Mobilising The Other India

Land has emerged the great Indian fault line of the early 21st century
Sudipto Mundle

India has done well from globalisation. No historic transformation can occur with only
gains and no losses, on which more below. But on net reckoning, India, like many other
developing countries, has gained. Despite the dire predictions of radical theories of
imperialism, the old Ricardian theory of comparative advantage has asserted itself, albeit in
a dynamic form. Today, it is the developed world that is haunted by the spectre of free
trade, not the developing world.
However, the benefits of globalisation have accrued only to one part of India: the India of
IT parks and financial markets, businessmen and traders, corporate leaders and executives
and, yes, also the white-collar workers in new corporate hubs like Gurgaon, Whitefields or
Rajerhat, and their blue-collar counterparts in the smart new factories. Let us call this
globalised India.
Then there is the other India: Bharat as we once used to call it. The India of small farmers,
of tribals clinging to their disappearing forests in Orissa, of landless Dalits living in the
shadow of upper caste atrocities, of shivering Bihari workers building roads in the frozen
deserts of Ladakh. It is another world, till recently untouched by globalisation.
Now, global competition and insatiable hunger for profits are driving globalised India into
a headlong collision with this other India over the right to land and other natural resources.
Clashes over land, the forests that grow on it and the mineral resources that lie beneath it
have become almost daily fare. From Nandigram and Singur to the forests of Orissa and the
Chotanagpur Plateau, from Karnataka’s illegal mines to the farmers protesting against an
expressway in Noida, land has emerged the great Indian fault line of the early 21st century.
Ominously, the frequency and intensity of these clashes are growing across the country.
Often, though fortunately not always, the ‘law and order’ machinery of the state has backed
globalised India in its onslaught on the other India. In a recent notice to the UP government
relating to land acquisition in
Noida, the Supreme Court described such partisan government intervention as state-
sponsored terrorism. The Naxalites thrive on such partisan state violence and the sullen
anger it generates in the other India. It creates the support base for their violent
confrontation with the state.
Now, with great foresight, Rahul Gandhi and his mother, the leader of the Congress,
are positioning themselves to represent this same constituency in the democratic process.
You don’t need rocket science to see the underlying arithmetic. This other India is by far the
largest constituency in this country. But there is more at stake here than the rise of an
individual political leader. Mobilisation of the other India within the democratic space is
probably the single greatest political challenge of our times. If politicians of the democratic
process fail, then the Maoists gain. Thus, the fault line between globalised India and the
other India also marks the dividing line between the politics of violence and the path of non-
violence.
Is there a possible path of peaceful dispute resolution on the question of land? The answer
is yes. The principle is really quite simple. Turn the potential losers from land acquisition into
a support base of winners. If you wish to acquire someone’s land, don’t coerce her or try to
rip her off. Instead make her an offer attractive enough to induce her to sell. In countries
with well-developed and competitive land markets, this is how it works. This is also the
principle adopted by multilateral agencies when they support public projects requiring land
acquisition: the displaced persons must be compensated enough to be better off after
displacement than before. The coercive approach leads to conflict between winners and
losers, and sometimes every one becomes a loser as in Singur. In the inducement approach,
everyone becomes a winner; there are no losers.
We have examples before us of how the two approaches work. Singur is a classic example
of a coercive approach that failed. But in Sanad, where the Nano project moved from Singur,
you have an example of the inducement approach. Handsome compensation for farmers led
to a win-win outcome for all. Other successful examples include the Mohali international
airport in Punjab, the Cochin international airport in Kerala and the profarmer land
acquisition policy of the Haryana government.
Given our inequities, our law needs to be tilted in favour of the weak, with mandatory and
harsh punitive provisions against attempts at regulatory capture by the strong. It is
promising that lawmakers are beginning to get their act together on the land question. The
group of ministers reviewing the draft Mines and Minerals (Development and Regulation)
Bill, 2010 reportedly reached a consensus that 26 per cent of annual profits must be set
aside for displaced families. This is quite radical in the Indian context.
There will be strong resistance to such initiatives from globalised India. But if politicians
hold firm, they will successfully mobilise the vote banks of the other India in the democratic
process. Globalised India too will eventually come to terms with this new reality of not taking
the other India for granted. Democracy in India will then have taken a great leap forward.
The writer is an emeritus professor at the National Institute of Public Finance &
Policy, New Delhi.

CURRENT ACCOUNT CAUTION

Acting on the deficit may carry more costs than benefits ILA PATNAIK The high
level of current account deficit is likely to be a short-term phenomenon. As the
world economy recovers and exports pick up, the deficit is likely to go back to
sustainable levels. India may see one or two more quarters of high current
account deficit, but we should not panic.
INDIA'S current account deficit widened to 3.7 per cent of GDP in the April-June 2010
quarter. Imports are about one-and-a-half times of exports and they grew rapidly as the
Indian economy witnessed healthy growth. Exports of goods and services also witnessed
high growth, but not fast enough to prevent the deficit from rising.
Isthelargecurrentaccountdeficit a matter of concern? Should the government or the Reserve
Bank of India respond to the deficit? Should they change trade policy, impose capital
controls or intervene in foreign exchange markets?
Indiahas,especiallyafterthe1991 crisis, lived with a fear of current account deficits. In
addition, the experience of many low income countrieswithlargecurrentaccount deficits has
been unpleasant. A sudden stop in capital inflows in the face of high deficits has led to a
balance of payment crisis. When a country runs a current account deficit, as an accounting
identity, it requires capital inflows in order to finance this deficit. If these capital inflows stop,
the country can be thrown into a crisis.
Could the present level of India's currentaccountdeficitleadtosucha scenario?
Thefirstquestioniswhetherthisis along-termtrend.IsIndiawitnessing long periods of high and
rising current account deficits building up to a position of high net indebtedness?
Anexaminationofthelastfive years shows that apart from the period immediately following a
crash in world trade after the Lehman crisis in September 2008, there is no such trend. The
long-run average has been roughly two per cent.
Second, the deficit has not been financed as much by debt as by
inflowsofcapitalattractedbyIndia's high growth path. The striking fact
hereisthattheseflowsarecontinuing even after one of the worst financial crises of the
century. The fear of a sudden stop of capital flows is lower than it would have been, had
global finance been in an overheated state.
India’s relatively stronger growth is likely to continue to attract capital inflows to finance the
current account deficit. Further, India’s engagement with foreign investment, including
portfolio and private equity flows, has deepened over the years and is likely to get stronger
and deeper in coming years.
Third, as the world economy recovers, exports are likely to grow even faster. The collapse in
exports witnessed during the crisis is the main reason for the present current account
deficit. When the world economy is back on track, even though the outlook looks bleak at
present, the deficit is likely to go
back to its average level.
One may therefore argue that the current level of deficit is a short-term phenomenon and
does not pose the threat of a crisis. Even so, were action necessary, what could be done?
There are three kinds of steps that could be taken.
First, there could be direct action on the current account such as restricting imports or
encouraging exports either through quantitative restrictions or a change in duties. This is an
obviously bad idea. It would be distortionary, it would create lobbies and be difficult to get
rid of.
The second and third set of actions would work through prices — that is, the rupee. Without
capital
inflows, a high current account deficit would have resulted in rupee depreciation, making
exports cheaper and hopefully expanding them. The rupee is not depreciating today despite
the crisis, as there is a high demand for rupee assets.
Blocking capital inflows could put downward pressure on the rupee and the price effect
would make imports more expensive and exports cheaper and thus reduce the deficit.
This strategy has risks. We may ban one or the other kind of capital inflow, but money
usually finds its way around capital controls. Also, changing capital controls makes the
economy unattractive to foreign capital in the long run. Flip-flops in
policy make foreign capital jittery.
Apart from a few areas of debt and participatory notes, India's broad approach to capital
controls has not involved major reversals in policy.
This creates confidence among investors and facilitates foreign capital to become a reliable
source of funding for domestic investment.
The third option could be for the RBI to intervene directly in the foreign exchange market to
push depreciation. This is a bad idea as it would pump up money supply in an
alreadyinflationaryeconomy.Sterilisation of forex intervention is difficult under the present
levels of government borrowing. The RBI has broadly stayed away from forex markets for a
year and saved itself a lot of trouble on the monetary policy front. It will be wise to stay that
way.
The biggest problem with the set of actions that work through the rupee is that we are
assuming, first, that the rupee will move. Second, we are assuming that imports and exports
will respond significantly to the change in the exchange rate. If both happen, the current
account deficit will come down. Evidence, however, suggests that the price elasticity of
Indian exports is very low. The volume of Indian exports is hugely dependent on the volume
of world trade and world GDP. In recent years, Indian exports grew fast when the rupee was
appreciating and slowed down when it depreciated. The overwhelming determinant of
export growth is going to be the pace of recovery in the US and Europe.
Not only is manipulating the rupee unlikely to be effective in impacting the current account
deficit, it will also be inflationary. In the present scenario of high inflation, a weaker rupee
will push up the price of imports. While this may or may not reduce the volume of imports,
depending on the price elasticity of imports, it will lead to pushing up the price of tradables
further. Given the present level of high inflation, this is not desirable.
In summary, first, the high level of current account deficit is likely to be a short-term
phenomenon. As the world economy recovers and exports pick up, the deficit is likely to go
back to sustainable levels. India may see one or two more quarters of high current account
deficit, but we should not panic. Second, if we do want to act, we need to remember that all
policy measures have costs.
We need to carefully weigh these costs before taking any action. At present, it does not
appear that any of these costs are worth incurring.
Getting the fundamentals right
Good policing a must to fight terrorism
by B.G. Verghese
THE anger over Mumbai still appears to induce irrationality among sections of society as
witnessed by the Shiv Sena threat to prevent any lawyer accepting a brief to defend Qasab,
the one Pakistani terrorist apprehended alive in the recent attack. Legal defence is not
tantamount to showing sympathy for the accused but a professional duty in accordance with
the rule of law and in the interests of a fair trial and justice.
It will not do to argue that the crime was committed in full public gaze, now stands self-
confessed and was in any event so heinous as to exclude due process. This would be a
travesty of justice and would set a dangerous precedent in the wake of earlier threats
against anybody defending alleged Muslim terror suspects, though some, including the Shiv
Sena, rushed to defend so-called “Hindu terror” suspects. If the law is to take its course and
the criminal justice system to enjoy credibility, due process must not be jettisoned. And
those seeking to thwart it on “patriotic” grounds should be dealt with sternly.
Attention has turned to securing tougher laws to curb and try terror and strengthening the
national security and intelligence apparatus. This is necessary as systemic flaws have been
exposed in both cases. However, any superstructure must stand on sure foundations and not
on sand as will be the case without basic police reforms as the primary basis of day-to-day
security for the citizen, maintenance of the rule of law and good governance. This has
scarcely been mentioned by the political parties or the government - and with good reason:
none wants it.
Indeed, the criminalisation of politics and the politicisation of crime have gone hand in hand
over the years, lubricated by corruption. In consequence, police reforms have been
languishing ever since the National Police Commission reported 30 years ago. Successive
review commissions have reiterated the same recommendations, the last being the Soli
Sorabjee Committee.
The salient elements of reform were summarised by the Supreme Court which directed that
these be implemented by the Centre and states by January 2007. Twenty months later, little
has happened beyond some window-dressing. The plain fact is that the political class,
irrespective of party affiliations, wishes to keep the police and intelligence services as
handmaidens to further their personal and political interests and spy on and smite their
opponents. This abuse has become endemic.
It was to stem this rot that the Supreme Court directed governments to constitute state
security commissions to ensure unwarranted interference in the working of an independent
police; ensure that the DG Police is appointed through an independent mechanism, selected
on merit and, like other officers at the operational level, enjoys a minimum two-year tenure;
set up a police establishment board to decide on all appointments, transfers and promotions
of police officials; establish a national security commission to empanel and select chiefs of
all central police organisations with fixed tenures; create independent police complaints
boards at state and district levels to look into public complaints relating to misconduct,
custodial deaths, grievous hurt or rape in police custody and other misconduct; and
separate the investigative and law and order functions of the police. This charter, if
implemented, would go a long way towards making the police a professional and citizen-
friendly service.
The states have pleaded undue judicial activism, federal rights and invasion of their
constitutional authority to stall progress. The monitoring committee appointed by the
Supreme Court to oversee action taken has moved slowly but is now making more headway.
Poor police emoluments and living conditions, exaggerated VIP protection and pomp and
show duties, inadequate training and equipment for the tasks that confront the police today
and lack of specialisation need attention. India is also greatly under-policed, the ratio of
policemen per 10,000 population being 126 as against the modest UN-prescribed norm of
220.
Alarmed by this state of affairs, some 50 eminent citizens from different parts of the country
recently signed a statement urging the Prime Minister, the Home Minister, the Chief
Ministers and party leaders to act swiftly and treat police reforms as a non-partisan issue
and ensure their earliest implementation (starting with Delhi and other Union Territories),
even as the new national security superstructure is put in place.
Simultaneously, action must be taken to move on two other vital axes: rendering
intelligence gathering, collation, analysis and dissemination more professional and free of
motivated political influence. Equally, we must show zero-tolerance for corruption by
removing the so-called single directive that requires permission to prosecute ministers and
senior bureaucrats and incorporate the powerful UN Convention on Corruption into domestic
law.
Automatic and independent prosecution machinery is required to obviate political discretion.
The independence of the Vigilance Commission and the CBI too must be safeguarded, a Lok
Pal appointed and the position of the Lok Ayuktas in the states strengthened. Political will
and a commitment to the national interest are what is required, not more lame excuses.
Given police reforms and quick acting and independent appellate authorities, stronger laws
as enacted will not derogate from human rights and need not brutalise society. Good
policing is the first line of defence in the battle against terror. Otherwise, the rest is dross.
Meanwhile, dangerously harebrained initiatives like the RSS plan to provide combat training
to youth must be abandoned.
Ecological balance facing grave threat
Conservation vital for sustainable growth
by Sunderlal Bahuguna
The 20th century, especially the four-and-a-half decades since 1950,, may rightly be
called the era of development because during this period the world economy expanded
from $ 4 trillion in output in 1950 to more than $ 20 trillion in 1995. In a span of just 10
years -- from 1985 to 1995-- it grew by $ 4 trillion, which is more than it ever grew from
the beginning of civilisation to 1950.
Development became synonymous with growth. Greater production became the key to
prosperity and peace. Even before this, there was unprecedented economic growth in
the West due to industrialisation. The exploitation of colonies and the extension of trade
empires played an important role in it. The evil effects of industrialisation and
deforestation for agricultural extension are now apparent. Oxygen, essential for
breathing, has become polluted. Carbon-dioxide and other foul gases have spread in the
atmosphere, causing acid rain. Forests have been disappearing and lakes have died.
Water from rivers is not even fit to bathe in, let alone drinking. The sight of an open and
clean sky has become a dream. There are no technical solution to these problems. The
development pattern of the West has now become universal. When it was adopted by
poor countries with dense populations, the problem of pollution became visible and
acute. Depletion of natural resources -- water, forests and land-- started rapidly. The
extension of cities is connected with industrialisation. The energy and transport needs of
the densely populated cities are responsible for the combustion of fossil fuels [coal, oil
and gas]. This becomes the main reason for air pollution. We throw 56 gm. of carbon into
the atmosphere when we use one kilowatt of thermal power. The chimneys of industrial
establishments directly emit smoke. Automobiles present both smoke and noise. Trees,
which absorb carbon dioxide, are disappearing.
The other aspect of environmental pollution is the rapid depletion of natural resources.
There has been a miraculous rise in the foodgrain production between 1950 and 1990. It
almost trebled -- from 631 million tonnes in 1950 to 1780 million tonnes in 1990.The
production of meat went up 2.6 times and that of fish five times. But now this illusion is
over.
The rise in the food grain production was mainly due to the extension of crop area,
irrigation, extensive use of chemical fertilisers and hybrid seeds. Mining of water was
done to such an extent that its level is going down dramatically. Canal irrigation has
brought the salts on the surface and the water - logged area has increased. Besides this,
soil erosion is eating up fertility of the soil. The magic of chemical fertilisers, whose use
had gone up nine times between 1950 and 1984, is now over because they have started
giving diminishing returns. In India, 34 per cent of irrigated land is the victim of salinity
and waterlogging. Two million hectares of saline land has already gone out of production.
Agricultural land has been raped but a greater injustice than even that is being done to
the forests. Centuries old natural forests, especially the virgin forests of Africa, Asia and
Brazil, are disappearing at a rapid pace. These are being replaced with fast growing
species like eucalyptus and pine, which are detrimental to the health of the soil. A forest
is a community of living things, of which the tree is the greatest asset. Social forestry
has converted forests into timber mines. Many species have become extinct. Tropical
forests are rich as there are a number of species in a small space. Many of these are the
very basis of the lives of forest dwellers. These forest dwellers have been forced into the
market economy of competition and exploitation from the subsistence economy of the
forests, where they have been living in perfect harmony with nature. Some of these
tribes are on the verge of extinction. Food production has been directly affected by
deforestation because forests are the mothers of rivers and the factories of soil
manufacture. One of the main causes of deforestation has been mining. The mining of
metals and minerals has destroyed the forests of Goa, Madhya Pradesh, Rajasthan, Bihar
and Orissa. The third invasion of the materialistic civilisation has been on water. The
Green Revolution was mainly based on hybrid seeds and chemical fertilisers and these
require water in very large quantities. Domestic use of
water goes up along with urbanisation. The urban dweller
uses ten times more water than an ordinary villager. The
affluent use 100 times more and five-star hotels up to 250
times more per capita of water. Industries are responsible
for killing the rivers. Industrial effluents flow down to the
rivers. Some years ago, the Ganga caught fire in Barauni,
due to the spills of oil in it. All the effluents from leather
factories in Kanpur flow into the Ganga. I have seen the
effluents from a rayon factory flowing into the Chariyar
river of Kerala. The 21st century is beginning with struggles over water. These struggles
are between states within India. International rivers like the Nile, Mekong and Ganga
have become the subject of strife between nations
The earth is a victim of the onslaught of a materialistic civilisation and the oceans too
have been invaded. The latter have become dumping grounds for effluents and even of
radioactive nuclear waste. Sewage from cities freely flows into the sea. Sea coasts have
become spots for luxury tourism. As a result of this, there is severe competition to usurp
them. Mangroves have been cut down to build hotels. The crisis of oceans will directly
affect the poor, because the fish catch will be lowered. Dams,too, have had a disastrous
effect on seas and fresh water lakes. The fish, which survived on the coasts in the
mixture of sea and fresh water, have become extinct. Many species of flora and fauna
are also becoming extinct. Only 20 per cent of the people of the world enjoy a luxurious
lifestyle due to this development whereas the same number of people have no proper
habitat. Nutritional food is a far off dream for them. They do not even have access to
safe drinking water. This is all about human beings, for whose development there is so
much hue and cry. The major problem humankind is facing today is the depletion of
three renewable resources -- water, forests and land. None of these problems can be
solved in isolation. There are two other intricate problems connected with this which are
the gifts of development. The first is that of security. The nations sitting over the citadels
of development possess an armoury of 42,000 nuclear weapons. Besides this, there is
also the problem of internal insecurity. Governments are increasing poverty by spending
the hard earned money of the poor on an unproductive activity like security.
The second problem is that of hunger and poverty. Now famine has taken the form of
malnutrition. Production is decreasing due to ecological disasters, loss in soil fertility,
water shortage and pollution. The cause of famine and malnutrition is the use of fertile
land to grow cash crops. The poor, who constitute one third of the total population of
India, do not even get enough calories, leave aside a nutritious diet.
During the long course of history, religion played a vital role in regulating society. But
gradually the real face of religion (Dharma) disappeared and it came to be covered with
rituals. The Industrial Revolution in Europe led to two basic changes in human thinking:
(1) Nature is a commodity (2) Nature is for human beings because society consists only
of human beings. This became the basis of human development with economic growth.
When the objective of development became affluence and prosperity, man became the
butcher of nature. He misused the power of science and technology for maximum
exploitation of the resources of the planet. We became the rich children of a poor
mother.
A new religion has taken birth in the development era. This is the religion of economic
growth. The market is its temple, technocrats and experts its priests, and the ‘Dollar’ is
the new god.
Those who equate development with affluence forget that there should be two basic
characteristics of development:
1. It should be sustained. The benefits that we are getting now from it should be assured
to future generations.
2. It should be ethical. Whatever the benefits, a person or a species should not harm
other individuals or species.
Modern life has become so complex that we cannot live
without many of the things that have become an integral
part of our lives. However, their production creates
pollution and is destructive. Among the resources used to
generate energy, fossil fuels, nuclear energy and big dams
are at the top of the list. This system would be suicidal for
poor countries with dense populations. The alternatives
that are pollution free and appropriate for the social and
economic environment of these countries, in order of
priority, are: human, animal, bio, solar, wind, tidal, geo-
thermal and hydel power from water.
Energy is related to the production systems. High energy is needed by big centralised
industries. This centralised system of production is responsible for exploitation and
pollution. There should be more emphasis on khadi, village and other such decentralised
industries. These are based on the natural law that whatever is essential for survival,
should be easily available in the neighbourhood. Science and technology should be
directed towards this objective.
The only way to get more food from less and degraded land is tree farming. Trees give
more production on less land. The only way to combat the increasing water crisis in India
is to declare water as the main product of forests. For this the remaining natural forests
should be managed as protected forests. No green felling should be done in these.
The second step should be the conversion of mono-culture stands into mixed forests by
raising food, fodder, fuel, fertilisers and fibre giving species of trees, bushes, climbers,
herbs and tubers in the midst of these monocultures. The objective of development
should not only be to raise the economic standard of life but to raise the social,
economic, ethical and spiritual level of the people.
We shall have to change all those forces and circumstances which are giving birth to
war, pollution and hunger. The way will be shown by those who, in spite of the
onslaughts of the materialistic civilisation, have survived by sticking to their culture.
They live because they did not adopt the lifestyle of the conquerors of nature. Instead
they developed a lifestyle which was in harmony with nature.
Renowned scholar of ecology, Edward Goldsmith, concludes his book The Way thus: “The
solution can only reside in restoring the natural systems that have been disrupted ---
which means returning to the cultural behaviour pattern that assures the maintenance of
the critical order of the living world.”
The writer, an internationally renowned conservationist, led the famous
Chipko movement.

