Tuesday, August 11, 2009

India 9 percent Inclusive Growth Issues and Challenges

India Growth Story

In the previous post I have written about farmer’s suicide and status of poverty in India. In this post I am talking about how it can be managed and reduced.

Seasonal Rainfall Scenario (1 June to 29 July)

The cumulative seasonal rainfall for the country as a whole during this year’s monsoon has so far been 19% below the Long Period Average (LPA). Progressive cumulative rainfall departure from LPA during monsoon season 2009 for the country as a whole and over the four broad homogeneous regions of India are given below
Out of 36 meteorological sub-divisions, the cumulative rainfall during 1 June to 29 July 2009 was excess/normal in 17 and deficient in 18 and scanty over 1 (West Uttar Pradesh) meteorological sub-divisions.

Can we Change Monsoon?

No, we can’t do anything to it. It was like this for all the time, it is becoming more and more unpredictable so because of Global Warming.
This reminds of what the former Finance Minister of Pakistan and the author of the UNDP's Human Development Report, the late Mahbub-ul-Haq (who was a personal friend of Dr Manmohan Singh) had once remarked, ''We were wrongly taught that we should take care of GDP and it will automatically take care of poverty. Let us reverse it. We need to take care of poverty and it will automatically take care of GDP". And the World Bank reluctantly acknowledged, though belatedly, ''the gap between some of India's largest and poorest states exhibit slow progress in human development indicators; low growth rates particularly in the agricultural sector. If the present trends continue, the bulk of the poor in these states will be unable to participate in future growth.'' Like Mr. Chidambaram, Mahbub-ul-Haq too refused to accept the stark reality – economic growth will not reduce poverty and deprivation.

India Growth Story

India’s economy has come a long way, especially since the start of this century. It is impossible to ignore India’s rise in every field.
GDP at market prices has increased from US$ 20 billion in 1950-51 to US$ 912 billion in 2006-07 and is expected to cross a trillion dollars in the current year. In terms of purchasing power parity (PPP), India’s GDP at US$ 4 trillion in 2006-07 accounted for 6.3 per cent of global GDP.
Average annual economic growth, which had been constant and tardy at 3.5 per cent during the first thirty years of Independence, increased to 5.7 per cent during the 1990s and, since 2003-04, the average rate has increased further to 8.6 per cent. 2006-07, in particular, was a splendid year with the GDP growing at 9.4 per cent.

This growth has not been jobless growth. During 1999-2000 to 2004-05, India added to its workforce about 12 million people each year. During this period, the rate of growth of employment was 2.9 per cent per year.

Present Status of Poverty and Employment in India

Protectionism, self-reliance and village republics are not enough to lift 1.3 billion of the world’s poor out of absolute poverty. There is sufficient empirical evidence to demonstrate that trade can be a powerful catalyst for poverty reduction, that free trade with fairer policies will benefit the world's poor more than aid or charity. The problem is that World Trade Organization negotiations and global trade are far from free and fair, with the balance skewed in favor of powerful trading blocs like the US and EU and against poorer nations

Employment Generation

The latest Economic Census of India 2005 reports that rural India witnessed a higher rate of employment-generation in recent years compared to urban India
Rural India has outshone its urban counterpart in generating employment, reports the latest Economic Census of India 2005. In the average annual growth in employment since 1999-2000, with employment growth rates of 3.33%, rural areas have outperformed the urban sector, which registered a rate of 1.68%, according to provisional results of the census. Interestingly, the results also show that 42.12 million enterprises are engaged in various economic activities other than crop production and plantation.
If poverty reduction is an explicit over-riding concern, any programmed, project or policy must be evaluated for its effects on this, which means assessment of its impact on poorer populations in terms of:
productive employment opportunities

access to and price of basic food requirements

access to basic housing/shelter requirements

access to and price of basic infrastructure services, including power, water, sanitation

access to and price of health services

access to and price of education services

access to and voice in the institutions of governance and administration

Focusing on all these indicators in turn imply that poverty is viewed as a multi-dimensional phenomenon, rather than simply in terms of nutritional deprivation, and the effects of material poverty on social exclusion are also recognized.

Trust on Agriculture

Studies by the Ministry of Agriculture have clearly demonstrated that farm incomes have fallen in the past five years. Rice farmers in West Bengal for instance earn less by 28 per cent in 2002-03 than what they earned in 1996-97. Incomes of sugarcane farmers decreased in Uttar Pradesh by 32 per cent and in Maharashtra by 40 per cent. Farm incomes of north Indian farmers eroded by 10 per cent on an average. The sharp decline in farm incomes is happening at a time when incomes in the urban areas are on an upswing. Add to it the declining consumption of cereals in real terms, the message is crystal clear. For bulk of the population, the capacity to buy food is eroding fast. This is leading to worsening of poverty and thereby leading to acute malnutrition. The Economic Survey, presented a day before the Budget, clearly stated that cereal consumption within a year had fallen drastically, indicating worsening poverty levels.
The HDI for India is 0.619, which gives the country a rank of 128th out of 177 countries with data

This year’s HDI, which refers to 2005, highlights the very large gaps in well-being and life chances that continue to divide our increasingly interconnected world. By looking at some of the most fundamental aspects of people’s lives and opportunities it provides a much more complete picture of a country's development than other indicators, such as GDP per capita. Figure illustrates those countries on the same level of HDI as India can have very different levels of income.
Of the components of the HDI, only income and gross enrolment are somewhat responsive to short term policy changes. For that reason, it is important to examine changes in the human development index over time

