to meet the requirements of social justice. Examples of wrong usage in development schemes abound.  In some places members of SHGs were given unpaid tasks which are essentially extension of their domestic roles such as cleaning schools and even toilets.  They are made to participate in targeted population control interventions without even access to information about the rationale, benefits and dangers related to the tasks demanded of them. 

• A third and growing reason for state interest is shaped by the recognition of its mobilisational possibilities. SHGs are viewed as avenues to rent a crowd at lesser rates for political rallies and more commonly for ruling parties’ political grand shows. Increasingly self help groups are being recognized as important vote banks for political parties- at least no party can afford to be seen as aloof or hostile to it and even where they are not interested enough to support it, are looking over their shoulders to ensure that the opponent is not making mileage from this mobilization.

•  Panchayats often dominated by local landlords and traders see the groups as a vote bank that needs to be lured or at least neutralized. Schemes like SGSY that come attached to SHGs have created another opportunity for corrupt officials to get a cut from the subsidy released and therefore they bring the unwelcome attention of local vested interests and pressures on the SHGs.

• The relationship of fundamentalist forces to such mobilization is interesting. In principle there is nothing that prevents fundamentalist forces from building SHGs in states ruled by them or elsewhere and use it for propagation of their ideology. Indeed there are many major attempts that are now available for examination. However the fear that this will really materialize in mobilizations of women for literacy, or community health work or in credit cooperatives seems to have been over stated (though the last word on this has yet to be spoken). Such forces at the local level are represented by the local elite and the limits they set on such mobilization are so sharp that beyond a very minimal level of functioning they would be unwilling to let such organizations of weaker sections grow even if there are potential ideological gains to be made. Perhaps this explains why after decades of planned penetration of the tribal areas by fundamentalist forces some forms of intervention like schools, charitable hospitals, free medical treatment etc are preferred over some others. Perhaps…

Banks and Financial Institutions

For banks SHGs provide

a) A means to gather the savings of the poor to increase their cash flow to some extent.
b) Show disbursal to rural and weaker sections at incredibly low risks and comparably high rates of return.
c) Cover their retreat from all other forms of rural credit to which they were earlier committed.

Women members of SHGs ensure that banks can increase the volume of credit disbursed, minimizing their risk because of the phenomenally high rate of repayment.  This stands in sharp contrast to the rates of default on the part of men, in particular middle class and elite men, as well as some large companies.   The transaction costs for banks are greatly reduced since SHGs provide ready made clients and ones who will perform the task of monitoring each other.  Banks tend to forget that the poor are paying interest on the credit that they take, and that the terms of the transactions need to be negotiated with their clients.

Often the banks are lending without proper evaluation and credit assessment to fulfill targets.

• In Andhra Pradesh the State Government has directed banks to lend at 3% to SHGs and get interest loss compensated by the state government. But big NGOs are opposed to this.

• SIDBI, RASHTRIYA MAHILA KHOSH, NATIONAL MINORITIES DEVELOPMENT FINANCE CORPORATION, THADCO and other such agencies receive loans from funding agencies including international funding agencies and on lend to NGOs. SIDBI promotes the WB line of converting NGOs into NBFCs, RMK needs revamping with more efficient staff and branch offices, NMDFC AND THADCO are corrupt and other Government agencies do not have a vision.

• ICICI Bank has promoted Micro Finance Institutions which avail loan from the bank and on lend to NGOs at a higher rate which has come in for criticism.

Corporate Business

• Corporations such as Hindustan Levers and Amway are using SHGs to market their products in an effort to capture even more of the rural market. The rural market is dispersed and considerable investment is needed to access these markets. In many areas rural markets have not been penetrated by big capital and still it is the local economy and local manufacture that predominates. To corporate business SHGs is a potential entry point to such rural markets- displacing local manufacture with city made goods and in an era of increasing penetration of television creating new wants and accentuating false desires( baby foods, fairness cosmetics for example) that lead only to further impoverishment of the rural poor. The announcement of Reliance, Muthoot Bankers and Bharti indicates the potentials they look at.

The International AID-Funding agencies

• Donor agencies are impressed by the relative visibility of results that SHGs provide and also by the fact that compared to a lot of things they fund, this at least happens. Many donor agencies also view SHGs as a means to ensure that NGOs achieve the goal of financial self-sustainability- an important, often mythical, goal in donor consideration.  Some donors, extending this logic and seeing that sustainability is not being achieved at small scales are pushing NGOs to convert themselves into Micro Finance Institutions or Non Banking Financial Companies.  The results of such a move – still largely in its infancy are uncertain- if indeed they do take off. A study of 36 organisations has shown that most of the MFIs are dependent on subsidy even up to the scale of 80% but they talk of sustainability. The World Bank and many funding agencies see micro finance as an Industry which should be done with a profit motive and the Government and Banks should withdraw from the field leaving it to market forces.

The role of SHGs in the changing discourse of development and social justice

The significance of what the emergence of SHGs implies cannot be captured only by adding the sum of the parts.  It has implications for the very nature of discourse on development and social justice. There are now many contending discourses on development and the process of social change that this entire experience is forcing a re- appraisal of.

One is the discourse of the dominant. In this discourse the onus of overcoming poverty is being placed on the poor.  The presentation of this discourse is that with a dose of credit the poor will turn into entrepreneurs who can pull themselves out of poverty. This would leave unacknowledged and unchallenged the systemic inequalities that lead to poverty.  This discourse would also seek to mould the idea of social change to one which is a narrowly defined, instrumentalist development agenda of the State- at odds with the real interests of women. The idea of the `collective’ is refashioned into a mere coming together of women for the purpose of saving. The intensive processes of mobilization, trust, solidarity and perspective building, reflecting on actions jointly undertaken are no longer required under such a discourse for a collective to emerge.  The quick fix nature of the solutions being offered is not merely low cost – it also seeks to actively mould and control the nature of social change.[Let us not forget that IRDP provided credit to 54 million households but  hardly removed anybody from poverty.]

The other is the discourse of rejection. Here the self help group is at best a ploy of legitimising globalization in popular perception and retreat of the state and at worst an active device of further subjugation and exploitation. The task of the radical is to expose mercilessly every attempt at programme involvement and improvement as but another move of the dominant in their relentless quest for domination and seek to build women’s organizations only outside and in opposition to such self help group as mobilization.( Curiously it is some of the radical external funding agencies that have taken such a position most stridently)

The third discourse that actually guides practice of groups like TNSF, even if it has been poorly articulated in grand theory, is to see the self help group as a terrain of engagement, negotiation and struggle. What is essentially a people’s programme is captured and replicated by the dominant for extending its agenda. What results is that different sectional interests vie with each other to pull the programme in different ways and to the extent that poor women are able to access a leadership that has a radical change perspective their strength at the negotiation is strengthened. Given the limited options women are only too happy to participate in it and indeed can hardly refuse participation. The point is in their winning increasingly better terms of participation – and that should be the central agenda of democratic involvement in self help groups. The role of radical critique in such a discourse is not only to expose the exploitative and subjugator elements, but also to defend and extend and maximize the real gains that self help groups can make for weaker sections of society Other wise like what has happened to rural banking and cooperative banking we land up leading the opposition when it exists and leading the defense after its gone!!


