Can we have a more informed debate on food security both inside and outside the Parliament?

 Frankly, I am taken aback by the quality of discussion on food security that is taking place. On the one hand are our politicians who have continually disappointed us and this time is no different. The government has suddenly woken up from its sleep and decided that it will once again get into the business of governing India. The principle opposition party has openly declared elections and their more bothered about petty things. But what I find most disturbing is that the media is not engaging in a constructive debate on a matter that concerns more than 70% of India’s population. Most of the discussion in the newspapers is unfortunately not well researched. For instance, Mr. TK Arun writes in the economic times that “number of empirical studies show that hunger is no longer a major worry for the vast majority of Indians (4% are hungry), but over 40% are malnourished”( http://economictimes.indiatimes.com/opinion/columnists/t-k-arun/a-dozen-alternatives-to-food-subsidy-for-improved-welfare-of-the-poor/articleshow/20907793.cms).

He does not cite the empirical studies neither does he explain what is his definition of hunger. Generally undernourishment is considered a part of hunger. It is interesting to note that way back 2011, economic times had reported that countries like China and Pakistan ahead of us in the Global Hunger Index published by the International Food Policy Research Institute (IFPRI) (http://articles.economictimes.indiatimes.com/2011-10-12/news/30270931_1_global-hunger-index-hunger-levels-india-ranks). Either Mr. Editor does not read his own newspaper or he grossly underestimates its readers!

Time for some facts. Is hunger really not an issue in India as the likes of Mr. Arun would have us believe? Firstly, what exactly is hunger? Hunger refers to the discomfort associated with lack of food. Food and Agriculture Organization (FAO) defines food deprivation as the consumption of fewer than 1800 calories which is regarded as the minimum that most people require to live a healthy and productive life. According to FAO’s World Hunger Map, 18% of the Indian population or about 217 million people are undernourished (http://faostat.fao.org/site/563/default.aspx).

 In the Global Hunger Index (GHI) Reports, “hunger” refers to the index based on the following three indicators:

1.      Undernourishment - proportion of undernourished people as a percentage of the population

2.      Child underweight - proportion of children younger than age five who are underweight

3.      Child mortality - mortality rate of children younger than age five

GHI ranks countries on a 100-point scale in which zero is the best score and 100 the worst.

According to the GHI Report 2012, India ranks 65^th out of a total of 79 countries and its GHI score is 22.9 which implies that hunger levels in India are ‘alarming’. India has lagged behind in improving its GHI score despite strong economic growth in the past two decades. During the period from 1990 to 2012 when India’s per capita GNI more than doubled, GHI score improved by only 24%. A quick comparison of GHI scores across countries reveals that India ranks way below her neighbours China (2^nd), Sri Lanka (37^th), Pakistan (57^th) and Nepal (60^th) in the GHI index. Moreover, 28 Sub-Saharan African countries are ahead of us. Even strife torn countries like Sudan (61^st) rank ahead of us.

According to the MDG India Country Report 2011 published by the Ministry of Statistics and Programme Implementation (MoSPI), India is likely to miss the millennium development goal of halving the proportion of people who suffer from hunger. Therefore, which empirical studies are being relied upon to say that hunger is not a major worry for India is not clear at all?

P Sainath has compared the ruling classes of India who pursue business friendly policies while cruelly neglecting the poor with Nero’s guests. It is high time the Indian elite stop acting like Nero’s guests and the media stop misinforming us so that we can clearly see the alarmingly high levels of hunger present in India. Such high levels of deprivation cannot be acceptable in a civilized society. India needs a more a more informed debate on food security both inside and outside the Parliament which considers all the concerns of the opposition parties, farmers groups, civil society and academia and then the enactment of food security bill which improves the lives of millions in India and gives them a dignified life. Is anybody ready to rise up above petty politics and short term gains?

Challenges and solutions for a sustainable future

Sustainable development has been the overarching goal of the international community ever since the United Nations Conference on Environment and Development (UNCED) in Rio in 1992. However, two decades on, the world is far from realizing the bold vision set forth in Rio. Today, we continue to struggle with the grave challenges of climate change, food and energy security for a growing population, high levels of poverty and deprivation in the developing countries, and rising global inequalities.

So, what are the underlying factors behind our less than satisfactory progress on sustainable development? And what steps can we take now to make truly sustainable development a reality?

The Obstacles

Extreme poverty and inequality have stalled progress: Despite the vast amounts of wealth currently being produced, about 22.4%  of the world’s population lives on less than $1.25 a day.Out of 84 countries with available data on Millennium Development Goals, 40 countries are not on track to meet the poverty reduction target (World Bank, 2009). On the remaining targets as well, sub-Saharan Africa shows very little progress. According to the Report on the World Social Situation 2010, 963 million people or about 14.6% of the estimated world population of 6.6 billion are undernourished. This extreme poverty and inequality is a key factor in the failure of sustainable development because poverty eradication, food security, universal access to modern energy services, public health and employment generation are the overriding concerns of developing countries. Therefore, for future success, poverty alleviation and equity should be placed at the centre of sustainable development efforts at Rio+20.

International discussions on sustainable development have failed: The international discussions on sustainable development are beset by a lack of trust between developed and developing countries. This lack of trust reflects a lack of appreciation of the domestic political commitments and constraints on both sides and makes implementation of global commitments on sustainable development impossible. The problem of trust stems from the huge gap in finance and technology between the developed and developing worlds. Agenda 21, an outcome of the UNCED in Rio in 1992, argued that financing for sustainable development and technology transfer are the two key means of implementing sustainable development, along with education, training, public awareness, science and informed decision making. Official development assistance can be a vital source of external finance for many developing countries for implementing renewable energy projects and providing energy access to the poor people.

