Reversal in economy is likely

 Reversal in economy is likely

FM has paid lot of lip services to rural development without concrete announcement of policies, says Gopal k  Agarwal

The Government has turned out to be a damp squib. The Congress and the Left, earlier highly critical of the economic policies of the NDA Government, were expected to give a clear direction to the country's economy. The UPA Government inherited a healthy economy with very strong fundamentals, burgeoning foreign exchange reserves, a economic growth of eight per cent, fiscal deficit and inflation under control and a booming stock market. All these were the result of the sound economic policies pursued by the NDA Government. Everybody expected the Congress and the Left Front to implement their distinct policy statements in this Budget. However, the ideological differences in the economic thinking between the two does not leave any room for economic innovation. This has come out very clearly in the criticism of the Budget by the Left Front.

First, in his Budget speech. Finance Minister P Chidambaram paid a lot of lip services to rural development without concrete announcement of policies. Almost all the policies of the NDA Government are being continued. Instead of providing support to the smallscale sector. 85 items have been dereserved.

Second, Mr Chidambaram has spoken so much of education and has imposed a cess of two per cent across the board on all taxes, but he has not spelled out as to how this fund would be spent. Will this amount be in addition to the amount earmarked for education earlier? In our bureaucratic setup, implementation of policies has always been a problem. If the Government does not specify how the benefit will be delivered to the actual beneficiaries, all the good intentions will not bear fruit.

Third, Mr Chidambaram has announced that a consortium of private banks will give loans to the tune of Rs 40,000 crore for infrastructure development. Announcements regarding intentions of the private banks will have no meaning as these will be commercial decisions, and its credit cannot be taken in the Budget. Fourth, in the field of water conservation, Mr Chidambaram's announcement that wells, ponds, etc.. will be repaired and renovated is also an eyewash as this will be done over a period of 10 years and that too without any fund allocation.

To meet revenue requirement, Mr Chidambaram has stated that there would be a 40 per cent increase in revenue collection from the corporate sector only without there being any increase in the tax rates. He plans to achieve this through greater and stricter compliance of tax laws which is unrealistic and impractical.

After criticising so much the disinvestment policy of the NDA Government, Mr Chidambaram, in continuing with the disinvestment of NTPC, a profit-making company, has also announced the setting up of a disinvestment commission.

The Left Front's rhetoric of opposing FDI in strategic sectors has been given a raw deal by announcing increase in FDI in all the three strategic sectors of telecommunication, aviation, and insurance. Telecommunication is one sector in which even the US does not allow majority holding to foreign investors.

Tax concessions in income tax on the taxable income of up to Rs 1 lakh is creating confusion. It would have been much better if instead the basic exemption limit of Rs 50,000 was increased. This will create resentment to anybody having even a slightly higher taxable income of more than Rs 1,00,000.

The increase in service tax by 25 per cent of the earlier level of (eight to 10 per cent) will also have an inflationary effect. Service tax has a cascading effect and the Government needs to control inflation to control fiscal deficit, which is already showing signs of increase. Further, increase in excise tax on steel will also be inflationary as it is a basic metal for infrastructure development. and will harm the housing sector too. The imposition of the anretisonable transaction tax on all securities transactions came as a big blow to the securities market. It seems the Government has not applied its mind as to whether this can be absorbed or will it completely kill the capital and bond market. Transaction tax is bad as every transaction does not lead to profit. Second, 80 per cent of the stock market turnover is through either arbitrage business or jobbing transactions at a very meagre price difference of as low as five paisa. This will lead to complete erosion of liquidity in the market which is very essential for true and fair price discovery and for reducing impact cost (that is, the effect of bulk purchase order on the price of a scrip).

The low interest regime of the NDA Government, which was a ma- jor factor in facilitating industrial development, housing sector, etc., is showing signs of reversal as interest rates are firming up. If the UPA Government does not take major initiatives, which are missing in the Budget, then we may soon see reversal in the country's economy.

