Water war could result in Assam's economic downswing

India's Congress-led UPA may soon experience major political turmoil. Recent reports from China say that  3,30,000 people in China’s Hubei and Henan provinces have been employed for the water diversion project. The resettlement work is to be completed by 2011- an effort to supply water to the parched areas of Beijing, Tianjin, Henan and Hebei regions.
The two Asian giants have been at loggerheads since the Indian media reported of China's incursions on Arunachal Pradesh. India is now threatened by the dam, which will be a threat to Assam's economy, a northeastern state in India. The state's economic conditions are set to take a big hit with the water diversion to China.

Along with Assam, Arunanchal Pradesh, too, is heavily dependent on the river for its economic development. A major blow would be to Assam's recent gas cracker project - Brahmaputra Cracker and Polymer Ltd, a Rs 5460-crore project. This project is the prospective employer for thousands of people across the country. The dam's purpose to divert the flow of the river toward arid areas of China for Zangmu hydropower project has been protested by the Assam government, headed by Chief Minister Tarun Gogoi.

The 2,906-km long Brahmaputra is one of Asia’s largest rivers that flows the first stretch of 1,625 km in Tibet region, the next 918 km in India and the remaining 363 km through Bangladesh before converging into the Bay of Bengal.

For long the state of Assam has felt neglected by the center. The state’s economic development has been a slow process. When India’s GDP grew 6 percent in the period of 1981 to 2000, Assam’s growth rate grew only by a half.

Another point to note is that 80 percent of the 28 million people living in the two states make a living off farming. The agricultural sector, as a whole, contributes 28 percent to the country's GDP. Besides that,The farming business is certainly a major concern for the country. India has had a controversial history of farmers committing suicide. The reasons range from debts to droughts. Some analysts say that nearly 17,500 farmers commited suicide between 2002 to 2006, mainly in the states of Maharashtra, Andhra Pradesh, Karnataka, Kerela and Punjab. 

Does U.S. await yet another expensive war?

When Mr. George Bush decided to dispatch more American troops to Iraq to wage the war, he did not foresee the economic challenges that lay ahead, and the criticisms followed. Today, many eyes are set on President Barrack Obama, as he mulls over the future of the Afghanistan war. In this beleaguered economy, will US be able to manage another expensive war?

Very recently, Obama’s top commander in Afghanistan, Gen. Stanley McChrystal requested for 40000 more troops as the existing 68000 troops in addition to NATO’s 38000 troops, were not enough to fight the Taliban. While Mr. Obama has been busy with meeting his advisors and seems in no hurry to call the shots on this one, the situation in the war zone is not a pleasant one. According to several reports in the American media, the military operations in the third world country are not going too well. With the war starting to quiver, McChrystal aims at redefining the strategy from hunting down Taliban to protecting the civilians, which he believes will put the American military in a better position.

Another factor to think about is that the money involved is huge. Amy Belasco, a US Defense Policy and Budget specialist, said in her total report - The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11- that a total of $849 billion has been spent on the military operations post 9/11 terror attacks.

From the total budget, $189 billion were appropriated for the Afghanistan war. However, the latest estimate in a newspaper report said that $288 billion have been spent on the operation to date, according to a newspaper report. The numbers involved here are big, a startling especially because of tough the economic situation that U.S. is in right now – with little to no signs of improvement.

The major concern for America at this point should be the economic input and the political outcome. Once the defense budget is exhausted, more funds will be directed from the Federal Reserve to the operation. And if they do not survive this war the economic loss would be in billions – the amount that can possibly employ billions of Americans. In a nutshell, the scenario would be similar to that of the Iraq war – the one that left a bad impact on everybody's mind. The extravagant expenditure on the war in the Bush years also led to an incredible increase in the US government’s debt - the money that was borrowed from Saudi Arabia, Japan and China.

An important step for Obama in this precarious scenario would be to think economically as well as politically, unlike Bush who thought politically and that reflected in most of his decisions, the war in Iraq being the most prominent example.

Will IU-Bloomington become unaffordable?

