AT last, there was some good news for the Indian business community. The annual meeting of the US-India Business Council in Washington, DC this month managed to remain upbeat despite the political uncertainty in New Delhi and the fact that the Indian Budget 1997 had not been passed. The underlying message from various speakers and investors was an urgent one to the political factions in Delhi: get your act together and pass the Budget.
Said Council chairman Howard L. Clark, Jr, who is also vice-chairman of Lehman Brothers: "One must assume that the Indian business community is even more concerned that the Budget should be passed. It is significant both to foreign investors and Indian investors." Referring to the "political uncertainty in India", he added: "For American business, recent events have highlighted a couple of enduring truths. The first is the underlying stability of India's parliamentary system. The level of political manoeuvering and the uncertainty of the outcome have been stunning, but they serve to underscore the robustness of the system."
The theme of political uncertainty and economic continuity was echoed by several other speakers during the course elf the meeting on April 16. US Ambassador to India Frank Wisner, on conference call from Delhi, said: "Any American company which wants to be a global player cannot afford not to be present in India. As discomforting as the present political uncertainty can be, it will not stop the Indian economy." Ambassador Naresh Chandra and Revenue Secretary N.K. Singh also reassured the audience by saying that the political changes in Delhi would not affect economic policy. Singh said the macro-fundamentals of the Indian economy were as strong as ever and that "economic policy had been de-politicised".
India's reforms agenda also came in for praise. In his luncheon address, US Commerce Secretary William M. Daley praised India for "executing a reform programme that is finally throwing off the shackles of socialism, introducing market forces, and creating an environment conducive to foreign trade and investment".
He, however, noted, that there remained "serious obstacles and barriers" that were "still holding India back"--namely, lack of reforms in banking, insurance and pensions. The insurance sector was "largely shut out from market influences and foreign investment".
Another key factor absent in India, said Daley, was a "transparent regulatory framework that gives investors confidence and entices them to the table". There needs to be clear laws and procedures at both the state and national level to ensure that investors had "a smooth ride through the investment approval process". Speaking about Enron, Daley noted: "The memory of the long and tortuous approval process still lingers uneasily in the minds of many American business executives." Daley said the US-Indian trade numbers were "failing way short of their potential levels" and there was no reason why India, "the world's second largest country, should be only the 32nd ranked US export market". Announcing that he would be leading a trade mission to India in late 1997 or early 1998, Daley recalled that Ron Brown's January 1995 mission brought "$7. 1 billion in deals, more than on any other Presidential Business Development Mission before or since".
Meanwhile, Mieko Nishimizu, vice-president, South Asia, in the World Bank, spoke about regulatory and pricing reforms in the infrastructure sector. In response to a question, Nishimizu said she did not see a sharp increase in the demand for Bank guarantees for power projects.
In an interesting footnote about Japanese investment in India, Andrew M. Saidel and Russ Hayward of Dynamic Strategies Asia pointed out that, while the US outpaces Japan in the number of business certifications granted in India, Japan actually moves forward with between and 70 per cent of the projects it gets certified. The US, on the other hand, does not reach 20 per cent.
Then, there were the able comparisons with China. Paula Stern, president of the Stern Group, said she was concerned to hear certain investors say that "democracy was a disadvantage in India". Far from it, admonished "Democracy federalism India a comparative advantage over China." According to her, the main reason India was lagging behind China in its economic reform process was that "China got started 10 years before India". China had many problems in its bilateral trade relationship with the US--human rights, sanctions, MFN status. On the other hand, India, boasted of the rule of law and a respect for pluralism. She felt India needed to use the fact that it was a member of the WTO to push its agenda "more skillfully" than it had done till now. As for the US, Stern said it needed to learn more about India's democracy, federalism and rule of law and that changes in government did not spell instability. "The fall of the government in Delhi doesn't mean that the economy will collapse," she said. Which must surely have gladdened the hearts of all present.