(The writer is member, Central Economic Cell, BJP)

Sum of all Subtractions

 Sum of all Subtractions

By Gopal K Agarwal,

The turnover tax is III-advised as all transactions do not lead to profit

IN its first Union budget the United Progressive Alliance was expected to give a clear direction to the economy of the country. The UPA government had inherited a healthy economy with very strong fundamentals, burgeoning foreign exchange reserves, economy growing at more than 8 per cent annually, fiscal deficit and inflation under control and a booming stock market. All were the result of economic policies followed by the previous NDA government. There is no doubt that there were certain sectors like agriculture and small-scale industry which needed some drastic steps and had been identified by the NDA for focus in the coming period but the NDA lost the elections. Thus, everybody expected the Congress and its allies to clarify their policy on each of these issues.

The Indian economy in at a critical juncture. Internal contradictions at the government due to differences in the economic views of the Congress and the Left do not leave much room for innovation. This is evident from the criticism of the budget by the Left Front.

In his budget speech, the finance minister paid a lot of lip service to rural development the there are no concrete provisions or policies. Almost all the policies of the NDA government are being continued. But instead of going support to the small-scale sector, 85 items have been dereserved Second, he has spoken so much on education and imposed a cess of 2 per cent scates the board on all taxes, but it has not been clarified ut to how this fund will be spent In our bureaucratic set-up imple mentation has always been a prob lem. If the government does not specify how the benefits will be delivered to designated beneficiaries, no amount of good intentions will bear results. If all these hands are left to the states to be utilised as they see fit, certain failures would appear inevitable. Third, the finance minister has announced that a consortium of private banks will give loans to the tune of Rs 40.000 crore for infrastructure development. This kind of announcement regarding intention of the private banks has no meaning as these will be commercial decisions and the credit can not be taken in the budget. Fourth, announcements with regard to water conservation, that wells, ponds, etc, will be revived, is also an eve-wash, as thus will be done over a period of 10 years and that too without any fund allocation

To meet his revenue requirement ment the finance minister says there will he a 40 per cent increase in revenue collection from the corporate sector without any increase in tax rates. He plans to achieve this through stricter compliance of tax laws. This may strike some as highly unrealistic.

After criticizing the NDA government on disinvestment, the UPA is to continue with disinvestment of NTPC. It also proposes to raise FDI caps in three sectors, including telecommunications which the NDA was reluctant to do.

Conomions on taxable income up to Rs 1 lakh have created some confusion. It would have been much better if, instead of this, the basic exemption limit of Rs 50,000 had been increased. The current change will create resentment amongst those whose income is slightly higher than the cut-off mark. The increase in service tax by 25 per cent of the earlier level 8 per cent to 110 per centy will also have an inflationary effect. Service tax has a cascading effect and the government needs to control inflation to control fiscal deficit, which is already showing signs of increase. Moreover, increase in excise on steel will abe be inflanon ary as this basic metal and this will have repersime to the housing sector.

There is a big blow to the securities market by the imposition of an unreasonable as on all transactions. The transaction tax in illad voed, as, first, all transactions do not lead to profit. Second, 80 percent of the stock market turnover is either arbitrage business or jobbing transactions at a very meagre price differencs of as low as Rs 0:05. Thus will lead to a complete erosion of Inquility in the market which is very casential for true and bar price decovery and reduang impact cost (that is, the effect of bulk purchase order on the price of a scrip). Even without this step the market was very nervous about the policies of the UPA government and the influence of Left partisan economic policy.

The low interest regime of the NDA government, which was a major factor facilitating industrial development and growth in the housing sector, etc, is showing signs of reversal as interest rates are firming up. If this government does not take major initiatives which are missing in the budget, the impact on the economy could be severe.

(The writer is member, Central Economic Cell, BJP)

Should they kill the goose for the egg?

 Should they kill the goose for the egg?

By Gopal K Agarwal,

The ban on outsourcing may also be a sign of weakening of American confidence in the strength of dollar. The US has been running up higher and higher deficit.

