When India started wooing foreign investors in 1991, critics warned that this would lead to the return of the East India Company. Business is never divorced from politics, they said, and letting in American investors will mean letting the US dominate us in foreign policy too.
The very opposite has turned out to be true. By attracting American investors, India has obtained not just dollars but powerful foreign policy allies. Lobbying by corporate America was the major reason for India\’s huge triumph on human rights in the US Congress last Thursday, a victory that makes Pakistan green with envy.
Every year. Republican Congressman Dan Burton moves an amendment to the US foreign aid bill demanding a cut of 25 per cent in aid to India as punishment for its human rights violations. He has been egged on by Khalistanis and Pakistanis, who long to see India flayed by the international community. The US aid bill allots just $ 56 million to India, and Burton\’s proposed cut is only $ 14 million, negligible compared with. India\’s foreign investment inflow of $ 5,600 million per year. So the significance of the annual Burton amendment has always been political, not economic.
In 1995, the Burton amendment almost went through—it failed by just 19 votes. But in 1996 his amendment was defeated by 296 votes to 127, a margin of 169 votes. And his 1997 effort failed on Thursday by a whopping 260 votes. The vote was 342 to 82, and more than 50 of Mr Burton\’s supporters were diehard conservatives who would have voted for any aid cut to any country. That means support for Burton\’s human rights campaign has become a virtual irrelevance, whereas two years ago it loomed as a major foreign policy threat.
There are several reasons for this transformation, including new appreciation for Indian democracy on its 50th anniversary of independence, as well as the quelling of the insurgency in Punjab. But the most important reason is organised lobbying on India\’s behalf by US corporations interested in business in India. In the bad old days when India strove for self- sufficiency and kept out foreign investors, India had no effective way of influencing votes in Congress. It could not compete with Pakistan, which had old military and strategic ties with the USA, while India was viewed as a Soviet ally. These attitudes did not disappear immediately after the Soviet collapse or India\’s economic liberalisation in 1991. Many American corporations feared that the reforms would be reversed, and the end of the Cold War led to a greater focus on human rights, an area where India found itself in trouble because of insurgencies in Kashmir and Punjab. Pakistan and Sikh secessionists had a field day, and when the Burton amendment almost went through in 1995, they thought they were on the verge of a breakthrough that would rub India\’s nose in the dust.
Yet within two years they have been made virtually irrelevant. Within the US, an India Interest Group has started functioning, and has proved a valuable ally. This group includes top corporations like General Motors, Boeing, Enron, Ford, AT & T, Raytheon, Citicorp, Motorola and Hughes. An India Caucus has also been formed in the US Congress, which includes people like Gary Ackerman, Benjamin Gilman and Jim Mcdermott. In 1995 the Indian embassy in Washington had not yet organised these allies against Burton. But the near-disaster that year spurred new efforts at coordinated lobbying, which have yielded huge results. The Times of India correspondent in Washington, Ramesh Chandran, was told by Congressmen after last year\’s vote, \”Corporate America finally played a key role on an India vote in the US Congress, as it has been doing for years on behalf of China.\”
This is a sea change from the bad old days when a socialist India aimed for self-sufficiency and deliberately sought to reduce foreign trade and investment (which it viewed as instruments of neo-colonial domination). Marxists and socialists were convinced that reducing foreign commercial interest in India would strengthen our foreign policy, and prevent us from becoming a neo-colonial puppet.
It did nothing of the sort. Pakistan was the main gainer. As a strategic ally of the US, it gained powerful friends in the Pentagon and State Department. India had no comparable allies. Corporate America was either indifferent or actually hostile (after FERA obliged Coca Cola and IBM to leave India).
Today, India has corporate US allies that Pakistan cannot hope to match. No matter how hard Pakistan tries, India will always constitute a far more attractive destination for US goods and investment. The stronger Indo-US commercial ties grow, the weaker will Pakistan\’s influence in Washington DC become. Islamabad still has allies in the Pentagon, who cannot shake off the Cold War mind-set. But these Cold Warriors will fade away, while India\’s commercial supporters will keep increasing. So, no matter how much Pakistan tom-toms the violation of human rights in Kashmir, it is not going to get very far in the US or other western countries whom it has traditionally regarded as allies. That is the foreign policy bonanza that flows from economic liberalisation.
This should surprise nobody who has followed US-China relations. After China cracked down on students demanding democracy at Tiananmen Square, it was in the doghouse politically. It was in danger of losing all its trading privileges, including access to the US market on most-favoured-nation terms. Yet, despite denunciations of China\’s human rights record by President Clinton and many NGOs, that country has managed to retain and even improve its trade privileges. US corporations lobbied strongly and successfully not to let political disagreements disrupt economic relations. In Mao\’s time, China would have been penalised heavily through trade and technology sanctions. But Deng\’s China is a haven for foreign investment, and so escaped scot-free.
There is a lesson in this for all (including the BJP and CPM) who still fear foreign investment as the return of the East India Company. Events have proved them right in one thing-that business and politics are indeed connected. But the connection has generated political forces in a direction diametrically opposite to the one usually alleged. Foreign investment has actually increased Indian influence in the USA. This is the East India Company in reverse.