Foreign Aid - The Debate

I am returning from a long hiatus. While I work quite a bit of hours, I can't say that the hiatus resulted from a higher workload. I have traveled for work quite a bit in the past few months, but I can't say this directly contributed to my lack of motivation to blog. I guess I have no real excuse, but I am back and I hope this post will serve to start a discussion.

A few weeks ago, the head of the international development practice of my firm visited from DC. He did a whirlwind tour of Delhi, Mumbai and Chennai. We set up meetings for him with NGOs, diplomats, law firms, and entrepreneurs. When he was in Chennai, we began an interesting debate, which has stayed with me since. Foreign aid and its purpose. Let's face it, funding for foreign aid is one of the first things on the proverbial "chopping block" when a government tries to reduce spending. The debate of governments' responsibilities to their citizens vis a vis foreign citizens inevitably ensues.

Questions of "why should we pay for the building of schools and hospitals in less well off countries, when our own schools and hospitals are struggling with shrinking budgets?" "Why if country X has a perfectly functional government, should we help pay for the poor children of country X to read?" "We have lots of problems at home, why should we support foreigners' whose government is not capable of or does not care to adequately support them?" All are perfectly reasonable questions.

Here are a few other things to consider - poverty alleviation, improving education, and job creation are both domestic and international issues. While we hope and work towards improving the situation at home and abroad the situation not ever be perfect. However, a wealthy country's purchasing power abroad is much higher than at home. The impact of a bit of aid coming from a wealthy country is much higher than at home. If we can help using relatively little funding and make a big difference to multitudes, why not do it? Foreign aid, when administered through cooperation with the beneficiary government is good foreign policy, which results in improved bilateral relations. I know this may be a bit simplistic, bu better relationships between countries lead to trade, which results in job creation jobs and economic growth on both sides of the border.

UK and India

In the past few months, UK and Indian press have been replaying a quote by Pranab Mukerjee, India's Finance Minister saying that British aid is no longer necessary and is "peanuts." The quote fueled controversy in the UK over the role of DFID, British aid agency, in India - the top recipient of British aid. By the way, this quote is actually from 2010 and was taken up by two MPs who are making the argument for a reduction in British foreign aid.

Sure, India's economy has shown robust growth, growing up to 10% a year. Was no one really left behind during this blockbuster economic growth spurt of the past five years? The latest data released by India's Planning Commission indicates that poverty in urban India declined by 20.9%, in rural India by 33.8%, and at all-India poverty level declined to 29.8%  in 2009-2010. While states such as Himachal Pradesh, Madhya Pradesh, Maharashtra, Orissa, Sikkim, Tamil Nadu, Karnataka and Uttarkand saw a decline in the poverty ratio of 10 percentage points, states such as Assam, Meghalaya, Manipur, Mizoram, and Nagaland saw their poverty ratio increase. Bihar, Chhattisgarh and Uttar Pradesh have only seen a marginal decline in the poverty ratio.


However, these census figures do not capture the whole picture. For example, data shows that minorities and marginalized community groups - scheduled castes and scheduled tribes - still predominate the least well to do. Casual or temporary laborers in urban areas - those that come to cities for better opportunities - also have a very high incidence of poverty. According to the data released by the Planning Commission, poverty among casual laborers in Bihar is 86%, Assam is 89%, Orissa is 58%, Punjab is 67.6%, and West Bengal is 53.7%. Data released by the National Sample Survey Office (NSSO), indicates that while 2009-2010 is characterized by significant economic growth, this type of growth generated a rather small number of jobs. Furthermore, while the number of temporary workers grew by 21.9 million, the number of regular or full time workers only grew by 5.8 million, meaning that people have less opportunities to find stable and steady employment.

The last piece of statistic I wish to bring up is the measurement of inequality. Latest data released by the Planning Commission indicates that all-India inequality worsened - the Ginni coefficient (which measures inequality) went from .35 to .37.Inequality worsened in rural areas of ten states and urban areas of 18 states across India. If you want to compare to inequality in the United States', the Ginni coefficient in the US in 2009 was 46.8.

So we can see that while overall poverty declined, a closer look at the data indicates that India is experiencing a widening of the space between the proverbial "haves" and "have-nots." True, India is one of the world's fastest growing economies, with immense yet-to-be-realized potential, is home to the largest number of billionaires, but it also home to a large population in need of home and foreign government assistance.

Sorry, I veered into India-specific statistics, but I feel there a case to be made for foreign aid to the world's most vulnerable. What do you think?

