Contents Previous Chapter
The Trade Syndrome
(i) Growth in Foreign Trade
(ii) Nature of Exports & Imports
(iii) The Trade Deficit & BoP
(iv) From Dunkel to Doha
(v) The New Slave Trade
It is said that globalisation is inevitable. Whatever the
negative aspects, there is no alternative to it. This is mere imperialist logic
as they must have a free flow of goods and capital throughout the world in order
to intensify their neo-colonial domination and loot around the world. While
themselves resorting to increasingly protectionist measures they seek to prise
open the markets of the world by smashing all restrictive trade and investment
practices. In India these policies of the imperialists are accepted as the
gospel truth by the ruling elite — the manna for development. The WTO has
been the battering ram of the imperialists, more powerful and effective than the
cannons and guns of yore. The Indian ruling classes have willingly implemented
all the policies adopted in the first Dunkel draft passed in 1995. Now, the
second round of attack is being brought into play as a result of the Doha meet.
For all the hoax of being called a ‘development’ round, and India’s
so-called opposition to the West, in fact, the imperialists have been quietly
pushing their own agenda, and the deadly Doha accord is all set to be
implemented within two years, as per the dictates of the imperialists. There has
not even been a whimper of protest against what is taking place behind close
doors. Like in 1995, India will sign on the dotted line. The countdown has
begun. Sovereignty be damned, India must become even more ‘open’ to the ravages
of the TNCs, international speculators and the leeches of finance capital. If
Dunkel was a disaster, Doha will mean death.
Whether it is inevitable or not we shall see later, here we
must understand that trade and investment liberalization is a key necessity for
the loot of countries like India by the imperialists and their comprador agents
within the country, even if it results in the de-industrialisation and mass
impoverisation of India. Though this is quite obvious to all after this decade
of globalisation, it continues at a frantic pace under the banner of ‘second
generation reforms’. Changing the Indian Patent Act, drastic reduction of
import tariffs, removal of QRs (Quantitative Restrictions) on imports,
liberalization of foreign banking, making the rupee convertible on current
account and moving towards capital account convertibility, setting up export
processing zones where Indian laws do not apply, giving huge export subsidies,
continuous devaluation of the rupee, large scale outsourcing for TNCs,
particularly in the IT sector, at labour costs that are a fraction of that
abroad, removing all restrictions on foreign investment flows, scrapping of the
public distribution system, and hundreds of other policies linked with the
globalisation of trade in the economy, have already been enacted. Hundreds
more are in the pipeline, which, after the coming into being of the Doha accord,
will be even more lethal. All these policy changes are essential for the
TNCs to extend their markets in India through import promotion and the take-over
of all commerce, industry and finance within the country.
We have already seen its impact on investment inflows, we
shall now turn to TRADE.
i) Growth in Foreign Trade
There has been a gigantic growth in foreign trade (i.e.
exports & imports) and services in this period of globalisation. From 17% of GDP
in 1991 it has risen to roughly 25% of GDP in 1998. 1
Looked at in absolute terms foreign trade has risen from $37
billion in 1991/92 to $95 billion in 2000/01. Looked at in rupee terms the
increase is even more drastic — from Rs 66,000 crores to Rs 4.3 lakh crores in
the same period. 2 While the
dollar-figure growth was just less than a three-fold increase; the rupee-figure
growth was as much as a six-fold increase, due to continuous devaluation of the
rupee. Over-and-above this, trade in services (tourism, transport, IT, etc.) has
also shown a marked increase in this decade.
What does this mean for the Indian economy as a whole? This
form of growth orientation means that for development, rather than depend on the
expansion of the home market the economy is becoming dependent on foreign trade.
And the expansion of the home market can take place primarily through the rise
in the purchasing power of the masses, which would mean a reduction in their
poverty levels. With an export-import oriented economy they could not care less
if the masses do not come into the picture of the market — foreign trade and
elite consumption at home becomes the chief orientation for market expansion.
