Magic Realism of Indiscriminate Industrialisation : Growth Means Consumer Durables and Capital Goods as Nano Dream Meets Dead End in Singur , Tata Seeks Another Slot and Gandhigiri Fails Miserably

[Palash]

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Magic Realism of Indiscriminate Industrialisation : Growth Means
Consumer Durables and Capital Goods as Nano Dream Meets Dead End in
Singur , Tata Seeks Another Slot and Gandhigiri Fails Miserably

Troubled Galaxy Destroyed Dreams: Chapter 64

Palash Biswas
http://troubledgalaxydetroyeddreams.blogspot.com/


Times Now.tv West Bengal Governor steps in to resolve Singur deadlock
Press Trust of India, India - 6 hours ago
The Governor's fresh bid comes a day after West Bengal Chief Minister
Buddhadeb Bhattacharjee's efforts to resolve the Singur tangle failed
to make any ...
Communists in West Bengal to garner support for Tata Thaindian.com
Tatas tell WB govt more land cannot be provided Economic Times
Mamata-Buddha talks fail Hindustan Times
Business Standard - Hindu Business Line
all 174 news articles » BOM:500570



Rediff Misery and death on West Bengal's tea estates
Rediff, India - 12 Sep 2008
If you drive 100 km due east from the dusty, overpopulated town of
Siliguri, located in the scrawny chicken's neck of northern West
Bengal, a three-hour ...


Sify Tatas move court to block Singur contract release
Business Standard, India - 20 hours ago
Tata Motors today moved Calcutta High Court against the State
Information Commission to prevent it from releasing “secret” sections
of the commercial ...
Tata Nano: Final decision by Monday Sify
Tata Motors obtains stay on making public Singur pact Hindu
HC asks CIC not to disclose text of agreement with Tatas Business
Standard
all 49 news articles » BOM:500570


India begins talks with US companies

NEW DELHI, Sept. 11: With the NSG having given India a waiver to have
nuclear commerce, the government has begun the exercise of finalising
bilateral agreement with friendly countries like France and Russia
though it would become operational only after the US Congress approves
the 123 Agreement, said an official spokesman.
“There had been growing public interest in developments regarding
civil nuclear initiative and therefore this exercise has been
undertaken “following the NSG statement which enables civil nuclear
cooperation by NSG members with India,” he said. n SNS


http://www.thestatesman.net/page.news.php?clid=1&theme=&usrsess=1&id=222194



Ration Riot in Hegemony Polity ruled by Regemented Gestapo in West ...

The indiscriminate industrialisation and urbanisation drive by
Hegemony Polity ..... Some questions about agrarian structure in
contemporary India - Blog ...
indiainteracts.com/members/2007/.../Ration-Riot-in-Hegemony-Polity-
ruled-by-Regemented-Gestapo-in-West-Bengal... - 101k - Cached -
Similar pages - Note this
Hunger and Revolution in India
Consequently it was decided that an industrialised India would be of
much more value to British imperialism than the agrarian India of the
past. ...
www.marxists.org/archive/roy/1925/x01/x01.htm - 29k - Cached - Similar
pages - Note this

With talks to resolve the the Singur deadlock failing to make any
headway, Governor Gopalkrishna Gandhi stepped in for the second time
today saying a solution can still be found and asked all sides to show
a "spirit of accomodation". "I believe, given the will, a solution can
still be found in a manner that accords with the law, safeguards the
interests of farmers, of the small car factory and, going beyond, help
in establishing the farm-factory balance that we so vitally need," he
said.
The Governor's fresh bid comes a day after West Bengal Chief Minister
Buddhadeb Bhattacharjee's efforts to resolve the Singur tangle failed
to make any breakthrough.


America tried a surveillance system as custodian to classified
information to save President Ronald Reagan during Water Gate Era. The
technology is back with Boom to kill whatsoever democratic space
created by Information Explosion and Internet. Sting Operations may be
nullified now. Swiss Bank Accounts details may save sanctity as well!
RTI could be irrelevant! We never know whether Indian Ruling Hegemony
is going to try it as NSG agreement denies India the supply of
sensitive technology!Industrialisation has been championed by
economists as a way to pull millions out of poverty. But across India,
land for factories have turned into battleground!India’s
industrialisation strategy has come under the spotlight.There has also
been violence in Orissa state over South Korean steel giant POSCO’s
plans for $12 billion steel plant, and clashes over plans for other
Special Economic Zones, a part of the big push for industrial
expansion.The fight at Tata’s $350 million Singur plants is now being
projected as a test case for India’s industrialisation.The challenge
to balancing industrial growth with the needs of farmers is in giving
displaced farmers new skills and sources of revenue, economists
say.Whatever the outcome of the Singur battle, industry groups say
India desperately needs fast industrialisation to create more jobs for
its population of more than 1.1 billion.indiscriminate
industrialisation, dumping of hazardous industries that were. and are
being phased out of Europe and the US, in Gujarat and all over.


While supporting the Magic realism of Indiscriminate Industrialisation
defending Ruling Hegemony interests intact, it is the logic of
mainstream Media as well as Economists that Going by the volume and
intensity of India Inc's support for Ratan Tata, West Bengal would be
in deep trouble if the Nano doesn't drive out of Singur! With the
talks between West Bengal Chief Minister Buddadeb Bhattacharjee and
Trinamool Congress chief Mamata Banerjee failing to make any headway,
Governor Gopalkrishna Gandhi on Saturday called for a "spirit of
accommodation" that was evident during the talks he presided over to
break the Singur deadlock. While,Trinamool Congress chief Mamata
Banerjee lashed out at West Bengal government on Saturday alleging
that it broke the terms of agreement with her party, leading to the
Singur standoff. She alleged that Chief Minister is taking all the
decisions on his own without consulting Trinamool Congress. Finally,
it appears like it’s curtains at Singur. At the end of the late-night
talks between West Bengal chief minister Buddhadeb Bhattacharjee and
Trinamool Congress leader Mamata Banerjee on Friday, it was finally a
dead end. Mamata Banerjee may be gunning for 300 acres inside the
complex, but the Nano vendors are determined to spoil her party.
Homegrown auto major Tata Motors has convened an annual meeting of its
vendors in Mumbai on October 16, but the company said it is not
related to the Singur issue.

The Marxist state government in West Begal, which in the past had
opposed industrialisation, wooed the Tatas to set up the plant to
create jobs in the desperately poor state.
Tata Motors, in turn, “came to West Bengal hoping we could add value,
prosperity and create job opportunities in the communities in the
state,” a Tata spokesman said.
Tata Motors has said it could have built the Nano plant in other parts
of India with better infrastructure, but wanted to develop under-
industrialised West Bengal “as our gift.”

What Industrialisation means in India noadays? Auto Hype, Chemicals,
Construction, Banks, Retail Chain, SEZ, Nuclear parks, Infrastructure,
IT, entertainment, Realty an so on! Highly dependent on Plastic money
and Sensex related Public Issues targeting the Resurgent Middle Class
and rural sector to expand the Consumer market.Magic Realism of
Industrialisation sustains with a Big Bang of Consumer durables and
capital goods particularly during this Festival Season all over this
diveded geopolitics bleeding!

Meanwhile, BJP opts for the best Super Highway of US Corporate
Interests , the age old Hindutva Road! Amarnath Shrine Land dispute
was the first sign. now RSS demands to divide Jammu and kashmir. Nuke
Deal has rescued US Economy struck with sub prime crisis and recession
now the Zionist Weapon Economy depends on strategic re alliance most
to wage War and Civil War across political borders. 9/11 tremors and
War against Terrorism gets newer dimensions with serial blasts in
India. Bangalore, Ahmadabad and now New Delhi blasts justify the US
unilateral Military interference in Pakistan. Big shopping in
Washington may just be justified with a full scale War! Now see,
Hindutva forces puts the issue of rehabilitation of kashmiri Pundits
along with the demands of nationalisation of entire Amarnath route!