However, inadequate financing remains the biggest obstacle to sustainable development in poor countries. Without financing from developed nations, developing countries will not be able to mobilize the resources for the additional investment needed to promote sustainable development. In addition, most developing countries have poorly developed markets for long-term domestic financing for development projects and a weak fiscal basis, which further limits the scope for substantial increases in domestic funding. So, provision by the wealthy nations of new, stable, predictable financial resources to support implementation activities in developing countries is essential for the achievement of tangible outcomes. Unfortunately the developed countries have failed to meet their commitments to help developing countries meet the sustainable development goals set forth in Rio. Most of the developed countries have not allocated 0.7 per cent of GDP to aid for developing countries which was first pledged in a United Nations General Assembly Resolution in 1970. Since then the target has been affirmed in many international agreements including the March 2002 International Conference on Financing for Development in Monterrey, Mexico and at the World Summit on Sustainable Development held in Johannesburg.

Moreover, a huge technological gap exists between developed and developing countries. Although a few large developing countries such as China, Brazil and India possess the ability to undertake technological efforts on their own, the majority of the developing countries are not in the same situation. Therefore, for the world to move onto a path of sustainable development, developing countries would require access to technology at affordable prices. However, there has been little technology transfer from developed to developing countries. The focus of implementation has generally been on creating conditions in developing countries conducive to foreign investment and building capabilities to absorb and utilize imported technologies. Currently a large body of technological information is held by the private sector which is in turn, dependent on intellectual property income. Therefore, the intellectual property regime is a decisive determinant of technology diffusion. Available evidence points to a centre-periphery character in technological evolution where firms from developed countries are the main holders of intellectual property rights and developing countries are technology followers. Existing IPR laws are not able to distinguish between countries at different stages of development in ways that might help IPRs to fully contribute to development objectives.

We reward the wrong activity – Another major cause of concern is that governments all over the world continue to spend huge amounts of resources to subsidize environmentally unsound practices in agriculture, energy, water and transportation. The subsidy system is now deeply entrenched in political systems worldwide. According to IEA (2011), fossil fuel consumption subsidies amounted to $409 billion in 2010. However, only 8% of the $409 billion spent on fossil-fuel subsidies was distributed to the poorest 20% of the population. A major shift in subsidies is needed in which governments work to reduce the initial costs and risks associated with implementation of sustainable practices such as solar and wind energy.

The Way forward

We must redefine the concept of development. The priority given by political leaders to GDP growth tends to crowd out sustainable development concerns. The predominant economic growth agenda has increased material wealth of a small section of society at the expense of growing ecological scarcities and social disparities. For instance, a major weakness in India’s growth story is that it has not been sufficiently inclusive and has come at the cost of overexploitation of the country’s resources. India’s performance in poverty eradication is very disappointing. According to UNDP’s Multidimensional Poverty Index (MPI) 53.7% of India’s population is poor (UNDP, 2011). Nations all over the world need to intensify their efforts to improve the lives of the poor and provide for basic needs such as education, nutrition, health care services, adequate shelter and a clean environment. Thus, the political goal must shift from maximizing growth rates to improving the lives of the people. This shift necessitates alternative indicators of development, such as the UNDP’s Human Development Index (HDI), the UN system of Integrated Environmental-Economic Accounting (SEEA) and the OECD’s initiative on Measuring the Progress of Societies, which complement GDP and integrate economic, social and environmental dimensions of well-being.

The examples of Sri Lanka, Cuba, Costa Rica and the Indian state of Kerala show that high human development is possible without fast growth. Moreover, countries such as Nepal and Tunisia have also been successful in improving the human development index by following different pathways. Despite modest economic growth, Nepal and Tunisia have made impressive progress in health and education with the help of massive public policy efforts (UNDP, 2010). India’s Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA), a wage employment programme that guarantees hundred days of wage employment in a financial year to a rural household, is also an important step towards sustainability and equity in India. It promotes inclusive growth and empowers the poor and marginalized groups by financing rural works that address causes of drought, deforestation and soil erosion restores the natural capital base on which rural livelihoods depend.

We must bridge the trust gap. To build trust between developed and developing countries, we need more effective dialogue and co-operation that is not reflected in today’s multilateral regimes. Given that the overall required investment for sustainable development is very high and that the greatest need is in developing nations, stronger commitments and concrete actions from developed countries are the need of the hour along with innovative sources of financing. A currency transaction tax could be an innovative new source to meet the financing gap. The tax can be a simple proportional levy on individual foreign exchange transactions assessed on foreign exchange dealers and collected through existing financial clearing systems. Moreover, developed countries should also stimulate private sector innovation with a combination of tax and regulatory policies. Innovative financing schemes canbridge the financing gaps in some sectors like water and sanitation in developing countries which are regarded as high risk, low-return investment. For instance, in Niger the Coca-Cola Companyand the United States Agency for International Development (USAID) sponsoredthe installation of locally made rope pumps.