Sources:

       Gilligan, Andrew “India tells Britain: We don’t want your aid” The Telegraph 4 February 2012 <http://www.telegraph.co.uk/news/worldnews/asia/india/9061844/India-tells-Britain-We-dont-want-your-aid.html>

2.       Mehra, Achal “Let them eat cake” Little India 16 March 2012 <http://www.littleindia.com/commentary/12376-let-them-eat-cake.html>

3.       Mishra, Asit Ranjan “Fewer poor, but still a long way to go” LiveMint 20 March 2012 <http://www.livemint.com/2012/03/20003512/Fewer-poor-but-still-a-long-w.html?h=A1>

4.       Padhamanabhan, Anil “Poverty falls, but inequality worsens” LiveMint  20 March 2012 <http://www.livemint.com/2012/03/19225906/Poverty-falls-but-inequality.html?atype=tp>

Consumer Urges

Ever wonder how you go to the grocery store with a list and come back with lots of unplanned purchases and a much larger bill? This really applies to any sort of shopping - clothing, electronics, toiletries, and souvenirs.

When my husband moved into my lovely DC share in Dupont Circle we talked about food shopping and budgets. He knew that grocery shopping ranked lowest on my list of things that I don't like doing but need to do in order not to starve. Yes, for me grocery shopping ranks below cleaning the bathroom. My husband had a brilliant idea, developing the grocery store map! Yes, it may seem funny at first, but hell it works. He scoped out my favorite grocery store, Trader Joe's - ah I miss it so - and created a map of the store based on the things that we usually need and buy. He spent a few hours compiling the map, but it made shopping a lot less excruciating and expensive. Each time we would go to TJ's we would create our shopping list on this map - putting fruit and veggie, hummus, and meat in the corresponding spots on the map. I mean, sure you still buy things impulsively, but mapping out your grocery list created big savings in time, stress, and financial management.

A whole science exists on how things are placed in your local grocery store. Store owners tend to place most expensive items at eye level, while less profit generating products at customers' feet and at tops of shelves. Store owners tend to group complementary products together as customers will buy more products - you know how salsa and chips always end up conveniently located next to each other? You know when you come into the store after work and you encounter that divine smell of fresh baked bread - yes, it makes you hungry and more likely to buy more food. Ever notice how staple goods like milk, cereal, bread and yogurt are at the back of the store - right, that's to make you walk through entire aisle's worth of stuff that you really don't need to get to the essentials. If you are a fan of Trader Joe's you will notice the kiddie sized shopping carts and the wonderful scavenger hunt offered for kids -  they entice pint size consumerism! My favorite is the selection of a variety of trashy and not so trashy magazines with gum and candy next to the checkout clerk, standing in line longer encourages a greater number of poor buying decisions. I mentioned a few strategies used in placing items in a supermarket, but there are obviously many more ideas on how to get consumers to spend more time and money in shops.

There are a few instances where I observed a number of really interesting business models of store managers/owners maximizing our instincts to shop. First, I have a friend from undergrad which loves and raves about this wonderful supermarket which she and her husband discovered in upstate New York. They live in the city, so driving to the supermarket is already a sunk cost. Once there, as a consumer, you will want to maximize your time and buy everything in one place. This supermarket had a snakelike layout. My friend raves about the fact that the whole store is made up of one winding aisle, thus relieving the anxious consumer of the stress of running between different specialty aisles. Brilliant! Consumer walks through and sees all the offerings of the store; not completing their trek through the store will mean that they will never get out. From the store owner's perspective, by forcing all customers to look at every item they have on offer will encourage a greater number of impulse buys, thus maximizing his/her return on investment. I don't feel its great for the individual consumers, but from a marketing standpoint, this idea is pure gold, ahem...literally.

Second, in Chennai, I have had to also stop and appreciate marketing brilliance of a retail business idea. Meet Anokhi, my happy place. This two story compound appeals to four shopping tendencies among young upper middle class women; clothing, home textiles (nesting), jewelry, and coffee/dessert. The Anokhi compound houses a clothing and home textiles store on the ground floor and a jewelry/tchotchke/cosmetics and coffee shop on the second floor. They have been expanding the ground floor for another retail venture, which I feel will just enhance the draw of the shopping compound. A deceptively simple idea shines in its brilliance. I mean think about it, you want to meet a girlfriend for dessert and coffee. Inevitably, one of you will be running late. Sure, there are newspapers at the coffee shop, but who will peruse the news if you can peruse the latest offerings in beautiful prints and organic cotton? Gotcha! The more late your girlfriend runs, the more likely you will buy something.

Alternatively, you are American and don't want to make your friend wait, so you arrive early. The clothing and textiles store is on the ground floor, thus you have to pass it on the way to the coffee shop, since you are early, why not stop and browse right? Lastly, on the way to the coffee shop you have to pass the tchotchke, jewelry and cosmetics shop on the second floor - who can have constant iron will not to want to spoil oneself just this once, right? I take my hat off to the designers of Anokhi, they definitely get what drives our consumer urges.

My Frenemy: the Auto(rickshaw)

Oxford dictionary defines frenemy as "a person with whom one is friendly despite a fundamental dislike or rivalry." Meet my ubiquitous frenemy - the auto and its fearless driver. You will find my frenemy prominently displayed above the text.

Things between Chennai auto drivers and I, are complicated. We maintain a symbiotic relationship - I use their driving services to get to places in lieu of safe public transport and the auto drivers try to skin as many rupees off me as possible. I am not saying Chennai auto drivers only try to skim as much as possible off my humble person: no, auto drivers tend to maintain democratic standards - they attempt to fleece everyone equally.  In the Lonely Planet's India country guide - Chennai auto drivers are affectionately described as sharks.

