East India Co in Reverse

When India embarked on its economic reforms in 1991, leftist critics claimed the doors were being opened for the re-colonisation of India by a new version of the East India Company. They warned that the US multinationals would become instruments of the US foreign policy to subjugate India.

During Prime Minister Mr Narasimha Rao’s visit to the US, it became clear that the very opposite was true. The US business rose as a man to cheer Mr Rao as a leader who had reformed the biggest democracy in the world and created a national consensus for change. The US multinationals saw tremendous prospects in joining with India in a new partnership. They have already poured billions into India in the last year, and see no reason why India should not one day rival China’s record of attracting over $ 60 billion of foreign invest-ment per year. And they are going to do, their damnedest to ensure that the US administration does not mess up this promising partnership by putting undue pressure on non-commercial matters like human rights and missiles. Far from acting as a tool of US foreign policy. The American business is going to act as a lobby for Indian foreign policy. This is the East India Company in reverse.

MAJOR PLANK: In past decades, Indian Prime Ministers seemed to believe that long moral lectures could influence the US foreign policy. Their other major plank was third-world unity. Both approaches worked up to a point till the 1970s, then decayed, and became pretty useless in the 1980s. The end of the cold war meant India could no longer play off one superpower against the other, and a host of new demands came from the US-on human rights, intellectual property rights, and capping our nuclear and missile programmes.

Many leftists in India denounced this as renewed imperialism in a unipolar world. They suggested that India should band together with other developing countries against the US. But India had already found (in GATT and elsewhere) that other developing countries would rather strike bilateral deals with the US than join hands with India.

Where then was India to look for new allies? Where could it obtain some countervailing power against pressures from the US administration? The unexpected answer has turned out to be —US investors. It is rightly said that the business of America is business, and all US administrations view the world though the eyes of multinationals, partly though not wholly. Top members of every administration (including president Clinton’s) include people drawn from business. One of Mr Clinton’s economic advisors (Mr J. Rubin) was formerly with Goldman Sachs, an investment company which hopes to funnel billions into India.

DOLLAR FLOOD: The flood of dollars into India in the last year has taken our foreign exchange reserves to aver $ 15 billion. This has had another vital foreign policy consequence: it has deprived the US administration of the leverage it normally enjoys over developing countries in need of aid and trade concessions. In a major recent speech, Senator Lee Hamilton, who dominates the Senate Foreign Relations Committee, had castigated India’s proposal to deploy the Prithvi missile, and suggested that the US should use its voting power in the IMF and the World Bank to pressure India into giving up Prithvi. However, thanks to foreign investment that has poured into India, the country is no longer dependent for dollars on the IMF and the World Bank. so this American leverage has disappeared.

India has abandoned its earlier plan to take a new $ 7 billion loan from the IMF, and instead repaid $ 1.13 billion to the IMF ahead of schedule. India has also told the World Bank that it does not want any more fast-disbursing loans ( where it gets upfront cash in return for policy changes). Earlier, it had been thought that stiff conditions would be imposed by the IMF and the World Bank before giving fast-disbursing loans. Now that there are to be no such loans, there will be conditions either.

WB MEETING: Indeed, at a recent Board meeting of the World Bank in preparation for the coming meeting of the Aid India Consortium, the governors stressed the importance of keeping India as a major client, and said that too many conditions should not be attached to loans for different sectors. They felt it was more important to support India’s efforts with cash than try to influence it with conditions.

These are the phenomenal advantages that flow when a country is in a position of financial strength. What has given India this new strength? Its new rapport with foreign investors. By making itself attractive for foreign investment, by convincing the biggest corporations of the world that it is abandoning its self-imposed isolation and becoming part of the global economy, India is suddenly neck-deep in dollars.

The US will not abandon pressures on India in strategic matters and human rights. However, India is now in a much stronger position to resist such pressure, and is developing powerful allies in the form of US businessmen.

What do you think?