8/10/2019 DEBT (1)

1/19

Prepared for International Jesuit Network on Debt, October 1998

INDIA'S O!"I#N D"$%& I%S IPA(% ON %)" A!#INA*IS"D

Walter FernandesArundhuti Roy Choudhury

K.T.Chandy

Most developing countries of the South are today caught in the foreign debt trap. The balance of

ments !"#$ crisis is a conse%uence of the combination of the pattern of development chosen by many&ly independent countries' the un(ust international economy and decades of une%ual trade relations&een the rich countries the )orth$ and those of the South. Through their control over the &orldnomic institutions the countries of the )orth have been restructuring the economies of the South andosing a single economy on them. The restructuring of the &orld economic institutions signified in*

asing li%uidity of finances. This gave rise to inflationary pressures and e+cessive e+pansion of credit'h no regulation on capital movement. This process &as intensified by official policies in many countrieshe South' such as e+cessive consumerism and militarisation. They have combined to push them into aance of payments !"#$ crisis &hich results in their further impoverishment.

This imbalance is most visible in Sub*Saharan Africa' much of &hich depends on a single commodityose international price ,eeps falling &hile that of the finished goods they import from the )orth ,eepsng Kurien -/0 1$. As a result' in -2 the South as a &hole o&ed more than 34 trillion to the )orth.poorest countries o&ed 344/ billion. Among them' the 46 Sub*Saharan African countries minus Southica' o&ed 3- billion &hich is 478 more than their 9)#. :n the -7s many of them li,e Mo;ambi%ue'ld repay only -78 to 478 of &hat &as due to be paid every year Mahony - SA#$' has been imposed on more than 67 developing countries undertutelage of these international lending agencies #atnai, -10 414$.

Though such restructuring of the &orld economy is presented as a mechanism to cope &ith the# crisis' in practice the volume of foreign debt of these countries paints an entirely different picture.ead of decreasing' their debt burden has gro&n over the period of SA#. !esides' both international

%ualities and poverty in the former colonies have intensified during the last decade. With the evereasing debt crisis the developing countries seem to have been transformed into open economicitories and their national economies into reservoirs of cheap labour and natural resources to the benefit

he global )orth.

"ne does not state that the South alone faces the problems of trade deficit and foreign debt. ?SAone of the biggest trade deficits in the &orld. !ut the control it e+ercises over the &orld finances andsi;e of its economy enable it to deal &ith it. Australia too has faced a debt crisis because its economy isculture and mineral dependent' as such similar to that of the poor countries. !ecause of &orld recessionfall in the price of the commodities it e+ported' its foreign debt rose from 3-- billion in -6-' to 3-72

ion or 468 of its 9=# in -6/. :n that year' debt servicing &as /18 of its e+ports. !ut in the same year'st @atin American countries fared much &orse. The debt servicing of Argentina &as 4548 of its e+portsin !ra;il' the #hilippines and Chile it &as more than -778 AC"A -6

8/10/2019 DEBT (1)

2/19

n identify some of the processes &hich led to it and a fe& of its conse%uences. We shall end the paper by,ing at some possible solutions.

DIA'S D"$% (!ISIS $"O!" SAP

@i,e many other developing countries :ndias !"# too has been under stress during much of thet*independence period. !ut till the -

8/10/2019 DEBT (1)

3/19

4*5 557-.6 -. 46

8/10/2019 DEBT (1)

4/19

-*64 44/5 -/21 157 /4 17 /14*65 4

8/10/2019 DEBT (1)

5/19

stantially from around -78 of the population at independence to about 578 of a much bigger populationsrochers -

8/10/2019 DEBT (1)

6/19

ble 7& "ports, Iports %rade $alance 2/.S il3 196:1 to 1996:91*************************************************************r G+ports :mports =ifference :mp as 8 of G+p*************************************************************7*2- -7-/ -4

8/10/2019 DEBT (1)

7/19

8/10/2019 DEBT (1)

8/19

ides' &hat has been the nature of :ndias e+ports and &hat is their implications for the marginalised We shall ans&erse %uestions later.

ebtedness and t5e International Order

SA# &hich results in higher debt is presented as free mar,et. :n reality it is freedom of une%uals geared to thefit of a fe&. To be considered fair' liberalisation should include free trade' free flo& of capital and of labour Kurien/0 4-*44$. :n practice' the 57 "GC= countries in general and 9*< in particular' limit freedom to movement of capital

m the rich to the countries not of labour or e+ports in the opposite direction. Through the 9ATT Agreement onestment and through other :MF conditionalities' they demand free access of their capital to the South but put everre restrictions on visas for the citi;ens of the South. The free trade it propounds in reality strengthens the presentsion of the )orth and South into ra& material and finished goods providing countries. To many poor countries'ittances from their &or,ers abroad are an important mode of dealing &ith the !"#. )ot allo&ing them entry and notnding to fair trade relations &hile insisting on free flo& of foreign investment is a &ay of ensuring an ongoing !"#is in the poor countries. Thus it is a one &ay imposition by the po&erful.