To be fair to these distinguished professionals - auto fares in Chennai are currently artificially low. The government has not allowed auto drivers to raise basic fares for many years, resulting in auto drivers negotiating fares in lieu of using their meters. Furthermore, recently petrol prices began to steadily increase as a result of the Indian government's removal of petrol subsidies, further reducing the auto drivers' profit margin. These circumstances lead to a unique challenge as a consumer of auto services - one must learn accurate fares for various destinations as quickly as possible. Failure to do so results in grossly overpaying and acquiring the reputation of a consumer that grossly overpays for auto services.

Over time my frenemy has developed an interesting business model of calculating fares. Each driver bases fares on answers to the following questions:

1. Does the potential passenger look like they come from Chennai? In my case, the driver assumes I am a tourist - the biggest prize to fleece. I do not blend in - making the case that I know fares and my way around this city - is particularly difficult.
2. Is he or she in a hurry? Showing stress, impatience, and fear will raise the fare accordingly.
3. Is it raining? Alternatively, is the potential passenger sweating profusely after spending a few minutes in the blazing sun? Fares fluctuate depending on the strength of the rain or heat/sun.
4. Does the passenger speak Tamil? Sadly, my Tamil skills melted into the haze, the only exception -  I am can still give directions and bargain in Tamil.
5. Are there other autos around? Fares fluctuate according to the number of other auto drivers hanging around. However, if other drivers decide to help their buddy negotiate, the passenger loses ground quickly.
6. Is it after 10 PM? Fares at night arbitrarily rise. If there are no other auto drivers around, your bargaining power does not exist.
7. Is the passenger a regular customer? A passenger that engages an auto driver regularly, contributes to the auto driver's income regularly, thus creating a disincentive to fleece more than acceptable.
8. Does the passenger have change? Lack of change will result in very expensive auto rides as, inevitably, no auto driver is willing to part with his change - most claim not to have any change even as early in the morning as 7:15 AM.

I generally like the auto guys that hang out across the street. We agreed on prices to my yoga place and work. The drivers at the auto stand down the block from our house will usually give us really crappy deals, thus I stay away from that auto stand. I usually return from work during rush hour with many autos passing my office-building and tend to negotiate with moderate success. To avoid very expensive auto rides, I've began hoarding change, which makes my wallet really full - even though I am not carrying much cash in terms of absolute value. I've generally failed at negotiating rides that take place less regularly even if I need to go pretty close to my house. Every new route, even if the auto driver I am negotiating with knows me and takes me somewhere on a regular basis, turns into an epic battle of the wills. Since I am usually in a hurry and running late, I lose.

I've recently noticed that I have a much less sunny personality when negotiating fares, but a girl must do what a girl must do, to get from point A to point B.

In the great words of Ostap Bender of The Golden Calf by Ilf and Petrov:

"Автомобиль не роскошь, а средство передвижения" = "The auto is not a luxury but a means of transportation"

Since we are still waiting for our car - rumor has it we will get it soon - I live to fight...I mean negotiate, another day.

In the Land of Yoga: This White Girl Sweats (Profusely)

As some friends observed to me recently, I have been rather stingy on the posts. I apologize, life got hectic and sadly blogging fell by the wayside. I am trying to make it up, hence the flurry of posts. Currently, I am in a reflective mood - possibly because we are working out the details of a trip to Kerala aka G-d's Country coming up with two wonderful friends serving in the Gulf. In 2 weeks, when we see them, it will be about a year since our eyes welled up seeing them off to their respective destination. Our friends, posted in the Gulf miss greenery and us, of course - so they are super excited to explore post-monsoon Kerala. This will also be our first venture into G-d's Country. Additionally, my parents arrive in just 6 short weeks and I am in charge of planning our extended foray into the North of the country. My boss is not amused at the moment - I am taking more vacation days than the company allows - but who are we if we are not surrounded by the love and warmth of family - sad, lost souls.

Right, this white girl discovered Ashtanga Yoga. Following in the footsteps of a few foreign service spouses that joined this, for now lets call it "studio," I discovered a wonderful fitness routine. The Orion Health Centre is my happy place, the place where everyone knows my name - in four short months, mainly because the instructors admonish me on forgetting the sequence of my routine - my peaceful place, my balance restoring place, and the only place where I have been able to shed my New York OCD frame of mind. I love going to  Orion and am so grateful that a spouse that recently departed India for an onwards assignment discovered this wonderful space.

