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S. Balakrishnan

SURPLUSES are turning into plenty. Forex reserves have crossed $100 billion and look set to continue rising through 2004. A virtuous cycle is in motion: the economy is performing, even outperforming, exports are booming (though still far behind China's) and the country is becoming a hot destination for foreign investors.

Yet all is not rosy. Economic and financial pundits would point to the Government's fiscal indiscipline, which necessitates borrowing just to pay interest.

Then there are the second-generation reformers - those for whom the public sector is anathema and labour enjoys too much protection. Exit all public enterprises, enable a hire and fire regime and watch the economy move to a higher growth plateau.

Still there is no unanimity on these things. The more farsighted economists and businessmen recognise the catalytic role of Government expenditure and public investment in promoting private investment and incomes. For all the ballyhoo, the fact is that, till the nineties, the financial risks (and, therefore, business risks) of new investments were shouldered by Government-owned financial institutions and banks, which funded most of the fixed and working capital needs - often as much as 75 per cent - of the private sector. Inflated costs, ill-conceived projects and the phenomenon of sick companies have been the natural consequences.

Fierce differences exist on the extent of foreign ownership. The line is clearly drawn between those who would do away with all barriers (approximately the CII crowd) and others who want restrictions (basically the FICCI), although it is difficult to see any ideological issue here: it seems to boil down to whether we need intermediaries or not, given that the Indian owners cannot provide much more than "access" to the powers-that-be, lacking as they do the technological and financial prowess of foreign companies.

The real question - the pattern of ownership of natural resource companies and others - has not merited serious discussion thus far. We have put ourselves in a quagmire with the trivial matters of 49 per cent vs. 74 per cent foreign shareholding.

Meanwhile, capital, people and ideas are flowing freely across borders in industry, trade and services. Agriculture will also transform into agribusiness.

There is little doubt that the integration of India into the global economy has created a growing, thriving and prosperous middle class, estimated to be among the biggest in the world.

What is disturbing is the still starkly visible poverty, child labour and vast differences in the quality of life, access to education and health care between an affluent minority and the majority, epitomised so well in the columns of this paper by P. Devarajan in the person of Lacchman Singh.

The endless debates on sterilisation of liquidity sound sterile amidst the terrible contrast between these two Indias, so near and yet so far from one another.

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