Ever hitched to the wrong cart

Consider globalisation, the subject of much freely-vented Indian angst. Gujral said in Edinburgh that while some countries — implying developed ones — had gained from globalisation, others risked marginalisation. Quite right. India would be right to throw in its weight against globalisation — the new shorthand substitute for “western imperialism” — if it had indeed lost from globalisation.

But has it? Does India belong with genuinely marginalised least-developed countries (LDCs)? Or is it a gainer, though certainly not in the same league as the rich countries, and would be a bigger gainer if it aligned itself more closely with the global economy? The Prime Minister suggested it belongs firmly in the first category. What a pity. One can only wonder where this wrong-headed diagnosis is coming from.

In case anyone needs reminding, India has grown at between six and seven per cent in the wake of some opening up to the world economy. Its exports grew by 18-20 per cent a year on average before hitting a roadblock last year. And the slowdown was explained by the Finance Minister of this self-same government as being due to the tapering off of the initial benefits of external liberalisation.

From a balance of payments crisis that left it with reserves enough for about two months’ imports, India now has foreign reserves of $30 billion. Their composition is not ideal. Foreign direct investment (FDI) still plays a too-small part. Portfolio — “hot money” — inflows abound, causing speculation about the reserves’ durability. But whereas India has its opening up to thank for the large reserves, their composition is to be blamed on a failure to be open and attractive enough to FDI.

Poverty remains to many far and away the most crucial point about economic reform — and globalisation. Persisting abject poverty through liberalisation; the numbers of the destitute; and accentuated income inequalities have stirred unending debate. Now, since no one is debating growth rates of six-seven per cent, overall wealth creation is clearly not the issue. The issue is the failure of reform to address the predicament of sections that lose from globalisation. Increasing inequalities are striking in Britain and the United States, models of the globalised economy. But India’s failure to more evenly redistribute wealth and to cushion the poorest has been a failure of the Indian state, even if globalisation is responsible for accentuating inequalities.

The question is: are India’s economic figures since it began opening up to the world typical symptoms of a marginalised player? The LDCs should be so lucky. With these economic figures, they would not be caught carping. India is no loser from globalisation. Its problem is different, and threefold.

The first is that its blinkered vision will not let it see the writing on the wall. Any country in its right mind would conclude from recent economic performance that further opening up was the only way. Not so India, whose faith in its own exceptionalism persuades it that good economic figures for five years of closer global integration still mean disaster ahead. Not only does this coalition itself believe in the humbug of Indian victimhood, it has the support of the “intelligentsia”. These are people who, with characteristic integrity and spunk, lay low in the heyday of reform and emerged enthusiastically from the woodwork when the political tide turned.Combined with this sense of persecution is a delusion of grandeur. In the chattering classes, this is reflected in unceasing comparisons with China. India has some cheek to equate itself with a country whose trade surplus with the US exceeds India’s total exports, as do its annual FDI inflows. At the level of government, this delusion is reflected in an insistence on leading crumbling and obsolete groupings, whose membership no longer even views India as a leader but is content to let this large country cut off its nose for a cause that is not even its own.

Finally, after Narasimha Rao’s electoral debacle, politicians have homed in on the fact that there is no political capital in a commitment to globalisation. Why bother? Far easier to debunk the idea than become a martyr for it.

Switch to Kuala Lumpur. Not content with getting egg all over its face at the first ministerial of the World Trade Organisation (WTO) in Singapore last year, India has taken its silly campaign against a multilateral agreement on investment (MAI) to the G-15.

If it hopes to become attractive to foreign investors, India can do so on their terms or not at all. This agreement, being negotiated in the OECD, is the handiwork of countries that are the main exporters of capital. The idea is to ensure even-handed treatment for MNCs by capital-receiving countries. It is in India’s interest to join the MAI because capital goes where it is treated best, and India needs capital urgently. But with familiar perverseness, India sets up a shrill cry in the ragtag G-15 to preempt it.Commerce Minister B.B. Ramaiah, not the sharpest man to grace Udyog Bhavan, has said we are safe on an investment treaty because the WTO has promised to reveal the study on trade and investment now underway there. Well, of course it will. What then? WTO Director-General Renato Ruggiero has said he “fully expects” a WTO agreement on trade and investment two years on.

The odds are ten to one that Indian officials will be seen, two years on, rushing about in a terrific frenzy to drum up support against this agreement. Unfortunately, our allies of the G-15 and sundry third-rate economies will sensibly see the merit of going along with the agreement if they are to attract much capital. At which point, isolated and discredited, India will tuck tail between its legs — and sign.