The Orion Health Centre does not stray far from the usual business structure - one can get their dental checkup, get an ultrasound and cardiogram, get their blood-work done, and finally get their yoga routine at the very top floor of the complex. This place is not your yoga studio in the Western sense - organized classes with instructors calling out each move, while monitoring how the students move - Ashtanga Yoga at Orion is a place where people go regularly, not so regularly, drop in and out, and people are comfortable sharing recent aches and pains and health issues with the three instructors. You find very few ex-pats at Orion. What you find is a sense of chosen family. Although, I remember VERY few things from Hebrew school, I remember this proverb "G-d chooses your family, but to make up for your lack of choice in that respect G-d lets you choose your friends" - please don't quote me, but this is the gist. I feel this way about Orion - the three people running this place create an atmosphere of comfort, acceptance, and family. I don't know how to explain it exactly, but I tell you whatever they are doing works!

Since I am an economist, I also look at pricing. I've dabbled in yoga in the US, but the price tag of this type of routine is high. In DC a 16 class card costs your $200 USD per month. In NYC you will pay $460 for a 30 day class card - if you go 5 times a week this covers 6 weeks. Now that I started going 5-6 times a week for the month I pay a mere 3000 INR ($ 60 USD) - this buys be 20-24 classes a month. Hot yoga - all the craze in the US - since there is no AC - no extra charge. For 60 USD you get access to three wonderful yoga instructors, who watch over you like hawks or if you want to be less dramatic private teachers. For example, I sweat profusely - someone told me it takes about a year to get used to a different climate - at first this made the instructors nervous - so they would make me lie down and nap for 10-20 minute increments - just to make sure that I don't collapse and hurt myself.I still sweat profusely, but the yoga instructors got used to my dripping form, which does not serve as a precursor to passing out.

Benefits? The 12 unattractive pounds that I put on working comparatively long and sedentary hours in DC as a consultant are now history! I feel more energetic and focused at work - I go at about 7:15 AM every workday - and I feel stronger and less out of breath walking around Chennai. I look more toned and am happier.

P.S. My husband voluntarily - don't let him fool you into thinking otherwise - joined me for yoga on Saturday mornings. I observed a serious temperature difference between coming at 7:15 and 9:00 AM.

Samantha needs no yoga for balance

Working in the local economy - not impossible and rewarding

So here I am, on Saturday following in my mother's footsteps - I am using amazing Trader Joe's Brownie Truffle Baking Mix to bake. I am not sure TJ's will appreciate this, but my mom made some substitutions. A few years ago my mother one of her moments to brilliance and replaced butter with Disaronno which resulted in out of this world fluffy, light and delicious - sadly not kid friendly - brownies. Thanks mom! Unfortunately Disaronno is unavailable in our commissary I had to substitute with Baileys and am experimenting with adding little pieces of pineapple for a little zing. While mixing the brownies I found myself musing about where I am and what it all means.

While my browser is open to about 20 different Indian microfinance articles - the subject of my next past - I want to step back and think about my life. When my husband decided to join the foreign service, I was rather apprehensive. We were getting a great life - my husband his dream job and we both would get a chance to explore the world in ways that many people cannot even fathom. Great! So here is the hitch, my own job prospects and earning potential would plummet as we crossed the border. You think unemployment in the US is bad - as far as I remember from my spousal orientation session out of all spouses and partners that want to work, about 45% actually succeed in securing jobs. However, I make up a tiny positive part of that statistic, because I am part of the tiny minority that works in the local economy. When asked about local employment, most people sigh and say that finding a job is impossible and working in the local economy turns out to be more difficult lower paid than its worth.

I am here to present the opposite case. Working in the local economy has its tradeoffs and is not for everybody. Personally, I feel I traded pay and vacation for my dream job. In the local economy you don't get both local and US holidays. Your pay, will likely not much lower than you are used to. I mean hell, I think I make less than a pimply teenager flipping burgers in DC. However, in my opinion, if you are willing to look at working in the local economy the payoffs, are tremendous. You can find your dream job, you can reinvent yourself professionally and your education and skills if you are outside of Western Europe - lets get real how many diplomats get to serve in Western Europe - are in high demand!

When I worked as a consultant in DC, I met with my former employer's India expert. She condescendingly informed me that my job prospects were severely limited. According to her, the best I can do for myself in India; teach English and write press releases for a company with business interests in the West. I was devastated, but when I got over the ego blow, I thought logically. I have a MA in international economics from a top tier US graduate school. English is one of two of India's languages of business, surely more opportunities exist in addition to teaching English? I worked really hard. I got out of my shell and networked like a crazy person. I spoke to anyone willing to listen and think about job options in India. I learned about the local job market. I learned about bilateral employment agreements - especially the one between India and the US. I bugged the local mission about work permit procedures. I went on informational interviews.

Finally I hit my professional jackpot - I was connected with a SAIS alum at a DC economic consulting firm and he passed on my resume to the firm's office in Chennai. The alum and one of the senior staffers from the India office interviewed me in DC and offered me a job - as an economist! This all happened before my arrival, so I advise; fulfilling your professional dreams takes time so its never too early to start. While the spouse trains in DC, the capital of networking - talk to people, think about your options, contact your mission's community liaison officer and local US trade representative. I love that I get to get out of the community to do something both challenging and rewarding. I am growing professionally and am satisfied with my choice.