The main drivers of industrial growth, as measured by the Index of
Industrial Production (IIP), were capital goods and consumer goods.
The manufacturing sector, which has a weight of 79.4% in IIP, grew
7.5% in July 2008 against 5.9% in June 2008 but lower than 8.8% in
July last year. Buoyancy in the production of consumer durables and
capital goods helped industrial growth bounce back to 7.1% in July,
from 5.4% in the previous month. However, the rebound was not enough
to prevent slower industrial growth of 5.7% during the first four
months of 2008-09 compared with 9.7% in the corresponding period last
year. Slower industrial production growth indicates that economic
expansion is moderating due to the Reserve Bank’s tight monetary
policy. In view of strong growth in consumer goods and 12.1%
inflation, economists expect interest rates to harden further.

Setting the stage for fast track approval of the 123 Agreement by the
US Congress, the Senate will take it up for hearing on Thursday with
both sides hoping to wrap up the Indo-US nuclear deal during Prime
Minister Manmohan Singh's visit here on September 25. Under Secretary
of State for Political Affairs William Burns will testify on Capitol
Hill before the Senate Foreign Relations Committee headed by Chairman
Joseph Biden, who is also the Democratic Vice Presidential nominee,
during the hearing on September 18.

The Centre for Monitoring Indian Economy (CMIE) data reveals that in
case of outstanding investment proposals too, West Bengal has seen a
quantum jump. The state has, for instance, registered a 76 per cent
growth for 2007-08, to Rs 4,77,370 crore worth of outstanding
proposals. In manufacturing alone, investments have risen sharply from
Rs 96,810 crore in 2006-07 to Rs 1,94,032 crore in 2007-08. "Unlike
the late '90s, when many of the proposed projects fell through, since
2004-05 there has been almost zero dropping of projects," says Mahesh
Vyas, CEO, CMIE. While it's hard to say how many planned projects will
fructify finally, it can be safely assumed that West Bengal isn't
doing too badly.

Of course, the haste to push through industrialisation has its costs.
It is not just the aggrieved displaced farmers in Nandigram and Singur
who have joined forces with opposition leaders in voicing protests
about the lack of adequate rehabilitation packages, or alternate
livelihood. The discontent in this populated state has already found
political reflection in the local panchayat elections earlier this
year, with the ruling CPI(M) faring poorly.


"Through the Singur discussions on September 5, 6 and 7, I saw earnest
participants showing a rare spirit of accommodation. That spirit needs
to be operationalised," a Raj Bhavan release said.

Gandhi said, "Reason can be reasonable; passion dispassionate. I
believe, given the will, a solution can still be found in a manner
that accords with the law, safeguards the interests of farmers, of the
small car factory and, going beyond, help in establishing the farm-
factory balance that we so vitally need."

Invoking Rabindranath Tagore, the Governor said, "Jiban jakhan shukai
jai koruna dharai esho (when the heart is hard and parched up, come
upon me with a shower of mercy."

The Chief Minister had offered 70 acres in lieu of the Tata Motors
project site at Singur to "unwilling farmers" and monetary
compensation to those whose land fell outside, but was rejected by
Mamata Banerjee at a face-to-face meeting with him on Friday evening.
The agreements of September 7 did mention the fact that ’maximum’ land
from inside the project area would be given back. There were, however,
no numbers quoted officially in the agreement.

Mamata Banerjee had, subsequently, broadcast the 300-acre figure
loudly. Whether the CM had agreed to giving 300 acres from inside the
project area even unofficially, will never be known.

Tata Motors is all set to manufacture 1,000 Nanos at its Pune plant.
The vendors have released their last lot of components for Nano on
Thursday, which will be delivered to Pune within a day or two.


Mamata said, "West Bengal government doesn't respect us. It has broken
the terms of agreement. We are not ready for any more talks."



“We will announce a final decision on September 19,“ Mamata said.

The Trinamool chief called for 'march to Singur' on September 16 and
threatened agitational programme after September 19.

Mamata's statement has come barely hours after Governor Gopalkrishna
Gandhi called for a "spirit of accommodation" that was evident during
the talks he presided over to break the Singur deadlock.

Mamata did not budge from her stand that the West Bengal government
should honour the agreement it had signed for giving up 300 acres
inside the Nano complex. Buddhadeb could not go more than 70 acres,
because he said the Tatas wouldn’t agree to it.

Reports coming in from the CM’s office indicate that a formal letter
would now go on behalf of the state government to the Tatas, saying
that all efforts to break the stalemate have failed, and that it can
do no more. The onus will then be on the Tatas to do whatever it wants
to do. Mamata Banerjee has started questioning the credibility of
agreements to which the state government and chief minister were
party.

“Tata Motors, which is keenly watching the developments at Singur, is
getting itself ready to rollout Nano in October. If the Singur logjam
is not resolved within a fortnight, then they have to make some
arrangements to roll out Nano from any of its plants. As of now, this
does not look to be a part of the much-speculated Plan B,” Tata
circles indicated.

Incidentally, Tata Motors had informed its 55-odd vendors of Nano to
supply components for 1,000 Nanos by September 8 to the Pune factory.
This was also confirmed by a leading vendor, who had invested in the
Singur vendor park, and will be supplying sheet metal for Nano
chassis.

Incidentally, nearly 3,000 components are required to manufacture a
Nano. However, the vendors also feel that the Pune plant will not be
able to meet the volumes that Tatas are looking at for Nano in the
next two to three years time.

"Yes, the company (Tata Motors) has informed us about the meeting and
we will attend it," one of the leading vendors of Tata Motors told
reporters.

The meeting is a regular annual event and Singur may be a prominent
point of discussion, he added.

When contacted, Tata Motors spokesperson confirmed the development and
said: "We will have the annual vendors convention on October 16 and it
is a routine yearly meet."

Asked if the meeting is meant to discuss the impasse regarding Nano
project in West Bengal, he categorically denied saying: "This is not
at all related with Singur issue and we are meeting as part of our
regular meet with all stakeholders of Tata Motors, like dealers
meet".

Land for vendors of the Nano car has become the major point of
contention in West Bengal, where the main opposition Trinamool
Congress has been demanding that they be set up away from the mother
plant.

In the meantime, Tatas themselves are considering alternate options
like manufacturing Nano from other facilities of the company, but it
is not clear if the original vendors would move with them.

Tata Motors suspended work at Singur late last month after its
employees were intimidated by protesters.

Economic times reports:
Tata Motors is on the lookout for a new location to house the main
manufacturing facility for its Rs 1 lakh car Nano. According to
sources in the automobile industry , while the fortnight-long work
suspension at Singur continues, the company is scouting for a new
piece of land preferably somewhere in central or south India.

The company feels it cannot pull out of Singur entirely, because of
the emotional and financial involvement at that site. But
increasingly, Singur is being looked at as a satellite plant option
along with Pune and Pantnagar. Tata Motors component suppliers say the
company is toying with Madhya Pradesh (Indore being a favourite) or
Gujarat or down South (Chennai being a favourite) as a possible
location for the new mother facility. Pune in the west, Pantnagar in
the North and Singur in the East could end up being the three regional
manufacturing sites.

As the company gears up for the promised Diwali launch of the Nano,
the vendors have been told to supply “anywhere” and the production
targets have been cut to 10,000 from the earlier 60,000, say industry
sources. The Nano will likely be available in fewer variants and
colours and will probably be up for test drives in most markets before
becoming available for retail sales countrywide.