The issue of technology in poor nations needs to be addressed at various stages in terms of facilitation, development, deployment and technology transfer. In the context of developing countries, lack of awareness about clean technologies is a key barrier for small scale units. Thus, collaborative research with the necessary arrangements for building capacity in developing countries will go a long way in reducing the technology gap.For instance, with the support of the Swiss Agency for Development and Co-operation (SDC), The Energy and Resources Institute (TERI) has helped the Firozabad Glass industry cluster switch over to energy-efficient and environment friendly technologies based on natural gas. The energy efficiency of coal-fired muffle furnace was very low and a major source of pollution in Firozabad, India. The higher pollution from these coal-fired systems affected the health of the workers and the local population in Firozabad. Joint efforts of TERI and SDC improved the lives of the workers and reduced the level of environmental pollution in Firozabad at the grass roots level in addition to lowering the fuel cost of glass units on account of reduced energy consumption. Thus, fostering partnerships between developing country institutes, which have a better understanding of local problems, and international organisations which have the requisite resources and technologies, is the key to finding solutions to the environmental problems and to contribute to the improvement of the lives of the poor people in developing countries.

There are high expectations on the Rio+20 summit for renewed momentum for global sustainable development. Therefore at Rio+20, world leaders must build upon and scale up theachievements, best practices and lessons of theMDGs, and lay strong foundations for the post2015 development agenda.In order to make significant progress towards sustainable development, the summit should come up with a concrete roadmap for future and define aspirational goals for the international community in the areas of food security, sound water management, universal access to modern energy services etc.

 

Understanding theme 1 of the Rio+20: “A green economy in the context of sustainable development and poverty eradication”

Rio+20 marks the 20thanniversary of United Nations Conference on Environment and Development (Rio 1992) and the 25th anniversary of the Brundtland Report. Sustainable development has been the overarching goal of the international community since Rio 1992. However, two decades on, the world is far from realizing the vision of Rio. The upcoming UNCSD is therefore, an opportunity for world leaders to address the economic, social and environmental crisis gripping the world today. Theme 1 of the conference is as follows:
“A green economy in the context of sustainable development and poverty eradication”
The concept of green economy has moved into the mainstream of policy discussions, however, it is not a concept that enjoys widespread agreement and there is substantial ambiguity in its definition. The following definitions of green economy/ green growth exist in the literature:

“The green economy approach is an attempt to unite under one banner a broad suite of economic instruments relevant to sustainable development. (UNCSD, 2010)”

“A green economy is one that results in “improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. (UNEP, 2011)”

“Green growth is environmentally sustainable economic progress to foster low-carbon, socially inclusive development. (UNESCAP )”

In a nutshell, the concept of green economy amalgamates several existing concepts such as durable economic activity, reduced environmental impact, sustained growth in high quality jobs and reduced poverty.However, it is not clear how the green economy approach adds value to the sustainable development paradigm. Discarding sustainable development without a proper understanding of what the green economy approach entails might stall the progress on sustainable development particularly in the developing world where the achievements have not been impressive on many dimensions of sustainable development.

The critiques of this concept imply that the social pillar of sustainable development receives inadequate attention and that the environmental protection agenda, which is dominant, could negatively impact economic growth. As such, recognising the different stages of development of nations and the differences in environmental endowments and challenges, each country would need to define its own strategy for achieving a ‘green economy, and identify both the opportunities, challenges and needs in doing so.

The green economy approach presumes a higher rate of growth, poverty alleviation and social equity. However, some of the difficult but important questions that need to be answered are: how the green economy approach would contribute to poverty alleviation and achievement of millennium development goals: what would be the impact on economic growth in developing countries; how to identify and deal with trade off; how to garner resources for the transition to a green economy; how to handle the transition from the present to the greener economy; what are the elements that should be incorporated in the green economy concept so that it adequately addresses the issues of poverty and equity?

Why Dr Manmohan Singh is wrong

On the eve of India’s 64th independence day, Anna Hazare appealed to the people of India to join the peaceful protest against corruption and demand a strong Lokpal Bill which will reduce corruption from the Indian society. His speech became the biggest news of the day and overshadowed Dr Manmohan Singh’s address to the nation. In the last one week he has said time and again that he has no magic wand against corruption, Parliament has the sole right to make laws and protests will affect India’s image and economic growth. The fact he had no power over his corrupt colleagues is clear to the entire nation. He failed to garner support from fellow Parliamentarians. All the opposition parties critised Anna Hazare’s arrest. The main opposition party has targeted him on grounds of corruption in Common Wealth Games and 2G spectrum allocation even before Anna Hazare started his fast in April. The credibility of his government lowered further because of the active smear campaign launched by his party colleagues. The new charges against his government are arrogance, murder of democracy and brute force. Since use of police force and “I will not submit to the fancies of activists” attitude proved counterproductive, he tried to lean on the economic pillar. Indeed, he is widely respected in India and abroad as a good economist. He has also been hailed as the man who abolished license raj, liberalized India and put the Indian economy on a higher growth trajectory. However, the common man has dismissed his theories on the resilience of Indian economy in the face of global imbalances. Most of the protesters refuse to accept his argument that global factors are responsible for high inflation and are critical of Government’s supply side management. No one in India except the policy makers is convinced about India’s economic progress. Most of the urban residents are critical of the government’s indifference towards agrarian distress. Therefore, his third line of defence also fails. Dr Singh is absolutely wrong because protest against corruption is not anti-growth, on the contrary, corruption is the greatest obstacle to economic and social development. It undermines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends. Corruption in the Common Wealth Games severely dented India’s image and most of the Indians felt humiliated when foreign players opted out of the games. Moreover, the ills of corruption are particularly severe on the poor because they are most reliant on the provision of public services and are least capable of paying the extra costs associated with bribery, fraud and misappropriation of economic privileges. He needs to understand that Indians are no more content with political freedom and economic prosperity of the select few. They demand accountability from the government which they have elected not blows of police lathis. Although many of the protesters do not know of the nuances of the Lokpal Bill and how it is expected to reduce corruption, they have united against the governance deficit in his government. Instead of trying to kill the movement with a heavy hand, he should admit the follies of his government and try to regain the confidence of Indian society as “Mr Clean”. At the moment he unfortunately does not have many friends outside his cabinet.

