Whither liberalisation

TO USHER in new technology and additional investment, and promote exports, Direct Foreign Investment (DFI) is advocated by several experts. All DFI'S opponents argue that multinational companies (MNC) will never part with their technology. It is opposed on the ground of the adverse impact it could have on our domestic industries and technical capacities, and the cost of high profits that foreign firms would repatriate.

DFI does bring in new investment and supplements domestic investment. Foreign investment of us $ 10 billion/year could raise the growth rate of India by 1.5 per cent, which is fairly commendable. If the economy were to grow at 7.5 per cent, instead of 8 per cent, it will help all including the poor.

The soft technology of management, project planning and execution, organisation and sales are often the main advantages of having multinationals around. These technologies are easily emulated and diffuse in the rest of the economy spurring allround efficiency. The infusion of new technology, even if it is not shared with Indian industry, will at least provide better products to Indian consumers and hopefully, encourage Indian manufacturers to better the output quality of their production.

DFIs can also vastly promote our exports. A significant portion of the world trade is intra-firm trade that is an MNC exporting from one subsidiary in one country to its sister concerns in other countries.

The fear that MNCS will hinder and even crush Indian technological development may deserve some merit. MNCS come with established brand names and large advertising budgets, as well as access to cheap credit. The advertising budget advantage will certainly be important for items of mass consumption. But here, the Indian consumer is very price conscious and the MNC in question will have to compete hard on the price front, For manufacturers who purchase capital and intermediate goods, product performance will be the decisive factor and not advertising. Thus, MNCs are likely to drive out only relatively inefficient firms producing inferior products at high cost in our country.

Another possible threat from these multinationals is that MNCS can also try to drive out potential Indian competition in areas of high-tech relevance. This proves that the greater threat to Indian technologies is from the import of computer chips and not potato chips!

Therefore, what we need is a strategic technological vision. In today's rapidly changing technological scene, the pace of innovation is so high that no country can be a technological leader in all areas. Similarly, we will be technological leaders only in some selective fields. The technological leadership would not be attained by protection but by mounting adequate, sustained and focussed R&D efforts, and by creating a policy environment in which such efforts flourish. In critical defence - related technologies, obviously, nobody will sell this technology to our country. It needs to be developed indigenously.

Finally, the MNC'S concern for high profits is often misplaced. If an MNC makes 100 per cent profit by selling a product in a free competitive market at a price lower than others, their rate of profit should not be our concern. If profit is excessive, other producers will have incentives to move in and provide competition, and soon the excess profit would disappear.

The areas of concern are where our domestic markets are distorted: like power sector. Since we subsidise electricity and many consumers do not pay its full cost, the marginal social value of electricity may be lower than the cost of producing it. If we promise a high rate of return to foreign private power producers, it can happen that India would pay up more than what it profits. This is not an argument against foreign entry into power generation; the latter situation should depend on reasonable terms and realistic price from users.

In summary, I think rather than projecting MNCs as economic demons, one can gain a lot from their incorporation into the economy of the country. All we need is to ensure protection to Indian entrepreneurs and plan a strategic R&D policy, and of course, negotiate better deals than the Enron deal.

BASICALLY the term sivadcshi covers all aspects of national development - social, political, cultural, economic, international, science and technology and education. Developmental models based on indigenous cultural ethos and national resources in terms of humanpower and natural resources which preserves national interests, Could be defined as the "swadeshi approach". It could be a refined version of Kautilya's Arthashastra or Pandit Deendayal Upadhvaya's Integral Humanism in detail. Here, only one aspect of sivadeshi - economic development based on Indian cultural ethos - is discussed.

Till the end of the '70s, many believed that communism or regulatory mechanism would solve all basic economic problems. India also adopted the socialistic pattern of society and incorporated the notion into the Indian Constitution as if it was the permanent strategy for economic development evolved by national consensus. But around one third of our population still live below the poverty line according to official estimates. In the case of 90 per cent of them, poverty revolves around the same family tree generation after generation. Socialism, which believes in an egalitarian society, has ended tip creating "socioeconomic dualism" instead.

After communism's collapse, it was replaced by market mechanism, without realising the latter's limitations. If regulatorv mechanism believes in class conflict, market mechanism induces exploitation of one country by the other.

Hence, both regulatory mechanism and market mechanism arc alien to our cultural ethos which believes in class- cooperatio n and people's welfare. Unless and until we succeed in national reconstruction, which includes all-round economic progress, cultural renaissance remains hollow.

Currently, the country is plagued by two major economic problems: internally - poverty, which can be tackled through accelerating job opportunities; externally - we are in a debt-trap and a balance-of-payments crisis. To tackle the problem, export earnings should be provided a boost, but not through the limited organised sector alone.

Although industrial growth rate doubled from an annual average rate of four to five per cent in the '70s, to eight to nine per cent in the '80s, the eniplovinent generation rate got halved from 3.1 per cent in the '70s to 1.3 per cent in the 80s. This clearly indica,es limitations and failure of the organised sector. This will worsen with policy liberalisation, and gradually replace labour-intensive techniques by capital -intensive techniques of production. The best dependable bet is the Linorganised sector, in which job generating potentiality is five times that of the organised sector.

The organised sector's products by and large imitate products of the international market. To be competitive in terms of quality and price, Indian industry has to get upgraded technologically, which is impossible in the near future, To begin with, the handicrafts industry should be encouraged and artisans should get a fair share in the price these products command in the market.

Although agriculture's share in the GDP has reduced from 66 per cent to 33 per cent over the last four decades, there has not been a proportionate fall in the percentage share of population depending on agriculture. Agro-related industries should be promoted in villages. For instance, scientific storage facilities in villages not only help farmers to store fruits and vegetables, they also create additional job opportunities. Similarly, effort should be made to provide health care, education, entertainment, and infrastructures in the villages, so that with all basic amenities, there is no migration to cities.

For a stable development of the country, proper care should be taken to focus attention on the needs and amenities of women and the tribal peoples. Balanced growth also demands sustainable use of natural resources.

Today, vested interests try to distort the meaning of globalisation and suggest prescriptions to make developing countries subordinate to the industrialised countries. In fact, this is the trap laid in the form of the us Omnibus Act, Dunkel Proposals and the International Monetary Fund-World bank prescriptions.

It is in the nation's interest to welcome foreign capital and technology to strengthen the weaker sectors like energy conservation, pollution control, coal and washery, to name a few. For financial assistance from international institutions, efforts should be made to approach non-resident Indians to tap their resources, as well as talents.

To sum up, the "swadeshi approach to economic developments" is dependence on age-old native craftsmanship and the rural sector to tackle poverty and external debt, protect national interests in the context of international economic relations and above all, get inspiration from our own cultural ethos to evolve developmental strategy. Essentially, the two faces of swadeshi are swablimian (self-respect) and swavalamban (self-reliance).