Questions for Ulhas and Henry on India and China

Ulhas Joglekar uvj at
Sat Jun 2 06:07:49 MDT 2001

Saul Thomas:
> If I understand correctly, you are saying that integration with the
> capitalist world economy has actually helped India develop strong economic
> growth, and at the same time helped develop a strong and independent
> national bourgeoisie. Competition with advanced foreign industries has not
> wrecked Indian industry, but rather forced it to become more competitive
> and has ended up strengthening it. Was this possible because Indian
> industry did not have to build up from scratch, but was already built up,
> in a protected environment, during the Nehru era?

Industry has grown consistently in both the periods, pre-liberalisation
period (1950-1990) as well as liberalisation period (1990-2000). In the
first period, India had built up a diversified industrial base. In a period
characterised by Deng's reforms in China and the disintegration of fSU, old
policy was not sustainable. Industry as well as the economy as a whole had
to adapt successsfully to this new environment. India has never pursued the
strategy of export lead growth. Growth means expansion and development of
domestic markets and domestic investments. Domestic savings have been
supplemented by foreign capital and overseas borrowings. But FDI and
portfolio investments are not the engines of accumulation in India. There is
a distinction between a) domestic accumulation process driven by and
subordinated to the foreign investment and b) foreign investment attracted
by and subordinated to the domestic accumulation.  Global annual FDI
flows are about $ 800-1000 billion. India gets about $ 2-3 billion a year.
This figure includes investments by overseas Indians. The volumes of FDI and
portfolio investments in India are small, when compared with a) GDP ($450
billion) and the rate of domestic savings (23-25% of GDP), b) global FDI
flows, c) FDI flows to the developing world as a whole and d) FDI flows to
China and Vietnam. I expect Indian economy to attract more FDI and portfolio
investments, if robust growth can be achieved.

> Are there any issues on which the national bourgeoisie is in fundamental
> conflict with the foreign bourgeoisie?

Market access, labour and environmental standards, food security etc. are
important issues. But there is no fundamental conflict. India will not
withdraw from the WTO, when China and Vietnam are waiting to join. Some
nations are likely to use regional trade blocks, but India does not belong
to any regional trade block like ASEAN, EU. India can only argue
for renegotiation of the WTO agreements. However, there are basic  political
issues on which Indian State will not compromise. They are: a)Kashmir and
b) nuclear weapons with appropriate delivery and surveillance systems.

>Even if the national bourgeoisie has
> welcomed the liberalization that has taken place so far, don't they still
> welcome some kind of protection? As far as I understand, the WTO rules
> permit "developing" countries to have higher tariff barriers on all
> products than "developed" countries. Surely the Indian bourgeoisie wants
> keep its relatively protected "developing" status, doesn't it?

Smaller businesses would want protection. Protection can be provided by
using anti-dumping duties. Depreciating Indian currency also provides
protection to the entire domestic industry. There is no impact, if the fall
in the ad valorem import duties is compensated by equivalent fall in rupee
vis-a-vis dollar. Reduction in tariff barriers is usually matched by
reduction in taxes on domestic production and sales.

> Is there a point after which liberalization can "go too far", such that
> "whole" national economy (if that's not an absurd abstraction) is actually

> hurt by integration with international capitalism?

This can happen, especially in a severe global crisis.


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