State Policies And Gatt.docx

One of the features of modern business is the increasing involvement of the government in business activities. As of today, there is no country in the world where the government of the land does not interfere, in one form or the other, in its economic activities. Involvement is all the more pervasive in our economy which till recently was planned and regulated one.

REASONS FOR STATE INTERVENTION Why the government should interfere in business activities is a relevant question. The following constitute the answer. 1. Economic historians have noted that the later a country moves towards economic development, the greater has to be the role of the State. Delayed growth has to be sponsored growth, and the government has to be the sponsor.

2. It is argued that the modern economy must be a planned economy. The need for planning becomes clear if we examine the dangers of non-planning. In the absence of planning, there is no proper direction to the economy, wrong priorities are chosen, scare resources are wasted, and booms and depressions occur regularly. In order to check these and some other evils, and to ensure speedy and balanced development of the economy with the least wastage of resources, planning becomes necessary. 3. Ours being a socialist society, the government is compelled top enter directly into industrial and commercial activities. Our constitution binds the government to take an active part in economic activities. The State’s role is clearly underlined in the Preamble, the Fundamental Rights and the Directive Principles of State policy. Articles 38 to 48 of the Directive Principles; the Right to equality, the Right to Freedom and the Right Against Exploitation of the Fundamental Rights and Justice, Liberty and Equality for all in the Preamble make it mandatory for the State to participate in economic activities. \\ 4. The considerations which apply in deciding what undertaking is to be established , how it should be run, where it should be established, how its products will be priced and distributed, all these and other considerations are influenced by the policy to which the government is committed. For instance, the government must consider not so much what the likely demand is going to be according to market projections, but may infact have to decide what the demand should be, and take steps to influence the demand, either to build it up or to pare it down or to vary it. If the country is to achieve a certain pace of development, if certain standards of living are to be attained, certain demands must be created. Otherwise the whole pace of development will slow down, and not be adequate to attain the targets which the nation has set before itself. This is a feature which private enterprise cannot cope with. For example, the standard of living of a people can be statistically related to the power and to the steel per capita consumed in the country. There are several such indicators. A government politically

committed to certain social objectives may then well decide that in order ot achieve these per capita ratios, it may be necessary top setup, to evolve and to operate a pattern of prices, subsidies, incentives or disincentives of different kinds in order to influence the consumption pattern. 5. The functions of the government which were originally limited to the maintenance of law and order have considerably expanded. In our country, the government has assumed the responsibility of social and economic well-being of the people. In this changed context, taxation can no longer be solely depended upon, and infact has proved inadequate, for the task of raising the total revenues, the State now needs for its multifarious activities. By active participation in business, the State has sought to tap the gold mines of industry and commerce for the funds needed to discharge the new and heavier burdens it now shoulders.

6. State participation is necessary to lay a strong base for the future development of industry and commerce. The Government must assume responsibility for the development of core industries and facilities such as power, fuel, iron, and steel, transport, atomic energy, machine tools, transportation and communication. 7. Finally, the failure of markets invited government intervention in an economy. As is too well known, markets may be monopolistic or competitive. Monopoly leads to the wastage of resources and exploitation consumers. Clearly, avoidance of these evils is the main reason for State intervention. Infact, protection of consumers against trade practices harmful to public interest is the main objective f the Competition Act, 2002. If monopolies fail, it does not imply that competitive markets succeed. Infact, competitive markets often fail because of at least three reasons: (i) externalities, (ii) public goods, and (iii) information problems.

TYPES OF INTERVENTION Also called as controls or regulations, government intervention assumes several forms. Thus, we may distinguish between formal and informal controls, between direct and indirect controls, controls in relations to competition and promotional and regulatory controls. Formal and informal controls: Formal controls are usually those emanating from legislation, as for, example, the FEMA, the Companies Act, 1956 and the Competition Act 2002. Formal controls are very powerful and when we think of government control over business, we generally mean formal controls. Informal controls refer to the controls which various groups impose upon themselves out of need and custom. Business firms in various lines of activity develop conventions, informal agreements and accepted ways of doing things that have important regulative implications.

Coercive and inductive controls: Coercive regulations require performance of certain actions or refraining from others in order to avoid penalties. For instance, taxes must be paid or fine or imprisonment may result. In contrast, inductive hold out a promise of reward for compliance with the desired line of action. For example, subsidies may be granted to stimulate certain activities. Direct and indirect controls: when the government fixes prices of certain products or services, it is an example of direct control. The administered price policy of the Government of India is a direct control measure. The variation of corporate income tax to influence economic activity is an indirect control measure. Businessmen prefer indirect controls to direct regulations. Effect on competition: Depending on the relationship on the relationship to competition, regulations may be: (a) Government regulations designed to make competition work, the Competition Act, for example; (b) Government competition with business forms as a means of setting standards of competition, or (c) Direct government ownership and operation to supplement competition.

Promotional and regulatory controls: Promotional measures are of a positive nature, and include such activities as expansion of public sector establishment and operation of development banks revival of sick units, encouragement to small-scale units, and removal of regional imbalances, provision of incentives and subsidies and export promotion. Regulatory measures ensure orderly development of industries with the least wastage of resources. Regulatory measures include direct controls like the Industries Act, the Competition Act, the Companies Act, the Foreign Exchange Management Act and price and distribution controls labour laws and indirect controls like monetary policy and fiscal policy.

EXTENT OF INTERVENTION Ours being a regulatory economy, government intervention is enormous and all pervasive. State intervention is noticed in all aspects of a business establishment. Regulatory measures that apply to small units are different and are equally powerful and numerous. After years of liberalisation, State intervention in business has come down considerably. State regulation as it applies to foreign collaboration.