One suicide every 8 hours

Vidarbha remains a grim statistic. One suicide in every eight hours. More than half of those who committed suicide were between 20 and 45, their most productive years. The Maharashtra government says as many as 1920 farmers committed suicide between January 1, 2001 and August 19, 2006. Nearly 2.8 million of the 3.2 million cotton farmers are defaulters, reports Jaideep Hardikar

India's Growth - Luxury for the rich, squalor for the poor

"India is one land, but the rich and poor exist on apparently different planets. Virtually unreported are some awful daily realities: the rate of malnutrition in children under five is a shamefully high 45%. Less than a third of India's homes have a toilet and most women have to wait until the dark of evening to venture out to answer the call of nature. The talk of making poverty history sounds hollow in India, a land which is home to a third of the world's poor and where some 300 million people live on less than $1 a day."
Even in macroeconomic terms India is still poor and small. It holds a sixth of the world's population but accounts for just 1.3% of world exports of goods and services, and 0.8% of foreign direct investment flows.
Even the investment that is trickling in is becoming more and more capital intensive rather than labour intensive. Hence this whole propaganda that investment creates more jobs is being proven to be utterly false in India.
In urban India this whole phenomenon of liberalization is playing havoc with city dwellers. As India's famous novelist and social activist Arundhati Roy put it, "This project of corporate globalization has created a constituency of very rich people who are very thrilled by it. They do not care about the hawkers being cleared from the streets or the slums that are disappearing overnight. India is not coming together but coming apart because liberalization has convulsed the country at an unprecedented unacceptable velocity."
Now half of Delhi's 14 million inhabitants live in slums and 18,000 structures outside of slum clusters have been deemed illegal. But if this capitalist aggression is devastating the lives of the workers and the urban poor, it has had a more devastating effect in the villages where 70% of India's population lives. As Roy says, "Where India does not live, it dies."
There have been reports of the phenomenon of endemic farmer suicides across India. In some states it worse than in others. The arrival of new pesticides, genetically modified seeds and swanky tractors that soak up increasingly expensive fuel have pushed up the cost of production.

First cousins: The ties between rural and urban India

At 27.8% of the total population, India’s level of urbanisation remains quite low. But that’s still 285 million urban citizens, a number that would constitute the fourth-largest nation in the world. To feed these ever-consuming cities electricity, water and natural resources, the habitats of rural India are becoming more and more depleted, forcing further migration into the cities
Thus, as urban studies scholars such as Amitabh Kundu have time and again pointed out, the level of urbanization in India actually remains quite low even though its contribution to the national economy has become extremely high--calculated at 60% in 2001.
But unfortunately, a hard-headed study of urban habitats around the world reveals that their goals may just not be achieved. And this could have everything to do with the situation of the 745 million rural Indians that shadow the horizon of all Indian cities. A shadow that may darken over a period of time when one finds that to feed the ever-consuming cities with electricity, water and natural resources, the habitats of rural India gradually become more and more depleted, forcing larger and larger numbers to migrate to cities, thereby further straining resources, especially since all the existing policies are doing little to absorb the needs of the urban poor.

Commitment to reduce Poverty Is Lacking

The ministry of water resources had demanded Rs 4,500 crore for the completion of major irrigation projects in the coming Budget.
The state governments' failure to complete irrigation projects has led to an escalation of their combined cost by close to a whopping one lakh crore rupees. According to the Planning Commission, 383 irrigation projects in 23 states have spilled over from the Ninth Five-Year Plan to the tenth plan.These projects were to irrigate more than 20 million hectares, reducing the farmers' dependence on the monsoon. By the end of the ninth plan, only 35 per cent of the area was covered. The delay in implementation is attributed to several factors. For one, the allocation to the sector in the Union budget has been coming down, point out sources. Another reason is that the number of irrigation projects has been increasing over time, without the earlier ones getting completed.

Agriculture as Thrust Area

Agriculture plays an important role in the rural economy of India. This sector provides gainful employment as well as raw materials for a large number of industries in the country. Of late, amid economic reforms and trade liberalization, considerable changes have been noticed in this sector. The reform process introduced in the early 1990s failed to recognize the crucial importance of this sector due to which it has faced serious difficulties. These difficulties manifested in a variety of forms like loss of livelihood, consequent decrease in purchasing power of the rural masses, and a steady increase in input prices crippling the agricultural producers. Complete failure of land reform programmes in turn resulting in a distorted land holding pattern, the crisis in this sector during the post-liberalisation has aggravated.
Looking at the core concerns of this sector, the growth of this sector in terms of increased public investment is of immense necessity at this juncture to revive the fate of the rural economy of India.
Looking at the expenditure pattern of the present government towards agriculture and allied activities, the share of agriculture and allied activities from total expenditure and GDP declined drastically to 10.37 percent and 1.64 percent respectively compare to the previous budget (2008-09 RE). The obvious conclusion from this expenditure trend shows how committed is present UPA government at the centre towards reviving the rural economy of India as more than 52 percent of the total population of India depends on agriculture as their means of livelihood.
Graph-1: Percentage Distribution of Plan Allocations in Agriculture and Allied Activities Since the Seventh Five Year Plan
Source: Compiled from the data given in Economic Survey, 2007-08, GoI

Plan expenditure shows the commitment of the government towards the overall development of that sector over the plan period. Share of plan investment (both Center and States/UTs) in agriculture sector has been declining since 1985. Declined share of investment in agriculture shows that less priority has been accorded to this sector. During the Seventh Five Years Plan, the share of plan investment in agriculture and allied activities out of total plan investment was 5.8 % and this got reduced to 3.7 % in the proposed Eleventh Five Year Plan.
The Solution
There can’t one single pill which can solve the Problem, we need step by step approach. And first of this step is Reducing dependence on Rain fed Farming and Monsoon