The free mar,et the rich countries demand' is based on structural ine%ualities. They and the middle and upperses in the poor countries' have appropriated its benefits for themselves. :t has resulted in the impoverishment of theority at the global as &ell as national levels. With enormous economic po&er concentrated in their hands' those fe&ing access to capital can destabilise a &hole country or economy' as the recent events in South*Gast Asia and Me+icoify.

A sign of this impoverishment is the gro&ing disparities in the global income and resource use. According tomates' in the late -/7s' 54.28 of the &orlds population accounted for 6

8/10/2019 DEBT (1)

9/19

poor do not count in this search for profit but pay the price of such policies' is seen from the fact that bet&een -61-66 the net outflo& of capital from the SA# affected countries of @atin America and Africa alone &as of the order of5 billion Reddy -20 4-2$.

An e+ample is life e+pectancy. "ne can see in Table / that a large number of Sub*Saharan African and Gastopean countries have e+perienced a fall in the life e+pectancy of their citi;ens. Common to them is acceptance of aral economy or SA#. The Gast Guropean life e+pectancy rose in the -67s and fell in the -7s. The only countrieshave not had SA# imposed on them are :ra% and )orth Korea. @ife e+pectancy in the former that rose in the -67s'

in the -7s because of the sanctions imposed on it. The latter has e+perienced some years of famine. Children are thest sufferers. :n :ra%' for e+ample' infant mortality has risen from 67 per -777 in -67 to -7- in -/ and under fivertality from 5 to -5/. :n Korea under five mortality has risen from 54 to 2/ and in !ots&ana from 67 to 62. :nntries li,e 9uinea and 9uinea*!issau &here it is above 477' the figures for -67 are not available World !an, -60*-72$.

ble ;& *ife "pectanc< in Soe SAP (ountries in 1986 and 199;***********************************************************Country @ife G+pectancy L Sl Country @ife G+pectancy

-67 -/ L )o -67 -/**************************L********************************!elarus $ and tribals. !ut Coal :ndia gave a (ob each to only /56-68$ of the /'4/2 families 54'777 persons$ they displaced till -4 !HAE)!HK -50 5/$.

"ther policy changes too result in negative employment generation. !ecause of the protection accorded throughMonopoly and Restrictive Trade #ractices Act of -/' a considerable number of small and medium industries

9

8/10/2019 DEBT (1)

10/19

rated in the country. They had absorbed a si;eable portion of the &or,force. After the licensing system &as lifted' theye unmatched competition from large enterprises. !esides' monopolies resulting from portfolio investment that focusesac%uiring control over locally o&ned companies' ma,e smaller units non*competitive. A basic norm of liberalisation isthe economy of a poor country should be globally competitive. :ts impact on local competitiveness and the viabilitymall units is ignored. #reliminary data indicate that a large number of small enterprises have closed do&n' and (obsas a conse%uence :)SAF -

8/10/2019 DEBT (1)

11/19

urity of (obs' etc. The right to unionise is the important casualty of the process.

Moreover' to circumvent the e+isting labour la&s' industries have started using contract labour more thanmanent &or,ers. The trend to use casual &or,ers is also on the increase. Today one is &itnessing increasing incidenceausalisation of :ndian &or,er in the urban areas. While' on one hand' the increase in the use of temporary and casual

ourers discourages the &or,ers to ac%uire firm specific s,ills that are a re%uirement of modernisation of industries' onother hand it also mitigates the advantage the firm had of allo&ing its &or,ers to learn by doing. Thereby' the

claimed ob(ective of increasing production remains th&arted. "ne may add that this practice increases the economic

efit of core permanent$ &or,ers at the cost of peripheral &or,ers because the latter do not participate in anyective bargaining !attacharya and Mitra -50 -6*-2$.

