At this point of time a conference is going on in Osmania University on the
topic North-South Imbalances: A Global perspectives and Challenges
. In the
inaugural session the distinguished speakers have thrown light on their
perspectives on these imbalances. However the views of Academicians are not
understandable to all. There are two types of conceptualizations.
One that is
understandable to even ordinary people and another that is only understandable
to intellectuals. As the conceptions of academicians are difficult to be
understood by ordinary people this Article makes an attempt to present a
perspective on several issues ranging from Globalization, Protectionism, Brexit
and Indian Economy which can be understood even by ordinary people. The attempt
is not only to present a simplistic view devoid of rhetoric but also to reduce
the complexity lent by intellectual jargon generally surrounding issues relating
What is Globalization?
Globalization may be defined as the process of integration of economies across
the world through cross border flow of factors, products and information,
factors.. in the sense, the land, labor, capital and entrepreneurship. The IMF
defines globalization as the growing economic interdependence of countries
worldwide through increasing volume and varieties of cross border transactions
in goods and services and of international capital flows, and also through the
more rapid and widespread diffusion of technology.
The expression liberalization is a correlated word in Indian context which is
part of LPG (Liberalization, Privatization and Globalization) initiated in
1991. It refers to the economic liberalization of the country’s economic
policies initiated in 1991 with the goal of making the economy more market
friendly and service oriented and expanding the role of private and foreign
Why LPG for India?
There was a crisis in Indian economy at around 1990 which had its roots in 1985
when India began having balance of payments problems as imports swelled, leaving
the country in a twin deficit: the Indian trade balance was in deficit at a time
when the government was running on a large fiscal deficit. By the end of 1990
in the run-up to the Gulf war, the situation became so serious that the Indian
Foreign Exchange Reserves could barely finance three weeks worth of imports
while the government came close to defaulting on its financial obligations. By
July that year, the low reserves had led to a sharp depreciation of the rupee,
which in turn exacerbated the twin deficit problem.
The Government could not
pass the budget in February 1991 at a crucial time when Moody had downgraded
India and it further went down after the budget was not passed and global credit
rating agencies further downgraded India from investment grade making it
impossible to even get short term loans and the government was not in a position
to give any commitment to reform the economy.
The IMF and World Bank also stopped their assistance, leaving the government
with no option except mortgaging the country’s Gold to avoid defaulting on
payments. This led government to airlift national gold reserves as a pledge to
a large conditional bail out from the IMF and World Bank in exchange for a loan
to cover balance of payment debts.
The crisis led to the liberalization of the Indian economy, as one of the
conditions stipulated in the World Bank loan (Structural reform), requiring
India to open itself up to participation from foreign entities in its
industries, including state owned enterprises.
The politics of whatever mentioned above in India thereafter is that the
Congress party took this bargain on Economic Sovereignty of Nation as
Manmohanamics. And successive governments carried forward these Economic
reforms and people were under the impression that there is a well-crafted shift
from the Socialist Model of economy prescribed by Nehru-Indira to a Capitalist
model in order to put country’s economy back on track. The NDA government had
different reasons to support this Capitalist model of economy which will be
Revolution of ICT and Electronic Media in India in 1990s
The above mentioned reforms of LPG were coincided with the revolution in
Information and Communication Technology with Internet, Mobile and Electronic
Media spreading into every nook and corner of the country through Cybercafés,
Computers, Televisions, Mobile phones in 1990s.
It cannot be said that only
these Economic reforms led to putting of Indian Economy back on track, it is a
combination of factors like these that coincided with this reversal of Indian
Economy from being almost a dead horse to a raging bull. What is to be
understood primarily here is that it is not any magic or statesmanship of any
politician, or economist because the shift towards this Capitalist model was
made because of compulsion of Structural adjustment proposed by World Bank and IMF for giving World Bank Loan when India ran out of Forex Reserves to meet its
BOP obligations during 1991.
So, if at all any credit goes to these Economic reforms it goes to World Bank
and IMF, not to Manmohan Singh or Congress party. So…for all the wealth we
Indians enjoy today, thanks to World Bank and IMF.
What is World Trade Organization?