At the production end, Tata Motors has decided to have five plants
including one mother facility which will support four satellite plants
where the car will be assembled from CKD kits. “The company may shift
the mother plant (from Singur) to the closest possible location, which
will also serve as the main production hub for the Nano. While Singur
is a remote possibility now, the company is likely to freeze its plans
in central India or down south soon,” said a Delhi-based Nano vendor.
http://economictimes.indiatimes.com/News/News_By_Industry/Auto/Automobiles/Tatas_eye_new_mother_house_for_Nano/articleshow/3478592.cms

Tatas get court gag on car agreement
OUR LEGAL REPORTER
Calcutta, Sept. 12: Calcutta High Court today restrained the state
government and the West Bengal Industrial Development Corporation from
making public the agreement signed with Tata Motors on the Singur
project.

“The stay will be operative for 15 days and the case will come up for
hearing on September 19,” Justice Dipankar Dutta said in an interim
order on a Tata Motors petition.

The company demanded the stay after the WBIDC posted the text of the
agreement on its website on a direction from the state information
commission, which had received a Right to Information (RTI) Act plea
for such disclosure.

Section 11(1) of the act, however, says that when a third party —
other than the RTI petitioner and the government — is involved, a
submission from it is needed before any information can be revealed,
said legal expert Satadal Chatterjee, who specialises on the RTI Act.

The legal action by the Tatas, the third party in this instance,
suggests they were not consulted before the text was made public.
There was, however, no confirmation from either side.

Tata Motors lawyer Samaraditya Pal argued before the court that the
state information commission had violated the RTI Act by asking the
state to display the agreement.

“According to the act, my client has the right to keep the agreement
secret because it is related with its trade,” Pal said. Other than the
state information commissioner, the state government and the WBIDC
have been made respondents in the case.

Pal said: “The agreement was signed on March 9, 2007. It was decided
the copy of the agreement would not be made public. But the state
information commission, in an order dated September 8, asked the
government to display the agreement.”

The court asked the lawyer what good it would do to have the text
withdrawn now, since it had already been on display. Pal replied that
the WBIDC had not displayed the “secret part” of the agreement yet.

“But it is our apprehension that this part of the agreement will be
displayed, too.”

Industries secretary Sabyasachi Sen said he was not aware of the court
order.

The government had read out the agreement to a House standing
committee on August 27. Industries minister Nirupam Sen had then said
a copy could not be handed over without the Tatas’ consent.

“According to the RTI Act, a document where a third party is involved
can’t be made public without their consent,” Sen had said.

The RTI petition was moved by Amitava Chowdhury, a Calcutta resident.


http://www.telegraphindia.com/1080913/jsp/frontpage/story_9828532.jsp

Serial Blasts in Delhi
A series of blasts ripped through some of the most crowded markets in
Delhi today. At least five people were reported killed and over a
dozen injured. However, reports trickling in suggest that the toll
might be far greater. ... | Read..



What a letdown!
Buddhadeb Bhattacharjee this evening took to Mamata Banerjee a package
offering more land inside the complex, higher compensation for
landlosers, jobs and development projects. ... | Read..


Tatas get court gag on car agreement
Calcutta High Court today restrained the state government and the West
Bengal Industrial Development Corporation from making public the
agreement signed with Tata Motors ... | Read..


‘Spy’ who got caught
A “spy” sat staring at his polished shoes locked up in the small
office of cultural group Sahmat for almost an hour today, after
hamhanded snooping blew his cover a ... | Read..


Roy allies flash unity signal
Putting up a show of unity, the coalition partners of the Meghalaya
Progressive Alliance (MPA) tonight announced that they would stick
together under the leadership of chief ... | Read..


No mala fide intention: Probe
The controversy surrounding weightlifter Monika Devi’s dope test which
led to her withdrawal from the Beijing Olympics could have been easily
avoided, according to forme ... | Read..


Razi talks norms, but AG to stay
The state government today decided to continue with advocate-general
S. B. Gadodia, but Governor Syed Sibtey Razi is understood to have
summoned him to explain that he ha ... | Read..


Naveen receives threat letter
The chief minister’s office received another threat letter, a week
after the additional resident commissioner in New Delhi had received a
threat call from an unident ... | Read..


Cabinet nod to wage revision
The state cabinet today resolved to execute the recommendations of the
Sixth Central Pay Commission, by forming a committee, headed by
retired accountant-general S.K.F. Kujur ... | Read..
http://www.telegraphindia.com/1080913/jsp/frontpage/index.jsp


Meanwhile, the US remained silent over the controversy in India
triggered by President George W Bush's assertions that nuclear fuel
supply assurances to New Delhi were only political commitments and not
legally binding.
"It's a letter from the President to the Congress, I'll refer you over
to the White House for an answer," State Department spokesman Sean
McCormack said on Friday when queried about Bush's communication to
the US Congress on nuclear fuel supplies issue that has kicked up dust
in India.

"...We've had good discussions with the Indian government on this
matter, the 123 agreement, as well as a number of other issues. And
we're going to be providing quite a bit of information there. We have
to the US Congress. And there's going to be testimony during that
process. I'll let that testimony and the information that we've
provided the Congress speak for itself," McCormack maintained.

In his message transmitting the 123 agreement to the US Congress for
its approval, Bush had said " In Article 5(6), the Agreement records
certain political commitments concerning reliable supply of the
nuclear fuel given to India. The agreement does not, however, transorm
these political commitments into legally binding commitments because
the Agreement, like other US agreements of its type, is intended as a
framerwork agreement."

"If President Bush sends a letter, a cover letter on the deal, and
says something, is that binding on the deal? Like, does it hold?" the
spokesman was asked.

"It's all a matter of the public record," he replied. Asked if the
administration had a target date for ratification of the nuclear deal,
he said "we'd like it as soon as possible".


With the Indo-US nuclear deal waiting to get the Congress approval,
the State Department has said the initiative will help meet India's
growing energy requirements and strengthen the non-proliferation
regime by welcoming India into internationally accepted
nonproliferation standards and practices.
Issuing a fact sheet on the civilian nuclear initiative, the Bureau of
South and Central Asian Affairs also expressed hope to get the deal
approved by the US Congress.

"This initiative establishes a firm foundation for additional
nonproliferation and counter proliferation cooperation, areas we fully
intend to advance through the course of our strategic partnership,"
the State Department said.

"Congressional approval would be the culmination of an unprecedented
three-year effort by the US and India, in a way that deepens our
strategic partnership and strengthens global nonproliferation
principals while providing trade and investment opportunities that
will assist India to meet its energy requirements in an
environmentally responsible way," it said.

Calling the decision of the IAEA of August 1 and that of the NSG of
September 6 as ‘historic events’ the State Department has said that
these events ‘have welcomed India into the nonproliferation regimes
and formed a firm foundation for the US and India to strengthen our
efforts in the future to prevent WMD proliferation and to combat
terrorism’.

On home front , kashmir Conflict takes a dangerous twist as the
Mainstream hindutva force RSS demands to divide Jammu and Kashmir!

Firmly ruling out any division of Jammu and Kashmir, Congress
President Sonia Gandhi said on Saturday that there was no question of
pandering to separatists.

"I unequivocally reject the notion of a further division of Jammu and
Kashmir which has been advocated by the RSS. There is also no question
of pandering to or being soft on the separatists," she said in her
address at the meeting of the Congress Working Committee here.

"Let me categorically state that the people of all regions of Jammu
and Kashmir are part of India. If any section feels alienated, it is
incumbent upon us to deal with it most sensitively," Gandhi said.

Expressing hope that the recent settlement on the Amarnath land row
would lead to return of peace in the state, she said it was a matter
of "deep anguish" that the earlier normalcy and peaceful situation
should have taken "such a painful turn".

Gandhi said there had been a marked improvement and development in the
state in recent years and the Prime Minister's Reconstruction Package
and programmes and initiatives at the state level "were making a
decisive impact."