Step 1

Water Conservation

  • Farm Level

  • Village Level

  • Taluka Level

  • State Level

  • National Level


(TBS) built many check dams in Alwar district, in the 503 sq km watershed of the 45-km-long Arvari river some 238 water harvesting structures had been constructed by the mid-1990s by the 70 villages located within its watershed. The work started in 1986 and, lo and behold, the Arvari, till then a drain that flowed during the monsoon did not dry up but slowly became a perennial river. In 1990, it had a flow till October and, by 1995, it had become perennial. tbs now lays claim to revival of five rivers.
Hydrogeologist R N Athavale who visited the Arvari watershed has made the following estimates based on his experience to explain the revival of rivers. Earlier, only 15 per cent of the rainfall would go into the soil 5 per cent becoming soil moisture and about 10 per cent going deep into the ground, most of it below the bottom of the wells and the level of the Arvari bed because of the depleted groundwater reserve. Therefore, only 5 per cent of the rainfall would slowly seep into the Arvari and villagers could use just about 1 per cent for drinking and irrigation. Now, with check dams, 35 per cent goes into the soil instead of 15 per cent. As a result, the monsoonal runoff to the Arvari has dropped from the earlier 35 per cent of the rainfall to only 10 per cent. But an estimated 22 per cent of the total rainfall now seeps into the Arvari from the recharged groundwater reserve in the post-monsoonal months to give it a perennial flow. The villagers themselves now use about 3 per cent of the total rainfall that falls in the watershed with which they can take two crops a year.

Friday, August 7, 2009

Importance of Ethics in Knowledge Economy


Economy based on creating, evaluating, and trading knowledge. The knowledge economy is a term that refers either to an economy of knowledge focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge technologies to produce economic benefits.

Various observers describe today's global economy as one in transition to a "knowledge economy", as an extension of an "information society". The transition requires that the rules and practices that determined success in the industrial economy need rewriting in an interconnected, globalized economy where knowledge resources such as know-how and expertise are as critical as other economic resources.

A key concept of this sector of economic activity is that knowledge and education (often referred to as "human capital") can be treated as one of the following two:

§ A business product, as educational and innovative intellectual products and services can be exported for a high value return.
§ A productive asset

Can be defined as

“The concept that supports creation of knowledge by organizational employees and helps and encourages them to transfer and better utilize their knowledge that is in line with company/organization goals”

Driving forces
Commentators suggest there are various interlocking driving forces are changing the rules of business and national competitiveness:

§ Globalization — markets and products are more global.
§ Information technology, which is related to next three:
¨ Information/Knowledge Intensity — efficient production relies on information and know-how; over 70 per cent of workers- in developed economies are information workers; many factory workers use their heads more than their hands.
¨ New Media- New media increases the production and distribution of knowledge which in turn, results in collective intelligence. Existing knowledge becomes much easier to access as a result of networked data-bases which promote online interaction between users and producers.
¨ Computer networking and Connectivity – developments such as the Internet bring the “ Global Village” ever nearer.

As a result, goods and services can be developed, bought, sold, and in many cases even delivered over electronic networks.
¨ Knowledge enhanced products or services can command price premiums over comparable products with low embedded knowledge or knowledge intensity.
¨ Pricing and value depends heavily on context. Thus the same information or knowledge can have vastly different value to different people, or even to the same person at different times.
¨ Knowledge when locked into systems or processes has higher inherent value than when it can "walk out of the door" in people's heads.
¨ Human capital — competencies — are a key component of value in a knowledge-based company, yet few companies report competency levels in annual reports. In contrast, downsizing is often seen as a positive "cost cutting" measure.
¨ Communication is increasingly being seen as fundamental to knowledge flows. Social structures, cultural context and other factors influencing social relations are therefore of fundamental importance to knowledge economies.

Knowledge, productivity, education, and intellectual capital were all regarded as exogenous factors that are, falling outside the system. New Growth Theory is based on work by Stanford economist Paul Romer and others who have attempted to deal with the causes of long-term growth, something that traditional economic models have had difficulty with.

Enhancing human capital is critical for GDP growth
But sustained GDP growth doesn't just happen. In order to make investments in technology, a country must have sufficient human capital. Human capital is the formal education, training and on-the-job learning embodied in the workforce.

What is the knowledge economy? "A knowledge-driven economy is one in which the generation and exploitation of knowledge play the predominant part in the creation of wealth" (United Kingdom Department of Trade and Industry, 1998). In the industrial era, wealth was created by using machines to replace human labour. Many people associate the knowledge economy with high-technology industries such as telecommunications and financial services.

More than 60% of US workers are knowledge workers

Knowledge workers are defined as "symbolic analysts", workers who manipulate symbols rather than machines. They include architects and bank workers, fashion designers and pharmaceutical researchers, teachers and policy analysts. In advanced economies such as the US, more than 60 per cent of workers are knowledge workers.

What Is Knowledge?
Unlike capital and labour, knowledge strives to be a public good (or what economists call "non-rivalrous"). Once knowledge is discovered and made public, there is zero marginal cost to sharing it with more users. Secondly, the creator of knowledge finds it hard to prevent others from using it. Instruments such as trade secrets protection and patents, copyright, and trademarks provide the creator with some protection.

Know-why and know-who matters more than know-what

There are different kinds of knowledge that can usefully be distinguished. Know-what, or knowledge about facts, is nowadays diminishing in relevance. Know-why is knowledge about the natural world, society, and the human mind. Know-who refers to the world of social relations and is knowledge of who knows what and who can do what. Knowing key people is sometimes more important to innovation than knowing scientific principles. Know-where and know-when are becoming increasingly important in a flexible and dynamic economy. Know-how refers to skills, the ability to do things on a practical level.