Tough steps needed to check polluting

units
Rapid industrialisation causing havoc in
Haryana
by K. L. Johar
A quarter of a century ago, people in the Third
World showed little concern about the looming
environmental crisis. Whereas ‘Greens’
emerged as a major force in the industrialised
North in the sixties and the seventies, there
was no effort worth the name to protect the
environment in the Asian sub-continent,
including India. However, this attitude of callous
indifference to an all-important issue in the
commerce-crazy world is disappearing fast. The frequent forays of
monsoon floods, cloudbursts in the mountains, disastrous landslides
and many other environmental disasters are the result of ruthless
exploitation of natural resources. For a change, people are now
becoming conscious and convinced that protection of environment
is essential for the very survival of human civilisation. The only
alternative is total extinction of all species on this beautiful planet.
Man is aware of the influence of nature in the form of the air he
breathes, the water he drinks, the food that he eats and so on.
Unpolluted air and water — precious gifts of nature — are to be
preserved. Any disturbance in the level and quality of these
ingredients will disturb the quality of life. The total world scenario is
dismal and gloomy. The level of carbon dioxide is increasing in the
atmosphere, giving birth to the green-house effect which is the
direct consequence of the ravaging of ecology, particularly plant
life, which absorbs carbon dioxide and exudes oxygen. India has
experienced a phenomenal rise in industrialisation during the last
two decades, but, unfortunately, not much thought has been given
to the problem of industrial pollution. The resultant danger has been
recognised only recently and legislation brought into force to
prevent such damage to ecology and the quality of water and air.
The ever-increasing use of synthetic goods can lead to serious
consequences, short term glitter notwithstanding. Chemicals,
fertilisers, insecticides and pesticides are causing water pollution.
Soil fertility is going down as a result of the excessive use of
chemical fertilisers, nitrates and in some cases by excessive
irrigation. Every year more than 200 million tonnes of carbon
monoxide and 50 million tonnes of various hydro-carbons are being
pumped into the atmosphere. Over 150 million tonnes of sulphur
dioxide is also being thrown into the sky. The result is acid rain over
many regions with consequences not unknown. The protective layer
of the earth, saving it from ultraviolet rays, is in danger. There is
already a big hole over the Antarctica.
The threat of population explosion is very grave. Population of the
world that stood at about 90 crore in 1800 AD will be around 600
crore by the turn of the century. India’s population, which was 35
crore in 1947, is now touching a billion mark. Added to this is
wastage of natural resources by the developed countries. A United
Nations Publication Environmental Events Record in its issue of
April, 1990, noted that “Westerners admit that they are destroying
the earth by consumption of wealth in wasteful ways. The rich North
consumes 80 per cent of the world’s global resources, while three
quarters of the world’s population who live in the poor South share
what is left. The average American flushes away more water
everyday than a Madagascan uses in three months. Western
industry produces vast amounts of toxic waste, much of which is
dumped in the Third World. The World Commission on Environment
and Development in its report Our common future said: “It is
impossible to separate economic development issues from
environment issues. Poverty is a major cause of global
environmental problem”.
If India has to survive in the national and international market, we
have to improve our technical skills and technologies to eliminate or
reduce the industrial waste and adopt technologies and improve
production methods and to protect the wholesomeness of our water
and air in its natural settings for a better tomorrow, both for the
present generation and also for the future generations.
Let us turn our attention to Haryana and see where it stands in
terms of environment and pollution. Since its inception in 1966,
Haryana has taken unprecedented strides in industrial growth. With
just 1.7 per cent of the total geographical area and less than 2 per
cent of the country’s population, Haryana today is one of the four
states in the country having the highest per capita income. The
state today ranks amongst the largest contributors of foodgrain to
the central pool after meeting its own requirements. In the
industrial sector, the state is the largest producer of passenger cars,
tractors and motor cycles manufactured in the country every year.
It has about 350 big industrial units with foreign collaboration. The
number of small-scale units has now crossed 1.27 lakh.
But, unfortunately, in Haryana, as in the rest of the country, not
much attention has been paid to the protection of environment in
the wake of the rapid industrial growth. Simultaneous control of
environmental protection systems would have been ideal. However,
the Haryana State Pollution Control Board, established in the year
1974 to regulate, prevent and control the water pollution caused by
untreated industrial effluents and hazardous wastes, has been quite
active, particularly during the last two years. The board has taken
various tough and stringent measures to regulate and control the
‘highly polluting’ categories of industries such as distilleries, sugar
mills, basic drugs, leather tanning, pesticides and chemical
fertilisers.
The number of ‘polluting’ industrial units is 2338, which if not
checked will cause unprecedented havoc to the quality of life.
Currently, all new industrial units falling under 36 categories of
‘pollution’, and ‘highly polluting’ industries are required to obtain
consent to operate under Sections 25/26 of the Water Act and
Sections 21 and 22 of the Air Act.
The board has been able to persuade as many as 456 units to install
effluent treatment plants during the last two years. But perhaps
stricter measures need to be adopted in respect of some categories
of ‘highly polluting’ industries. All nine distilleries, 13 sugar mills,
two thermal plants and four units of sulphuric acid continue to flout
the Water and Air Acts with impunity. Out of the 15 drugs and
pharmaceutical units, only three are following the Act while out of
the 10 paper units, seven units are not complying with the Act.
Similarly, only four cement units out of 8 are complying. However,
all units of fertilisers (two), cement (eight) and leather (five) and
dye (two) are complying with the directions. It is encouraging that
most of these defaulting units are now in the process of
modification and upgradation of their pollution control devices.
Besides, there are about 405 stone-crushing units of the state in the
districts of Faridabad, Gurgaon, Bhiwani, Yamunanagar and
Panchkula. These stone-crushing units are ‘highly polluting’ in
nature as a lot of dust is emitted from the crushing operations. The
campaign launched by the board for the effective implementation of
pollution-control devices, which include providing water sprinklers,
covered shed, wind breaking wall and metal road within the
premises, is yielding good results.
Haryana is basically an agriculture-based state where a lot of agro-
chemicals are being used. This has resulted in the pesticide
pollution of water, air, soil, vegetables, grains, bovine, milk, etc.
Pesticides from the environment get biomagnified and ultimately
result into various types of health problems. Regular monitoring of
pesticides, residuals and planned agricultural practices need to
be adopted for better environment.
A senior functionary of the Forest Department of Haryana informed
that the forest cover in the state is 1.5 lakh hectares which is about
3.2 per cent of the total land area. This compares poorly with the
all-India figure of 11 per cent. But the state has done some good
work in the area of social forestry and if the plantation under this
category is also taken into account, the cover comes to 8 per cent.
The Forest Department of Haryana has launched a project under the
National Forestry Action Plan, through which it hopes to bring the
area under forest cover to 20 per cent in the next 20 years. Social
forestry seems to be the best device in Haryana as the state by and
large is deprived of natural forestry.
The ground water is saline in many parts of Haryana with excess
sodium salts. Ground water has high fluoride concentration in many
parts of Haryana (especially Jind and Sonepat) where fluorosis is
found to occur commonly in rural areas where people draw water
from wells.
Surface water quality in Haryana also needs attention and regular
monitoring. Rivers like the Kaushalaya, the Yamuna and the
Ghaggar, which are shared by the neighbouring states, should be
regularly monitored.
Environmental scientists of Guru Jambheshwar University, Hisar, in
collaboration with the Directorate of Environment, Government of
Haryana, are preparing the Environmental Status Report for
Haryana. Under this programme, the quality of underground water,
surface waters (major rivers and canals), air pollution status and
pesticide residue contamination and urea adulteration of bovine
milk are being investigated. For spreading environmental awareness
a quarterly magazine, Green News, is also being published.
‘Awakening’ to the dangers of environmental degradation is the key
word. The government alone will not be able to do it. Voluntary
agencies should include protection of environment as one of its
primary objectives. The universities and colleges should consider
the feasibility of making environment a compulsory subject at each
level of education. The universities should incorporate in the syllabi
topics on natural environment, socio-cultural environment,
demography and human development. It is unfortunate that out of a
total of 228 universities in the country, just 20 are imparting
education in environmental sciences and environmental
engineering. A concerted effort should be made to take Mahatma
Gandhi’s message, “Nature has enough for human need but not for
his greed” to every home and hearth. Man has to stop being greedy.
Once this happens, his craze for ruthless exploitation of nature will
cease. He will learn to ‘eat to live’ and not ‘live to eat’.
The writer is the Vice-Chancellor of Guru Jambheshwar
University, Hisar..

Extensive damage to life support

systems in region
Eco-plans should be backed by
political will
by S. K. Sharma
IN the first decade following 1947,
India accorded high priority to rehabilitation of displaced persons.
Large- scale environmental degradation began as forests were cut
down, existing towns and cities expanded and new townships were
established. In the following decades, major development
programmes were launched. Roads were built, industries set up,
agriculture developed and water resources tapped. The rapid rate of
population growth, urbanisation, increasing industrial and
agricultural output caused increasing degradation in environmental
quality.
Until 1980, the responsibility for conserving the environment and
forests was divided among several Central ministries. No single
agency was invested with the authority to coordinate environmental
protection activities. In 1981, several factors prompted the
Government of India to establish the Ministry of Environment and
Forests. In the 1980s, departments of environment were set up in
all states and Union territories.
Haryana and Punjab, the pioneer states of the Green Revolution,
have forest area just 1.4 and 2.8 million hectares respectively. Even
the capital of India, Delhi has 1.7 per cent forest area. As per the
National Forest Policy, these states and Union territories should
have a forest area of 33 per cent. In the case of Himachal Pradesh,
the state forest department has recorded a forest area of 63.60
million hectares.
Vehicular pollution is fast becoming the single largest threat to the
environment and health. Medical studies reveal that pollutants
released by these vehicles can cause severe respiratory disorders
such as bronchitis, asthma and allergies.
In Ludhiana, the number of vehicles has increased by 60 per cent —
from 2.4 lakh (in 1989) to 3.9 lakh in 1995.
Chandigarh, too, is slowly being gripped by vehicular pollution.
Chandigarh has the highest vehicles per person as compared to any
other part of India. If an effective management measure, such as
introduction of a viable public transport system from Panchkula to
Chandigarh and from Mohali to Chandigarh and back (particularly
during office hours), is not taken in time this city too would become
a polluted city.
The discharge of untreated sewage into the rivers is the major
season for the degradation of quality of water. Long stretches of the
Yamuna in Haryana and the Sutlej in Punjab have been identified by
the CPCB as highly polluted river stretches. A Rs 2000- crore
scheme to make the Yamuna pollution-free has been initiated. Out
of this, a sum of Rs 400 crore has already been spent. Reportedly,
no worthwhile progress could be seen either in the field or in the
quality of water in the Yamuna even after spending such a large
amount. The programme for cleaning the Sutlej has been initiated
under a national river conservation plan in Ludhiana, Jalandhar and
Phillaur,
The Union Ministry of Environment and Forest, in consultation with
the CPCB, identified 17 categories of highly polluted industries in
1992. The aim was to control water and air pollution from large and
medium industries under these categories throughout the country
as early as possible. Initially, the deadline fixed for these industries
to comply with standards was December, 1993, but, on one pretext
or another, the date was extended. There are still 180 industries out
of 1551 which have not complied with the prescribed standards
until December, 1996. Show-cause notices have been issued to
these industries but the authorities have not decided the future
course of action.
In Punjab, 18 out of a total of 45 industries, have not complied with
the prescribed standards, whereas in Haryana there are 8 industries
out of 43 that fall in this category.
Keeping in view, serious water and air pollution, the Ministry of
Environment and Forest has identified four critical polluted areas in
the region. These are Parwanoo and Kala Amb (H.P.) Mandi
Gobindgarh (Punjab) and Najafgarh in Delhi. The environmental
epidemiological studies to study the distribution and determinants
of diseases are being carried out in Mandi Gobindgarh and
Najafgarh.
Population growth, rising standard of living and changes in
consumption patterns have increased the discharge of the waste
into the environment. A survey conducted by CPCB in 1996
regarding municipal waste generation in 23 metropolitan cities has
revealed that the total generation of municipal waste is about
30,000 per tonne per day. Of this, Bombay generates the maximum
(5355 tonnes) per day followed by Delhi and Chennai. In Delhi the
municipal waste generation is about 4000 tonne per day.
On an average, an individual generates about 400-800 gm of solid
waste per day. More waste is generated from urban areas. Thus,
one can easily calculate the quantity of total waste generated per
day in his area. Even in Chandigarh, 500 tonnes of solid waste is
generated per day but the Municipal Corporation of Chandigarh has
not formulated scientific waste management practices such as
segregation, composting and recycling.
Plastic is non bio-degradable. It is now posing a serious problem in
urban and rural areas. Not only does it increase the volume of waste
but also causes choking of drains and affects vegetation. It is also a
potential threat to the animals. Efforts are being made to employ
the three Rs (reduce, reuse and recycle) for effective managements
of wide varieties of plastics by the Centre and the states. Himachal
Pradesh took a lead by enacting a legislation. Haryana is still in the
process of framing a law pertaining to the use of plastic.
There are number of industries in this region which produce
hazardous waste matter. This needs to be preferably incinerated or
disposed of at a specified site. The site should be selected by
conducting Environment Impact Assessment (EIA) and should have
double impervious lining of a resistant chemical/material and a
system of collection of leachates.
Although the MOE&F and CPCB have been insisting the state
pollution control boards identify and develop sites for disposal of
hazardous waste, nothing has been done in this direction.
The Congress Grass (parthenium hysterophorous) is an exotic weed
that poses an imminent threat to our country’s vegetation. Along
with its adverse effect on the vegetation, Parthenium also is the
causative agent of several diseases like asthma and dermatitis.
On a petition filed by the ESI, the Punjab and Haryana High Court
directed the governments of Punjab, Haryana and Chandigarh
Administration to prepare an action plan for the uprooting of this
weed. No state government has so far enacted a law to prosecute
owners and occupants of land infested with Congress Grass.
What are the main causes of setbacks? We are excellent in planning
 but poor in implementation. A prestigious environment and
citizens’-friendly “community based sanitary- cum- epidemiological
programme”, which was praised by national and international
experts in public health was scrapped after functioning successfully
for about a decade without the knowledge of a senior functionary of
the Chandigarh Administration.
In fact, most of our programmes lack political will and are aimed at
short-term and not long-term gains. On the other hand, the main
aim of the Non Government Organisations (NGOs) is to supplement
government efforts and raise a voice against insults to the
environment. A few NGOs do raise a voice against environmental
insults but their awareness programmes have no lasting impact
unless they are followed by action programmes. A bit of Sanskrit
wisdom voices this: “So long as the earth is full of nature, human
race is going to survive.”
The writer is the President of the Environment Society of
India and is based in Chandigarh.
Feudal mindset still dogs women’s struggle
A fair deal, equitable system urgently needed
by Vimla Dang
While the country is celebrating the Golden Jubilee of
Independence, we salute the brave martyrs, both known
and unknown, who sacrificed their lives at the altar of
freedom. We recall with pride the noble deeds of
thousands of women who responded to the call of
Mahatma Gandhi and came out of their homes, braving
brutal British repression, and courted arrest. In some areas
of the country, women even took to arms.
Leaders of the national movement led by Jawaharlal Nehru took a progressive stand
regarding women’s rights and proposed radical changes in the Hindu law relating to
marriage and succession. After 15 long years of struggle, four Acts, forming the core of
the Hindu Code Bill, were passed by the first Parliament. These were the Special
Marriage Act, the Hindu Marriage Act, the Hindu Succession Act and the Adoption and
Maintenance Act.
In Amritsar, Jan Sangh women burnt copies of the Hindu Code Bill. When I first came to
Punjab, I found that stiff opposition had been worked up against the Hindu Succession
Act. This Central Act had granted equal right to daughters and sons in property, including
agricultural land. The Punjab Istri Sabha ran a mass campaign and did a lot of lobbying,
too.
It printed a special booklet in defence of the Act. Aruna Asaf Ali and Vimla Farooqui,
president and general secretary of the Bharatiya Mahila Federation to which PIS is
affiliated, presented a memorandum to S. Gurnam Singh, Chief Minister, Punjab, asking
him to withdraw the amendments. Tara Bai, president, AIWC, Violet Alwa, the then
Deputy Speaker, Rajya Sabha, also made a appeal against the amendment.
A similar stand was taken by the Haryana Assembly led by Bhajan Lal, Chief Minister,
against the Act. We greatly appreciated the stand of late Om Prabha Jain, a Congress
Minister, Haryana, for her consistent stand in defence of the Act. Raksha Saran and
Pritpal Wasu of AIWC also joined us. The Punjab Istri Sabha and the Haryana Mahila
Sabha organised dharnas outside Punjab and Haryana assemblies. A joint delegation of
the Punjab Istri Sabha and Haryana Mahila Sabha met Bhajan Lal but he refused to
budge.
Let it be noted that the amendments proposed by the two assemblies were rejected by
the Centre more than once. In fact, some state governments, like Maharashtra, have
adopted special state legislations, withdrawing the right of the father to deprive the
daughters by will of their share in paternal property, a weakness of the Central Act, thus
putting the sons and daughters on an equal plane.
Women of our country had expected that freedom would end their poverty. But
even after 50 years of Independence, India is still listed in the U.N. human development
report as one of the poorest countries in the world. But from a chronically food deficit
country it has become self-sufficient. That is good, yet one-third of our people go without
adequate food. Over 70 per cent of our people live in villages and 40 per cent of them
are living below the poverty line.
In 1970, we women participated in a countrywide land struggle organised by the CPI
demanding basic land reforms. There was an Akali government in Punjab then. Over 140
offered satyagraha with me at Bedi farm in Ferozepore and were jailed. Hundreds of
others were lathicharged by the police and driven away.
The public distribution system has totally collapsed. The Budget adopted by the U.F.
government in 1997-98 had enhanced subsidies on foodgrains and fertilisers and
promised to give 10 kg of rice and wheat at half the price to those below the poverty
line.
This has not been implemented. It is my opinion that the policies of the present BJP
government, continuation of liberalisation, globalisation and privatisation will lead to
further price rise.Women cannot advance without education. Over 60 per cent of our
female population is illiterate. We are far behind in providing free and compulsory
education to all. Even today, 50,000 villages do not have a primary school. About
4,40,000 are without any upper primary school.
Recently, an alarming trend has emerged in the field of education in Punjab. The number
of students in the age group 14-18 belonging to the Scheduled Castes fell from 1.24 lakh
in 1992 to 1.22 lakh in 1993 and to 1.18 lakh in 1994. The share of the Scheduled Castes
girls in the total enrolment in the age group 14-18 fell from 18.32 per cent in 1993 to
17.36 per cent in 1994 (Economic Survey of Punjab, 1995-96). However, in recent years
enrolment of girls has increased though there are dropouts. About 54 per cent of the
schools in the villages in our country are without water, 79 per cent without lavatories
and 66 per cent without playgrounds.
During the previous Congress government in Punjab, education was made free for girls
up to the graduation level. This has definitely helped the girls. Those upgraded do not
have full staff and adequate accommodation. Many girls have to go to private institutions
which charge heavily. The students and the women’s movement are demanding that we
spend at least 10 per cent of our Budget on education. For girls we need more
polytechnics and hostels.
Employment is an important index of economic status of women. Work participation of
females has risen from 14.22 per cent in 1971 to 22.27 per cent in 1991. However, this
progress is quite unsatisfactory. In India, women constitute 90 per cent of the total
marginal workers, but in the organised sector, they constitute only 4 per cent. About 30
million women work as agricultural labourers. The others work on roads, brick kilns,
construction projects etc.
In industry, women have been thrown out so that expenses on maternity benefits etc.
are saved. Women do not get equal pay for equal work, except in government factories.
There is no law for the protection of women who are given work in private sheds and
houses. Since Independence, there has been tremendous progress with regard to the
status of women, though not all of it is satisfactory. Actually, there has been a
contradictory process.
On the one hand, there has been some awareness about the need for gender equality.
Women’s organisations have led powerful movements and struggles for their rights.
Many laws to protect them are on the statute book. On the other hand, oppression and
atrocities against women have been on the increase for some years now. Cases of wife-
beating, dowry deaths, kidnappings, molestation, rape and aminocentisis (killing of
female foetus in the womb) are common.
Everyone knows that a number of cases are not registered with the police due to the
social stigma attached to rape cases. Newspapers are full of alarming news about rape
cases, including gangrapes of minor girls. Our organisations, including the Punjab
Istri Sabha, are taking up cases of social oppression all over the state and in the
Union Territory of Chandigarh. It cooperates with AIWC, Red Cross, ASHI, Janwadi Istri
Sabha and some others. In the cities and villages, trade unions, kisan organisations and
youth associations give us all help. Members of panchayats are also approached
whenever possible.
In matrimonial disputes our approach generally is to bring about reconciliation between
husbands and wives by patient, persuasive and impartial handling of cases. Experience
shows that police interference does not always help. Only in very special circumstances
do we report cases to the police and that, too, to very senior officers to get their help.
Women’s cells of police have not proved to be very effective so far. In cases of dowry
deaths, we have succeeded in getting some culprits arrested and punished. Conviction
was secured in Amritsar in two cases of rape recently.
There are times when we need the support of people against particular cases of violence
against women. The response has been tremendous. Our opinion is that there should be
no party considerations. In Punjab there was the case of Kiranjit Kaur of Mahal Kalan in
Sangrur district. The girl, a minor student, was kidnapped, gangraped, killed and buried
in the neighbouring fields. The police, backed by some political leaders and vested
interests, tried to hush up the case. Rallies were held. The stinking body was ultimately
traced after 10 days. I have never in my life seen such massive protest rallies as the
ones in Mahal Kalan demanding the arrest of the culprits and action against police
officers. Success in this case was achieved after a prolonged struggle.
There is the recent case of Preeto Bai of Ferozepore. The women was raped by two
brothers. She fought her case boldly. Both the culprits were convicted for 10 years
imprisonment by the Sessions Judge on April 29, 1998. They then disappeared from the
sessions courts. Two days later, they attacked Preeto Bai while she was asleep in her
village and with a sharp weapon chopped off her left leg.
On reading the news, I went to Ferozepore with a group of women and employees and
met Preeto Bai in the Civil Hospital, Ferozepore. We gave her some monetary aid. Later,
we met the SSP and demanded the immediate arrest of the culprits and security for the
family. The culprits were arrested after two days and are in jail. Mandeep Kaur, a
polytechnic student of Ferozepore, was kidnapped over four months ago and most likely
done to death. Manjeet Kaur of a private nursing home seems to have been driven to
suicide. The police have not been acting properly. People are now demanding that the
case be handed over to the CBI.
Increasing social oppression in our opinion is not only due to persistence of old feudal
ideas but also to the fact that we now have a consumerist society. Money and more
money is becoming the sole aim not only of the upper but also of the middle classes.
This has led to tremendous increase in corruption and degeneration of moral values. A
criminal politician-police nexus has also evolved. With money power and VIP links,
people can get away even with crimes such as rape. Women’s organisations must,
therefore, fight relentlessly and demand a new system in society based on justice and
equality and free from feudal rituals and exploitation.
Women must fight for an end to discrimination between a male and female child.
Textbooks in schools must instill the idea of equality of the sexes from the beginning.
Economic independence does not by itself lead to equality in the family. Highly educated
women with big salaries meekly tolerate maltreatment and beatings.
An alarming development is the eulogisation of the practice of sati. Agitations during the
Roop Kanwar’s episode in Rajasthan brought to light that there have been 40 reported
cases of sati since independence. Is it not a shame? The acquittal of all the 32 accused
by the sessions court and their public garlanding in this case shows the emergence of
Hindu revivalist forces. Similarly, the judgement of the Supreme Court was nullified in
Shah Banu’s case to please the Muslim fundamentalists for partisan political ends.
The establishment of National Women’s Commission with statutory powers is a great
step forward. We feel that similar commissions must also be set up in the states.
The writer is an eminent social activist and a former legislator.
They succumb to violence due to economic dependence
Yet, women in India survive, grow and achieve so much
by Sharmila Joshi
IF you consider the innumerable forms of violence women in India
are subjected to, it’s a testament to their determination and
strength that so many women survive, grow, and achieve so much.
Let’s take the case of Rukmini, a fictitious person, representative of
women in our society, and very real in all the violence she
experiences. Violence, after all, is not just physical or mental. Any
form of gender-based discrimination constitutes violence. It harms
the woman, it violates her rights.
Rukmini almost lost her chance to be born. To her middle class
parents in a small town, a possible fourth daughter was an
unwelcome liability. Rukmini’s father proposed amniocentesis — a
pre-natal medical technique which indicates, among other things,
the sex of the foetus.
Tests like amniocentesis and chorion villus biopsy, devised to detect
genetic abnormalities, were banned for sex determination in
Maharashtra and Rajasthan a decade ago. A similar national Bill
awaits ratification since 1992. Meanwhile, the tests are still offered
in clinics in Mumbai, and other cities, as a package deal. If the
foetus is female, the cost of the test covers the cost of the
subsequent abortion.
But her mother resisted, and Rukmini was born. If she had been
born in the Salem or Usilampatti districts of Tamil Nadu, or in Bihar
or Rajasthan, she may not have lived beyond a few weeks. She may
not have survived either in the resettlement colonies of Delhi or
Thane in Maharashtra, which also sporadically report murders of
female infants.
A midwife or a female relative would have killed her by any of these
methods: by stuffing her mouth with black salt, lacing the milk fed
to her with pesticide, tobacco paste, or grains of paddy husk which
slit the tender gullet, suffocating her with a wet towel or a bag of
sand, feeding her juice of the poisonous oleander bery, starving her
to death, strangling or drowning her, or leaving her out to die of
cold on a chilly winter night.
Such contempt for female life, in conjunction with a high maternal
mortality rate (570 per 100,000 live births), the gross neglect of
women’s health and dowry deaths, accounts for millions of
“missing” women in India.
A recent UNDP report says India has 10 per cent fewer women than
would be expected in demographic terms. The national sex ratio in
1991 was 927 women to every 1,000 men, down from 972 in 1901
“The very neglect of girls is indirect infanticide,” says demographer
Malini Karkal. Therefore, it is violence. A March, 1997, study
analysing data from the 1992-93 National Family Health Survey
shows that boys are breastfed for a longer period of time than girls,
and that girls are consistently less likely than boys to be reported ill
with the three common childhood diseases — diarrhoea, fever and
acute respiratory infection.
Having survived all these threats to her brief life, the future is
hardly promising for baby Rukmini. Her parents cannot afford to, or
think it unnecessary, to send her to school. She, like over 60 per
cent of India’s nearly 150 million girls, will remain illiterate. Instead,
she will be conditioned to be docile and domestic.
During her tentative childhood, Rukmini will also face the
constant possibility of molestation and rape. Of the 10,068
rapes registered in India in 1990, 2,105 were of girls aged 10 to 16
and 394 of girls below 10. A mid-’94 survey by the Bangalore-based
National Institute of Mental Health and Neurological Studies of
college girls showed that one-third had experienced sexual abuse
by the age of nine.
As soon as it is possible, Rukmini’s parents will marry her off. Of the
4.5 million marriages that take place in India every year, says a
1994 UNICEF report, three million involve girls in the 15-19 age
group. In some districts of feudal Rajasthan, over 45 per cent of
young girls in the 10-14 age-group are married.
Her parents cannot afford it, but Rukmini’s wedding will be
accompanied by a huge dowry, even though the practice is illegal.
Inevitably, poor Rukmini’s dowry will not satisfy her husband and his
family. They will harass her. Then, the husband will resort to
physical violence, battering Rukmini every day. But our Rukmini is
lucky; she will not die due to dowry-related violence, like one
woman does every 102 minutes in India.
But a desperate Rukmini cannot return to her parents’ home. Apart
from the “social stigma” of such a move, her father, by now a proud
parent of a son, does not recognise her as a legitimate inheritor of
his property. Her right to her matrimonial home will also be denied
to her. If she were Muslim, Rukmini would be legally denied
maintenance after divorce. If she were Christian, she would not be
able to divorce her brutally violent husband because the relevant
personal law (except in Maharashtra and Kerala) permits divorce
only when cruelty is compounded by proven adultery.
If Rukmini becomes widowed, in many parts of India she would lose
any right to dignity and happiness. In Rajasthan, she might be
forced to immolate herself, like Roop Kanwar was, in 1987. In Tamil
Nadu and West Bengal, she could be discarded in a decrepit
widows’ home, where all she can look forward to — is death.
Throughout her fearful existence, the perpetrators of violence in
Rukmini’s life are not only her family. If she ventures beyond the
confines of her home, she could be one of the women molested
every 26 minutes in India, or raped as one woman in every 54
minutes, or kidnapped as one woman in every 43 minutes (National
Crime Bureau figures).
She could even end up in a Mumbai brothel, raped and beaten until
she is too broken to resist.All these, and many more, forms of
violence have been suffered by Rukmini, who is representative of all
women, for centuries. In a study titled Violence Against Women:
New Movements and New Theories in India, social activist Gail
Omvedt of the Shetkari Sanghatana in Maharashtra, says evidence
of patriarchal domination over women is evident as far back as
3,000 BC. It probably existed even before that.
It is with this perspective that several campaigns in the women’s
movement in India have focused on amendments in laws. In doing
this, several struggles have been fought for Rukmini and the
millions of women she represents.
A campaign against rape in the early 1980s is generally regarded as
the catalyst which sparked off the contemporary women’s
movement in India. In 1972, Mathura, a 16-year-old tribal girl, was
raped by two policemen within a police compound near Nagpur.
In 1974, the Sessions Judge acquitted the accused on the
ground that Mathura had a boyfriend and was “habituated to
sexual intercourse. The High Court reversed the order. But in 1978,
a three-Judge Bench of the Supreme Court once again set the
culprits free.
This set off the campaign, which included public protests and wide
media coverage. In 1980, the law related to rape, unchanged for
120 years, was amended, though not entirely to the satisfaction of
the campaigners. By the Criminal Law (Amendment) Act, 1980, the
onus of proof of consent was shifted to the accused, but only in
cases of custodial rape (involving policemen, public servants,
wardens and so on). The amendment stipulated seven years as the
minimum punishment for rape
Around the same time, media attention was drawn to “dowry
deaths” with increasing reports of deaths of young brides in kitchen
accidents. Kanchan Bala died in Delhi in March, 1979, and was the
first case to be recognised as one of bride-burning. This was
followed by the death of Tarvinder Kaur, also in Delhi, in May 1979.
By June that year, a vociferous campaign was under way,
demanding stringent action against the perpetrators of such
murders. The 1961 loophole-riden Dowry Prohibition Act was
amended twice, in 1984 and 1986, making demands for dowry a
non-bailable offence and shifting the burden of proof to the
accused, amongst other changes.
Over the next decade, other campaigns have also resulted in
changes in, or introduction of, laws. In 1986, the Cr P C was
amended (Section 498A) to create special categories of offences to
deal with cruelty to wives (domestic violence) dowry harassment
and dowry deaths. Following a concerted campaign in Bombay,
amniocentesis was banned for sex-determination in Maharashtra in
1989.
Legal provisions were accompanied by other changes. For the first
time, women began to openly talk about hitherto “taboo” subjects
like domestic violence, rape and incest. Women’s rights and legal
activist Flavia Agnes, wrote a book called My Story, Our Story, of
Rebuilding Broken Lives, detailing the physical violence her
husband subjected her to.
But all the positive changes pale in comparison to the simultaneous
status quo in other arenas — such as unchanging attitudes, a more
exploitative media, a rising crime graph — and in the area of legal
justice.
“If oppression was to be tackled by passing laws,” writes Agnes in a
critique of legal amendments, “then this decade (1980-89) could be
adjudged as the golden period for Indian women activists.”
“The enactments conveyed a positive picture of achievement, but
the statistics revealed a different story... The rate of convictions
under these lofty and laudable legislations was dismal. Hence the
deterrent value of the enactments was totally lost.”
But social change takes time. Along with the negatives, points out
Omvedt, the activities of mass-linked women’s organisations, party
women’s wings and urban feminist collectives are also spreading.
“Old theories, stereotyped ideas and conventional methods of
action are being challenged,” she writes. “In fact, it is the mass
movements arising from those at the very depth of an exploitative
and destructive social order, particularly the movements of peasant,
adivasi and Dalit women, and the theories coming out of them,
that are in the forefront of dealing with the challenge and the
crisis.”
The writer works for Women’s Feature Service, New Delhi.