PROBLEMS OF GOVERNMENT INTERVENTION IN DEVELOPING COUNTRIES  Individuals may know more about their own preferences and circumstances than the government.  Government planning may increase risk by pointing everyone in the same direction – governments may make bigger mistakes than markets.  Government planning may be more rigid and inflexible than private decision making because complex decision-making machinery may be involved in government.  Governments may be incapable of administering detailed plans.  Government controls may block private-sector individual initiative if there are many bureaucratic obstacles.  Organisations and individuals require incentives to work, innovate, control costs, and allocate efficiently, and the discipline and rewards of the market cannot easily be replicated within public enterprise and organisations. Public enterprises are often inefficient and wasteful.  Different levels and parts of government may be poorly coordinated in the absence of the equillibriating signals provided by the market, particularly where groups or regions with different interests are involved.  Markets place constraints on what can be achieved by government; for example, resale of commodities on block markets and activities in the informal sector can disrupt rationing or other nonlinear pricing or taxation schemes. This is the general problem of “incentive compatibility”.  Controls create resource-using activities to influence those controls through lobbying and corruption-often called rent seeking or directly unproductive activities.  Planning may be manipulated by privileged and powerful grups that act in their own interests, and planning creates groups with a vested interest in planning, for example, bureaucrats or industrialists who obtain protected positions.  Governments may be dominated by narrow interest groups interested in their own welfare and sometimes actively hostile to large sections of the population, planning may intensify their power. A GOOD CONTROL SYSTEM A good system of control, if it were to avoid negative consequences, should have the following qualities:  It must be democratic. This means that it must be exercised in the interest of the governed as they see their interests.  It should know what it wants.  It must be powerful-powerful enough to make an unwilling minority obey the will of the majority.  It must be efficient, and at the same time, it must not destroy the efficiency of the thing it is regulating.  It must ‘economise coercion’.

 It must utilise all the strongest and most persistent motives of human nature, both generous and selfish hopes of reward, fear of punishment and those loyalties, persuasions’ and suggestions which rest upon the deeper fact that the individual is essentially a part of the community.  The duties imposed must be simple enough to be understood; and this means, among other things, that social control must follow precedent a great deal of the time.  Control must be guided by experience or by wise experiment.  It must be adaptable.  It must have a wider vision and canvas to develop. It must look beyond the immediate effect of doing a given thing to the further results of leading people to expect it in future.  And lastly, social control must be capable of progressively raising the level of mankind. In a democracy, where the mass of mankind does the ultimate controlling, this amount to saying that social control must continue somehow, to rise higher than its source.

World Trade Organisation The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. Principles of the trading system The WTO agreements are lengthy and complex because they are legal texts covering a wide range of activities. They deal with: agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards and product safety, food sanitation regulations, intellectual property, and much more. But a number of simple, fundamental principles run throughout all of these documents. These principles are the foundation of the multilateral trading system. 1. Most-favoured-nation (MFN): treating other people equally: Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members. This principle is known as most-favoured-nation (MFN) treatment. It is so important that it is the first article of the General Agreement on Tariffs and Trade (GATT), which governs trade in goods. MFN is also a priority in the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), although in each agreement the principle is handled slightly differently. Together, those three agreements cover all three main areas of trade handled by the WTO. 2. National treatment: Treating foreigners and locals equally: Imported and locally produced goods should be treated equally at least after the foreign goods have entered the market. The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and patents. This principle of “national treatment” (giving others the same treatment as one’s own nationals) is also found in all the three main WTO agreements (GATT, GATS and TRIPS), although once again the principle is handled slightly differently in each of these. National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs duty on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax. 3. Freer trade: gradually, through negotiation: Lowering trade barriers is one of the most obvious means of encouraging trade. The barriers concerned include customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively. From time to time other issues such as red tape and exchange rate policies have also been discussed. Since GATT’s creation in 1947-48 there have been eight rounds of trade negotiations. A ninth round, under the Doha Development Agenda, is now underway. At first these negotiations focused on lowering tariffs (customs duties) on imported goods. As a result of the negotiations, industrial countries’ tariff rates on industrial goods had fallen steadily to less than 4%. The negotiations had expanded to cover non-tariff barriers on goods, and to the new areas such as services and intellectual property. Opening markets can be beneficial, but it also requires

adjustment. The WTO agreements allow countries to introduce changes gradually, through “progressive liberalisation”. Developing countries are usually given longer to fulfill their obligations. 4. Predictability: through binding and transparency: Sometimes, promising not to raise a trade barrier can be as important as lowering one, because the promise gives businesses a clearer view of their future opportunities. With stability and predictability, investment is encouraged, jobs are created and consumers can fully enjoy the benefits of competition choice and lower prices. The multilateral trading system is an attempt by governments to make the business environment stable and predictable. In the WTO, when countries agree to open their markets for goods or services, they “bind” their commitments. For goods, these bindings amount to ceilings on customs tariff rates. Sometimes countries tax imports at rates that are lower than the bound rates. Frequently this is the case in developing countries. In developed countries the rates actually charged and the bound rates tend to be the same. A country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. One of the achievements of the Uruguay Round of multilateral trade talks was to increase the amount of trade under binding commitments. In agriculture, 100% of products now have bound tariffs. The system tries to improve predictability and stability in other ways as well. One way is to discourage the use of quotas and other measures used to set limits on quantities of imports administering quotas can lead to more red-tape and accusations of unfair play. Another is to make countries’ trade rules as clear and public (“transparent”) as possible. Many WTO agreements require governments to disclose their policies and practices publicly within the country or by notifying the WTO. The regular surveillance of national trade policies through the Trade Policy Review Mechanism provides a further means of encouraging transparency both domestically and at the multilateral level. 5. Promoting fair competition The WTO is sometimes described as a “free trade” institution, but that is not entirely accurate. The system does allow tariffs and, in limited circumstances, other forms of protection. More accurately, it is a system of rules dedicated to open, fair and exact competition. The rules on non-discrimination, MFN and national treatment are designed to secure fair conditions of trade. So too are those on dumping (exporting at below cost to gain market share) and subsidies. The issues are complex, and the rules try to establish what is fair or unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade. Many of the other WTO agreements aim to support fair competition: in agriculture, intellectual property, services, for example. The agreement on government procurement (a “plurilateral” agreement because it is signed by only a few WTO members) extends competition rules to purchases by thousands of government entities in many countries. And so on. 6. Encouraging development and economic reform: The WTO system contributes to development. On the other hand, developing countries need flexibility in the time they take to implement the system’s agreements. And the agreements themselves inherit the

earlier provisions of GATT that allow for special assistance and trade concessions for developing countries. Over three quarters of WTO members are developing countries and countries in transition to market economies. During the seven and a half years of the Uruguay Round, over 60 of these countries implemented trade liberalisation programmes autonomously. At the same time, developing countries and transition economies were much more active and influential in the Uruguay Round negotiations than in any previous round, and they are even more so in the current Doha Development Agenda. At the end of the Uruguay Round, developing countries were prepared to take on most of the obligations that are required of developed countries. But the agreements did give them transition periods to adjust to the more unfamiliar and, perhaps, difficult WTO provisions particularly so for the poorest, “least-developed” countries. A ministerial decision adopted at the end of the round says better-off countries should accelerate implementing market access commitments on goods exported by the least-developed countries, and it seeks increased technical assistance for them. More recently, developed countries have started to allow duty-free and quota-free imports for almost all products from least-developed countries. On all of this, the WTO and its members are still going through a learning process. The current Doha Development Agenda includes developing countries’ concerns about the difficulties they face in implementing the Uruguay Round agreements.