#hool singh' a 17 year old s,illed te+tile &or,er in the spinning department of H.C. Mills @imited' 9&alior'mmitted suicide. Be &as one among many te+tile &or,ers of 9&alior to commit suicide or die because of e+tremenomic and physical deprivation. 12 year old Ramhet &as &or,ing in the Khata section of the H.C Mills o&ned by a bigporate group of :ndia. Since the closure of the factory in April -4' Ramhet had been unemployed. Bis &ife &asously ill' suffering from acute chest pain. Ramhet had as,ed for money from his friends and neighbours. !ut they &ereally poor and helpless. :n utter helplessness Ramhet ,illed himself by consuming poison.

The survey of te+tile &or,ers colony in 9&alior in September -2 revealed that there is a long list ofmployed &or,ers' &ho have either committed suicide or died due to various diseases. According to the leader of thetile :ndustry Wor,ers ?nity ?nion' 5< te+tile &or,ers have committed suicide and more than -77 have died unnaturalths during the last t&o years. )o& &e have lost trac, of suicides' deaths and disease among them Labour File,Iol4' -/' )e& =elhi$. These deaths refer to one city in central :ndia. Thousands of such stories are heard all over thentry.

:n such a senario' education in general and modern technical education in particular is the only avenue forployment and survival under the present paradigm of development. :n reality 2

8/10/2019 DEBT (1)

12/19

9iven the une%ual social structure of :ndian society and in the absence of measures such as unemploymenturance' subsidies are essential for the survival of many poor families. Their reduction or elimination is bound to have anerse impact on the poor. For e+ample' the 9ATT Agreement on Agriculture stipulates that no food subsidies be&ed e+cept to the !elo& #overty @ine !#@$ population. That many millions of families remain above the povertythrough these subsidies is ignored. They may end up belo& the poverty line' in the absence of viable alternatives.

erefore it is imperative to provide safety nets to cushion the poor against rising prices> =avid -

8/10/2019 DEBT (1)

13/19

**************************************************************r Ialue L ear Ialue*****************L************************

8/10/2019 DEBT (1)

14/19

8/10/2019 DEBT (1)

15/19

neva in =ecember -5 and &as signed at Mara,ash' Morocco' on April -2' -1.

The second important demand is control over land. For e+ample' the -1 draft of the )ational Rehabilitationicy for #ro(ect =isplaced #ersons' being formulated by the Ministry of Rural =evelopment' 9overnment of :ndia'an by stating that the ne& economic policy &ill result in greater investment and more land &ill be re%uired. :t thuslied that there &ill have to be more displacement of people for development pro(ects. Bence the need to have aonal rehabilitation policy MR= -10 -.-$. :t adds that most natural and mineral resources are found in the tribal

as ibid0 1.-$. Bence much displacement &ill be in these regions. :n other &ords' to facilitate foreign and :ndian

estment' displacement should be ta,en for granted particularly of the marginalised communities li,e the tribals. Somes are offered in the name of rehabilitation. !ut the right of the poor to a life &ith dignity' is not recognised.

To understand its conse%uences' one should remember that in :ndia at least 57 million persons have beenplaced by development pro(ects since -2-. More than 178 of them are tribals &ho form only

8/10/2019 DEBT (1)

16/19

ttempting to find a solution' it is important to note that the issue of debt is a political one and thus calls for politicalutions. :t is also important to remember that the elites of the )orth and South &or, in close collaboration to ensure itscess.

So an effort to change these structures has to be made both at the national and international levels. :t is importantcounter the collaboration bet&een the )orth*South elite' through an organic alliance bet&een the human rightsvists' scholars and others committed to (ustice to the marginalised. This effort has to be supported through studies andocacy in the )orth as &ell as the South. Such advocacy has to be guided by some principles.

Colonialism is a sin. 9ermany &as forced to pay compensation to the Guropean countries it tried to con%uer in Worldr : and ocuupied before World War :: and to :srael for the massacre of He&s by the )a;i regime. :n the same mannercountries of Gurope and the ?SA that have colonised Asia' Africa and @atin America' have robbed them of their

ural resources' financial independence' of their self*respect and their very identity. The loss these countries thusfered has to be %uantified and compared to the foreign debt of the countries of the South. The fe& studies that haven done on &hat the colonies have lost to the colonisers' e.g. Sri @an,a and imbab&e sho& that the colonisers o&e tose countries several times their present foreign debt. These countries have to be compensated. The international leadersinvestors must accept their share of the cost and contribute to repay it.