Such an approach is disastrous in numerous ways:
First, there is a limitation in this type of growth, which
becomes highly vulnerable to the vicissitudes of international trade and
commodity prices. With one-quarter of the GDP already dependent on foreign trade
and services, any disturbance, like the present slowdown in the world economy,
could have a devastating impact. Besides, with such a one-sided dependence, the
imperialists can dictate terms to India, utilizing the threat of tariffs,
sanctions, etc., to crush Indian exports, or can refuse to allow key imports, in
order to blackmail and threaten the country to accept its policies.
Second, it further pushes the mass impoverisation of the
people, while pampering the already rich elite; creating thereby extremes of
rich and poor. It entails an approach to write-off over 70% of the population,
which is barely able to reach the market (except for food and medicines), while
boosting the incomes of the already rich. So while the PDS is scrapped, user
charges introduced in health, water, etc. and other subsidies to the poor
reduced, massive subsidies are given for exports and to the corporate world in
Third, with a flood of cheap imports, due to reduction of
tariffs, indigenous industry and agriculture is pushed to the wall, leading to
thousands of bankruptcies and enhancing rural stagnation.
And fourth, due to world competition, exports tend to be sold
at cheaper and cheaper rates, resulting it huge losses to the country, even
though the individual exporter may make large profits due to the big subsidies.
The situation is so desperate, that even devaluation is now being idealized.
The foreign trade syndrome is therefore a panacea that
furthers the disease; it gives an illusion of well being, and it turns an
economy into one that is more and more dependant on the imperialists.
ii) Nature of Exports & Imports
Though globalisation has led to a flood of imports it has had
little impact on the nature of Indian exports. As in the pre-1990 period, Indian
exports continue to comprise a mere 0.6% of world exports. And the desperation
to sustain even this level has been achieved only by a continuous cut in export
prices in dollar terms. Besides, the nature of exports continues to be much the
same as existed at the beginning of the 1990s — i.e. primarily low-end
manufactures and agricultural (and allied) products.
As the following Table shows, except for ‘chemicals’, the
nature of exports has remained basically the same. The Table V.1
3 gives the percentage of the particular
category in the total exports:
Percentage of total exports
Ores and Minerals...................
Gems & Jewelry........................
Total in Rs crores..................
Total in $ billions....................
Inspite of all the hype on a leap in exports, India continues
to export its traditional items that have low value-added. Over 70% of exports
belong to this category. Agriculture, ores, leather, textiles, handicrafts and
gems basically utilise sweatshop low-productivity labour to process our natural
wealth, which is then robbed by the imperialists at exceedingly low prices. This
is what existed earlier, it is what continues to this day. Globalisation has had
no impact on this.
If one turns to imports, here too we see a similar pattern as
what existed earlier. With the major item being crude oil, the bulk of the
balance of the imports comprises capital and intermediate goods. All three items
comprise the motor of industrial growth, which has become increasingly dependent
Crude oil is not only the major source of fuel in the
country. It is also the source material for all petroleum products, like
plastics, synthetic fibres, etc. Imports have leaped forward, while indigenous
production has been actually declining. Though vast reserves are available in
the country, our comprador rulers would rather make the country dependent on the
powerful western oil monopolies that dominate the industry. Not only is
production stagnant, in the last few years it has been falling. While crude oil
production was 28.2 million tons in 1997/98, it fell to 24.5 mil. tons in
2000/01. Today, crude oil comprises nearly one-third of our total imports.
The Table V.2
show that the bulk of the remaining items continue to be capital and
intermediary products. If these had been produced in the country, it would have
provided large amount of employment. Besides this, there has been a massive
increase in edible oil imports, even though a surfeit existed in the country.
This has totally crushed the local producer, as also the agriculturist.
Percentage of total Imports
Crude Oil (petrol)............................
Paper, newsprint, etc......................
Drugs & Pharmaceuticals.............
Besides this, India has continued to import a large quantity
of gold. Bowing to the powerful gold lobby abroad, the government closed down
the Kolar Gold Field in order that India continues as the duping ground for gold
which is no longer being maintained as a reserve against currencies in the
western countries. Of late, they have been emptying their vaults, and India has
been a major buyer. No wonder nearly 10% of imports are ‘precious metals’, part
of which is gold, the balance is precious stones for a growing elite population.