Following the Uruguay Round Agreement, GATT was converted from a provisional
agreement into a formal international organization called WTO (World Trade
Organization) with effect from Ist January 1995. WTO now serves as a single
institutional framework encompassing GATT and all the results of the Uruguay
Round. The Uruguay round sought to broaden the scope of MTNs (Multilateral
Trade Negotiations) far wider by including new areas such as:
- Trade in Services
- Trade Related aspects of intellectual property (TRIPs)
- Trade related investment measures (TRIMs)
Under the old system, there were two GATTs:
- GATT the Agreement – i.e. the agreement between contracting parties
(governments) setting out the rules for conducting international trade;
- GATT the Organization – an international organization created to
facilitate discussions and administration related to the Agreement (adhoc,
though, continued to exist until the establishment of the WTO).
GATT the organization, ceased to exist with the establishment of WTO and GATT
the Agreement which always dealt with (and still does) trade in goods continues
to exist, in amended form, as part of the WTO alongside two new agreements,
viz., General Agreement on Trade in Services (GATS) and General Agreement on
Trade Related Aspects of Intellectual Property Rights (TRIPs). The old text is
now called ‘GATT 1947’ and the updated version is called ‘GATT 1994’.
GATT (the institution) was small and provisional, and not even recognized in law
as international organization. GATT (the agreement) was amended and
incorporated into the new WTO Agreements. GATT dealt only with trade in goods.
The WTO Agreements now cover services and intellectual property as well. The WTO
is a more powerful body with enlarged functions than the GATT and is envisaged
to play a major role in the world economic affairs. To become a member of the
WTO, a country must completely accept the results of the Uruguay Round.
Differences between GATT and WTO are:
- GATT was adhoc and provisional whereas WTO and its agreements are
- GATT had contracting parties whereas WTO has members
- GATT system allowed existing domestic legislation to continue even if it
violated a GATT agreement, on the other hand WTO does not permit this.
WTO endeavors to reduce trade barriers between countries and improve market
Why Advanced countries like USA, Britain and EU want Free Trade between
countries on Globe?
In all earnestness it must be understood that there are advanced countries
behind this coming into being of WTO. Before world war, the British set up
colonies, occupied countries like India for the purpose of exploitation of
natural resources, cheap labor to improve their country’s GDPs and in turn used
same countries as markets to sell their finished goods. In other words, they
needed countries like India for cheap raw material and for purchasing finished
goods manufactured in those countries.
Now political sovereignty is not required for them because they can force
developing countries to open their economies for access to markets, investments
– direct and indirect. In other words, they do not require political
sovereignty for exploiting the natural resources of developing countries and to
have access to markets of developing countries because of World Trade
However there is no need to view this with a magnifying glass to paint it as
some kind of imperialist mischief or villainy because over the past four
decades, trade among developing countries has increased substantially and
steadily and their trade relations have changed markedly from the traditional
north (industrial economies)-south (developing countries) pattern and in 2001,
40 percent of their exports went to other developing countries, compared to less
than 25 percent in 1960.
There has indeed been a robust trend in
intra-developing country trade since the 1990s. Between 1990 and 2001,
South-South trade grew twice as fast as world trade (10 percent versus 5
percent) with the share of intra-developing country trade in world merchandise
exports rising from 6.5 percent to 10.6 percent.
Keeping this aside, let us now try to understand the model of economic growth
and development in the Advanced countries which are primarily the Capitalist and
As economics students we read about the choice between Labor intensive and
Capital intensive models of growth. Here in these advanced countries we know
that there is no Labor intensive model because they have mechanized production
processes and perfected techniques of production through innovative
Their populations are under control because they are in the third
stage of demographic transition. Hence the needs of population can be met by
their mechanized production processes very easily and they produce beyond the
needs of their population which needs to be sold in some external markets, which
we call as Exports.
Let us imagine for a moment no other country imports their goods, they will have
to produce only to the extent their own population needs. Does it make them
richer? It does not, because their own country people cannot keep on making
repeat purchases from manufacturers in order that manufacturers earn profits.
Their growth gets stagnated and they will not require further growth in GDPs if
they don’t find markets beyond their domestic markets for their exports. As a
result their economies also get stagnated. So the model of economic growth of
these advanced countries relies heavily on external markets for their exports
and cheap raw material for imports.