 A succession of US visitors has told us that India is one of the most closed economies in the world. This is partly an attempt to legitimise anti-outsourcing legislation. The conventional test for gauging openness is tariff structures, on which India scores good as per WTO standards. New Delhi has strongly conveyed to Washington that any linkages of a quid pro quo in outsourcing would not be acceptable to it. It also holds the view that outsourcing is a commercial activity and should not be seen as a bilateral and hence not bedevil ties between India and the United States.

Americans were earlier in a position to win competition and control economies of other countries through monetary policies. They were vehemently establishing institutions such as IMF, WTO, GATT and World Bank to promote their interest by pursuing other countries to open their economies and remove trade barrier. When international trade agreements were extended to agriculture and services sectors, in which developed nations were not very comfortable and started loosing in competition, they started shouting anti-liberalisation slogans. Once this reverse process starts. it will not take much time for other nations to follow. US will be the biggest looser in the whole process. The US economy is based on accessing world markets. One cannot ban outsourcing of business process but continue to have access to world markets and international demands. US ban on outsourcing will have serious backlash.

Business process outsourcing (BPO) is a process through which some business processes are outsourced to other countries where they can be performed at a cheaper rate or at a better quality. This helps in globalizing national economies. Outsourcing depends on labour arbitrage. Per capital income of different countries varies.

Until national income of countries come on parity, these arbitrage opportunity will remain.

With the opening of the world economy and integration of international trade, BPO has created vast opportunities for the developing countries due to availability of cheap and skilled labour. India is considered to be a major beneficiary of this process. Take any field where knowledge is involved, India has the potential to become a global giant and an economic superpower. India has several advantages. Owing to availability of cheap and highly educated labour, the cost difference at which we can provide services and many commodities of comparable quality will put the other world at a great disadvantage.

India has cost-cum-competence advantage in professions such as law, accountancy, design, engineering, tax consultancy, financial and IT services. Doctors, MBAs, chartered accountants, nurses, lawyers and many other professionals are available in India at a much lower cost than the world over. Many multinational companies are setting up their R&D centers, BPO facilities and product development centers in India

 Recent technological revolution in the field of telecommunication etc. has put our infrastructure at par with global standards. India's vast pool of English-speaking manpower, coupled with its educational system and training programmes, has helped transform the country into a global outsourcing superpower. The rapidly growing BPO industry has virtually turned the country into an electronic housekeeper to the world, taking care of a host of routine activities for multinational giants. As Indian training institutes churn out tens of thousands of computer literates every year, the vast majority has jobs waiting for it with the local firms rushing to spread wings to offer services at sharply lower rates.

On the back of these English-speaking, tech-savvy. Cheap manpower, India's IT market has grown from $1.73 billion in 1994-95 to $16.5 billion in 2002-03. The country's software exports were able to grow at 26 to 28 per cent during the current fiscal year ending March 2004

Now suddenly we hear anti-globalisation noises in America. Recently, several legislations have been passed in US that seek to deter the outsourcing of work previously done in the US states to developing countries. It seems strange for a country that in the past had been harping so loudly on opening economies without international trade barrier, to turn conservative in its approach.

The ban on outsourcing may also be a sign of weakening of American confidence in the strength of dollar. The US has been running up higher and higher deficit, which has crossed half trillion dollars this year. Earlier, this was being financed by attracting global currency reserves. The central banks world over were keeping their currency in the form of dollars, thereby increasing the demand for dollars and keeping it strong. Now other currencies are gaining strength and dollar is weakening. A national debate is required so that a consensus can be built on capital account convertibility and delinking of the rupee-dollar exchange rate. We have huge foreign exchange reserves: we may think of delinking rupee from dollar and allow it to float freely.

US has to understand that good economics should not be sacrificed at the altar of short-term policies, as said by our Prime Minister Atal Behari Vajpayee. He further added that it was somewhat perverse that Americans should turn protectionist and thus reinforce anti-globalisation crusades at a time when developing countries like India had successfully handled the political economy of resistance and had begun to open up.