Non-resident undergraduate tuition sees 11 percent increase, others come close

Tyrone Van Tatenhove, a theater and drama major at Indiana University, works full-time as a bartender to support himself. If he didn’t work, studying in an increasingly expensive education environment would be impossible.

“I did my first three years of undergraduate degree at Indiana University Kokomo, and now that I have come to IU Bloomington to do my senior year, I see a considerable shift in tuition fees,” he said.

Healthcare and food are not the only areas seeing sharply rising costs in recent years; education has gotten much costlier, too. At IU Bloomington, fees for non-resident undergraduate students have increased the most, by 11 percent from 2007-08 to 2008-09. The annual fee increase was $2,453; the three year increase was 18 percent.

“We introduced the idea that the undergraduate freshmen will pay more than the returning students in order to generate some additional dollars for the presidential initiatives a few years ago,” said Stephen Keucher, vice president and university budget director. “Instead of increasing 10 percent for everybody, including seniors who may not advantage from the initiatives at the university, we increased fees of the incoming students as they would benefit the most.”

 combination of factors led to the increase in fees. The state of Indiana has been a significant provider of funds to the university but has been reducing its contributions because of poor economic conditions.

The recent trend in tuition increases began 2003-2004 academic year, when the Commitment to Excellence (CTE) program increased fees 22.6 percent. This was mainly to provide funding for academic initiatives at the university. The fourteen CTE initiatives continue to benefit students across disciplines such as the Cognitive Science Initiative and Two-Thirds World Initiative.

The university is concentrating on educational affordability for students from low income backgrounds. Some of the money collected in fees from resident undergraduate students goes toward financial aid for these needy students.

It is important to note that, along with non-resident students, the fees for in-state undergraduates were also increased, by five percent. Though the increase was not an alarming one, according to the National Center for Public Policy and Higher Education, the cost of education in the U.S. has been rising faster than an average family’s income. The increases can feel burdensome even with financial aid. According to the "Measuring Up 2008" study, poor and working-class families in Indiana must devote 43 percent of their income, even after aid, to pay for costs at public four-year colleges.

Jacklyn Kochell, a third-year undergraduate student at the IU School of Journalism, said tuition increases are a concern even though she receives federal, state, and IU aid. She plans to pursue a law degree after graduating, and the cost of a graduate degree worries her. Kochell’s brother will be a freshman at IU next year and her parents will be paying for his school.

“The increase will affect them. I also know several people who plan on graduating a year or semester early so that their parents don’t have to spend as much money on tuition,” she said.

The non-resident undergraduates saw a hike of 11 percent in their tuition fees this year.

Source: IU Budget Office

Kochell’s parents took out loans when they were students at IU and had to work extremely hard to pay them off, she said, and she doesn’t wish to spend years paying off loans like they did.

Tatenhove echoes that sentiment. He says he has become numb to his financial situation, dreading the financial condition of the country while keeping employment prospects in mind.

“Since theatre is a niche field, getting a job will be even more difficult,” he said.

With low income and recession hitting the country, followed by a series of job cuts, the scenario for the families supporting their kids seems difficult. But contrary to what one might think, studies have shown that during economic downturns, enrollment in higher education goes up.

“As soon as I graduate in 2010, I will prepare for my Masters program,” said Abhishek Naheta, a third year non-resident undergraduate student at IU. Naheta believes studying further will make him more marketable in this economically shaky situation.

Hailing from Mumbai, India, Naheta had been researching U.S. universities for two years and the skyrocketing fees did bother him.

“I see the situation getting tighter in terms of education cost. Hence, I will have to start working to support my personal expenses. But that will hinder my plans of pursuing further education.”

Despite increases in fees, IU saw its highest enrollment ever this year, a record 40,354 students, up 1,364 students or 3.5 percent from last year’s 38,990.

“It was a bumper crop this fall,” said Keucher. “We had not anticipated this high student enrollment. The freshmen class crossed what we had expected.”

