Sitting in the US, the landscape all white and beautiful with snow, happenings in India appear a little distant. Especially since, in the last couple of weeks, I have seen no mention at all of India either on TV or in the print media in the US—as though it did not exist. The joy of good industrial production numbers and the triumphalism associated with expectations of growth over 7% this year and 8% next year at home do not seem to have caused ripples on other shores. Still, three things appear to be engaging attention here in the West, all of which could be relevant in some ways for India.
First was the conference in London on 28-29 January where, under the chairmanship of UK Prime Minister Gordon Brown and with the support of the United Nations, 70 countries backed the concept of tempting the Taliban to give up fighting and to incorporate them into the mainstream of governance. This is a major victory for Pakistan, which has always advocated that all Taliban are not bad, and a major setback for India. The success of the Pakistan military in dealing with the Taliban in Waziristan has won approval in the US; during this diplomatic resolution, while China, Russia, Iran and Turkey have been consulted, India’s concerns have been shrugged off. The US media has approved of this positioning and is supportive of Pakistan: In the longer term, this would mean that India would continue to have to deal with a resurgent Taliban. Border security and internal security will continue to be areas of concern.
Second, the threatened financial meltdown in Europe, with Greece, Portugal and Spain reaching limits of their borrowing capacity, saw the euro tumbling. A reluctant Germany is expected to announce a bailout for Greece just to shore up the euro, and markets are still jittery. Credit-default swaps, insurance against debt default, have climbed steeply. Though Europe was seeing signs of recovery, these developments have added a new realm of concern about government deficits. In the US as well, the administration is under attack for high fiscal deficits that stretch into the future, and unemployment numbers that refuse to go down. There continues to be sponsored advertising encouraging people to pay their credit card bills, even at the risk of defaulting on their mortgages. The signs of recovery are, thus, still feeble, causing concerns in the financial markets.
In India, we may well see the fallout of this through in the volatility of the financial markets. Foreign institutional investors could be quite sensitive to these concerns, and the equity markets could be jittery. These short-term fluctuations are likely to be a serious concern for the Securities and Exchange Board of India, which has to ensure, as the regulator, that no mischief takes place.
Third, there is a growing respect and, indeed, reluctant admiration for China. There have even been a couple of seminars that have debated the advantages of strong state-controlled governance as an alternative to democracy. China’s protests over US arms sales to Taiwan caused considerable concern, and the defence equipment manufacturers put out conciliatory statements; yet, the political response to China’s protests have been quite muted. There is considerable analysis about the steps being taken by China to contain inflation and to tighten monetary policy, and there is a great deal of reporting on the various economic initiatives there.
On the energy front, in particular, China’s proposed investments in the field of renewable energy offer opportunities for development of new technologies that US companies are rushing to participate in. China has announced an investment of 13 trillion yuan for the development of a smart grid for power across the country that will be the first of its kind. This grid will consist of hundreds of nodes through which?power?would flow,?with?these nodes capable of detecting energy demands on each transmission line and directing energy into those lines—an initiative that the Chinese say would save them at least six new power stations a year for the next decade. The ability of China’s industry to focus on technological advances to improve efficiencies and reducing costs is getting the attention of academics and industry alike in the US. I am sure that there are lessons for India here.
The take-home for me is that, increasingly, we need to look after ourselves— not in the narrow sense of managing fiscal deficits, doing domestic reforms and addressing social sector concerns, but in terms of our global role. For the last 60 years, India has been inward-looking, its economic policies and strategies focusing on the needs of its citizens. This should now become a given, and there should be attention that the role that India needs to play in the world arena—in diplomacy, trade and strategic concerns that include energy and climate change.
I wish we had been among the first that offered aid to Haiti earthquake victims—China was, and we could well have done it. I wish we ensure that the assistance promised to Bangladesh during Sheikh Hasina’s visit last month is quickly channelled through, and not stymied by our bureaucracy.
We can do it.
S. Narayan, a senior research fellow at the Institute of South Asian Studies, Singapore, is a former finance secretary. We welcome your comments at email@example.com