10 benefits of the WTO trading system From the money in our pockets and the goods and services that we use, to a more peaceful world the WTO and the trading system offer a range of benefits, some well-known, others not so obvious. WTO tries to reflect the complex and dynamic nature of international trade. It highlights some of the benefits of the WTO’s trading system, but it doesn’t claim that everything is perfect otherwise there would be no need for further negotiations and for the system to evolve and reform continuously. Nor does it claim that everyone agrees with everything in the WTO. That’s one of the most important reasons for having the system: it’s a forum for countries to thrash out their differences on trade issues. According to WTO, there are many over-riding reasons why members are better off with the system than without it. 1. The system helps promote peace 2. Disputes are handled constructively 3. Rules make life easier for all 4. Freer trade cuts the costs of living 5. It provides more choice of products and qualities 6. Trade raises incomes 7. Trade stimulates economic growth 8. The basic principles make life more efficient 9. Governments are shielded from lobbying 10. The system encourages good government

1. The system helps promote peace: Sales people are usually reluctant to fight their customers. In other words, if trade flows smoothly and both sides enjoy a healthy commercial relationship, political conflict is less likely. Smoothly-flowing trade also helps people all over the world become well off. People who are more prosperous and contented are also less likely to fight.. The GATT/WTO system is an important confidence builder. The trade wars in the 1930s are proof of how protectionism can easily plunge countries into a situation where no one wins and everyone loses. The short-sighted protectionist view is that defending particular sectors against imports is beneficial. But that view ignores how other countries are going to respond. The longer term reality is that one protectionist step by one country can easily lead to retaliation from other countries, a loss of confidence in freer trade, and a slide into serious economic trouble for all including the sectors that were originally protected. Everyone loses. Confidence is the key to avoiding that kind of no win scenario. When governments are confident that others will not raise their trade barriers, they will not be tempted to do the same. They will also be in a much better frame of mind to cooperate with each other. The WTO trading system plays a vital role in creating and reinforcing that confidence. Particularly important are negotiations that lead to agreement by consensus and a focus on abiding by the rules. Peace is partly an outcome of two of the most fundamental principles of the trading system: helping trade to flow smoothly and providing countries with a constructive and fair outlet for dealing with disputes over trade issues. It is also an outcome of the international confidence and cooperation that the system creates and reinforces. History is littered with examples of trade disputes turning into war. One of the most vibrant is the trade war of the 1930s when countries competed to raise trade barriers in order to protect domestic producers and retaliate against each others’ barriers. This worsened the Great Depression and eventually played a part in the outbreak of World War 2. Two developments immediately after the Second World War helped to avoid a repeat of the pre-war trade tensions. In Europe, international cooperation developed in coal, and in iron and steel. Globally, the General Agreement on Tariffs and Trade (GATT) was created. Both have proved successful, so much so that they are now considerably expanded—one has become the European Union, the other the World Trade Organization (WTO).

2. Disputes are handled constructively: As trade expands in volume, in the numbers of products traded, and in the numbers of countries and companies trading, there is a greater chance that disputes will arise. The WTO system helps resolve these disputes peacefully and constructively. There could be a down side to trade liberalisation and expansion. More trade means more opportunities for disputes to arise. Left to themselves, those disputes could lead to serious conflict. But in reality, a lot of international trade tension is reduced because countries can turn to organisations, in particular the WTO, to settle their trade disputes. Before World War 2 that option was not available. After the war, the world’s community of trading nations negotiated trade rules which are now entrusted to the WTO. Those rules include an obligation for members to bring their disputes to the WTO and not to act unilaterally. When they bring disputes to the WTO, the WTO’s procedure focuses their attention on the rules. Once a ruling has been made,

countries concentrate on trying to comply with the rules, and perhaps later renegotiating the rules not on declaring war on each other. Around 300 disputes have been brought to the WTO since it was set up in 1995. Without a means of tackling these constructively and harmoniously, some could have led to more serious political conflict. The fact that the disputes are based on WTO agreements means that there is a clear basis for judging who is right or wrong. Once the judgement has been made, the agreements provide the focus for any further actions that need to be taken. The increasing number of disputes brought to GATT and its successor, the WTO, does not reflect increasing tension in the world. Rather, it reflects the closer economic ties throughout the world, the GATT/WTO’s expanding membership and the fact that countries have faith in the system to solve their differences. Sometimes the exchanges between the countries in conflict can be acrimonious, but they always aim to conform with the agreements and commitments that they themselves negotiated.

3. Rules make life easier for all: Smaller countries enjoy more bargaining power, and life is simpler for bigger countries. The WTO cannot claim to make all countries equal. But it does reduce some inequalities, giving smaller countries more voice, and at the same time freeing the major powers from the complexity of having to negotiate trade agreements with each of their numerous trading partners. Decisions in the WTO are made by consensus. The WTO agreements were negotiated by all members, were approved by consensus and were ratified in all members’ parliaments. The agreements apply to everyone. Rich and poor countries alike have an equal right to challenge each other in the WTO’s dispute settlement procedures. This makes life easier for all, in several different ways. Smaller countries can enjoy some increased bargaining power. Without a multilateral regime such as the WTO’s system, the more powerful countries would be freer to impose their will unilaterally on their smaller trading partners. Smaller countries would have to deal with each of the major economic powers individually, and would be much less able to resist unwanted pressure. In addition, smaller countries can perform more effectively if they make use of the opportunities to form alliances and to pool resources. Several countries are already doing this. There are matching benefits for larger countries. The major economic powers can use the single forum of the WTO to negotiate with all or most of their trading partners at the same time. This makes life much simpler for the bigger trading countries. The alternative would be continuous and complicated bilateral negotiations with dozens of countries simultaneously. And each country could end up with different conditions for trading with each of its trading partners, making life extremely complicated for its importers and exporters. The principle of non-discrimination built into the WTO agreements avoids that complexity. The fact that there is a single set of rules applying to all members greatly simplifies the entire trade regime. And these agreed rules give governments a clearer view of which trade policies are acceptable.