With that said, I could not have done it without a few wonderful people. First of all my loving, supportive and patient husband - he was there cheering me on even when I felt completely insecure.  My wonderful co-worker from my DC consultancy - who is now getting his MIPP at the Kennedy School at Harvard - who connected me with a SAIS alum at my current job. The SAIS alum that made time for me and passed on my resume to the firm's Chennai office. The US Department of Trade officer and his spouse who both pointed me in the right direction, provided me with local economy information, salary levels and negotiation options, and took me step by step through an Indian employment contract, and supported me in my endeavors - even though they knew me via email. I could not have done this without kind and supportive people that I met in my journey to Chennai.

My point - don't give up your dreams and ambitions and settle. Look at your choices and frankly weigh each option's pros and cons. Don't let people tell you that you are not good enough and finding what you want is impossible. You have choices as a diplomatic spouse and choices outside of the mission might be more interesting and rewarding than you expect.

News at 11: Used Car Dealer Disappoints Consumer

I feel like the title of today's blog should be a headline in "The Onion." My husband tried to buy a used car. Since most diplomatic vehicles were already sold, we asked some questions, asked for recommendations of a reputable used car dealership, did our homework and ventured into the local used car market.

We looked at cars, we rubbed our chins and discussed cars. Although, I don't want to fool you, I know nothing about cars, besides the fact that their purpose is to get you from point A to point B. We engaged a mechanic to look at finalists and finally made up our mind. We settled on a modest 2008 Hyundai Xanto(?) with fairly low mileage. Relieved that we found a suitable vehicle to get us from many point A's to just as many point B's. We bargained and settled on a used car price that would infuse between 4 and 5 times an average Indian annual salary, which hovers at around $1200 USD. We gleefully gave a deposit of - gasp 50000 INR or just over $200 and started filling out an application with the Ministry of External Affairs (MEA) to get permission to buy a car. The MEA permission is tied to the person, you say? Well, no that is not the case in India. MEA permission to buy a car is tied to the car. So we wait, and wait, and wait. We are told, "well, just another few days and everything will be settled." We hire a driver for when we receive...may I say it out loud....our car?

Approximately, seven weeks later we finally receive a "preliminary" approval for the sale. The MEA approval depends on one little thing. Nothing really, a document which the legal owner of the car has to obtain from his local police precinct. Basically, this document will say that there are no open investigations, tickets, ect in relations to the car. Indian law requires this document to approve sales of used cars to everyone living in the country foreigners and Indian nationals. A fairly straightforward and logical procedure, unless the owner will "under no circumstances" go to the police to get the aforementioned document, which invalidates our purchase. Since the MEA permission was tied to the car and not the buyer, to buy another car we start at the beginning.

After we found out we were not getting the 2008 Huyndai Xanto, we thought again. We looked at options that minimize our risks, albeit more expensive. We decided to buy a new car - from a factory. A few of my husband's co-workers traveled down that particular car acquisition road and we decided to follow them. This is where the situation gets more Kafka-esque. We need permission from the MEA for a car that does not yet exist. The factory cannot build this non-existent car without us obtaining permission to buy this non-existent car. We will also have to pay up-front before the non-existent car gets built. Sigh.

So here we are, waiting for permission from the Indian government to buy a non-existent car.

****

In other news, I got my work authorization from the same agency lightening fast - faster than getting permission to dump 4 times the average annual salary into the local economy. The funny thing is that the MEA permission to buy a car was processed in the local MEA office in Chennai and my work permit went through Delhi. Go figure right? Government bureaucracies work in mysterious ways.

I will do a write-up on my employment process begging to end, because you know what fellow diplo dependents, there is a great big world outside of your local mission and I am living proof that finding a job in the local economy is in fact possible.

Stay tuned folks!

Summer is in the air…

Summer means sunshine, frilly dresses, sandals, hats, burgeoning complexes about one’s appearance in a bikini, and of course ample sunscreen protection. I got all those things covered, but let’s face I am not the kind of girl that blogs about that sort of thing. I do however want to establish my nerd-tastic street credibility, so I write about…drum roll please…free trade agreements! 

First things first, definitions; a free trade agreement establishes a relationship of free trade between two or more countries. Free trade agreements eliminate tariffs and hindrances to movement of goods and services between signatory countries. For example, NAFTA the North American Free Trade Agreement became law in 1994 removing most barriers to trade and investment between its signatory states the United States of America, Mexico, and Canada. FTAs do not necessarily mean that capital and labor will move freely between signatory states, as is the case with common market agreements. Signatory states negotiate terms of free trade agreements, with each country aiming for greatest national benefit. Free trade agreements bring with them economic winners and losers, as the case with NAFTA, but most economists agree that free trade creates a net gain for society. I think N. Gregory Mankiw said it best, "Few propositions command as much consensus among professional economists as that open world trade increases economic growth and raises living standards."