The above chart does not show the vast amounts spent on the import of consumer
durables, liquor, foodstuffs and an increasing number of items of elite
consumption and only accounts for about 70% of the total imports. Besides all
this, huge amounts are also spent on the import of defense equipment, but this
will be dealt with later.
So we see, during the period of ‘globalistaion’ there has not
been much change in the nature of foreign trade, only its quantum has increased.
iii) The Trade Deficit & BoP
The trade deficit has increased from a mere Rs 6,860 crores
($2.8 billion) in 1991/92 to a whopping Rs 73,530 crores ($17.1 billion) in
1999/2000. 5 Due to the growing gap
between imports and exports, the gap has been widening. This entire deficit has
to be paid in foreign exchange. This is over-and-above the huge amount already
paid out on the debt servicing charges and the income on foreign investment.
Inability to pay these foreign liabilities results in a Balance of Payments (BoP)
crisis, resulting in the IMF bailout loans and the conditionalities that go with
it, which we witnessed in 1981 and again in 1991.
Ideally, exports should exceed imports (i.e. a trade
surplus), so that the foreign exchange surplus would be sufficient to balance
any such exceptional expenditure. So far the situation has been somewhat saved
by the huge amounts flowing into the country by workers earning abroad and
sending their savings back to their families in India. This has varied between
$10 and $12 billion each year. If this were to stop, the situation would be near
disastrous. Yet, inspite of this amount, the current account deficit remains at
$4 to $5 billion. This deficit is finally covered by the capital flows into the
country in the form of foreign investments, NRI deposits, foreign aid, etc. In
other words capital flows are used to cover daily expenditure on imports.
Anyhow, these large capital flows have resulted in a large
accumulation of foreign exchange, which our politicians and economists keep
barking as evidence of the ‘sound fundamentals’ of the economy. The fact
of the matter is that nine-tenths of the foreign exchange reserves consist of
borrowed money that can disappear overnight — the bulk comprising of FII, NRI
deposits and trade credits and short-term debts. In 2001 these items comprised
$36 billion of the total reserves of about $40 billion.
So, like what happened in East Asia in 1997, a speculative attack by the
international sharks can also precipitate a crisis in India. The country is at
So, once again we find that trade, structured in this way,
makes the country totally vulnerable to the imperialists. Not only is growth
linked to a desperation to export, the huge trade deficit is sustainable only on
the basis of massive inflows from abroad. If this were stopped, for say some
political reason, the economy would crash. A mere imposition of tariffs on
Indian exports, or sanctions on imports to India or temporarily stopping the tap
of foreign investments, can precipitate a crisis. The Americans have already
adopted such methods during the nuclear explosion, with sanctions imposed on
imports to India. Also, arm-twisting the Indian rulers (whenever required) to
implement WTO stipulations through anti-dumping duties, and a number of other
threats to wring out many other concessions has taken place in their numerous
secret dealings. All this becomes much easier due to the increased dependence.
India’s total silence at the Doha negotiations at the WTO that have already
reached an advanced stage, is just one other example of buckling under
But, the Indian rulers suffer from the TINA (there is no
alternative) syndrome. Having tied India’s trade to the imperialist chariot, any
resistance to imperialist dictates now, can result in any one of the numerous
reactions that can precipitate a crisis. So, they find it better to quietly
acquiesce and take a small share in the spoils. Ofcourse, the alternative is
there, but our compradors would prefer not to see it!!
iv) From Dunkel to Doha
We have already seen in
Chapter II of this book the
continuous changes in the EXIM (Export-Import) policies to bring India’s trade
policies in line with that of the 1995 WTO Accord. This has resulted in
reduction of import tariffs from about 400% to a mere 30%. It has resulted in
the removal of all Qualitative Restrictions on imports. It has resulted in the
opening out of export processing zones, which has created, defacto foreign
territory on Indian soil. It has resulted in the amendment of the Indian Patent
Act. It has disinvested the large public sector, selling off the country’s
assets for a song to the big comprador houses and the TNCs. And it has changed
the laws relating to foreign investments.
