Thursday, November 30, 2006

Japanese ODA and India

The concept of Development Assistance has it roots in the aftermath of the Second World War, when USA poured in billions of dollars into Europe and Japan, for rebuilding shattered economies, and for creating friends and allies in a bipolar world.

As soon as the economies recovered, countries at the top of the heap formed the Organization for Economic Cooperation and Development (OECD) they, among other things, committed themselves to a certain level of assistance to the underdeveloped world – this was called the Official Development Assistance (ODA).

OECD has 30 full-time members, of which, 24 are classified as “high-income” countries. Within OECD, the Development Assistance Committee (DAC) sets the guidelines for ODA. Japan has been a member of DAC since 1961.

The objective of Japan’s ODA is “to contribute to peace and development of the international community, and thereby to help Japan’s own security and prosperity”. Since there is no pretence to altruism, during the past few years, stagnation of Japanese economy has resulted in a steady decline in its ODA. In 2004, the dip was 6.5%.

Two arms of the Japanese Ministry of Foreign Affairs (MoFA) implement ODA project – Japan Bank for International Cooperation (JBIC – yen loans) and Japan International Cooperation Agency (JICA – technical coop, grant aid). Both these agencies are set to merge under the JICA umbrella, by 2008.

Japan’s total ODA in 2003-04 was Yen 963 billion ($ 8.9b), about 0.19% of Gross National Income. Of this, India received $ 704 million and stood 5th among the top ten recipients. China topped the list at $1.4 billion.

India absorbs a little over 9% of Japanese ODA and its outstanding liabilities is Yen 1166.3 billion, as on March 2004 (Rs. 46,640 Crores / US$ 10 billion).

The OECD figure of $ 704 million to India translates in to about Rs. 3000 Crores. However, the “MoFA White Paper 2004” puts the total disbursement at $325.79 billion (~Rs. 1400 Cr). Where did this money go? – Mostly into Yen Loans (93.5%), and the rest into technical cooperation (5%) and grand aid (0.7%).

Over the past two years, there has been a steady increase of yen loans to India. In 2005, nine loan agreements were signed for Rs. 5200 Cr. ($1.15b). In 2006 10 ODA loan agreements increased to Yen 155.458 billion (Rs. 5910 cr; $ 1.3b) – a record hike of about 15%.

The yen loans come at a rate of interest (RoI) of 1.3% per annum (30 years payback) for general projects, and at 0.75% RoI for environment sector projects (40 years).

Currently 28 projects are being implemented in India, which includes major initiatives such as - Delhi metro, Vizag port expansion, improvement of Bangalore water supply & Severage (Rs.1078 cr), Bangalore metro (Rs. 1699 cr), cleaning of Hussain Sagar lake in Hyderabad (Rs. 294 cr), and a project for waste management in Kolkata.

For more information, pls see - Yen Loan Projects in India (16 Sep., 2008) -


Japan - Aid At A Glance Chart

Organization for Economic Cooperation & Development (OECD),2337,en_2649_201185_1_1_1_1_1,00.html

Ministry of Foreign Affairs (MOFA), Japan

Wednesday, November 29, 2006

How Big is the Middle Class in India?

The answer to all nebulous questions begins with a tag – “it all depends..”. This time it starts with your definition of “Middle Class”.

The MW Dictionary says that the Middle Class is “a fluid heterogeneous socioeconomic grouping characterized by a high material standard of living, morality and respect for property”. Thats quite a mouthful but it is still subjective.

In the Indian context, NCAER considers the Middle Class as households with an annual income between Rs. 2 – 10 Lakhs (~$4000 to $20,000). The next slab is the “Rich (> Rs.10L), and below the middle class you have “Aspirers” (0.9 – 2L) and “Poor” (below 0.9L).

It goes on to say that of the 188 million households (2005), the middle class is 10.7 million (just 5.6%), while the vast majority is poor households (72%). If you assume that a household has six persons, the middle class is no more than 64 million of the total population of 1.13 billion.

However, reports based on National Sample Survey Organization (NSSO) go on an altogether different trip. The 55th NSS puts the 1999-2000 consumption figures at Rs.7,20,932 Crores (~$ 160b), and says that 42% of this comes from the middle class (241 million people, 23% of total pop.). There were 128.3 million urbanites in the ‘great Indian middle class’, with average consumption levels of Rs. 14,513 /capita/annum (~$322). Villages accounted for the remaining 112.8 m.