The Institute of International Education ranks IU Bloomington 13^th among U.S. colleges and universities for the number of international students enrolled. There were 4,287 international students enrolled at IU in fall 2007.

A comparison of resident and non-resident graduate student tuition fees at IU. While the former increased by 10 percent from last year, the latter was 9.7 percent.

Source: IU Budget Office

Non-resident graduate fees were increased by 9.7 percent; resident graduates saw an increase of 10 percent.

Anupam Das, a second year Masters in computer science student, had long decided to pursue his higher education in the U.S. Though he believes education fees all over the country have gone up, IU still suited his pockets.

“The fees may have gone up, but if one compares the university to the others, IU is still pretty reasonable for the education we get here,” he said.

Das and other students are currently worried about what will happen with tuition next year.

“At this point, we don’t know what we will be recommending for next year. There are many other actions that will need to happen before we will have an idea or planning parameter. It will be mid-spring before that occurs,” said Keucher.

Listen to an excerpt of Stephen Keucher’s interview here:
Download Quicktime

Change must come

America is experiencing merciless deaths of its age old newspapers. Colorado’s Rocky Mountain News closed just a few days before its 150th anniversary. Seattle Post Intelligencer stopped its print publication on Feb. 16 and continues its presence on the Web. While these two major newspapers could not withstand the dwindling readership and sour economy, the country’s newspaper industry has been in a bad shape since quite a few years. At least 120 newspapers have shut down since January 2009 and a few have even filed for bankruptcy, Tribune Company being one of them. Though layoffs and salary cuts are not restricted to the news industry alone, 21000 journalist’s jobs have vaporized in this time span.

But for how long will salary cuts and layoffs keep newspapers on life support? For big media companies like Times co. which announced temporary salary cuts and Washington Post co. which offered voluntary buyouts to its employees, the effects will be less as they have a strong advertising clientele, better readership and prominence.

The fault lies in the basic business model of a newspaper. But are the newspapers to be blamed? The inception of news business was less of a money making business and more of a passion for strength of writing, hence their business models have always been weak. Hence, with the shaky economy they now find themselves in a lurch and have to resurrect the companies in order to survive, which is certainly difficult. But different strategies are being tried and tested.

Detroit News and Detroit Free Press have reduced their home delivery to three times a week and the other four days copies will be available on racks and convenience stores. This strategy is questionable. Firstly, it breaks the reader’s habit of consuming news. What is the guarantee that a reader will shift its medium for news two times a week? This risky change was taken in order to maintain the vibrant newsroom.

The biggest blow to the news business is the major drop in advertising, which pulls in 70 to 80 percent of a newspaper’s revenue, dropped 23 percent in 2008 to $38 billion in 2008 from $49.5 billion the year before. The government has offered some respite to the news organizations. A bill has been proposed by Sen. Benjamin Cardin to allow willing newspapers to run as nonprofit organizations, by exempting taxes. This is under scrutiny by critics, as they fear government interference.

Newspapers which wish to survive will have to create a practical business model. The resources will have to be used carefully. New revenue streams have to open up apart from advertising. Newspapers today can no longer afford to be run traditionally, they ought to accept the change. The readership patterns have to change. For instance, Washington Post’s investigative projects team uploads news feeds on social networking Web sites like Twitter and Facebook which grab the visitor’s attention.

The most viable change for newspapers is turning to Web, but again, with a stronger revenue model. It will be a slow but much needed transition.

Resolutions and reactions, but solutions?

Seeking some way out in this ruthless economy, the world leaders gathered at the G20 summit in London last week to discuss the global economic recovery. The summit received much momentum before the final day in European media, though not so much in the American, for the controversy surrounding Franco-German demands for more international regulation.

While the summit reflected on the gravest issues relating to the global economy, some keynotes were left pending with no decision made yet. Of the key issues, boosting economies, resisting protectionism, aiding poor nations and imposing regulation on financial institutions were addressed by the leaders.

G20 mainly made news as the International Monetary Fund (IMF) received more funding which will help the poor nations breathe a sigh of relief. The resources have been bumped up to $1000 billion, which is the biggest success marked by the summit. Countries like Ukraine, Hungary and Latvia had already approached IMF for financial aid.