A vast majority lives in abject poverty

Gender bias, infanticide bane of Indian woman
by Sujata Madhok
SAY “women’s issues”, and a whole bunch of cliches comes to mind
— rape, dowry, crime, violence, sexual harassment, incest, wife-
beating, discrimination, rights, quotas, gender, sexism, feminism.
The list of problems and issues seems endless. But a basic,
underlying issue invariably gets ignored — the fact of poverty.
Yet, it is now well established that the poorest households in any
society tend to be those headed by women. Though too little Indian
data exists on this phenomenon, it is known and officially accepted
that the vast majority of Indian women lives in poverty all their
lives. The government acknowledges that the 1991 census and the
National Sample Survey (NSS) data of 10 per cent such households
is an underestimate.
The estimated 20 per cent rural women-headed households (where
women are widows, deserted wives or where men have migrated)
are particularly vulnerable, as women rarely have legal titles to
land, which is the critical survival resource in the countryside.
Landlessness and seasonal unemployment is the fate of the
majority. In the past, access to forest products like timber, the
mahua flower, the katha tree, and to foods like nuts, roots, fruits
and berries, edible grasses and bamboo shoots provided income
and sustenance during lean periods. As these sources are drying up,
the burden falls most heavily on the women — who bear
responsibility to somehow make provision for the family’s
sustenance.
Caste hierarchies, a feudal-patriarchal culture, the absence of land
reforms, anti-agrarian economic policies, polluting technologies like
chemical pesticides and fertilisers, and dearth of health and
education facilities do little to improve their lot.
If the village woman escapes female infanticide at birth, survives
infanthood despite discriminatory feeding and health practices, and
grows into adolescence, she faces the next hurdle of post-puberty
marriage and early motherhood. Repeated pregnancies and
undernutrition endanger her health and can be fatal.
Her lot is sickness, overwork and powerlessness in the family
hierarchy. Gender bias restricts her mobility, education and
acquisition of skills, ensuring that she cannot earn an adequate
income. Should her husband migrate to the city, desert her or die,
she can barely survive. If she is lucky, she dies a suhagin.
A 1987 survey of women workers by the National Commission on
Self-Employed Women based on 1.5 lakh questionnaires found that
35 per cent of respondents earned less than Rs 3,000 in a whole
year.
This, despite the fact that these women perform a multiplicity of
economic activities ranging from wage labour to self-employment.
On an average, each woman was doing four kinds of work — for
insurance, labouring in the fields for wages, working the family plot,
rearing livestock and processing agricultural produce for sale.
Her work contributed roughly 40 per cent to the income of the
family.
The rural wage labourer was found to earn the least — less even
than women engaged in independent work or in contract, piece-rate
work at home.Yet, census data shows that between 1981 and 1991
the number of rural women agricultural workers increased by a
phenomenal 36.15 per cent. Clearly, landlessness and poverty is
forcing more rural women into the labour force to earn a miserable
wage.
The argument that this increase reflects more accuracy in census
definitions and data is a partial and inadequate explanation for such
a huge jump.
Traditionally, women are paid lower wages than men. Usually, the
discrimination is justified by demarcating jobs as either “men’s
work” or “women’s work”. Even the government’s periodic
notification of minimum wage rates for agricultural labour, has not
effected any change.
Activist Brinda Karat in a two-part article in The Hindu says this
exploitation is being taken a step further. She cites farms and
sugarcane plantations in Andhra Pradesh where women are being
hired to do the planting normally done by men. “The exploitation of
cheap women labour has become an important instrument to
increase profits,” she writes.
On the one hand more women and men are looking for wage work
in the countryside than ever before. On the other, points out Karat,
the switch from agricultural crops to cash crops generally means
that less labour is required. The consequence is more poverty and
migration, forcing yet larger numbers into overcrowded cities.
Gender differentiated wage rates in industry too are marked, with
women earning roughly half what men earn. The enactment of
legislations like the Factories Act and its accompanying rules, the
Industrial Disputes Act and the Minimum Wages Act have not led to
women earning equal or fair wages. Studies, such as the Bridge
Briefings On Development and Gender, recount that women are
paid much less than men for the same work or similar work.
In part, this situation arisen from the fact that most women’s
employment — close to 95 per cent — is in the informal sector.
What employment growth there has been for women in the formal
sector, has been mainly in the public sector in the 1980s. Within the
private formal sector, there has been little growth after the 1970s,
contrary to popular belief which is based mainly on increased
employment for women at the higher levels in a company’s
hierarchy.
For most women, the struggle for survival defines their entire
existence. But caught up as the media, the women’s groups and the
mushrooming number of ‘gender experts’ are in debating the
multiple manifestations of sexism, they tend to ignore this harsher
reality.
Problems like domestic violence or alcoholism are often symptoms
of an interplay of factors ranging from patriarchy to poverty. To
stress only one factor is misleading. If you are a middle-class
woman, there is a possible solution to dealing with the problem of
an alcoholic husband — go to a social worker or counsellor or
psychiatrist for help.
But if you live in a slum, and your husband is an alcoholic, and
you can’t afford the next meal, and the landlord threatens to
evict you because the rent is three months overdue, and your sons
are becoming vagrants, you’ve never heard of a psychiatrist, and
the government-sponsored theka next door continues to sell
temptation at your doorstep despite your protests and those of the
neighbours, are the solutions that simple?
Consider how poverty affects the daily life of the woman in the
slum, where the degradation of the environment has led directly to
the decay in people’s personal values.
Back in the village, the public well was a meeting spot, especially
for women who come to collect the day’s water supply. The public
pond was a place where bathing was fun, children splashed in
abandon, women chatted over the household washing....
In the urban slum, overcrowding and shortages turn the sharing of
common facilities into a nightmare. Women are forced to fight for
water from public taps that are dry more often than not
Living cheek by jowl, sharing small common spaces like yards or
open grounds, queueing up to use the woefully inadequate public
toilets, all become sources of endless conflict. Neighbours beat each
other up over the smallest provocation; sometimes the fights
become lethal.
Slums account for much of the urban sprawl. according to the
estimates of the Task Force on Housing and Urban Development in
1981 between 30 to 45 per cent of the population of metro cities
like Bombay, Calcutta, Delhi and Madras were living in slums. (The
Task Force studied data from the Census, the National Sample
Survey Organisation, and the Town and Country Planning
Organisation, among others).
Instead of facilitating housing, government spending on housing
dropped from 34 per cent of the budget in the First Plan to nine per
cent in the Seventh Five Year Plan.
The writer is a journalist and a social activist.
Educating a woman means educating a family
by Rashmi Sharma
A lot has been said and written about the 50 years of Indian
Independence. Even the Indian Parliament convened a special
session to discuss what the members thought to be the issues most
fundamental to the development of Indian society and economy. We
know very well society cannot develop without the development of
its womenfolk.The Constitution of India enjoins upon every citizen
the duty to “renounce any practice derogatory of the dignity of
women”. Our religious scriptures also accord due respect to women
and assert that God lives where women are worshiped. In this way
our Constitution legalises what our scriptures prescribe as a social
duty. The need to incorporate their injunction into the Constitution
of India arose due to the prevailing atmosphere in which the women
were denied their place in society and subjected to humiliation,
which reduced them to a position inferior to men.Mahatma Gandhi
and a host of other leaders connected with the freedom movement
realised this and set out to liberate women in order to enlist their
valued cooperation in the all-round advancement of India. Hence,
the need to put women issues into the Constitution
In true spirit, the principle of the basic equality of sexes has never
been put into practice. That cannot be possible without the
development of women. For this, education of women is a must.
Educate a man, and you educate one person. Educate a woman and
you educate the whole family. This is a well-said dictum. For this the
Government of India should make education for women free and
compulsory.Women in India have covered a great distance in the
last 50 years. They are coming up in all spheres of life. They are
joining universities and colleges, entering into all kinds of
professions like engineering, medicine, teaching etc. If the
provisions of the Indian Constitution are observed in letter and
spirit, the future of Indian women is quite bright. The time has come
for adopting a revolutionary approach. With the introduction of 33
per cent reservation for women, the nation, or for that matter, the
world can be lifted to heights of greatness and distinction. There is a
great need for awakening of women socially. Without social
amelioration, political rights have no value. There is a visible gap
between the law as it stands and the law as it operates. The need is
to bridge the gap. It is one thing to declare, and another to enforce.
The potential of human rights law vis-a-vis women is worth
addressing in India, especially in view of the Indian Constitution, but
the problem of enforcement should not be underestimated. The fact
that women tend to suffer human right abuses in a specific way has
often been ignored.
The writer is a social worker and has won several awards .
Awaken her socially, and see the difference
by Madanjit Kaur
GENDER discrimination has been a universal phenomenon in human
history from time immemorial. On account of her biological
constitution, social taboos and scriptural sanction, the social
position of the woman has always been considered as inferior and
subordinate to man in society. Guru Nanak not only rejected the
lowly social status of woman but declared her to be the essence of
social coherence and progress, and equal to man in every sphere of
life. No doubt Sikhism brought great relief to the sufferings of the
Indian women, but the social transformation could not cross
religious boundaries. There were other reformatory movements
to elevate the status of women, but the position of women
remained the same in Indian society.
Even in Europe the right of franchise came to women much
later.However, with the dawn of modern age, old values have
changed. With new awareness on account of education, economic
development, social awareness, social organisations,
industrialisation, urbanisation, disintegration of joint families,
economic and technical developments, pressures of consumer
society, more opportunities for work, development of means of
communication and transportation and social mobility, a great
change has occurred in the attitude towards women. Subsequently,
the position of women has certainly been enhanced.
I see a steady trend among modern women towards increasing
consciousness of their rights, seeking liberty from gender
discrimination and finding an independent identity and economic
independence. Women have now certainly got a status in society. A
working women’s position is certainly different from that of
housewife. But the attitude and behaviour of society towards
working women is not yet satisfactory and just. Although women
have joined almost every profession in our country and most of
them are doing excellent work, the working women have to put in a
great deal of hard work to reach the top. But everything does not
stop there. She has to fight hard to retain her position and make
people realise the worth of her skills. Economic independence is
essential for the personality development of woman and for
providing economic support to her family. It gives her confidence,
liberty, identity, security, a status and a feeling of sharing the
economic needs of the household.Much work is needed on the
social front for the harmonious development of the position of
women in our society.
Social evils like girl abuse, women abuse, dowry deaths, sati,
gender discrimination etc are painful realities of our society. We
have to deal with these problems seriously and sincerely. The
dominant nature of the male in our society is one of the major
factors to be sublimated to the spirit of equality.Girls should not be
considered an unwanted burden, liability and problem. They need
equal attention and loving treatment for the mental and physical
development of their personality. Women should have more
facilities for education, applied sciences, professional courses and
training and more career prospects and avenues of employment.We
need more women welfare organisations to make efforts at the
grassroots level for the welfare of women and development of
society.
We need more opportunities for the development of women
entrepreneurship in the socio-economic, industrial and commercial
spheres so that women can play a definite role in the economic
development of the country and contribute significantly in the task
of nation building.The deal which I want from society is that the
woman should not be taken as an object of liability, property, a sex
symbol but as an equal human being. Although she has to awaken
to her potentialities, she still needs more awareness and alertness
about her rights and duties. She has definitely a serious role to play
in the 21st century. At the national front the women have also an
additional role to play in the preservation and conservation of
our cultural values. We have to safeguard our young generation
from the influx of western culture which is devoid of any morality
and human sensitivity, through media and other devices of
communication. This impact of western values is eroding our
cultural ethos and spirituality. The material value pattern of a
consumer society is no answer to the challenges of human
existence in this crucial phase of the times.
The writer is an eminent scholar, and is an authority on
Sikhism.

Man’s pysche must change

by Oshima Raikhy
The 21st century must become synonymous with the time the
woman finally got her rightful place in society. And her status at
home will largely determine her standing in the world. Respect for a
woman, her needs and aspirations is essential because only then
can she give her best to society. A happy woman will make a loving
home and bring up sons and daughters who have a healthy outlook
towards life and are not scared to denounce the evils afflicting
every little step of our walk towards a peaceful existence.Thus, to
begin with there must be democracy in the family. The husband and
wife should work as a team with both partners having an equal say
in decision-making. The woman must not be condemned to play the
role of a maid to the man - whether it is father, brother husband,
father-in-law, brother-in-law or son.Society needs to be rid of a lot of
shortcomings that have only undermined the position of woman.
Just as the practice of sati has been abolished (well, almost), the
world would be a far better place if people spent their time in
constructive activities rather than collecting dowry for their
daughters or marrying them off during childhood and leaving them
to their “fate” or satisfying their lust by kidnapping, raping and
dumping girls.In order to iron out the unevenness in society, the
women must be educated and they should learn to assert their
rights and shun the injustices heaped on them. The real change will
be when man’s psyche undergoes a transformation and both men
and women meet mid-way rather than the girl always making all the
adjustments.The writer is President, Punjab Istri Sabha.
(Interviews conducted by The Tribune staffers--Harvinder
Khetal, Tripti Nath, Jangveer Singh and Varindar Walia).
‘Adam for field, Eve for hearth’ no longer relevant
We have to change the patriarchal system
by M.L. Kak
‘WHETHER out of convenience, or conviction, or tradition, Indian
society, over the centuries, has been “unfair” to the fair sex, and
Jammu and Kashmir state, which has over 30 lakh women as per the
1981 census, is no exception.
Prominent women, whose contribution in the development of
education and in social service has been outstanding, agree that
during the last three decades women have marched ahead in fields
which used to be dominated by men, but even in the changing
scenario for the fair sex the age-old discrimination against women
has assumed a new and unfortunate trend in the shape of female
foeticide.
According to Shakuntla Seth, a prominent educationist who has
remained active for 45 years in promoting avenues for female
education in Jammu, female foeticide is a reformed version of
Rajput tradition of killing their daughters soon after they were
born.” She is of the opinion that “discrimination against women has
its roots in the tradition in which parents watch with tears in their
eyes the birth of a female child and are thrilled if a male child is
born.”
Mehmooda Ali Ahmed Shah, considered to be the founder of modern
educational system for women as the first Kashmiri principal of the
Government College of Women in Srinagar, says that despite the
fact that the freedom struggle threw up many women stalwarts, the
“patriarchal social system has denied women their right to have a
place of honour in society.
They have been denied, under this system, equal opportunities to
grow and work in their chosen field of activity. If we expect a fair
deal from society, we have to change the patriarchal system,” she
explains, adding that over the centuries “Indian society has been
plagued by the feudal system as far as its treatment to the fair sex
is concerned.”
She does not believe that legislation will create a miracle for women
if the social system and its values and attitudes do not experience
any major change. “Legislation does not percolate to the grassroots
level. And these laws will have no meaning if the male-dominated
society does not accept them and implement them.” She says, “We
have laws against dowry, against bride-burning, against female
foeticide but these crimes against women remain unchecked.”
Dr Nirmal Kamal, Professor in the Department of Economics in
Jammu University, expects society to change its outlook on women.
“We are treated as an instrument of entertainment. We are
victimised, exploited and used to serve the interests of man.”
The petite Dr Kamal does realise that in the “evolutionary process
man for the field and woman for the hearth is a thing of the past.
However, women are yet to be politically and financially
empowered.” Shakuntla Seth moves a step further and says that
“we expect the society to alter its attitude and stop treating women
as mere sex symbols.” What looks sickening is the way the male-
dominated society treats women as “pleasure dolls”, thinking that
“she has to live for man and die for him”. She is of the view that the
situation “has eased for women in the urban areas of the country
but it continues to be difficult in rural areas. Here women have been
denied opportunities to lead an honourable and self-sufficient
life.”
For Dr Koshalya Wali, eminent educationist and a true Gandhian,
“male chauvinism has denied the fair sex the right to be a human
being.. Boys have the right to flirt with girls, remain engaged for
months and then demonstrate their right to accept or reject the
girls they were engaged to be married,” she bemoans. “The
Constitution provides equal opportunities to women, but in practice
women face discrimination,” she explains.
Dr Wali would like one to differentiate between literacy and
education on the plea that despite the fact that the women literacy
percentage in India, including Jammu and Kashmir, has increased,
most of the women are not educated in the real sense of the term,
as they “are yet to experience development of their body, mind and
soul.” To her, “women stand on the crossroads of home life. Even
working women have to labour in the kitchen before going to the
office and after returning from it. Their status is nothing better than
that of a bonded labour.”
She says the dowry system has become a major social menace
under which the male-dominated society exercises its right to select
a girl as a daughter-in-law on the basis of the wealth she will bring
as dowry and not on the basis of her merit.” Mrs Seth and Dr Wali
say it is unjust if working women are forced to act “almost like
bonded labourers in the kitchen. She is expected to perform all the
domestic chores before going and after returning from the office.”
Mrs Seth laments “even those working women who draw good
salaries are teased by their in-laws for having brought meagre
dowry without realising that their daughters-in-law have been given
a sound education so that they can contribute several thousands of
rupees to the domestic pool every month.”
Their common refrain is that women in India, including those in
Jammu and Kashmir, “have not been allowed to develop self-
confidence.” It is so because “before marriage the fair sex is under
the thumb of the patriarch, and after wedding in awe of her
husband and father-in-law.”
Mrs Seth says “in the West, a single woman can move about and
travel to distant lands as a tourist but in our country even four
women feel scared in the presence of one man.”
Mehmooda Ali gives credit to late Sheikh Abdullah for having been
instrumental in providing women in Jammu and Kashmir
opportunities to receive education which has helped them to fight
for their rights. In fact, she says, the Naya Kashmir plan, conceived
by Sheikh Abdullah prior to India’s Independence, too, has helped
women to grow emotionally and mentally. She is not in favour of
launching a campaign on the pattern of Women’s Lib as was done in
the West. “We have our culture. We are not for westernisation but
for a change in the attitude of the society so that the fair sex enjoys
honour, freedom and equality.” To her there “is a need for changing
the society and its norms, which will take time.”
Mrs Seth is not optimistic about the prospects of “women launching
a crusade against male chauvinism. We have not united to see
women candidates get elected to the Lok Sabha, or to the state
assemblies.”
Dr Nirmal Kamal is of the view that gradual “social evolution has
brought women out of depression and deprivation but what is
needed is a revolution so that women get their rights and are not
treated as sex symbols.”
Dr Wali has one complaint that women have outclassed men as
engineers, architects, doctors, teachers and administrators but they
“are yet to be treated as human beings at a par with the male sex.”
She is of the view that increase in divorce cases is the result of male
chauvinism, but Ms Mehmooda believes that for a smooth married
life “understanding between the husband and the wife is
necessary.”
These prominent women do not want doles from society. They
expect women getting parity with men, and this can be achieved
once society changes its outlook. They refer to the government plan
of introducing reservations for women so that the Lok Sabha and
state legislatures have sufficient number of women
parliamentarians. In this connection they are of the opinion that
reservations may help women to have greater political power but
their ultimate “status and dignity of life is to be determined by
society.”
They are optimistic about the society witnessing a transformation,
provided women show determination in receiving higher education.
“Education alone will force society to change its attitude towards
women,” they observe, adding, “our society has deprived the
country of greater progress by keeping the fair sex as a decoration
piece only.”
The writer is The Tribune’s Special Correspondent based in
Jammu.