Even Alen Greenspan, Chairman of Federal Reserve, said that the efforts to protect OS jobs through legislation could end up backfiring. He further said that US had a choice of erecting walls to foreign trade and even discouraging job-displacing innovation but this would surely slow the pace of competition, Initially tensions might appear to ease but only for a short while. Further US companies have little choice, if they don't cut costs by outsourcing, they will rapidly become uncompetitive comparison to those companies that do. In that case many more US jobs will be lost as these companies shut down. Off-shoring is still only a small component of the business of many US-based companies.

Outsourcing is a two-way process, of which India was beneficiary. The world outsourcing market was estimated to be about five trillion dollars in 2002, according to Outsourcing Research Council Shri Colin Powell, the US Secretary of State, said that outsourcing is a reality of 21st century and an opportunity for both sides. Nearly 20 per cent of the total business is constituted by the IT and ITES market, which is growing at about 15 per cent per annum. Of this, India receives only about two per cent of the work, which indicates the huge potential. However, in a simultaneous reverse process, some of the best and biggest Indian companies are outsourcing strategic IT functions to some of the global companies.

Strategic outsourcing is in fact the fastest-growing segment in the Indian IT market as seen from the series of deals announced in the last few days. A notable deal is the one that struck in the recent past between Hewlett-Packard and Bank of India for over Rs 680 crore. It is also clear that global vendors have established their expertuse and experience in handling long-term, complex outsourcing needs of Indian companies to enable business transformation. It is not a sheer coincidence that strategic outsourcing is being opted by Indian companies at a time when the BPO phenomenon is at its peak. Indian non-IT companies are taking to outsourcing as they are on the lookout for vendors with the best domain knowledge. In simple terms, this is just a manifestation of globalisation.

But America's selfish mentality is evident everywhere. Until America did not feel the heat of terrorism, it ignored terrorist activities of some countries in the name of freedom struggle. As soon as the heat turned towards USA all forms of terrorism becarne bad for the world. Similar is the case with international trade. Now that USA's interests are clashing, it wants to wriggle out of agricultural and services sector agreements under WTO. In this unipolar world it is important that USA starts looking at the whole world neutrally.

(The writer can be contacted at gopalagarwal@hotmail.com)

Feeling good, continuously

 Feeling good, continuously

By Gopal K Agarwal, 

Two sectors the government is focusing on are agriculture and small scale industries

Recently India has embarked on a growth path unprecedented in the past. There is criticism from some quarters about its benefits being concentrated to small groups. But this 'feel good' factor has been attributed to the policies of the present BJP-led NDA government. The main contribution comes from good governance, a clear foreign policy, the economic reform process moving in the right direction and infrastructure development. This has led to wide economic activities, creating a push in demand and development in the manufacturing and services sector. It is reflected in the stock market boom. The world looks towards a resurgent and confident India.

The main task before the government now is to build on this confidence by furthering infrastructure development and implementing policies so that this growth continues further. The emphasis must be on wider distribution of its benefits. If a section of society cannot directly benefit from this growth, they must be provided support in the form of social security measures. Roopa Purshottam, co-author of the much talked about BRIC report of Goldman Sach, argued that to realise its true potential, India requires a lot of investment in sectors yet in the nascent cycle, like power, defense, telecom, oil and path gas exploration. The banking sector also calls for attention and the credit cycle should go forward. There should be a focus on sectors. But that are consumer-interest intensive Positive forecasts will not hold good if labor reforms are not. introduced. Anne Kreuger, first comes deputy managing director of International Monetary Fund form (IMF), has said that while fiscal imbalance was not the only impediment to growth, its reduction was important to encourage growth and reduce poverty in developing countries.