Knowledge gained by experience is as important as formal education and training
The implication of the knowledge economy is that there is no alternative way to prosperity than to make learning and knowledge-creation of prime importance. There are different kinds of knowledge. "Tacit knowledge" is knowledge gained from experience, rather than that instilled by formal education and training. In the knowledge economy tacit knowledge is as important as formal, codified, structured and explicit knowledge.

The Importance of Intellectual Capital
Intellectual capital is a firm's source of competitive advantage

To become knowledge driven, companies must learn how to recognise changes in intellectual capital in the worth of their business and ultimately in their balance sheets. A firm's intellectual capital - employees' knowledge, brainpower, know-how, and processes, as well as their ability to continuously improve those processes - is a source of competitive advantage.

The Importance of ICT
ICT releases people's creative potential and knowledge

What about information and communication technologies (ICT)? ICT are the enablers of change. They do not by themselves create transformations in society. ICT are best regarded as the facilitators of knowledge creation in innovative societies (OECD, 1996). The new economics looks at ICT not as drivers of change but as tools for releasing the creative potential and knowledge embodied in people.

The New Economics of Information
The rate of technological change has greatly increased over the past thirty years. Three laws have combined to explain the economics of information (Gilder, 1994). Moore's Law holds that the maximum processing power of a microchip at a given price doubles roughly every 18 months. In other words, computers become faster, but the price of a given level of computing power halves. Gilder's Law - the total bandwidth of communication systems will triple every 12 months - describes a similar decline in the unit cost of the net. Metcalfe's Law holds that the value of a network is proportional to the square of the number of nodes. So, as a network grows, the value of being connected to it grows exponentially, while the cost per user remains the same or even reduces.

While Metcalfe's Law has been applied to the Internet, it is also true of telephone systems. Gordon Moore first formulated Moore's Law in the early 1970s. There can be no doubt that the cycle of technology development and implementation is accelerating and that we are moving inexorably onward, out of the Industrial Age and into the Information Age.

Human Capital and Knowledge Management
The emergence of the global economy, monumental improvement in information and communication technology, and the emergence of the knowledge economy are among the forces that are resulting in the transforming the Human Resources (HR) function. There is a growing consensus that human capital (HC) is critical to an organization’s success and that the HR focus must be more strategic in the new knowledge-based economy (K-economy) era. Knowledge economy and emphasis on HC provides opportunity for HR function to fundamentally alter its role in the corporation and become true value-adding partners. To achieve this HR, must understand the most valuable of organisational knowledge is embedded in the HC and it must creatively aid in its sustainable exploitation.

The importance of HR and their management is ever more critical to organizations in the K-economy. Modern organizations are under relentless pressures to change. It is argued that organizations had to focus on the value of investments in HR as a major source of competitive advantage (Guest, 1990; Schuler & Jackson, 2005) in the face of structural changes in the organizations. HR are seen as the foremost intangible assets which composes a firm’s core competence and crucial to solving organizational problems and increasing performance (Rowley & Saaidah, 2007). This raises the question of how HR should be managed in the context of the K-economy to generate superior value including the issues organisational architecture of HR management (HRM) function.

The new strategic roles require a major shift to managing organizational capabilities, managing relationships, and managing learning and knowledge (Coates, 2001; Lengnick-Hall & Lengnick-Hall, 2003; Saint-Onge, 2001; Ulrich, 1997). Gloet (2004) submitted that HRM the revitalisation of the HR function requires the changes in roles, responsibilities, strategic focus, and learning. The new HR roles with particular reference to the knowledge economy have been outlined by Lengnick-Hall & Lengnick-Hall (2003) as one of HC steward, knowledge facilitator, relationship builder, and deployment specialist. Adequate HC must be channelled into the organisation with new competitive arrangements that caters the changing needs of the k-workers. To develop and exploit knowledge in an ever changing environment, HC must be constantly refurbished through active and ongoing individual, group and organisational learning Fitz-enz (in Chatzkel, 2002). Traditional organised and formalised learning is necessary but highly inadequate to cope with the learning needs in a k-economy. Additionally, HR must seek to develop relationship with not only the internal stakeholders but also supplier, intermediaries, buyers, and regulators to facilitate capabilities are distributed across these networks to maintain quality of services. Finally, HR, according to Lengnick-Hall and Lengnick-Hall (2003) must be able to deploy resources across networks to maintain service levels by process redesign and also improvements.

In the K-economy, HR and HRM will face a number of challenges. Firstly, HR must face the rather daunting task of revising and causing the revision of the conventional mental models and paradigms of work and workers. According to Senge (1995), the mental models underpin cognition, affect and action. Unless, the paradigms are changed, the old HR will not have an easy time transforming the organisation for the new economy. In the K- economy, the new HC i.e. the K-workers must be reconceived. The inappropriability of the knowledge embodied in the HC requires new forms of control and motivation (Soo, Devinney, Midley & Deering, 2002). The meaning and understanding of work must be accordingly revised. Active advocacy may be required to ensure the legal and political institutions recognise and facilitate the new management.

Secondly, HRM will be challenged to share the functional knowledge of and about the HR systems with the rest of the organisation. Functional units with organisations are repositories of both specialized explicit and tacit knowledge that collectively forms the store of organisational knowledge. The bane of knowledge management (KM) in most organisations is the lack of sharing and exchange of this critical information with others within the organisation. Departmentalism and functional silos have limited the contribution of various functional knowledge to business success. Strategic HRM calls for greater networking between HR and line units within organisations to facilitate the transfer of knowledge in both directions. Strategic HRM (SHRM) proponents have urged HR to maintain active link with the line to appreciate and develop amore business oriented mindset, hitherto missing in the professionally driven and introverted HR function (Guest, 1990; Wright, McMahan, Snell, & Gerhart, 2001). Knowledge transfer of the tacit type require interaction and exchange as the social context is key to effective transfer of HR or line knowledge (Roberts, 2001:102).

