Issue 48 Vol II, September 30, 2007

F E A T U R E S

Reforms Crush Small-Scale Sector in India
Vinod Anand

Small-scale sector is greatly inhibited by a number of exogenous, endogenous, supply-side and demand-side constraints. For example, the reforms process in India has gradually generated a number of severe exogenous constraints and bottlenecks for the small-scale sector.

India is passing through the second phase of the reforms process and the Government is determined to check the slowdown of the economy by reviving economic growth, arresting industrial decline, and reversing negative growth in the agriculture sector. How exactly these prescriptions have to be implemented has to be seen. In the wake of such considerable pessimism and uncertainty that invariably dominates the business sentiment, the 2001 Report on India by the Financial Consultants, McKinsey and Company, covering 13 sectors (2 in agriculture, 5 in manufacturing, and 6 in services) and accounting for 26 per cent of the GDP, had reminded the country of its potential in terms of foreign reserves, a huge and unparallel skilled manpower, and high liquidity of the banking system, and predicted a high per cent GDP growth in the coming five years.

This report recommended:

1. eliminating reservation of all products of the small scale sector;

2. privatization of power, telecommunication, and infrastructure sectors, and airlines;

3. further reduction in import duties;

4. removing the ban on foreign direct investment in retail trade, insurance, and telecommunication;

5. affecting full flexibility in use of contract labor;

6. transfer of management of transport infrastructure including airports, ports, and roads; and

7. Implementing land market reforms, essentially by establishing fast track courts to settle disputes involving real estates.

But it ignored the importance of an effective regulatory framework and good governance.

The conditions, as laid down above, are very difficult, and one wonders if they can be fully met within the given time frame, and without violating our built-in economic and social assumptions revolving around the basic needs of the majority of our people. The government, however, realizes that (a) rural economy needs urgent attention to eliminate hunger and unemployment and to give a boost to the industrial sector, and (b) the rural and urban infrastructure needs drastic improvement. There have been attempts to privatize the power sector, and to de-reserve the small-scale industries, and to amend the labor laws. The Government had earlier unveiled its 14-point reform agenda in order to reverse the economic slowdown. Going ahead with the second phase of the reforms process requires a much greater effort in terms of striking a healthy compromise between the requirements of the reforms process and protection of our key sectors like the small industry sector from the new competition policy.  No one would dispute the fact that introducing sweeping changes to promote competition would be a lethal dose for the economy. We have a very critical small industry sector, of which micro and small segments are very basic to the economy. The small-scale sector is already vulnerable to the changes brought about by the on-going reforms. We will have to safeguard the interest of this key sector at any cost because of its tremendous employment potential, if not for anything else. Every country including the US protects its key sectors and interests in the guise of one pretext or another. So, why can’t we also do it?

The policy of globalization, opening-up, and liberalization, as reflected in the WTO agreement, will become a serious bottleneck in terms of generation of additional demand though not so much for the micro and small units at present, but for medium, and large units.

The danger of granting patents on a number of products that are indigenously Indian to other WTO member countries do not offer any threat to Indian manufacturing units because of the simple fact that a patent is granted for something that apart from being new, is also useful and non-obvious. Most of our indigenous products (both agricultural and non-agricultural) manufactured by micro and small units are age-old and obvious (in the sense of being unique), and hence are not new and not even non-obvious. And hence, by and large patent rights will not hit our products. But we do, however, have a threat to our medium and large industries that produce and export non-traditional items in rivalry with WTO member nations. Despite this logic our country should, however, be cautious enough and be prepared to act promptly without waiting for infringements by international competitors who would always want to poach into the vast variety of products that we have been producing on the basis of our age-old knowledge and indigenous techniques. This is the only way to safeguard our interests and rich bio diversity in this age of globalization. The onus, therefore, lies on the government, and it is believed that it will live up to the expectations of our producers.

Apart from being sensitive to the issue of patents, the Government should also try to safeguard the interests of our indigenous units in terms of labor absorption, which is under threat in the wake of the on-going reforms process, which is based on economic liberalization and market autonomy. India is an excess labor economy, and hence any reduction in labor demand and the resulting labor absorption would add to the already existing high levels of poverty. In fact poverty level is inversely linked with labor demand. This inverse linkage, therefore, implies that poverty can be reduced by affecting such an increase in labor demand that cannot be met by the available labor supply. This task becomes difficult especially in an excess labor economy like India, and that too when the reforms process has already taken off. This shift in the economic management of the country is introducing, though gradually, capital-intensive techniques almost in all the spheres that matter in our day-to-day life. In terms of this constraint there is, therefore, a need to evolve a strategy whereby, on the one hand, we can take the advantage of the newly developed techniques of production, and on the other, also maintain, and even enhance, the demand of labour.

[The author is presently placed at the National University of Lesotho [Southern Africa] as a Professor of Economics.]

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The Great Game of Cricket
Ishtiaq Ahmed

Monday, September 24 2007 was a day millions of South Asian cricket fans will not forget because on that day some of the very best cricket was played in the final between Pakistan and India in Johannesburg, South Africa, in the new 20-over world tournament.

