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19 March 2010

Opinion

Viewpoint

India going cheap Why does India continue to sell itself so cheaply to the West, particularly to the US? A case in point is the Civil Liability for Nuclear Damage Bill which the Congressled UPA government is seeking to enact, in the face of strong opposition not only from the BJP and the Left but also from within its own ranks. Briefly, the Bill caps the damages paid to victims of a nuclear plant mishap at a total of Rs 2,800 crore, of which the private or public sector entity operating the plant will be liable for Rs 500 crore and the central government would stand good for the balance. The foreign company supplying the nuclear machinery or material will be free of all liability. India must pass this Bill before foreign suppliers, from the US and elsewhere, can sell the nuclear equipment this country urgently needs if it is to meet its goal of increasing its nuclear generation 10 times over the next 25 years. The nuclear liability Bill will activate the so-called Indo-US nuclear deal in defence of which the prime minister almost resigned during the UPA government's previous tenure. But even ardent champions of the Indo-

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US nuclear pact - which goes beyond nuclear issues and could help to establish India as a key partner of the US in regional and global affairs - are baulking at the limitation of liability, which former Indian attorney general Soli Sorabjee has described as 'discriminatory', unconstitutional and opposed to the 'polluter pays' principle prescribed by the Supreme Court. In short, there should be no cap on the damages paid to those who suffer as the result of a nuclear leak or other malfunction, nor should foreign suppliers be let off the hook in terms of liability in case an accident occurs. Remember the Bhopal gas tragedy perhaps the worst industrial disaster in the world - which in the 26 years since its occurrence seems to have been consigned to national amnesia? Barring some NGOs and victims' associations, everyone else appears to have misplaced in memory a toxic gas leak that reportedly took a toll of some 20,000 lives and caused severe bodily damage to almost 6,00,000 others. The culpable party, the Indian subsidiary of USbased Union Carbide, eventually paid a pittance - according to one calculation a scandalous Rs 12,410 per victim, compared with Rs 15 lakh to Rs 18 lakh given to the families of those who died in Delhi's Uphaar Cinema fire - by way of compensation to the affected, many of whom continue to suffer disease and severe disabilities to this day. Suppose an Indian company had done a Bhopal in the US? Would that company - which was responsible for the deaths of many thousands of American citizens have been allowed by the US authorities to get off as lightly as Union Carbide has done? Would an Indian company's CEO manage to escape the law, as did Union Carbide's boss, Warren Anderson, allegedly with the connivance of a senior Indian politician? Why do we allow Indian lives to be made so cheap in comparison to American lives, or the lives of others who belong to what calls itself the 'developed world'? Isn't an integral part of its development the fact that it values the lives and security of its own citizens, unlike we in India who reveal our lack of development by criminally undervaluing the lives and safety of our people? If we cannot learn to respect the right to life and health of our citizens we cannot expect others to respect this right, or to respect us. We need to remember this when the nuclear liability Bill is debated, not just in Parliament but also - and equally importantly - outside it. And while we're at it, will the sarkar please send a belated supplementary Bill to the constituent of America Inc responsible for Bhopal? Better 26 years late than never.

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A Question Of Balance One of the phenomenal events of this round of globalisation is the economic ascent of China. In 2009, China became the second largest economy in the world in nominal dollar terms. Although the American economy is still three times the size of the Chinese economy today, a reasonable prediction shows that China will overtake the United States to become the world's largest economy by 2025 at the latest. However, China is not alone in the quest for a better life. Three other big developing countries, India, Brazil and South Africa, are joining the ranks. Sharing the same destiny and same agenda, these four countries have begun to coordinate in international diplomacy, like what happened in the Copenhagen climate conference in 2009. Global imbalances, whereby some countries run high current account surpluses while other countries run high current account deficits, have resulted in excessive liquidities flowing from the surplus countries to the deficit countries. Many believe that this has been one of the causes of the global financial crisis. Inflexible exchange rate regimes in some surplus countries, particularly China, are often blamed for creating global imbalances; the more extreme opinions also believe that China's inflexible exchange rate regime is the root cause of unemployment in developed countries and

slow recovery in developing countries. But historical evidence shows that exchange rate regimes had little to do with global imbalances. Germany and Japan both have a floating regime, but both countries run very large surpluses. In particular, Japan has remained a strong exporter despite the Plaza Accord that forced the yen to float and revaluate. China's own experience since 2005 also rejects the claim. Between 2005 and 2008, the renminbi (RMB) appreciated by about 20 per cent, but China's trade and current account surpluses both surged. The claim that a weak RMB (Chinese yuan) hurts China's trade competitors has some merits. But one has to realise two things. One is that RMB is only pegged to the US dollar and floats against other currencies together with the dollar. If RMB's value is artificially low today, then there are periods when it is artificially high. For example, RMB was not devalued in the Asian financial crisis while most Asian currencies were devalued at the time. The other thing to consider is that there are costs attached with a fixed exchange rate regime that other countries may not want to bear. For example, liquidities are flowing to emerging markets including China; a flexible exchange rate regime discourages the movement by revaluation of the home currency and avoids asset bubbles, but a fixed exchange rate regime cannot do it.

Hopefully, Pawar Sahib will notice it now!

Those who know nothing of foreign languages know nothing of their own. - Johann Wolfgang von Goethe

editor@thesouthasianinsider.com

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Hopefully, Pawar Sahib will notice it now! Opinion 19 March 2010 TO REACH US BY PHONE/FAX : Tel : 516 280 0576 Cell : 917 612 3158 Fax : 516...

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