Thirdly, as part of the overall development of a strategic role and mindset, HR is advised to empower the line units with HR decisions (Ulrich, 1997). To make this empowerment work, HR must not only render many aspects of the functional knowledge explicit for line units to absorb the new knowledge efficiently (i.e. manuals, SOP, guidelines etc), it must also seek to transfer the corresponding tacit knowledge (Polanyi, 1966). Empowerment will falter if the empowered feel ill-prepared to reliably execute the HR authority devolved to them (Hazman, 1999). Effective transfer of explicit and also the tacit aspects of HR knowledge will ameliorate anxiety of about the new roles and develop greater willingness toward empowerment (Zahra & George, 2002). The exchange of the tacit elements will also diminish fears that the line units will place production and business needs ahead of human care and compassion and risk running foul of the statutory requirements.

Fourthly, HR must develop systems, policies and practices that cohere with the knowledge strategy of the new economy organisations. Lee’s (1999) taxonomy of HR policies for knowledge based firms provides a conceptual guide for practitioners. Haesli and Boxall’s (2005) case study of the complementarity of HR policies and knowledge strategy (codification vs. personalisation) is yet another example of HR facilitating a KM strategy.

Why are ethics important in Knowledge Economy

Recent events in corporate America have demonstrated the destructive effects that occur when the leadership of a company does not behave ethically. One might wonder why highly educated, successful, and business savvy corporate professionals at Enron, Tyco, WorldCom, and Adelphia got themselves into such a big mess. The answer lies in a profound lack of ethics.

Running a business ethically is good for business. However, "business ethics" if properly interpreted means the standards of conduct of individual business people, not necessarily the standards of business as a whole.

Applying ethics in business makes good sense. A business that behaves ethically induces other business associates to behave ethically as well. If a company (or a manager) exercises particular care in meeting all responsibilities to employees, customers and suppliers it usually is awarded with a high degree of loyalty, honesty, quality and productivity.

The best way to promote ethical behavior is by setting a good personal example. Teaching an employee ethics is not always effective. One can explain and define ethics to an adult, but understanding ethics does not necessarily result in behaving ethically. Personal values and ethical behavior is taught at an early age by parents and educators.

Ethics are important not only in business but in all aspects of life because it is an essential part of the foundation on which of a civilized society is build. A business or society that lacks ethical principles is bound to fail sooner or later.

Ethics refers to a code of conduct that guides an individual in dealing with others. Business Ethics is a form of the art of applied ethics that examines ethical principles and moral or ethical problems that can arise in business environment. It deals with issues regarding the moral and ethical rights, duties and corporate governance between a company and its shareholders, employees, customers, media, government, suppliers and dealers. Henry Ford said, "Business that makes noting but money is a poor kind of business".

Ethics is related to all disciplines of management like accounting information, human resource management, sales and marketing, production, intellectual property knowledge and skill, international business and economic system. As said by Joe Paterno once that success without honor is an unseasoned dish. It will satisfy your hunger, but won't taste good. In business world the organization's culture sets standards for determining the difference between good or bad, right or wrong, fair or unfair.
Corporate Governance in Knowledge Economy
Corporate governance may be regarded as the moral or ethical or value framework under which corporate decisions are taken. Corporate managements generally have been concerned with using the physical, financial and human resources available with the management to get the best possible results in the interests of the stakeholders and, particularly, shareholders. It is quite possible that in the effort at arriving the best possible financial results or business results there could be attempts at doing things which are verging on the unlawful or even unlawful. There is also the possibility of grey areas where an act is not unlawful but considered unethical. These raise moral issues.

The basic issue of what will be the ethical issues in corporate governance requires absolute integrity in all operations. Integrity in the wider sense covers:
· Financial integrity
· Moral integrity
· Intellectual integrity

In corporate governance financial integrity that assumes greatest importance. This would mean that the directors and all concerned should be open and straight about issues where there is conflict of interest involved in financial decision making. When it comes to even the purchase procedures, there is need for greater transparency.

Corporate governance and ethical behaviour have a number of advantages. Firstly, they help to build good brand image for the organisation. Once there is a brand image, there is greater loyalty, once there is greater loyalty, there is greater commitment to the employees, and when there is a commitment to employees, the employees will become have more incentive which drives creativity. In a competitive environment, creativity is vital to get a competitive edge.

Business Definition for: Corporate Social Responsibility

A voluntary approach that a business enterprise takes to meet or exceed stakeholder expectations by integrating social, ethical, and environmental concerns together with the usual measures of revenue, profit, and legal obligation

Corporate Social Responsibility - What does it mean?
CSR is about how companies manage the business processes to produce an overall positive impact on society.

The World Business Council for Sustainable Development in its publication "Making Good Business Sense" by Lord Holme and Richard Watts, used the following definition. "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large"

The same report gave some evidence of the different perceptions of what this should mean from a number of different societies across the world. Definitions as different as "CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government" from Ghana, through to "CSR is about business giving back to society" from the Phillipines.

The European model is much more focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons. Personally, I believe this model is more sustainable because:
Social responsibility becomes an integral part of the wealth creation process - which if managed properly should enhance the competitiveness of business and maximise the value of wealth creation to society.
When times get hard, there is the incentive to practice CSR more and better - if it is a philanphropic exercise which is peripheral to the main business, it will always be the first thing to go when push comes to shove.

