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Journalism of Courage
India is an enviable economy. That’s right, suddenly it is just that. Never mind that investor confidence is low, growth projections have been revised downwards, industry and exports are languishing, actual foreign direct investment flows have fallen sharply and much else besides. This country will see at least 5 per cent growth this year and, by some estimates, 6 per cent when economies all around it are contracting sharply or, at best, looking at sharply squeezed growth.
Of course this is because India’s still persisting isolation from the world economy has shielded it alike from the benefits and the downside of globalisation. For its current, relatively good fortunes India has already paid the price many times over in the form of lost growth opportunities. If it stayed poor for years when the world prospered, the least compensation it might hope for now is to be spared the worst of the world’s pains.
True, this is the time for countries to count their blessings not look a gift horse in the mouth. Yetit is precisely what construction the Indian leadership puts on the current global economic situation that will set Indian economic policies for the early years of the new millennium.
In 1991 India’s voluntary political will had nothing to do with what happened. Now, alongside a government with highly nuanced ideas about opening up, India has genuine policy options because the aggressive voices for that catch-all word “globalisation” have been temporarily silenced.
India can also claim to have been vindicated in maintaining restrictions on capital flows, which constitute one component of globalisation, the other being trade. That is why it is crucial to get a handle on what goes on.
Any one who attended the Economic Editors’ Conference in the capital last week would not have missed the new-found note of confidence in government. Never mind Yashwant Sinha’s excitement. He has proved himself to be an incorrigible optimist who needs very little provocation to set him off. But others not only reinforcedIndia’s self-congratulation in substantially staving off the Asian and then the world crisis. They also gave reason to believe that an economic vision and agenda based on it is evolving that might just unleash India’s famed, if rather worn, economic potential.
Those who have argued for years that if the Planning Commission is to continue to exist with any relevance it must mutate into a giant think-tank for India’s economic strategies suddenly had their wish granted. Jaswant Singh declared that the Commission would henceforth address itself to the economic aspects of nuclear diplomacy and the challenge of reconciling the demands of foreign economic policy and “the imperatives of the domestic political economy”.
It would, he elaborated, offer inputs for India’s response to the narrow “thought and vision” of the IMF and the World Bank which have been discredited as never before in the wake of the Asian crisis and its spread.
Singh was in good company. Jeffrey Sachs, the well known economist who hasassisted several economies in transition and has long been a critic of the IMF’s ways in the Third World, was declaring the same week that the IMF and the World Bank had displayed “stunning arrogance” in developing countries.
At the same Conference Ramakrishna Hegde, possibly in a first for a government minister, came out on the record against India’s import substitutions policies of past years and urged everyone to make exports “a national priority”.
He declared: “People say my mantra is 20 per cent (export growth). My mantra is exports. Export, export, export.” That chant was reinforced by an immediate package for exports which was of far smaller consequence than what he suggested he was trying to push for in the future: easier labour laws in export zones and for export-oriented units that would help exporters meet their delivery schedules without disruption; dereserving sectors which held out promise of large exports; and a policy on agro exports which would allow “stable” exports of theseproducts.
These are clearly measures with an import which extends well beyond exports and goes to the core of reforms. How far this agenda gets is anybody’s guess but at least minds are being applied and the correct priorities recognised.
Even as all this happens India plans to speak its mind, this time with much greater authority, at that other bugbear of BJP politicians, the World Trade Organisation. At a special meeting of the WTO’s General Council later this month, India proposes to stress in great detail what Hegde told the WTO ministerial conference in Geneva in May: if the multilateral trade regime is to have credibility with the developing world it must ensure that those parts of international trade agreements which stand to help these countries are implemented in letter and in spirit.
For India such an approach is nothing new. The world is accustomed to its grumbling on trade issues and somewhat inured. What is new is the world environment. When these things are said they have to be listened tocarefully. Rich countries which relentlessly pushed poorer ones to open up ever newer sectors to trade and investment are on the defensive not necessarily because their brand of global capitalism was wrong but because the countries that did open up are suffering for whatever reasons.
These proposed policies and strategies are all to the good, with one qualification. India’s old propensity towards didacticism and going overboard is cause for worry. Already it seems to be pitching for a developing-world initiative for a multilateral agreement on capital flows.
Now the trouble is, for instance, that such a thing could become an excuse for India to indefinitely put off banking and financial sector reform: it is now recognised that short-term capital flows are dangerous when the banking sector is vulnerable. In fact the BJP government is making the right noises on banks’ non-performing assets, though that could change.
But this sums up how a right idea could be used to justify lack of reform and perpetuationof India’s known penchant for protectionism. It may today feel satisfaction in prominent free-market economists opposing footloose capital flows. But it must remember that they propound controls as strictly short-term measures for countries to put their house in order, not to lock their front door.