Characteristics of urban transport in India

Introduction
India is one of the fastest growing economies of the world. The growth rate of the Indian economy averaged 8.5% from 2005-06 to 2009-10. The key driver of India’s growth has been high growth in industrial and services sector. The industrial and the service sectors grew at 8.2 and 8.7 per cent respectively as compared to 0.2% growth in agriculture during 2009 – 10 (MoF 2010). The increasingly urban character of growth has led to a rapid growth in transportation activity in Indian cities.

Increasing per capita incomes have had direct impact in terms of growing motorization rates in Indian cities, which has been the precursor to most of the urban transport related challenges that these cities face. The supply of transport infrastructure and services, by comparison, has lagged far behind demand. Most transport facilities are used far beyond their design capacity.

The Urban transport systems in large developing cities like India face major challenges, due to high rates of motorization, equity issues, importance of intermediate public transport such as three wheelers, vans etc and high congestion levels. When the urban transport system experiences major difficulties, consequences are felt by households, businesses, and the urban community at large. After a point, transport may even become a binding constraint on both economic growth and social development along with increased negative impacts on health and on the environment. Therefore, sustainable transportation is a prerequisite for sustainable growth.

Characteristics of urban transport in India
India’s transport crisis has been exacerbated by the extremely rapid growth of India’s largest cities in a context of low incomes, limited and outdated transport infrastructure, rampant suburban sprawl, sharply rising motor vehicle ownership and use, deteriorating bus services, a wide range of motorized and non-motorized transport modes sharing roadways, and inadequate as well as uncoordinated land use and transport planning. In the following section I discuss the major issues of urban transportation in India:

a. Growth trend of motor vehicles in India
The economic growth, increasing disposable income, and increasing urbanization is creating greater demand for transport and the number of vehicles on India’s road system is growing at a rate of 10% per annum. India had 89.6 million registered motor vehicles at the end of 2005/06.Personalized modes (two wheelers and cars) accounted for about 85% of the total number of motor vehicles in the country. A further break up of motor vehicle population reflects the dominance of two-wheelers with a share of more than 72% in the total vehicle population, followed by passenger cars at 13%. In contrast to personal vehicles, the percentage share of buses in the total number of registered vehicles has declined from 11.1% in 1951 to 1.1% during 2006, which indicates slow growth in public transport modes.

Economic development has historically been associated with an increase in the demand for transportation and particularly in the number of road vehicles. This relationship is also evident in India as outlined above. However, pattern of motorization in India is very different from that of the developed countries. In spite of the high rate of growth of personalized vehicles in India in the last decade the current vehicle ownership in India is still very low compared to industrialized countries.

Dargay et al (2007) examined the trends in the growth of the stock of vehicles for 45 countries and made projections till 2030 with the help of a Gompertz function which was used to estimate the relationship between vehicle ownership and per capita income. They estimated the stock of vehicles and vehicle ownership to be 156 million and 110 vehicles per thousand population respectively in India in 2030. These figures may be regarded as gross underestimates because they included only 4-wheeled motor vehicles. The classic S-shaped curve is based on developed countries experience where two and three-wheeled motor vehicles did not play an important role. In India and in many parts of Asia two wheelers account for over 70% of vehicle population. The four Asian countries of India, China, Japan and Malaysia have much higher levels of two wheeler penetration as compared to developed countries, therefore, with motorcycles as a much more affordable vehicle type, motorization levels in Asian countries may increase at even higher rates than found in the developed world.

b. Equity issues
With 25.7% of the urban population living below the poverty line, the mobility problems of the poor need special attention. Although India experienced very high rates of motorization in the past decade due to higher growth rates witnessed in the last decade, the growth has bypassed a vast majority of the population. The following table shows that a mere 4.6% of the urban households owned a motor car whereas 41.7% of the urban households owned a bicycle. Most of the poor urban households cannot afford any private motorized transport and are forced to walk or cycle long distances. About two-thirds of the trips in selected Indian cities were by walking or cycling as compared to 10-20% of the trips by private motorized transport (mainly cars and motor cycles). Similar results were found by Baker et al (2005) for the city of Greater Mumbai. Baker et al did a survey of 5,000 households and found that 44% of the commuters in Mumbai walk to work and the proportion of poor people who walk to work is even higher at 63%.

Table 1: Percentage of urban households possessing a specific vehicle
Year Bicycle Two wheeler Motor car
1993-94 37.1 11.6 1.2
1999-00 39.0 18.4 2.7
2004-05 41.7 26.0 4.6
Source: NSS 2005

However, transport policy in India continues to focus on the needs of the urban elite and middle class. Most of the funds are allocated to roadway expansions and improvements such as construction of flyovers, multi-laning of existing roads etc. which encourage the use of personal vehicles and ignore the needs of the poor. Urban transport infrastructure does not include any facilities for walking and cycling. With the exception of few cities, most of the major road networks have not been provided with footpaths and bicycle lanes.

c. Importance of intermediate personal transport (IPT) and paratransit
Public transport facilities are inadequate in most Indian cities. Therefore, IPT modes like auto-rickshaws, maxi cabs and motor cabs assume importance to meet the travel demand, particularly in the smaller cities. There are also locally contrived mechanical contraptions (commonly called jugad) which are used for ferrying goods and passengers in most cities of India. IPT are preferred by urban residents because they provide greater flexibility, frequency, better access and comfort over existing public transport.

