Economic Highlights

New Delhi, 24 July 2009

US Political Jugglery

STEMMING INDIA’S ECONOMIC GROWTH

By Shivaji Sarkar

Former President APJ Abdul Kalam frisked by the security of a US airline, Continental.  India signs the US’ End-Use Monitoring Agreement (EUM). The US tries to force India to accept legally binding emission reducing targets. Clearly, issues that should bother the nation. Add another: maneuverings to force provisions of the Nuclear Non-Proliferation Treaty (NPT) on the Government, among other compelling situations afflicting the country.

The incidents look unconnected as these happened at different places and time. But that may not be the case. The impact is more economic than political. The events at the G8 meeting in Italy and the NAM meet in Egypt would have deep bearings. Then again, during her visit to Delhi, the US Secretary of State Hillary Clinton said India should emerge as the super power, but all these incidents point to contrary positions.

An immediate fallout of these events is seen in the foreign institutional investors (FII) pull out of $ 1.06 billion – Rs 5240 crore -- since the presentation of the Union Budget. Whether accidental or deliberate it speaks of the low priority the country is accorded internationally. This apart, it is aimed at weakening the rupee.

Indeed, it smacks of either a poor diplomatic understanding of each nuance or an extreme callous attitude of the Ministry of External Affairs. Else, before signing the joint statement with Pakistan Prime Minister Yusuf Gilani one would have been cautious and created a diplomatic row over the word Baluchistan, which has no relevance to an Indo-Pakistan dialogue. This exposes the weakness of the country. Else no airline, foreign or domestic, would have dared to heap insult on a former President, a symbol of the nation’s pride, prestige and power.

The EUM is often a clause attached to many deals for all dual-use and high-technology purchases from the US since 1984. These are case specific. What has now been done is grave and extends to virtual inspection by US inspectors and technically would require that India allows access to its sensitive military equipment not only to the US but all foreign suppliers.

Does this have any economic implications? The officials would conveniently prefer to ignore it or shrug it off by saying that this is a small concession, if at all, for high-tech equipment. Not really, if we pay heed to what Defence Minister AK Antony says. Just the other day he expressed concern over the fact that 70 per cent of country’s defence equipment is acquired from foreign sources and that indigenisation efforts have suffered a major setback.  

Then again, the senior-most leader and Finance Minister Pranab Mukherjee, who Hillary is supposed to have fixed a meeting with is left out of a luncheon meeting hosted by the Prime Minister for the visiting dignitary. Instead, junior ministers and Congress General Secretary Rahul Gandhi are present. This is the crux. What Clinton says for public consumption about India’s super power status and what happens on the ground are two different things. The refusal to meet the country’s finance minster should better be seen as a US snub for “the largest growing economy”.

Even Clinton’s Mumbai statement tries to equate India with a backward Pakistan, which is virtually subsisting on US doles since 1998. Pakistan for most purposes has turned a vassal state of the US. Clinton possibly wants to reduce India to that status.

The US has virtually stopped outsourcing to Indian companies. It has affected balance sheets of many IT companies. They are on a spree of reducing staff. The latest to join the fray is Tata Consultancy Services (TCS), which has sacked almost 5,000 employees. The BPO sector alone has suffered a multi-billion dollar loss. Other exports to the US are also on the wane. Further, the nuclear deal does not benefit India as much as it does the US power companies.

It is often said that the US is scared of China. The way it is dealing with Beijing only shows that it is afraid of its power - economic, diplomatic, military and nuclear. So it tries to keep it as happy as possible. On its part, China has hardly shown any pusillanimity in dealing with the US. Global reports show that its economy is doing far better than  India’s and thus China earns the Americans’ respect.

Insofar as Pakistan-sponsored terrorism is concerned, the US has not been of much help, except for some robust rhetoric. Apparently, each terrorist act has boosted business for the US and western security agencies. India thus needs to critically look at issue of terrorism beyond security and law and order.

The US is almost non-commital on carbon reduction issues. Its special envoy and chief negotiator on climate change, Todd Stern in his discussions with Environment Minister t Jairam Ramesh and Power Minister Sushil Shinde virtually rejected New Delhi’s stand describing the demand for $ 75 billion as “unrealistic”. His central theme was to get the Obama administration’s ‘two degree’ clause accepted--.reducing global temperatures by two degrees. But this would mean Delhi accepts all conditions and in short, is being asked to reduce its developmental activities, power generation and industrial growth. 

It is time for a serious review of the policies towards the US.  If India loses the respect of the international community its economic build-up too would be on a shaky foundation. --INFA

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