Kuldip Nayar: Strike a balance while opening the economy

Only a decade ago did we hear a constant refrain during debates in developed countries that India was a "soft state." Academicians confirmed the observation in their books. Some of them wrote us off, arguing that the country was not capable of taking decision to extract itself from the poverty in which it was stuck. That kind of chiding has now stopped practically.

What has happened? It is not that India has licked poverty. Half of its 110 crore population is still extremely poor. The reason why the developed countries are quiet is the gain they have made in establishing their pre-eminence in the country.

They wanted two things: first, a free access to Indian markets and, second, the dismantling of the public sector undertakings that gave us pride - and confidence - of being self-sufficient. One can see foreign consumer goods flooded all over the country. So much so, the indigenously produced things seem to have been crowded out.

One visitor from a neighbouring country asked me a few days ago: "Where are the Indian goods?" The formula, which the IMF and the World Bank have laid down, is the mantra for our policies. Accordingly, import duty has been slashed to facilitate the developed countries to sell their goods cheaply.

Rich Indians are attracted by the very brand of clothes, shoes or even eatables. The result is that thousands of industrial units, particularly the smaller ones, have been forced to close down, rendering lakhs of people unemployed.

The dismantling of the public sector undertakings is like selling the household silverware. It is equivalent to demolishing what was built over the years at a time when the nation had to deny itself even the necessities to set up something like a refinery.

But it is a pity that the developed countries have had their way. Even the money-earning refinery - also of strategic importance - is scheduled for auction.

The attorney general, on whom the responsibility of selling equity in Hindustan Petroleum and Bharat Petroleum, the two major oil companies of the country, has been put has said that he was not asked on "the legal merits of the ultimate decision or the actual course action that the government may adopt to effectuate disinvestment" in the two companies. The government is unnecessarily eliciting support for the decision it should not have taken.

What is needed is the dismantling of the bureaucracy that guides the management of the public sector undertakings. Its working is inferior to none. But the ministries have made them their backyard where ministers and government officials play their games. They have, in fact, ruined most of the public sector undertakings.

The dismantling may also disturb the employment balance which has come to be achieved through reservations. The scheduled castes, the scheduled tribes and the backward have a quota in public sector undertakings as they have in the government.

The quota is being whittled down through transferring the units to private hands. Resentment on this count is increasing and may take the shape of agitation if reservations are not extended to the units sold.

The developed countries are hardly concerned over the problems that "economic reforms" are creating in India or, for that matter, in Pakistan and Bangladesh. Even their advantage of cheap labour is being nullified. Rich nations are introducing labour and environmental standards to make the entry of goods from the third world countries still more difficult.

When the constitution of the World Trade Organisation (WTO) was being discussed, the third world's plea was that free flow of goods should be accompanied by free flow of manpower, which the developing countries had in plenty. But this argument was never taken into consideration.

The result is the tariff walls have come down while visa restrictions have become more stringent. The developed countries have also imposed the quota and other impediments to see that there is no free flow of goods from the third world.

Agriculture is the backbone of India, Pakistan and Bangladesh. The WTO meeting at Tokyo earlier this month fortunately was deadlocked because there was a move to drastically cut the import tariffs on agriculture goods.

How could these countries agree to it when they already face the inundation of their markets by foreign agriculture goods? America and the European countries give subsidies to their farmers. Even when there have been strong objections by the third world countries, the term subsidy has been changed to some other name. In the face of such an attitude, no settlement is possible.

We have seen at the WTO meetings, beginning with the one in Washington, that the developed countries want markets and raw materials for a song. If they do not appreciate our difficulties and continue to ask for more concessions - it is now in the service sector - it may be better to have two WTOs, one for the developed countries and the other for the rest. The third world nations are increasingly losing confidence in WTO as it exists.

In fact, the Saarc countries should have their own common market. But political differences are having the better of economic gains. India, being a more developed country in the Saarc, should offer more concessions.

Why can't it allow goods from Pakistan, Bangladesh or Nepal to come in without any impost? Were New Delhi to do so, it would find people in Pakistan and Bangladesh developing a vested interest in economic ties that would help solve political problems. We should think of our economy, instead of placating the developed countries for a loan from the IMF or the World Bank.

The subcontinent has had the bitter experience of colonial rule. It does not want economic imperialism to take root. As a matter of fact, the developed countries were economically better off than India or the neighbouring countries, in terms of per-capita income, before their industrialisation began.

Western economics, therefore, though helpful, have little bearing on our present day problems. We have to do our own thinking profiting on the example of others, but essentially trying to find a path for ourselves suited to our own conditions.

However, we must be reminded that it is not by some magic adoption of socialist or capitalist method that poverty will suddenly lead to riches. The only way it can be achieved is through hard work and by increasing the productivity of the nation and organising an equitable distribution of its products.

It is a lengthy and difficult process. In a poorly developed country, the capitalist method offers no chance. It is only through a planned approach on socialistic lines that a steady progress can be attained. As this process continues, the texture of our life and thinking will gradually changes.

Planning is essential because we cannot afford to waste our limited resources. But it does not mean a mere collection of projects or schemes.

We have a terrible problem of extreme poverty in certain large parts, apart from the general poverty of the countries in the region.

We always have a difficult choice before us: whether to concentrate only on production in selected and favourable areas or try and develop backward areas at the same time.

A balance