Making globalisation work

THE FISCAL and monetary policies of our government acquire a great importance in the context of globalisation, liberalisation and free enterprise.

Free enterprise does not mean bereft of government controls and restrictions alone. The advantages the translationals - the moneybags of the world - have over others need to be corrected. Only then, there will be truly competitive economy and the inflation will be kept under check by the market forces themselves.

A certain amount of price rise is no doubt inevitable due to increasing demand with rising income and improved standards of living following the growth of economy. But the rise will be steady and uniform over a period with no spiralling effect of inflation. Inflation rate has a relation to the rate at which the price rise is increasing. We should aim for a nil or very low inflation rate.

Unchecked inflation is the result of speculation in currency, commodities and shares which distort the healthy mutual actions between the different economic forces generated in a level playing ground. In such conditions of `gambling' where money power has an unfair advantage, the government must intervene in the markets in the same manner as moneybags do as an elder brother to them, but with reverse objectives to bring about stability and fair play in the markets. Where the government finds due to lack of altruistic motivation or of sufficient monetary strength the advantages the transnationals have cannot be overcome by the government or our corporates, fiscal and monetary regulations to guide the economic forces to the country's best advantage become inevitable.

A foolish step

In 1991, when the economic reform measures were adopted and globalisation process started with the purpose of facilitating flow of substantial foreign investments needed for speedy high- tech industrialisation of our country, the foreign transnationals got a terrific advantage by forcing India to devalue its currency sharply. Unfortunately the then government did not realise the sinister significance of this. This was a foolish step taken by the government.

The purchasing power of rupee in India was high compared to the U.S. dollar. Foreign tourists found India then to be one of the cheapest places in the world, even in catering to their luxuries and to their higher style of living. The strong dose of devaluation resulted in spiralling rise in prices and is causing immense harm to the economic health of the country by aggravating poverty conditions. It has also become a drag on the industrial growth.

The insistence of the capitalist countries led by the U.S. for devaluation as a condition for flow of large investments into India can only be on selfish grounds. They know the rupee will appreciate in value when dollars pour in our country. By devaluation, the multinationals get more value for less investment in terms of dollars. They are able to get goods they need from the developing countries at cheaper prices in terms of dollars.

An argument advanced by Indian economic theoreticians with single track mind for devaluation is that if the currency rate is not at a realistic level, the hawala trade will increase and black market will flourish. Hawala trade is mostly supported by flow of slush money and money transactions which need to be hidden from the laws of the country. We see, even after devaluation, smuggling of Indian and foreign currencies and gold continue and hawala market thriving.

Exchange rate mechanism

The exhange rate mechanism is not understood by many. It is not a question of `adjustment' of the rate to what is perceived to be the `real' rate with reference to dominating currencies of the world. It is a matter of what India needs for eradication of poverty and competition in global economy. It should be in congruity with the purchasing power of rupee in India in relation to the needs and income level of the majority of the people and the income level we aim for. The exchange rate may be stipulated by the Reserve Bank of India from time to time at fairly well- spaced intervals. Exchange transactions will be, as at present, only through authorised agents. Floating exchange rates will not suit our purpose. The next measure for consideration now is to maintain the purchasing power of rupee in India and the exchange rate at the needed level? Can we exploit the `Gold sense' of the public in India and the gold holdings with the people and the government to stabilise the monetary system and maintaining the exchange rate at the stipulated level? Much thinking has to be done on this by the Reserve Bank. The experiences in other countries have to be studied.

Another attempt by the multinational moneybags of the world led and supported by the U.S. to make the economic milieu conducive to their interest is to pressure India through the world bodies like the United Nations, IMF and World Bank for elimination of subsidies and protective duties as a fiscal instrument and cutting down the import duty levels, using the argument of realistic globalisation. Subsidies and grants become inevitable in a developing country whose primary and priority objective is to reduce the high disparities in income levels in the country and upliftment of low income groups. There need be no guilty feeling either in the giver or receiver of subsidies, that they may encourage idleness or inefficiency. Wherever possible such payments may be result-linked as deductions from revenue instead of being accounted as expenditure.