All these changes are in the interests of imperialism and not
India. For example, the changes in the Patent Act will bring an extra $500
million booty to just the pharmaceutical companies. The benefits to TNC
agri-business will be another bumper draw. The US attempts at patenting
(robbing) our very natural genetic wealth, like basmati, neem, tumeric, and even
items like brinjal, bittergoud (Karela) and Jamun, has taken such open banditry
to an extreme. Yet, the process has not ended. On the contrary, further opening
up is proceeding at a speed double that of earlier. ‘Economic reforms’ is
like heroin to a drug addict. Once the India ruling-classes tasted this deadly
drug, they have got so addicted that they crave for more and more. Of course,
the chief drug pushers are the imperialists, particularly the US.
So we see that the stage is already being set in India for
the Doha agreements, with this year’s EXIM policy stretching for 5 years from
2002 to 2007. Passed during this year’s budget, it sets the ground for the
future sell-out. Let us take a look at this latest policy.
The new policy has removed the need for licenses and quotas
for a number of diverse items like medical bandages, postage stamps, poppy seeds
and some others of hardly any importance. The import of gold and silver jewelery
was one of the rare items that had continued to be subject to quantitative
restrictions requiring a Special Import License. Jewellery imports have now been
liberalised and placed under Open General License. With this the import quota
regime has been totally dismantled. The restrictions on imports would now be
limited to items that are banned under various international conventions for
The main thrust of the new policy is oriented towards export
production and export promotion, with even greater facilities being granted to
the special export zones. The cost of capital in these EPZs are being
drastically curtailed by the introduction of offshore banking facilities. Both
foreign and Indian banks can take advantage of this facility and provide cheaper
finance to exporters from the zones. RBI regulations will not apply to banking
in these zones. The exporters have now been permitted to repatriate all foreign
exchange earnings. What little controls existed on such territory are being
removed. Why do the rulers make such a hue and cry over Kashmir, when
sovereignty over prime trade areas, such as the SEZs and EPZs, are being handed
over to the imperialists?
In this new EXIM policy massive concessions have been given
to the diamond trade. These include the removal of all customs duties on the
import of uncut diamond, and added concessions for diamond cutting and
The Exim policy servilely follows its commitment contained in
the WTO’s Information Technology Agreement. This agreement requires the
signatories to move towards duty-free treatment in designated products. In
pursuance of this provision, the policy lays down that more than 200 IT
components would be covered by zero duty by 2005. In addition local enterprises
manufacturing or assembling computers would be able to import capital goods as
well as raw materials at lower duty rates.
Agricultural exports have been granted a number of incentives
in the new policy. The most prominent element is the grant of transport subsidy
for a large variety of agriculture products. Earlier transport subsidy was given
to wheat and rice exports. Now freight subsidies would be available to
horticulture, floriculture, poultry, dairy and processed grain exports. In
addition, packaging restrictions on agriculture trade have been removed. Export
quotas on a wide range of products have been lifted. The quantitative
restrictions would still remain on a few sensitive items like jute and onions.
Exports of branded primary and processed agriculture goods are being encouraged
by a special 3 per cent DEPB (Duty Entitlement Pass Book) on packs of one kg or
less. Credit facilities for exporters have also been improved. This will be a
boon for the huge TNCs that are coming into this sphere of operation.
A programme has been launched for developing infrastructure
in industrial clusters with high volume of exports. A beginning would be made
with towns like Tirupur, specialising in the exports of hosiery, Panipat
concentrating on woolen blankets and Ludhiana in woolen knitwear. Central
assistance would be made available to the state governments under the Annual
Plans for developing complementary and critical infrastructure like
establishment of container depots and container freight stations. Traditional
talent of the Indian people is now being fully geared for cheap sale to the
foreigner, while crores of handicraftsmen, like the weavers, are dying of
starvation. Yet, all funding will go for this small elite section involved in
exports, while the subsidies and benefits to the others are being stopped.