Joseph Stiglitz advocates the need to scrutinise the term globalisation. Opening up countries to more trade is good; opening them to unbridled capital flows is bad. Tariffs must be reduced and developed countries should open their fit markets to developing countries. Inefficient public enterprises must of be privatised, not efficient ones. Privatisation isn't about raising revenues for government but about increasing productivity in the economy. Care must be taken not to replace public monopoly with private monopolies.

The 10th Planning Commission document warned that the infrastructure won't be able to provide jobs for new entrants or clear the backlog. Fifty-four per cent of the India's population is under the age of 25; a majority have no inclination to work in the agriculture sector.

Two sectors the government is focusing on, and which have potential to sustain growth and its proper distribution, are agriculture and small scale industries. The agricultural sector requires the followingand allowing leasing of agricultural land; developing cottage industry to promote the village economy and stop the flow of rural population to the citiesimproving water management organizing private markets providing better storage and warehousing facilities, improving the rural road network; implementing crop insurance facilities; providing improved seeds to farmers, establishing research centres in agriculture  technologies and disseminating knowledge to farmers, giving credit facilities at low interest educating the farmer in patenting and intellectual property rights and promoting organic farming.

In the small-scale sector the proposed reforms are: Providing guidance vis a vis the induction process for the entrepreneur, conducting market survey reports for small industries; setting up laboratories for the analysis of raw mate- rial; branding the product; creating a cell in the government for legal assistance; framing taxation policies giving concessions for emastries. ployment generation; requesting equires RBI to earmark funds for SSIs; Imple- providing an exit policy, preventing reserved items from being ille- Leasing gally produced by big industries; loping preventing industries from going te the to BIFR without clearing SSIs dues; making provisions for revival of SSIs under RBI guidelines; monitoring banks for credit delivery and financing.

Some steps are also required in the capital market. The sensex has become the barometer of economic progress. The current ovid- volatility must be curbed. The rally house is being fueled by FII money. Rural. Some stabilising fund is required in case of a sudden exit of FIls.

With all the macroeconomic factors pointing towards a robust Indian economy, we hope to build on the current confidence and make it a global superpower by the year 2020.

(The writer is member, Central Economic Cell, BJP)

Touching the horizon

 Touching the horizon

By Gopal K Agarwal,

GROSS domestic product (GDP) is the broadest measure of the health of the economy. Real GDP is defined as the total money value of final goods and services produced by labour and property located within a country during an accounting year. Gross value includes that part of fixed capital also which is consumed during the year that is, depreciation. It does not include net factor income earned abroad. GDP is a measure of domestic production, it includes production within national borders regardless of whether the labour and property inputs are domestically or foreign-owned.

 By 2050, India is projected to become the third-largest economy in the world, behind China and the US, according to a recent report by Goldman Sachs. By another estimate, China, India, Russia and Brazil could outrank the combined economic might of today's Group of Six (G-6) and the UK by the middle of this century. According to the Organisation for Economic Cooperation and Development (OECD), in its latest issue of the Science, Technology and Industry Scoreboard, India has spent about $19 billion on research and development in 2000-01, putting it among the top 10 countries with the highest R&D spending. The World Bank says India can achieve economic growth of 8 percent during the Tenth Plan period only if it undertakes comprehensive reforms and reduces its internal debt and fiscal deficit. The International Monetary Fund forecast says India's economy is on an upward trajectory and its GDP is expected to record "close to 7 per cent" growth this year, and the target is 8 per cent growth in future.

The 11 per cent growth in exports and 19 per cent growth in imports clearly indicate an economic turnaround in the country. The export growth rate is the second highest in the world, next only to China, and hoists India's share of world trade to a high of 0.8 per cent. Foreign exchange reserves have reached an all-time high of $91 billion.

Experts, however, caution that some "pressure points" still exist in the economy, largely on account of subsidies on food and some petroleum products. Moreover, in order to achieve a high growth rate at the national level, it is important to identify areas of high growth potential both in terms geographical as well as sectoral. In India, being a huge country with vast inter-regional and intra-regional disparities, decentralisation of resources, planning and decision-making should be the main strategy.