Administrative will is lacking

by Sheila Didi
One of the biggest obstacles in the way of emancipation of women
in this materialistic world is the evil of dowry. Worse is when at
times women themselves play a role, whether active or passive, in
the perpetration of this practice.Article 15 of the Constitution
provides special provisions for women and Article 50-A presages
duties on individuals to renounce practices that are derogatory to
women’s rights and certain laws have been amended from time to
time for the betterment of women.
The post of dowry prohibition officers was created as also the
setting up of dowry prohibition advisory boards was envisaged.But
what has happened? How many raids have been conducted? How
often have the boards, wherever formed, met and what is their
contribution? There seems to be a lack of administrative will in
tackling the problem.
Drastic steps are needed to achieve the goal. Inept officers should
be replaced with dedicated ones and they should be sensitised to
the gender issues. Family courts are also the need of the hour to not
only expedite dowry cases but also provide some kinds of
counselling. Above all, women should unite and agitate for their
rights. Nobody will give them on a platter. Another experiment
towards this aim could be the introduction of a subject on family
relations at school.
Children must be taught to respect fellow human beings, especially
elders. Once the values of humanity are ingrained in them, half the
problems will vanish.Needless to say that given a chance, women
have always proved their mettle, both at home and at work. But to
achieve a balance, reservation for women in Parliament is
necessary, just as in the local bodies.
The writer is the President of the Chandigarh unit of the
Punjab Istri Sabha
A comprehensive legislation is required
by Nargis Bir Singh
HALF a century ago Jawaharlal Nehru had said,: “While the world
sleeps, India awakens to freedom”. But the tryst of Indian women
with destiny is still elusive. Though the country has made a lot of
progress, the role of Indian women in society remains only
peripheral. In independent India, women, particularly tribal women
and those belonging to the backward classes, are victims of male
terrorism. They are singularly disabled and need to be enlightened
by their representatives in political and social life.
The Indian woman has not only to liberate herself from this
suffocation, but also has to fight the forces of rural and urban
violence. The Central Social Welfare Ministry and the National
Commission for Women are putting in creditable efforts, but a lot
remains to be achieved.
“Equality to all”, as promised in our Constitution, still evades Indian
woman. Movements need to be launched on a war-footing for
granting economic and social justice to women. Given the
opportunity, women do not lag behind their male counterparts. The
educated Indian woman today is full of power and vision and none
can match her prowess when challenged. Basically, what is required
today is to bring an awakening among them by providing ample
opportunities for education and awareness of their rights.
India is a vast country and we have plenty of intelligent, talented
and socially-committed women, who should come forward and try to
improve the lot of Indian women.
The topic of reservation for Indian women is still a talk and needs to
be given a definite shape. I am confident that comprehensive
legislation, if brought forward, can go a long way in improving the
lot of Indian women. It has taken years for the Indian women to
speak up for their cause, and the only way this confidence can be
further kept is by making them self-reliant.
I pray that the talk of granting women equality, social justice and
better opportunities does not remain in the planning-rooms and
intellectual talk-shows only. It needs to be given a practical shape. .
Include our voice in all dialogue
by Shabana Azmi
AS identity is based on several factors, there are expectations I
have from society as an Indian, as an individual and as an artiste.As
an Indian, I think that the bottomline of all negotiations should be
our Constitution — a Constitution committed to gender equality,
secularism and democracy.
As a woman, I expect that finally space be given to women to
participate in the global dialogue, whether it is on issues of
industrialisation, or political and environmental issues. What I call
the feminine gaze should be included in all dialogue happening
locally and globally. All problems so far have been sought to be
solved by men, which means that 50 per cent of mankind has not
been included. This is why women are demanding inclusion in all
spheres of life in the global dialogue.
Ultimately, when we talk about empowerment, it means
participation in the decision-making process. The quality of
education needs to be improved. There has to be a political will to
alleviate poverty. If the government and the NGOs work together,
the problem of poverty can be tackled effectively.
There should be a healthy exchange of ideas between the East and
the West. It is the business of the East to inform the West of its
values.
(The writer is an actress and a Rajya Sabha MP)
We must live for a cause
by Meenu Kulkarni
Times have changed and so have values and needs. But, I feel that
certain values are eternal and are not going to change. Since
society is a web of inter-relationships, I expect individuals to respect
each other’s feelings and capabilities. To my mind, society is an
extension of a family and expecting something from fellow human
beings means fulfilment of their expectations as well. So, we have
to pause, think and act according to the needs of the time but not
without love, care and responsibilities.
I’m against blind competition and a futile rat race. I think that
parents today are so preoccupied with amassing wealth that they
end up neglecting their children. I expect parents to give more time
to their children.
I think each of us should live for a cause. I expect from society
justice to all irrespective of caste, creed and gender. I also expect
society to lend moral support to the downtrodden and help criminals
reform themselves.
|I feel that each of us should safeguard the bounties of nature and
be compassionate to animals. In fact, birds and animals give us
affection and love without expecting anything in return. We need to
imbibe this rare quality by learning to be self forgetful.
(The writer is a well-known artist)
Treat us with dignity
by Mohini Giri
Ultimately, whether it is empowerment of women or atrocities
against women, family, society and the community are what really
count.
Attitudes are developed when a child is small and these attitudes
are reflected later in society.
Unfortunately, in India, the mindset of man has always been to
subjugate women and to give her space behind the curtain. In
recent times, there has been a tremendous awareness among
women for which the women’s movement is primarily responsible.
Women activists, have, from time to time, raised issues of rape,
sexual harassment or harassment at places of work and last, but
not the least, on discrimination throughout life.
What we need to look at today really is what is the response of
society towards the cries of women. Is it sympathetic? Is it prepared
to listen?The bitter experience of the National Commission for
Women, especially in the last five to six years, has been that
whenever a woman wanted to break her silence and speak out, she
has been brutally silenced.
I expect from society dignity and equality for women and a
sensitivity to enable her show her true talent.
(The writer is Chairperson, National Commission for Women)
Modify the legal system
by Jayashree Anand
Even before a girl child comes into this world, parents exercise the
option of sex determination tests followed by abortion in case it is a
female. Such is the tumultuous beginning of the life of a girl child.
This is indeed thought-provoking because if her own parents cannot
hail her arrival, can society at a subsequent date assure her a life of
dignity and respect?
Unfortunately, our society is double-faced. On one extreme, in this
land of ours, Durga, Lakshmi, Saraswati are revered and worshipped
for granting the boon of strength, wealth and intellect. The mother,
while neglecting her own health, ambitions and aspirations proves
to be the backbone of the family. The female gender is the caring
daughter, loving sister, adoring wife and sacrificing mother.
On the other extreme, she is the prey, the victim, the target, the
exploited, the raped, the abused and, finally, the silent sufferer. A
mute sufferer, lest the society which has inflicted all these wounds
on her turns around and accuses her of being immoral and a curse
to womanhood.
(The writer is a former Deputy Advocate-General, Punjab,
and practising advocate in the apex court)
Respect our thoughts
by Shobha Broota
I think that society needs to respect, understand and appreciate art
as a medium of expression which contributes to its aesthetic
growth. An artist helps society see the finer aspects of living.
Since an artist enriches society by her unique aesthetic
contribution, she expects that society be prepared to provide her
sufficient help to fulfil her creative urge.Society should not expect
an artist to explain her works as her language is visual. An artist has
a peculiar language, her own perception and unique reaction to
experiences in life. I expect society to respect an artist for her
thinking, appreciate her for her expression as she is translating her
perception in her own language. I expect society to be tolerant and
sensitive to an artist’s novel expressions.
I also feel that society should promote art and help an artist display
her work in homes and places of interest to enable people seek
visual delight.Creation of artefacts has been the preoccupation from
times immemorial and this should continue forever (The writer
is a well-known artist)
A give-and-take relationship
by Shahnaz Husain
Each individual is a member of society. Therefore, I feel, what
comes first is what we can contribute to society and only then can
we talk of expectations. I come from a conservative Muslim family
and was married at the age of 15 and became a mother when I was
16. Therefore, I had to cross many barriers, including social barriers,
to achieve what I did.
What I did expect then was the recognition from society that apart
from being a wife and mother, a woman also feels the need to
establish her identity, fulfil her own ambitions and experience
financial independence too. The family, which is a unit of society,
must understand this aspect and it must respond by creating a
congenial environment and by adopting a broader outlook
Each individual must give back to society in some way. To that
extent, society has expectations from itself. When I started
Shamute to impart free training in beauty therapy to the deaf and
the dumb, I felt I had to do something to improve the lives of those
who are less fortunate than me. In my career, I have always
concentrated on spreading the Indian herbal heritage worldwide.
So, I do expect recognition from society, not so much for my
success as an entrepreneur but for creating a market for Indian
herbal cosmetics and taking our rich herbal heritage to every corner
of the globe.
(The writer is an internationally known cosmetician)
We must get rid of hypocrisy
by Sadia Dehlvi
There is no ideal society anywhere in the world just like there is no
ideal man, but the Indian society, in particular, needs to treat
women with dignity and respect and allow them the freedom to
make the choices they would like to make. I think a large number of
women are still suffering from a severe degree of male oppression
and that is not a healthy trend. I think Indian society, by and large,
is full of duplicity and hypocrisy, which we need to get rid of and
lead a life devoid of deceit. We have to strive to be an egalitarian
society free from gender biases, and, in order to achieve that, we
need to educate women, in particular, children, at the grassroot
level.
We, Indians, have a tendency to point fingers at others and blame
everything that goes wrong on someone else. But we must realise
that each of us can make a difference if we strive for perfection in
our own areas of work and family.
(The writer is a well-known columnist)
Culturally we are orphans
by Dalip Kaur Tiwana
I AM not a rebel. The woman writers of today do not understand the
difference between revolt and deviation. They talk of revolt as a
means of taking a step forward but do not know whether it will
benefit their cause or not.
Literature has become a means through which personal ambitions
of money, property and promotions are achieved. Writers have
made literature a system through which they justify their own
views. There should be a fine balance between action and
contemplation.
Another thing which has afflicted our society is the end of role
models. Society no longer has men of substance in most spheres,
which has demoralised the coming generation. Culturally we have
become orphans, with the family set-up breaking.
It is due to this degeneration of culture that we get this shabby
treatment from society. The need of the hour is the protection of
the soul for which the entire world can be sacrificed.
I have faced problems because I am a woman. When I entered the
field of literature, there were few women in it. However, I was
fortunate to get good guides. Even when I was doing my doctorate, I
was told by a department head of the university not to side with my
guide, or I would not get my degree. However, I remained steadfast
and eventually cleared the viva.
I write one novel a year and complete the work itself in five days
after the idea comes to my mind. However, I entered the literary
world by accident. I had taken up Punjabi in postgraduation in
protest after my uncle requested me to come home to Patiala when
I was studying law as well as attending classes of M.A., history, in
preparation of civil services examinations.
I took to Punjabi after my teacher, Pritam Singh, read out my test
report in which I got two marks out of a total of 10. I felt instigated
enough to say I would come first and started working even harder
after the death of my uncle, who had adopted me, a short while
later. I eventually stood first in the class.
While in Punjabi University, I was persuaded to write a story for the
university magazine, which caught the eye of Vice-Chancellor Teja
Singh. He encouraged me to write more stories, and my first
collection of stories was published from the money I got from
scholarships.
Following this I started writing novels and got the Sahitya Akademi
award for my second novel Aho Hamara Jeewana in 1972. I have
written 20 novels, besides a collection of seven short stories.
( The writer is Professor in the Punjabi Department, Punjabi
University, Patiala, and a Sahitya Akademy award winner)
Why this social oppression?
by Yasmin Hazarika
My expectations arise from what I think is wrong in society. Despite
the constitutional provisions, we continue to have inequality and
women are treated as inferior and subservient beings.
Men in our society do not consider women their equals, and when a
woman tries to assert this equality in family, there is tremendous
backlash. This is a basic factor behind all crime against women.
I feel that in our country we are just out to be nasty and rude to
each other. I wish people could be more humane, compassionate
and honest in all their dealings. I wish they could be more
pleasent to each other. Dishonesty seems to have become a
part of society now. I think that society needs to move from
consumerism to self-limitation. Our country was known for its
simple living but in the last 25 years, we have become materialistic.
I feel that society should follow Gandhian principles
Society has become more oppressive to women because of
materialism. It was not before mid-seventies that the first dowry
death was reported from Delhi. I feel that people should practice
bhakti in the sphere of religion instead of announcing their religious
faiths from the rooftops, which provokes communal violence.
(The writer is Deputy Commissioner of Police, Delhi).
Consumerism is the villain
by Tulsi Patel
I am a little non-plussed and puzzled because I have always thought
of what society expects from me and not what I expect from
society.Perhaps, such expectations would depend on how one
conceives the notion of society. For instance, what is the boundary
of society for an individual? Does one draw a line at family, friends
and relatives or does one extend it to society at large?
It is easier for me to articulate my expectations from society by
giving a thought to what I don’t expect from society. Therefore,
what I expect is peace, security and a more harmonious relationship
not terrorism and violence. As an extension of the philosophy, ‘live
and let live’, I strongly believe that consumerism ought to be
curbed. Society should not evaluate its members through their
material possessions.
I subscribe to Gandhiji’s philosophy that nature has enough to offer
to society to meet everybody’s needs but not enough for anybody’s
greed.
As a woman, I expect society not to treat women as objects and be
less harsh to them. This does not mean that men do not pull down
other men. This also needs to be denounced.
(The writer is a Reader, Department of Sociology, Jamia
Millia Islamia, New Delhi)
Give us equality and respect
by Pam Rajput
The plight of women in India is a sad reflection on our society. By
overlooking the injustices meted out to them at the social, political
and economic levels, the state becomes party to the discrimination
being faced by the women in this “man’s world”.
Despite the laws enacted to give equality to women in all spheres of
life, they are denied the basic right to live with dignity. In fact, the
conditioning is such that if a woman is wronged, even raped, she is
looked down upon. The problem is worse in rural poor houses where
education is not a norm of life.
Yet it goes to the credit of women that they continue to carry out
their responsibility towards the house and children. They are the
ones who have to bear the brunt of any upheaval.
For example, while the Green Revolution was taking place in the 60s
and 70s for the welfare of landlords, small farmers were undergoing
great hardship. Then the burden of meeting the daily expenses fell
on their women. It is almost the same case today in Andhra Pradesh
and Maharashtra where farmers are committing suicide due to
poverty.
Society has not recognised the contribution of women. It is time
that the invisibility and marginalisation that has been her lot till now
gives way to the woman getting her due. The contradictions
inherent in our society wherein goddesses and cows are worshipped
but living girls and women are bereft of a respectable existence
must end.
People are quick to point a finger at the woman but nobody extends
the hand of support. What is expected is support and help, not
protection. Before the situation goes worse, all agents of
socialisation — schools, religion, home, politics etc. — must be
activated to ensure a fair deal for this section of society which has
been battered for ages. Since education begins in the womb itself,
the role of parents cannot be underestimated.
Each person individually will have to pave the path for a harmonious
existence of the sexes with none treading on each other’s feelings,
sentiments and entitlements. We must work towards a world free of
any atrocity.
(The writer is Director, Centre for Women’s Studies and
Development, Panjab University, Chandigarh)
Recognise our dual role
by Rashmee Mehta
My perception of society is a community free of class
consciousness, gender bias, communal prejudices and exploitation
of all kinds.I expect society to represent a truly adroit humanity
which promotes social harmony in thought and deed by offering
equal opportunities to its members, irrespective of the gender,
caste and creed.
In keeping with our traditions and cultural heritage, I expect from
society a genuine community feeling of mutual respect, trust and
understanding.
(The writer is a DGM, Corporate Communications, Himachal
Futuristic Communi-cation Limited)
We are Shakti
by Vandana Shiva
I expect peace from society. To demand peace from others, we do
not need to display our capacity to destroy. I expect India to
remember that for us power is shakti power in female form, a
creative power in peaceful form. We cannot create nuclear
disarmament through nuclear explosions. As a feminist has said:
“You cannot break the master’s house using the master’s tools.”
I expect justice and equality from society, not just for myself as a
woman, but for every child, woman and man. I expect the
performance of the stock market to be replaced by the performance
of society to provide food to the hungry and water to the thirsty.
We are a civilisation which made annadaan the greatest form of
charity. Yet the largest number of hungry children today are in
India. I expect society to respect nature. We have called ourselves
an Aranya Sanskriti.
We have perceived ourselves as Vasudhaiv Kutumabakam, the
Earth Family.
(The writer is Director, Research Foundation for Science,
Technology and Ecology, New Delhi.)
 Building economic strength should
be our top priority
Innovation can make India a super power
by Subash K Bijlani
Knowledge is the new currency of international trade and commerce. Neo-classical
economic theory attributed growth in output to increase in the factors of production,
namely, labour and capital. The new paradigm is that the economic power, increasingly
seen as the basis of new political clout, arises out of a strong technology muscle of the
nation.
A nation’s advantage in trade no longer flows merely out of its natural endowments, e g,
raw materials, labour, capital and land. Over-whelming empirical evidence shows that
the per capita economic growth of the industrialised countries has been driven by
innovation resulting in technological progress, and not by aggregate capital investment
per se. Recent experience of nations shows that the contribution of raw materials, and in
many cases of labour, has steadily declined in providing the competitive edge to the
products.
This is perhaps best exemplified in micro-processor technology where the raw material
content has steadily fallen to an insignificant proportion of its price. The big strides of the
Asian `tigers’ is not because of their natural resources. Malaysia’s prosperity is no longer
based on tin and rubber. Countries rich in natural resources, on the other hand, for
example oil producing countries of Middle East, are not great economic powers.
Technology supremacy is the key to success. Increasingly, the contribution comes from
value addition through technology. While the market for capital is becoming freer with
nearly $400 billion moving across the globe every day, technology is highly guarded and
hardly ever transferred.
A dramatic example of how nations compete on their technological edge is given by the
well-established Swiss watch industry . The base of their technical excellence was
rendered obsolete virtually overnight with the advent of the electronic quartz watches.
The precision of the quartz watches could not be met by that of the best mechanical
watches. They were also cheaper to produce. The irony in this case is that the concept of
new technology of quartz watch had emanated from Switzerland itself!. They were
unable to identify its potential. Many Swiss watchmaking companies were forced out of
market. Faced with technological threat, several ailing companies of this industry got
together and subsequently used technology as a competitive weapon. The new firm,
ETA, created "Swatch". The revolutionary product design was backed by an
unconventional manufacturing and assembly process. They resorted to new technologies
such as the micro-injection of plastic under pressure, the use of polymethylemetracrylate
to obtain an extremely resistant glass, a new technique for welding the glass and case
together to make the watch totally water-proof, etc.
We will witness similar examples in a number of our industries. The traditional sports
goods industry in Jalandhar, for example, faces threat as new materials and
manufacturing processes lead to improved quality at lower costs. The tennis racket
industry in Sialkot has faced extinction with the advent of carbon fibres and vastly
improved production engineering.
A large number of industries, particularly the Small and Medium Enterprises (SMEs) in
the country face growing technological obsolescence. Punjab, for example, has the the
highest intensity of SMEs in the country – some 2,00,000. Their technological
upgradation is not even on the state government,s agenda. Regional R&D institutes,
once at par with world standards, have run down in quality. They have become simply
irrelevant to industry. In agriculture, too, productivity has plateaued at levels 30-50 per
cent below world standards. Indian industry is far too dependent on imported
technology. Even very large companies which enjoyed market dominance and
economies of scale in the protective, truly ‘Swadeshi’, days, did not upgrade their
products. When they need even marginal improvements on earlier technologies, they fall
back on import of further knowhow. The position has hardly changed. They are happy to
walk on the crutches of foreign technology.
There is a certain degree of inevitability in the change process relating to technology.
Four broad phases of economic development can be identified : Phase I witnesses
gradual liberalisation to integrate the country’s insulated economy with that of the
world’s. This phase is marked by hesitation and advocacy of protectionism from certain
sectors of industry in the name of giving more time to `adjust’.
While many forge ahead to take advantage of emerging technologies to meet with global
competition, some seek protection behind high fences of tariffs. In India there are
repeated calls again of `level playing field’ `Swadeshi’, and now `calibrated
globalisation’. Clearly, economic liberalisation is not an unmitigated advantage. This
phase witnesses extensive restructuring take-overs and mergers and selective
privatisation. 50 years after independence, we are still in Phase I.
Phase II is marked by accelerating changes and institution building. The emphasis is on
generating knowledge and creating manpower skills. The emphasis is away from import
substitution and on developing technology which is contemporary.
In Phase III economy is fully liberalised, high growth rates are witnessed and the country
becomes a global player.
Phase IV is marked by sustained generation and creating wealth and exploiting new
knowledge.
The need for indigenous technology development at the national level and in our
companies is going to be a greatly pressing one. Much of the impact of recent changes
on technology is actually not visible. How?
Firstly, liberalisation has led to low tariff walls, freer imports and liberal foreign direct
investment regime. Companies abroad, therefore, now prefer to export finished goods to
India rather than transfer technology to manufacture them locally.
Secondly, it is lot easier now to manufacture by setting up companies with majority
foreign equity holding, often 100%. Rather than give the know-how to partners,
technology will come `sealed’ in 100% equity companies. This has been witnessed in a
number of sectors.
Thirdly, as India grows competitive and as the industrial muscle grows, we shall
increasingly be perceived as a threat. We have witnessed growing restrictions on export
of products and technologies to India. This is just the beginning. Its full implications have
not been grasped.
The new technological order leaves India with no choice but to create and improve on
technologies. There is no other way to survive in an environment where commodity
prices decline and factors of production, such as labour and raw materials, face a rapidly
reducing advantage. It is no surprise that nations invest heavily in their R&D. The
distribution of global R&D is highly concentrated in the developed economies. About two-
thirds of the world-wide R&D efforts are found within the Triad of the US, Japan and
Western Europe. The Third World, by the most generous estimates, accounts for only
about 5% of global R&D and it is declining, especially in the heavily indebted countries.
Only in the "four tigers" (South Korea, Taiwan, Singapore, Hongkong) and also in China
and some other East Asian countries is there a rapid rise of R&D. Their R&D expenditures
have been growing rapidly. Taiwan and Singapore now have a level of R&D intensity
comparable to that of many european countries.
There is a new urgency to technology development by the Indian industry. It is time our
Chief Executives in industry, Research Laboratories and the Government took charge of
the cycle that embraces improving design competence through innovation and
invention, right to the point of commercialising. New products are not created at a single
point. Theyfollow the well-recognised process of (A) basic research when no applicable
technology is right (B) Developmental work where possible end use is visible (C) Proto-
typing and testing. Commercial feasibility at this stage is not clear. (D) Full scale
installation of new process. Technological risks are minimum. (E) Commercial launch.
Business risks dominate. The driving force in technology is desire to excel.
Mere market forces do not supply the motivation. Technology development does not
evolve by itself. It is not a natural law. It has to be willed. Societies everywhere have
shown that technological achievements are driven by strong social economic and
political commitments. When the Egyptians built pyramids, they created the tallest
structures : 400,000 people employed for 20 years moving 4 million tonnes of sandstone.
That was the state-of-art technology then. They created the tallest structures in the
world.
They remained unchallenged for next 4000 years, even though the knowledge and skills
existed to surpass them, till the new masts and skyscrapers, cathedrals and Eiffel Tower
came. That happened not because the technology was simply waiting to be converted
into structures. Materials were available, joining techniques were known. The real feat of
Eiffel Tower is that there was a will to do it. When the societies lose will, when industries
lose interest, technology development declines. There is no such thing as a technology
base from which developments spring up on their own.
When the US pride was hurt by launch of the `Sputnik’ by the Soviet Union in 1956, it
took them 10 years and as many workers as the Egyptians did for Pyramids to put man
on the moon in 1968. In both cases, the accomplishments grew out of a `will to do’.
Where is our will?
Let us, therefore, put technology on our agendas and make it an area of concern. We
have to reward engineering knowledge - making sure it is no less remunerative than
marketing or finance. Design and manufacturers must find a preference with our youth.
The excitement with chartered accountancy and commercial courses must be matched
with that of science and technology. We have to change salary structures in our
companies to help improve the contribution of technology in industry.
All changes require champions. The freedom movement needed a Gandhi. But great
ideas also require their singers and poets to carry the message, to enthuse people. The
freedom movement also needed a Tagore. The message of technology has to spread.
India’s might will, in the end, come from its economic strength. A nuclear test here and
there, even build-up of an arsenal and a delivery system cannot bring India the stature
and its rightful role in the world affairs. It has to be backed by a strong industrial base. It
is essential that we pursue science which is contemporary, not second rate, and develop
technology which answers the social and economic needs of the country. To change this
into reality, we need champions.
We need them to carry the message across, enthuse people with technology and make
them believe that not only it is within our reach but that, without it, we are not going to
be able to have our voice heard. Technology cannot stay a neglected agenda much
longer.
The writer is a well-known management consultant.