 Since 2007 India and the European Union have been negotiating a free trade agreement. The two governments completed 12 rounds of negotiations and the FTA may get signed into law either this month or at the end of June. The official name of the agreement, Broad-based Trade and Investment Agreement or the BTIA encompasses a number of industries. As much as 90% of bilateral trade would be covered by the BTIA. As part of this pact India will relax its investment rules. In 2009, India and EU’s bilateral trade relationship resulted in a flow of 53 billion Euros in goods and 16 billion Euros in services. The European Union is India’s largest trading partner. While New Delhi already completed FTAs with Japan, South Korea, and ASEAN and is conducting similar agreement negotiations with Thailand and Malaysia, the India – EU FTA is by far the most ambitious trade endeavor. 

Gains for both sides abound. Currently, the EU is struggling with economic woes such as slow growth, creeping unemployment, and let’s not touch Greece, Spain, and Portugal’s financial troubles. Through this FTA, the 27 nation bloc gains access to one of the fastest growing and dynamic economies in the world. With bilateral trade in goods and services between the EU and India growing, a free trade agreement will facilitate further expansion of each partners’ economy. For example, recently the EU granted duty free access to Bangladeshi manufacturers, flow of clothes from Bangladesh into the EU increased by an impressive 40% providing the producers with an extra $14 billion USD in a mere eight months. The Europeans recently negotiated an FTA with South Korea and are finishing up another FTA with Vietnam. The Europeans hope that the India FTA will trigger more free trade agreements across Asia.

As with any free trade agreement, negotiations stalled with regard to several industries. Negotiations regarding European access to markets of auto and auto components, wines and spirits, agriculture, stricter enforcement of property rights, as well as to insurance and banking sectors. First, I will address intellectual property rights and why they matter. Second, I want to focus on access to insurance and banking sectors in India. 

Generic Drugs

The European Union has been pushing for the Indian government to tighten intellectual property laws which will adversely affect India’s pharmaceutical industry. This past week India’s Prime Minister Singh instructed negotiators not to compromise the country’s stand on IPRs (intellectual property rights) with a special emphasis on pharmaceuticals. 

India and Israel are the world’s leading generic drug makers. Canada, South Africa, Brazil and Thailand also developed fairly large generic drug industries. Producing generic drugs in India costs about 35 – 40 % less than generic drugs produced in the US and the EU. Some estimates put India’s pharmaceutical industry at over $20 billion USD. About 50% of generic drugs produced in India leave the country for sale in Africa and Asia. Indian pharmaceutical companies provide antiviral medications to AIDS patients in a variety of African, Asian and South American countries at a fraction of the price of name brand medicines. 

According to Sen Gupta of the Delhi Science Forum, an NGO, from 2003 to 2008 the Indian pharmaceutical industry provided about 80% of medicines used by internationally funded AIDS treatment programs. South Africa, Brazil and Thailand all use Indian made antiviral medicines to run HIV treatment programs. Thailand, a country lauded for its expansive public health system may be adversely affected by stricter IPR regulation in India. With a public health system that covers approximately 96% of Thailand’s population, increases in drug prices may put the affordability of such a government safety net system into question. 

Implementation of stricter IPR regulation in India will result in price increases of generic drugs that treat heart disease and cancer, as well as managing AIDS. As things stand, the Indian government negotiators will not go beyond domestic law and agreements signed with the WTO. With respect to taking a stricter stance on IPRs, the Europeans want data exclusivity to be part of the FTA. When a drug manufacturer, both name brand and generic, wants to introduce a drug to the market, the company needs to show clinical data that this drug is safe for public consumption. After patents expire generic drug makers use the same clinical data submitted by name brand drug manufacturers to show that their generic drugs are safe for consumption. 

Data exclusivity on drugs means that the clinical safety data submitted for approval of a drug belongs exclusively to the company that submits this data. Thus with data exclusivity rules in place, after a patent of a name brand drug expires, generic drug makers will not be able to use clinical trials associated with that drug and patent to prove that the drug’s generic version is safe for consumption. Why does that matter? Generic drug makers will need to conduct their own clinical trials, which take time, labor and expense. Therefore data exclusivity rules will delay genetic medicines from entering the market. The extra expense of clinical trials the manufacturer will pass on to consumers. Additionally, if data exclusivity regulations are put in place in India, generic drugs currently produced by Indian firms will technically become illegal, since no clinical data was previously submitted, putting further stress on consumers that depend on those medicines. 

Banking and Insurance Industries

The EU negotiators also want access to Indian banking and insurance sectors. Since initial market liberalizations of the early 1990s, India’s economy grew at a healthy clip. In 2010 the Indian economy grew by 10.4%. With business booming and growth opportunities opening up every day, the banking and insurance sectors stand at the center of India’s economic growth. Start-up companies need seed money and loans, new entrants into the middle class want loans to purchase housing and other consumer goods, while other people with new disposable income think about extra financing for their children’s school fees and wedding expenses. Owners of new businesses, housing, cars and consumer goods want to insure their properties, thus it follows that demand for insurance products will also grow in this thriving economy.