t may not be easy to calculate all the loss suffered by the former colonies and repay it. !ut at least a fe& calculationsbe made. For e+ample' according to one estimate' around /7 million Africans &ere captured but only -2 to 47

lions of them reached the Americas to be sold as slaves. :f &e &ere to calculate the loss to their families at 3-77'777person' then it &ould come to several times the foreign debt of the &hole of Africa. According to another estimate' 52lion persons &ere deprived of their livelihood by the deindustrialisation of the South Asian sub*continent &hichudes the present day :ndia' #a,istan and !angladesh. That &as in a population of a little over 477 million &hile todaypopulation is seven times that number. Can &e %uantify this loss Australia seems to have had about four millionrigenes t&o centuries ago. Today their number has come do&n to half a million. Bo& many should they have been andere are the rest :f it is true that the Americas had 17 million indigenous persons five centuries ago' &hat is the loss

Add to it the land ta,en over' bullion e+ported' cultures and identities destroyed etc. Bo& much &ould it comeSince it is not easy to calculate all of them' &riting off all foreign debt unconditionally may be a practical &ay of

mpensating these countries for &hat they have lost through former direct colonialism and the present form of neo*

onialism including SA#.

Bo&ever' &riting off foreign debt is only a relief measure and a temporary solution. What is re%uired is not (ust thecellation of the unpayable or unpaid e+ternal debt or other forms of debt relief. Much more important from the point

vie& of long term survival of the poor in the South are measures &hich &ill prevent the recurrence of the !"# crisis.h that in vie&' there is a need for a fundamental restructuring of the international financial institutions. The e+istingti*lateral' regional and bilateral agreements such as WT" financial services investment agreement' )orth Americane Trade "rganisation )AFTA$ and others have to be re&or,ed and brought under greater control through regulationsobligationS on the investors. Moreover' control over capital transactions needs to be e+ercised by ma,ing the

estor more accountable and investment stable in nature.

The structural ad(ustment programme needs to be re(ected and in its place a more sustainable development processds to the initiated. This obligation is not merely on the rich but also on the poor countries. They need to come togetherorm regional blocs as alternatives to the system imposed by 9*

8/10/2019 DEBT (1)

17/19

&hat has been the loss

inally' &e ,no& today &hich country o&es ho& much. We also ,no& that the middle class in these countries gets itsefits. !ut it is also important to identify &hich country gains from foreign debt. Who o&es ho& much to &hichntry and ho& did it come about That can be the basis of the demand for compensation for t&o centuries of coloni*m that is the foundation of the foreign debt crisis.

These processes should lead us to demand a more (ust &orld at the time of the Hubilee 4777.

ferences

"A. -6ial Action52 n. l' Han.*March$' pp. 21*67.

asubramanyam' I.). -61. The Econom# of "ndia@ondon0 Weidenfeld and )icholson.

pai' ). -1. >:ndias G+ternal =ebt0 Retrospect and #rospects> Economic and Political $ee%l#' 4 n. 51' August pp. 4454*4411.

AE)!HK. -5. ocial "mpact: Pipar&ar and the 'orth (aranpura Coal Fields. Buntergan( and Chauparan0 !haratAndolan and )av !harat Hagruti Kendra.

attacharya' !. !. -2. >9lobalisation> in Alternati)e Economic ur)e# *++-*++. pp. 57*11. )e& Agernational @imited.

atacharya' !. ! and A. Mitra. -1. >Gmployment' @abour #roductivity #rivate Rate in #ublic and organised #rivate

tors in the Conte+t of Structural Reforms' The "ndian /ournal of Labour Economics' 5< n. 4' April*Hune$' pp. /4*

andra. K.). -66. The 0etarded Economies!ombay0 "+ford ?niversity #ress.

eria' Anita. -/. The $orld 1an% in 'a!arahole: A tor# of 2uman 0i!hts 3iolations, Lies and Deceit. !angalore0h the Author.

ossudovs,y' Michel. --. >9lobal #overty and the )e& World Gconomic "rder'>Economic and Political $ee%l#' 4/1' )ovember 4$' pp. 424"nte!ral Liberation,- n. 1' =ecember$' pp. 441*44.

meny' #aul. -6-. >The )orth*South :ncome 9ap0 A =emographic #erspective'> Population and De)elopmentie&,< n.4' Hune$' pp. 4"nte!ral Liberation- n. 1' =ecember$' pp. -"nte!ral Liberation- n. 5' September$' pp. -1-*.

ai' Meghnad. -5. Capitalism, ocialism and the "ndian Econom#: Annual Export-"mport 1an% Commencementture. !ombay0 G+im !an,.