Ethical Audit
Ethical auditing is a process which measures the internal and external consistency of an organisation's values base. The key points are that it is value-linked, and that it incorporates a stakeholder approach. Its objectives are two-fold: It is intended for accountability and transparency towards stakeholders and it is intended for internal control, to meet the ethical objectives of the organisation.

The value of the ethical audit is that it enables the company to see itself through a variety of lenses: it captures the company's ethical profile. Companies recognise the importance of their financial profile for their investors, of their service profile for their customers, and of their profile as an employer for their current and potential employees. An ethical profile brings together all of the factors which affect a company's reputation, by examining the way in which it does business. By taking a picture of the value system at a given point in time, it can:

- clarify the actual values to which the company operates
- provide a baseline by which to measure future improvement
- learn how to meet any societal expectations which are not currently being met
- give stakeholders the opportunity to clarify their expectations of the company's behaviour
- identify specific problem areas within the company
- learn about the issues which motivate employees
- identify general areas of vulnerability, particularly related to lack of openness

The findings of the audit give a snapshot, a view at a particular point in time, of the company's ethics. In the case of a first audit, they will necessarily be of less value for comparison purposes than would future audits, but they ought to give a clear picture of both values and vulnerabilities. An audit report is a factual document. Obviously it reaches a judgement, but it is not intended to be judgmental, in the sense of condemning a company for moral failure. The assumption which EIBE would make is that any company which commissioned an ethical audit is concerned about its moral standing and therefore intends to take action, where necessary, if moral failings become apparent. This is a stance which is praiseworthy and should be supported: the report's findings will give the company the knowledge necessary to take appropriate action. In this respect, the EIBE ethical audit is very far removed from the original social audits which were carried out on companies in the 1960s. These were undertaken by outsiders critical of company behaviour, who were seeking ammunition to bring external pressure on the company to change.

We believe that ethical audit will have particular benefits for multinational companies, but it could also be of great value in take-over and merger situations, especially ones which involve partners from different countries where there may be conflicting value systems.Other benefits include enhanced corporate reputation, making the company fraud resistant, and improving staff morale and motivation.

The technology of ethical auditing is still in its infancy. The full payback is not yet known. The benefits listed here derive from a number of experiences of consultancy work by members of the European Institute for Business Ethics, plus benefits about which we have been told by colleagues elsewhere. Our experiences have convinced us that this is one of the most exciting developments in management in decades - and that it is not simply another fad. Values are the basis of all organisational behaviour, and focusing on values will enable management to create an organisation which is excellent in every possible sense.

Importance of ethics in present global economy
The importance of holistic approach to human resources development has became more important in knowledge economy. If we look at financial crisis, it is handy work of very few unethical and corrupt people in the system. At AIG it one derivatives trading department which is responsible for the mess, Maddoff, Standford, then Societal General, Lehman, Satyam, Bearings, these are the few names. Names are not important but their corrupt attitude and behavior which has made this financial crisis. In this economy where one singe person can play havoc across the world we need more prudent and ethical mangers. If we see the 1996 crash of asian currencies, we can blame on one man for playing and manipulating the currency market. This is terrorism where lives of millions of peoples, their hard earn money and retirement benefits vanish. This must be very strongly and considered as terrorist act, this is terrorism by all means.

This financial crisis is all about the behaviors of few individuals at the helm of organization has made whole organization go down. Their greed and corrupt, unethical behavior has made the life miserable for millions of people.

In this global knowledge economy and global village where one individual can play havoc we need people who are socially responsible, transparent, and ethical. Who will consider themselves responsible for all stake holders, i.e. society at large? “This is what exactly I mean by holistic human resources management.”

Holistic Approach to the Human Resources Development
“And the Firmament has He raised high, and He has set up the Balance (of Justice), In order that ye may not transgress (due) balance, so establish weight with justice and fall not short in the balance.” Quran Surah Rahman: Ayah 7-9:

Allah has created this world in balance and justice but our deeds messes it. These deeds vary from personal life, our social behaviors, and our economic and political activities. If we see at the financial crisis world is in, this is very clear example”. Today people wants to transfer the risk, this will never work. What we are in “Financial Crisis” is ultimately result of not sharing the risk but transferring it to other. This is because we transgressed our limits on balance and justice. If we want to change, we need holistic approach to change our lives, then and then only justice and peace can come to the world. If we want to change this world, it must come from within first.

The Islamic Approach to Ethics in Financial Transaction
Quran 2:188
And do not eat up your property among yourselves for vanities, nor use it as bait for the judges, with intent that ye may eat up wrongfully and knowingly a little of (other) people's property.

The following was revealed about 'Abdan Ibn Ashwa' [al-Hadrami] and Imra' al-Qays [Ibn 'Abis]: (And eat not up your property among yourselves in vanity) through oppression, theft, usurpation, perjury, and other forbidden means, (nor seek by it to gain the hearing of the judges that you may knowingly devour a portion of the property of others wrongfully) through perjury; Imra' al-Qays admitted taking the money when this verse was revealed.

Tafsir Ibn 'Abbas, trans. Mokrane Guezzou

Tafsir Ibn Kathir
And eat up not one another's property unjustly (in any illegal way, e.g., stealing, robbing, deceiving), nor give bribery to the rulers (judges before presenting your cases) that you may knowingly eat up a part of the property of others sinfully.) Tafsir Ibn Kathir

`Ali bin Abu Talhah reported that Ibn `Abbas said, "This (Ayah 2:188) is about the indebted person when there is no evidence of the loan. So he denies taking the loan and the case goes to the authorities, even though he knows that it is not his money and that he is a sinner, consuming what is not allowed for him.'' This opinion was also reported from Mujahid, Sa`id bin Jubayr, `Ikrimah, Al-Hasan, Qatadah, As-Suddi, Muqatil bin Hayan and `Abdur-Rahman bin Zayd bin Aslam. They all stated, "Do not dispute when you know that you are being unjust.''