The government adheres to the view that the private sector and the market must play an important role. There are areas, such as infrastructure development, where gaps are large and the private sector cannot be expected to step in significantly.

The government assigns the highest priority to agricultural development, because growth in this sector is likely to lead directly to the widest spread of benefits, especially to the rural poor. It is pointed out that the first generation economic reforms had concentrated on reforms in the industrial sector and now agriculture should take its place. Second, the growth strategy of the Tenth Plan must ensure rapid growth in such sectors that are most likely to create high-quality employment opportunities- sectors such as construction, tourism and transport deserve support. We need to sincerely examine whether the  resources used for poverty alleviation schemes and for various types of subsidies in the name of the poor may be more effective in alleviating poverty or if they are directed to various types of asset creation programs in rural areas.

In the expenditure control area, two areas need focus first is subsidies, both direct and indirect, and the second is the pension liability of the government, which is the fastest growing component of current  expenditure. Currently, these liabilities are unfunded and signify a claim on the general revenues of the government. If the government is successful in strongly moving towards its goal of economic prosperity, India is bound to emerge stronger. The goal is in sight, the path is clear, the rest is up to us.

(The writer is a member of the BJP's central economic cell)

Wealth: agriculture plus services

 Wealth: agriculture plus services

By Gopal K Agarwal,

RACHEL Carson, in her R landmark landmark book Silent Spring, has stated that the power of an idea can be greater than political power. In the economic development of country, there are two factors at the creation of wealth and its distribution. Distribution is without doubt very important but unless we create wealth, distribution has no significance.

At present there are a lot of discussions on the direction India's economy should take. We have so far failed to develop a model suited to our needs. The Nehruvian model emphasised development through centralised planning. The emphasis was on industrialisation, to the relative neglect of agriculture, This process was continued by subsequent Congress governments. There was an over-emphasis on socialism culminating in the 1969 bank nationalisation. This opposition to capital and private ownership led to situation where we started sharing and distributing poverty. The country has to provide work opportunities to everybody but not jobs. Providing job security may only breed lethargy and inefficiency. The government's responsibility is not in the distribution of the acquired wealth of some individuals but equality of opportunities and distribution of resources.

Economic activities are generally classified into three categories: the primary, secondary and tertiary sectors. India's developmental module should emphasise the primary and tertiary sectors. This is because 70 per cent of our population live in villages and depend on the primary sector. Agricultural produce accounts for a major portion of our GDP. The overall economic development depends on the purchasing power of our people, which in turn relates to agricultural production. In other words, the demand push developmental model depends on agricultural production. We know that the backbone of our economy is agriculture. The standard of living of people here has to be uplifted. It is agriculture alone which can provide employment to millions of rural youth and help arrest rural-urban migration.

At the national level, rural infrastructure has to be developed by the government, which includes a functioning road network, organised markets, cold storage and warehousing facilities, the availability of capital at low interest rates, and so on. The time has also come to end the subsidies on fertilisers and encourage organic farming practices. This may result in a reduction in yields but research has shown that over a period of four years yields from organic farming increases while that from the use of chemical fertilisers and pesticides decrease. This switch will save subsidies of approximately Rs 1,72,000 crore every year.

In the international arena, we need to protect our agriculture, retail trade and small-scale sector from the onslaught of international manufacturers. With growing food production, burgeoning food stocks, the poor storage facilities along with the demand for increasing minimum support prices, if we are also forced to remove tariff barriers in agriculture we could find ourselves in a spot. Our negotiators should, therefore, insist on a minimum import quota based on GDP as prescribed under the Agreement on Agriculture earlier. Reduction in tariff and non-tariff barriers has to be linked to reduction in trade-distorting subsidies by the developed countries.

