(en) India and the global economy

Wed, 5th Mar 1997 11.23 GMT

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In January the IMF called on India to get rid of her remaining import restrictions and scale back her import tarifs which are among the highest in Asia. The WTO, speaking with the voice of India's main trading competitors, argued that these import controls were no longer needed as India's successful integration into the New Economic Order continues. --------------------------------------------------------- >>>> a-infos in one *byte* <<<<
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President Clinton had already fired a couple of broadsides on all of this at the Asia Pacific Economic Co-operation (APEC) forum in Manila late last year where he sought a commitment from the 17 other APEC members of the WTO to a firm timetable for eliminating tarifs on Information Technology. This was to be greatly in the USA's interests given that they were expected to achieve $100 billion in exports last year in this sector. One of the beneficiaries of India's import controls are the small business middle classes who depend on exclusive rights to manufacture more than 800 listed consumer items. Clearly their time has come and they must now move over and make room for big business who will be pampered in the usual ways. The New Economic Order demands that the economy be owned by the private sector but this is not the private sector of the small time farmer or artisan rather it is the multinationals who are destined to take control - sharing some of the pickings with a select local elite. Public sector workers are of course also in the firing line. India has always had a privileged bureaucracy but as part of the plan to line the pockets of the foreign investors it is also to this sector that we are now looking to see savings made. 30% of public sector employees are to go over the next 10 years with 350,000 posts to go immediately. Longer hours and shorter holidays will also be part of this new regime. To head off possible confrontation wage increases will be given under a formula which will give the biggest rises to senior government officials. Even this, however, will only amount to a paltry salary compared to what a chief executive can get in the private sector.


Narayana Murthy, the director of Infosys, one of the biggest Indian IT companies, is one of these private sector beneficiaries and sees great benefits from integrating into the global system: "It would seem that the world belongs to those that get up early. In Bangalore we are on our feet and at work before you have even woken up", he says. In scarcely three years India, a once poor agricultural and protectionist state has become a major competitor in the IT field. It has also seen the biggest export growth for the whole Indian economy: nearly 50% growth every year for the last decade ie double the average growth for the world economy. Revenue for exports has increased eightyfold and is expected to quadruple again in the next four years.

Fact File INDIA Pop. 900.5m Pop per Km sq. 274 Human Development index. 31 Av inflation. 1989-94 9.1% Main Export Destination. United States (16.4%) Foreign Debt as % of GDP. 37.3 Cost of Living Sept 1994 45 (New York=100)

Part of the reason why India has been so successful in this field is because of the cheapness of the labour force (see table below). But also, of course, simply the supply of technically minded folk is helpful. India has always had the edge on China to the North because of its well established domestic middle class which has come into its own since the 1980s. Company shares, bathroom tiles and designer clothes are popular among the upper middle classes - generally defined by economists as around the top 12-40% of the population. This is a sizeable number in India: 100-350m which is more than half the total population of the USA and nearly as big as the population of Japan. It is worth noting here that India is as advanced technologically, if not more so, as many of its Asian neighbours. India has developed a surprising range of self-sufficiency in a number of arenas: it has parked in geostationary orbit an Indian- designed and manufactured satellite for weather forecasting, telecommunications, and television broadcasting, using its own launching rocket. Indian technology was also to provide some 50 per cent of the 11 million telephone lines which were to have been installed by the beginning of this year. In the arms sector, it has developed and test flown an advanced light attack helicopter, and it has ambitious programmes for battle tanks, missiles, nuclear submarines, and combat aircraft. While India has and will, of course continue to depend on foreign technological assistance and more importantly investment, all these projects demonstrate the depth of scientific and technical human resources available, all of which will no doubt contribute more and more as India's economy opens up. From the point of view of corporate business in the USA this means that the infrastructure (paid for by the Indian tax payer) and an educated elite (cheaper than the home variety) makes India a good home for investment.


5,000,000 live in Bangalore which includes an elite of 10% of India's technical engineers. Bangalore is home to 3 universities, 14 engineering colleges and 47 technical schools. Every year 55,000 new engineers come onto the labour market and half of them find jobs in the offices and factories of the big TNCs like IBM, Digital, Hewlett Packard, Texas Instruments and Novell who have set up shop here. Why do they come to Bangalore? The answer is not hard to find and contains no surprises. The local authorities provide them with premises which have guaranteed water and electricity, computer and satellite links. In addition they enjoy customs benefits, a five year tax holiday and simplified export procedures. Can they repatriate profits? Of course.


India 3 084 China 4 627 Malaysia 10 179 Indonesia 12 111 Japan 27 541 South Korea 28 199 Hong Kong 30 755

For those who share the town with them life is different. Since the TNCs have arrived the public spending tap which has been so generously turned on for the big boys has been firmly turned off for the less important folk. Rubbish isn't collected, roads and pavements are in disrepair, hundreds of shanty towns burn down in the summer and are flooded when the rains come, the price of land has risen fivefold in as many years, traffic has reached saturation levels with attendant record pollution levels. Whilst electricity and water are guaranteed elsewhere the tax payer has to put up with cuts so frequently that in their frustration they have taken to sabotaging the generators. The local authorities have been forced to meekly publish notices calling for, 'calm, patience and co-operation' but we imagine that the new sleeker state will do the necessary if more than polite notices are required as India integrates herself further into the Old American Disorder.


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