4. Freer trade cuts the costs of living: Protectionism is expensive, it raises prices. The WTO’s global system lowers trade barriers through negotiation and applies the principle of non-discrimination. The result is reduced costs of production (because imports used in production are cheaper) and reduced prices of finished goods and services, and ultimately a lower cost of living. There are plenty of studies showing just what the impacts of protectionism and of freer trade are. These are just a few figures:

Negotiating agricultural trade reform is a complex undertaking. Governments are still debating the roles agricultural policies play in a range of issues from food security to environmental protection. But WTO members are now reducing the subsidies and the trade barriers that are the worst offenders. And in 2000, new talks started on continuing the reform in agriculture. These have now been incorporated into a broader work programme, the Doha Development Agenda, launched at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001. The textiles and clothing trade is going through a major reform under the WTO that will be completed in 2005. The programme includes eliminating restrictions on quantities of imports.

5. It provides more choice of products and qualities: Think also of the things people in other countries can have because they buy exports from us and elsewhere. Look around and consider all the things that would disappear if all our imports were taken away from us. Imports allow us more choice both more goods and services to choose from, and a wider range of qualities. Even the quality of locally-produced goods can improve because of the competition from imported googs. The wider choice isn’t simply a question of consumers buying foreign finished products. Imports are used as materials, components and equipment for local production. This expands the range of final products and services that are made by domestic producers, and it increases the range of technologies they can use. When mobile telephone equipment became available, services sprang up even in the countries that did not make the equipment, for example. Sometimes, the success of an imported product or service on the domestic market can also encourage new local producers to compete, increasing the choice of brands available to consumers as well as increasing the range of goods and services produced locally. If trade allows us to import more, it also allows others to buy more of our exports. It increases our incomes, providing us with the means of enjoying the increased choice.

6. Trade raises incomes: The WTO’s estimates for the impact of the 1994 Uruguay Round trade deal were between $109 billion and $510 billion added to world income (depending on the assumptions of the calculations and allowing for margins of error). More recent research has produced similar figures. Economists estimate that cutting trade barriers in agriculture, manufacturing and services by one third would boost the world economy by $613 billion equivalent to adding an economy the size of Canada to the world economy. In Europe, the EU Commission calculates that over 1989–93 EU incomes increased by 1.1–1.5% more than they would have done without the Single Market. So trade clearly boosts incomes. Trade also poses challenges as domestic producers face competition from imports. But the fact that there is additional income means that resources are available for governments to redistribute the benefits from those who gain the most for example to help companies and workers adapt by becoming more productive and competitive in what they were already doing, or by switching to new activities.

7. Trade stimulates economic growth: There is strong evidence that trade boosts economic growth, and creates more jobs. It is also true that some jobs are lost even when trade is expanding. But a reliable analysis of this poses at least two problems. First, there are other factors at play, for example, technological advance has also had a strong impact on employment and productivity, benefiting some jobs, hurting others. Second, while trade clearly boosts national income (and prosperity), this is not always

translated into new employment for workers who lost their jobs as a result of competition from imports. The picture is not the same all over the world. The average length of time a worker takes to find a new job can be much longer in one country than for a similar worker in another country experiencing similar conditions. In other words, some countries are better at making the adjustment than others. This is partly because some countries have more effective adjustment policies. Those without effective policies are missing an opportunity.

8. The basic principles make life more efficient: Trade allows a division of labour between countries. It allows resources to be used more appropriately and effectively for production. But the WTO’s trading system offers more than that. It helps to increase efficiency and to cut costs even more because of important principles preserved in the system. Imagine a situation where each country sets different rules and different customs duty rates for imports coming from different trading partners. Imagine that a company in one country wants to import raw materials or components copper for wiring or printed circuit boards for electrical goods, for example for its own production. It would not be enough for this company to look at the prices offered by suppliers around the world. The company would also have to make separate calculations about the different duty rates it would be charged on the imports (which would depend on where the imports came from), and it would have to study each of the regulations that apply to products from each country. Buying some copper or circuit boards would become very complicated. That, in simple terms, is one of the problems of discrimination. Imagine now that the government announces it will charge the same duty rates on imports from all countries, and it will use the same regulations for all products, no matter where they come from, whether imported or locally produced. Life for the company would be much simpler. Sourcing components would become more efficient and would cost less. There are many instances where the facts show that the opportunity has been grasped where freer trade has been healthy for employment. Often, job prospects are better in companies involved in trade. An attempt to tackle a problem in the short term by restricting trade turned into a bigger problem in long run. Even when a country has difficulty making adjustments, the alternative of protectionism would simply make matters worse. Non-discrimination is just one of the key principles of the WTO’s trading system. Others include: Transparency (clear information about policies, rules and regulations);  Increased certainty about trading conditions (commitments to lower trade barriers and to increase other countries’ access to one’s markets are legally binding);  Simplification and standardisation of customs procedure, removal of red tape, centralised databases of information, and other measures designed to simplify trade that come under the heading “trade facilitation”. Together, they make trading simpler, cutting companies’ costs and increasing confidence in the future. That in turn also means more jobs and better goods and services for consumers.

9. Governments are shielded from lobbying: One of the lessons of the protectionism that dominated the early decades of the 20th Century was the damage that can be caused if narrow sectoral interests gain an unbalanced share of political

influence. The result was increasingly restrictive policy which turned into a trade war that no one won and everyone lost. Superficially, restricting imports looks like an effective way of supporting an economic sector. But it biases the economy against other sectors which shouldn’t be penalised if you protect your clothing industry, everyone else has to pay for more expensive clothes, which puts pressure on wages in all sectors, for example. Protectionism can also escalate as other countries retaliate by raising their own trade barriers. That‘s exactly what happened in the 1920s and 30s with disastrous effects. Even the sectors demanding protection ended up losing. Governments need to be armed against pressure from narrow interest groups, and the WTO system can help. The GATT/WTO system covers a wide range of sectors. So, if during a GATT/WTO trade negotiation one pressure group lobbies its government to be considered as a special case in need of protection, the government can reject the protectionist pressure by arguing that it needs a broad ranging agreement that will benefit all sectors of the economy.

