Watch the elephant walk

When the Thais were hit and exchange rates collapsed all over East Asia, everybody lamented capital account convertibility. At that time India said it would finally convert on capital account, but after meeting the economic requirements for that step.

I was planning minister then and in the Ninth Plan we said we would carry out financial reform first because a sensible interest rate was needed. Also our plan was to build up exchange reserves and then go global on capital account. The Reserve Bank has built up reserves with a vengeance and on the interest rate we are getting close, although the fiscal deficit is a whammy.

CNN carried a story on the greater flexibility given to the Indian companies and citizens and how the software companies are scoring in global stock mar

kets.These are years of low growth rates for countries from Thailand to Japan and India stands out. But the most interesting story was the story in the Far Eastern Economic Review on foreign direct investment in India and China. They bring out the fact well known to financial experts that much of the foreign investment in China is in fact foreign exchange held by the Chinese and people of Chinese origin abroad being laundered back. They say that Indians underestimate foreign investment.

Chinese FDI is a little above 2 per cent of its GDP and India8217;s is around one and a half per cent. There is still a substantial difference, but less than the hype. They have a story by an investor on the terrible experience a foreigner faces in India but once the hurdles are crossed the laws are fair and there is more security to the money and stability in policy. I hope we will also become investor friendly and then of course there will be no holding us back.

But the most interesting thing I saw was an interview with the Singapore strong man Lee Kuan Yew. He is known for not mincing words and had the supreme confidence that what they did was always right. He built up a nation where dissent was frowned upon, but a strong feeling of nationhood was fostered in a multi-religious and ethnic setting.

In the late eighties the then prime minister had sent me to South Korea. I have a sneaking feeling he wanted me to be educated in reform. I wrote a piece on that trip which was extensively quoted in the literature on strategic reform, but in the meeting in which I presented it, the eminent Hong Kong intellectual Edward Chen presented one of the earlier stories on the countries of Asia flying in groups as 8216;geese8217;.

Chinese is a pictorial language and they take these things seriously. I told Chen that his Chinese geese were flying ahead of the Indian geese. He smiled but didn8217;t seem to know the answer to the terrorism hitting East Asia. He began by stating that 8216;the Arabs have succeeded in getting the Southeast Muslims to become more like Arab Muslims8217;. He wanted his countrymen to accept 8216;that this is our problem, and not an American problem8217;. He saw this as a long haul problem and so 8216;It may take another 20, 30 years before it can get into another cycle, but the theocratic state will fail8217;.

When President Jiang Zemin visited India, he told the press at the end of his visit that he discussed chaos theory with the minister in waiting in India and that was on account of the fact that he is an electrical engineer by training and differential equations used in generating chaos in a model comes easy to him. But I remember the other work which bothered him was Samuel Huntington8217;s Clash Of Civilizations. He genuinely felt that there was no clash between the Chinese and the Islamic world views. And yet the problems persist. As I returned home, I wondered if India8217;s freedom movement and the experience of the politics of the first half century of the Indian republic had an answer which was different from East Asian problems. The important fact is that whether it is our economy, or our larger concerns, India does matter in the world.

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