"Normalcy had returned, a fact borne by the strong revival in tourism,
for instance," she said.


Fuel supply not legally binding: Bush
13 Sep, 2008, 0216 hrs IST, ET Bureau

NEW DELHI: In what could give credence to the charge that the original
terms of the Indo-US nuclear deal have changed, US President George
Bush, in a letter, has made it clear to the US Congress that the fuel
supply assurances given to India, in the eventuality of a nuke test,
are not legally binding on America.

“In Article 5(6) the Agreement records certain political commitments
concerning reliable supply of nuclear fuel given to India. The
Agreement does not, however, transform these political commitments
into legally binding commitments because the Agreement, like other US
agreements of its type, is intended as a framework agreement,” said
President Bush.

The critics of the deal said it was a vindication of their positions.
BJP leader Arun Shourie as well as strategic experts like Brahma
Chellaney have been maintaining that just as the Hyde Act bars the
transfer of civil reprocessing, enrichment and heavy-water
technologies or equipment to India, except for a multinational or US-
supervised facility, the NSG waiver, too, is based on an understanding
against exports of similar technologies to India.

“That is no surprise in view of the Hyde Act? Section 103(a)(5) asking
the administration to do the following: Given the special sensitivity
of equipment and technologies related to the enrichment of uranium,
the reprocessing of spent nuclear fuel, and the production of heavy
water, work with members of the NSG, individually and collectively, to
further restrict the transfers of such equipment and technologies,
including to India. Such restrictions, however, flout the July 18,
2005, US commitment to adjust US laws and policies, and work with
friends and allies to adjust international regimes to enable full
civil nuclear energy cooperation and trade with India,” said Mr
Chellaney.

In Washington, US officials still maintained that the deal was “fully
consistent” with the requirements set out by the Congress. “We have
presented a very strong package fully consistent with the requirements
that the Congress set out,” assistant secretary of State for South and
Central Asian Affairs Richard Boucher said.

“We understand how tight the Congressional calendar is this fall. But
we look forward to continuing with Congress on the initiative and we
hope the legislation can be passed before Congress adjourns for the
year,” he added.

The Congress, which opened on September 8, will be in session till
September 26. It is, therefore, being asked by administration to do
away with the mandatory 30-day period before it can take up the
Agreement for a simple yes-no vote without a debate. Mr Boucher also
said that the agreement, which enjoyed great support at the Capitol
Hill, is likely to generate a fair amount of discussion and a lot of
questions in the House.

Meanwhile, welcoming the “substantial” submission made to the Congress
on the US-India civilian nuclear agreement, Speaker of the House of
Representatives Nancy Pelosi hoped that the Congress will waive the 30-
day rule for the legislation to be considered. “...the submission we
received last night — and it’s very — it’s quite substantial. It will
require a waiver of our rules, because you need 30 consecutive
legislative days to pass before you could take up such legislation,”
reports quoting Pelosi said.
http://economictimes.indiatimes.com/PoliticsNation/Fuel_supply_not_legally_binding_Bush/articleshow/3477891.cms






Industrialisation In India
http://www.tcd.ie/Economics/SER/archive/1999/essay20.html
Jana Hambrock and Sebastian Hauptmann - Socrates

The development of India into a modern industrialised country is a
slow but continuing process. Jana Hambrock and Sebastian Hauptmann
provide a detailed analysis of the Indian economy, referring to its
historical and theoretical context, as well as to its future
prospects.


Introduction

To discuss the topic "The Indian approach to industrialisation", this
essay is divided into several parts. Firstly, the reasons for, and
policies of industrialisation are discussed. The theoretical framework
is finished by identifying indicators to be used in the evaluation of
the success of such policies. The second section gives a rough
overview of the development of industrialisation in India since
independence. The third section goes into more detail and provides
information about some specific and important areas for
industrialisation. The fourth section uses the defined indicators to
measure the success of India’s two main approaches to
industrialisation and evaluates the results. The fifth section
describes the main problems India faces today and in the future. Last
but not least, the sixth section informs about current trends in
Indian policy.

Theoretical Framework for Industrialisation

Before analysing the Indian approach, we want to introduce the aims of
industrialisation, give a rough overview of the industrialisation
strategies for Less Developed Countries (LDCs) and identify indicators
for the evaluation of the success of industrialisation policies.

Why Industrialisation?

What are the ultimate objectives of economic development? Different
governments may have different objectives in mind. Generally, however,
they will include a faster growth of national income, alleviation of
poverty, and reduction of income inequalities.

But how is industrialisation expected to contribute to these goals?
The experience of industrial economies shows a close association
between development and industrial expansion. But industry is also
thought to provide certain spillovers which would benefit other
activities: enhancement of skills, training of managers, dispersion of
technology, etc. Moreover, pessimism about the prospects of food and
raw materials made the substitution of domestic for imported
manufactured goods seem the most promising route to development for
many countries.

Industrialisation and foreign trade

Economists and policymakers in the developing countries have long
agreed on the role of government in providing infrastructure and
maintaining stable macroeconomic policies. But they have disagreed on
policies toward trade and industry. The form of government
intervention in this area is the distinguishing feature of alternative
development strategies.

A convenient and instructive way to approach the complex issues of
appropriate trade policies for development is to set these specific
policies in the context of a broader Less Developed Countries strategy
of looking outward or inward. Outward-looking development policies
encourage not only free trade but also the free movement of capital,
workers, enterprises, the multinational enterprise, and an open system
of communications. By contrast, inward-looking development policies
stress the need for LDCs to evolve their own styles of development and
to control their own destiny. Within these two broad philosophical
approaches to development, a lively debate has been carried out
between the free traders, who advocate outward-looking export
promotion strategies of industrialisation, and the protectionists, who
are proponents of inward-looking import substitution strategies .

The advocates of import substitution (IS) – the protectionists –
believe that LDCs should substitute domestic production of previously
imported simple consumer goods and extend this later to a wider range
of more sophisticated manufactured items – all behind the protection
of high tariffs and quotas on imports. In the long run, IS advocates
cite the benefits of greater domestic industrial diversification and
the ultimate ability to export previously protected manufactured
goods, as economies of scale, low labour costs, and the positive
externalities of learning by doing cause domestic prices to become
more competitive with world prices.

By contrast, advocates of export promotion (EP) of both primary and
manufactured goods cite the efficiency and growth benefits of free
trade and competition, the importance of substituting large world
markets for narrow domestic markets, the distorting price and cost
effects of protection, and the tremendous success of the East Asian
export-oriented economies of South Korea, Singapore, and Hong Kong .

The balance of the debate has swung back and forth, with the
protectionists predominating in the 1950s and 1960s, and the export
promoters gaining the upper hand in the late 1970s and in the 1980s
and 1990s, especially among Western and World Bank economists.

Indicators for measuring economic development

Of course, any development policy has to be assessed by measuring the
economic development it effects. India’s first Prime Minister
Jawaharlal Nehru declared on the eve of the departure of the British,
on 14 August 1947, that India’s task in the future included "the
ending of poverty and ignorance and disease and inequality of
opportunity".

These measures will be used to determine the success of the inward-
looking policies he initiated, as well as to compare their success
with the success of the reform policies. Therefore, growth of income
per capita, alleviation of poverty and reduction of income
inequalities are amongst the most important indicators.

To measure advances regarding inequality of opportunity and ignorance,
several indicators pertaining to education and health will be used.
These are two important public goods to which every individual is
entitled; both for their intrinsic importance and for their
enhancement of instrumental personal, social and process roles, and
also empowerment and distributive roles.

History of Industrialisation in India

This section gives a rough overview of the history of
industrialisation in India. Several areas will be discussed in more
detail in the following section.

