Fierce debate among titans on India's development model

New Delhi, Dec 19: Titans of economics-- Lord Meghand Desai and Nobel Laureate Joseph Stiglitz--celebrated the seminal success of India at its high growth rate, but sharply differed on the future course of reforms and approach to globalisation.

The Economists were of the view that India's success story of reforms has not got the appreciation it deserves, nor the attention it should have got.

The scene of action was a marathon debate at the FICCI auditorium here yesterday on:'The Way Ahead' and in the Chair was Planning Commission Deputy Chairman Montek Singh Ahluwalia. This was the valedictory session at a day long seminar on 'Making Globalisation Work; An Indian Perspective.' The event was inaugurated by Prime Minister Manmohan Singh who lashed out at the industrialised countries for draining wealth out of the developing countries and following restrictive policies on the movement of labour and immigration, while seeking free flow of capital.

Globalisation was inevitable and was a plus for most countries, the economists said, but the difference of opinion related to the manner in which it should be carried out.

While Lord Desai favoured full convertibility of the Rupee and furthering financial sector reforms, Prof Stigletz said financial sector reforms have rarely led to higher growth.

Fear of a crisis should not prevent us from moving ahead", Lord Desai said.

Prof Stiglitz said if globalisation leads to lower standards of living for many or most of the citizens of the country and if it compromises fundamental cultural values, then there will be political demands to slow or stop it.

Prof Stiglitz said the current policies of globalisation were generating unbalanced outcomes, both among and within countries. Wealth was being created, but too many people are not sharing in its benefits. They also have little or no voice in shaping the process. Prof Stiglitz, regarded as one of the best known economist, argued that seen through the eyes of the vast majority of women and men, globalisation has not met their simple and legitimate aspirations for decent jobs and a better future for their children. Many of them live in the limbo of the informal economy without formal rights and in a swathe of poor countries that subsit precariously on the margins of the global economy.

Even in the industrialised countries; some workers and communities have been adversely affected by globalisation.

Meanwhile, the revolution in global communication heightens awareness about disparities, Prof Stiglitz said and added that these imbalances were morally unacceptable and politcally unsustainable.

The moderating voice was that of Dr Ahluwalia who said high growth was a welcome feature of the Indian economy, but for it to be sustainable it has to be inclusive. He argued that in a country of the continental size of India, the role of the government cannot diminish. Yet it has to change-- from being in business to getting into the business of provision of public services, such as health and education.

Besdies, it was a futile argument whether growth emnates from the services sector or manufacturing--both were needed. Nearly three-fourths of GDP in the United States resulted from service sector activities.

He said the assurance that the populace sought was that the government was always at their back and willing to step in whenever there was a crisis and to protect them.

Prof Stiglitz said the trickle down affect has rarely worked and the international evidence in this regard was weak. Inequalities were not only growing in India, but all over the globe. He regretted that the Intellectual Property Rights regime that India had agreed to did not serve its interests well and would tend to benefit the pharmaceutical multinationals rather than the generic industry.

On a question of protection to Indian industry, Prof Stiglitz said while subsidies in the United States and European Union to the agricultural sector were transparent, in the industrial sector this was less obvious. The subsidies to industry came by way of the Defence Department which spends huge amounts on research that benefits industry. For instance, the internet was inventened by the US Defence and has benefitted the entire industry.

He said the United States being a rich country can afford the luxury of wealth going up in flames in the capital markets. In the 2001 crash of the bourses in America, investors lost close to 1.5 to 2 trillion dollars of wealth, but wondered whether it would be a good idea for a growing economy like India to follow suit.

Prof Stiglitz said the concept of social security should move away from a corporate level security to a national level security.

Companies like General Motors have gone bust because of the huge pay outs on account of social and economic insurance like housing and medical allowance. But a social security net needs to be provided to the entire country.

Prof Stiglitz favoured that FDI in the retail sector needs to be viewed cautiously due to advantages which the large sector has by way of credit and marketing facilities.

Lord Desai, however, argued to the contrary, saying that all that was required to protect the small entrepreneur was provision of skill development, technology and marketing skills. FDI in retail would benefit the nation by way of forward and backward linkages.

Lord Desai blamed the slow growth of the Indian economy in the initial years after independence to excessive export pessimism and said the breaktrhough in GDP growth rates after the benckmark year of 1991 should not be stulted by putting fetters on policies of reform.

UNI