Access to these growing industries in India will help the Europeans grow their own economy, as they can provide expert financial and insurance services for the growing Indian economy. If India opens up its banking and insurance to the EU opportunities for the Europeans abound. However, India has been very careful about opening its markets, careful at calibrating local employment and industrial demands while taking advantage of opportunities offered by foreign investments and experts. Currently, foreign firms such as large supermarket chains and furniture stores have had no success in accessing local retail markets. 

As any trade agreement, the India – EU FTA will bring tremendous growth opportunities for both the Europeans and Indians, however as any economic policy the agreement will also negatively affect the livelihoods of people in both countries. With that said, the estimated benefit for both partners of this FTA amounts to a boost of 160 billion Euros by 2015, a sizable net gain for society.

  
Sources:

Balakrishnan, Reghu “Pharma MNCs take JV route for India” The Business Standard. 17 April 2011 <http://www.business-standard.com/india/news/pharma-mncs-take-jv-route-for-india/432494/>

Chatterjee, Patralekha “India-EU free-trade pact could stifle generics industry.” The Lancet. 16 April 2011. Vol. 377 Issue 9774, p1305-1306.

Chatterjee, Patralekha “India combats confusion over counterfeit drugs” The Lancet. 13 February 2011 <http://www.thelancetglobalhealthnetwork.com/archives/723>

Devraj, Rajeet “INDIA: EU Trade Deal May Curb Affordable Drug Supply | IBSA” IBSA. 24 March 2011 <http://www.ibsanews.com/india-eu-trade-deal-may-curb-affordable-drug-supply/>

“EU-India free trade agreement and impact on generics” Genetics and Biosimilars Initiative. 29 April 2011 <http://www.gabionline.net/Generics/General/EU-India-free-trade-agreement-and-impact-on-generics>

Gupta, Surojit “India-EU FTA talks in crucial phase” The Times of India. 5 May 2011 <http://articles.timesofindia.indiatimes.com/2011-04-26/india-business/29474428_1_india-fta-eu-officials-senior-eu-diplomat>

“India v China: The X Factor” The Economist. 23 April 2011. <http://www.economist.com/node/18586836?story_id=18586836>

“India, EU step up efforts to reach FTA this year” The Business Standard. 18 April 2011 <http://www.business-standard.com/india/news/india-eu-stepefforts-to-reach-fta-this-year/132472/on>

 “India not for IPR beyond domestic law in FTA with EU: PM” IBN  Live. 30 April 2011 <http://ibnlive.in.com/generalnewsfeed/news/india-not-for-ipr-beyond-domestic-law-in-fta-with-eu-pm/667668.html>

“India, Mercosur ‘must withstand EU pharma demands’” Pharma Times Online. 05 May 2011 <http://www.pharmatimes.com/Article/11-05-05/India_Mercosur_must_withstand_EU_pharma_demands.aspx>

Mehdudia, Sujay “PM’s Trade and Economic Committee to review trade treaties” The Hindu. 28 April 2011 <http://www.thehindu.com/business/Economy/article1818790.ece>

Mukherjee, Pranab “India not to dilute stand on intellectual property rights” The Economic Times. 2 May 2011 <http://articles.economictimes.indiatimes.com/2011-05-02/news/29496250_1_trade-pact-india-eu-bilateral-trade-intellectual-property-rights>

“No compromise in our stance on IPR, says India” Deccan Herald. 30 April 2011 <http://www.deccanherald.com/content/157977/no-compromise-our-stance-ipr.html>

Sen, Amiti “India, European Union closer to free trade agreement” The Economic Times. 13 April 2011 <http://articles.economictimes.indiatimes.com/2011-04-13/news/29413626_1_free-trade-auto-parts-partner-with-bilateral-trade>

Sharma, Vijay “PM Committee asks Commerce ministry to go easy on India-EU trade pact” Real Time News. 30 April 2011 <http://rtn.asia/314_pm-committee-asks-commerce-ministry-go-easy-india-eu-trade-pact>

Singh, Manmohan “India to talk tough on IPR issue in free trade talks with EU” The Times of India. 1 May 2011 <http://articles.timesofindia.indiatimes.com/2011-05-01/india/29492970_1_free-trade-pact-joint-study-group-largest-trading-partner>

“Singh favours strict rules for drug trade” The Telegraph. 1 May 2011. <http://www.telegraphindia.com/1110501/jsp/business/story_13925562.jsp#>

 Srivastava, Shruti “India-EU FTA likely by end of June, says commerce secy” Indian Express.com. 5 May 2011 <http://www.indianexpress.com/news/India-EU-FTA-likely-by-end-of-June--says-commerce-secy/786075/>

“The Arab spring’s chill winds” The Economist. 23 April 2011 <http://www.economist.com/node/18587630?story_id=18587630>

“Will free trade prevail?” Pharmaceutical Technology Europe; Apr2011, Vol. 23 Issue 4, p8-8, 2/3p

Relationship between voter turnout and incentives or the siren call of fried chicken…

Ok, admit to yourself, you are really reading this because you want to find out the relationship between voter turnout and friend chicken. But think about it what incentivizes people to vote? I’ve read about the effects of early and consistent civic education and strength of civil society positively contributes to voter turnout. For example, children that grow up exposed to lessons of why it matters to vote and learn to participate in democracy early – such as voting for class president or hall monitor – grow into adults which vote in greater numbers. Feeling of ownership of your neighborhood, city, state and country, in other words a well developed civil society also predicts higher voter turnout. 