Even as we recognize that the impetus for the promotion of credit is driven by the suppliers of credit, in collusion with the State, we should also recognize and respect the fact that poor women need credit. It is true that in the face of very limited options of survival and few spaces to come together, SHGs have provided women mobility, greater confidence and the potential to act collectively.  Despite the multiple interests of powerful players and their efforts to mould them into good women, women have demonstrated agency and signs of subversion. The DWCRA members of AP did indeed contribute to the downfall of a state government that they saw as having failed to respond to their struggle for survival. It also needs to be recognized that it is poor women who need to be central to determining whether and what form of micro credit works in their interest. 

What we NEED?

• Data needs to be made available by the State as to the impact of SHGs on the lives of women in terms of levels of poverty and change in the status of women. The indicators used to measure these changes need to be clearly spelt out.

• Investment in building capacities of members of SHGs must increase.   These need to be broadened from managerial, efficiency related inputs to include issues such as gender, caste and social equity, violence, political participation and health. These learning opportunities are essential if SHGs are to be transformed from spaces that are `given’ by the State to rural women, to spaces that are `taken’ by them towards meeting an agenda that they themselves have determined. The State also needs to provide women with information about its policies and programmes, especially those related to anti-poverty, health, education, employment and social justice – including the systems it has set in place towards ensuring that these work in the interests of poor. SHGs have to be provided learning opportunities, which can enable them to determine strategies that can best serve their interests, which could include the need for micro credit.  Sustained literacy needs to be made available to members of SHGs.  

• We SHOULD oppose the claims of the State that the mere creation of SHGs is enough.  The State needs to invest resources towards meeting the needs of poor women with respect to health, education, child care and livelihoods.  Changes in policies are urgently required in order to ensure that poor women have effective control over means of production, including their own labour and natural resources.  The government needs to fulfill its commitment to guaranteeing employment in a manner that recognizes the centrality of women in the struggle for survival and covers the rural poor across the entire country.

• We should demand that the State stop its tokenistic use of women’s organizations. The government needs to create mechanisms to ensure that women’s organizations (including SHG federations with experience of work related to gender justice) can actively engage in policy formulation, planning, budgeting, review and monitoring, including expenditure reviews – at all levels.

• We can demand that SHGs are given rights to collective resources like ponds, fish tanks, trees, quarries and grazing land.

• We should demand that the State provides services that are essential for women to exercise their rights such as legal services, shelter homes and child care services. SHGs must not be viewed as the providers of services that are the responsibility of the state. 
The women’s movement and other progressive movements have always engaged critically with discourses of development.  We critiqued the welfare approach for its invisibilization of women, or limiting their roles to those of beneficiaries.  We opposed the development approach when it evoked the participation of women in the existing development paradigm without providing the space for women to determine the nature of development.   Historically, women’s groups and NGOs have demanded women’s right to credit. What we have now however is a scenario in which the agenda of economic empowerment of women has been reduced to the singular component of savings and credit.   Even as we demand actions from the State, we can interact with the right based groups and guide them

• By promoting more inclusive agendas within SHGs

• By seeking to address the economic agenda through the promotion of equitable and sustainable livelihoods strategies rather than being driven by the availability of credit alone.

• By exploring alternative strategies that allow women to determine their collective initiatives and address their political, reproductive, economic, health, education, child care and bodily integrity interests, rather than being limited by the prescriptive norms of SHGs, and enabling women to negotiate these.

• By continuously striving to draw attention to poor women, who should be at the heart of the discourse on micro credit and SHGs. There are many benefits, both tangible and intangible, that micro credit offers to the many players.  Women are contributing much to the family, the community, the State, the banks and corporations.  There is however not much that is being invested back for the women.  This investment is essential and long overdue, not only to redress the imbalance, but to enable women to understand and determine the nature and form of SHGs themselves.

• It is sad that the proposed Micro Finance bill also does not address these issues.

(Article by Shri. Thomas Franco, General Secretary, Tamilnadu Science Forum)

Discovering Nuclear Energy For Justifying A Bad Deal

September 22, 2007

WE are having a discussion in the country on the importance of nuclear energy to our energy basket only in the context of the India-US nuclear deal. The government and the prime minister have gone into an overdrive in order to sell the India-US nuclear deal, stressing on its importance for India’s energy security. If indeed nuclear energy were so important to India’s future, why is it that no serious techno-economic study has ever been presented impressing upon us the vital importance of nuclear energy?
Currently, nuclear energy stands at 4,120 MW, which is a little less than 3 per cent of our installed capacity of power plants. A part of the reason has been the nuclear isolation we have faced and therefore the much slower development of our program. However, this is only a part of the reason. The other part is the techno-economics of nuclear power and its relatively high cost.
The key issue is what is the total amount of power that can be added using the nuclear route and what will be its cost? We shall deal with the techno-economics of nuclear power later, but let us take up first the possible proportion of nuclear energy, both in terms of its contribution to electricity generation and as a proportion of the primary energy basket.
If we assume that we need to add about 100,000 MW in the next 10 years, as the ministry of power is asserting, what is the best-case scenario for nuclear power? According to the Planning Commission’s study (Integrated Energy Policy, 2006, Planning Commission), taking the most optimistic scenario, it is 15,000 MW by 2015 and 29,000 MW by 2021 (see Table 1). These targets include 8,000 MW of imported reactors. Even though these targets have already been admitted as quite ambitious by the Planning Commission (Planning Commission calls it the Optimistic Scenario), let us assume for the sake of argument, that they can be met. Even then, nuclear energy will only add up to about 7 per cent of our total installed capacity. And if we take the even more ambitious figures that the government is now bandying about – 40,000 MW by 2020 – this will still be less than 9 per cent of our total installed capacity. Figures such as 40,000 MW by 2020 have no relation to the actual capabilities on the ground, or the need for huge amounts of capital for such a program, or the cost of such power if these plants are set up. However, even by these “optimistic” of scenarios, it is clear that that nuclear power is going meet only a small part of our electricity needs. And as the techno-economics will show, going ahead with such an ambitious nuclear electricity program will come at a high cost and will dry up investments in other sectors.

