TCS Daily

Impressions of the U.S.-India Summit

By Arjun Swarup - January 7, 2010 12:00 AM

In late November, I had the opportunity to attend a panel discussion at the Peterson Institute for International Economics in Washington DC. Montek Singh Ahluwalia was the chief guest, and the topic was India's economic story, as well as his impressions of the Prime Minister's visit. Ambassador Meera Shankar was also present at the event.

The session moved along well, in no small part due to how much at ease Montek looked at in this environment, with his overall candor and eloquence working very well in the setting. One can't help but imagine that Manmohan Singh, more technocrat than politican himself, would probably feel similarly more at home.

Montek began by pointing out that this visit had no real big issue to pivot on, unlike in '05, when the nuclear deal hogged all space, but was more about a lot of small and incremental wins. He did have a hilarious anecdote around how amused the entire official contingent was to see the state dinner menu analyzed on CNN!

Before jumping to the economic analysis, he made two very quick points. One, he repeatedly emphasized how much intelligence and security cooperation between the two countries had spiked up, especially post 26/11, and how India was especially pleased at the quality of cooperation between the two. I found this to be very revealing, for it did illustrate that the scale of the carnage last year, and the round-the-clock global coverage the incident got, did make it India's 9/11. Unpalatable as it sounds, the scale, audacity, impact, as well as the targeting of the rich, powerful, and yes, the foreigners, gave India's ongoing struggle against terrorism a new legitimacy, or at the very least, a higher profile. (This isnt unique to India, of course, the twin towers coming down and killing 2,300 rich New Yorkers did a lot more than the blowing up of tankers and killing of US soldiers all through the 90's).

The second point Montek made was around how a lot of the restrictions on technology sharing, which were remnants of the era when India was in the nuclear dog-house, were also discussed, and while not all would be lifted, at least immediately, much progress was made in that respect.

This, to my mind, is an area for which Manmohan Singh does not get enough, if any, credit. Whatever one's personal inclinations around nuclear technology and weapons (and the two would always remain linked), the fact remained that India's presence in the nuclear dog-house for almost 3 decades, did lead to a technology restrictions for Indian industry. While one could argue that India, with its industrial and technical manpower, and its booming corporate sector could - and should overcome that (and this author certainly feels so!), this could well prove to be a major catalyst.

Jumping onto economics, Montek struck a confident note around India's growth prospects. He made a humorous dig at the World Bank and IMF's forecasts, saying that they had consistently under-predicted India's (and others) growth rates, so if one added on that "error factor" a forecast of 9% did not seem that far off (The latest IMF prediction for India is around 6.4%, and more broadly in the 6%-7% range).

What was interesting, though, was his analysis around how and what would happen. Creating a supply-and-demand based paradigm, he made the point that India had more than enough capability for "adequate supply" for a 9% growth rate. However, with shrinking demand in industrialized nations, the question would be whether there would be adequate demand to meet this supply. This, allied with the universally acknowledged weaknesses of India's infrastructure, logically suggested that heavy investments in the infrastructure sector would work well to create demand, and in turn sustain the growth rate.

I was personally surprised by this assertion, which to be honest, sounded a lot like the Chinese model. While this would no doubt work to an extent, the historically consistent inefficiencies of Indian government spending implies a lot of waste. While Montek did not cover this in his speech, I suspect PPP's would be a major vehicle in making this happen.

The big disappointment of the talk, for me, was when the question veered around to long-term economic challenges. Montek identified energy security, ground-water levels, and climate change as issues which could impact the economic story. The skipping of law and order issues - both foreign and domestic- was interesting. There was no mention of the Naxal problem, which by latest estimates, now affects over 200 districts across the country.

However, his blunt assertion here was that India would just look to other major nations and see what they were doing, and adopt 'best practices'. For a nation with the unique combination of major challenges, a fairly well equipped manpower pool, and innovative entrepreneurs, this seems to be a poor compromise.

The Q&A session was somewhat predictable. There were a couple of questions around law and order, and being able to protect large capital foreign investments, especially in light of 26/11. The standard response here was that law and order and terrorism were global issues, and India was no different, and that no major foreign investment in India has been harmed, or even targeted. There was also a plug for Chidambaram, by saying that he was an exceptionally talented minister, and he was in charge of this area. A clever ploy, to my mind, and the subtle reminder that India should not be looked at differently from other developing, or even developed nations, worked well. However, it did side-step the larger question.