It is reported in the Two Sahihs that Umm Salamah narrated that Allah's Messenger said:

(I am only human! You people present your cases to me, and as some of you may be more eloquent and persuasive in presenting his argument, I might issue a judgment in his benefit. So, if I give a Muslim's right to another, I am really giving him a piece of fire; so he should not take it.)
The Ayah and the Hadith prove that the judgment of the authorities in any case does not change the reality of the truth. Hence, the ruling does not allow what is in fact prohibited or prohibit what is in fact allowed. It is only applicable in that case. So if the ruling agrees with the truth, then there is no harm in this case. Otherwise, the judge will acquire his reward, while the cheater will acquire the evil burden.

This is why Allah said:
(And eat up not one another's property unjustly, nor give bribery to the rulers (judges before presenting your cases) that you may knowingly eat up a part of the property of others sinfully.) meaning, `While you know the falsehood of what you claim. ' Qatadah said, "O son of Adam! Know that the judge's ruling does not allow you what is prohibited or prohibit you from what is allowed. The judge only rules according to his best judgment and according to the testimony of the witnesses. The judge is only human and is bound to make mistakes. Know that if the judge erroneously rules in some one's favor, then that person will still encounter the dispute when the disputing parties meet Allah on the Day of Resurrection. Then, the unjust person will be judged swiftly and precisely with that which will surpass whatever he acquired by the erroneous judgment he received in the life of this world.''

Quran 4:29
O ye who believe! Eat not up your property among yourselves in vanities: But let there be amongst you Traffic and trade by mutual good-will: Nor kill (or destroy) yourselves: for verily Allah hath been to you Most Merciful!

(O ye who believe! Squander not your wealth among yourselves in vanity) through transgression, usurpation, false testimony, lying in oath or through other unlawful means, (except it be a trade by mutual consent) except if there is mutual agreement between you in the course of buying and selling or in abating the price in selling (Muhabat), (and kill not one another) without justified right. (Lo! Allah is ever Merciful unto you) when He forbade you to kill one another without such a justification. (Tafsir Ibn 'Abbas, trans. Mokrane Guezzou)

Tafsir Ibn Kathir
Quran 4:29. O you who believe! Eat not up your property among yourselves unjustly except it be a trade amongst you, by mutual consent. And do not kill yourselves (nor kill one another). Surely, Allah is Most Merciful to you.) Prohibiting Unlawfully Earned Money

Allah, the Exalted and Most Honored, prohibits His believing servants from illegally acquiring each other's property using various dishonest methods such as Riba, gambling and other wicked methods that appear to be legal, but Allah knows that, in reality, those involved seek to deal in interest. Ibn Jarir recorded that Ibn `Abbas commented on a man who buys a garment, saying that if he likes it he will keep it, or he will return it along with an extra Dirham, "This is what Allah meant, when He said, o (Eat not up your property among yourselves unjustly.'') `Ali bin Abi Talhah reported that Ibn `Abbas said, "When Allah sent down, (O you who believe! Eat not up your property among yourselves unjustly) some Muslims said, `Allah has forbidden us from eating up each other's property unjustly, and food is our best property. Therefore, none among us is allowed to eat from anyone else's food.' After that Allah sent down, (There is no restriction on the blind) (until the end of the Ayah). ﴿24:61 ﴾.''' Qatadah said similarly. Allah's statement, (except it be a trade amongst you, by mutual consent.) means, do not revert to illegal ways and means to acquire money. However, there is no harm in commercial transactions that transpire between the buyer and the seller with mutual consent, so that money is legally earned from these transactions. Mujahid said that (except it be a trade amongst you, by mutual consent.) means, "By selling and buying, or giving someone a gift.'' Ibn Jarir recorded this statement. The Option to buy or Sell before parting is Part of `Mutual Consent' in Trading Mutual agreement in various transactions is attained when both parties have the right to uphold or dissolve the agreement before they part. In the Two Sahihs, it is recorded that the Messenger of Allah said, (The seller and the buyer retain the (right to change their mind) as long as they have not parted.) Al-Bukhari's wording for this Hadith reads, (When two men conduct a transaction, they retain their (right to change their mind) as long as they have not parted.)

Sunday, August 2, 2009

My Lost Paradise

My village which is really an extension of Borgaon Manju ( Akola MS India). 18 Km from district place Akola on national highway no 6 in Maharashtra. Our home 3 KM away from village with 42 other homes from same family and around 100 government quarters for railway workers and railway station. Family is involed in farming and agriculture. The land is very good quality, black cotton known for its productivity with water table at 40 feet at that time. I am talking of time when I was a kid. These 40 years has change everything in this small paradise.

Agriculture is giving very good yield, cotton known as white gold was a main stay as commercial crop giving year after year guaranteed returns. Jowar(one of the cereals Sorghum) as staple crop and pulses to support mix cropping. Livestock’s, buffalo’s, cows and bullocks and goats was part of life. All agriculture operations are manual with bullocks playing key role in all operations. Orchards of mango, lemon and other plants are necessary part of life.

There were almost 40 permanent laborer’s staying and working in the farm. Almost all family use to work in the farm except school goings kids. Now only 4 families.