Colonial rule

Under colonial rule, India, as with most other developing countries,
followed a non-industrial model. But many Indians believed that
progress was retarded by this. It was believed that true economic
progress lay in industrialisation; Smith’s and Ricardo’s ideas of
international specialisation and mutually advantageous free trade were
rejected, at least until India became an exporter of more
sophisticated goods.

Industrialisation since Independence

India’s first Prime Minister, Jawaharlal Nehru, Premier from 1947 to
1964, saw industrialisation as the key to alleviating poverty.
Industrialisation not only promised self-sufficiency for his nation
that had just regained political sovereignty, but also offered
external economies accruing from technical progress. Believing the
potential of agriculture and exports to be limited, Indian governments
taxed agriculture by skewing the terms of trade against it and
emphasising import substitution, thus giving priority to heavy
industry.

Nehru believed a powerful state with a centralised planned economy to
be essential if the country was to industrialise rapidly. The
Industries (Development and Regulation) Act (IDRA) in 1951 laid the
foundations for this administrative control on industrial capacity.
But, over time, the licensing requirements became increasingly
stringent and were accompanied by a gamut of procedures that required
clearance by a number of disparate and uncoordinated ministries.

In order to pursue IS, the Import Trade Control Order of 1955
subjected almost all imports to quantitative restrictions in the form
of import licenses. These were supplemented by tariffs at rates that
were among the highest in the developing world.

Indian state intervention in industrial development has been
extensive. Unlike many East Asian countries, which used state
intervention to build strong private sector industries, India opted
for state control over key industries. At different times,
nationalised industries included chemicals, electric power, steel,
transportation, life insurance, portions of the coal and textile
industries, and banking. To promote these industries the government
not only levied high tariffs and imposed import restrictions, but also
subsidised the nationalised firms, directed investment funds to them,
and controlled both land use and many prices.

Under Prime Minister Indhira Gandhi (1966-77), two major shifts took
place in the role of the state. First, the neglect of agriculture was
reversed through state activism in subsidising new seeds and
fertilisers, agricultural credit, and rural electrification. The green
revolution took off and by the mid-1970s India was self-sufficient in
grain. The second shift was the further tightening of state control
over every aspect of the economy. Banks were nationalised, trade was
increasingly restricted, price controls were imposed on a wide range
of products, and foreign investment was squeezed.

In 1973, dealings in foreign exchanges as well as foreign investment
came to be regulated by the Foreign Exchange and Regulation Act
(FERA). The act virtually shut out the inflow of new technology from
abroad in the 1970s and 1980s, particularly when these involved large
equity participation.

The Indian system of state planning went far beyond the usual inward-
looking industrialisation policies that most developing countries
pursued after World War II. The government regulated the most basic
business decisions for all firms above a certain size: borrowing,
investment, capacity utilisation, pricing and distribution.

The over-restrictive, and often self-defeating nature of the
regulatory framework, began to become evident by the late 1960s and
early 1970s. Comprehensive planning was increasingly criticised as
planned targets were not met and many plans were not even implemented.
The lack of success in some dimensions led to a new and more
restrictive set of regulations. One example is the attempt to reserve
sectors for small industries and to restrict the growth of large
firms.

Beginning in the early 1980s, a mild trend towards deregulation
started. Economic reforms were introduced, starting to liberalise
trade, industrial and financial policies, while subsidies, tax
concessions, and the depreciation of the currency improved export
incentives. These measures helped GDP growth to accelerate to over 5%
per year during the 1980s, compared to 3.5% during the 1970s, and
reduced poverty more rapidly. However India’s most fundamental
structural problems were only partially addressed. Tariffs continued
to be among the highest in the world, and quantitative restrictions
remained pervasive.

Moreover, a significant government influence continued in the
allocation of credit to firms and a discouragement of foreign
investment. Relatively inefficient public enterprises, controlling
nearly 20% of GDP, remained a drag on economic growth.

The government expanded antipoverty schemes, especially rural
employment schemes, but only a small fraction of the rising subsidies
actually reached the poor. Competition between political parties drove
subsidies up at every election. The resulting fiscal deficits (8.4% of
GDP in 1985) contributed to a rising current account deficit. India’s
foreign exchange reserves were virtually exhausted by mid-1991 when a
new government headed by Narasimha Rao came to power.

In July 1991, India launched a second major economic reform program.
The government committed itself to promoting a competitive economy
that would be open to trade and foreign investment. Measures were
introduced to reduce the government’s influence in corporate
investment decisions. Much of the industrial-licensing system was
dismantled, and areas once closed to the private sector were opened
up. These included electricity generation, areas of the oil industry,
heavy industry, air transport, roads and some telecommunications.
Foreign investment was suddenly welcomed.

Greater global integration was encouraged with a significant reduction
in the use of import licenses and tariffs (down to 150% from 400%), an
elimination of subsidies for exports, and the introduction of a
foreign-exchange market. Since April 1992, there has been no need to
obtain any license or permit to carry out import-export trade. As of
April 1, 1993, trade is completely free, barring only a small list of
imports and exports that are either regulated or banned. The WTO
estimated an average import tariff of 71% in 1993 which has been
reduced to 40% in 1995. With successive additional monetary reforms,
the rupee, since 1995, can nearly be considered a fully convertible
currency at market rates. India now has a much more open economy.

Special areas of economic policy

After giving a rough overview of the history of industrialisation,
this chapter provides more detailed information about the areas of
human factors for industrialisation, structure of foreign investment,
and the process of privatisation.

Human Factors for industrialisation

A very necessary ingredient for promoting industrialisation and
technological change is the investment in human capital. India’s
current average adult literacy rate is low at 52%. There are large
inequalities between males (literacy: 64%) and females (literacy:
39%), between urban and rural areas, and between different social
classes. Low levels of female education in India are due to the gender
division of labour. Females are expected to spend most of their life
in domestic work and child rearing. Secondly, the practice of dowry
and the ideology of hypergamous marriage can turn female education
into a liability. An educated girl is likely to be more expensive to
marry off, thus female education tends to be a threat to the social
order. Illiteracy is widespread not only in older groups, but also
among young boys and girls, particularly in rural areas.

The remarkable neglect of elementary education in India is all the
more striking given the widespread recognition, in the contemporary
world, of the importance of basic education for economic development.
Primary education in India is not compulsory. However those who
receive primary education and make it through secondary school have an
excellent chance of getting a high-class University education. India
has a huge supply of people with more education than they can use.

Amartya Sen argued that there were deep-seated class biases in the
pressures that have determined Indian educational priorities, and that
the inequalities in education are, in fact, a reflection of the
inequalities of economic and social powers of different groups in
India. India’s hierarchical, brahmin-dominated society has been
noticeably casual about primary education; resources have been poured
into the higher education that benefits the upper class.

The persistence of endemic illiteracy and educational background in
India generally limits the freedom and well-being of the Indian masses
and has a direct role in the relative deprivation of women in
particular. Elementary education is extremely important for a
successful integration in the world market and if the process of
growth were more ‘participatory’ it could raise the income-earning
power of large parts of the nation. Even if India’s high technology
industries, such as modern computer software or engineering products
had an accelerated growth, the bulk of the Indian population would
benefit only marginally.

Foreign Investment Policy Instruments

Since independence, new foreign investment has been rigidly controlled
in line with established development thinking. Investment was mostly
restricted to industries where it was felt that the acquisition of
foreign technology was important, or where the promise of exports was
convincing. The FERA was a landmark. In most industries, foreign
shareholdings in rupee companies had to be reduced to 40%. The
relative importance of foreign ownership in the private corporate
sector fell significantly in the next decades. The attitude towards
foreign investment began to change in 1985 as a part of Ghandi’s drive
for advanced technology. Despite this, looking at 1988 shows how
poorly India fared in attracting private foreign investment. Net
Private Foreign Investment to India (in million US$) was $280. This is
compared to her Asian competitors with figures of $2344 (China), $1093
(Thailand) and $986 (Philippines).