Where the monetary benefits arising from an economic activity are much more to the economic unit (including an individual) than the benefit accruing to the nation as a whole, that is, where the profit margin is high, the government steps in and mops up the excess profits by taxation. It stands to reason, where the benefit is more to the nation than to the individual unit, it should be the policy of the government to make payments as incentives to a unit to take recourse to economic activities considered conducive to national interest. Such payments may be linked to identifiable quantified parameters of the results aimed at, and given as `deductions from revenue' instead of as items of expenditure. The present system of subsidies, grants, conditional exemptions from taxes, duty drawback on exports and similar other rebates can be brought to the extent possible within this concept of `negative taxes.' Being need-based and within the revenue discipline they have more of revenue bias than subsidies or grants. Being stipulated by an Act of Parliament in the same manner as duties or taxes, there will be definiteness about the payment and amount of payment. There will be no scope for criticism of any arbitrariness or of extraneous consideration in quantifying the amounts of the payments. As payments are made after the achievement of the results aimed at, there will be less scope for abuse.

Slavish mentality

Globalisation has to be to our advantage and not to our continued subjugation by the moneybags of the world. The slavish mentality that ``beggars cannot be choosers'' should go. It should be realised that developed nations with their excessive money supply badly need places to invest the same. We should be clever enough to exploit their needs and play one mega unit against another. For this, our industry has to aim for acquiring a well-knit pattern of corporates, medium and small, tiny, informal (unorganised) cooperatives and individual entrepreneurs, so that one comes to subserve/support the interests of the others, wherever necessary with the support of non-government welfare organisations.

All sectors acting in unison can fight for prevention of damage to our economy that is being caused by the world moneybags, may be unintentionally. We have seen how they have ruined the economies of Far Eastern countries with their monetary invasion. The most vulnerable spot at which they hit a developing country, for its continued dependence on developed countries, is the foreign exchange rate. When an integrated pattern of relationship between the different sectors in industry and trade in our country comes about, our economy by itself will become global in the true sense, our country taking its leadership role in the United Nations suited to the country's size, population, natural resources, culture and large availability of superior brain- power. We are not conscious of our own strength. Together we succeed. Divided we fall.

The government in framing the economic policy has to keep in mind the Directive Principles of State Policy in our Constitution - particularly 39 (b) & (c) - reproduced below:

``The State shall, in particular, direct the policy towards securing (b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; and (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.''

Conceptual framework

A common conceptual framework of mind in the nation has to evolve within which the people, the trade and the State can pursue their own inclinations and actions.

Very broadly, the qualities of humans living as part of organised society reaching out towards stability and growth with societal and legitimate individual interest, well balanced, are of two kinds; one, thinking-oriented and the other, action-oriented. In some, the former prevails predominantly and in others the latter. Similarly, in the different hierarchical and functional divisions of an organisational setup within or outside the government in a nation, there are two streams of forces running through and across the structure. One is the conceptual force and the other operational. The former, authority-oriented and the latter power- oriented. A harmonious and elegant empathy between the two is essential for purposeful, balanced functioning of the setup towards its objectives and purposes.

Thought and action in an organisation, perforce, have to be separate both in time and space, but simultaneous collectively. The close links between the two have to be maintained for progress on the right path. A streamlined feedback system is essential for the management of an organisation for reassurance when on the correct path and correction when there is a straying away from its objectives. The path towards the objective may not be straight, but there should be a conscience that the goal will be reached and maintained.

The places for interaction of thinking, knowledge and views are the training institutes and academies of learning, research and economic studies, where the discussions between the leaders of action and thought from the government, industry and trade, and the public can be with an academic approach, but with more than an academic interest. By this means, a common conceptual framework of mind in the nation for its progress and development can evolve.

M. RAMACHANDRAN

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