10.The system encourages good government: The rules include commitments not to backslide into unwise policies. Protectionism in general is unwise because of the damage it causes domestically and internationally, as we have already seen. Particular types of trade barriers cause additional damage because they provide opportunities for corruption and other forms of bad government. One kind of trade barrier that the WTO’s rules try to tackle is the quota, for example restricting imports or exports to no more than a specific amount each year. Because quotas limit supply, they artificially raise prices, creating abnormally large profits. The profit can be used to influence policies because more money is available for lobbying. It can also provide opportunities for corruption, for example in the allocation of quotas among traders. In other words, quotas are particularly bad way of restricting trade. Governments have agreed through the WTO’s rules that their use should be discouraged. Nevertheless, quotas of various types remain in use in most countries, and governments argue strongly that they are needed. But they are controlled by WTO agreements and there are commitments to reduce or eliminate many of them, particularly in textiles. Many other areas of the WTO’s agreements can also help reduce corruption and bad government. Transparency (such as making available to the public all information on trade regulations), other aspects of “trade facilitation”, clearer criteria for regulations dealing with the safety and standards of products, and non discrimination also help by reducing the scope for arbitrary decision making and cheating.

10 common misunderstandings about the WTO WTO’s activities are criticised by several people for various reason. According to WTO all those criticisms are misunderstanding about the activities of WTO and it clarifies all those misunderstandings. How ever certain misunderstandings are real facts. Is it a dictatorial tool of the rich and powerful? Does it destroy jobs? Does it ignore the concerns of health, the environment and development? According to WTO, criticisms of the WTO are often based on fundamental misunderstandings of the way the WTO works. People have different views of the pros and cons of the WTO’s “multilateral” trading system. One of the most important reasons for

having the system is to serve as a forum for countries to thrash out their differences on trade issues. Individuals, NGOs, corporate organisations can participate, not directly, but through their governments. It is important for the debate to be based on a proper understanding of how the system works. WTO clarifies the following 10 common misunderstandings. 1. The WTO dictates policy 2. The WTO is for free trade at any cost 3. Commercial interests take priority over development 4. Commercial interests take priority over the environment 5. Commercial interests take priority over health and safety 6. The WTO destroys jobs, worsens poverty 7. Small countries are powerless in the WTO 8. The WTO is the tool of powerful lobbies 9. Weaker countries are forced to join the WTO 10. The WTO is undemocratic

1. The WTO dictates policy: WTO does not tell governments how to conduct their trade policies. Rather, it’s a “member-driven” organization. That means, the rules of the WTO system are agreements resulting from negotiations among member governments, the rules are ratified by members’ parliaments, and decisions taken in the WTO are virtually all made by consensus among all members. In other words, decisions taken in the WTO are negotiated, accountable and democratic. The only occasion when a WTO body can have a direct impact on a government’s policies is when a dispute is brought to the WTO and if that leads to a ruling by the Dispute Settlement Body (which consists of all members). Normally the Dispute Settlement Body makes a ruling by adopting the findings of a panel of experts or an appeal report. Even then, the scope of the ruling is narrow; it is simply a judgement or interpretation of whether a government has broken one of the WTO’s agreements that the infringing government had itself accepted. If a government has broken a commitment it has to conform. In all other respects, the WTO does not dictate to governments to adopt or drop certain policies. As for the WTO Secretariat, it simply provides administrative and technical support for the WTO and its members. In fact it’s the governments who dictate to the WTO.

2. The WTO is NOT for free trade at any cost: It’s really a question of what countries are willing to bargain with each other, of give and take, request and offer. One of the principles of the WTO system is for countries to lower their trade barriers and to allow trade to flow more freely. After all, countries benefit from the increased trade that result from lower trade barriers. But just how low those barriers should go is something member countries bargain with each other. Their negotiating positions depend on how ready they feel they are to lower the barriers, and on what they want to obtain from other members in return. One country’s commitments become another country’s rights, and vice versa. The WTO’s role is to provide the forum for negotiating liberalisation. It also provides the rules for how liberalisation can take place. The rules written into the agreements allow barriers to be lowered gradually so that domestic producers can adjust. They have special provisions that take into account the situations that developing countries face. They also spell out when and how governments can protect their domestic producers, for example from imports that are considered to have unfairly low prices because of subsidies or “dumping”. Here,

the objective is fair trade. Just as important as freer trade perhaps more important are other principles of the WTO system. For example: non-discrimination and making sure the conditions for trade are stable, predictable and transparent.

3. Commercial interests take priority over development: The WTO is NOT only concerned about commercial interests. This does NOT take priority over development. The WTO agreements are full of provisions taking the interests of development into account. Underlying the WTO’s trading system is the fact that freer trade boosts economic growth and supports development. In that sense, commerce and development are good for each other. At the same time, whether or not developing countries gain enough from the system is a subject of continuing debate in the WTO. But that does not mean to say the system offers nothing for these countries. The agreements include many important provisions that specifically take developing countries’ interests into account. Developing countries are allowed more time to apply numerous provisions of the WTO agreements. Least-developed countries receive special treatment, including exemption from many provisions. The needs of development can also be used to justify actions that might not normally be allowed under the agreements, for example governments giving certain subsidies. And the negotiations and other work launched at the Doha Ministerial Conference in November 2001 include numerous issues that developing countries want to pursue.

4. Commercial interests take priority over the environment: In the WTO, commercial interests do not take priority over environmental protection. Many provisions take environmental concerns specifically into account. The preamble of the Marrakesh Agreement Establishing the World Trade Organization includes among its objectives, optimal use of the world’s resources, sustainable development and environmental protection. This is backed up in concrete terms by a range of provisions in the WTO’s rules. Among the most important are umbrella clauses (such as Article 20 of the General Agreement on Tariffs and Trade) which allow countries to take actions to protect human, animal or plant life or health, and to conserve exhaustible natural resources. Beyond the broad principles, specific agreements on specific subjects also take environmental concerns into account. Subsidies are permitted for environmental protection. Environmental objectives are recognized specifically in the WTO agreements dealing with product standards, food safety, intellectual property protection, etc. The system and its rules can help countries to allocate scarce resources more efficiently and less wastefully. For example, negotiations have led to reductions in industrial and agricultural subsidies, which in turn reduce wasteful over-production. A WTO ruling on a dispute about shrimp imports and the protection of sea turtles has reinforced these principles. WTO members can, should and do take measures to protect endangered species and to protect the environment in other ways. Another ruling upheld a ban on asbestos products on the grounds that WTO agreements give priority to health and safety over trade. What is important in the WTO’s rules is that measures taken to protect the environment must not be unfair. Members cannot be lenient with your own producers and at the same time be strict with foreign goods and services. Nor can discriminate between different trading partners. This point was also reinforced in the recent dispute ruling on shrimps and turtles, and an earlier one on gasoline. According to WTO it is not the WTO’s job to set the international rules for environmental protection. That is the task of the environmental agencies and conventions.