Since the liberalisation in, mid-1991 India has become a magnet for
foreign investment. A noteworthy feature is the dramatic speed of
approvals, some taking only a week. Automatic approval of projects in
34 industrial sectors is permitted. The constraint that foreign
investment should reach only 40% was relaxed to 51%. In certain
sectors, such as infrastructure and computer software, the ownership
can also be as high as 74%. In some sectors such as transport
infrastructure, full foreign ownership is permitted and even
encouraged.

Foreign direct investment rose from $170 million in 1991-92 to $1.3
billion in 1994-95. India is targeting foreign direct investment of at
least $10 billion annually by the turn of the century. It attracted a
total of $2.4 billion in 1996-97 and $3.4 billion in 1997-98. Foreign
direct investment is nearly 25 times higher than it was before the
economy was liberalised.

The government in New Delhi is continuing to work toward reforming
long-standing policies to make the country more "investor friendly"; a
move that continues to heighten US interest in the country. A growing
number of US companies, motivated by an increasingly favourable
investment climate and the country's huge reserves of both human and
natural resources, have seriously begun to consider investing there.
US investment has been more than 24% of the total investment since
1991. In 1995 approximately $3.5 billion of US foreign investment
flowed into India.

The US continues to be the leading investor in India. The US is
followed by other more ‘traditional’ investors like the U.K. (6.4%),
Israel (5.9%), Mauritius (4.6%), Japan (4.2%) and Germany (4.1%). Most
of the investment interest has been in the telecommunications, oil
refining, automobile and transportation sectors, with other projects
developing in the electronics, software and electrical equipment
industries.

Revitalisation of the Indian Private Sector

India has always been a trading nation. Centuries of alien rule and
decades of socialism did not stamp out the Indian entrepreneurial
spirit. The Statement of Industrial Policy 1991 reduced the list of
industries reserved for the public sector from 17 to 6. In 1992/93,
104 out of a total of 237 central public sector enterprises made
losses. With few exceptions, the inefficiency of public enterprises,
which generate 17% of GDP, has continued to be a serious issue. It is
clear that there is a prima facie case for privatisation on grounds of
efficiency. However, the strength of the case for privatisation varies
with the type of industry.

Now exposed to international competition, Indian companies are forming
alliances with each other to face the challenges of the future. It is
now even possible for Indian firms to merge with other companies.
Procter & Gamble merged its operations with Godrej Soaps. Coca Cola
acquired Parle, its erstwhile competitor, thus extending the cola wars
to new exotic lands. Companies are enjoying the benefits of economies
of scale and synergy. As larger and stronger groups emerge, they will
have the resources necessary to invest in upgrading technology and
will become more competitive.

Evaluation of Industrialisation in India

The indicators named above will be used to evaluate the success of
Indian industrialisation policies. A distinction will be made between
the period from Independence until 1980, characterised by inward-
looking policies such as IS, and the period from 1980 until today,
characterised by reforms and the opening up of the Indian economy. The
following analysis with indicators compares the achievements of these
two periods only. Absolute statements of Indian achievements follow
later on.

It must be emphasised that the analysed data conceals sharp
disparities within India between development-oriented states and
laggards, between women and men, between adults and children, and
between city and countryside. Different states have progressed at
differing paces and, even within states, different regions have
achieved markedly varied results. Even more noticeable than geographic
differences in poverty reduction are the inequalities that persist
across gender, caste and ethnic groups. Social indicators for women –
literacy, for example – are distinctly lower than for men, and the
level of scheduled castes and tribes in both economic and social
achievements is still well below the national average.

Growth of national income

Growth of national income in GNP per capita in India was about 1.4% in
the years from 1960 to 1980. The effects of the reforms of the 1980s
are reflected in growth figures: the average GNP per capita growth
increased to 3.25%. And with further opening up in the 1990s, the GNP
per capita reaches new heights with 3.8% average growth in the period
from 1987 to 1997.

Alleviation of poverty

In the early 1950s, about half of India’s population was living in
poverty. Since then, poverty has been declining slowly. The poverty
reduction was given new impetus by the reforms: falling from around
55% in 1974 to just under 35% in 1994 by a headcount index. In the
1980s and 1990s, poverty reached historically low levels. Still,
because of India’s rapid population growth rate, the relative
reduction of poverty has not been sufficient to reduce the absolute
number of poor which increased from about 164 million in 1951 to 312
million in 1993-94.

Reduction of income inequalities

The reduction of income inequalities has only made slight advances.
The biggest advances were made mostly before the reforms. On the other
hand, one of the biggest increases in inequality happened in the late
1970s, and the developments for the late 1980s / early 1990s in Figure
1 look promising. Compared to other low-income economies, the
inequality is relatively low.




Education

From 1960 to 1977 the reduction of illiteracy was only 11%. From 1978
to 1995, it was 25%, thus much higher. Of course, there are also long-
term developments involved here, so that the higher reduction in the
second period might be partially due to actions taken in the first
period.

Health

Life expectancy, used as an indicator of health, has increased
constantly since independence. During the period from 1960 to 1980, it
increased from 43 years to 52 years, which is an increase of 21% in 20
years. From 1980 to 1995 it grew to 62 years, which is a 19% increase
in only 15 years. This means that the growth of this indicator has
increased by a rate of 24% compared to the previous period.

Even clearer is the improvement in the reduction of infant mortality.
This was reduced by 25% in the period 1960 to 1995 and a further
reduction of 45% took place from 1980 to 1995. This is partially due
to better education of mothers, as well as to an improved economic
situation of parents.

Summary

Independence - 1980

The system of state planning constrained growth of the private sector
by allowing it to expand only with government permission. But despite
the massive interventions, economic progress was made during the
period following independence. The per capita GDP grew at a
respectable rate of 1.4% per annum from the late 1940s into the 1970s.
Both famine and poverty were significantly reduced during this period.
Nevertheless, most economists argued that the interventions lowered
India’s economic growth rates to a level which was not adequate for a
country that saved and invested over one-fifth of its GDP. With few
major producers of many key industrial products, the concentration of
domestic production was very high, inviting monopolistic pricing.
Moreover, as the world economy grew and as beneficial opportunities
for growth through trade expanded, India paid an increasing price for
its economic isolation.

The Indian system of state planning has been described as combining
"the worst of socialism and capitalism, by suppressing growth while
failing even to deliver the social welfare that communist systems
provided".

1980 – mid-1990s

The liberalisation that started in the 1980s and gained further
momentum in mid-1991 proved the critics of the old system right.

Per capita GNP reached historically high growth rates; industrial
output-growth averaged 8.4% in 1994-95; exports were up by 27%;
inflation dropped below 10%; the current account deficit is below 1%
of GDP; foreign-exchange reserves are high at $20 billion; and food
stocks have hit an all-time high of 37m tonnes.

The long neglected private sector today generates two-thirds of
India’s GDP. The World Bank describes the change of the state’s role
from that of principal investor to that of facilitator of
entrepreneurship. Thus, over the course of a few years, the old
national consensus on socialism has given way to a new consensus on
liberalisation.

India – a perspective

It should not be forgotten, that despite all mentioned advances, India
is still a low-income, developing country. It has an economy slightly
smaller than Belgium’s with a GNP per capita of $390. Only about half
of its 960 million people can read. Only 14% of the population has
access to clean sanitation - a lower proportion than anywhere else
except for parts of Sudan and Burkina Faso. According to the World
Bank, 63% of India’s under-five-year olds are malnourished. The infant
mortality rates of two Indian states is above the sub-Saharan average.
About 40% of the world’s desperately poor live in India.