Only nuclear energy can give us

long-term security
An economically strong India can dictate terms
by R. Chidambaram and R.K. Sinha
INDIA of the next century should be an economically strong nation,
with the quality of life of all its people comparable to the one in the
developed societies.
How can we quantify ‘quality of life’? The United Nations has a
methodology to quantify the quality of life of the people of a country
in terms of what they call the Human Development Index (HDI), and
they base this on per capita GDP, literacy rate and life expectancy
at birth. The UN Human Development Report, 1995, ranked India,
with an HDI of 0.439, at the 134th position in the world.
It has been our feeling for many years now that better measures of
HDI in a developing country are per capita electricity consumption
and female literacy, and both need to be raised substantially for
India to be rated as a "developed" country in the world community.
The per capita electricity consumption in India should go up by a
factor of at least 8 to 10 for this to be achieved.
Electrical energy is an essential ingredient of social development
and economic growth. Argentina and Brazil had per capita
electricity consumption figures of 1636 and 1547 kv per year,
respectively, in 1992. Thus, to be able to reach even a reasonable
level of development the Indian per capita electricity consumption
should be about 1500 kv per year. It may be noted that the
corresponding world average figure even now is 2400 kv per year
which is higher than the modest target indicated here. For achieving
this target by the year 2020, and assuming that the Indian
population will level off beyond this year, we will need to have an
installed electrical generation capacity of about 450 GWe by the
year 2020. Making slightly different sets of assumptions, one may
have somewhat different projections, but the basic point sought to
be established through this assertion does not get altered. Having
an installed capacity of 450 GWe by the year 2020 and beyond, is
surely a desirable objective.
Our annual rate of growth of GDP during the past few years has
been about 5.5 per cent. An analysis of past trend indicates that for
each one per cent rise in GDP the per capita electricity consumption
has to increase by about 1.25 per cent. This, in turn, implies that
even to sustain the current rate of growth of the Indian economy,
with the existing rate of population growth, it is necessary to have a
rate of growth of installed electrical capacity of at least about eight
per cent per annum.
Let us now consider the requirements for working out an optimum
mix of energy resources needed to achieve the aforementioned
desirable objective. Remembering that we are still talking about
reaching a less than optimum goal, we should consider only our
currently known economically exploitable resources and
technologies which are available to us today. Based on available
information we can assume that the total renewable and hydro
potential available in India, economically convertible to electrical
energy through established technologies, amounts to 104 GWe. Let
us also assume that this maximum potential can be reached by the
year 2020. We have already done an exercise to assess the
potential growth of nuclear power up to the year 2020 and came to
a conclusion that by the year 2020 it should be possible to reach an
installed capacity of 20 GWe using nuclear energy, at the currently
envisaged rate of growth, which averages to about 12 per cent of
nuclear generation capacity addition per year during the
forthcoming 22 years. The balance of about 320 GWe required in
the year 2020 will need to be, therefore, provided by using fossil
fuel based thermal power stations. Essentially it amounts to a
growth of thermal based electricity generation capacity at the rate
of about seven per cent per year up to the year 2020. With our
meagre reserves of oil and natural gas, and expected rise in the
cost of their import in the years to come, we can also assume that
by the year 2020 practically all the thermal power stations will be
based on coal.
With an installed capacity of 320 GWe, the annual consumption of
the Indian coal used for power generation purposes would be such
that our currently estimated economically mineable reserve of coal
available for power generation purposes, would be fully consumed a
couple of decades before the end of the next century. Surely, there
is a possibility of using advanced technologies in future for
exploiting the remaining, currently not economically mineable,
reserves of coal. We may also probably locate some additional
reserves of coal. Even if it is so, one must take into account
increasing concern about global warming due to CO2 emission, the
need for conserving coal as a basic industrial raw material in steel
and other such industries, and the increasing utility of coal to serve
as a source of generating fluid fuels for transport application. For
India, with a heavy dependence on oil imports draining its economy
and making it potentially vulnerable to external pressures, the last
factor has to be given a serious consideration in a short term time
frame itself. With these economic as well as strategic
considerations, it does not seem to be wise to contemplate a
continued growth in the use of coal for power generation in India
after we reach a level of about 450 GWe installed capacity. If this
objective is met by 2020 then during the post-2020 era, the
installed capacity in coal- fired stations should progressively get
depleted as the older stations are taken out of service.
With the renewable and hydro having reached maximum potential
in the year 2020, the deficit arising out of the progressive
retirement of coal-fired stations will need to be made up by other
sources of energy. There is no other choice other than nuclear
energy.
This will require the nuclear power generation capacity to continue
increasing beyond 20 GWe from 2020 AD onwards. With some
additional renewable resources becoming economically exploitable,
technological advances leading to increased efficiency in energy
conversion processes becoming available, and adoption of energy
conservation measures, some part of the burden on nuclear energy
may get reduced, but the bulk of the future requirements will still
need to be borne by nuclear energy. Unforeseen commercial
development of new sources of energy including fusion, which is
another form of nuclear energy, along with the aforementioned
other possible developments may lead to a better prospect of
reaching beyond the modest goal without reducing our dependence
on fission-based nuclear energy.
It must be remembered that we are not discussing whether the
target is realistically achievable or not at the currently envisaged
rate of growth of nuclear energy. We are at a crucial juncture today,
and our decisions and actions today will determine the feasibility or
otherwise of achieving the desired objectives in time.
Generation of electricity through application of nuclear energy has
been our main priority so far. We must, however, also plan for the
scenario when the indigenous reserves of fossil fluid fuels will get
depleted and their import will become unaffordable for our
economy. This situation may manifest in the early decades of the
next century. Conversion of low-grade coal reserves to fluid fuels,
and extraction of low quality petroleum reserves requires high
temperature steam. Most of the potential hydrogen generating
processes also demand heat at high temperature. Nuclear energy
seems to be the only viable means to provide such process heat in
a medium to long term time frame. Thus, apart from its application
for electricity generation purposes, India also requires nuclear
energy for meeting its long term non-electricity application needs.
To summarise, it can be stated that while we must exploit the
renewable and hydro-potential to the fullest in the quickest possible
time, and we should utilise our fossil fuel resources to achieve an
accelerated economic growth in the short term; it is only nuclear
energy which can provide us the essential long term energy
security.
In view of the foregoing, the R&D challenges in nuclear technology
have been and are directed towards providing the required energy
services for the Indian population while avoiding any unacceptable
environmental impacts. These challenges have been defined
considering the indigenous nuclear fuel resources. India has a
modest reserve of uranium and a large reserve of thorium. Most of
the other nations in the world, who are advanced in nuclear
technology, have access to sufficiently large quantities of uranium
reserves. Hence, the technologies required for exploitation of
thorium have a much higher priority for India than that accorded in
most of these other nations. Therefore, the R&D challenges involved
in pursuing the thorium path, have to be necessarily met head-on
by the Indian R&D teams without much benefit from the knowledge
base available elsewhere.
This perception was the basis of planning an indigenous nuclear
energy programme in India way back in the mid-fifties by our policy-
makers. The indigenous R&D has led to our developing self
sufficiency in all the important technological areas important for our
current programmes. It has also led to creation of an R&D
infrastructure which can take up, and has been taking up, any
challenges for the future development of next generation nuclear
energy production systems, undeterred by the technology control
regimes sought to be imposed on us.
Uranium-235 is the only naturally occurring fissile isotope
constituting about 0.7 per cent of natural uranium. The balance
mostly comprises uranium-238, a ‘fertile’ material which gets
partially transmuted to fissile plutonium-239 on absorbing neutrons
during operation of a nuclear reactor. Thus, during the operation of
a nuclear reactor, while the original fissile material gets converted
to fission fragments and energy, the fertile inventory gets partially
converted to transmuted fissile materials. Progressively, on account
of the neutron absorbing character of most of the fission fragments,
the capability of the fuel to generate additional energy reduces and
the fuel has to be discharged. There are two ways of dealing with
this spent fuel. The first one, termed ‘open cycle’, consists of
treating the entire spent fuel inventory as waste and dispose it as
such. This has been the approach being followed by several
advanced nations of the world. With this approach, for a uranium
fuelled reactor, along with the fission waste products, the plutonium
content in the spent fuel, and the balance uranium-238 which
constitutes almost 98 per cent of the spent fuel is also disposed. In
other words, with this approach only about two per cent of the
energy potentially exploitable from nuclear fuel is utilised.
To avoid this colossal waste, a closed fuel cycle has to be pursued.
It is possible to remove the plutonium and uranium-238 from the
spent fuel in a reprocessing stage and use these two valuable
nuclear materials once again in a recycling mode. Thorium is a
fertile material which cannot be used as a fresh fuel alone.
However, like uranium-238, thorium also gets partially converted to
a fissile material uranium-233 when used as a part of nuclear fuel
mix. Thus, utilisation of thorium is possible only if a closed nuclear
fuel cycle is adopted.
Right from the inception of the Indian nuclear power programme,
the Indian strategy has been to reach closed nuclear fuel cycle
stage based on utilisation of plutonium and thorium based fuels in a
planned manner at the earliest.
On the basis of the above mentioned strategy, three phases of
Indian nuclear power programme have been identified. In the first
phase, natural uranium dioxide based fuel is used in heavy water
moderated and cooled Pressurised Heavy Water Reactors. The
indigenous resources can support about 10,000 MWe of installed
capacity through use of PHWRs without plutonium recycling. In a
subsequent stage, the fissile plutonium contained in the spent fuel
of the PHWR is separated in fuel reprocessing plants. This plutonium
serves as the main fissile element for fuelling the Fast Breeder
Reactors (FBRs), with plutonium-uranium mixed fuel and fertile
depleted uranium and thorium in blanket regions, where plutonium
can be efficiently used to not only generate power but also to
convert non-fissile uranium-238 and thorium to fissile plutonium-
239 and uranium-233 respectively.
Using FBRs an energy output of 350 GWe can technically be
sustained using indigenously available fuel resources. In parallel, as
a part of the second stage of Indian nuclear programme, it has been
planned to use thorium based fuel along with a small feed of
plutonium based fuel in Advanced Heavy Water Reactors (AHWRs).
The AHWR would help in reaching the stage of large-scale thorium
utilisation sufficiently early. In the third stage, dedicated breeder
reactors based on uranium-233 and thorium are planned to be
constructed. These reactors would serve as the main stay of the
final, thorium utilisation stage, of the Indian nuclear programme.
The currently known Indian thorium reserves amount to more than
200,000 GWe-year of electrical energy and can easily meet the
 Indian requirements during the next century and beyond.