17

8/10/2019 DEBT (1)

18/19

gra' !harat. -4. tructural Ad4ustment $ho 1ears the 1urden)e& =elhi0 #ublished by the Author.

;e' Hean and Amartya Sen. -6.2un!er and Public Action."+ford0 Clarendon #ress.

nandes' Walter. -6. >=evelopment*:nduced =isplacement in the Tribal Areas of Gastern :ndia> in S.C. =ude ed.$i5uit# to 6odernit# in Tribal "ndia, 3ol *: Continuit# and Chan!e Amon! the Tribals ' :nter*:ndia #ublications' pp.*57-.

nandes' Walter and S. Anthony Ra(. -4. De)elopment, Displacement and 0ehabilitation in the Tribal Areas ofssa.)e& =elhi0 :ndian Social :nstitute.

nandes' Walter and Arundhuti Roy Choudhury. -6. >Mercantile Colonialism0 =estruction of the Gconomy andservience'> #aper presented at"nternational Conference Colonialism to Globali8ation: Fi)e Centuries After 3asco

Gama.)e& =elhi0 :ndian Social :nstitute' Ferbruary 4*/.

osh' Hayati. -9ender and Macro*Gconomic #olicy in :ndia Since --'> $omen9s Lin%' 5 n. 1' "ct.*=ec.$' pp.-.

vt. of :ndia. -6.Economic ur)e# *++-+;.)e& =elhi0 9overnment of :ndia.

SAF. -/. The :mpact of 9lobalisation on @abour:ndia>. #aper presented at aseminar on Gettin! a Grip on $orld Labourorganised by )C"S' !elgium. Hune -7*-5.

hony' Hohn Cardinal. -@abour ?pdate'>Lo%a#an 1ulletin' Hanuary *Feburary. pp. /-*/ Economic anditical $ee%l#' no. 5-' 52 to 5

8/10/2019 DEBT (1)

19/19

&at' A. S. -5.Deforestation in the Lesser 2imala#an (umaun and "ts "mpact on the Peasant $omen and on the0a4is.)e& =elhi0 )ehru Memorial Museum and @ibrary' Centre for Contemporary Studies.

ddy' =. )arasimha. -2. >#olitical Gconomy of Crisis and the Strategy of Structural Ad(ustment #rogramme in :ndia'>M. A. "ommen et al.Political Crisis in "ndia: tudies in Political Econom#.)e& =elhi0 Khama #ublishers' pp. -/*.

ddy' =. )arasimha. -2a. >@abour and Gmployment'> in Alternati)e Economic ur)e#,>)e& =elhi0 Alternative

nomic Survey 9roup' pp. 12*16.

' :lina. -4. >Mechanisation and the Wor,ing Class Women'> ocial Action14 n. 1' "ct.*=ec.$' pp. 5-*177.

' Abhi(it. -Structural Ad(ustment and Rural #overty0 Iariables that Really Matter'> in 9. K. Chadha and Ala,hSharma eds$. Gro&th, Emplo#ment and)ert#: Chan!e and Continuit# in 0ural "ndia.)e& =elhi0 Ii,as #ublishing Bouse' pp. --7*-44.

GR#A -7. En)ironmental tatus 0eport, *++?. District Chamoli. 3ol.". @uc,no&0 Society for Bimalayanvironmental Rehabilitation and #eoples Action.

gh 9ill' Sucha. -/. >9ATT Agreements and Sustainable =evelopment of Agriculture in :ndia'> in K. 9opal :yer ed$.tainable De)elopment: Ecolo!ical and ocio-cultural Dimensions.)e& =elhi0 Ii,as #ublishing Bouse' pp. 1*2 ocial Action15 n. -' Han.*March$' pp. 45*5-.

K. -The )e& Gconomic #ath * Trends and :mpact'> in A(it Muric,en ed$. op. cit. pp. -2-*-67.

hishta' #rem' S. >?rban :nformal Sector0 A #rofile of Marginalised :rregulars'> ocial Action' 17 n. 4' April*Hune$'-4/*-12.

rld !an,. -4. The $orld 1an% 1oo% *++@.!altimore0 Hohn Bop,ins ?niversity #ress.

rld !an,. -/. $orld Debt Tables, $orld 1an% 1oo% *++, 3ol. @.!altimore0 Hohn Bop,ins ?niversity #ress.

rld !an,. -