Auto-rickshaws/passenger three wheelers are a very important mode of travel in most of the Indian cities. The share of passenger three wheelers in total stock of passenger vehicles namely two wheelers, passenger three wheelers, cars and jeeps, taxis and buses was 4% in 2006. The share of passenger three wheelers is highest in Cochin (43%) followed by Patna (10%) and Bombay (8%).

Public transport is the predominant mode of transport in mega cities while the IPT modes are popular in smaller cities. This is because larger cities have better public transport facilities as compared to smaller cities. The share of trips by IPT modes was higher than public transport in cities with population of 0.1-0.5 million in 1998 but the share of IPT modes in total trips declined with increase in city size.

d. High congestion levels
Traffic congestion is one of the most pressing transport problems in Indian cities despite the fact that vehicular ownership rates in most Indian cities is much lower than developed countries. The road way speeds for motor vehicles has declined in most cities and the average travel time has increased greatly. The stop-and-go traffic flow caused by congestion also wastes energy and increases pollution. Moreover, roadway congestion increases the likelihood of crashes.

The three main reasons for increasing congestion levels in the Indian cities are as follows:

1. Uneven distribution of vehicles: The vehicular penetration of India at 22 vehicles/1000 persons is quite low as compared to the developed countries like U.S.A. (675/1000 persons) and Japan (598/1000 persons). However, even at such low levels of motorization congestion has become a major problem in Indian cities because of uneven distribution of vehicle population. In 2006, the twenty-three metropolitan cities in India, each with over one million population, accounted for about 28% of the total vehicles registered in the country. About 53% of the total cars and 31% of the two-wheelers in the country were confined to these metropolitan cities in 2006.

Moreover even within metropolitan cities vehicles are distributed very unevenly. In 2006, Delhi, Mumbai, Kolkata and Bangalore accounted for 48% of the total registered vehicles in metropolitan cities. Delhi had the highest stock of registered motor vehicles at 4.48 million and its share in the two wheeler and car population in metropolitan cities was 16% and 30% respectively in 2006.

Congestion levels are likely to rise in the future as the second tier cities like Coimbatore (12.9%), Madurai (10.9%), Nagpur (14.6%) and Vishakhapatnam (17.2%) posted higher average annual growth rates as compared to Delhi (4.3%) and Mumbai (6.2%) during the period 2001 to 2006. Ahmedabad experienced the highest growth rate at 16 % during the same period. (MORTH 2009)

Heterogeneous traffic: Indian cities are characterized by the co-existence of slow non-motorized modes such as bicycles, cycle-rickshaws, pedestrians, and animal-drawn carts along with faster motorized modes such as cars, trucks, buses, and auto rickshaws. Slow moving transport modes reduce the average motorway speeds for motor vehicles and increase travel time of urban commuters. They also increase the probability of accidents.

2. Inadequate transport infrastructure: The motor vehicle population in metropolitan cities of India increased from 7.42 million in 1991 to 21.06 million in 2006, registering an average annual growth rate of 8.4%. (MORTH 2009) However, the length of urban roads increased from 186,799 km in 1991 to 301,310 km in 2004 at an average annual growth rate of 3.7%.(TERI 2009) Moreover, most roads in Indian cities are narrow, with only one lane in each direction. Barring a few cities, roads are generally in a state of disrepair and there is a general lack of modern traffic signals and signage.

The addition of more capacity in the form of roads and flyovers has not been able to meet surging demand by private vehicles. These measures have only succeeded in shifting the point of congestion further up the traffic stream, without really improving the overall performance of the network.

Urban Transport Sector in Developing Countries

There are critical differences in the urban transport problems that the cities in the developing countries face as compared to the industrialized countries. Urban transport systems of cities in the developing countries are characterized by premature congestion and deteriorating environmental standards and security c0nditi0ns. The mega cities of developing countries face road congestion at much lower levels of car ownership. Although most developing countries have less than 100 cars per thousand people as compared to 400 or more in the industrialized world but the relationship between income growth and car ownership is similar. Congestion in mega cities of developing counties is due to the concentration of population and income in the cities. In many African and Asian cities the capital city is more than 40 times as large as the second city. The primacy index for Malaysia was 0.29 in 2000 and a similar situation is prevalent in many other cities of Asia. Vehicle ownership and use is growing even faster than the population, with ownership growth rates of 15–20% per year not uncommon in developing countries. However, growth of road infrastructure has not been able to keep pace with the vehicle growth.

The most important feature of urban transport systems in developing countries is the absence of an efficient public transport system. Unlike the rich industrialize countries which are able to afford rail based mass transit systems; public transport is developing countries are mostly dependent on buses. Though buses are the main mechanized public transport mode, carrying 6.5 trillion (6.5 × 1012) passenger-km per year in 3 million vehicles, of which over 2 million operate in cities, the traditional local monopoly bus operators, whether private or publicly owned, have now mostly collapsed. (Gwilliam 2003)

Impact of urban transport activities on climate change
The growing energy needs that countries face in the transport sector, especially in urban transport in developing countries, present major challenges in terms of energy security and the environmental externalities associated with GHG emissions, which are growing at a faster rate than is population. In urban metropolitan areas the transport sector is estimated to account for a third or more of total emissions of the greenhouse gases. For example, in Malaysia transport sector accounts for 49% of the carbon dioxide emissions. In Lima transport accounts for about 37 percent of CO2 emissions, and in 2000 the sector was estimated to contribute 4.68 million tons of the city’s CO2 emissions. In Santiago emissions of CO2 from the transport system in 1994 were estimated at 4.2 million tons, about 68 percent of which was attributed to cars, taxis, and light trucks. In Mexico GHG emissions from transport accounted for an estimated 19.6 million tons of CO2 in 1998. (World Bank 2006)

Need for immediate actions
It is critical to address the issue of urban transport in developing countries because there is strong correlation between urban development and per capita energy consumption in the transport sector (World Bank 2006). The importance of transport sector in climate change mitigation action is well articulated by the fact that in the EU-15 all the sectors had a decreasing emissions trend from 1990 to 2005 except transportation where emissions grew by 26% (Silvestrini et al 2010).