The issue of energy security, which was covered in his speech, did draw a question around why India was not being more proactive or innovative. Montek did make two valuable points: the first was around the fact that political will had not 'coalesced' around making it a priority. Secondly, he also pointed out that this stage, the bigger wins for India would be simply in improving efficiency at this point, especially in power transmission. Whether this is candid realism, or short-sighted myopia, is something that time will tell.

There were also some questions around the newly formed G-20, and how it would impact global dynamics. There were also some questions around the role of institutions such as the IMF, in the new world order. The response here was insightful. While he skipped all mention of China, he was forthright in his assertion that Europe, as a region, remained over-represented in most international bodies and forums, not due to any overt biases, but more as a result of the past. However, this was not sustainable, especially from an economic perspective today, although the political realities could still be somewhat different.

There was also a good question from the moderator (Fred Bergsten, the founder and director of the Institute) on how India achieved the impressive growth rates of the past half-decade, given that no one back in the late 90's was forecasting above the 5%-6% range. Montek said it was a validation of the policies set in place in '91, although there wasn't much mention of the NDA's role. He also said the corporate, and in fact of all of the private sector, consistently surpassed expectations, in how nimble, adaptive, and aggressive it turned out to be, both in terms of meeting challenges, and driving growth. If this thinking is reflective of a changed mindset in the official establishment of how the private and public sectors can work together, it does augur well.

Arjun Swarup is a Virginia-based business analyst.


India can afford to move more slowly than most...
India is in the enviable position that it need not strengthen its central government in order to participate in any contests of global military hegemony. Its greatest rivals are Pakistan and China, neither of which should seen any percentage in a direct confrontation. India has no imperialistic interests of its own and little defensive reason to directly manage its economy beyond the motivation to enhance sustainable development. Furthermore, India already has strong decentralized institutions of government in place and operational as many other nations seek to understand how to create wealth, freedom and security for themselves without the overhead of the strong central governments they can no longer afford to maintain.

America is already struggling with this transition and those of our sovereign competitors who have been trying to model themselves after the United States must realize that we cannot all live like Americans have been. Even Americans are finding that our own socio/economic paradigm must be unsustainable.

The Indians can afford to wait until novel technologies become proven and affordable. Without rushing to be the first to invest and then finding themselves stuck with obsolete goods and services. In the meantime, the Indian economy is expanding at a rapid, sustainable pace. Indian industrialists are well integrated throughout the developed and the developing world at all they won't miss anything or be left out of any opportunities. The Indian people are doing better than ever and they have been able to hold onto their proven cultural routines better than most. Wherever they have traveled to live and to work Indians are truly global players and they know how to find their way home.

'more slowly than most'
What do you mean by that? It's not clear that "most" need to move faster. Countries can stay backward and poverty stricken for millenia.

No country 'needs' to strenghten their central governments, they do it because most politicians like more power.

In India's case, what they 'needed' to develope was less central power, and in their case soviet style massive intervention of the Nehru/Ghandi dynasty. Now that they have more economic freedom, they have the predictable result of becoming richer, more developed, more civilized.

What Kind of Life Do You Live: Acne Solution
It might seem like a silly question but when you have acne, lots of different things influence your skin. Finding the right acne solution for you depends on skin type as well as what type of activities you like to do. Taking care of your skin is important; everyone wants to have healthy beautiful skin. Many people do not realize that stress, environment, diet and exercise are all things that influence skin. The amount of sleep you get also makes a difference. In general, people that exercise on a regular basis might have a little more acne because of heat and sweat. Always make sure to wash your face well.

The kind of acne treatment that is right for you may not be right for other people. You have to know what skin type you have like oily, dry or a combination. Finding the right acne treatment does not have to be hard. Acne-reviews is a free service that gives you all kinds of tips and information on skin care as well as reviews of skin care products. Skin care products range in how well they work based on your skin type and how well you use them as directed and on a regular basis. They can direct you to a product that can help your skin.

Lots of the activities we do everyday have affects on our skin and we might not even know it. When we exercise, we sweat and that can cause our skin to become clogged with dirt and oils if we do not wash our face and bodies quickly after we have finished and that can have an impact on our skin care. Exercising is important though not only because it will help make us strong and healthy but because, when you sweat it helps rid your body of toxins and waste. When you are looking for acne treatment, it is important to follow the directions so you can get the best results possible.

What kind of separate reality is aasiwal in?
Did you submit to the wrong forum, or are you on another planet?

Montek identified the real challenges facing Indian economy. As being heavily depended on the primary sector, climate changes and ground water levels are greater challenges to Indian economy, since if we don't sustain, what development should we be talking about?

TCS Daily Archives