If I see economics it was great, I knew every year we use to have surplus of at least a million Indian Rupees that was great. There was no concept of taking loan from banks for cropping. We use to pay daily wages to all labor’s every week and jowar a kg a day per person and annual two pairs of cloths apart from their vegetables. Everybody was happy. Most of the time we use to bear education cost of their children’s as part of our social responsibility.

This was really golden era of Indian Farming, with university support and government extensions work we use to get all updated information along with technology.
When I look back now, see the things, I feel sorry about the present status of my villages. Indian is growing at 8 percent and people are getting rich and media and government are saying poverty is down. But when I get call from my cousin that he needs money for cropping this year urgently, I got surprised. Same land which use to deliver millions every year, today no money. “Who has stolen my money”. In last four years every year I have to step in to solve the issues.

One of my cousin has taken a loan of RS 60,000 four years back (fortunately not on interest). But on agreement that his land will be mortgage to money lender, money lender will cultivate the land until he pays back whole amount in one shot. The value of land is almost 500,000 or more and annual yield may be more than 60,000 INR, this is irrigated land. When I saw him worried and losing weight with old parents who earn all this from hard work working in Saudi Arabia. I given his to get back his land from money lender.

Water table is down 100%
Soil salinity is up so production is down
Debt has increased substantially because of capital intensive farming.

I want to ask just one question. Where is development? I don’t believe these big numbers, I like to see it in grounds.
Every year many farmers are committing the suicide? Why are they so desperate to die? Has any one has any answer for the same. You may have numbers but not the answer.

One suicide every 8 hours

Vidarbha remains a grim statistic. One suicide in every eight hours. More than half of those who committed suicide were between 20 and 45, their most productive years. The Maharashtra government says as many as 1920 farmers committed suicide between January 1, 2001 and August 19, 2006. Nearly 2.8 million of the 3.2 million cotton farmers are defaulters, reports Jaideep Hardikar

Cost of cultivation

Across the country, the average cost of cultivation in cotton is a little more than Rs 16,000 per ha. With an average productivity of 460 kg per ha, it costs between Rs 35 to Rs 48 per kg to grow cotton. In Vidarbha, the cost of cultivation could go well beyond Rs 20,000 perha and if marketing cost is added, it crosses Rs 22,000. But the productivity is only 146 kg per ha. In other words, the cost per kg is almost double --- well over Rs 70 per kg. In Maharashtra, the cost of growing cotton increased from Rs 17,234/ha in 2001-02 to Rs 20,859 in 2002-03.

The Planning Commission's fact-finding mission members found out that nearly 2.8 million of the 3.2 million cotton farmers in Vidarbha are defaulters. Of every Rs 100 borrowed, approximately Rs 80 goes back in to servicing of old loans.

Export-oriented agriculture

Until very recently, the majority of farmers throughout Asia would grow a range of seasonally varied crops for their own consumption, along with some extra for trade at local markets. Now, with a shift to export-oriented agriculture, farmers are required to generate those products that fit into the narrow constraints of the global market place. What is more, their production is expected to be large-scale, uniform and highly specialized.
In her testimony to the Women’s Tribunal, Yaowapa Promwong related that, until a decade ago, families in her village in northeast Thailand exchanged seeds with each other. Most families would grow rice as their main crop, each usually growing several different varieties. Different families therefore had different harvesting seasons, allowing for community members to help each other during the harvests. Through such activities, production costs were kept low and community spirit was strong. In addition to their primary crops, families would often farm fish, prawns and other shellfish in the rice fields, grow vegetables, and raise livestock around their homes. They produced enough food for their own consumption, often with surplus to trade at local markets. This culture is now quickly disappearing.

The decline of seed-saving
Chemical-intensive agriculture
Imports and subsidies

Why Suicide
Money lenders – Most farmer suicides result from their inability to repay loans taken from unscrupulous money lenders. Lending at usurious rates, up to 70% of poor village population goes to money lenders for loan, alternative financing being unavailable for them. Our financial system does not have space for the poor of the villages.

Capital Intensive Farming- We have made farming very costing, all input costs have become so high that profitability has been severely impacted. Farming has become un-economic for the farmers.

Intensive and export oriented farming – Single and intensive cropping has made farmers poor and more prone to foreign market preferences and seasonal factors like monsoons.

Way Out
· Freedom from Usury – the only solution is Interest free financing.
· Returning to sustainable farming practices.
· Better access to markets.
· Multiple cropping and mix cropping.
· Water Conservation
· Agriculture ( Food) Processing Industries
· Village Industries

New Report on Present Status of Poverty in India

India is emerging as the world centre of hunger and malnutrition, a report by Indian campaign group, the Navdanya Trust, says.
The trust says that there are more than 200 million people - or one-in-four Indians - going without enough to eat.
The prominent environmentalist Vandana Shiva, who runs the trust, said there were now more hungry people in India than in sub-Saharan Africa.
Ms Shiva said that 57 million children in India are underweight due to malnutrition.
The Navdanya Trust says that per capita food consumption in India has decreased from 186 kg per person annually in 1991 to 152 kg in 2001, despite government food subsidies costing billions of dollars.
She was also critical of genetically modified crops and chemical fertilizers, arguing that they only served to increase the costs of food production, forcing farmers into debt and in some cases causing them to commit suicide.
"Studies worldwide show that the hungriest of people are its producers - the farmers," she said.
Some experts say that if the government is able to pass the bill it will be a significant first step towards improving India's ranking on the global hunger index.
The trust's report follows a UN study released in June which said that hunger in South Asia had reached its highest level in 40 years because of food and fuel price rises and the global economic downturn.
The report by the UN children's fund, Unicef, says that 100 million more people in the region are going hungry compared with two years ago.