With more than 300 cities in Asia expected to have over 1 million inhabitants by 2025, and many secondary cities growing rapidly, future economic growth will largely be driven by urban economic activity (World Bank 2006). Therefore, emissions from transport sector will grow fastest in the developing world as economies in Asia continue to experience high rates of growth.

Global best practices
A few cities in developing countries have implemented transport projects that have helped them reduce the climate change impacts of their transport sector. The case studies of two cities namely, Curitiba and Bogota are discussed in the following section.

Integrated land use and transport planning in Curitiba
Curitiba ranks first in the use of public transport system among all the Brazilian state capitals, with 75% of commuters using the system on weekdays. The fuel consumption of Curitiba is 30% lower than the fuel consumption of eight comparable Brazilian cities. Curitiba has emerged as a successful example of sustainable transport practices because it focused on improving the availability as well as the accessibility of buses in the city.

The transportation system of Curitiba evolved in the late 1960s with the formulation of the master plan for the city. The master plan of Curitiba focused on integrated land-use and transport planning as a tool to meet the challenge of growing urban limits rather than the policy of large scale highway construction followed by most other Latin American cities.

Curitiba’s Integrated Transport Network is managed by URBS (Urbanizao de Curitiba) which is a state owned company created in 1963. URBS monitors and coordinates the system, operates the bus lines and maintains the infrastructure of the system. The buses are owned and run by 16 private companies that receive licenses for specific lines and are paid on a per kilometer basis.

To increase convenience and boarding efficiency Curitiba developed boarding tube stations and low floor buses with turbo engines and wider doors. Provisions have been made for the convenience of disabled and elderly passengers. Regular maintenance and renewal of fleet in every ten years ensures that the buses are in good conditions and pollution level is under control.

A road hierarchy and land control system, assigning priorities to buses, and proper zooming laws were put into effect. Integrated systems with trunk and feeder routes, express lines and inter-district routes were introduced. The city also introduced automatic combined ticketing.

Dedicated public transport system in Bogota

In the 1990s, the urban transport system of Bogota, Columbia was characterized by long travel times, congestion, high occurrence of accidents and poor road network and high levels of pollution and high levels of pollution. With the aim of improving the transport system of Malaysia, the mayor of Bogota in 1998 decided to focus on reconstruction and maintenance of sidewalks, construction of cycle paths, campaign against the use of private motor vehicles and development of an efficient public transport system. As a result Transmilenio which is a bus rapid transit system was created in 2000.

The main features of the system include dedicated bus lanes, level loading and offloading of passengers, pre-selling of tickets and improvements in technology. The buses have a capacity of 160 passengers, are disabled friendly and meet Euro III emission standards. The system uses 165 articulated passenger buses and with clean diesel engines. A key advantage of Transmilenio is its low cost. Operating costs are also low because of the innovative Transmilenio partnership.
The system accounts for almost 1.3 million daily trips and the main line carries more than 40,000 passengers per hour. Transmilenio users save on an average save 223 hours of travel annually and 9 percent of Transmilenio users have been diverted from commuting by private automobile.

Urban transport in India
The Indian urban transport sector is characterized by the dominance of personalized modes constituting mainly two wheelers and cars. At the end of the fiscal year 2005 – 06, India had 89.6 million registered motor vehicles out of which the share of two wheelers and cars was 72% and 13% respectively (MORTH 2009). The share of buses in total registered vehicles has declined from 11.1% in 1951 to 1.1% during 2006 which indicates the slow growth in public transport modes (MORTH 2009). Most State Road Transport Undertakings (SRTUs) are sick and their fleet size has declined rather than grow to meet the demand. Consequently street congestion has increased tremendously in Indian cities and overall speeds on major corridors have dropped significantly.

The share of non motorized transport especially cycling has also declined in Indian cities. Congestion, increase in trip lengths due to urban sprawl, increase in purchase power of people and totally inadequate facilities for cycling have all contributed to reducing cycling to less than 11% of the mode share which is down from nearly 30% in 1994. And for pedestrians our city roads have simply forgotten they exist. The percentage of roads with pedestrian footpaths runs to hardly 30% in most cities. (MoUD …)

In the following section the case of Indore and Bangalore are discussed which are examples of a good model for urban bus system operations.


Indian best practices
Indore is a fast growing industrial city in the state of Madhya Pradesh. The population of Indore in 2001 was 1.6 million. Like many other metropolitan cities of India, Indore faces the twin challenges of a growing population and pressure on existing urban transport system. In order to improve the accessibility levels in the city, popularize public transport and reduce the dependence on private vehicles, it started the process of improving its urban services in 2005.

Indore Municipal Corporation, Indore Development Authority and the district administration jointly invested in the creation of an SPV called the ICTSL (Indore City Transport Services Ltd.). Under the aegis of the ICTSL, a PPP model for creating and expanding urban bus services in Indore was structured. The investment in common structures like bus stops and office space was contributed by the ICTSL and the investment in rolling stock was made by the bus operators. The ICTSL finalized the routes for operation of the city buses and initiated a tendering proves for inviting private bus operators to bid for operating buses on predefined routes. The ICTSL also involved private parties in the provision of services like provision of bus passes, installing and operating GIS/PIS and advertising in the buses. The performance parameters for all the private entities are prescribed and monitored by the ICTSL.