Table 1: Planning Commission’s Optimistic Nuclear Power Scenario

 Note: * Integrated Energy Policy, Planning Commission, August, 2006, 

Table 2: Govt’s Current Optimistic Nuclear Power Scenario


In the 60s and 70s, there was a lot of euphoria about nuclear power. By the 80s, it became clear that nuclear power was expensive. In the West, nuclear plants routinely overshot their budgets and the time required to erect them. With discovery of gas in large quantities and increased efficiency of thermal power plants, nuclear plants were perceived to be too expensive. This was quite independent of the debate regarding the potential hazards, de-commissioning costs, and the problem of storing nuclear wastes.
The India experience is this regard has been no different. Nuclear power plants are about 50 per cent more expensive, even when using domestic technology and equipment. However, as they take a long time to build, a large amount of capital is locked up during construction. If the plant is built using a mix of equity and debt, this cost of locking up money is known as Interest During Construction (IDC); the capital cost of building a plant, without taking its IDC into account, is called “overnight” costs. All conventional power plants are built with a mixture of debt and equity and this is also the way Nuclear Power Corporation is proposing to build plants in the future. Taking IDC for both thermal and nuclear plants, the capital cost of nuclear power plants would be twice that of coal-based thermal power plants – about Rs 7.4 crore per MW (about Rs 6 crore as overnight costs and 6 years to construct the plants) for nuclear plants, as against Rs.3.73 crore per MW (Rs 3.2 crore as overnight costs and 4 years time for construction) for coal fired plans. That means that the cost we incur to put up nuclear plants that will generate 10,000 MW of nuclear power is far greater; with the same amount of money we can put up 20,000 MW of coal-fired plants.
If imported reactors for nuclear power are considered, the situation becomes even worse. The cost of nuclear plants, as overnight costs is Rs 9 crore per MW. A number of studies have taken this as the base cost of nuclear power plants. Though the nuclear plant suppliers have claimed a lower figure, all existing plants have cost more than $2,000 per KW and therefore this is a reasonable base for our calculations. Taking into account the IDC component, this translates to Rs 11.1 crore per MW or three times the cost of coal-fired power plants. In other words, with the same amount of money, we could put up 30,000 MW of coal-fired power plants instead of 10,000 MW of imported nuclear plants. For a 40,000 MW nuclear power program, it would mean importing 20,000 MW of imported reactors with 20,000 MW of indigenous reactors. This means an investment of Rs 375,000 crore, which is equal to the total amount of investment we have planned for the entire 100,000 MW in the next 10 years. Incidentally, India’s total capacity addition in the last 10 years has been less than 40,000 MW, the figure that is now being proposed for nuclear power alone. 

Table 3: Comparison of Capital Costs and Tariffs Coal vs. Nuclear

 Table3 for nuclear fuel costs.
Table 4: Cost of Nuclear and Coal Based Power Stations


The cost of power from nuclear plants, as compared to that from coal-fired plants, is also quite a bit higher. Coal-fired plants today produce electricity at the plant end (not as delivered to the consumer) cost about Rs 2.50 per unit depending on the coal cost at the location. For nuclear plants with domestic reactors, the cost is about Rs 3.60 per unit. For imported reactors, it is about Rs 5.10 per unit. If we take a figure for time of construction of 8 years instead of 6, as is quite likely for imported reactors, then the corresponding cost figures would be around Rs 5.50 for imported units.
Not only is nuclear power more expensive, investing in nuclear power in a big way without addressing its techno-economics, will also have adverse effects on the entire electricity sector. Going in for huge investments for imported nuclear power plants – three times the cost of similar coal fired units –– would mean starving the Indian economy of other investments. It would mean either giving up much larger investments in the power sector or starving other infrastructure sectors.
We agree that India should invest some money in nuclear power plants. We have been under sanctions and have not received any technology for nuclear power plants from anywhere in the world. Our scientists and technologists have struggled very hard to develop every bit of our nuclear technology indigenously. It has taken us almost 20 years to do this, once nuclear isolation was imposed on India after the 1974 Pokhran I blast. Therefore, this technology needs to be nurtured and developed further. Even though nuclear power may not be economical today, it is possible that in the long-term, as coal and oil reserves run out, nuclear energy will become more and more important. But to argue that we should put in the major part of our available money in to nuclear energy right now, that too with imported reactors, seems to be very short sighted.
Those familiar with the nuclear power know that what killed it in the US is not the hazards of nuclear power or disposing nuclear wastes but simply its costs. It was too expensive to put up nuclear power plants and the electricity out of it cost much more than from other sources. That is why the last reactor commissioned in the US was in 1996 and it took 23 years to build. The US nuclear industry today is surviving almost entirely on foreign orders. And that is why they are looking to India for orders worth billions to revive their moribund industry.
For those familiar with Enron, there is a sense of history repeating itself. First, there is a political decision to give Enron a 2,000 MW project, then the fuel policy and power policies are changed to suit Enron. The liquid fuel policy of using naphtha as fuel for power plants came out of the need to accommodate Enron. Today, it is clear that such a policy, decided without application of mind and the techno-economics of the sector, has resulted in a major crisis for Maharashtra State Electricity Board and idling of plants using naphtha. Unfortunately, a similar exercise is underway with respect to nuclear energy. In order to justify the India-US nuclear deal, we are now talking about 40,000 MW of nuclear energy, without taking into account its capital cost or the price of electricity from such plants. If the MSEB crisis was the result of adding a 2,000 MW Enron plant, we can only imagine what would be the impact of introducing 40,000 MW of nuclear power and its high cost.
The talk of using imported nuclear reactors for providing energy security is also misleading. Unlike the three-phase nuclear cycle, which envisages the use of enriched uranium in Pressurised Water Reactors (PWR), then using reprocessed plutonium of the PWR’s in Fast Breeder Reactors (FBR), and finally plutonium and thorium mix in Advanced Heavy Water Reactors (AHWR), the imported Light Water Reactors (LWR) plants use only enriched uranium. In such a cycle, the requirements of uranium are much higher, and we would need continuous imports of large amounts of uranium. If we concentrated, instead, on the FBR and AWHR route, this would require much smaller amounts of uranium and would provide much greater fuel security than the imported reactor route that the Government is currently pushing.
One of the objectives of the US through this deal is also to provide an immediate “easy” LWR route to India for nuclear energy instead of developing FBR technology. It is interesting that it is only when Department of Atomic Energy has now been able to commercialise its PWR technology and scale it up to 540 MW that the US is now offering to lift technology sanctions on reactors and fuel. Once we take this easy route, they will then be able to control us through their control over fuel as well as control over technology (spare parts, etc.). Therefore, developing the FBR route and indigenous reactor technology would provide a much surer route to energy security than taking the dependent route of imported reactors. 

