Swadeshi Goes Global

Very simply, swadeshi means nationalism, explained Sinha. "It means patriotism. When we say that we want India to be built by Indians, we are exhorting our countrymen to work harder and work more diligently—to think about the nation before they think about themselves. That's the kind of spirit we would like every Indian to imbibe. And I'm saying it in the context of the fact that there has been an erosion of those values and therefore it is important for us to emphasise this point."

 And just in case his American audience didn't get the point, the finance minister elaborated: "Swadeshi is pro-globalisation because it's pro-Indian without being anti-foreign. And that's the important message from India: you can be pro your own country without being anti any other country. Therefore, swadeshi is the best means of globalisation. If every country was to follow this policy, and most countries are following it, we can have a better world. A more equal world, a more just world."

Care was taken to allay fears of potential investors. "Swadeshi can be defined in another way and that is more easily done, because I can tell you what it doesn't stand for. Swadeshi doesn't mean a retreat into protectionism. That is not the case of this government. We are not relapsing into protectionism. We are not trying to create a wall of tariffs. Having recognised globalisation as a fact of life, we are merely saying that a calibrated approach is needed toward the process of globalisation. In some areas we shall move vigorously and fast. In certain others, we have to be a little more cautious. And that is all there to swadeshi."

"We are not running away from global competition. Far from it. We will face global competition. We are looking for partnerships. We are looking forward to a common goal (with the US). I'm sure we can find that commonality. There's nothing to stop us from marching together."

 A sold-out crowd of more than 350 big shots of the New York financial community warmly applauded Sinha, as well as finance secretary Montek Singh Ahluwalia—who is more familiar to the Wall Street crowd than Sinha is—and the burly Indian envoy to the US, Naresh Chandra.

In introducing Sinha, whose son works in McKinsey, Boston, Winthrop H. Smith Jr, chairman of Merrill Lynch International, noted: "There is active and keen interest in India. And the timing of Sinha's trip couldn't have been better." Ever since the Atal Behari Vajpayee administration was inaugurated in New Delhi, a sense of confusion, if not sheer bewilderment, has prevailed in the American financial community about the government's economic policies. The question in the minds of those who control the levers of the global investment community were: Who are these new rulers of India? What are these people up to? Is India still open for business? Do we need to keep India active in our radar screen?

In coming to Gotham and making a case for India in his own earthy and sincere manner, Sinha appears to have succeeded in giving a human face to the BJP and its economic policies. In his presentations before the Indo-American Chamber of Commerce and the US-India Business Council as well in appearances before the Asia Society and the leaders of the Indian American community, Sinha was confident and composed and made a logical case about "change-with-continuity" being the core of his government's policies.

SAYS international management consultant William S. Poston: "I liked everything he said. He sounded very positive. The new government's case was presented very well. From a purely US perspective, I saw no headaches or problems per se." Agrees Stella Yiu, a director of the Hongkong Shanghai Bank: "He particularly impressed me with his openness.

After hearing him, my impression is that India is open for business. Also, Mr Sinha seemed very confident about the stability of his government. And that's indeed important. "

 Of course, not everyone was so ecstatic. One grouse was that Sinha was not very specific, announcing that policy decisions would be made public in the upcoming Budget. Says Ram Khanna, vice-president, Asia business at Marine Midlands Bank: "He's not a charmer. He spoke very well, but he's a bureaucrat or a technocrat. I didn't see any forceful commitments being made. On policy matters he simply stayed away. A politician wouldn't do that." Catherine J. Dwyer, vice-president, strategic planning at New York Life International, feels the same: "I don't think he clarified much. He didn't lay out a financial agenda." "Positive, but wait and see. The proof of the pudding is in eating," asserts Lawrence D. Rosenshein, general manager, international operations, from the Port Authority of New York and New Jersey. And Guido Chiprianni, a vice president of research at the Union Bank of Switzerland (UBS), remains skeptical about the pace of reforms: "We look forward for a strong statement in this regard in the Budget. I believe that talk is one thing, action is another."