India’s progress in fighting poverty is modest when compared with some
of its Asian neighbours. Between 1970 and 1993, the proportion of
Indonesia’s population living in poverty dropped from 58% to 8% – a
greater decline in a shorter period of time. According to the World
Bank,

"it is through rapid growth that India will be able to reduce poverty
and generate the resources to invest in the health and education of
its people who will in turn sustain this growth, [as] overall growth
accounted for the lion's share of poverty reduction: 80% of the
decline in the number of households below the poverty line between
1951 and 1970, and almost 100% since 1970".

But India, like many developing countries that adopted a philosophy of
government intervention with import substitution policies, is finding
that economic reform can often be a slow, incremental process.
Complications continue. Domestic producers will resist tariff
reductions that subject them to increased competition. Government
bureaucrats will try to maintain the power and influence they acquired
during periods of substantial government involvement in economic
decision making. The reforms so far are a positive step but must be
extended and accelerated if India is to catch up with the East Asian
tigers.

It is not possible to condemn the inward-looking policies as totally
wrong. Some advances were made and no one can say what would have
happened if India had followed another strategy. In our opinion, the
idea that industrialisation was important for India in the 1950s was
right, as the share of commodities in world trade is constantly
decreasing. However, the view that exports are not important and that
India could go its own way was wrong. By protectionism and
interventions, India fostered the establishment of industries. India
didn’t create an efficient private sector but a huge, inefficient
public sector, and protectionism lowered the competitiveness of
India’s economy. Furthermore, the neglect of exports led to the fact
that India’s share of world trade decreased from 2% in 1950 to 0.5% in
1990.

In our opinion, India should have followed an EP-strategy as the Asian
tigers did and shouldn’t have created the system of state planning and
such a large public sector; both of which led to huge inefficiencies.
The success of the recent opening up of the economy illustrates the
potential India has. Therefore, India should proceed in this direction
to encourage further economic growth.

Still, economic growth alone is not enough. Amartya Sen emphasises
that growth must be "high and participatory". But even today, India’s
"have-nots are treated virtually as are-nots" due to the caste-system
and are neglected. Sen toured India in January 1999 to communicate his
message that Indians are woefully underfed, undereducated and sickly,
even by the standards of poor countries. The impact remains to be
seen. India’s biggest current problems will be covered in the
following section.’

India’s current problems regarding industrialisation

After evaluating important indicators for industrialisation and giving
a summary of industrialisation since independence, we will now take a
more detailed look at some specific areas for future industrial
development in India.

Infrastructure

Perhaps the biggest problem for doing business in India is the woeful
state of its infrastructure. Consider this: it takes four days for a
truck to travel the 900 miles between India’s national capital New
Delhi and its commercial capital Bombay. It takes months to get
connected to the power supply in any Indian city, and several years to
get a telephone connection in large cities.

Poor infrastructure is acting as a drag on the Indian economy, and the
Indian government is now attracting private domestic and foreign
investment to build the backbone of a modern economy. A recent report
estimated that investment in infrastructure would rise from 5.5% of
GDP in 1997, to about 7% in 2000/01. This includes massive
improvements in telecommunications, power, energy, and transport.

India has recognised the vital role telecommunications play in the
growth of the economy. The Indian telecom sector was wholly under
government ownership and control until recently and was characterised
by under-investment and outdated equipment. There is vast potential
for extending these services in India, which has one of the world’s
smallest telephone densities of 1.3 per 100 people, compared with the
world average of 10 per 100. Advanced communication services such as
fax, data transmission, and leased circuits are becoming increasingly
common. Foreign collaboration is also being encouraged in cellular
phones and paging systems. In the telecommunications sector, estimates
for regional investment needs range from $40 billion a year, to as
high as $70 billion a year by the end of the century.

The power problems are severe in India with three-hour-a-day power
cuts and damaging voltage fluctuations that require companies to
generate their own power. Investment in energy is a sound way of
increasing manufacturing activity. If all 49 proposed private sector
power projects are implemented, these would add a total of 20,000
megawatts to India’s current capacity of 66,000mW. However it should
be noted that India’s energy demand is growing at 8-10% a year.

As part of India’s liberalisation efforts, the transportation sector
has been opened to private investment. The government is offering
incentives to invest $4.7 billion to construct and operate bypass
roads, highways, bridges, railways, and ports.

Health and Education

HIV/AIDS is a newly emerging threat to India’s public health. About 3
million people in India may be affected. Malnutrition also continues
to impede India’s development. Prejudices against women and girls are
reflected in the demographic ratio of 929 females for every 1,000
males.

To support India’s goal of achieving universal primary education, the
World Bank is supplementing increased state government expenditure.
This has boosted school enrolment, particularly among girls and
disadvantaged children, and is improving the quality of instruction
and learning achievement.

Amartya Sen reckons that India could enrol all its children in primary
school by spending an additional 0.5-1% of GDP. Providing basic health
and education is not expensive where labour is cheap. But health and
education indicators, while showing some progress, still remain among
the world’s lowest.

Public sector

Another big problem is India’s notoriously bloated and inefficient
public sector. The World Bank has turned down applications for power
loans worth $750 million for projects in some states because of
mismanagement in their government. Many electricity boards have become
insolvent as a result of providing electricity at extremely subsidised
rates and ignoring large-scale thefts of electricity. State
governments have been unable or unwilling to take the politically
unpalatable decisions needed to make their electricity boards viable.

The most telling evidence of the cost of delaying reform is the sheer
effort companies have to expend to cope with the country’s
labyrinthine bureaucracy. For example, foreign investors continue to
seek permission from the Foreign Investment Promotion Board, even
though their plans are covered by the automatic approvals system.

Corruption

An immediate threat to India’s governance is not the tottering
coalition governments or the BJP, but corruption. The combination of a
state-run economy and weak political institutions created all too many
opportunities for crooked politicians and bureaucrats.

Worse still for the business community is that the government itself
is the fountain-head of corruption. This is particularly serious in
view of the huge importance of the government sector in India’s
economy.

Corruption has become ubiquitous at all levels and is accepted by
everyone. Many Indian businessmen feel that liberalisation of the
economy will have no impact on reducing the corruption that has become
so well entrenched. The influx of foreign companies is already
unleashing a new wave of even greater corruption. A survey of 183 US
firms conducted by the US embassy in 1995 revealed that US investors
rated corruption in India as the third worst problem they faced after
red tape and a lack of electric power.

The blame for the deluge of corruption in India lies in the lack of
transparency in the rules of governance, extremely cumbersome official
procedures, excessive and unregulated discretionary power in the hands
of politicians and bureaucrats, who are prone to abuse it, and a lax
judiciary.

Tax Problems

Tax reforms have been seeking to transform India’s tax system from one
with high differential tax rates falling on a narrow base, into one
with tax rates at moderate levels falling on a broad base. The 1995
fiscal budget reduced taxes on corporate income, and a major reform of
excise taxes has been implemented to make it resemble a value-added
tax more closely.

But the government’s income is also constricted by an inefficient
taxation system. Rural areas are not taxed because they contain such a
large pool of voters and no government has had the political will to
change this. Income tax is skilfully dodged. This leaves the
government with excise and customs duties, which represent two thirds
of all taxes.

Labour market

India needs greater labour market flexibility to make its companies
more competitive and its economy more productive. Politically powerful
labour unions have stifled most efforts at serious reform or
privatisation of India’s largest public sector enterprises, including
most banks, all insurance companies, and many major industries, even
though privatisation would probably cost the jobs of no more than 1.1%
of the urban labour market. India’s labour laws hinder efficiency and
growth.