Moving on, a couple of days before the summit, Nicolas Sarkozy’s demand for a ‘moral’ capitalism and a stop to stimulus packages was wise, though that didn’t go down well with the American media, as his tone gave subtle hints of U.S. being responsible for the recession. But that is the most important area of concern for world economies at the moment. How many stimulus packages will be doled out to save the financial institutions and firms? The problem lies in the regulatory body which has to be addressed and that’s what happened at the summit after Sarvozky pressed on the matter, along with Angela Merkel.

Now, they mapped out a new future for financial regulation with the agreement for better bank capital and establishing a new Financial Stability Board Regulation of systematically important hedge funds. However, the details about regulation on hedge funds were missing. First and foremost question, how will hedge funds be regulated? Either the leaders didn’t mention or the media coverage failed to point out what would be the optimal regulation required for hedge funds or why is the current SEC oversight on hedge funds not sufficient. Also, they didn’t talk about how regulation could be one of the reasons for the failure of hedge funds in 2008 and to what extent will it be more regulatory?

Protectionism, which is being practiced by most of the countries today, was under microscope too. Though G20 decried protectionism and encouraged international trade, only time will tell what comes out of that discussion. If the limited (American) media coverage is to be believed, there was no clarity on the status of home-market-first laws like Obama’s Buy American provision’s status. One will have to wait and watch where economic nationalism leads after the summit, as these policies will have been in practice. The global trade grew around 6 percent in 2007, and the good shipment is expected to drop by 9 percent in 2009. India imposed a 5 percent duty on import of steel, and foreigners are being denied jobs in countries like Malaysia and Gulf countries. Let’s see which countries are “named and shamed” by the WTO.

While most of the issues were successfully addressed with potential solutions, its implementation will prove how triumphant was the meet in London. A similar meet took place in Washington D.C. last year in November on a lower scale though. Since then the global economy has recorded a disastrous fall with no ray of hope whatsoever. Protectionism was rejected even then, but between then and now, there have been myriad protectionism policies initiated in various countries, Barack Obama’s Buy American provision being one of them. If this issue was on the agenda for April’s summit, why did the global leaders, who approved rejection of protectionism, go ahead making policies against foreign workers?

Oversight on hedge funds was discussed last November too, so this meeting had nothing new to offer in terms of a solid solution.

Well, actions speak louder than words and its best we don’t believe in the promises that they make.

Whom should we trust?

With the country in recession, everyone turns to news media for relevant information about the economy so they know what to expect next. But how should a common man react to the contradiction he reads in the news? For instance, the retail sales are sliding backwards hinting at low consumer demands as budget is being slimmed down. Circuit City, Virgin Megastore, Steve & Barry’s are a few retail stores which have shut down. This development certainly means the business in US is hugely affected and continues to perform badly as far as the latest data is concerned. Retail spending hiked by 1.8 percent in January and dropped in February again.

Contrary to this, President Obama and his administration have been addressing the economic issues providing “glimmers of hope” to the country.

Time and again, Obama has touted economic progress along with a mention of the hard times ahead. So, how much does a 1.1 percent monthly drop in the retail sales reflect on the optimism of Obama or the current state of the economy? Very minimal, I would say. The drop in retail sales has to be gauged relatively. Economists have said that the drop witnessed during the season sale of late 2008, over 4.5 percent, has been was certainly alarming than early 2009.

Who is responsible for creating this vague picture of the current situation? Obama, for making a speech which talks of a promising economy ahead, thinking from a long-term perspective? Or the newspapers which put two and two together, and form a conclusion?

The retail sales are like the market these days, the fluctuations are obvious. While covering a story on these lines, one must understand the short-term effects as opposed to the long-term scenario.