An overlap does exist between environmental agreements and the WTO on trade actions (such as sanctions or other import restrictions) taken to enforce an agreement. So far there has been no conflict between the WTO’s agreements and the international environmental agreements.

5. Commercial interests take priority over health and safety: The WTO does not dictate to governments on issues such as food safety, and human health and safety. Again commercial interests do not override. The agreements were negotiated by WTO member governments, and therefore the agreements reflect their concerns. Key clauses in the agreements (such as GATT Art. 20) specifically allow governments to take actions to protect human, animal or plant life or health. But these actions are disciplined, for example to prevent them being used as an excuse for protecting domestic producers protectionism in disguise. Some of the agreements deal in greater detail with product standards, and with health and safety for food and other products made from animals and plants. The purpose is to defend governments’ rights to ensure the safety of their citizens. As an example, a WTO dispute ruling justified a ban on asbestos products on the grounds that WTO agreements do give priority to health and safety over trade. At the same time, the agreements are also designed to prevent governments setting regulations arbitrarily in a way that discriminates against foreign goods and services. Safety regulations must not be protectionism in disguise. One criterion for meeting these objectives is to base regulations on scientific evidence or on internationally recognised standards. The WTO does not set the standards itself. In some cases other international agreements are identified in the WTO’s agreements. One example is Codex Alimentarius, which sets recommended standards for food safety and comes under the UN Food and Agriculture Organization (FAO) and World Health Organization (WHO). But there is no compulsion to comply even with internationally negotiated standards such as those of Codex Alimentarius. Governments are free to set their own standards provided they are consistent in the way they try to avoid risks over the full range of products, are not arbitrary, and do not discriminate.

6. The WTO destroys jobs, worsens poverty: The WTO does not destroy jobs or widen the gap between rich and poor. The allegation is inaccurate and simplistic. Trade can be a powerful force for creating jobs and reducing poverty. Often it does just that. Sometimes adjustments are necessary to deal with job losses, and here the picture is complicated. In any case, the alternative of protectionism is not the solution. The relationship between trade and employment is complex. So is the relationship between trade and equality. Freer flowing and more stable trade boosts economic growth. It has the potential to create jobs, it can help to reduce poverty, and frequently it does both. The biggest beneficiary is the country that lowers its own trade barriers, the countries exporting to it also gain, but less. In many cases, workers in export sectors enjoy higher pay and greater job security. However, producers and their workers who were previously protected clearly face new competition when trade barriers are lowered. Some survive by becoming more competitive, others don’t. Some adapt quickly (for example by finding new employment), others take long time. Some countries are better at making the adjustments than others. This is partly because they have more effective adjustment policies. Those without effective policies are missing an opportunity because the

boost that trade gives to the economy creates the resources that help adjustments to be made more easily. The WTO tackles these problems in a number of ways. In the WTO, liberalisation is gradual, allowing countries time to make the necessary adjustments. Provisions in the agreements also allow countries to take contingency actions against imports that are particularly damaging, but under strict disciplines. At the same time, liberalisation under the WTO is the result of negotiations. When countries feel the necessary adjustments cannot be made, they can and do resist demands to open the relevant sections of their markets. There are also many other factors outside the WTO’s responsibility that are behind recent changes in wage levels. Much of the rest is attributable to “skill based technological change”. Developed economies are naturally adopting more technologies that require labour with higher levels of skill. The alternative to trade protection is expensive because it raises costs and encourages inefficiency. Part of the damage that can be caused by protectionism is lower wages in the protectionist country. In developed countries, 70% of economic activity is in services, where the effect of foreign competition on jobs is different if a foreign telecommunications company sets up business in a country it may employ local people. About 1.15 billion people are still in poverty, research findings of World Bank, has shown that trade liberalisation since World War II has contributed to lifting billions of people out of poverty. The research has also shown that it is untrue to say that liberalisation has increased inequality.

7. Small countries are powerless in the WTO: Small countries are not powerless in the WTO. Small countries would be weaker without the WTO. The WTO increases their bargaining power. In recent years, developing countries have become considerably more active in WTO negotiations, submitting an unprecedented number of proposals in the agriculture talks, and working actively on the ministerial declarations and decisions issued in Doha, Qatar, in November 2001. They expressed satisfaction with the process leading to the Doha declarations. All of this bears testimony to their confidence in the system. At the same time, the rules are the result of multilateral negotiations (i.e. negotiations involving all members of GATT, the WTO’s predecessor). The most recent negotiation, the Uruguay Round (1986–94), was only possible because developed countries agreed to reform trade in textiles and agriculture both issues were important for developing countries. Under the WTO trading system, everyone has to follow the same rules. As a result, in the WTO’s dispute settlement procedure, developing countries have successfully challenged some actions taken by developed countries. Without the WTO, these smaller countries would have been powerless to act against their more powerful trading partners.

8. The WTO is the tool of powerful lobbies: The WTO is not the tool of powerful lobbies The WTO system offers governments a means to reduce the influence of narrow vested interests. This is a natural result of the “rounds” type of negotiation (i.e. negotiations that encompass a broad range of sectors). The outcome of a trade round has to be a balance of interests. Governments can find it easier to reject pressure from particular lobbying groups by arguing that it had to accept the overall package in the interests of the country as a whole. A related misunderstanding is about the WTO’s membership. The WTO is an organization of governments. The private sector, non-governmental organizations and other lobbying groups do not participate in WTO activities except in special events such as seminars and symposiums. They can only exert their influence on WTO decisions through their governments.