Table 5: The Approximate Potential Available From Domestic Sources for Nuclear Energy


Source: Department of Atomic Energy quoted in Integrated Energy Policy, 2006, Planning Commission, P 36


Electricity is only a part of our total energy needs. We need fuel for transport and also for manufacturing fertilisers and petrochemicals. The requirements of primary fuels would of course also depend partially on what kind of fuel we use for electricity generation. However, it is clear that in any scenario, the bulk of India’s electricity needs – from 91 per cent as the best-case scenario to 95 per cent as per current plans – would have to come from non-nuclear sources. For the foreseeable future, nuclear option is going to have little impact on our need for other sources of energy.
Oil has been used in India primarily for transport and industry. The Tenth Plan has this to say about the growth of hydrocarbon demand: “The share of hydrocarbons in the primary commercial energy consumption of the country has been increasing over the years and is presently estimated at 44.9 per cent (36.0 per cent for oil and 8.9 per cent for natural gas). The demand for oil is likely to increase further during the next two decades. The transportation sector will be the main driver for the projected increase in oil demand. Consequently import dependence for oil, which is presently about 70 per cent, is likely to increase further during the Tenth and Eleventh Plans.”
It has been estimated that by 2015, Indian demand for crude oil would be around 4.25-4.5 million barrels/day (mb/d) and it would be importing about 80 per cent of this, almost entirely from the West Asian region. The important issue here is that if we look at the power sector demand, oil does not figure in this. So nuclear energy, which can be used to produce electricity, is not a substitute for oil under any circumstance. While India accounts for only about 2 per cent of world’s oil consumption, it is already amongst the 10 largest importers of oil in the world. With increasing oil consumption, this trend is likely to continue with India and China emerging as major importers of oil accounting for at least 15 per cent of world’s oil demand. As there is no way nuclear energy can go into trucks, buses and cars, the transport sector will continue to be heavily dependent on imported hydrocarbons.
If we take nuclear energy as a fraction of the total primary energy needs of the country, we find that this is not more than 3 per cent to 5 per cent of our total primary energy basket (the 5 per cent to 9 per cent of the electrical energy translates to 3 per cent to 5 per cent in primary energy terms). If we look at oil and gas, even with an ambitious nuclear energy program, they will still constitute more than 30 per cent and 10 per cent respectively and together more than 40 per cent of our future energy needs. More than 40 per cent of our energy needs in the future is going to come from oil and gas –– and this, independent of our nuclear energy program.
Therefore, the nuclear deal that has been signed between India and the US will help us only marginally address our primary energy needs. The argument that nuclear energy is the energy for the future is not backed up by either an analysis of India’s energy needs nor does it take into account that nuclear energy is an option very few countries are exercising today. We definitely need to keep the nuclear option open, looking at possible long-term needs; but to present this as a panacea for our current energy requirements flies in the face of reality. If India has to take measures for its energy security, its primary concern must be to secure oil and gas supplies. It is in this context that peace and stability in West Asia is of such vital concern for India; its delight in being seated at the international high table, courtesy the USA, is just a diversion, and a harmful one that is against the country’s national interests.

(Courtesy: An article by Shri.Prabir Purkayastha. People’s Democracy, 2007 September 02 Issue)

Justice V.R.Krishna Iyer writes to the P.M.

September 7, 2007

  August 23, 2007

Revered Prime Minister,

Onam salutations to you!

I address you, Dr. Manmohan Singh, as a Statesman who, when convinced, will change your view in tune with embarrassing truth and the inviolable obligation of high office to the supreme value of Swaraj which ‘We, the People of India’ won with dignity, in a do-or-die struggle, without a war.  This great event was proclaimed at the Midnight hour of August 15 when a historic ‘tryst with destiny’ was made and the nation resolved to ‘wipe every tear from every eye’ and secure to every Indian those great fundamental rights which are part of the basic structure of the Constitution and binds you as well as all of us.  Now your paramount duty to uphold the Suprema Lex is being put to the test, your commitment to Indian humanity is being challenged, the grave issue being an Indo-U.S Nuclear Deal.  The controversy is as to whether we, a non-aligned nation, whose sovereignty is non-negotiable, sign a treaty with a hegemonistic Big Power which has had Hiroshima, Kabul and Baghdad as its indelibly imperial record, regarded as gross outrage on international comity, as scant respect for other nations’ sovereignty and as aggressive acts of cosmic terrorism, judged from the perspective of Gandhian global compassion and Nehruvian Non-Alignment Movement.  I am somberly aware, as I write this letter, that I am an illiterate in the arcane art of political diplomacy and the imbroglio of nuclear power logomachy.  I am equally aware that, being in the last leg of my mortal tenure, I have a wholesome detachment from worldly-wise pragmatism, unprincipled party politics of every brand and material hopes of personal gain or distinction.  This subjective independence gives me the patriotic disposition to express my considered judgment in culturally conditioned humility to the Prime Minister of India than whom none sits higher in the pyramid of political governance.  Do forgive me for this critical letter since I have, to the extant I know you, regarded you as straightforward and, therefore, capable of conscientious reconsideration of any stand you might have taken earlier.  I salute you reverentially before communicating my profound skepticism about your provisionally non-negotiable adherence to the polemical Washington deal.  I recollect, in this context of your statement in a letter to me that in persuading yourself into entering into this treaty your principal concern is the interests of the Indian people.  Anyway, our Parliament, as the sentinel on the qui vive, will perform a grand inquest into this nationally controversial issue.

          True, I have not studied the Indo-US Civilian Nuclear Co-operative Deal and therefore have to rely on my inferences from what appears in the media.  I cannot dismiss as irrelevant the firm stand taken by the Left Parties against this Deal especially because they have been supporting your Government to the point of its survival.  Of course, their political approach does not govern my judgment on this matter but it is a serious factor, even as your firm stand cannot conclude my attitude but it is a pregnant factor.

          You have stated, in your letter to me dated June 23, 2007, that we cannot depend, for our energy needs so vital for Development, on our fossil fuels which are limited in quantity and poor in quality, our hydro-power potential, though large but is threatened with environmental hazards.  Consequently, you argue for nuclear power and the Nuclear Deal with the USA is “a manifest attempt on our part to overcome this situation”.  I give as aide memoire a relevant extract from your letter as annexure.

          In this context, I plead with you to permit me to state that our wind energy and tidal power have not been exploited save for a tiny extent and these resources are large and free from pollutive potential.  Again our hydro-electric energy source is enormous.  While I was a minister for Irrigation and Electricity in the Kerala State I had occasion to prepare a Master Plan of the State’s water resources and to present it to Prime Minister Nehru who told me how small projects in the Soviet collective farms served their needs considerably and economically and you should produce energy from minor projects from rivers which are many.  These projects save on generation cost and transmission losses.  Indeed, I had a well-grounded hunch that our creative engineers and political visionaries can explore this grand nidus of power with confidence that environmental pollution can be obviated and distant places served energy at lesser cost.  We have not made a national survey of our vast hydro-electric resource and its imaginative utilization through rural generation sans environmental injury.