That is why they use WTO as a tool to force developing countries to go for LPG
which will force developing countries to open up their economies. No to
protectionism, yes to free trade is the Mantra of their development models.
Let us imagine a scenario when every developing country becomes a developed
country on globe and no one requires imports. What happens then? Then no
country can afford a GDP growth rate. Countries can afford GDP growth rate only
as long as there are developing countries serving them markets to import extra
GDP produced. As South bloc developing countries are serving these North bloc
Advanced countries as markets they are getting richer otherwise their economies
would have long back stagnated.
While proposing Capitalist and Capital intensive models to sell their Capital
goods and Technology to developing countries these North bloc countries forget
that if this mechanization in developing countries leads to loss of job
opportunities that will lead to loss of markets for their exports. But it does
not matter if a significant portion of population is driven to poverty and small
portion of population keeps graduating to middle classes and higher middle
classes to serve as their markets. That will still serve the purpose.
What this means politically for developing countries?
It means that there can be Exclusive growth in the country. May be 30 percent
of population engages in the production of Goods and Services required for
Economy and remaining 70 percent just lives the life at subsistence level. This
70 percent population cannot serve as markets for domestic manufacturers because
they lack purchasing power. But remaining 30 percent population by virtue of
having good purchasing power can serve as markets for the Exports of North bloc
Advanced countries of the world.
What is produced as extra GDP by this 30 percent population relying on Capital
Intensive Industry can find markets outside the country. No need to develop our
own people to achieve better economic status to enjoy purchasing power so that
they become Markets for us.
Is our Nationalism Pseudo-nationalism?
At a first glance this may appear as an irrelevant question for the discussion
of economics. But we have to understand the political perspective of this
economic model. In this globalized world, Nationalism means nothing. The rich
30 percent population mentioned above will produce what it wants from the
natural resources of a country and for markets it depends on foreign countries
Which means formation of a Rich Elite group of people across globe
surpassing National boundaries as a result of free trade regulations pushed into
by WTO, for whom the poverty and poor people in their own countries mean
nothing. They produce and find international markets for extra GDP and that
leads to Exclusive growth.
Those who fight for independence in states like Kashmir and those fighting for
or against CAA in country today must understand that in business our religious
and national affiliations matter nothing for us. You are selling groceries in a
shop as a Hindu and you will find Muslim buyers who have purchasing power and
Hindu buyers who don’t have purchasing power, you will care for Muslim buyers.
Business matters for us nothing else.
When it comes to exports, the attitude
is, we don’t care for purchasing power of Indian buyers, let them live in
poverty, I am happy as long as I get markets for my exports. If my fellow Hindus
cannot purchase my goods I will sell them to Muslims in Gulf countries. The
same is case vice-versa for Muslims. They will prefer Hindu buyers having
purchasing power over Muslim buyers who don’t have purchasing power. Only money
matters…neither religion, nor nationality matters in Business.
The very fact that majority of developing countries experiencing Exclusive
Growth shows that there is only Pseudo-nationalism across the globe today,
because we care little for the poor who are out of jobs because of Capital
Intensive models of economic growth the developing countries adopting.
What is a market?
A market is a group of people having purchasing power. Who are poor people?
Those who cannot be considered as Market by any Exporting country or for that
matter, any manufacturer irrespective of him being a domestic or foreign
What the Advanced countries get by increasing North South imbalances? They will
lose markets if poverty increases in developing countries.
That is why attacking poverty is not only the job of individual countries but
also that of wealthier North bloc advanced countries of Globe. They are not
doing any charity by attacking global poverty in South bloc countries. They are
creating markets for their exports by doing so.
They can no more think that our exports need markets but developing countries
should reel under poverty because if these developing countries become rich they
will stand in competition to us in defense and security of nation which will
have a bearing on the geopolitical equations of armed power. There is
definitely risk involved in it but they must go with a positive attitude that
when these developing countries enter 3rd stage of demographic transition their
population’s education levels will increase, as a result that will foster
positive international relations between States. It should not be their case
that our MNCs want your markets, our businessmen wants investments but your
governments should be poor and you should remain a developing country forever.
What is Brexit?
It is Britain’s exit from European Union. Britian held a referendum in 2016 in
its country referring question to people - whether to remain part of EU or not.