Now Doha is all set to aggressively follow up on the 1997 WTO
Financial Services Agreement. This entails the complete opening out of the
financial sector to foreign capital and the handing over of the Indian banks to
the TNCs. The process has anyhow been quietly taking place with the government’s
plans of disinvesting its holdings in the public sector banks to 33%, it will
now be speeded up. In the past decade of liberalization the foreign owned banks
have already increased their share in the total banking assets from 5% to 8%,
but seek to increase it to 30 & 40% as they have done in Latin America.
Doha is demanding: permission for entry of foreign banks through subsidiaries;
removal of restrictions on the foreign share of banking assets; removal of the
restriction on the number of branch licenses per year; removal of the investment
limit by branches of foreign banks (in India) in finance companies; removal of
all distinctions between Indian and foreign banks; and to allow trading in
banking services through modes of supply other than commercial presence.
No doubt the Indian rulers will capitulate totally,
notwithstanding the noise they made at the Doha summit.
v) The New Slave Trade
During the birth of capitalism, blacks were whipped, tied and
exported from Africa to America. Nothing so crude is required in the era of
imperialism. Outsourcing of work to India is gaining ground — some of this, as
in the IT sector, is refined, others more crude. The ship-breaking yards; the
trade in human organs; the use of Indians as experimental guinea pigs; and the
use of Indian genes, human embryos and human blood for the growing
bioinformatics industry, are a few examples of the extent to which the drive for
profits can reduce the imperialists/compradors to a vampire-like existence.
We have already seen the extent of the outsourcing in the IT
sector and other related spheres like Call Centres, etc. Here, an Indian
programmer can be bought for $3,000 to $5,000 per year; a similar (white)
programmer in the US would cost the same amount per week. And as the number of
these IT trainees grows, the increased competition will result in a further drop
in their wage rates. The huge savings in costs has resulted in the growing
demand for IT outsourcing, particularly from the US and Europe. Earlier we saw
how the major IT companies in India are nothing but glorified labour
contractors. Besides this, foreign companies have themselves set up in India to
exploit this cheap labour. A large number of such companies have set up shop
here. Just one example is the London based Anglo-Norwegian engineering and
construction company, Kvaerner. Much of its detailed engineering work for global
projects is outsourced through Mumbai, where 700 engineers are employed. A
second center in Pune works for the domestic market.
It is said that there could be no argument against such
outsourcing, as, though the major benefits may accrue to the TNCs, the spill-off
provides reasonably well-paid employment in India. Looked at narrowly this would
indeed appear as the picture. But the problem, as elsewhere, is structural. With
outsourcing, the major profits go towards growth and development in the source
country, and does not in any way help the overall development of the Indian
economy, and hence employment generation here. The super-profits extracted
through outsourcing will be re-invested in America. Besides, for all the hype,
barely a few lakh are employed in the IT sector as a whole, compared to the
crores of educated unemployed. And even those Indian compradors that outsource
labour use their profits for further business abroad. If the (now-sacked)
Infosys vice-president, stationed in America, can be paid a yearly salary of Rs
2 crores, we can understand where its profits are diverted. .
If one turns to the crude forms of slave-type labour, one
just needs to look at the huge ship-breaking plant in Gujarat — the largest in
the world. Here the working conditions are medieval. Contractors employ labour
at exceedingly low rates, with working hours stretching from 10 to 12 a day. The
working conditions are atrocious, housing is poor, medical benefits are few and
much of the work has to be done with cancerous-causing paints. There are daily
deaths at this site, with most workers’ life span reduced 10 to 15 years.
Disease, particularly TB, is rampant. Most ships are foreign.