Where India does have a comparative advantage is in the tertiary, or services sector. India has a cost-cum-competence advantage in professions like law, accountancy, design, engineering, tax consultancy, financial and IT services. Doctors, MBAS, chartered accountants, nurses, lawyers and many other professionals are available in India at a much lower cost than elsewhere in the world. This is a major strength. Many multinationals are setting up their R&D centers, business process outsourcing facilities and product development centres in India. Indian IT firms can provide world-class services at one-tenth the cost that an US company, for instance, would incur. At the international level, we have to push for the opening up of services sector under Mode 3 and Mode 4, ie, there should be free mobility of manpower across countries and complete reciprocity with developed nations. Mutual recognition agreements should be put in place so that our professionals get recognition and opportunities in those countries.

What about the manufacturing sector? Building the infrastructure required entails capital expenditure and is risk-ridden in a world where technologies get obsolete very quickly. Take the case of BSNL, which has the world's most extensive networks of copper wire. But this may no longer be an advantage since people are switching rapidly to wireless telephony. It makes sense, then, to concentrate on developing the agriculture and services sector.

(The writer is member, Central Economic Cell, BJP)

What's in WTO for us?

 What's in WTO for us?

By Gopal K Agarwal,

During the 18th century, imperialism had a physical form. Countries which had military power colo- nased other countries and exploited their resources. Today developed countries exercise control over poorer ones in a more subtle way. International financial institutions act as tools in the overall game plan. The situation is, however, fast changing.

If the WTO is to be true in its objective of opening and liberalising international trade with free market access and without domestic and export subsidy, India would stand to gain. We have to keep in mind that the WTO is about negotiations in international trade. It is not a unilateral charter of demands; it is not our wish list. In any trade negotiations we have to proceed from the present stage keeping in mind our long-term objectives. To accomplish our goals, we should enter into strategic alliance with developing countries with similar concerns. Our emphasis should be on translating the spirit of the Doha Declaration in order to protect the interests of these countries.

We have to protect our agriculture, retail trade and small-scale sector from the onslaught of international manufacturers With growing food production and burgeoning food stocks in India, if we are forced to remove tariff barriers in the agricultural sector, it could create problems. Our negotiators should insist on a minimum import quota based on GDP as prescribed under the Agreement on Agriculture earlier.

The true benefit of the WTO will be achieved in the services sector. We have to push for the opening up of the services sector under Mode 3 and Mode 4- that is, there should be free mobility of manpower across countries. There should be complete reciprocity with developed nations in areas such as accoun- tancy, health services, legal services, tourism and travel services. Mutual recognition agreements should be put in place so that our professionals get recognition and opportunities abroad. In addition, India should negotiate to place agriculture workers on the Mode 4 list.

The basic problem with the WTO is that it is talking of liberal ising international trade through reduction in tariff and non-tariff barriers without emphasizing on reduction in trade-distorting subsidies by developed countries. Another major concern before the WTO is the misuse of TRIPS, or intellectual property rights. There are several cases where patent rights have been given to firms over existing traditional knowledge by the US Patent and Trademark office. This problem is exacerbated by the fact that many developing nations, including India, have not yet managed to document their traditional knowledge

In the area of public health, we should insist on major diseases being brought within the ambit of compulsory licensing. The US, thankfully, has dropped its demand that disease coverage be limited to HIV/AIDS, TB and malaria. This expansion is important from the point of view of India's health needs as well as the development of our pharmaceutical sector and its exports to other developing countries

Recent attempts by developed countries to push additional agenda issues called Singapore issues such as a multilateral agreement on investment, competition policy, transparency in government procurement procedures, industrial tariff, trade and environment, and labour standards, too, should be resisted.

The notion that India stands to lose under the WTO regime stems from an underestimation of our abilities. We always talk of our glorious past; this is an opportune time to realise it. India today is not what it was some twenty, twenty-five years back- a weak nation at the mercy of superpowers, ruled by a diffident leadership. We should sit together, apply our minds, identify our strengths and weaknesses and negotiate accordingly. The WTO can be a catalyst in the process of reverse imperialism.

(The writer is member, Central Economic Cell, BJP)