          Now a few words on the nation’s dependence on Nuclear Power Generation which you give as a reason for the agreement with the U.S..  Atomic power as a policy is, an act of despair, a very last resort.  It is costliest, relatively speaking.  It is pathologically dangerous because nuclear radiation is a sure cause of cancer and other risks.  More than all, any technical defect or accidental default will inflict national disaster as Chernobyl was in Russia and the narrowly averted Three Mile Island disaster would have been in the U.S.  You know that these great countries have not started any Nuclear Power Plant in the contemporary era, so far as my information goes.  The USA has only 20% Nuclear Power and many countries of the West, except France (and Japan in Asia) relies on this source.  The menace of the atom was highlighted by that great American public interest activist, Dr. Ralph Nader in a book which I have read. Public opinion opposed such a plan in Kerala and the idea was dropped.  Nuclear fission, as distinguished from Nuclear fusion (which is yet undeveloped) is so grave a risk that I humbly submit you should not adopt a policy of reliance on Nuclear Power without deep scientific investigation.  The disposal of nuclear waste without a perennial reuse programme is yet not a scientific or pragmatic process even in the USA and such material is fraught with calamitous consequences.  Indo-US Deal apart, I pray that you consider with anxiety the dependence on Nuclear Power as a major source of energy. The deleterious consequences on public health from our own nuclear plants and nuclear experiments are not revealed to the people because of statutory secrecy.  From the Government’s angle kindly enquire and discover the grave human hazards of radiation before you finalize on a policy of borrowing from the U.S raw material for building up our Energy Estate.

          Some scientists and public interest activists have told me about the harmful results of the currently controversial Nuclear Deal, my role being that of a lay activist communicator with a nationalist conscience, so that you may check upon my apprehension with regard to the nuclear fuel supply from the USA.  America Inc. has huge investments ambition in India making Swaraj a mirage.  Quite apart from these considerations, the dubious Deal has grave dangers.  American inspectors when they land in India in the name of the nuclear deal treaty to be satisfied about our programme, accessibility of dual use technology as well as the impact of this Agreement on our independent Foreign Policy, freedom of action and non-aligned judgment as a sovereign nation are intangible to superficial observers but latently terrible for those who know Big Power stratagems.

          We live in a unipolar world where domination belongs to the U.S whose aggressive President is Mr. George Bush.  Whatever be your sense and sensitivity against a dependencia syndrome, Washington will promote its strategic domestic and foreign policy objectives in Asia.   Be warned, dear Prime Minister, that this global Power can be diabolic in its on hegemonic objectives.  Korea and Vietnam are alarming pages.  India will be reduced to a satellite position if Lord Acton’s statement that ‘Power tends to corrupts and absolute power corrupts absolutely’ is too universal for an American exception.  American propaganda is so powerful an agent to condition naïve minds and dollar-tempted souls that even our bureaucracy including our U.S. Ambassador, may succumb to the pressure of the Yankee lobby.  Information Technology geared to imperial interest may victimize veracity and make it incarnate as convincing mendacity through the process of brainwashing.  I am an admirer of the U.S in many of its achievements and its noble Declaration of Independence, of the great President Abraham Lincoln, John Kennedy and Martin Luther King (Jr.) who were victims of assassination.   Even in the field of jurisprudence celebrated Chief Justices like Marshall and Earl Warren and marvelous judges and jurists have extorted my deep appreciation.  How sublime were Thoreau, Emerson, Walt Whitman and the Chicago Address of Vivekananda as far back as 1893! Harvard, Yale and Stamford are educational wonders and so too a host of other institutions and superlative achievements.  Indeed, the people of the USA in a large majority do not go with President Bush.  So it is that I say that my statement against the suspect Treaty is not induced by any hostility to the USA.  However, to be a realist, you must appreciate how once Prime Minister Nehru in a statement in Parliament, reminded the U.S President Eisenhower that we are not international mendicants to beg for arms.  (This is my failing recollection).  The general impression is that American Power may likely be on the side of Pakistan in case of conflict, taking advantage of the unfortunate differences between our two countries.  Smt. Indira Gandhi, a great leader, found the U.S Seventh Fleet on Pakistan side but the Soviet presence nullified its aggressive support. (Again my dim memory).  Being the sole Super Power, Washington can pressurize us into obedience to its policy, a situation which militates against our anti-imperialist, pro-socialist vision and values.  It is in this broad prospective that I submit your government should investigate with profound care the perilous possibilities of the controversial Nuclear Deal.  Are we not disturbed by the comment of U.S Under Secretary of State for Political Affairs Nicholas Burns, that people should not forget “in the twenty first century the shift in the global situation”.  The Hydel Act, whatever our interpretation, will ultimately bear Washington’s semantic construction.  A progressive friend of mine, who is not a communist wrote to me that “to regard George W. Bush as India’s best bet in the present international scenario is an affront to the world movement against Bush’s policies that has acquired an unprecedented magnitude within the United States itself”.

          Let me candidly admit that I am not a campaigner for or against the Indo-U.S Nuclear Deal, although I have independent views on it.  But reading about the bitter controversies in Parliament on the subject, I thought it fair to inform you, Smt. Sonia Gandhi, Sri. Prakash Karat and the Hon. Speaker Somnath Chatterjee (since the matter is now in the cognizance of the House) about my views in a brief way.  Kindly have the charity and the compassion to consider my views as that of a patriot whose only interest in this matter is the well-being and swaraj value of Indian humanity.  There are moments of crisis in a nation’s life when speech is a duty and silence is guilt.

With kind regards,

Yours sincerely,



         Dr. Manmohan Singh

         Hon’ble Prime Minister of India,

         7, Race Course Road,

         NEW DELHI


‘It is unfortunate that the Civil Nuclear Cooperation Agreement with the United States-which is still under discussion-should have become an object of controversy.  I would, however, like to assure you that the approach we have taken in these negotiations is fully in keeping with our national interests.  As one of the most eminent figures of our country, you will appreciate what I mean.  The ‘Achilles’ heel’ of India‘s future growth potential is the energy deficit.  The likelihood of an energy crunch is already becoming evident, and there is an urgent need to overcome this situation.  We are not well endowed with fossil fuel.  Our coal supplies are hardly unlimited and, unfortunately, are of poor quality.  With growing concerns over GHG emissions, coal cannot, hence, become a major energy source.  We have substantial hydro resources, but there are environmental concerns concerning large dams.  It is this, which made us look at nuclear energy as an alternative source.  For many years, we have remained victims of a discriminatory, iniquitous nuclear regime-almost a form of nuclear apartheid.  The Civil Nuclear Cooperation Agreement with the United States is a manifest attempt on our part to overcome this situation.  We are hopeful that it would enable us to break out of our existing nuclear isolation.  That we would be able to do so without sacrificing our strategic programme, our national pride and our independence, will be no mean achievement.  You can rest assured that under no circumstances, would we compromise our independence of action or alter the contours of our Foreign and Defence policies.  I shall be grateful if you could convey this same assurance to others who may share similar concerns.’

Micro Finance and Neo-liberalism

September 4, 2007

Prior to the introduction of “liberalization” in India in 1991, the provision of rural credit was the responsibility of the banking system. In fact this was one of the stated objectives of bank nationalization. And the banking system did not do too badly in this respect after nationalization. It is true that institutional credit may not have reached the very poor in the agricultural sector or in the rural economy as a whole, but the ratio of agricultural credit to the total credit of the banking system kept rising steadily until the end of the eighties. Since then there has been a complete reversal. The ratio of agricultural credit, strictly defined, to total credit, has declined sharply. But since priority sector lending “norms” are still in place, and this decline violates such “norms”, the government has been trying to “help” the banks to pretend that they are meeting these “norms” by expanding the definition of “agricultural credit” (which now includes all sorts of infrastructure projects).

