If Indian politicians run true to type, once the BJP government gets over its initial hiccups, you can expect a White Paper on how the Congress and the United Front governments mishandled the country's economy over the years.The build-up has already begun, with well-wishers and wannabe advisers talking of how the new finance minister may wish to inform Parliament how effortlessly the country's interests were signed away without even a brief hint of reciprocity, and that globalisation so far has essentially implied a one-sided give-away.
The immediate reference, obviously, is to issues relating to the World Trade Organisation (WTO) -- whether it relates to patents or to lowering of import duties to levels below those acceptable to Indian industry.
Frankly, preparing a white paper on the subject is perhaps the most unadvisable thing for any government to do, let alone one which is going to be critically dependent on the goodwill of all parties to survive. More important, most of the arguments beingadvanced are a combination of loud talk and complete balderdash, and if the BJP hopes to make any kind of success of the economy, it has to get over its past beliefs. While many of the issues involved date back several years, it is useful to revisit some of these, as they clearly haven't died a natural death.
The first issue clearly relates to patents and how India has been forced to accept the western model of product patents. In other words, Indian companies, or individuals, will now have to pay for copying products, mostly in the pharmaceutical sector, developed abroad. The argument here is that the Congress capitulated on the patents issue but didn't bargain hard enough to get the western world to open up its textile markets which continue to be governed by quotas, or reduce the protection enjoyed by their farmers.This is, at best, a partial truth. The correct position, anyone who followed the Uruguay Round talks would know, is that domestic political compulsions, including those from senior BJPleaders, forced Indian negotiators to take intransigient positions. In the event, they refused to bargain, found themselves increasingly isolated, and then ended up accepting what was on offer. So while supporters like Brazil walked away in earlier rounds, the last one in Singapore saw Indonesia and Malaysia distancing themselves from India. In any case, what could better Indian negotiators have achieved anyway, when the entire world is agreeing to these new rules?
And, for all the talk of the west not allowing us to access its textile markets, for example, years of protecting our textiles industry and therefore not forcing it to modernise, have led to a situation in which we are actually benefitting from the quotas which are still imposed by the west. If there were no quotas, and say, US buyers were allowed to buy from anywhere in the world, the purchases from India would fall dramatically. Indian units, for example, can just produce around eight shirts a day per operator as against around 14 inBangladesh. As a result, India's exports of apparel have already begun slowing down in comparison with others -- they grew from $2.5 bn in 1990 to $4bn in 1996 as against China's $15.4 to $22, Bangladesh's $0.6 to $1.8, and Mexico's $0.6 to $3.6.
In any case, for all the tirade about how the country's interests have been bartered, foreign direct investment is just over a measly two per cent of the country's total investment. Imports -- after you remove items like petroleum, edible oils, and precious stones imported for re-export -- are just around seven per cent of the country's GDP. With such low foreign `interference', it does seem unreasonable to blame our woes on the foreign devil.
Surely the closure of the big textile mills in Ahmedabad and Mumbai have little to do with cheap imports flooding the markets. They have more to do with complete mismanagement and the competition from the powerloom sector which enjoyed various tax concessions. In more recent times, the closure of most of the smallerplayers in the synthetic yarn business -- JK Synthetics, Orkay, JCT -- has little to do with imports. It has to do with the uneconomic sizes of their plants, and the fact that companies like Reliance set up huge capacities which drove down prices.
The white paper, when it is finally presented, will, no doubt, talk of how the Congress-UF have neglected the agriculture sector. It is true that investment in agriculture has fallen dramatically over the years. What is more devastating, however, is the fact that, for example, under 40 per cent of public spending in the sector is in productivity-enhancing areas today. By contrast, this was around 60 per cent in 1981-82. With the lion's share of funds going into subsiding irrigation for example, there is little to even maintain existing canal systems, most of which have fallen into disrepair. Thus, agriculture subsidies have virtually crippled the entire delivery system for various inputs such as water and power. But with the BJP's Akali allies, above all,committed to maintaining farm subsidies, the BJP can hardly be expected to talk about this.
Under the circumstances, any white paper will be forced to reiterate much of the earlier stance taken by BJP leaders. In the event, it will act as a kind of guiding principle for the party's actions in various areas and prevent them from exploring any new ground. Clearly, that's something the party would like to avoid.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