The ICTSL is also extending the PPP model for operating 100 luxury taxies for throughout the city. It is also looking for ways to expand its services to less profitable routes by
 planning the system integration of the tempo and mini bus operators into the system as feeders to the bus service;
 exploring the option of cross subsidizing the urban bus services on less commercially attractive routes by working out a negative premium mechanism, where ICTSL pays the operator to run the system.

Reforms to include bus services in Bangalore
Bangalore is India’s IT hub and the third most populous city of India. Its population was five and a half million in 2001 and the total number of registered motor vehicles was ….. out of which 80% were two wheelers. The public transport system in Bangalore faced the following problems:
 Irregular services
 Drastically reduced fleet services
 Low internal and external efficiency in terms of resource management
 Poor maintenance of vehicles
 Mounting losses

In order to improve the situation of public transport, BMTC (Bangalore Metropolitan Transport Corporation) was formed in 1997 as an independent corporation under the Road Transport Corporations Act 1950. It took over 13 depots, divisional offices and bus stations attached to the erstwhile Bangalore service divisions, with 2088 buses operating 1934 schedules and 13294 employees, a staff ratio of 6.9 per bus (TERI 2009). Routes under the BMTC are either allocated on the basis of demand from a group of commuters or successful implemental routes taken up by BMTC on its own initiative that result in high revenues (TERI 2009). It is the only profit-making public bus company in India.

BMTC went about carrying its operations with the aim of providing an efficient, adequate and economical transport system to the people. The rationalization of fares and operation of differential services in the city has helped make bus transport more attractive to the people. The occupancy ratio has improved over the years and the average route length has increased as well. Although Bangalore is not a decongested city, it is a good example of a city taking serious initiatives to promote public transport by improving the quality of services and accessibility.

Recommendations

Transport is a key infrastructure sector and an efficient transport system is a prerequisite for the achievement of the goal of continued economic growth. Sustainable transport system requires a sound and efficient public transport system. Therefore, there is an urgent need to stem the decline of public road transport systems in developing countries. Many developing countries have state run bus services which are highly inefficient and a drain on the exchequer. The performance of the state public transport system in terms of quality and efficiency should be improved and private sector resources should be utilized for expanding the network of bus services.

High costs of foreign exchange reserves

Globalization has been hailed by many as a remarkable system for more efficient global allocation of resources. However, financial globalization has been accompanied by frequent and painful financial crises. Since the debt crises of 1982, financial crises have occurred every now and then. Some of the most famous ones are Mexican crisis in 1995, East Asian crisis in 1997, Russian crisis in 1998, Turkish crisis in 1994 and 2001, Brazilian crisis in 1999, Argentine crisis in 2002 and the current crises which has the unique feature of having originated in the developed countries.

The developing countries found a way to protect themselves from such crises and the painful process of IMF conditionalities by accumulating reserves. Countries with higher level of liquid foreign assets are able to withstand panics and sudden reversal of capital flows. Therefore, developing countries including India started accumulating foreign exchange reserves on an unprecedented scale. The total foreign exchange reserve holdings in most emerging economies far exceed all the rules of reserves accumulation. However, accumulating excess foreign exchange reserves is a costly means of averting crisis.

There are essentially three ways in which the cost of holding excess foreign exchange reserves can be ascertained.

• The spread between the private sector’s cost of short-term borrowing abroad and the yield that the Central Bank earns on its liquid foreign assets.
• The spread between the interest on domestic government bonds and the yield on reserves. This is known as the fiscal cost of reserves.
• Lastly, reserves could have been alternatively used to augment the public capital stock of the economy, and the social opportunity cost of (public) capital can be used as the relevant benchmark for the cost of foreign borrowing.

The objective of this paper is to compute the first kind of cost i.e. spread between the private sector’s cost of short-term borrowing abroad and the yield that the Central Bank earns on its liquid foreign assets for India.

Phenomenal growth of Reserves

India’s foreign exchange reserves have risen dramatically since the crisis year of 1990-91 when reserves were barely sufficient to cover 3 weeks of imports. In the year 1991-92 total foreign exchange reserves were at US$ 9,220 mn whereas in the year 2007-08 India’s foreign reserves stood at US$ 309,723 mn. Reserves begin to increase steadily from 1991-92 which is identified with the onset of the era of globalization. Note that there is a decline in the reserve holdings in 2008-09 to US$ 251,985 mn. The decline in reserves can be attributed to the financial crisis in the developed world which led to the reversal of capital inflows.

Prior to the era of financial globalization, countries held reserves mainly to manage foreign exchange demand and supply arising from current account transactions. The traditional rule of thumb for Central Banks was that they should hold a quantity of foreign exchange reserves equivalent to three months of imports. However, in the age of financial liberalization when panics and sudden reversal of capital flows are very common this rule of thumb was clearly insufficient. All developing saw the advantage of holding a large stock of international reserves to protect their domestic financial system without IMF cooperation. Infact the policy guideline that the IMF provided to the developing countries with uncertain access to capital markets also encouraged the accumulation of reserves equal to short term debt. The rule that countries should hold liquid reserves equal to their foreign liabilities coming due within a year is known as the Guidotti-Greenspan rule.

India's short-term debt/reserve ratio was significantly above unity in the early 1990s. Since then, India has built up enough reserves to abide by the Guidotti- Greenspan-IMF rule, and the short-term debt/reserve ratio has stabilized at around 0.5 from 2.07 in the year 1991 – 92.