Making India an economic

super power
We need a rapid build-up in national pride and self-confidence
by S. Gurumurthy
For a nation like India, politically subjugated for centuries by alien conquest, and socially
unsettled by invasions, the idea of becoming a super power is no ordinary thought.
Understandably, even after winning freedom, India never aspired seriously to become a
super power, politically or economically. Such an idea, if it existed, was dormant in the
Indian consciousness. But it did acquire seriousness after the Pokhran blasts in May, 1998.
But even now, the national opinion is not uniform on how to become a super power. "Not
atom bombs, only development can make India a super power," say some. "We need both to
make us a super power", say others. Nevertheless, the idea that we should aim at being a
super power is no more a dormant one, even if it is not a dominant one. But the desire has
come a little late. There is background to it — the background of India’s post-Independence
history.
The freedom movement had promised much more than a mere change of rulers. But what
happened was, as aptly described by English historians, a mere "transfer of power" from the
aliens to the locals. Nevertheless, what did India intend to be after it became free?
When India attained freedom, it thought of emerging as a global leader, without becoming a
global power. Its claim to leadership rested on the age-old Indian values of universal
tolerance, peace and happiness. But the post-War world afflicted by cold war had no
reverence for such high values. So India was swiftly marginalised in a world which respected
only power.
But, within India, the Indian leadership did the other way round — it persuaded the people
not to pursue their age-old values, but, accept the Anglo-Saxon ideas and institutions in the
main. It folded back the philosophic lead shown by Gandhi, Aurobindo and Tilak. Their
definition of the Indian identity was substituted by the western ideas of secularism and
socialism. Since then, for over four decades, the Left-Socialist parties and intellectuals
mounted a vicious attack on the Indian past, and virtually delinked the Indian polity,
economy, history and education from its past and turned to Anglo-Saxon values.
This is precisely what the Indian freedom movement had struggled against. Because of this
drift, to the Indian intellectual, India’s past became a burden and ceased to be matter of
pride. Also, the secular-socialist leadership systematically fragmented the Indian society into
majority and minority, rich and poor, forwards and backwards, and denied India the deeper
awareness of its intrinsic unity brought about by Hindu values and civilisation. This resulted
in setting one Indian against another, leading to massive self-deprecation. This eroded our
self-confidence as a nation. The idea of a powerful India could not be internalised in a
situation where every Indian was running down the other.
The socialist regime turned two generations of potential entrepreneurs into job-seekers.
Permit quota and licence, not efficiency or merit, became the route to business success. The
competitive strength of India was systematically weakened, and the traditional skills of the
trading and business communities in India were dissipated. The devastation caused by the
socialist regime in the post-Independence period was more pervasive than the devastation
of the Indian economy by the British rule.
The pre-British India, described as caste-ridden, feudalistic and unmodern, was economically
ahead of the rest of the world,including Britain and the USA. The Indian economy had a
share of 19 per cent of global production in 1830, and 18 per cent of global trade, when the
share of Britain was 8 per cent in production and 9 per cent in trade, and that of USA, 2 per
cent in production and 1 per cent in trade. India had hundreds of thousands of village
schools and had a functioning literacy rate of over 30 per cent. In contrast, when the British
left, India’s share of world production and trade declined to less than 1 per cent and its
literacy was down to 17 per cent. And yet, in 1947, India had large Sterling reserves, no
foreign debt, and Indians still had an effective presence in such trade centres as Singapore,
Hong Kong, Penang, Rangoon and Colombo. But, by the time the Socialist regime came to a
close, India had become politically and economically weak and disoriented, lacking in self-
confidence. Its influence in South Asia too had waned.
But, with the collapse of the Soviet Union, the Indian establishment swung to the other
extreme — from socialism to market capitalism. It was again in tune with its lack of self-
confidence — if it is not communism, it has to be capitalism. And we began to witness a
massive effort to globalise — which means westernise — the Indian economy. The persons
and parties who grossly maladministered the national economy suddenly turned ‘reformers’
and they paraded themselves as the new messiahs as if someone else was responsible for
the wrongdoings in the past which needed to be reformed. Thus, Congressmen, that is those
who needed to be reformed, styled themselves as ‘the reformers’. Just as socialism was an
ideology earlier, globalisation too became an ideology. Now anyone who dissents against
globalisation is being labelled as backward-looking and anti-modern. Thus, just as we
adopted socialism without a debate as to its viability in India and discarded it, we have
adopted globalisation without any debate. As a result, we have set out blindly to experiment
on India the experience of the West. And just as we had committed one set of mistakes
before 1991, we have now begun committing another set of mistakes from 1991.
The great question remains: Will what we have been doing since 1991, make India an
economic super power? If not, by what method will India emerge as an economic super
power? Before we comprehend what India should do to become a global power, we must
understand properly what is happening in the world today.
There is a gradual shift in the global view on global trade and currency regimes of today. It
questions not just the global assumptions, but also the national assumptions about the
global regime. The experience of Mexico first, the EC currency crisis next, and the South
Asian crisis now, tend to question the very foundation, stability and viability of the present
global economic regime under installation. The assumptions about what India should do is
also changing fast. For instance, not even the diehard lobbyist for globalisation today talks
about the full convertibility of Indian currency for which P. Chidambaram had, only a year
ago, unveiled a three-year master plan. Dr Jagdish Bhagwati, an uncompromising advocate
of currency convertibility, has now come to the view that currency convertibility should be
"avoided like a plague". This single shift is enough to demonstrate how unstable are global
economic prescriptions and institutions.
It is not that what happened in South Asia now was not anticipated. Akio Morita, the former
Chairman of Sony Corporation, wrote a letter to the G7 leaders in 1992 questioning the
rationale of globalisation with a currency regime operated by mindless speculation. Akio
Morita said that what manufacturing, efficiency and technology achieved might be
destroyed by the free-for-all money market over which no one had any control. The world
was forced into the present free-for-all currency regime in 1971. It was to prevent this, and
to prevent money turning as a destabiliser that the world opted for a fixed rate of exchange
in 1949. The very constitution of the IMF, the World Bank and GATT after the World War II
was to avoid a free-for-all currency regime. But it was reborn in the year 1971 after the gold-
dollar convertibility was discontinued. But, with global economics coming under money-
spinners, the new regime has been increasingly questioned, more seriously now.
What is the lesson for India in the changing situation? The WTO, which is the symbol of free
trade, cannot function without a free currency market, but, a free currency market
destabilises free trade. This is a Catch-22 situation for which there is no answer within the
global trade regime today. A mere comparison between the trade volumes in the world
currency market and the volumes of trade in goods and services is adequate to demonstrate
how paper money dominates trade. The daily global trade in currency is over $ 1.2 trillion; in
contrast, the annual global trade in goods and services is $ 4.5 trillions. It means that for
every dollar of actual trade, the trade and speculation in currency is $ 95!
If anything that will ultimately destroy the global trade regime, it will be the global currency
regime. That means the present global trade regime does not have a guaranteed success,
though it is not guaranteed to fail. India should not reorganise its national economy to match
a global regime which has no guarantee for success. It means that India shall have to frame
a national agenda.
So, the road to economic success in future will be not unlimited globalisation, but,
controlled, guided, calibrated globalisation which is the vehicle for acquiring global economic
strength. Even in the past, it has been so. Japan became an economic power by controlled
globalisation even as China is doing the same thing now. It means that India has to devise
its own strategy, that is what the idea of Swadeshi is all about. Swadeshi means Indian
agenda to which the global agenda can only be a supplement, and not the other way round.
This is what China did in the 1980s, it set out on a national agenda to double its food
production from 200 million tonnes to 400 million tonnes between 1983 and 1993. It turned
to its agriculture to power its economic growth beyond 10 per cent during the 1980s and
turned to other areas to sustain the growth rate afterwards.
In contrast, the Indian agriculture virtually remained stagnant throughout the period from
1990 to 1998. This is how we malprioritised our economic strategy even after we set out to
desocialise our economy in 1991. What then should we do now?
The answer is obvious. If we have to break into a high trajectory growth rate on a sustained
basis, just as China did, we have to start with agriculture. Higher agricultural growth leads to
rural prosperity which, in turn, leads to more buying power, and that triggers high industrial
growth. The Indian agriculture has greater advantages than the Chinese agriculture had. We
have one-and-a-half-times as much plain land as China has and a whole year’s sunshine.
Agriculture involves the greatest number in our country and unless a nation activates a
majority of its people, it cannot grow. Thus, agriculture is our biggest asset. We should have
invested more and more capital in agriculture. But, in contrast, the capital formation in
Indian agriculture is declining from year to year down from 17 per cent in 1980 to 9 per cent
now. So agriculture in India has been increasingly neglected. Agriculture is the starting point
for India to emerge as an economic super power.
The second trigger for high growth is the energy sector. It is linked to transport. We did not
plan for multimodel transport, nor did we integrate energy and transport in planning. We
have allowed the cheaper Railways to decline in favour of costly road transport. The
Railways share in freight traffic has come down from 88 per cent in 1950 to 37 per cent now;
in passenger traffic from 68 per cent to 13 per cent. The reduction in the Railways share has
meant a corresponding rise in the share of energy — intensive road transport. Why did the
Railways decline? It is because we have saddled our Railways, which is one-and-a-half-times
in length of the US Railways and twice as that of China, with coal transport and coal
accounts for 45 per cent of railway freight today. It completely clogs the railway system and
prevents its modernisation. We have not yet tapped the vast potential of coastal transport
and inland water transport which can considerably ease the pressure on the energy-
intensive road transport and the clogged railways.
Water transport involves less than 1/3 of the energy as land transport. We have not also
tapped atomic energy. The expert view is that by using fast-breeder reactors with
international safety standards, India can produce 3,00,000 MW of atomic power with
indigenous resources. Our current power generation from all sources is about 89,000 MW.
Atomic energy has higher initial investment, but, no running cost. But in thermal power,
running cost is as high as 50 per cent of the production cost. In other countries, atomic
energy constitutes a high percentage of total energy — it is 76 per cent in France, 40 per
cent in Sweden, 29 per cent in Japan and 23 per cent in USA, but less than 2 per cent in
India. Also we can turn alcohol into diesel like Brazil does, in large quantities. An integrated
energy-cum-transport planning can trigger a high growth.
The third area for large-scale activation of India is the non-corporate sector which accounts
for 40 per cent of our GDP, over 30 per cent of exports and more than 75 per cent of
employment outside agriculture. This sector consists of the traditional craftsmen and
artisans in the main. During 1997-98, this sector had contributed over $ 12 billion by way of
remittance from skilled Indian workers employed abroad. From 1980, the total remittance by
this sector has exceeded $ 75 billion. This is largely self-employed and labour intensive. This
has withstood the socialist assault and, later, the free market globalisation.Yet this sector
has had no assistance from the system by way of organised finance or employment or social
insurance schemes. This has enormous potentiality for high growth.
As an adjunct to this is the services sector — both modern and traditional services. This is an
area of high growth potentiality for India because of the advantage of familiarity with the
English language, particularly in the modern services sector like law, accounting,
consultancy and advertising. And yet we are mindlessly allowing the MNCs to enter this area
where we have our dominance.
Yet another area in which India is expected to become a major player is textiles, particularly
after the quantitative restrictions are removed by the West from 2005. Textiles account for
30 per cent of India’s exports and the largest industrial employment. But this crucial area is
underdeveloped in terms of technology and processing. Powerlooms, which account for 73
per cent of the textile produced in India, are not funded by organised financing. Organised
finance, technical upgradation and freedom from tax inspectors will transform the textile
sector into a high growth area.
Computer software and IT technology are an important area. The Indians in the Silicon
Valley in the USA have proved our proficiency in IT products. The global players are sourcing
India in a big way because of the highly skilled manpower available here. Some of the best
minds in India are taking to this area of expertise. Since information is key to the world
ahead, the Indian mastery over this area is likely to make India a dominant IT power in the
next decade. There are estimates that by 2002, India will export software products worth $
10 billion.
This takes us to the role of foreign direct investments in India emerging as a global power.
By its very nature, FDI has a marginal, but, crucial role to play. But it must be made to flow
into areas where the local capital is shy or incapable of funding a mega venture, particularly
for global use. It can usefully supplement our large national savings which, in dollar terms,
amount to over 90 billion. Instead of going for FDI in areas which hurt the local economy and
employment, the government may allow 100 per cent FDI in, say, four large international
airports or two large seaports. Such facilities require income to be generated from abroad
for their very survival. Indian capital cannot build them and the ordinary Indian need not pay
for them. Such airports alone can fetch an FDI of 20-30 billion dollars in the next five years.
The thrust of the FDI regime must be to channel FDI where local capital is inadequate and
from where the FDIs cannot leave India at will.
Indians must realise, as have the westerners and the Japanese, that global business is war,
not just commerce. Wars have always followed commerce and commerce has followed wars.
Therefore, trade, like war, is a game of deception; and free trade is a strategy, not an
ideology. That is why nations build up non-tariff barriers. South Korea used to tax-raid the
buyers of foreign cars. The Philippines mandates that cars may be produced by foreign
companies, but, distribution can only be by a local company.
France has instituted professional appraisal of imported electronic goods so as to clear only
a fraction of the imports. Thus, every nation digs trenches to fight the advances of global
trade to the prejudice of national interests. But in India, just as socialism did, free trade has
emerged as an ideology. Indians must learn to look upon trade as war and free trade as a
strategy and develop native non-tariff formulations.
Again, what India and Indians critically need is a measure of national pride and self-
confidence. Without both, no nation can prosper. It is unfortunate that the English-educated
Indians have repeatedly failed to generate personal or national self-confidence. Instead,
they began to deprecate everything Indian. In the process, they deprecated each other,
resulting in all-round self-deprecation. This trend has to be reversed. If we deprecate
ourselves, as we have been habituated to, no one is going to respect India. The atomic test
by India triggered our national pride in a big way, but we threw cold water on it. We have to
build, and not waste, such achievements whether it is the Param Super Computer, or PSLV
launch, the Tata Car or Kamini nuclear reactor working on thorium. A rapid build-up of
national pride and self-confidence will yield a quantum jump in economic advancement.
Trade is a matter of psychology. When Japan followed the Chinese lead in technology, it
prided itself as combining the ‘Japanese spirit’ and ‘Chinese technology’; when it was forced
to accept the western technology, it coined a new motto, ‘Japanese spirit with western
technology’. Thus, a measure of nationalism has to be built up to create a psychology of
national pride. This is needed for economic advancement and those who delink national
pride from economic growth will have to be educated on what the world history teaches
every nation.
And, finally, what India needs, as the first step, to transform into a global economic power is
national consensus. The confrontationist politics and political untouchability that we are
witnessing for the past few decades has made the formation of national consensus difficult.
But this is what the Japanese considered as the first step for national economic
development. In fact, even the Japanese democracy is unlike the Anglo-Saxon model. It
refused to accept the divisive idea of majority-minority party politics and continues to
pursue, even today, consensus as the national principle.
But the Indian parliamentary democracy, which is a carbon copy of the western system,
does not allow the emergence of national consensus in politics; even though the Indian
society functions on consensus, the Indian polity does not. For transforming India into a
global power expeditiously India has to review its polity and bring it in tune with its
traditional principle of panchayat or the idea of consensus to which the Indian society is
accustomed.
There is no need for a trade-off between democracy and development, as Lee Kwan Yew,
the former President of Singapore, proposed. Probably, a presidential form of government
will ensure the support that national economics needs from national politics. Yes, India has
all the potentialities and also the compulsion to become a global economic power in the 21st
century, and early enough in the coming millennium.
All that India expects of its leadership is that it should ensure that there are no round pegs
in square holes. The leadership must inspire the nation to think and function as a nation. The
essential quality of a leader is that he does not care how long will he be in power, but how
decisively he rules. This is what Lal Bahadur Shastri did. He ruled for just 18 months and
asked the people to starve on Mondays — a trans-religious auspicious day. He is
remembered for both. India is expecting such a trait in its leadership to lay its claims to
becoming an economic super power. Will the present leadership, which claims to be
different from the previous ones, respond to the will of the nation to become a global
economic power?
Absolute advantage The argument, associated with Adam Smith, that trade is based on
absolute differences in costs. Each country will export those products for which its costs,
in terms of labor and other inputs, are lower than costs in other countries.
Absorption model A Keynesian analysis of the conditions necessary for the success of a
devaluation, namely, that output must grow relative to the domestic use of goods and
services, and that domestic savings must grow faster than investment. Associated with
Sidney Alexander.
Accommodating transactions Those items in the balance-of-payments accounts which
occur in order to offset imbalances in the total of the remaining items. Flows of foreign
exchange reserves are the dominant accommodating transaction.
Ad valorem tariff A tariff that is measured as a percentage of the value of the traded
product.
Appreciation An increase in the value of a currency, measured in terms of other
currencies,
in a regime of floating exchange rates. If the dollar/sterling exchange rate moved from
1 pound = $1.50 to 1 pound = $1.75, that would be an appreciation of sterling.
Arbitrage Purchase of a good or an asset in a low-price market and its riskless sale in a
higher-price market. If arbitrage is possible, prices should be forced together, differing
by no more than transport or transactions costs.
Articles of Agreement of the IMF The founding document of the International Monetary
Fund that defines the Fund’s functions. Agreed to at the Bretton Woods conference in
1944 and amended since then.
Asset market model of the balance of payments A group of models of the balance of
payments or the exchange rate which views foreign exchange as a financial asset rather
than as a claim on real goods. Capital transactions, rather than current account
transactions, dominate these models. Foreign exchange is bought or sold in order to
facilitate financial transactions rather than merchandise trade, and the models are based
on supply and demand functions for financial assets.
Autonomous transactions Those items in the balance-of-payments accounts which occur
for commercial or financial reasons, and not to balance other items. The sum of the
autonomous items is offset by accommodating items. International trade and long-term
capital flows are autonomous transactions.
Balance of payments A set of accounts that represents all transactions between residents
of one country and residents of the rest of the world during a period of time, normally a
year.
Bank for International Settlements (BIS) A financial institution located in Basle,
Switzerland, which provides a range of services for the central banks of the industrialized
countries. The BIS was founded in 1930 to manage problems in German reparations
payments from World War I. Some central banks hold part of their foreign exchange
reserves as deposits at the BIS. Representatives of the central banks of the industrialized
countries frequently meet at the BIS for consultations on monetary and exchangemarket
policies.
Base money The total volume of member bank reserve accounts and currency created by
a central bank. The stock of base money, sometimes known as “high-powered money,”
is central in determining the money supply of a country.
Basic balance A balance-of-payments surplus or deficit measured as the sum of the current
account and the long-term capital account. Excludes short-term capital and flows of
foreign exchange reserves.
Bilateral exchange rate The price of the local currency in terms of a single foreign
currency.
BP line Combinations of interest rates and levels of domestic output which will produce
equilibrium in the balance of payments.
Brady Plan A plan, named after the secretary of the Treasury during the Bush
administration,
to ease the Latin American debt crisis by encouraging banks to write off some
of these debts and lengthen those maturities that remained.
Brain drain The movement of scientists, engineers, and other highly educated people from
developing to industrialized countries, which imposes a loss on public investments in
education on the developing country.
Bretton Woods Agreement The conclusion of the Bretton Woods conference, held at a
resort of that name in New Hampshire during the summer of 1944. The World Bank
and the International Monetary Fund were founded as a result of the Bretton Woods
Agreement. The phrase “Bretton Woods system” is often used to describe the international
monetary system of fixed exchange rates which prevailed until the crises of
1971 and 1973.
Cable transfer A means of transferring foreign exchange from one economic agent to
another. An electronic message instructs a bank to transfer funds from the account of
one party to that of another.
Call An option contract that allows the owner to purchase a specified quantity of
a financial asset, such as foreign exchange, at a fixed price during a specified period. The
owner is not required to exercise the option. The price at which the option can be
exercised is known as the “strike price.”
Capital account A country’s total receipts from the sale of financial assets to foreign
residents
minus its total expenditures on purchases of financial assets from foreign residents.
These assets include both debt and equity instruments.
Cartel A collusive arrangement among sellers of a product in different countries, which is
intended to raise the price of that product in order to extract monopoly rents.
c.i.f. Cost, insurance, and freight. This measurement of the value of imports includes the
cost of the goods itself, insurance, and freight.
Clean floating exchange rate A rate that exists when an exchange rate is determined
solely
by market forces. The central banks not only fail to maintain a parity, but also refrain
from buying or selling foreign exchange to influence the rate.
Clearing House International Payments System (CHIPS) The electronic system among
banks in New York and other major foreign financial centers, which is used to transfer
foreign exchange, that is, to complete foreign exchange market transactions.
Commercial policy Government policies that are intended to change international trade
flows, particularly to restrict imports.
Glossary 497
Common market A group of countries that maintain free trade in goods among the
membership, share a common external tariff schedule, and allow mobility of labor and
capital among the members.
Common property resource A resource for which use by one individual reduces the
amount
available for other individuals, but one from which no individual can be excluded.
Community indifference curve A line that shows all the combinations of two goods which
provide the community with the same level of welfare, that is, to which the community
would be indifferent. A set of these curves can be used to show increases in community
welfare as more goods are made available.
Comparative advantage The argument, developed by David Ricardo in the early
nineteenth century, that mutually beneficial balanced trade is possible even if one
country has an absolute advantage in both goods. All that is required is that there be a
difference in the relative costs of the two goods in the two countries and that each
country export the product for which it has relatively or comparatively lower costs.
Conditionality The policy under which the International Monetary Fund makes large
loans (drawings) to member countries only if they pursue exchange rate and other
policies that can be expected to improve the borrowing country’s balance-of-payments
performance and make the repayment of the loan possible.
Consumers’ surplus The difference between what a consumer would be willing to pay for
a product and its market price.
Contagion When a balance of payments or debt crisis begins in one country and then
spreads to similar countries, often in the same region, that did not experience the
original negative payments shock to the first country. Thailand had such a crisis in the
summer of 1997, which soon spread to Malaysia, Indonesia, and South Korea.
Countervailing duty A tariff imposed by an importing country which is intended to
increase the price of the goods to a legally defined fair level. Often used in export subsidy
and dumping cases.
Covered return The rate of return on an investment in a country after allowance for the
cost of a forward contract to move the funds back to the country of the investor.
Crawling peg An exchange rate system in which a fixed parity is maintained, which is
changed quite frequently (sometimes weekly) to maintain balance-of-payments equilibrium
and/or offset differing rates of inflation among countries.
Credit A transaction that results in a payment into a country. Exports, receipts of dividend
and interest payments, and purchases of local assets by foreigners are all credits in a
country’s balance-of-payments accounts.
Crowding out The argument that government budget deficits do not increase GNP because
the deficits crowd out or discourage other private transactions, perhaps through higher
interest rates resulting from government borrowing.
Currency basket A weighted average of a group of currencies to which the currency of a
country is pegged. India, for example, has maintained a fixed exchange rate for the rupee
relative to a basket of currencies of India’s major trading partners.
Currency board An institution that fulfills the role of a bank but is not allowed to own
domestic financial assets. Its only financial assets are foreign exchange reserves, meaning
that its ability to create base money, and thereby increase the domestic money supply,
is strictly regulated by the balance of payments.
Currency mismatch When an enterprise or government borrows heavily in one foreign
currency but does not maintain offsetting assets in that currency or undertake other
hedging techniques. If the home currency is later devalued relative to the currency in
498 Glossary
which the borrowing occurred, large capital losses are imposed on the debtor. If such
currency mismatches are widespread, the local economy may experience a large number
of bankruptcies that can create a serious recession or depression. Argentina experienced
this circumstance in 2002, as did Thailand in 1997.
Currency substitution The argument that national currencies are often viewed as
substitutes and that firms switch from holding one currency to another in response to
changes in expected yields and risks.
Current account A country’s total receipts from exports of goods and services minus its
local expenditures on imports of goods and services. Also includes unilateral transfers
such as gifts and foreign aid.
Customs union A group of countries that maintain free trade in goods among the
membership
and a common external tariff schedule.
Deadweight loss The loss from a tariff or other restrictive policy that is a gain to nobody.
A pure efficiency loss.
Debit A transaction that results in a payment out of a country. Imports and purchases of
foreign securities are debits in a country’s balance-of-payments accounts.
Debt/equity swap An exchange that occurs when a bank sells financial claims on a foreign
government to another firm at a discount, and that firm allows the debtor country to
pay the debt in local currency, which it uses to finance a direct investment in the debtor
country. Frequently used in Latin America to ease the burdens of excessive debt.
Depreciation A currency’s decline in exchange market value in a flexible exchange rate
system.
Destination principle A tax is levied on a good in the country where it is consumed. Under
GATT rules the destination principle is applied to indirect taxes, and rebated on
exports but imposed on imports.
Devaluation A condition that arises when a government or central bank changes a fixed
exchange rate or parity for its currency in a direction that reduces the value of the local
currency compared to foreign currencies.
Direct tax A tax levied on individuals or income.
Dumping Selling a product in an export market for less than it sold for in the home market
or for less than the importing country views as a fair value, which is usually based on
estimates of average cost.
Economic union An agreement among a group of countries to maintain free trade among
themselves, a common external tariff, mobility of capital and labor among the members,
and some degree of unification in their budgetary and monetary systems.
Economies of scale Conditions characterized by the decline of long-run average costs as
an enterprise becomes larger. Economies of scale frequently exist when fixed costs are
particularly important in an industry.
Effective rate of protection A measurement of the amount of protection provided to an
industry by a tariff schedule which allows for tariffs on inputs that the industry buys from
others, as well as for the tariff on the output of the industry. The effective tariff can be
negative, which means that the government policy is discriminating against local firms
and in favor of imports, if tariff levels on inputs are sufficiently higher than the tariff on
the final good.
Embargo A complete prohibition of trade with a country. US trade with Libya and Cuba,
for example, has been under an embargo.
Escape clause A provision of US law which allows temporary protection for US industries
that are under particular pressure from imports.
Glossary 499
Euro The new currency of the European Monetary Union (EMU), the membership of
which includes 12 members of the European Union. It became an accounting currency
in January 1999, and replaced the 12 national currencies for all uses in 2002. A euro was
worth about $1.15 in mid-2003.
Eurobonds Bonds sold in one or a group of countries which are denominated in the