Merrill Lynch, which sponsored the Harvard Club event for Sinha, observed in a position paper on India: "We believe that reforms will continue—the extent of modifications of the reform process in the light of the BJP's protectionist attitude and likely restrictions on the role of foreign direct investment in non-priority areas are the key policies to watch out for."

 The eight-page document adds: "Corporates are likely to postpone their investment decisions until the government spells out its economic policies in its Budget document." Another paper from the same investment bank observes: "Currently, political stability is a concern, but this may be overcome with a set of pragmatic policies aimed at giving a thrust to the economy which will likely boost business confidence and improve stock market sentiment."

 Asserts the document: "India is a transitional economy undergoing the difficult task of making structural changes in the trade, finance, industrial sectors and capital markets. The Big Bang approach to liberalisation has been consciously rejected in favour of a more gradual approach by all political parties. This implies that at every stage the reform process will be evaluated and certain measures will be pushed through while others will not. This is clearly the case with the new government."

And this is global credit rating agency, Standard & Poor's assessment: "The new government is likely to continue with cautious liberalisation, but faces serious challenges in strengthening public finances and reforming the public sector. Despite provocative statements by some of its members, the BJP-led government is likely to pursue the cautious, step-by-step reform path followed by its predecessors. While the BJP government is not likely to rescind existing agreements, it may increase selective tariffs within the constraints of existing commitments. Such measures could stall the gradual improvement in India's external debt burden in recent years." While S&P feels that the BJP-led government is unlikely to change the direction of economic reforms, the pace may get slower "more due to instability within the ruling coalition than by ideological hostility."

A similar sentiment that the BJP was not against economic reforms was enunciated at a high-powered seminar on India at the Asia Society as a prelude to Sinha's appearance at the organisation's closed-door dinner. Jagdish Bhagwati, Arthur Lehman Professor of economics at Columbia University, said: "The threat to reform really comes from the Left—and not from the right in India." He, however, felt that since there was "no threat of crisis" in India, there was no real urgency toward speedy reforms: "I wish a little of the contagion from East Asia had come to India. Only if there's a crisis, there's a momentum behind the need for reforms."

Bhagwati dismissed swa-deshi as a "cultural artefact" and said the concept has no ideological moorings to it: "In that context, the BJP comes (to power) with no ideology or (economic) baggage. In that sense, there is an opening to convince them about liberalisation. The 3.5 per cent Hindu rate of growth will essentially be killed by a Hindu party."

Speaking at the same seminar, former US envoy to India, Frank G. Wisner said: "The new government's strategy thrust will be on infrastructure. Swadeshi is not the core. And the government is going to accentuate the positive." Wisner, who returned from a business trip to India recently, said that more than the federal government, growth signals in the economic sector will emanate from the states and cited the example of Rajasthan, where the power sector is to be freed from government controls: "Watch the states. Impulses for growth-oriented policies will be coming from the states. Watch what people do, not what they say."

Professor Ashutosh Varshney, who teaches at Harvard and Columbia Universities, agreed: "The rhetoric has gone down and the moderation in their policy is also seen in the choice of personnel. Three key economic ministries—finance, commerce and power—have gone to moderates or non-BJP ministers." Varshney argued that the main threat to stability for the government stemmed from the RSS and the VHP.

But Sinha dismissed the RSS factor in his appearance before the editorial board of The Wall Street Journal. According to a participant in that session, Sinha forcefully argued that contrary to the belief that the BJP was influenced by the RSS, the reality was the other way around.

At the Asia Society seminar, Marshal Bouton, the main India expert in that out-fit, had observed: "In the weeks since the new government has come to power, there is a deep concern about the state of the Indian economy. There's a fog of confusion to be cleared here." Sinha's debut on the international stage is a first step in clearing that fog. Act One of Sinha's overseas swadeshi saga attracted an enthusiastic audience. The financial community came to see him, heard him and appear to have given him the benefit of the doubt. But they await firm action to arrive at a firm decision. Read: the Budget. Talk alone won't sell.