This is the logic of neo-liberalism. Banks now finance stock market speculation, luxury consumer credit, credit card borrowings, and all other such “credit needs” which are lucrative for them. But they have been withdrawing from their social obligations. Neither the multinational banks, nor even the private Indian banks, were ever concerned about meeting priority sector targets; and the government had been turning a blind eye to their transgressions; but now, in the new ethos of profit-making even the nationalized banks have abandoned social and developmental banking. And their place is supposed to be taken in the current neo-liberal dispensation by NGO-controlled “micro-finance institutions”. Micro-finance in short is not some new innovation superimposed on the existing structure, but it is a replacement for the system of development banking. Instead of banks directly dealing with the borrowers, the NGO-controlled institutions act as intermediaries between the banks and the borrowers. They also collect savings from potential borrowers, and funds from other sources, including foreign funds, for redistribution as credit.

Microfinance institutions have the specific characteristic of being private, especially NGO-controlled. And they are supposed to stimulate “market-led growth”, leading to a privatization of the economy, which is why the World Bank promotes them assiduously. They are presented as being superior to the banking system for the purpose of lending to the poor, on two grounds: lower “transaction costs” and better recovery rates.

The first of these two claimed advantages however is a myth. “Transaction costs” refer to a whole range of administrative costs, namely, the costs of information collection about the prospective borrowers; the costs of screening projects; the costs of monitoring, supervision, and co-ordination; and the costs of collecting dues. Since banks enjoy substantial economies of scale, there is little reason a priori why the NGO-controlled micro-finance institutions should have lower transaction costs; and indeed several studies show that their transaction costs are comparatively much higher than those of the banks, which they cover in two ways: through charging exorbitantly high interest rates, and through the implicit subsidy provided by donors (especially foreign donors).

The second claimed advantage, better recovery rates, is also not firmly established. While some international studies do show high recovery rates, these are usually on very small loans, not given for income-generating projects. On the other hand, an NGO-controlled bank, the SEWA bank in India, has NPA ratios which are no lower than those of the public sector banks. So, when micro-credit institutions cater to needs similar to those met by the banking system, they face similar recovery problems.

An argument is sometimes advanced that micro-credit institutions can give loans without collateral and can have higher recovery rates, because they deal with borrower groups, or the SHGs. Loans given through SHGs to individuals put the onus of recovery on the SHGs, which can be relied upon to repay; and even loans given directly to individuals with the full knowledge and backing of the SHGs put an implicit pressure on the individual borrowers for repayment. This phenomenon is referred to as “social collateral”. Micro credit is supposed to rely on “social collateral” which increases its capacity to lend to the poor and to recover loans from them, as compared to the banking system which insists upon physical collateral.

Not only is the claim about higher recovery rate, however, a dubious one as we have just seen, but even this argument itself is spurious: there is no reason why banks too should not be able to deal with SHGs, which have a family resemblance to co-operatives, and why this should be an exclusive virtue of the NGO-controlled micro-credit system.

The high interest rates paid by the individual borrowers accessing micro-credit are the greatest drawback of this system. The high interest rates, higher than what the banks charge, arise for at least three reasons: first, they arise because, the micro-credit institutions themselves being intermediaries between banks and the borrowers, and having administrative costs higher than those of banks, any substitution of direct bank credit by micro-credit must raise interest rates. Secondly, since success in loan recovery itself is dependent on supervision over credit use by borrowers and on the follow-up of overdue loans, both of which raise administrative costs, to the extent that micro-credit agencies have higher recovery rates, their administrative costs get pushed up for this reason as well, and are covered by higher interest rates. And, finally, this sector is dominated by a host of unscrupulous operators, who are no different from the old moneylenders and who charge moneylenders’ rates which have nothing to do with administrative costs as such.

A NABARD study for Kerala showed that many individuals had made it a business to form SHGs and act as moneylenders to these SHGs on the basis of funds borrowed from the banks. In fact since there is no law against a person belonging to more than one SHG, they went from village to village forming such SHGs and expanding their money-lending empire on the basis of funds borrowed from public sector institutions. Such money-lending activity, masquerading as micro-credit, is of course not confined to Kerala. And in the context of the present agrarian crisis, it has already taken its toll in the form of suicides. In the worst such case reported, which was in Andhra Pradesh, sixty persons had committed suicide for not being able to pay back their micro-credit loans.

Micro-credit, it follows, is at best a fig-leaf to cover the dereliction of social duty on the part of the banks in the era of liberalization. More commonly, however, it represents the return of the old moneylender. Democratic mass organizations must struggle to ensure that banks are made to fulfill their social obligations for which they were nationalized, and that they do not withdraw from giving credit to the rural economy, and in particular to the agrarian economy. Multinational banks or private Indian banks should be made to forfeit their licenses for carrying on business if they are unwilling to meet these obligations. On the sixtieth anniversary of India’s independence, it is only legitimate to demand that everyone should have the right to access institutional credit. Micro-credit can operate, within a system of universal access to institutional credit, by providing even better services; but it cannot be a substitute for institutional credit.

Universal access to institutional credit alone however will not be enough. If peasants and petty producers continue to be engulfed by crisis, then the availability of larger institutional credit, instead of helping them, will only drag the lending institutions into crisis. The provision of universal access to institutional credit must be accompanied, therefore, by steps to overcome the agrarian crisis and the crisis of petty production in general. It is often argued that the overcoming of these crises is impossible without significant productivity increases in these sectors. But before any productivity increase can occur at all, it is necessary that the sector must first survive. For this, assured prices must be given to producers which make these activities remunerative even at the existing levels of productivity.

(Prabhath Patnaik)


Magsaysay Award for the missionary journalist

August 31, 2007

It is heartening to see that Shri. P.Sainath,  Editor, Rural affairs, The Hindu Daily has been presented with the 2007 Ramon Magsaysay Award – regarded as Asia’s equivalent of the Nobel prize, for his contributions to journalism, literature and creative communication arts.

As a  journalist,  he has been championing the cause of the underprevilleged throughout his carreer and still is writing profusely about the agrarian problems.

Sainath, who joined the Hindu in 2004 has presented his readers with a world that belied the giddy accounts of India’s economic miracle. It is his passionate commitment as a journalist that restored the rural poor to India’s consciousness, moving the nation to action.

Sainath discovered that the acute misery of India’s poorest districts was not caused by drought, as the government said. It was rooted in India’s enduring structural inequalities-in poverty, illiteracy, and caste discrimination-and exacerbated by recent economic reforms favoring foreign investment and privatization.

Full version of the citation given to Sainath.


On this occasion, we salute this committed and conscious journalist, a real role model, with all respects and affection. We reproduce below one of his recent articles which we feel should be discussed and deliberated in detail.