South Africa proved to be a very generous and caring host nation. Not very long ago its name was associated with the most disgraceful political system in the world as apartheid classified and segregated human beings on the basis of their skin colour, and thus established a most oppressive type of social hierarchy.

Now, a sea change had taken place. Whites, browns, blacks and all other shades, including some who had painted themselves yellow, green, red and so on were sitting side by side, enjoying cricket and having great fun. The dancers gave their best performances each time the ball hit the boundary or flew over it for a six.

But I was particularly watching the way the Indian and Pakistan players and fans were conducting themselves. For several weeks, the Pakistani and Indian flags flew side by side in mixed crowds as fans congregated to back up their teams.

I did not notice any truculence among them at all. It seemed, gone were the days when an India-Pakistan match would turn into a vulgar and grotesque display of crass chauvinism and religious exhibitionism.

Following the 2004 series, when India visited Pakistan and Pakistan paid a return visit to India in 2005, both countries and their people have begun to behave decently with each other and enjoy it that way. This is indeed a very good and positive development.

It reminded me of the very interesting fact that even when India and Pakistan parted company in 1947 and became two separate nations, their attitude towards sports was not at all that combative. Thus, the legendary medium pacer, Fazal Mahmood, was selected to tour Australia in 1947-48 as part of the Indian team, but at the last moment he decided not to go on it.

In his autobiography, From Dusk to Dawn, Fazal gives his sense of patriotism as the reason for pulling out, but he admits he regretted missing an opportunity to play against the greatest batsman of all times: Sir Donald Bradman.

Fazal Mahmood speaks in very warm terms about the first Pakistani cricket team's visit to India in 1952 to play test matches. Players from both sides knew each other since they were used to playing in the same tournaments that were organised on an all-India level, before the parting of ways.

We learn that in a benefit match in Bombay for the famous Lahore-born cricketer, Lala Amarnath, in which the touring Pakistani players also took part, the famous Indian actor Raj Kapoor made a contribution of Rs 100,000 to the benefit fund, which Fazal rightly points out was a most generous sum in 1952 terms.

He mentions with great feeling that when Lala Amarnath visited Lahore many years later he brought his two sons, the cricketers Mohinder and Surinder Amarnath, with him. They both touched Fazal's feet to show their respects.

Now, at Johannesburg the atmosphere was once again very congenial. The crowds bonded with each other admirably. Pakistan lost to India in the final because of sheer bad luck. Both teams were evenly balanced and there was hardly any department of the game -- batting, bowling or fielding -- in which the players did not put in their best effort. It was truly one great beginning for a new international cricket tournament.

I developed a very special liking for pacemen, Umar Gul and RP Singh, because they bowled so intelligently, accurately and lethally. Misbah-ul-Haq and Gautam Gambhir excelled with the bat. But on an overall basis there is no doubt that Yuvraj Singh and Shahid Afridi were outstanding with their sixers.

As to the two captains, I must say I found both very able strategists. Leading a side requires a lot of nerves and composure. Both, MS Dhoni and Shoaib Malik, kept their cool and took risks when needed. They should make excellent leaders for their cricket teams.

I was especially impressed by Dhoni's decision to give the last over to the rather unknown Joginder Sharma instead of Harbhajan Singh. That decision proved to be a turning point because the Pakistanis seemed less prepared to deal with his offside medium pace deliveries, while Harbhajan's line and length had gone awry.

Therefore, the crucial boundaries in the last over could not be hit to score the required 158: Misbah-ul-Haq's decision to hit the ball in the air towards fine leg proved to be a fatal miscalculation because Sreesanth ran in and took an easy catch. India won the final as the Pakistani total remained 152.

I have a feeling that the 20/20 over structure is here to stay and will be an excellent complement to the one-day tournament and indeed, test cricket. Cricket without the five-day tests is unthinkable, but there is no reason not to innovate with more exciting shorter forms of that great game.

It is important to emphasise that sport should not be connected to politics and certainly not to religion. Non-Muslim fans of the Pakistani captain, Shoaib Malik, from Pakistan, India and elsewhere have expressed disappointment over him thanking the Muslims of the world for backing the Pakistani team. Why he chose to do that makes no sense, except that it must be a force of habit and nothing more.

Pakistan has been represented by both Christian (Wallis Mathais, Duncan Sharpe) and Hindu (Danesh Kaneria) cricketers and there is absolutely no requirement that one should be a Muslim in order to play for Pakistan or idolise Pakistani players. Equally, two Muslims, Irfan Pathan and his brother Yusuf Pathan, played for India in the final. They must have felt embarrassed by what the Pakistani captain said.

It is important that the captain of the Pakistani team upholds high standards of courtesy and follows protocol. Even when defeat is suffered, the captain is expected to congratulate the winning side. Shoaib Malik forgot to do that.

The senior and more experienced Shahid Afridi, while receiving the coveted award of 'Man of the Series', then spoke and congratulated the Indian team and nation on their victory. It would not be wrong if some instructions on protocol are given to our otherwise very talented and impressive captain.

The author is a visiting senior research fellow at the Institute of South Asian Studies (ISAS), National University of Singapore. isasia@nus.edu.sg Courtesy News, Pakistan. http://www.thenews.com.pk/print1.asp?id=73942

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