9. Weaker countries are forced to join the WTO: Weaker countries do have a choice; they are NOT forced to join the WTO Most countries do feel that it is better to be in the WTO system than to be outside it. That is why the list of countries negotiating membership includes both large and small trading nations. The reasons are positive rather than negative. They lie in the WTO’s key principles, such as nondiscrimination and transparency. By joining the WTO, even a small country automatically enjoys the benefits that all WTO members grant to each other. Small countries have won dispute cases against rich countries they would not have been able to do so outside the WTO. The alternative would be to negotiate bilateral trade agreements with each trading partner. That could even include regularly negotiating the regular renewal of commitments to treat trading partners as equals. For this, governments would need more resources, a serious problem for small countries. And in bilateral negotiations smaller countries are weaker. By joining the WTO, small countries can also increase their bargaining power by forming alliances with other countries that have common interests.

10.The WTO is undemocratic: The WTO is not undemocratic. Decisions in the WTO are generally by consensus. In principle, that is even more democratic than majority rule because no decision is taken until everyone agrees. It would be wrong to suggest that every country has the same bargaining power. Nevertheless, the consensus rule means every country has a voice, and every country has to be convinced before it joins a consensus. Quite often reluctant countries are persuaded by being offered something in return. Consensus also means every country accepts the decisions. There are no dissenters. What is more, the WTO’s trade rules, resulting from the Uruguay Round trade talks, were negotiated by member governments and ratified in members’ parliaments. Economic reforms started in India after 1991 after joining GATT regime. Indian leaders signed GATT agreements to set write the problems of foreign exchange reserves. Fortunately, this agreement helped our nation to grow in all sectors and today India is the second highest growing economy. How ever still there are problems in LPG programmes of our nation. India can enjoy all the benefits of LPG by solving the problems associated with LPG.

General Agreement on Trade and Tariff (GATT) After World War II three important international measures were undertaken by the US and its allies to liberalise trade and payment.  

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International Monetary Fund (IMF) was established to facilitate international payments. After the War, European countries and Japan had to rebuild their production plants; this meant that these countries required a large amount of foreign capital. To encourage free flow of private capital, International Bank for Reconstruction and Development (IBRD, now the World Bank) was also established. To facilitate free trade, ITO was to be born.

GATT was the result of an international conference held at Geneva in 1947 to consider a draft charter for the International Trade Organization (ITO). The US initiated negotiations with 22 other countries that led to commitments to regulate tariff rates. It was considered as provisional agreement that would be replaced once the ITO became operational to take over its functions. So GATT began its provisional existence on January 1, 1948, when 23 contracting parties signed the agreement. However, US Congress refused in 1950 to ratify the treaty establishing the ITO. Major Provisions of GATT 1. Tariff: GATT obligates each country to accord non discriminative, most favoured nation (MFN) treatment to all other contracting parties with respect to tariffs. MFN treatment does not mean free trade or national treatment. Imports from contracting parties are subject to tariffs or quotas. Exceptions: o o o

Existing tariff preferences such as those between British Commonwealth. GATT/WTO allows the formation of customs union, which causes a significant erosion of the MFN principle. An escape clause allows any contracting party to withdraw or modify tariff concessions, if it threatens a serious injury to domestic producers.

2. Quantitative Restrictions: GATT in general prohibits the use of quantitative restrictions on imports and exports. Exceptions: o o o o o

Agriculture - when government needs to remove surplus of agricultural and fisheries products. Important to US Balance of payments - to safeguard balance of payments and if a country's foreign exchange reserve is low. Developing countries - LDCs may use import quotas to encourage infant industries. National Security- Strategic controls on certain exports. Patents, Copyrights, Public Morals

3. Special Provisions to promote the Trade of Developing Countries. In 1965, the contracting parties added Part IV (Trade and Development) to GATT. o GATT gives high priority to reduction/elimination of tariffs on products of LDCs. o Refrain from introducing tariffs and non Tariff Barriers to such imports. o refrain from imposing internal taxes to discourage consumption of primary products from LDCs o Not expect reciprocal commitments from LDCs.

4. Other Provisions o Provisions to eliminate hidden protection such as customs valuation. Procedural matters: each member is entitled to one vote, decisions are made by majority vote. 2/3 majority is required to waive obligations, settlements of disputes. Problems  

Failed to liberalize trade in agricultural products to any significant degree. This was one of the major goals of the Uruguay Round. Has experienced partial success in regulating trade practices adopted by member countries in response to BP difficulties. For example, in 1971 the US imposed a 10% surcharge on its imports, thereby doubling its average duties.

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Steady erosion of MFN principle by the European Countries. Article 24 permits member countries to form a costumes union or free trade area. The European countries keep out agricultural products, lowered duties to many African and Mediterranean countries, which are not extended to other GATT contracting parties. Has condoned managed trade for textiles, largely because of pressure from the US, and automobiles. GATT was an executive agreement under the Protocol of Provisional Application. It was only a gentlemen's agreement with no teeth, no enforcement power to discipline parties that violate the rules. Moreover, contracting parties are not obligated to observe rules that are inconsistent with their domestic laws at the time of entry into GATT. Many countries sidestep or bypass the rules by narrowly defining commodities for tariff purposes. This stipulated a separate duty for "brown or dappled cows reared at a level of at least 300 meters above sea level and passing at least one month in every summer at an altitude of at least 800 meters." This was intended to isolate the duties on Swiss cattle from MFN treatment by defining a distinct commodity.

Trade and Diminishing National Sovereignty A country is presumed to have full sovereignty over its citizens within its territory. Any foreign governments or entities that say any negative things on domestic regulations or problems have been criticised for meddling with internal or domestic politics. This was so at least until GATT was formed in 1948, and GATT was transformed into WTO in January 1995. Members of WTO are agreeing to abide by the rules of WTO, and hence allowing WTO to monitor domestic laws that may be in conflict with trade rules set by the WTO. Similarly, members of International Monetary Fund also allow the Fund’s surveillance of their exchange rate practices. Thus, increased trade is gained only through reduced national

sovereignty. Gains from trade often forces member countries to sacrifice some national sovereignty. For example, India’s patent laws allowed counterfeit copies of drugs without requiring license fees, which made Indian drugs available at low cost to the mass. Now India overturned its Patent Laws for all medicines invented since 1995. This shows India’s attempt to make their internal laws consistent with the rules of WTO. Members of EU took steps to deepen integration of European countries. Negative French referendum is evidence of discomfort arising from speedy integration and the loss of national control of French sovereignty which results from these efforts to unite European countries. WTO not only governs trade of goods, but also services and foreign direct investment. Similarly, IMF monitors exchange practices that harm other member countries. Increased trade will continually exert its pressure to harmonise disparate domestic laws on the movement of goods, services and people.