Times Asia puts the figure at 250m (2004). Marketing gurus claim that it has crossed 300m – the entire population of USA…

So, the answer to the big question still remains vague. The only thing you have for sure is the tag – “It all depends..”

Interesting Links:

The Hindu, 22 May 2005
Who is this middle class?

BusinessLine Saturday, Jan 22, 2005
The Great Indian Middle Class and its Consumption Levels

National Council of Applied Economic Research (NCAER), New Delhi
The Great Indian Market, August 2005

Rediff.Com July 02, 2005
Middle class in India has arrived

Time Asia: 29 Nov 2004
The Respect They Deserve

Tuesday, November 28, 2006

Just in Time for Kaizen

You read stuff from books and assume that you understand a subject, and then comes along a lively, interactive video conference that exposes the limits of what books can teach you.

Over the last two weeks Prof. Seiichi Fujita of Waseda University has transformed my perspective on the Japanese concepts of KAIZEN, 5S and JIT.

Literally, “Kaizen” is a combination of two pictograms representing “Change” and “Better” respectively. But it is more of a feedback mechanism that brings about some improvement in a process. You could implement Kaizen to make your worktable more efficient and the same concept, in an industrial setting, could lead to substantial cost-savings in a production process.

A case in point is the “Single Minute Exchange of Die (SMED)” implemented by Toyota for revolutionizing car production. Stamping machines are critical elements of a car production line. SMED has enabled the company to change the dies in stamping machines (about 13 tons apiece!), within just 5 minutes!

A competitive advantage of this scale could not be implemented overnight. It takes a work ethic and culture that starts from the basics. This is where “5S” comes in - it is a reflective attitude towards work, which summarizes five Japanese words –

1. Sei-ri : “Organising” – Eliminating unnecessary things and getting rid of what you don’t need. (Tools – classification management, ‘Red-tag Movement’)
2. Sei-ton: “Neatness” – Eliminating search through an efficient & functional layout of a workplace – “A place for everything and everything in its place!”
3. Sei-so: “Cleaning” – Eliminating thrash and filth for a cleaner workplace. (Tools – close supervision and regular inspection)
4. Sei-ke-tsu: “Standardization” – Recognizing a ‘problem’ (a gap between the ideal state and the present condition) and standardizing the solution (Tool – “Tiger-bands” to highlight hazardous areas)
5. Shi-tsu-ke: “Self-discipline” – Inculcating habits that create a disciplined workplace.

The last one is not quite popular because it suggests that workers need to be disciplined like schoolchildren – compulsory physical exercises, protocol for wishing superiors, etc. It may be effective in some situations but companies like Toyota prefer a more mature approach and stop at the fourth ‘S’ and call it the “4S Concept”.

Another popular improvement mechanism is Just in Time (JIT), also known as Toyota Production System (TPS).

A conscious and unrelenting drive to make their production system more efficient led Toyota to identify “Seven Wastes” – over-production, waiting time, transportation waste, processing waste, inventory waste, waste of motion and waste from product defects.

Among the seven wastes, inventory waste was identified as the biggest waste. For something that just occupies space it seemed a rather unlikely villain but analysis showed that a buffer stock of inventory eases people into the dangerous zone of complaisance.

If you have stocks at hand, defective products are easily replaced and then forgotten; equipment downtime is easily solved without getting to more durable solutions; deficiencies in planning, operation and control remain hidden. But the moment you reduce the buffer from the system, the problem areas stand out like rocks in a shallow pond.

Once you have the problems exposed, you need to come up with fool-proof solutions for each small, niggling problem. This is where an interesting concept – “Poka-yoke” - comes in. Literally it means ‘elimination of carelessness’. Again it looks simplistic until you are informed that nearly 50% of all wastage comes from negligence or forgetfulness or just plain carelessness.

How do you eliminate carelessness? – By introducing thoughtful changes in design and devices. A pokayoke can take many forms – it could be just a rope you tie to a brush used for cleaning tanks; a button that activates a toilet door only after you wash your hands (hygiene in a bakery); a notch on a screws that prevents screwdrivers from slipping away; placing essential stuff (keys, cards) in shoes so you don’t forget them on your way out…

The concepts are so simple that they look trivial and unimportant. But then, we’ve always known that looks are deceptive…