Last week Damon M. Cann of Utah State University presented results of his curious study at a political science conference in Chicago. You can read more about the conference in The Atlantic article found here. Mr. Cann conducted an experiment on voter incentives. Basically he divided the residents of River Heights, Utah into two groups and then knocked on doors with his two different messages. One group of people that Mr. Cann talked to received a well reasoned argument why it matters to vote in the upcoming election, in other words an argument in favor of participatory democracy. The other group of people Mr. Cann reached out to got the promise of discount coupons for fried chicken, French fries, a Mexican meal and rock climbing, in return for voting in that same election. If a resident that was promised discounts showed up as voted in the polls, he or she received coupons. If that person elected the chicken discount, they got two buckets of chicken at the local KFC. 

Which pitch proved more persuasive a well reasoned argument in favor of participatory democracy or incentives presented by the dismal science, aka economics? While a well reasoned argument for participatory democracy created an increase of 4% bump in voter turnout, economic incentives (promise of coupons) bumped voter turnout by a further 9%. Economic incentives are stronger than arguments for civic duty should not come as a surprise. I mean, think of Tammeny Hall and Boss Tweed in early 20^th century NYC. If you are not a political science junkie from New York, this link might help shed light on my arcane reference. I mean had we been magically transported back to NYC in 1917 supporting a particular candidate would have gotten you two buckets of chicken – also this type of incentivizing is illegal. Therefore ideas of how to properly incentivize the electorate, shall we say, definitely not new.  

While talking about boosting voter turnout numbers with free buckets of chicken is kind of fun, maybe this soon to be published study may shed some light on why we take time out of our day to vote.  Why our voter turnout trails so many other industrialized nations? My previous statement includes voter turnout during elections that are perceived as being close contests, where people turn out to vote in greater numbers, in other words you feel that your vote counts more as you possibly cast the deciding vote. Well, I look forward to reading more details of the study, when I can get my hands on it, as it stands: participatory democracy 0, dismal science 1.

Tamil 101: Week 6

Last week I arrived at the halfway point in my crazy endeavor to learn a little bit of Tamil. For the first few weeks of class I shared a classroom with 4 other students all Foreign Service officers posted to Chennai, India in the near future. While their mandatory language training consists of approximately six months of intensive language classes, I have 12 weeks to learn as many Tamil words and grammatical concepts as humanly possible. Since a significant divergence between the times allotted for me and my classmates to learn Tamil exists, my awesome instructors separated me from the rest of the class to give me a more intense and quicker introduction to the language. As a result, in addition to one hour of language lab every day I am locked in three hours of intense awkward Tamil conversation with three different instructors.

 

I am pretty sure the conversation is more awkward on my end, since I am the one that does not speak Tamil. Thus far studying Tamil has been quite a challenge. I never thought I would hear myself say this, but I miss studying Arabic! Fortunately my instructors bring different sets of skills into the classroom teaching me the language in different ways. I am enjoying language class. Well, minus the Tamil sized meltdown I had a few weeks ago, where my brain literally froze and I could not respond to anything. I admit that was a pretty crappy day and I do not think I’ve made it a great teaching experience for my instructors. 

I want to give great big thanks to all of my Tamil instructors as they are incredibly committed to seeing each and every student succeed. I am so grateful for them making space in their schedules for me. Although I have no idea of my progress, since now I can’t manically plot my language learning progress as it compares to my former classmates; I did in the past and I don’t think that was too productive - I think I am making a bit of headway. Last Friday using language skills of a three year old, I had my first economics conversation. I compared taste quality of American fruits and vegetables to those grown in India. We talked about how weather and infrastructure has either a positive or negative effect on supplying food to local markets. Do I know the words for supply, demand, market (had to ask that one), and infrastructure? Not yet, but then a three year old would not know how to use those words anyway.

What I was able to say and am pretty smug about it, was that fruit and veggies in the USA are picked before they are ripe and are delivered to the stores before they are ready to be eaten - that is why fruit and vegetables in the US are not very flavorful. I asked my instructor about the taste of fruits and vegetables in India. I am afraid I do not know the word for produce, excuse my repetition of “fruits and vegetables.” My instructor responded that fruits and vegetables in India are very flavorful. We debated the merits of constant sunlight and picking produce when it is ripe. However, I said India has a different problem, 75% of its produce spoils before it gets to markets, because of lack of refrigeration during transportation and bad roads. 

In other news, I am not sure if it was the effect of Sudafed or my tired brain on instant replay, but last night I dreamed that I was doing my Tamil homework over and over again. I would wake up every once in a while realizing that it’s the middle of the night and I am in bed, but fell asleep only to dream about doing Tamil homework.