The decade of our discontent

P. Sainath

Rural India is a funny place. In 60 years we haven’t managed — except in three States — to push through any serious land reforms or tenancy reforms. But we can clear a Special Economic Zone (SEZ) in six months. In the sixth decade of our independence, structural and other inequalities deepen, and rural India is in big trouble

The first lead story on the front page of a major English daily four weeks ago was striking. A young man from Chandigarh had paid Rs.15 lakh for a ‘fancy’cellphone number. It wasn’t long before the rest of the media got into the act. Soon we saw his parents distributing sweets to mark their son’s achievement. Newspapers editorialised (in front page ‘news reports’) on how this reflected India’s new confidence. Our ‘aggro’ in the period of economic reforms and liberalisation.


It surely reflects something. A class exists to whom it is perfectly natural for a leading Indian magazine to act as luxury scout. Its publisher’s letter tells them that “for $115,000 a box, 500 limited edition Dragon Gurkha cigars are now available. In 80 year old camelbone boxes that once belonged to a Rajasthani ruler.”

The average monthly per capita expenditure (MPCE) of the Indian farm household is a long way from Rs.15 lakh. And further from $115,000. It is, in fact, Rs.503. Not far above the rural poverty line. And that’s a national average, mixing both giant landlords and tiny landholders. It also includes States like Kerala where the average is nearly twice the national one. Remove Kerala and Punjab and the figure gets still more dismal. Of course, inequality is rife in urban India too. And growing. But the contrasts get more glaring when you look at rural India.

About 60 per cent of that Rs.503 is spent on food. Another 18 per cent on fuel, clothing, and footwear. Of the pathetic sum left over, the household spends on health twice what it does on education. That is Rs.34 and Rs.17. It seems unlikely that buying unique cellphone numbers is set to emerge a major hobby amongst rural Indians. There are countless households for whom that figure is not Rs.503, but Rs.225. There are whole States whose average falls below the poverty line. As for the landless, their hardships are appalling.

It is not that inequality is new or unknown to us. What makes the last 15 years different is the ruthlessness with which it has been engineered. The cynicism with which it has been constructed. And the scale on which it now exists. And that’s at all levels, even at the top. As Abhijit Banerjee and Thomas Piketty put it in a paper on “Top Indian Incomes 1956-2000,” “The rich (the top 1 per cent) substantially increased their share of total income [in the reform years]. However, while in the 1980s the gains were shared by everyone in the top percentile, in the 1990s it was only those in the top 0.1 per cent who made big gains.”

“The average top 0.01 per cent income was about 150-200 times larger than the average income of the entire population during the 1950s. This went down to less than 50 times as large by the early 1980s. But went back to being 150-200 times larger during the late 1990s.” All the evidence suggests it has gotten worse since then.

Industry’s hostile response to Prime Minister Manmohan Singh’s meek comments on CEO salaries is just a sign of how entrenched such privilege now is. The editorials of most newspapers blew Dr. Singh out of the water. So it is odd and worth noting, that one of the very best pieces on concentration of wealth in recent times comes from the Executive Director of Morgan Stanley. (The Economic Times, July 9, 2007). “We believe,” writes Chetan Ahya, “that the social pressure arising from widening inequality has increased in the past few years, driven by globalisation and the rise of capitalism.” He finds the “rising social challenge on account of the rise in inequality” a worrying trend. He also finds that “the inequality gap in wealth is even starker … Our analysis indicate an increase in wealth of over $1 trillion (over 100 per cent of GDP) in the past four years — and that the bulk of this gain has been concentrated within a very small segment of the population.” Mr. Ahya rightly sees “social and political upheaval,” as the outcome of some directions we are taking. As in the case of farmers and SEZs.

Structural inequalities

All this comes atop existing structural inequalities in rural India. In 60 years, we never resolved the issue of land. Nor those of forests and water rights. Or of appalling levels of caste and gender discrimination. We never really addressed our structural or other inequalities. Now we’re working hard at making them worse.

Even at the start of the reforms period, the bottom half of rural households accounted for less than 3.5 per cent of total land ownership. The top ten per cent of households owned well over 50 per cent. That’s for all lands as a whole. If we took into account only irrigated land, the picture is more frightening. Add productive assets, and it gets still worse. In one estimate, over 85 per cent of rural households are either landless, sub-marginal, marginal or small farmers. Nothing has happened in 15 years that has changed that situation for the better. Much has happened to make it a lot worse.


The direction of policy on farming — central to rural India — is simple in its main idea. To take agriculture out of the hands of farmers and place it firmly in the hands of large corporations. Every move, every policy, only pushes this idea further forward. We are witnessing the largest displacement in our history. It is not happening in a dam or a mining project. It’s happening in agriculture. And we haven’t a clue yet what we will do with the millions we’re busy shoving off the land. This is not being done with tanks and bulldozers. We just make farming impossible for small holders. And we create no options for those whose livelihoods we so cheerfully destroy.

The early decades were at least decades of hope. There were improvements, significant if not impressive. In literacy, life expectancy, and other human development indicators. There was a sense that “India lives in her villages.” The slogan that caught the nation’s imagination, even if in wartime, was ‘jai jawan, jai kisan.’ The farmer was seen as carrying the nation’s future on his or her shoulders. (More normally ‘his’ since women are to this day denied property rights and not seen as ‘farmers.’) At least, that was the image.

Sixty years on, rural India is a shambles. The most severe agrarian crisis since the eve of the Green Revolution rages on, but does not hold elite or media interest for long. Farm incomes have collapsed. Hunger has grown very fast. Public investment in agriculture shrank to nothing a long time ago. Employment has collapsed. Non-farm employment has stagnated. (Only the National Rural Employment Guarantee Act has brought some limited relief in recent times.) Millions move towards towns and cities where, too, there are few jobs to be found. Many move towards a status that is neither farmer nor worker. A huge pool of menial labour or domestic servants. (In one estimate, there are close to two lakh girls from Jharkhand in Delhi alone, in work of this kind.)


A credit squeeze has pushed lakhs of farmers into bankruptcy. This after encouraging, even pushing them towards high-cost cash crop cultivation with its attendant risks. In Kerala of 2003-04, raising an acre of vanilla cost 15 to 20 times what it took to raise an acre of paddy. But farmers were asked to rush in regardless. The price of vanilla has sunk and the credit flow has stopped. And several such growers have taken their own lives.

We fail to invoke even those measures the blatantly unfair WTO allows us; this means the prices our own farmers get for products like cotton collapses by the season. The huge subsidies attached to U.S. cotton — over a million bales dumped on this country in just 2001-02 — are not challenged. Duties are not raised. We’re glad to trade the interests of our poor for another 30,000 H1B visas.

The government tells us over 112,000 farmers have committed suicide since 1993. A gross underestimate but the figure is bad enough. These are suicides driven by debt. And the indebtedness of the peasantry, so the National Sample Survey tells us, has almost doubled in the past decade.

