Economic Highlights

New Delhi, 12 November 2010

Obama’s Visit --- A Critical Look

INDIAN CRUTCH FOR GASPING ECONOMY

By Shivaji Sarkar

The US President Barack Obama’s visit has raised many hopes as also many questions about the gains for India.

Undoubtedly, gains were perceived to have been made more in the political arena --- a permanent UN Security Council seat, possibly without a veto power as per the proposal for UN reforms, and a “strong” warning to Pakistan. It was also seen as a great achievement that the US President did not do a balancing trick between India and trouble-torn Pakistan.

But people forget that just three days before his visit began, the US gave Pakistan three advance F16 fighter planes and promised greater financial support. Obama’s criticism of India on Myanmar and Iran caused more consternation in the South Block. Pakistan certainly has the last laugh.

This is not all. Obama remained reticent on India’s outsourcing to the US IT industry forcing Prime Minister Manmohan Singh to retort, “India is not stealing jobs from the US”. The US President should have known that Indians drinking coke creates more jobs in America!

Obama has seemingly got a lot, a political compulsion for him in the wake of the drubbing to Democrats by the Republicans in his home elections. The promise of 50,000 jobs to his countrymen from a poor, at least not so rich, India may be seen as a great political achievement for the Democrats as the US struggles to create jobs.

Significantly, Obama’s offer is simple --- give the US all the Indian shops. “Open your markets” of all nature, from retail to education so that US thrives at the cost of India, he underscored.  Not only that. He has also not promised much of investment in India.

The August and September reports from US industry suggest it has not been able to create jobs on home turf since the Lehman Brothers-led severe recession hit it the US in September 2008. A rising India, not China, is seen as an easy bait on the promise of technology transfer, many of which possibly India does not need.

Needless to say, India has the capability to develop it. It has demonstrated this during the over 30 years of US sanction against its nuclear energy programme. Also, Indian scientist even developed super computers to run its nuclear energy and space programmes. Washington’s promise of a transfer of technology needs to be seen as a strategy to capture the Indian market and push back hi-tech research. The Central Government’s investment in research in these areas has taken the country to heights which demand global attention.

Pertinently, the fall back of the US offer might lead to cut in funding of indigenous research as the cost weighing Finance Ministry would prefer import of cheaper readymade technology to encouraging basic research. Our solar energy programme is a victim of this attitude. Countries like Canada, with far less sunshine, have done significant research in this area. Many in the Government prefer to buy solar energy instead of developing it here. Therefore, the Obama visit would only lead to a state of regression and cause heartburn among Indian scientists.

Apparently India is gradually losing its pride. It needs to learn from Obama’s speech that the country has always been a leader in the IT sector and invented the zero. It can do much more provided the Government decides to raise its investment on all scientific research. The US is a technology leader because it has been systematically investing in research of all kinds. The Government should have taken a promise from Obama for investment in this area and should not have been euphoric about the assurance e of technology transfer.

Strangely, the Planning Commission Deputy Chairman Montek Singh Ahluwalia, during Obama’s visit, pushed for private (foreign) investment in education by suggesting that doors could be opened to the US. He forgot that education has become extremely expensive in the country whereby many people, even from the so called middle class, are unable to fund their children’s education. What to speak of the poor who are getting further marginalised. Ahluwalia only supports Obama’s profit motive.

More. The Planning Commission’s Dy Chairman has not questioned the nature of investment that the US President has suggested. In reality, Washington will not invest even a cent. The money is to come from the India-US joint $ 10 billion Infrastructure Debt Fund for the supposed funding of over trillion dollars needed for the 12^th Plan. This fund, in turn would create the physical funds.

The exact details are not known but it is definitely going to burden India’s public funds and private sector more as the US keeps tight its purse strings. Why should Government–owned entities like India Infrastructure Finance or public sector banks sponsor funds that would benefit the US more?

That New Delhi is not very happy at Obama’s proposals is made plain by the Finance Minister Pranab Mukherjee’s address to US CEOs. He cautioned against unilateral action by individual countries to deal with the post-financial crisis and said that remedies for the problems lay in collective approach. Whereby, easy money policy flow in the developed world seeking higher returns is leading to inflation. “The second round of quantitative easing announced by the US will only exacerbate the problem,” Mukherjee added.

As it stands, the over $ 38 billion investments in the equity market has caused enormous problems for the Reserve Bank of India as it battles high inflation. Apparently, Finance Mukherjee does not agree with the US Treasury Secretary Timothy Geithner assertion, “more dollars are better than no dollars” at the CEO’s meet.

That India is in no hurry to open up the multi-brand retail sector is also testified by Commerce Minister Anand Sharma’s statement, “India has a positive mind but any democratic process takes time”.

Besides, Obama has not been categorical in helping India increase its exports and reduce the balance of payment problems with the US. The partnership that the US President promises appears more one-sided. He has little to offer to make India more export-competitive.

Again, not much could be achieved in the defence sector except Washington’s offer of open sale of arms and equipment. The sale of civilian aircraft and promises to set up nuclear energy plants are only meant to boost the US’s own industry.

In short, Obama has saddled India with fewer solutions. In his suave manners, he behaved more like the big brother. Of course, the US President had little to offer. As Geithner emphasised, “chances of a double-digit recession in the US were lower than at any time during the last 12 months”. Clearly, it is an admission of a gasping economy that looks for crutches from India! ----- INFA

(Copyright, India News and Feature Alliance)