Fear Of Flying

When will New Delhi speed up reforms and scrap quantitative restrictions for its largest trade partner? That’s the one question that hugged the lips of the US business team accompanying President Clinton that walked in for discussions with Indian bureaucracy and business in the Capital. Perhaps the reason why Clinton’s India yatra saw deals worth only $4.4 billion, a far cry from the $15-20 billion usually closed when he goes with a high-level business team.

That question also summed up the mood: serious to do business but wary of delayed processes. Especially at the Centre where red tape still prevails while the states are keener on ushering in change. "I’d say the changes in states like Andhra, Gujarat, Karnataka and Tamil Nadu have been quite fast. This is encouraging," says Jack Bell Cotton, regional vice-president, Foster Wheeler Corp, which is active in power plants and refinery products businesses in India. A feeling that strengthened in Cyberabad where the new inter-dependence of the two countries was the toast of the visit.

The capital of AP, which gifted Clinton a driving licence in moments, bowled over even the first citizen of the world’s most IT-powered country. Speakers talked about the need to remove what Clinton referred to as the "silk curtain". They got instant support from Satyam Infoway’s chairman Ramalinga Raju who said how it was in the US he learnt the true meaning of individual freedom. "I was born in India but reborn in the United States," said Raju. But the mood had changed: Indian corporates were not a supplicant, but an equal with info-czars more interested in the business weather report in the US than in inviting American capital.

And in the financial capital of Mumbai, this newly-acquired aggression of India Inc was evident in the witticisms of infotech minister Pramod Mahajan who regaled the audience which was waiting for Clinton at the former trading floor of the Bombay Stock Exchange. "We’re talking of two great democracies. One’s prosperous. The other populous (he said ‘populist’, though). I know I can’t transfer our population to you. But I’d sure like a chunk of your prosperity. In 10 years, IT will do it." The president too went emotional while talking of more business cooperation between the two countries: "I can’t imagine the world I want for my children’s generation without deeper and better partnership with India. I came here to build it or at least lay the foundations before my term is over." He sure succeeded in it, so far as the deals signed in India’s "dotcom capital" go-deals worth $2 billion in commercial signings and $1 billion in the US Exim Bank financing was inked in the city.

In Delhi, however, bilateral trade glitches and bureaucratic warfare overcame the political fawning. Consider this cryptic remark from deputy US trade representative Susan Esserman in response to a query from an Indian businessman: "We have a market which is the world’s largest and do not have quantitative restrictions and minimum import prices like India has." Of course, she is right. The US enjoys about 30 per cent of India’s trade, but New Delhi has less than a per cent of US’ trade turnover. Beijing’s trade with Washington is eight times that of New Delhi. Even Singapore with its three million people, trades three times more. Naturally, US commerce secretary William Daley joined Esserman in calling for improved trade ties.

"The biggest deterrents are India’s tariffs and non-tariff barriers. So it’s natural that FDI from the US is less," Esserman told Outlook. Asked why American oil majors like Chevron and Amoco continue to stay away, David Mengebier, vice-president, cms Energy (which has major power projects in Andhra and Tamil Nadu), lists three deterrents. "The state boards need reforms and the government must depoliticise the tariff structure. The recent hike in dividend tax will also dissuade investment since it implies double taxation." His comments drew immediate response from petroleum secretary S. Narayan, who promised a comprehensive energy policy soon.

The deals inked include ibm’s with dsq Worldcom for computer products and services, BankAm-dsq Software for global IT services, Infodream tie-up with Modicorp for innovative portals, Synergies Energy with Power Finance Corp for the Srinagar hydroelectric project in UP and Enron-Ispat Energy deal for supplying natural gas to Dolvi power plant near Mumbai. But the figure could have been higher. "The sense of optimism is palpable but it’s got a lot to do with the president. The ground realities for doing business are far too different. Companies must tune their techniques and expertise accordingly," says Cotton, who feels red tape is more in the capital than in the states.

Agrees Suresh Malik, MD, international operations, of the Washington-based engineering major Sverdrup Civil which has a sizeable presence in India: "Look at roads. The PM wants east-west, north-south corridor by 2010. It’s not feasible since the process is very slow. Indian companies, those in infrastructure, need to change."

Even in IT, the dissatisfaction is perceptible. Fumes Donald L. Conover, president, CBay Systems: "The major bottleneck is the lack of a free market for the Net. It took me four hours to download 125 e-mail messages. In the US, it’d take less than five minutes, even from a dial-up connection. We have 24,000 ISPS, none of which are licensed and no one asks the nationality of promoters. That’s what makes Internet the driving engine of the US economy."

Bureaucracy is a hurdle even in IT. Says Praduman Kaul, CEO, Hughes Network Systems of the US: "In the e-commerce age, everything must be immediate. It’s a take-it-or-leave-it situation. If India doesn’t want it, there are other takers." A feeling that probably resulted in not many US honchos visiting India this time.

Delegates agree. Reasons for the dismal show of heads: Clinton’s visit was packaged as a goodwill tour and US companies are still unhappy with New Delhi’s pace of reforms. They also cite examples of tensions faced by Enron, Cogentrix, McDonald’s and Coca Cola while doing business in India. "Even the White House is aware of the wide gap between the government’s projections (read intentions) and the ground reality. India is mentioned along with China in terms of investment opportunities. But just compare Clinton’s nine-day China trip to this and you know the difference," say observers. More than 20 CEOS went to China and signed major infrastructure deals.

The flip side of doing business in China is about sticking to government rules and currying favour with ministers while post-reforms, it’s more of business as usual here. So the CEO needn’t come down to plead his case. Something which even Clinton felt and which led to his inviting Reliance MD Mukesh Ambani to his New Year bash. There’s a perception in the US that few industries in India can shape government policies.

But this perception may no longer matter much. Says Ashok Trivedi, president of the $470-million Igate Capital: "There’s an Indian billionaire created in the US every month. The situation is such that if someone seeks funds, the venture capitalists ask, ‘Where’s the Indian?’" In business at least, finally India’s politicians have ceased to matter more than potential partners.

That could end up as the base of the American visit. Drowning the irritations, the red tapes and the delays, it’s the face of the future that beckons both countries. As Trivedi says: "America’s endorsement of India’s capability is the best thing that has happened to India. The challenge for India is to create a true middle class of 200-300 million in the next 10 years-a class that’s IT-savvy. In 5-7 years, an IT engineer in Bangalore will make as much money as one sitting in Boston. Now the former earns $5,000 annually while the latter in excess of $70,000. Look at what Netscape and Yahoo! became in five years. From India, we expect better success stories." And dreams, don’t we know it, have this tendency of getting fulfilled.