The Cost of Reserve Holdings

India like many other developing countries has been accumulating reserves far in excess of the conventional bench marks. For every $1 of reserve assets India accumulates in excess of the optimal level, it pays a cost equal to the spread between the private sector’s cost of short-term borrowing abroad and the yield that the Central Bank earns on its liquid foreign assets.

The natural question that arises in this exercise is what constitutes optimal amount of reserves. However, there is no clear answer to this question because even countries with sound macroeconomic policies can be hit by contagion from elsewhere in the world of liberalization. Hence the bench mark for optimal reserves keeps increasing. Keeping in mind the self – insurance motive it is assumed that the optimal amount of reserves equals the sum of short term debt, six months of imports and foreign portfolio investments. Reserves in excess of this amount are considered unnecessary. With this definition of optimal reserves, I find that excess reserves have been increasing steadily from negative levels in 1991 – 92 to a high of US$ 140,076 mn in India.

To ascertain the loss in income associated with holding excess reserves, potential investment rate has been calculated by adding excess reserves as a percentage of GDP to the actual rate of growth of investment. Once this potential investment rate has been calculated, the potential rate of growth of GDP can be calculated by dividing potential investment rate by the incremental capital output ration. The loss in growth is the difference between the potential growth rate and the actual growth rate (Table 1.).

Table 1.

Year	Rate of NDCF	ROG of GDP at FC	Excess Reserves/ GDP	Potential Growth Rate	Loss of Growth
1991-92	12.7	1.4	-4%	0.98	-0.45
1992-93	13.5	5.4	-2%	4.57	-0.79
1993-94	13.7	5.7	2%	6.51	0.83
1994-95	17.1	6.4	3%	7.51	1.12
1995-96	17.2	7.3	1%	7.71	0.42
1996-97	15.2	8	0%	7.97	-
1997-98	16.9	4.3	1%	4.56	0.25
1998-99	15.3	6.7	2%	7.56	0.87
1999-00	18.3	6.4	2%	7.14	0.7
2000-01	16	4.4	3%	5.17	0.81
2001-02	13.8	5.8	6%	8.34	2.53
2002-03	16.6	3.8	9%	5.92	2.08
2003-04	19	8.5	14%	14.81	6.29
2004-05	22.7	7.5	14%	12.08	4.61
2005-06	25.8	9.5	11%	13.57	4.05
2006-07	27	9.7	14%	14.8	5.05
2007-08	28.9	9	19%	14.94	5.93

Source: Calculated from Reserve Bank of India data

*Figure in parentheses indicate negative values

The loss of GDP growth has been increasing with the increase in reserve holdings. The percentage loss in GDP growth was 5.93% in 2007 – 08 and the loss was highest in the year 2003 – 04 at 6.29%.

The above analysis proves that India is paying a very heavy price to play by the rules of financial globalization. In the year 2003 – 04 India lost out above 6% of GDP due to its policy of accumulating reserves in excess of what is justified by all rules of reserve accumulation. The amount of excess reserves held by the Reserve Bank of India could have been alternatively used to augment the public capital stock of the economy. In a country like India which is characterized by inadequate expenditure on infrastructure and social sector, this is indeed a great loss. The social rate of return would have been much higher if these excess reserves could be invested in infrastructure which is the focus area of the government during the Eleventh Five Year Plan.

A study (Fan, Hazell and Thorat, 1999) carried out by the International Food Policy Research Institute on linkages between government expenditure and poverty in rural India has revealed that an investment of Rs. 1 million in roads lifts 165 poor persons above the poverty line. The number of people who would have moved out of poverty if the entire amount of excess reserves had been invested in roads has been calculated in Table 3.

Table 2. No. of people out of poverty with investment in Roads equivalent to Excess Reserves

Year	Inv. In Roads/Excess reserves	Number of people out of poverty
1991-92	-9,886.25	-16,31,231
1992-93	-6,213.25	-10,25,186
1993-94	4,686.20	7,73,223
1994-95	9,263.90	15,28,544
1995-96	2,325.80	3,83,757
1996-97	130.79	21,581.17
1997-98	3,578.76	5,90,494.6
1998-99	6,908.65	11,39,926
1999-00	9,233.97	15,23,605
2000-01	13,384.78	22,08,488
2001-02	25,654.36	42,32,969
2002-03	40,384.93	66,63,513
2003-04	69,453.45	1,14,59,818
2004-05	78,226.29	1,29,07,337
2005-06	68,343.14	1,12,76,617
2006-07	94,340.38	1,55,66,163
2007-08	140,076.00	2,31,12,539

In 2007 – 08 the amount of excess reserves held with Reserve bank of India was US$ 140,076 mn. According to the Uniform recall period distribution data of NSSO 61st round the number of people living below the poverty line is 3017.20 lakh in 2004 – 05. If the entire excess reserves (US$ 140,076 mn) in 2007 – 08 had been invested in road infrastructure then according to the study by Fan, Hazell and Thorat approximately 231.12 lakh people or 8% of the people living below poverty line would have moved out of poverty.

India has responded to financial globalization in a manner that is far from optimal. By accumulating reserves far in excess of its short term debt obligations India has lost approximately 2% of GDP every year during the period 1991 – 92 to 2007 - 08. Moreover the investment of the excess reserves in social and infrastructure sector would give a higher social rate of return. The sudden reversal of capital flows due the crisis in developed countries reduced the foreign exchange reserves in 2008 – 09 but now India is again accumulating more reserves. Therefore, the loss in GDP growth and the opportunity lost in domestic investment is likely to rise in future.