THE CONSTITUTION OF INDIA The constitution of India is the most significant document which is fundamental to the governance of the state. The constitution has three parts, viz., the preamble, the Fundamental Rights, and the Directive Principles of State Policy.

THE PREAMBLE The preamble is an introduction to the constitution and contains its basic philosophy. The preamble to the Indian Constitution states that … “We the people of India having solemnly resolved to constitute ourselves into a Sovereign, Socialist, Secular, Democratic Republic and to secure to all citizens: ” The words- “We, the people of India….adopt, enact and give to ourselves this constitution”,- declare the ultimate sovereignty of the people of India and that the constitution rests on their authority. The preamble commits India to the ideal of converting political democracy established by the constitution into a social and economic democracy and that too in a democratic way, under the rule of law.

THE FUNDAMENTAL RIGHTS The constitution has eight Fundamental Rights as mentioned below: 1. Right to equality; 2. Right to six freedoms, viz., (a) Freedom of speech and expression; (b) Freedom to assemble peacefully and without arms; (c) Freedom to form associations or unions; (d) Freedom to move freely throughout the territory of India; and (e) Freedom to practise any profession or to carry on any occupation, trade or business. 3. Right to life and personal property; 4. Right to freedom of religion; 5. Right to cultural and educational freedom; 6. Right against exploitation; 7. Right to constitutional remedies. 8. Right to elementary education – On 2nd April, 2010. 9. Right to information. Some of the fundamental Rights have economic significance. The right to equality, for example, prohibits discrimination against any citizen on grounds of religion, race, caste,

sex or place of birth. Implied in the right to equality is the concept of protective discrimination which assures protection Scheduled Castes who have suffered discrimination for centuries. Special efforts are to be made for the development of the socially and economically backward sections of society. Right to freedom is an important and the most valuable fundamental right guaranteed by the Constitution. As Nani Palkhivala has said, “The Constitution is a part of the great heritage of every Indian. Its founding fathers wanted to ensure that even while India remained poor in per capita income, it should be rich in individual freedom.” Particularly, the right to practise any profession or to carry on any occupation, trade or business has great economic significance. The constitution guarantees to citizens the fundamental right of freedom to take up any job or carry on any trade or business. The freedom of professional qualifications and (c) when a state itself decides to engage in any trade or occupation, the individual freedom is restricted. The right to life has implications. The right to life includes(a) (b) (c) (d) (e)

right not to be subjected to bonded labour right to decent environment right to privacy right to pure drinking water Right to good roads.

The fundamental right against exploitation prohibits the exploitation of the weaker sections of society by individuals as well as by the State. Article 23 prohibits traffic in human beings and forced labour. Article 23 reads thus: “Traffic in human beings and other similar forms of forced labour are prohibited and any contravention of this provision shall be an offence punishable in accordance with the law.” Article 24 provides special protection to children. It reads thus: “No child below the age of fourteen years shall be employed to work in any factory, mine or engaged in any other hazardous employment.” Thus, the fundamental rights enshrined in the Constitution guarantee several economic rights to citizens. At the same time, the state is empowered to impose reasonable restrictions on such economic rights in public interest. It is this power that has enabled the government to impose a series of statutory controls over business.

DIRECTIVE PRINCIPLES OF STATE POLICY The Directive Principles of state Policy are a unique feature of our Constitution. Speaking on the Directive Principles, Dr.Ambedkar observed: “The Directive Principles are like the instruments of instructions which were issued to the Governor-General and the Governors of colonies, and to those of India by the British Government under the 1935 Government of India ‘act. What is called ‘Directive Principles’ is merely another name for the instruments of instructions. The only difference is that they are instructions to the legislature and the

executive. Whoever captures power will not be free to do what he likes with it. In the exercise of it, he will have to respect these Instruments of Instructions which are called Directive Principles. He cannot ignore them.”

The Directive Principles are the directives to the various governments and government agencies and are fundamental in the governance of the country. As Pylee observed, “the Directive Principles enshrine the fundamentals for the realisation of which the State in India stands. They guide the path which will lead the people of India to achieve the noble ideals which the Preamble of the Constitution proclaims: Justice-social, economic and political, liberty, equality and fraternity.” There are 17 Directive Principles and they may be classified, for convenience, under four heads as shown below: A. B. C. D.

Provisions dealing with Welfare (Art. 38, 42, 45, 47). Provisions dealing with social Justice (Art.39, 41, 43, 46). Provisions promoting Democracy (Art.40,44,45) Miscellaneous Provisions (Art.48,49,50,51)

The first two categories of provisions have economic significance. Article 38(1) lays down that the State shall promote the welfare of the people by securing a social order in which justice- social, economic and political – shall inform all the institutions of national life. Justice and welfare are the twin objectives of our Constitution. Article 38(2) lays down that the state shall strive to minimise the inequalities in income, and eliminate inequalities in status, facilities and opportunities, not only among individuals but also among groups of people. Article 39 emphasises that the state shall direct its policy towards securing: (a) adequate means of livelihood to all citizens; (b) a proper distribution of the material resources of the community to the common good; (c) the prevention of concentration of wealth to the common detriment; (d) equal pay for equal work for both men and women; (e) the protection of the strength and health of workers and avoiding circumstances which force citizens to enter avocations unsuited to their age or strength; and (f) the protection of childhood and youth against exploitation or moral and material abandonment. Article 41 lays down that the State shall, within the limits of its economic capacity and development, make provision for securing the right to work, to education and to public assistance in cases of unemployment, old age, sickness and disablement. Article 42 states that the State shall make provision for securing and humane conditions of work and for maternity relief. Article 43 emphasises the necessity of an adequate or living ware in all sectors of economic activity. The Article enjoins that healthy conditions of work should be provided and a

decent standard of living should be guaranteed. It also stresses the right to leisure for all working people. The cottage industries in rural areas should be promoted either though individual or cooperative efforts. Article 43(A) states that the state shall take steps to secure the participation of workers in the management of undertakings, establishments or other organisations engages in any industry. The State shall promote, with special care, the educational and economic interests of the weaker sections of the people, and in particular, of the Scheduled Castes, Scheduled Tribes and shall protect them from social injustice and all forms of exploitation (Article 46). The State shall endeavour to protect and improve the environment and to safeguard the forests and wildlife of the country [Article 48(A)] Thus, the Directive Principles pf State Policy enjoin upon the State varied responsibilities and provide vast scope for State intervention in the economy.