On the similar lines, we have the unemployment rate of the country rising to 8.5 percent, which is a serious issue. Technology giants Google, Cisco and Yahoo have laid off thousands of employees collectively. And the trend is common in every mid-sized and small company as well. Then how believable is Federal Reserve Chairman Ben S. Bernanke when he said that there have been recent "tentative signs that the sharp decline in economic activity may be slowing,” in a recent speech? What are these “tentative signs.” Either Bernanke didn’t mention those or the newspapers decided to cut it off. This came from his speech to the Morehouse College.

From what the five rules of Obama’s new foundation for resurrecting the economy looks like, there’s still a long way to go for anyone to speculate or predict the current scenario.

The one, who suffers during these times, is the common man. As he has no idea what is happening. Reason being, hardcore news consumers trust the New York Times or Wall Street Journal as much as they trust Obama.

Is it recession or economic slowdown?

At a recent lunch with one of our guest speakers, Sylvia Nasar, our knowledge of the current economic crisis was put to test. She quizzed a bunch of journalism graduate and undergraduate students about the recession and how U.S. will survive this difficult phase. While conversing with Nasar, she asked something in relation to the countries in recession, and a journalism undergraduate student said, “Isn’t the whole world into recession?” This surprised me a little bit if not much. Probably a common man couldn’t care less about what happens beyond his country, but someone who is preparing to provide news to the world should be aware that not all countries are in recession.

It may sound insignificant at first, since most of the powerful countries are in recession like U.S. United Kingdom, Euro zone. Canada, New Zealand and Australia make for the other set of recessionary economies and Japan has been there for a long time now. Volumes have been spoken about Asia being the future of economic growth, but it is being dragged in with the misused term ‘global recession.’

So, is the news consumption wrong or the news was not delivered at all? It’s surprising how people assume that China and India, the two emerging economies, are in recession already. The fact is that they are not totally immune from the financial crisis, but they are not in recession either. The term that we are looking for is ‘economic slowdown.’ There is a significant difference between a recession and economic slowdown, which most of the newspapers take for granted. Now, an offshoot of this argument is that are news consumers really ignorant or is it the newspapers who hardly mention about India’s growth as an economy and doing well amidst the recession. How many newspapers reported on the country’s GDP growth which hit a 7.3 percent in 2008 as opposed to most of the economies starting to fail?

I asked a couple of Indian students and journalists whether they though India was in recession, while the students, studying in U.S. universities said that India is not in recession but is suffering from the global crisis, the journalist stated that it is definitely in recession.

My intention is not to belittle people’s knowledge of world news; probably I would have had the same knowledge as the others had I not had a keen interest in business and economic reporting. It’s the way business journalism function which makes me question an individual’s knowledge. The purpose of a business journalist should be to educate a layman about concepts and developments worldwide which he would not read anywhere else.

Despite financial crisis, Bloomington employment rate soars

Total employment jumps 6% from 2000 to 2007; food sector, life sciences jobs show biggest increases.

The employment rate in the university town of Bloomington has been bucking the national trend for the last eight years as a sizeable student population compensates for the dwindling native population while spurring consumption and also creating demand for jobs in food sector, life sciences.

According to the Bureau of Transportation Statistics, there has been consistent and steady job growth in the city. The food preparations and services sector marked the highest growth with a steep increase in jobs by a third. Trailing behind is business and financial operations which more than doubled. Along with these, there has been a considerable growth in the information technology sector space, with 800 more jobs created in the time span.

Employment growth in Bloomington, by sector

Jerry Conover, director of the Indiana Business Research Center, draws a comparison between Bloomington and the other cities of Indiana.

“While Kokomo, Anderson, Richmond are struggling economically, Bloomington is doing pretty good," he said. "It is a moderate city with Indiana University being the major employer.”

He pointed out other sectors like healthcare and services, educational services, real estate as fields that also have seen significant growth.

The positive employment in Bloomington can be traced to the alignment of various factors. As far as the food services sector is concerned, the number of restaurants has increased, thus creating a job pool for residents. Restaurant owners say the increase in students at the university is one of the key reasons for the growth in jobs. Indiana Memorial Union, which attracts a heavy university crowd, has seen notable growth in businessthe last couple of years.