It is not as if there is no resistance, no voices raised. The people have spoken to their governments and all of us in election after election. In protest after protest. And good things, too, have happened. Like the NREGA. But the larger direction is overwhelming. And it is one that races towards catastrophe, disaster having already been achieved. We, however, are more interested in the cellphone number worth Rs.15 lakh. And maybe there’s a point in that. The ‘fancy’ number was purchased on borrowed money. Our orgy in inequality plays out on borrowed time.

(courtsey: The Hindu Daily dated 09 August 2007, Indiatogerther)


August 26, 2007

Ashis Sen

Com.Ashis Sen is no more.

No words can be more painful, more heart-rending, more devastating to Reserve Bank employees, vast section of bank employees and trade union fraternity than these.

He suffered a massive cerebral attack in the early morning of 22nd August 2007 and was admitted to a city hospital. He breathed his last at 1.30a.m on 24th August 2007. He leaves behind his wife, his silent companion in struggles, Smt.Archana Sen, son and daughters.

Com.Ashis Sen was born in September 1922 – the same year the “Currency Association” was formed in the then Controller of Currency Office at Calcutta, which later became Reserve Bank Employees’ Association. Com.Ashis Sen and the trade union movement of Reserve Bank Employees are thus truly synonymous. Coming from a background of freedom movement and trade union movement – his maternal uncle Bhupati Mazumder was a renowned freedom fighter and his father Ajith Sen was the pioneer and founder of trade union movement in State Bank of India. Com.Sen himself, an activist of anti-imperialist students’ movement of pre-independent India, joined Reserve Bank in 1944.

Imbued by the surging freedom movement of the early forties, Com.Sen with a few other colleagues of his, transformed the then quiet and subdued Reserve Bank Employees Association, into a militant class conscious trade union body and integrated it with the general democratic and workers’ movement. That was a courageous and sustained effort, fraught with risks, but he was undaunted. Reserve Bank Employees and the Association will forever remain indebted to Com.Ashis Sen, who as the organiser of collective effort, led them from the front through trials and tribulations, through stormy situations, brought glories and honour to the movement. He was the Secretary RBEA, Calcutta from 1949 to 1955, its Vice-President and President for long years, General Secretary of All India Reserve Bank Employees’ Association from 1968 to 1990, and then Vice-President and currently he was the advisor.

In late forties and early fifties Com.Sen had a leading role in forming and shaping up the All India Bank Employees’ Association. Along with Coms.Naresh Pal, Pravat Kar, H.L.Parwana, Montu Biswas, Com.Sen had significant contributions for rallying bank employees with AIBEA.

Com.Sen had been the founder General Secretary of Bank Employees’ Federation of India (BEFI), then its President and was currently its advisor. Under the inspiring guidance of Com.Naresh Pal, he laid the foundation of a strong militant, class conscious bank employee’s organisation. He was the pioneer architect of militant unity of bank employees under the banner of UFBU.

He was the founder President of All India Regional Rural Bank Employees Association (AIRRBEA) and guided the Gramin Bank employees till his last days.

Com.Ashis Sen had been the leader of trade union movement as a whole. He has always taught us to look beyond the confines of one’s own trade union and extend fraternal support to others in struggle. Unions of various sectors sought his guidance, his counsels, which he provided amply.

He was arrested twice, on 4th January 1956 on the eve of a countrywide strike call by AIBEA and on 2nd May 1979 while leading anti-computerisation movement in RBI Mumbai.

In the year 1966, RBI management dared to serve him show-cause notice to remove him from trade union movement. The employees rose in total opposition, struck work for 10 days and forced the management to rescind the show-cause notice. It was a memorable event in the annals of trade union.

In recognition of his immense contribution to bank employees and country’s trade union movement, he became a member of the Rajya Sabha from 1987 to 1993 and in that forum he fought for the workers and trade unions.

Com.Sen’s contribution can not be narrated in a few words. Suffice it to say that whatever we are today and whatever we aspire to be are due to Com.Sen. Suffice it to say that we could afford to make mistakes because Com.Sen was there to rectify us. Now he will guide us through the lesson he left for us.

Com.Ashis Sen is no more. However, painful it may be, we have to continue our work for strengthening the trade union movement, the working class movement, the democratic movement for that is what he has done strenuously for more than six decades, till his last days. Age and failing health could not overpower his eagerness to attend any important meeting of RBEA/AIRBEA/BEF/BEFI and other important fora. As always, even in his last days, he guided such meetings with sharpness and vision that was exclusively his, borne out of his vast experience.

As Com.Sen has bequeathed his body for medical science, it will be handed over to NRS Hospital, Kolkota on August 27, 2007.

(Samir Ghosh, General Secretary, AIRBEA)


A tribute to the departed leader

P.Sadasivan Pillai, President, BEFI

My association with Ashis Sen, the legendary leader of Bank employees’ movement started way back in 1977. I heard his name for the first time in 1972 from a cousin of mine who was working as an officer in Reserve Bank of India , Chennai . During a personal discussion, when he was persuading me to take promotion,  I told him that as I’m active in bank employees’ trade union movement I’m not interested in taking promotion. To this, he reacted “If you want to see a trade union leader you should meet Ashis Sen, he is not just a union leader but an institution by himself”. He added that though Ashis Sen himself was an officer, he was not the leader of Officers’ Association, instead  he was the leader of workmen organization. Such is the regard and respect he commanded among RBI officers and employees.

I got the chance to interact with him for the first time during a meeting in 1977. Frankly speaking, I was not very impressed with the thin fragile man clad in white Bengali traditional clothes in our first encounter. Later on, when our acquaintance became closer and deeper I could feel that behind the cool, calm, smiling face there is a raging sea roaring against the enemies of working class.

His contribution to Reserve Bank employees’ movement needs no description. He was the general secretary of All India Reserve Bank Employees Association from 1968. He was also the founder President of All India Regional Rural Bank Employees Association (AIRRBEA). His indomitable spirit to fight and the strenuousefforts he had taken in placing strong arguments and presentations before the ‘Obul Reddy’ commission has helped RRB employees to achieve parity with commercial bank employees.

He was a Rajyasabha member during the period 1987-1993. He was one of the few MP’s who was not having a car. Most of the days he used to walk to the Parliament and back. I had occassions to walk with him to the parliament. His simple way of living , which endeared him to thousands of bank employees, is one thing that has become very rare these days. His mode of conveyance in Kolkata was the crowded buses, most of the times. When he retired from RBI he was not having a residence of his own, to move out of the quarters. Later, his comrades could find a small one bedroom flat for him in which he lived till he left us.

Comrade Ashis Sen was a man with immense humour sense. Despite being a senior leader, he used to mix up with young comrades as equals.  As my cousin had rightly remarked, he was not a leader of Bank employees but a legend and an institution by himself. The only way by which we can pay tribute to him is by following his simple way of  life and by dedicating ourselves for strengthening the working class movement.