Financial sector

India’s financial sector still cannot effectively mobilise and mediate
capital to respond to economic changes. The resulting high cost of
capital makes Indian industry and exports less competitive. In spite
of recent improvements, India’s equity markets are still too thin and
volatile to inspire great confidence on the part of domestic or
foreign investors. Bond markets are practically non-existent.
Liberalisation of the insurance industry, which would greatly improve
the investing of India’s substantial savings, now 26% of GDP, has been
stymied. India’s banking system remains flawed, with the dominant
state-owned banks still carrying bad loans amounting to 15 to 25% of
their total.

Outlook

The arrival of a BJP-led government in March looked like a setback for
freer trade. It took two steps away from trade liberalisation.
Firstly, India’s anti-dumping procedures were tightened. Secondly, the
Finance Minister imposed an extra tariff of 4% in June. However, it is
too early to conclude that India is returning to protectionism. The
government insists that tariffs were increased to raise revenue, not
to protect Indian business.

BJP strategy regarding foreign investment

BJP party leaders seem keen to limit foreign investment in all areas
other than infrastructure. They are worried that Indian culture will
be eroded by western consumerism such as food habits brought in by
Kentucky Fried Chicken or McDonald’s. Such sentiments cause alarm.

"Foreign investors are not exactly queuing up to enter India, and this
attitude will scare away those who are weighing up the possibilities
of doing business here," cautions a top executive with a foreign
investment bank in Bombay. In its defence, the BJP says that while it
seeks to protect domestic industry and reserve "India for Indians", it
does not intend to take back the reforms. But approved and actual
foreign direct investment already shrank between January and July
1998. Approvals totalled only $4.7 billion, compared with $7.1 billion
in the same period in 1997 and actual inflows slid to $1.6 billion
from $1.9 billion.

Furthermore the BJP’s decision to conduct five nuclear tests in May
1998 underscored India’s reputation for unpredictability and
highlighted the vulnerability of infrastructure investment to
international and domestic political pressures. The sanctions imposed
by the US on India include bans on private banking assistance to the
Indian government and pressure on multinational lenders such as the
International Monetary Fund to withhold loans. The sanctions hit the
Indian economy and Indian companies generally, and were potentially
very onerous for foreign developers.

On the other hand, the government recently encouraged foreign direct
investment. In July 1998 it put forward a plan allowing foreign
companies to take stakes of up to 26% in Indian insurance companies,
having resisted opening the insurance market to foreigners in the
past. "Automatic" approval of foreign investment of up to 100% was
extended to more sectors of industry.

Recent development of the macroeconomic situation

The macroeconomic situation is also causing concern. After a year of
patting itself on the back for escaping the Asian crisis, the Indian
government is now sitting up at some spine-chilling signs that the
economy hasn’t been unscathed after all.

India’s gross fiscal deficit will rise to 6.6% of GDP from a planned
5.7% in 1998, forcing the government to keep borrowing and pushing up
interest rates. But the government’s infighting and inability to push
through much-touted economic reform bills raises doubts as to whether
it can tackle these problems.

The ballooning trade deficit comes on top of sluggish industrial
production, high inflation (a 9% annual rate in the first half of
November), and an expanding budget deficit. Currency devaluations in
the rest of Asia have made Indian exports even less competitive than
they were previously.

The current deficit of $2 billion has been pushed to the highest level
since 1991. The rising deficit is financed by foreign-exchange
reserves, and is expected to put upward pressure on the rupee .

On the other hand, GDP growth is forecast to move upwards to 6.4% in
1999. This follows a slowdown to 5.1% in 1998 due to a 1.5% decline in
agricultural production, slowing exports, and industrial growth.
Factor-cost GDP is forecast to expand by an annual average of 6.7%
until 2002-2003.

Overall, it remains to be seen how entrenched the reforms are in India
in the face of more difficult and troubled economic conditions.

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SINGUR ROW:
Continued from page 1 locating land. Mr Chatterjee complained to the
Governor that the industries minister had adopted an inflexible
attitude since the accord between the state government and the Tri

Kashmir to have timely elections
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take place “on time”, the Election Commission spokesman said today.
The spokesman said the poll panel would not want to wait for

‘25% of terrorism in India funded by drug money’
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money to fund terrorism in India, particularly in Jammu and Kashmir,
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Kashmir burns again: 2 killed, 130 injured
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Citu’s 36th state council, held in Durgapur today. “Under any
circumsta

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Navnirman Sena president Mr Raj Thackeray withdrew his protests
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Central government’s ban on the radical Islamic outfit Students
Islamic Movement of India (Simi) for four more weeks. The ban will
rem

India approves satellite navigation project
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its approval to a satellite-based navigation system, which would meet
the growing air traffic and strengthen aviation navigation s

Safeguards for women in NRI liaisons
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deserted by Indian husbands overseas, the government today announced a
series of measures ranging from compulsory registration of marria

Water-borne diseases strike flooded districts
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starvation so far but now flood victims might die of severe water-
borne diseases which have begun striking the flooded districts of Bih

briefs
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till 1 October in connection with the Ludhiana city centre sca

CWC brainstorming session today
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success in securing the NSG’s historic waiver, ending India’s 34-year
nuclear isolation, the Congress party is all set to firm up

Food and shelter, but clothing still lacking
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and dry places along the embankments now face another challenge ~
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BJP national meet to prepare for polls
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its national executive meet here from tomorrow is determined to do
well in the elections to the Lok Sabha and a few of the state

UPA govt a failure on all fronts, says BJP chief
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at the UPA government for what it termed as its failure on all fronts
including the tackling of terrorism, inflation, foreign polic

BSP could field 30 candidates in Bihar
Statesman News Service NEW DELHI, Sept. 11: After stealing the media
limelight and provoking mixed reactions in political circles over her
decision to donate a whopping Rs 11 crore from the UP gover

IEA asks India to do away with fuel subsidies
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contributed to high international oil prices. IEA executive d

Ansal brothers sent to jail
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and Gopal Ansal were today sent to jail by a Delhi court where they
surrendered in compliance with a Supreme Court order cancelling

N-cooperation to top PM-Sarkozy talks agenda
Statesman News Service NEW DELHI, Sept. 12: With the Nuclear Suppliers
Group (NSG) waiver clearing the way for nuclear commerce for India,
Paris is ready to collaborate with New Delhi in this sector.

Nandigram clashes hurt 6
TAMLUK, Sept. 11: Fresh violence flared up in different parts of
Nandigram, Khejuri and BhagaSwanpur blocks of Midnapore East district
today when CPI-M and Trinamul Congress workers clashed in these a

BSP could field 30 candidates in Bihar
Statesman News Service NEW DELHI, Sept. 11: After stealing the media
limelight and provoking mixed reactions in political circles over her
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Briefs
Haywood returns MUMBAI, Sept. 11: American national Mr Kenneth Haywood
who fled the country on 17 August under mysterious circumstances after
the Mumbai Anti-terrorist Squad traced the Ahmedabad blast

Searching for ‘smart snacks’
N Ravikumar CHENNAI, Sept 11: The sheer variety of snacks at the food
market is mind boggling. But, since most of them only satisfy the
taste buds and imagination of children, parents and dieticians a

One drowned, 17 missing in Bihar boat mishap
Sheikhpura, Sept. 11: One person was drowned and 17 others, mostly
women and children, on board a boat were missing after it capsized in
Harohar river near Bavgha village of Bihar's Sheikhpura distric

Kandhamal improving, SC told
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Court that the situation in Kandhamal district, where violence broke
out following the murder of VHP leader Swami Laxmananad Sarasw

WBIDC owes Rs 59 lakh to state
Rajib Chatterjee KOLKATA, Sept. 11: The agency which acquired land
for the Tata Motors small car factory at Singur has upset the state
land and land reforms department by failing to pay the required


http://www.thestatesman.net/page.news.php?usrsess=1&clid=2

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