“The university’s success is the key reason for a hike in employee numbers,” said Steve Mangan, general manager of dining services at the union.

"More jobs are being created at IMU with the university doing well. There is more programming and facilities added to the Union. We have a lot of music and art performances, speakers coming in for various school programs. We definitely need more employees for offering these services," stated Mangan, who has been in the food business for 25 years.

The growth has prompted operation changes as well. For instance, restaurants used to close at 6 p.m. but now are open until 11, said Steven Richards, operations director for IMU dining services.

“This has rushed the need for more employees,” he said.

While the growth in student population is helping lift IMU’s employment, the overall population growth of the city has been very slow.

According to the Indiana Business Research Center, the population increased by a few thousands. The slow growth in population has been vital in maintaining a good job rate throughout this time span. Close to 80 restaurants exist in Bloomington, and while food service seems to be doing comfortably well, a few restaurants have gone out of business - the most recent was Colorado Steak House.

Mangan said many restaurants come and go because some don’t adopt the right business strategy, but that will not affect the employment drastically since the labor pool in the city is strong. He said the unemployment rate played up by certain sources of information is misleading.

"They do not reflect every location and sector in the US. Bloomington has a good labor pool, and the jobs will continue to grow even in the near future. University being the hub, Bloomington is (a) little insulated by the ups and downs of the nation."

Another pattern among employees is their satisfaction with their respective jobs.

Such is the case with Rob Park, who has been working with Burger King at the Union for seven years. Asked about moving to a restaurant that allows tipping, he said he prefers to continue working at the same place because the wages have increased with his experience. Park is a father to two kids and was a manager at another restaurant in Bloomington before beginning at IMU.

The wage rates of IMU have gone up steadily along with the increase in employment, and so has the pay at other food service places. However, they may not look very lucrative at the outset.

According to Lawrence Davidson, founding director of the Center for the Business of Life Sciences, the wages for food service employees are low compared to other jobs because the former are not skilled positions. But since most people working for restaurants are university students, the growth in jobs will be consistent.

Average pay for IMU workers, 2000-2008

Food prices did see a dramatic increase in 2007, with the food index jumping up to 4.9 percent. Malibu Hospitality’s general manager, John Bailey, echoed that the wages have naturally gone up as the number of restaurants has increased and so has the demand for employees.

"We at Malibu will be recording the second best month of business in 14 years. The volume has increased in general," he said.

So, is there a possibility of unemployment rising in the food sector anytime soon? Said Mangan, “There could be a drop in the rate, if the enrollment fees at IU go up or the student loans get tight.”

The overall food business is most affected in the spring semester, when there is a drop in the number of students. Thus, the number of employees is ordinarily reduced.

Another reason for a drop in employment would be increasing competition and companies hiring unskilled employees for larger amounts. One such case was that of General Electric a few years back, which paid its employees $25 an hour which affected the restaurants of IMU and the others.

In addition to the boom in the food sector, Davidson and Conover point out the number of life sciences companies that have mushroomed in Bloomington in a short span. Cook Medical has expanded its business with Cook Pharmica. Other companies like Bio Convergence and Baxter are rapidly growing, too.

“Cook Pharmica hired close to 200 people and will be hiring hundreds more," said Conover, while Baxter has 1000 employees on payroll.”

Like other cities and states, Bloomington was definitely hit by the recession period of 2001 and its after effects in the following two years. However, after the gradual drop, employment has steadily increased.

Keeping the brighter side of employment aside, the city has seen a drop in the manufacturing sector. Sixty to 70 years ago, manufacturing was huge in the city. Furniture manufacturing by Showers Brothers was very successful, after which the city witnessed a phase of manufacturing televisions. Today, the manufacturing of refrigerators is seeing a dramatic drop as well with the relocation of manufacturing to Mexico, where the labor comes much cheap as compared to the U.S.

Now, with the latest recession settling in, will there be an increase in Bloomington’s unemployment rate?

“I see a rise in unemployment by a percent or two next year,” said Conover. “However, by the end of 2009, the employment will be high.”