currency of another country, such as dollar-denominated bonds sold in Europe.
Eurodollar market Banking markets in Europe, and elsewhere outside the United States,
in which time deposits are accepted and loans are made in US dollars. Similar
arrangements exist for such offshore banking in other currencies.
European Economic Community An association of European countries, established in
1957, that agreed to free trade among its members and imposed a common external tariff
on trade with nonmembers. As of 1995 there were 15 member countries. In 1967 the
EEC joined with the European Coal and Steel Community and Euratom to become the
European Community. In 1993 an agreement to achieve even closer economic
cooperation was ratified, which established the European Union.
European Monetary System (EMS) The phased unification of the monetary systems of
the
members of the European Union. Fixed exchange rates and coordinated monetary
policies existed until 1992–3 when the system encountered major problems. The EMS
became a full monetary union in January of 1999.
European Monetary Union (EMU) The monetary union which grew out of the European
Monetary System. In January of 1999 the exchange rates of the original 11 members
were irrevocably fixed relative to each other and the euro was introduced as an accounting
currency. EMU is run by the European Central Bank, which is headquartered in
Frankfurt. Its management structure is very similar to that of the US Federal Reserve
System, with the governors of the national central banks sitting on the Governing
Council, along with six members of the Executive Board, and acting as the Federal Open
Market Committee does in the United States. The euro fully replaced the 12 national
currencies in 2002.
Exchange market intervention Purchases or sales of foreign exchange by a central bank
which are intended to maintain a fixed exchange rate or to affect the behavior of a
floating rate.
Exchange Rate Mechanism (ERM) The arrangement through which the members of the
European Monetary System maintained fixed exchange rates before 1992–3 when a
much wider band was at least temporarily adopted.
Export-led growth Policies in developing countries that are designed to encourage
economic growth which is based on rapid growth of exports sales. Widely used in East
Asian countries.
Export tariffs Taxes or tariffs that are applied to export receipts. Such tariffs are frequently
used by developing countries as a revenue source, but have the effect of discouraging
exports of the tariffed products.
External economies of scale Greater production by one firm in an industry allows costs
of production for other firms in the industry to decline. This benefit from greater
production represents a positive externality that an individual firm will ignore in
deciding how much to produce. In such circumstances some advocate a subsidy to give
the firm an incentive to expand output.
Externality Benefits or costs from a transaction that affect those who are not parties to the
transaction. A positive externality from more flu vaccinations given is better health for
those exposed to inoculated individuals.
500 Glossary
Factor intensity reversal A situation in which it is impossible to rank clearly or identify
the relative factor intensities of two products, because one is more labor-intensive at
one set of relative factor prices, but the other becomes more labor-intensive at another
set of relative factor prices. Factor intensity reversal can occur when it is far easier to
substitute one factor for the other in one industry than it is in the other industry.
Factor-price equalization The argument that international trade that is based on
differences
in relative factor endowments, as predicted by the Heckscher–Ohlin theorem,
will tend to reduce or eliminate international differences in factor prices. Free
trade between Australia and Japan, for example, would reduce land prices in Japan and
increase them in Australia until land prices in the two countries became equal or at least
similar. Associated with Paul Samuelson and Wolfgang Stolper.
f.a.s. Free alongside ship. This measurement of the value of exports includes the price of
the goods shipped to the side of the ship, but without loading costs.
Filter rule An approach to speculation in which an asset is bought or sold on the basis of
the recent behavior of its price. One such “rule” would be to buy a currency that had
recently appreciated by some percentage or sell it if it had depreciated. Another would
be to sell currencies that had recently appreciated and vice versa. If exchange markets
are fully efficient, such filter rules should not be consistently profitable.
Floating exchange rate An exchange rate for which a government or central bank does
not
maintain a parity or fixed rate, but instead allows to be determined by market forces.
f.o.b. Free on board. This measurement of the value of exports includes the price of the
goods loaded on the ship, but without the cost of international shipping and insurance.
foreign exchange reserves Foreign financial assets held by a government or central bank
which are available to support the country’s balance of payments or exchange rate.
Includes holdings of gold, the country’s reserve position in the International Monetary
Fund, and claims on foreign governments and central banks.
Foreign trade multiplier The Keynesian multiplier adjusted to allow for the existence of
foreign trade. The marginal propensity to import makes this multiplier lower than that
which would prevail for the economy without trade.
Forward exchange market A market in which it is possible to purchase foreign exchange
for delivery and payment at a future date. The quantity and exchange rate are determined
at the outset, but payment is made at a fixed future date, frequently in 30, 60, or
90 days.
Free-trade area A group of countries that maintain free trade among the membership, but
where each country maintains its own tariff schedule for trade with nonmembers.
Free-trade zone An area within a nation where manufacturing can be carried out with
imported parts and components on which no tariffs have been paid. The output of such
manufacturing efforts must then be exported if it is to remain duty-free. Many developing
countries have free-trade zones, which are also known as “duty-free zones,” as a way
of encouraging export activities, which require imported inputs, without eliminating
protection for domestic industries that produce such inputs for the rest of the economy.
Futures market for foreign currencies A market that is similar to the forward market
except that all contracts mature on the same day of the month, a secondary market for
the contracts exists, and the amounts of money in the contracts are smaller. Futures
contracts are traded in commodity markets rather than through commercial banks.
General Agreement on Tariffs and Trade (GATT) An agreement reached in 1947 that
established principles to govern international trade in goods. Also, until 1995 the
GATT was an organization based in Geneva to administer this trade agreement, to
Glossary 501
settle trade disputes between member countries, and to foster negotiations to liberalize
trade. It was replaced by the WTO in 1995.
Generalized System of Preferences A preferential trading arrangement in which
industrialized
countries allow tariff-free imports from developing countries while maintaining
tariffs on the same products from other industrialized countries.
Gold standard A monetary system in which governments or central banks maintain a
fixed price of gold in terms of their currencies by offering to purchase or sell gold at fixed
local currency prices. Exchange rates are then determined by relative national prices
of gold.
Heckscher–Ohlin theorem The argument, developed by two Swedish economists in the
1920s, that international trade patterns are determined by the fact that countries have
different relative factor inputs. Each country will export those products that require a
great deal of its relatively abundant factor of production.
Hedging Undertaking a financial transaction that cancels or offsets the risk existing from
a previous financial position.
Immiserizing growth Economic growth that is so strongly biased toward the production of
exports, and where the world demand for these exports is so price-inelastic, that the
world price falls sufficiently to leave the country worse off than it was before the growth
occurred.
Import substitution A development policy in which economic growth is to be encouraged
by repressing imports and by encouraging the domestic production of substitutes for
those imports.
Indirect tax A tax levied on production or consumption of goods and services.
Industrial strategy The argument that the growth of industries within an economy should
not be left to market forces but should instead be guided by government policies. The
government should choose industries that have strong prospects and encourage their
growth, perhaps by maintaining barriers to imports.
Infant-industry protection The argument that an industry’s costs will be high when it is
beginning, and it will therefore need protection from imports to survive. If provided
with a period of protection, the industry’s costs will decline and it will be able to prosper
without protection.
Intellectual property Property developed through research and other creative efforts.
Forms of protection include patents, copyrights, and trademarks.
Interest parity theory The forward discount on a currency, measured as an annual rate,
should equal the local interest rate minus the foreign interest rate.
International Bank for Reconstruction and Development (IBRD) An institution
founded in 1944 that lends money to developing countries. Located in Washington DC,
it was originally to finance both reconstruction from World War II and development
projects in poor countries. This institution also carries on research and provides advice
in the area of development economics. Also known as the “World Bank.”
International Finance Corporation A division of the IBRD which carries on equity
financing of private projects in developing countries.
International Monetary Fund (IMF) An institution that was founded at the Bretton
Woods conference in 1944 and lends money to countries facing large balance-ofpayments
deficits. Located in Washington DC, across the street from the IBRD, it also
oversees the exchange rate system and provides research and advisory services for
member countries in the areas of monetary economics and international finance.
Intra-industry trade Trade that occurs when a country both exports and imports the
output
502 Glossary
of the same industry. Italy exporting Fiat automobiles to Germany and importing VWs
from Germany would be an example of intra-industry trade.
IS line Combinations of interest rates and levels of domestic output which will equate
savings and intended investment, thus producing equilibrium in the market for goods.
Isoquant A curve representing all the combinations of two factors of production which will
produce a fixed quantity of a product. A set of isoquants can be used to represent a
production function for two inputs.
J-curve effect The possibility that after a devaluation or depreciation, a country’s balance
of trade will deteriorate modestly for a brief period of time before improving by far more
than enough to offset that loss.
Law of one price The argument that international differences in prices for the same
commodity should be arbitraged away by trade. If the exchange rate is 5 pesos per dollar,
a product that costs $1 in the United States should cost 5 pesos in the other country.
This law is frequently violated in oligopolistic markets.
Learning curve A relationship showing the tendency for a firm’s marginal cost of
production
to fall as its cumulative output rises. This relationship has been especially important
in aircraft and semiconductor production.
Leontief paradox The 1953 research finding by Wassily Leontief that US exports were
more labor-intensive than US imports, which contradicts the predictions of the
Heckscher–Ohlin theorem.
Letter of credit A document issued by a commercial bank which promises to pay a fixed
amount of money if certain conditions are met, such as the delivery of exported goods
to a customer. If firm A wishes to purchase goods from firm B in a foreign country,
firm B may require that firm A provide a letter of credit for the amount of the purchase.
If such a letter is provided, firm B is guaranteed by a known commercial bank that it will
be fully paid a certain number of days after firm A takes delivery of the goods.
LM line Combinations of interest rates and domestic output which, given a money supply,
will clear the domestic market for money.
London Interbank Offer Rate (LIBOR) The market-determined interest rate on shortterm
interbank deposits in the Eurodollar market in London, frequently used as the basis
for floating interest rates on international loans. A country might borrow at LIBOR plus
1 percent, for example.
Long position Owning an asset or a contract to take delivery of an asset at a fixed price
with no hedge or offsetting position. A long position is profitable if the price of the asset
rises, and vice versa.
Maastricht Treaty An agreement among the members of the European Community which
was completed in Maastricht, the Netherlands, in December 1991. This treaty led to
the European Monetary System becoming a full monetary union in early 1999, the euro
to fully replace the national currencies of the 12 members in 2002. The treaty also
included provisions to make it easier for nationals of one EU member to migrate to
another seeking work, and moved Europe toward a full union in other ways.
Managed [or dirty] floating exchange rate A policy in which a government or central
bank
does not maintain a parity, and instead allows the exchange rate to change to some degree
with market forces. The government or central bank buys or sells foreign exchange,
however, when it is displeased with the behavior of the market. Such intervention
is intended to produce exchange market behavior that the government prefers.
Marginal propensity to import The percentage of extra or marginal income which
residents of a country can be expected to spend on imports.
Glossary 503
Marginal rate of substitution The rate at which an individual or a group of people would
be willing to exchange one good for another and be no better or worse off. Equals the
ratio of the marginal utilities of the two goods, which equals the slope of an indifference
curve.
Marginal rate of transformation The rate at which an economy can transform one good
into another by moving productive resources from one industry to another. Equals the
ratio of the marginal costs of the two goods, which equals the slope of the
productionpossibility
curve.
Marshall–Lerner condition The elasticity of demand and supply conditions that are
necessary for a devaluation to improve a country’s balance of trade.
Mercantilism The view that a government should actively discourage imports and
encourage exports, as well as regulate other aspects of the economy.
Monetarist model of the balance of payments A view of the balance of payments, or
the
exchange rate, which emphasizes excess demands for, or supplies of, money as causes of
exchange market disequilibria. An asset market approach to the balance of payments in
which domestic and foreign assets are viewed as perfect substitutes.
Moral hazard An institutional or legal situation which, perhaps unintentionally,
encourages people to behave badly. If, for example, the IMF always provides financial
packages for developing countries that face debt crises and this results in the lenders
being fully compensated, i.e. “bailed out,” banks in industrialized countries may
be encouraged to lend less than prudently. The expectation of an IMF “bail-out”
encourages irresponsible lending in developing countries, which makes a later debt crisis
more likely.
Most-favored-nation status (MFN) When a country promises to offer the country having
most-favored-nation status the lowest tariff which it offers to any third country.
Multi-Fibre Arrangement (MFA) A system of bilateral quotas in the markets for textiles
and garments in which each exporting country is allowed to send a specified quantity of
various textile or garment products to an importing country per year.
New International Economic Order A list of requests by the underdeveloped countries
for
improvements in their trading and development prospects, to be largely financed by
the industrialized countries. The agenda was actively discussed during the 1970s, but
interest in it declined in the 1980s. The most important element in the agenda was a
system of price support programs for primary products which are exported by developing
countries. Fears of enormous costs and resource allocation inefficiencies led the
industrialized countries to resist this and other parts of the NIEO program.
Newly industrialized countries (NICs) A group of previously poor countries that
experienced very rapid economic growth during the 1970s and 1980s, based primarily
upon greater production of manufactured goods that were exported to developed countries.
South Korea, Taiwan, Hong Kong, and Singapore were the original NICs but in
the 1990s China, Thailand, Malaysia, and Indonesia were added to that group.
Nominal effective exchange rate A weighted exchange rate for a currency relative to the
currencies of a number of foreign countries. Trade shares are frequently used as the
weights.
Nontariff barrier Any government policy other than a tariff which is designed to
discourage imports in favor of domestic products. Quotas and government procurement
rules are among the most important nontariff trade barriers.
North American Free Trade Agreement (NAFTA) An agreement to establish a freetrade
area consisting of the United States, Canada, and Mexico. A US–Canada free-
504 Glossary
trade area began operations in 1989, and was extended to Mexico at the beginning of
1994.
Offer curve A curve that illustrates the volume of exports and imports that a country will
choose to undertake at various terms of trade. Also known as a “reciprocal demand
curve.”
Official reserve transactions balance A measurement of a country’s balance-of-
payments
surplus or deficit which includes all items in the current and capital accounts. It excludes
only movements of foreign exchange reserves. Also known as the “official settlements
balance of payments” and occasionally as the “overall balance.”
Open economy macroeconomics Macroeconomic models that explicitly include foreign
trade and international capital-flow sectors.
Opportunity cost The cost of one good in terms of other goods which could have been
produced with the same factors of production.
Optimum currency area The area within which a single currency or rigidly fixed exchange
rates should exist.
Optimum tariff A tariff that is designed to maximize a large country’s benefits from trade
by improving its terms of trade. Optimum only for the country imposing the tariff, not
for the world.
Organization for Economic Cooperation and Development (OECD) An organization
consisting of the governments of the industrialized market economies, headquartered in
Paris. It provides a forum for a wide range of discussions and negotiations among these
countries, and publishes both statistics and economic research studies on these countries
and on international trade and financial flows.
Origin principle A tax is levied on the good in the country where it is produced. No tax
adjustment is made at the border when a good is exported or imported.
Overshooting A condition that occurs when the price of an asset, such as foreign
exchange,
is moving in one direction but temporarily moves beyond its permanent equilibrium,
before coming back to its long-run value. Associated with Rudiger Dornbusch’s analysis
of the response of a floating exchange rate to a shift in monetary policy.
Par value A fixed exchange rate, denominated in terms of a foreign currency or gold.
Policy assignment model A model of balance-of-payments adjustment under fixed
exchange rates in which it is possible to reach both the desired level of domestic output
and payments equilibrium through the use of fiscal and monetary policies. Associated
with J. Marcus Fleming and Robert Mundell.
Portfolio balance model A view of the capital account or of the overall balance of
payments
which emphasizes the demand for and supply of financial assets. Concludes that
capital flows in response to recent changes in expected yields rather than in response to
differing levels of expected yields. That part of the asset market approach to the balance
of payments in which domestic and foreign assets are viewed as imperfect substitutes.
Predatory dumping Temporary dumping designed to drive competing firms out of
business
in order to create a monopoly and raise prices.
Preference similarity hypothesis The argument that trade in consumer goods is often
based on the fact that a product that is popular in the country in which it is produced
can most easily be exported to countries with similar consumer tastes. Associated with
Stefan Burenstam Linder.
Principle of second best The argument, associated with Richard Lipsey and Kelvin
Lancaster, that when it is not possible to remove one economic distortion, such as an
imperfectly competitive product or factor market, eliminating another distortion, such
Glossary 505
as a trade barrier, may not increase economic efficiency. Many arguments for protection
are based on this principle.
Producers’ surplus The difference between the price at which a product can be sold and
the minimum price which a seller would be willing to accept for it.
Production function A graphical or mathematical representation of all the combinations
of inputs which will produce various quantities of a product. Can be represented with
an isoquant map if only two inputs exist.
Purchasing power parity The argument that the exchange for two currencies should
reflect
relative price levels in the two countries. If yen prices in Japan are on average 200 times
as high as dollar prices in the United States, the exchange rate should be 200 yen = $1.
Associated with Gustav Cassel.
Put An option contract that allows its owner to sell a specified amount of a financial asset,
such as foreign exchange, at a fixed price during a specified period of time. The owner
of the option is not required to exercise the option. The price at which the asset can be
sold is known as the “strike price.”
Quota A government policy that limits the physical volume of a product which may be
imported per period of time.
Quota rents The extra profits that accrue to those who get the right to bring products
into a country under a quota. Equal to the difference between the domestic price of the
product in the importing country and the world price, multiplied by the quantity
imported.
Real effective exchange rate The nominal effective exchange rate adjusted for differing
rates of inflation to create an index of cost and price competitiveness in world markets.
If a country’s nominal effective exchange rate depreciated by 5 percent in a year in
which its rate of inflation exceeded the average rate of inflation in the rest of the world
by 5 percentage points, its real effective exchange rate would be unchanged.
Real interest rate The nominal interest rate minus the expected rate of inflation. Current
saving and investment decisions should be based on the real interest rate over the
maturity of the asset.
Real money supply A nation’s money supply divided by the price level in that country.
The real money supply, which represents the purchasing power of the nation’s money
supply, is critical in determining the demand for goods and services, as well as for
financial assets, in a monetarist model.
Relative factor endowments The relative amounts of different factors of production which
two countries have. India has a relative abundance of labor, while the United States has
a greater relative abundance of capital.
Relative factor intensities The relative amounts of different factors of production that
are used in the production of two goods. Textiles and garments are relatively laborintensive,
whereas oil refining is relatively capital-intensive.
Residence principle A tax is imposed on the income of a country’s residents, regardless of
where the income is earned.
Revaluation An increase in the value of a currency in terms of foreign exchange by
changing an otherwise fixed exchange rate.
Rybczynski theorem The argument, associated with Thomas Rybcyznski, that if the
supply of one factor of production increases, when both relative factor and goods prices
are unchanged, the output of the product using that factor intensively will increase
and the output of the product using the other factor of production intensively must
decline.
506 Glossary
Section 301 A provision of US trade law which allows retaliation against the exports of
countries maintaining what the United States views as unfair trade practices such as
allowing the theft of US intellectual property by local firms.
Settlement date The date at which payment is made and an asset received. Normally two
business days after the trade is agreed to for spot foreign exchange transactions. If
General Motors purchases DMs from Citibank on Wednesday, payment will be made
in both directions on that Friday, which is the settlement date.
Short position Having a liability or a contract to deliver an asset in the future at a fixed
price with no hedge or offsetting position. A short position is profitable if the asset
declines in price, and vice versa. A short position in sterling would exist if someone
owed a sterling debt without offsetting sterling assets, or if that person had sold sterling
in the forward or futures market while not holding offsetting sterling assets.
Singer–Prebisch hypothesis The argument developed by Hans Singer and Raul Prebisch
that developing countries face a secular decline in their terms of trade owing to a trend
toward lower prices for primary commodities relative to prices of manufactured goods.
Smoot–Hawley tariff A very high level of tariffs adopted by the United States in 1930
which caused a dramatic decline in the volume of world trade. It is widely believed to
have worsened the great depression.
Society for Worldwide Interbank Financial Telecommunication (SWIFT) An
electronic
system maintained by large international banks for transmitting instructions for foreign
exchange transfers and other international transactions.
Source principle A tax is imposed on the income earned in a country, regardless of
whether
a resident or nonresident earns it.
Special Drawing Rights (SDRs) A foreign exchange reserve asset created by the
International Monetary Fund. The value of the SDR is based on a weighted average of
the US dollar, the DM, the yen, sterling, and the French franc.
Specie flow mechanism A balance-of-payments adjustment mechanism in which the
domestic money supply is rigidly tied to the balance of payments, falling in the case of
deficits and rising when surpluses occur. Associated with David Hume.
Specific factors model A factor of production is specific to an industry, or immobile, when
its productivity in one industry exceeds its productivity in other industries at any price.
A specific factors model predicts that immobile factors that produce import-competing
goods will be harmed by free trade. The text refers to the case where capital is immobile
between industries, but labor is mobile, as a specific factors model.
Specific tariff A tariff that is measured as a fixed amount of money per physical unit
imported – $500 per car or $10 per ton, for example.
Spot market The market for an asset, such as foreign exchange, in which delivery is in only
one or two days.
Statistical discrepancy Also known as “net errors and omissions,” this is the number that
must be entered in the balance-of-payments accounts of a country to make them sum
to zero. Logically, the accounts must sum to zero, but many of the entries are estimates
of actual transactions that contain many errors, so these estimates seldom do sum to
zero. The statistical discrepancy number is frequently placed at the end of the table and
is simply the sum of all the other entries in the account with the sign reversed.
Sterilization A domestic monetary policy action that is designed to cancel or offset the
monetary effect of a balance-of-payments disequilibrium. When a payments surplus
increases the domestic money supply, an open-market sale of domestic assets by the
central bank will cancel this effect and will constitute sterilization.
Glossary 507
Stolper–Samuelson theorem The argument that in a world of Heckscher–Ohlin trade, free
trade will reduce the income of the scarce factor of production and increase the income
of the abundant factor of production in each country.
Strategic trade policy The argument that trade policy, including protection, should be
used to encourage the growth of domestic industries which the government feels to
have strong prospects in world markets. This usually involves trying to choose industries
in which rapid technical advances are likely and where growing world markets exist.
Strike price The price at which an option can be exercised before the expiration date. Such
an option is said to be “at the money” if the strike price equals the current market price,
and “in the money” if the market price exceeds the strike price, so a call option is worth
exercising. A call option is “out of the money” if the current market price is below the
strike price, so the option is not worth exercising.
Swap A transaction in which one security or stream of income is exchanged for another,
frequently with a contract to reverse the transaction at a date in the future. In foreign
exchange, a swap means the purchase of a currency in the spot market and its
simultaneous
sale in the forward market.
Tariff A tax on imports or exports imposed by a government. Tariffs are frequently a major
source of revenue for developing countries, but are primarily used for protectionist
reasons in industrialized countries.
Tariff rate quota A trade restriction which places a low tariff rate on a fixed volume
which is imported per period of time and a higher tariff rate on imports above that level.
Alternatively, there may be no tariff on the fixed volume, and a tariff above that
level.
Terms of trade The ratio of a country’s export prices to its import prices. High terms of
trade imply large welfare benefits from trade, and vice versa.
Trade Adjustment Assistance (TAA) The practice of providing financial aid for
industries injured by growing imports or for their employees. When tariffs are reduced,
trade adjustment assistance is sometimes promised for import-competing industries.
Trade balance A country’s total export receipts minus its total import expenditures during
a period of time, usually a year.
Trade creation An efficiency gain that results from the operation of a free-trade area
because more efficient firms from a member country displace less efficient local
producers in the domestic market.
Trade diversion An efficiency loss that results from the operations of a free-trade area
because less efficient firms from a member country displace more efficient producers from
a nonmember country. It occurs because of the discriminatory nature of the tariff
regime. The member country faces no tariff in the import market, whereas the
nonmember still faces a tariff.
Trade-related investment measures (TRIMs) Government policies in which foreign
direct investments in a country are allowed only if the investing firm promises to meet
certain trade performance goals. The Uruguay Round agreement prohibits TRIMs that
require firms to use a certain amount of domestically produced inputs or maintain a
certain balance between imports and exports.
Transfer pricing The practice of using false or misleading prices on trade documents in
order to evade ad valorem tariffs or exchange controls, or to shift profits within a
multinational firm from a high-tax-rate jurisdiction to a low-tax-rate jurisdiction. Also
known as “false invoicing.”
United Nations Conference on Trade and Development (UNCTAD) A series of
508 Glossary
conferences carried on through the United Nations since 1964 at which the developing
countries discuss trade and development issues. The New International Economic Order
agenda for reform of the world economy grew out of these conferences.
Uruguay Round A round of negotiations on trade liberalization held under GATT
auspices which was completed in 1993. The agreement reached reduces tariffs and
addresses trade practices not previously covered by GATT rules. It also replaces GATT
with the World Trade Organization.
US Trade Representative An official of the executive branch of the US government who
is responsible for carrying on negotiations with foreign governments on foreign trade
issues. Previously known as the “Special Trade Representative.”
Vernon product cycle The observation that a country such as the United States will
frequently export a product that it has invented only for as long as it can maintain
a technical monopoly. When the technology becomes available abroad, perhaps because
a patent has expired, production grows rapidly in foreign countries where costs are
lower, and the inventing country experiences a decline in its production of the product
because of a rapid growth of imports. Associated with Raymond Vernon.
Voluntary export restraint (VER) An agreement by a country to limit its export sales to
another country, frequently in order to avoid a more damaging protectionist policy
by the importing country. Sometimes known as an “Orderly Marketing Agreement”
(OMA). VERs are severely restricted by the Uruguay Round agreement.
Walras’s law The idea that excess demands must net out to zero across an economy in
a general equilibrium framework, because if there is an excess demand in one market,
there must be an offsetting excess supply in another market. Associated with Leon
Walras.
World Trade Organization (WTO) A successor organization to the GATT established in
1995, as agreed upon in the Uruguay Round. The WTO provides a stronger administrative
framework, more streamlined dispute resolution provisions, and a trade-policy
review procedure, all of which suggest more effective implementation of the agreements
reached.