People preferred an exit from EU.
The first argument for it is that it threatens Britain’s sovereignty.
past decades, a series of EU treaties have shifted a growing amount of power
from individual member states (of EU) to the central EU bureaucracy in
Brussels. On subjects where the EU has been granted authority – like
competition policy, agriculture, and copy right and patent law – EU rules
override national laws. Which means the Britian has to compromise on its
Sovereignty in so far as these matters are concerned.
Now having briefly understood the Brexit let us now shift our focus to WTO.
In the third difference set out in the above question What is World Trade
Organization, viz., - 3. GATT system allowed existing domestic legislation to
continue even if it violated a GATT agreement, on the other hand WTO does not
we have similar compromise of Sovereignty by the member states
and India is a member of WTO.
Let me now make a reference to 42nd Amendment of Constitution, 1976 in which two
important words, Secular
is introduced into the
Preamble of the Constitution. India followed Socialist model, Nationalized
banks, brought land reforms legislations etc. In 1991 this obligation towards
Constitution of our country’s economic model being socialist is compromised
because of Structural adjustment proposed by World Bank and IMF while lending
loan to help India survive its BOP crisis.
Somehow it is not taken as compromise of sovereignty by Indian political
parties, more particularly Congress party projected this compromise on
Sovereignty by moving away from Constitutional obligation as Manmohanamics
Though it appears to be oversimplified, it is a serious issue relating to
Sovereignty of our Nation.
Why BJP carried forward this Manmohanamics?
The reason why BJP carried forward Economic reforms of Dr.Manmohan Singh is
that it is politically pitched against Leftists. BJP which is basically a
political wing of RSS has nothing to take from RSS in so far as Economic policy
to adopt for the Nation. They have a political ideology of Hindutva but they do
not know what Economic policy suits well for this Hindutva.
Two reasons for BJP pursuing Economic reforms are that:
- Congress followed Nehruvian Socialist model which he initiated having
been inspired by the Economic model of Soviet Union. Leftists in India
support it. BJP is politically against Leftists always. And so Capitalist
Economy of Advanced countries is suitable for India.
- RSS is basically an organization inspiring Hindus to protect Hinduism
from onslaught of people of other religions and nations if required.
Without any support RSS itself, on its own it keeps training people to be
prepared to fight enemies within and coming from outside.
The Shakas it organizes to impart the training in fighting, use of sticks as
weapons etc are examples for it. Now having understood that without any
government support itself if it has so much of interest in Defence of
Nation, if it comes to power what will it do? It will focus on Defence of
India. And having seen the Capitalist model of USA and fall of Soviet Union
it has no doubt in mind that in order that India be militarily strong, it
must follow the Capitalist model of USA.
Otherwise, they are people leading simple life, without much grandeur and pomp,
following Spiritual path proposed by Hinduism. But for this mindset to rely on
violence to defend, in all other aspects they are as simple as Mahatma Gandhi.
But while accepting and carrying forward this Capitalist model they have not
thought what happens to Hindu family system. Hindu families are breaking up
because of Capital Intensive Technology and Capital Intensive Industrialization.
Children from joint families are influenced by the glittering world of rich
shown by Advertising media and they are migrating from Rural to Urban areas and
from Urban areas to Advanced countries. Joint family system which is back bone
of Hindu Family has given way to formation of Nuclear families.
The problem of elderly destitute is taken care of by Old age homes and Senior
Citizens Act and Section Cr.PC 125 of the Act.
Capitalist model of Economy has a huge contribution for this.
Hindu festivals have become dispirited by market extravaganza and pomp to show
off wealth by Hindu families getting rich. Markets have taken over Hindu
festivals. Till 1990s people were enjoying sweet relationships during festivals
now people are enjoying Western Model parties in the ethnic garb vulgarly
Hindu way of living has transformed from simplicity to vulgar display of wealth
and elite consumption because of exposure to variety of goods and services
produced by market economy. As a result the country’s defense is surely growing
but the country is losing the very foundation on which our Hindu culture
We are protecting India’s geography at the cost of its ethnicity.
Written By: Chandra Sekhar Anjuru,
Asst. Professor at Aurora Legal Sciences Academy, Bandlaguda,