Despite repeated exposures, the trade in human organs
continues unabated, as the recent disclosures from A.P., Tamil Nadu, Kerala and
Karnataka have shown. Also experimentation on living patients in private and
public hospitals is widespread, with American research institutes being the
prime pushers. The recent exposures of the John Hopkins Institute’s nefarious
activities in India are just one example. Here the RCC hospital in Kerala
utilized its patients for testing an American anti-cancer drug. Tests were
carried out on patients not only at this hospital, but also throughout the
country, in cities like Pune, Kolkota, Kanpur, Benaras and Jaipur. Recently,
Dr.Reddy’s Lab (DRL)was caught in testing an anti diabetic drug for the
Scandinavian company NovoNordisk on thousands of patients, with permission of
the Drug Controller General of India. Now that these drug trials have been
withdrawn as it was proved to cause cancer, DRL is refusing to disclose where
these tests were carried out. In all this, what has come to light is the mere
tip of the iceberg. Much more goes on secretively under various innocuous
covers. In the period of globalisation a vast number of TNCs, like Monsanto,
have entered India, in collaboration with various universities and institutes
(including government ones) for such research and experimentation.
And in this field of experimentation, the most lucrative and
widespread has been the new sphere of ‘bioinformatics’. The bioinformatics
industry in India is already worth $500 to $700 million a year. Bioinformatics,
entails the computer processing of DNA, RNA, cells and molecules of the human
body, which has helped researchers discover new biological insights that hasten
the drug discovery process. Stem cell research, involving the human embryo, sold
by abortion clinics, is one major sphere. This research is purely in the
interests of the US pharmaceutical industry that uses Indian scientists for its
legwork and Indian blood samples, embryos, etc. as the raw material for
research. As Bush has banned abortion in the US, playing up to the fascist and
conservative lobby, India has become all the more important for such activities.
A vast pool of cheaply available English-speaking scientists,
unquestioning and unlimited source of blood, genes, embryos, etc. and a totally
pliant government, has turned India into a major center for such deadly research
projects. It has been promoted by the government itself, by the setting up of
the Human Genome Project, to which vast amounts of public funds have been
allocated. And as much of the scientific work is technical — i.e. mere
recording the computer data of the 32,000 genes, with 1.5 million proteins in
each — cheaply available Indian scientists are ideal for the American research
It is then no wonder that nearly all the major comprador
houses, in JVs with some US company, have entered this field. Some TNCs have
also set up independently. We have already seen Reliance’s major inroads into
this area. Then there is the Rs 450 crore JV of TIDCO and the US-based Genome
Technologies for setting up a genomic and bioinformatics (BI) center at Chennai.
The Tata Institute of Fundamental Research (TIFR) has set up a major research
center at Bangalore and the TCS (Tata Consultancy Service) has also entered the
field. The Karnataka government is itself setting up an institute of
biotechnology. The Pune-based Exogen, has already outsourced work by the US
company Myriad Genetics. There are a number of other big players in this line,
like DSQ Biotech, Biocon, GVK Biosciences, Avestha Gen, Dr.Reddy’s Lab, Kshema
Technologies and Spectramind E-services, all of which are collaborations between
India’s compradors and US TNCs. Moreover TNCs, like IBM and Oracle, have also
directly set up labs in India to undertake research in bioinformatics.
Educational bodies have also been pulled into the vortex, with the TIFR, Indian
Institute of Science (Bangalore), Madurai Kamraj University, and the JNU, having
launched specialist post-graduate courses in bioinformatics. These will create
the necessary scientific personnel to man this growing network of
Much of this research is of the type seen in horror films,
kept totally secret, with even the scientists unaware of the overall project and
its implications. These vultures prey not only on the living, but also on the
So we find that with globalisation India has become a massive
hunting ground for its cheap labour — both hi-tech and the illiterate variety;
as also for the trade in human blood, body parts, genes and its patients as
research material. And if to all this one adds the spiralling tourist industry
(which has more than doubled in size during the decade of globalisation) with
the growth of sex trade and the marketing of Indian women, it amounts to the
most inhuman and demeaning form of profit-making conjured up by capitalism — a
sort of slave-trade of the modern era, without the overt crudity of the past,
but as ruthless, vicious, and degrading as that of the medieval ages.
1. EPW; Sept. 25, 2001
2. Tata Year Book; 2001-02
3. Tata Year Book; 2001-02
4. Tata Year Book; 2001-02
5. Tata Year Book; 2000-01; p. 91
6. The Hindu; May 8, 2001, Prem Shankar Jha
7. EPW; June 15, 2002