Absolute advantage The argument, associated with Adam Smith, that trade is based on
absolute differences in costs. Each country will export those products for which its costs,
in terms of labor and other inputs, are lower than costs in other countries.
Absorption model A Keynesian analysis of the conditions necessary for the success of a
devaluation, namely, that output must grow relative to the domestic use of goods and
services, and that domestic savings must grow faster than investment. Associated with
Sidney Alexander.
Accommodating transactions Those items in the balance-of-payments accounts which
occur in order to offset imbalances in the total of the remaining items. Flows of foreign
exchange reserves are the dominant accommodating transaction.
Ad valorem tariff A tariff that is measured as a percentage of the value of the traded
product.
Appreciation An increase in the value of a currency, measured in terms of other
currencies,
in a regime of floating exchange rates. If the dollar/sterling exchange rate moved from
1 pound = $1.50 to 1 pound = $1.75, that would be an appreciation of sterling.
Arbitrage Purchase of a good or an asset in a low-price market and its riskless sale in a
higher-price market. If arbitrage is possible, prices should be forced together, differing
by no more than transport or transactions costs.
Articles of Agreement of the IMF The founding document of the International Monetary
Fund that defines the Fund’s functions. Agreed to at the Bretton Woods conference in
1944 and amended since then.
Asset market model of the balance of payments A group of models of the balance of
payments or the exchange rate which views foreign exchange as a financial asset rather
than as a claim on real goods. Capital transactions, rather than current account
transactions, dominate these models. Foreign exchange is bought or sold in order to
facilitate financial transactions rather than merchandise trade, and the models are based
on supply and demand functions for financial assets.
Autonomous transactions Those items in the balance-of-payments accounts which occur
for commercial or financial reasons, and not to balance other items. The sum of the
autonomous items is offset by accommodating items. International trade and long-term
capital flows are autonomous transactions.
Balance of payments A set of accounts that represents all transactions between residents
of one country and residents of the rest of the world during a period of time, normally a
year.
Bank for International Settlements (BIS) A financial institution located in Basle,
Switzerland, which provides a range of services for the central banks of the industrialized
countries. The BIS was founded in 1930 to manage problems in German reparations
payments from World War I. Some central banks hold part of their foreign exchange
reserves as deposits at the BIS. Representatives of the central banks of the industrialized
countries frequently meet at the BIS for consultations on monetary and exchangemarket
policies.
Base money The total volume of member bank reserve accounts and currency created by
a central bank. The stock of base money, sometimes known as “high-powered money,”
is central in determining the money supply of a country.
Basic balance A balance-of-payments surplus or deficit measured as the sum of the current
account and the long-term capital account. Excludes short-term capital and flows of
foreign exchange reserves.
Bilateral exchange rate The price of the local currency in terms of a single foreign
currency.
BP line Combinations of interest rates and levels of domestic output which will produce
equilibrium in the balance of payments.
Brady Plan A plan, named after the secretary of the Treasury during the Bush
administration,
to ease the Latin American debt crisis by encouraging banks to write off some
of these debts and lengthen those maturities that remained.
Brain drain The movement of scientists, engineers, and other highly educated people from
developing to industrialized countries, which imposes a loss on public investments in
education on the developing country.
Bretton Woods Agreement The conclusion of the Bretton Woods conference, held at a
resort of that name in New Hampshire during the summer of 1944. The World Bank
and the International Monetary Fund were founded as a result of the Bretton Woods
Agreement. The phrase “Bretton Woods system” is often used to describe the international
monetary system of fixed exchange rates which prevailed until the crises of
1971 and 1973.
Cable transfer A means of transferring foreign exchange from one economic agent to
another. An electronic message instructs a bank to transfer funds from the account of
one party to that of another.
Call An option contract that allows the owner to purchase a specified quantity of
a financial asset, such as foreign exchange, at a fixed price during a specified period. The
owner is not required to exercise the option. The price at which the option can be
exercised is known as the “strike price.”
Capital account A country’s total receipts from the sale of financial assets to foreign
residents
minus its total expenditures on purchases of financial assets from foreign residents.
These assets include both debt and equity instruments.
Cartel A collusive arrangement among sellers of a product in different countries, which is
intended to raise the price of that product in order to extract monopoly rents.
c.i.f. Cost, insurance, and freight. This measurement of the value of imports includes the
cost of the goods itself, insurance, and freight.
Clean floating exchange rate A rate that exists when an exchange rate is determined
solely
by market forces. The central banks not only fail to maintain a parity, but also refrain
from buying or selling foreign exchange to influence the rate.
Clearing House International Payments System (CHIPS) The electronic system among
banks in New York and other major foreign financial centers, which is used to transfer
foreign exchange, that is, to complete foreign exchange market transactions.
Commercial policy Government policies that are intended to change international trade
flows, particularly to restrict imports.
Glossary 497
Common market A group of countries that maintain free trade in goods among the
membership, share a common external tariff schedule, and allow mobility of labor and
capital among the members.
Common property resource A resource for which use by one individual reduces the
amount
available for other individuals, but one from which no individual can be excluded.
Community indifference curve A line that shows all the combinations of two goods which
provide the community with the same level of welfare, that is, to which the community
would be indifferent. A set of these curves can be used to show increases in community
welfare as more goods are made available.
Comparative advantage The argument, developed by David Ricardo in the early
nineteenth century, that mutually beneficial balanced trade is possible even if one
country has an absolute advantage in both goods. All that is required is that there be a
difference in the relative costs of the two goods in the two countries and that each
country export the product for which it has relatively or comparatively lower costs.
Conditionality The policy under which the International Monetary Fund makes large
loans (drawings) to member countries only if they pursue exchange rate and other
policies that can be expected to improve the borrowing country’s balance-of-payments
performance and make the repayment of the loan possible.
Consumers’ surplus The difference between what a consumer would be willing to pay for
a product and its market price.
Contagion When a balance of payments or debt crisis begins in one country and then
spreads to similar countries, often in the same region, that did not experience the
original negative payments shock to the first country. Thailand had such a crisis in the
summer of 1997, which soon spread to Malaysia, Indonesia, and South Korea.
Countervailing duty A tariff imposed by an importing country which is intended to
increase the price of the goods to a legally defined fair level. Often used in export subsidy
and dumping cases.
Covered return The rate of return on an investment in a country after allowance for the
cost of a forward contract to move the funds back to the country of the investor.
Crawling peg An exchange rate system in which a fixed parity is maintained, which is
changed quite frequently (sometimes weekly) to maintain balance-of-payments equilibrium
and/or offset differing rates of inflation among countries.
Credit A transaction that results in a payment into a country. Exports, receipts of dividend
and interest payments, and purchases of local assets by foreigners are all credits in a
country’s balance-of-payments accounts.
Crowding out The argument that government budget deficits do not increase GNP because
the deficits crowd out or discourage other private transactions, perhaps through higher
interest rates resulting from government borrowing.
Currency basket A weighted average of a group of currencies to which the currency of a
country is pegged. India, for example, has maintained a fixed exchange rate for the rupee
relative to a basket of currencies of India’s major trading partners.
Currency board An institution that fulfills the role of a bank but is not allowed to own
domestic financial assets. Its only financial assets are foreign exchange reserves, meaning
that its ability to create base money, and thereby increase the domestic money supply,
is strictly regulated by the balance of payments.
Currency mismatch When an enterprise or government borrows heavily in one foreign
currency but does not maintain offsetting assets in that currency or undertake other
hedging techniques. If the home currency is later devalued relative to the currency in
498 Glossary
which the borrowing occurred, large capital losses are imposed on the debtor. If such
currency mismatches are widespread, the local economy may experience a large number
of bankruptcies that can create a serious recession or depression. Argentina experienced
this circumstance in 2002, as did Thailand in 1997.
Currency substitution The argument that national currencies are often viewed as
substitutes and that firms switch from holding one currency to another in response to
changes in expected yields and risks.
Current account A country’s total receipts from exports of goods and services minus its
local expenditures on imports of goods and services. Also includes unilateral transfers
such as gifts and foreign aid.
Customs union A group of countries that maintain free trade in goods among the
membership
and a common external tariff schedule.
Deadweight loss The loss from a tariff or other restrictive policy that is a gain to nobody.
A pure efficiency loss.
Debit A transaction that results in a payment out of a country. Imports and purchases of
foreign securities are debits in a country’s balance-of-payments accounts.
Debt/equity swap An exchange that occurs when a bank sells financial claims on a foreign
government to another firm at a discount, and that firm allows the debtor country to
pay the debt in local currency, which it uses to finance a direct investment in the debtor
country. Frequently used in Latin America to ease the burdens of excessive debt.
Depreciation A currency’s decline in exchange market value in a flexible exchange rate
system.
Destination principle A tax is levied on a good in the country where it is consumed. Under
GATT rules the destination principle is applied to indirect taxes, and rebated on
exports but imposed on imports.
Devaluation A condition that arises when a government or central bank changes a fixed
exchange rate or parity for its currency in a direction that reduces the value of the local
currency compared to foreign currencies.
Direct tax A tax levied on individuals or income.
Dumping Selling a product in an export market for less than it sold for in the home market
or for less than the importing country views as a fair value, which is usually based on
estimates of average cost.
Economic union An agreement among a group of countries to maintain free trade among
themselves, a common external tariff, mobility of capital and labor among the members,
and some degree of unification in their budgetary and monetary systems.
Economies of scale Conditions characterized by the decline of long-run average costs as
an enterprise becomes larger. Economies of scale frequently exist when fixed costs are
particularly important in an industry.
Effective rate of protection A measurement of the amount of protection provided to an
industry by a tariff schedule which allows for tariffs on inputs that the industry buys from
others, as well as for the tariff on the output of the industry. The effective tariff can be
negative, which means that the government policy is discriminating against local firms
and in favor of imports, if tariff levels on inputs are sufficiently higher than the tariff on
the final good.
Embargo A complete prohibition of trade with a country. US trade with Libya and Cuba,
for example, has been under an embargo.
Escape clause A provision of US law which allows temporary protection for US industries
that are under particular pressure from imports.
Glossary 499
Euro The new currency of the European Monetary Union (EMU), the membership of
which includes 12 members of the European Union. It became an accounting currency
in January 1999, and replaced the 12 national currencies for all uses in 2002. A euro was
worth about $1.15 in mid-2003.
Eurobonds Bonds sold in one or a group of countries which are denominated in the
currency of another country, such as dollar-denominated bonds sold in Europe.
Eurodollar market Banking markets in Europe, and elsewhere outside the United States,
in which time deposits are accepted and loans are made in US dollars. Similar
arrangements exist for such offshore banking in other currencies.
European Economic Community An association of European countries, established in
1957, that agreed to free trade among its members and imposed a common external tariff
on trade with nonmembers. As of 1995 there were 15 member countries. In 1967 the
EEC joined with the European Coal and Steel Community and Euratom to become the
European Community. In 1993 an agreement to achieve even closer economic
cooperation was ratified, which established the European Union.
European Monetary System (EMS) The phased unification of the monetary systems of
the
members of the European Union. Fixed exchange rates and coordinated monetary
policies existed until 1992–3 when the system encountered major problems. The EMS
became a full monetary union in January of 1999.
European Monetary Union (EMU) The monetary union which grew out of the European
Monetary System. In January of 1999 the exchange rates of the original 11 members
were irrevocably fixed relative to each other and the euro was introduced as an accounting
currency. EMU is run by the European Central Bank, which is headquartered in
Frankfurt. Its management structure is very similar to that of the US Federal Reserve
System, with the governors of the national central banks sitting on the Governing
Council, along with six members of the Executive Board, and acting as the Federal Open
Market Committee does in the United States. The euro fully replaced the 12 national
currencies in 2002.
Exchange market intervention Purchases or sales of foreign exchange by a central bank
which are intended to maintain a fixed exchange rate or to affect the behavior of a
floating rate.
Exchange Rate Mechanism (ERM) The arrangement through which the members of the
European Monetary System maintained fixed exchange rates before 1992–3 when a
much wider band was at least temporarily adopted.
Export-led growth Policies in developing countries that are designed to encourage
economic growth which is based on rapid growth of exports sales. Widely used in East
Asian countries.
Export tariffs Taxes or tariffs that are applied to export receipts. Such tariffs are frequently
used by developing countries as a revenue source, but have the effect of discouraging
exports of the tariffed products.
External economies of scale Greater production by one firm in an industry allows costs
of production for other firms in the industry to decline. This benefit from greater
production represents a positive externality that an individual firm will ignore in
deciding how much to produce. In such circumstances some advocate a subsidy to give
the firm an incentive to expand output.
Externality Benefits or costs from a transaction that affect those who are not parties to the
transaction. A positive externality from more flu vaccinations given is better health for
those exposed to inoculated individuals.
500 Glossary
Factor intensity reversal A situation in which it is impossible to rank clearly or identify
the relative factor intensities of two products, because one is more labor-intensive at
one set of relative factor prices, but the other becomes more labor-intensive at another
set of relative factor prices. Factor intensity reversal can occur when it is far easier to
substitute one factor for the other in one industry than it is in the other industry.
Factor-price equalization The argument that international trade that is based on
differences
in relative factor endowments, as predicted by the Heckscher–Ohlin theorem,
will tend to reduce or eliminate international differences in factor prices. Free
trade between Australia and Japan, for example, would reduce land prices in Japan and
increase them in Australia until land prices in the two countries became equal or at least
similar. Associated with Paul Samuelson and Wolfgang Stolper.
f.a.s. Free alongside ship. This measurement of the value of exports includes the price of
the goods shipped to the side of the ship, but without loading costs.
Filter rule An approach to speculation in which an asset is bought or sold on the basis of
the recent behavior of its price. One such “rule” would be to buy a currency that had
recently appreciated by some percentage or sell it if it had depreciated. Another would
be to sell currencies that had recently appreciated and vice versa. If exchange markets
are fully efficient, such filter rules should not be consistently profitable.
Floating exchange rate An exchange rate for which a government or central bank does
not
maintain a parity or fixed rate, but instead allows to be determined by market forces.
f.o.b. Free on board. This measurement of the value of exports includes the price of the
goods loaded on the ship, but without the cost of international shipping and insurance.
foreign exchange reserves Foreign financial assets held by a government or central bank
which are available to support the country’s balance of payments or exchange rate.
Includes holdings of gold, the country’s reserve position in the International Monetary
Fund, and claims on foreign governments and central banks.
Foreign trade multiplier The Keynesian multiplier adjusted to allow for the existence of
foreign trade. The marginal propensity to import makes this multiplier lower than that
which would prevail for the economy without trade.
Forward exchange market A market in which it is possible to purchase foreign exchange
for delivery and payment at a future date. The quantity and exchange rate are determined
at the outset, but payment is made at a fixed future date, frequently in 30, 60, or
90 days.
Free-trade area A group of countries that maintain free trade among the membership, but
where each country maintains its own tariff schedule for trade with nonmembers.
Free-trade zone An area within a nation where manufacturing can be carried out with
imported parts and components on which no tariffs have been paid. The output of such
manufacturing efforts must then be exported if it is to remain duty-free. Many developing
countries have free-trade zones, which are also known as “duty-free zones,” as a way
of encouraging export activities, which require imported inputs, without eliminating
protection for domestic industries that produce such inputs for the rest of the economy.
Futures market for foreign currencies A market that is similar to the forward market
except that all contracts mature on the same day of the month, a secondary market for
the contracts exists, and the amounts of money in the contracts are smaller. Futures
contracts are traded in commodity markets rather than through commercial banks.
General Agreement on Tariffs and Trade (GATT) An agreement reached in 1947 that
established principles to govern international trade in goods. Also, until 1995 the
GATT was an organization based in Geneva to administer this trade agreement, to
Glossary 501
settle trade disputes between member countries, and to foster negotiations to liberalize
trade. It was replaced by the WTO in 1995.
Generalized System of Preferences A preferential trading arrangement in which
industrialized
countries allow tariff-free imports from developing countries while maintaining
tariffs on the same products from other industrialized countries.
Gold standard A monetary system in which governments or central banks maintain a
fixed price of gold in terms of their currencies by offering to purchase or sell gold at fixed
local currency prices. Exchange rates are then determined by relative national prices
of gold.
Heckscher–Ohlin theorem The argument, developed by two Swedish economists in the
1920s, that international trade patterns are determined by the fact that countries have
different relative factor inputs. Each country will export those products that require a
great deal of its relatively abundant factor of production.
Hedging Undertaking a financial transaction that cancels or offsets the risk existing from
a previous financial position.
Immiserizing growth Economic growth that is so strongly biased toward the production of
exports, and where the world demand for these exports is so price-inelastic, that the
world price falls sufficiently to leave the country worse off than it was before the growth
occurred.
Import substitution A development policy in which economic growth is to be encouraged
by repressing imports and by encouraging the domestic production of substitutes for
those imports.
Indirect tax A tax levied on production or consumption of goods and services.
Industrial strategy The argument that the growth of industries within an economy should
not be left to market forces but should instead be guided by government policies. The
government should choose industries that have strong prospects and encourage their
growth, perhaps by maintaining barriers to imports.
Infant-industry protection The argument that an industry’s costs will be high when it is
beginning, and it will therefore need protection from imports to survive. If provided
with a period of protection, the industry’s costs will decline and it will be able to prosper
without protection.
Intellectual property Property developed through research and other creative efforts.
Forms of protection include patents, copyrights, and trademarks.
Interest parity theory The forward discount on a currency, measured as an annual rate,
should equal the local interest rate minus the foreign interest rate.
International Bank for Reconstruction and Development (IBRD) An institution
founded in 1944 that lends money to developing countries. Located in Washington DC,
it was originally to finance both reconstruction from World War II and development
projects in poor countries. This institution also carries on research and provides advice
in the area of development economics. Also known as the “World Bank.”
International Finance Corporation A division of the IBRD which carries on equity
financing of private projects in developing countries.
International Monetary Fund (IMF) An institution that was founded at the Bretton
Woods conference in 1944 and lends money to countries facing large balance-ofpayments
deficits. Located in Washington DC, across the street from the IBRD, it also
oversees the exchange rate system and provides research and advisory services for
member countries in the areas of monetary economics and international finance.
Intra-industry trade Trade that occurs when a country both exports and imports the
output
502 Glossary
of the same industry. Italy exporting Fiat automobiles to Germany and importing VWs
from Germany would be an example of intra-industry trade.
IS line Combinations of interest rates and levels of domestic output which will equate
savings and intended investment, thus producing equilibrium in the market for goods.
Isoquant A curve representing all the combinations of two factors of production which will
produce a fixed quantity of a product. A set of isoquants can be used to represent a
production function for two inputs.
J-curve effect The possibility that after a devaluation or depreciation, a country’s balance
of trade will deteriorate modestly for a brief period of time before improving by far more
than enough to offset that loss.
Law of one price The argument that international differences in prices for the same
commodity should be arbitraged away by trade. If the exchange rate is 5 pesos per dollar,
a product that costs $1 in the United States should cost 5 pesos in the other country.
This law is frequently violated in oligopolistic markets.
Learning curve A relationship showing the tendency for a firm’s marginal cost of
production
to fall as its cumulative output rises. This relationship has been especially important
in aircraft and semiconductor production.
Leontief paradox The 1953 research finding by Wassily Leontief that US exports were
more labor-intensive than US imports, which contradicts the predictions of the
Heckscher–Ohlin theorem.
Letter of credit A document issued by a commercial bank which promises to pay a fixed
amount of money if certain conditions are met, such as the delivery of exported goods
to a customer. If firm A wishes to purchase goods from firm B in a foreign country,
firm B may require that firm A provide a letter of credit for the amount of the purchase.
If such a letter is provided, firm B is guaranteed by a known commercial bank that it will
be fully paid a certain number of days after firm A takes delivery of the goods.
LM line Combinations of interest rates and domestic output which, given a money supply,
will clear the domestic market for money.
London Interbank Offer Rate (LIBOR) The market-determined interest rate on shortterm
interbank deposits in the Eurodollar market in London, frequently used as the basis
for floating interest rates on international loans. A country might borrow at LIBOR plus
1 percent, for example.
Long position Owning an asset or a contract to take delivery of an asset at a fixed price
with no hedge or offsetting position. A long position is profitable if the price of the asset
rises, and vice versa.
Maastricht Treaty An agreement among the members of the European Community which
was completed in Maastricht, the Netherlands, in December 1991. This treaty led to
the European Monetary System becoming a full monetary union in early 1999, the euro
to fully replace the national currencies of the 12 members in 2002. The treaty also
included provisions to make it easier for nationals of one EU member to migrate to
another seeking work, and moved Europe toward a full union in other ways.
Managed [or dirty] floating exchange rate A policy in which a government or central
bank
does not maintain a parity, and instead allows the exchange rate to change to some degree
with market forces. The government or central bank buys or sells foreign exchange,
however, when it is displeased with the behavior of the market. Such intervention
is intended to produce exchange market behavior that the government prefers.
Marginal propensity to import The percentage of extra or marginal income which
residents of a country can be expected to spend on imports.
Glossary 503
Marginal rate of substitution The rate at which an individual or a group of people would
be willing to exchange one good for another and be no better or worse off. Equals the
ratio of the marginal utilities of the two goods, which equals the slope of an indifference
curve.
Marginal rate of transformation The rate at which an economy can transform one good
into another by moving productive resources from one industry to another. Equals the
ratio of the marginal costs of the two goods, which equals the slope of the
productionpossibility
curve.
Marshall–Lerner condition The elasticity of demand and supply conditions that are
necessary for a devaluation to improve a country’s balance of trade.
Mercantilism The view that a government should actively discourage imports and
encourage exports, as well as regulate other aspects of the economy.
Monetarist model of the balance of payments A view of the balance of payments, or
the
exchange rate, which emphasizes excess demands for, or supplies of, money as causes of
exchange market disequilibria. An asset market approach to the balance of payments in
which domestic and foreign assets are viewed as perfect substitutes.
Moral hazard An institutional or legal situation which, perhaps unintentionally,
encourages people to behave badly. If, for example, the IMF always provides financial
packages for developing countries that face debt crises and this results in the lenders
being fully compensated, i.e. “bailed out,” banks in industrialized countries may
be encouraged to lend less than prudently. The expectation of an IMF “bail-out”
encourages irresponsible lending in developing countries, which makes a later debt crisis
more likely.
Most-favored-nation status (MFN) When a country promises to offer the country having
most-favored-nation status the lowest tariff which it offers to any third country.
Multi-Fibre Arrangement (MFA) A system of bilateral quotas in the markets for textiles
and garments in which each exporting country is allowed to send a specified quantity of
various textile or garment products to an importing country per year.
New International Economic Order A list of requests by the underdeveloped countries
for
improvements in their trading and development prospects, to be largely financed by
the industrialized countries. The agenda was actively discussed during the 1970s, but
interest in it declined in the 1980s. The most important element in the agenda was a
system of price support programs for primary products which are exported by developing
countries. Fears of enormous costs and resource allocation inefficiencies led the
industrialized countries to resist this and other parts of the NIEO program.
Newly industrialized countries (NICs) A group of previously poor countries that
experienced very rapid economic growth during the 1970s and 1980s, based primarily
upon greater production of manufactured goods that were exported to developed countries.
South Korea, Taiwan, Hong Kong, and Singapore were the original NICs but in
the 1990s China, Thailand, Malaysia, and Indonesia were added to that group.
Nominal effective exchange rate A weighted exchange rate for a currency relative to the
currencies of a number of foreign countries. Trade shares are frequently used as the
weights.
Nontariff barrier Any government policy other than a tariff which is designed to
discourage imports in favor of domestic products. Quotas and government procurement
rules are among the most important nontariff trade barriers.
North American Free Trade Agreement (NAFTA) An agreement to establish a freetrade
area consisting of the United States, Canada, and Mexico. A US–Canada free-
504 Glossary
trade area began operations in 1989, and was extended to Mexico at the beginning of
1994.
Offer curve A curve that illustrates the volume of exports and imports that a country will
choose to undertake at various terms of trade. Also known as a “reciprocal demand
curve.”
Official reserve transactions balance A measurement of a country’s balance-of-
payments
surplus or deficit which includes all items in the current and capital accounts. It excludes
only movements of foreign exchange reserves. Also known as the “official settlements
balance of payments” and occasionally as the “overall balance.”
Open economy macroeconomics Macroeconomic models that explicitly include foreign
trade and international capital-flow sectors.
Opportunity cost The cost of one good in terms of other goods which could have been
produced with the same factors of production.
Optimum currency area The area within which a single currency or rigidly fixed exchange
rates should exist.
Optimum tariff A tariff that is designed to maximize a large country’s benefits from trade
by improving its terms of trade. Optimum only for the country imposing the tariff, not
for the world.
Organization for Economic Cooperation and Development (OECD) An organization
consisting of the governments of the industrialized market economies, headquartered in
Paris. It provides a forum for a wide range of discussions and negotiations among these
countries, and publishes both statistics and economic research studies on these countries
and on international trade and financial flows.
Origin principle A tax is levied on the good in the country where it is produced. No tax
adjustment is made at the border when a good is exported or imported.
Overshooting A condition that occurs when the price of an asset, such as foreign
exchange,
is moving in one direction but temporarily moves beyond its permanent equilibrium,
before coming back to its long-run value. Associated with Rudiger Dornbusch’s analysis
of the response of a floating exchange rate to a shift in monetary policy.
Par value A fixed exchange rate, denominated in terms of a foreign currency or gold.
Policy assignment model A model of balance-of-payments adjustment under fixed
exchange rates in which it is possible to reach both the desired level of domestic output
and payments equilibrium through the use of fiscal and monetary policies. Associated
with J. Marcus Fleming and Robert Mundell.
Portfolio balance model A view of the capital account or of the overall balance of
payments
which emphasizes the demand for and supply of financial assets. Concludes that
capital flows in response to recent changes in expected yields rather than in response to
differing levels of expected yields. That part of the asset market approach to the balance
of payments in which domestic and foreign assets are viewed as imperfect substitutes.
Predatory dumping Temporary dumping designed to drive competing firms out of
business
in order to create a monopoly and raise prices.
Preference similarity hypothesis The argument that trade in consumer goods is often
based on the fact that a product that is popular in the country in which it is produced
can most easily be exported to countries with similar consumer tastes. Associated with
Stefan Burenstam Linder.
Principle of second best The argument, associated with Richard Lipsey and Kelvin
Lancaster, that when it is not possible to remove one economic distortion, such as an
imperfectly competitive product or factor market, eliminating another distortion, such
Glossary 505
as a trade barrier, may not increase economic efficiency. Many arguments for protection
are based on this principle.
Producers’ surplus The difference between the price at which a product can be sold and
the minimum price which a seller would be willing to accept for it.
Production function A graphical or mathematical representation of all the combinations
of inputs which will produce various quantities of a product. Can be represented with
an isoquant map if only two inputs exist.
Purchasing power parity The argument that the exchange for two currencies should
reflect
relative price levels in the two countries. If yen prices in Japan are on average 200 times
as high as dollar prices in the United States, the exchange rate should be 200 yen = $1.
Associated with Gustav Cassel.
Put An option contract that allows its owner to sell a specified amount of a financial asset,
such as foreign exchange, at a fixed price during a specified period of time. The owner
of the option is not required to exercise the option. The price at which the asset can be
sold is known as the “strike price.”
Quota A government policy that limits the physical volume of a product which may be
imported per period of time.
Quota rents The extra profits that accrue to those who get the right to bring products
into a country under a quota. Equal to the difference between the domestic price of the
product in the importing country and the world price, multiplied by the quantity
imported.
Real effective exchange rate The nominal effective exchange rate adjusted for differing
rates of inflation to create an index of cost and price competitiveness in world markets.
If a country’s nominal effective exchange rate depreciated by 5 percent in a year in
which its rate of inflation exceeded the average rate of inflation in the rest of the world
by 5 percentage points, its real effective exchange rate would be unchanged.
Real interest rate The nominal interest rate minus the expected rate of inflation. Current
saving and investment decisions should be based on the real interest rate over the
maturity of the asset.
Real money supply A nation’s money supply divided by the price level in that country.
The real money supply, which represents the purchasing power of the nation’s money
supply, is critical in determining the demand for goods and services, as well as for
financial assets, in a monetarist model.
Relative factor endowments The relative amounts of different factors of production which
two countries have. India has a relative abundance of labor, while the United States has
a greater relative abundance of capital.
Relative factor intensities The relative amounts of different factors of production that
are used in the production of two goods. Textiles and garments are relatively laborintensive,
whereas oil refining is relatively capital-intensive.
Residence principle A tax is imposed on the income of a country’s residents, regardless of
where the income is earned.
Revaluation An increase in the value of a currency in terms of foreign exchange by
changing an otherwise fixed exchange rate.
Rybczynski theorem The argument, associated with Thomas Rybcyznski, that if the
supply of one factor of production increases, when both relative factor and goods prices
are unchanged, the output of the product using that factor intensively will increase
and the output of the product using the other factor of production intensively must
decline.
506 Glossary
Section 301 A provision of US trade law which allows retaliation against the exports of
countries maintaining what the United States views as unfair trade practices such as
allowing the theft of US intellectual property by local firms.
Settlement date The date at which payment is made and an asset received. Normally two
business days after the trade is agreed to for spot foreign exchange transactions. If
General Motors purchases DMs from Citibank on Wednesday, payment will be made
in both directions on that Friday, which is the settlement date.
Short position Having a liability or a contract to deliver an asset in the future at a fixed
price with no hedge or offsetting position. A short position is profitable if the asset
declines in price, and vice versa. A short position in sterling would exist if someone
owed a sterling debt without offsetting sterling assets, or if that person had sold sterling
in the forward or futures market while not holding offsetting sterling assets.
Singer–Prebisch hypothesis The argument developed by Hans Singer and Raul Prebisch
that developing countries face a secular decline in their terms of trade owing to a trend
toward lower prices for primary commodities relative to prices of manufactured goods.
Smoot–Hawley tariff A very high level of tariffs adopted by the United States in 1930
which caused a dramatic decline in the volume of world trade. It is widely believed to
have worsened the great depression.
Society for Worldwide Interbank Financial Telecommunication (SWIFT) An
electronic
system maintained by large international banks for transmitting instructions for foreign
exchange transfers and other international transactions.
Source principle A tax is imposed on the income earned in a country, regardless of
whether
a resident or nonresident earns it.
Special Drawing Rights (SDRs) A foreign exchange reserve asset created by the
International Monetary Fund. The value of the SDR is based on a weighted average of
the US dollar, the DM, the yen, sterling, and the French franc.
Specie flow mechanism A balance-of-payments adjustment mechanism in which the
domestic money supply is rigidly tied to the balance of payments, falling in the case of
deficits and rising when surpluses occur. Associated with David Hume.
Specific factors model A factor of production is specific to an industry, or immobile, when
its productivity in one industry exceeds its productivity in other industries at any price.
A specific factors model predicts that immobile factors that produce import-competing
goods will be harmed by free trade. The text refers to the case where capital is immobile
between industries, but labor is mobile, as a specific factors model.
Specific tariff A tariff that is measured as a fixed amount of money per physical unit
imported – $500 per car or $10 per ton, for example.
Spot market The market for an asset, such as foreign exchange, in which delivery is in only
one or two days.
Statistical discrepancy Also known as “net errors and omissions,” this is the number that
must be entered in the balance-of-payments accounts of a country to make them sum
to zero. Logically, the accounts must sum to zero, but many of the entries are estimates
of actual transactions that contain many errors, so these estimates seldom do sum to
zero. The statistical discrepancy number is frequently placed at the end of the table and
is simply the sum of all the other entries in the account with the sign reversed.
Sterilization A domestic monetary policy action that is designed to cancel or offset the
monetary effect of a balance-of-payments disequilibrium. When a payments surplus
increases the domestic money supply, an open-market sale of domestic assets by the
central bank will cancel this effect and will constitute sterilization.
Glossary 507
Stolper–Samuelson theorem The argument that in a world of Heckscher–Ohlin trade, free
trade will reduce the income of the scarce factor of production and increase the income
of the abundant factor of production in each country.
Strategic trade policy The argument that trade policy, including protection, should be
used to encourage the growth of domestic industries which the government feels to
have strong prospects in world markets. This usually involves trying to choose industries
in which rapid technical advances are likely and where growing world markets exist.
Strike price The price at which an option can be exercised before the expiration date. Such
an option is said to be “at the money” if the strike price equals the current market price,
and “in the money” if the market price exceeds the strike price, so a call option is worth
exercising. A call option is “out of the money” if the current market price is below the
strike price, so the option is not worth exercising.
Swap A transaction in which one security or stream of income is exchanged for another,
frequently with a contract to reverse the transaction at a date in the future. In foreign
exchange, a swap means the purchase of a currency in the spot market and its
simultaneous
sale in the forward market.
Tariff A tax on imports or exports imposed by a government. Tariffs are frequently a major
source of revenue for developing countries, but are primarily used for protectionist
reasons in industrialized countries.
Tariff rate quota A trade restriction which places a low tariff rate on a fixed volume
which is imported per period of time and a higher tariff rate on imports above that level.
Alternatively, there may be no tariff on the fixed volume, and a tariff above that
level.
Terms of trade The ratio of a country’s export prices to its import prices. High terms of
trade imply large welfare benefits from trade, and vice versa.
Trade Adjustment Assistance (TAA) The practice of providing financial aid for
industries injured by growing imports or for their employees. When tariffs are reduced,
trade adjustment assistance is sometimes promised for import-competing industries.
Trade balance A country’s total export receipts minus its total import expenditures during
a period of time, usually a year.
Trade creation An efficiency gain that results from the operation of a free-trade area
because more efficient firms from a member country displace less efficient local
producers in the domestic market.
Trade diversion An efficiency loss that results from the operations of a free-trade area
because less efficient firms from a member country displace more efficient producers from
a nonmember country. It occurs because of the discriminatory nature of the tariff
regime. The member country faces no tariff in the import market, whereas the
nonmember still faces a tariff.
Trade-related investment measures (TRIMs) Government policies in which foreign
direct investments in a country are allowed only if the investing firm promises to meet
certain trade performance goals. The Uruguay Round agreement prohibits TRIMs that
require firms to use a certain amount of domestically produced inputs or maintain a
certain balance between imports and exports.
Transfer pricing The practice of using false or misleading prices on trade documents in
order to evade ad valorem tariffs or exchange controls, or to shift profits within a
multinational firm from a high-tax-rate jurisdiction to a low-tax-rate jurisdiction. Also
known as “false invoicing.”
United Nations Conference on Trade and Development (UNCTAD) A series of
508 Glossary
conferences carried on through the United Nations since 1964 at which the developing
countries discuss trade and development issues. The New International Economic Order
agenda for reform of the world economy grew out of these conferences.
Uruguay Round A round of negotiations on trade liberalization held under GATT
auspices which was completed in 1993. The agreement reached reduces tariffs and
addresses trade practices not previously covered by GATT rules. It also replaces GATT
with the World Trade Organization.
US Trade Representative An official of the executive branch of the US government who
is responsible for carrying on negotiations with foreign governments on foreign trade
issues. Previously known as the “Special Trade Representative.”
Vernon product cycle The observation that a country such as the United States will
frequently export a product that it has invented only for as long as it can maintain
a technical monopoly. When the technology becomes available abroad, perhaps because
a patent has expired, production grows rapidly in foreign countries where costs are
lower, and the inventing country experiences a decline in its production of the product
because of a rapid growth of imports. Associated with Raymond Vernon.
Voluntary export restraint (VER) An agreement by a country to limit its export sales to
another country, frequently in order to avoid a more damaging protectionist policy
by the importing country. Sometimes known as an “Orderly Marketing Agreement”
(OMA). VERs are severely restricted by the Uruguay Round agreement.
Walras’s law The idea that excess demands must net out to zero across an economy in
a general equilibrium framework, because if there is an excess demand in one market,
there must be an offsetting excess supply in another market. Associated with Leon
Walras.
World Trade Organization (WTO) A successor organization to the GATT established in
1995, as agreed upon in the Uruguay Round. The WTO provides a stronger administrative
framework, more streamlined dispute resolution provisions, and a trade-policy
review procedure, all of which suggest more effective implementation of the agreements
reached.