India can stimulate world economy, says Mulford

Outgoing United States Ambassador to India, David Mulford, believes that India can help stimulate the world economy in the wake of the global economic meltdown.

He made the observation at an interaction held at Washington, DC and moderated by Stephen P Cohen, head of the South Asia Program at The Brookings Institution.

"India is a very important place today because the projections for its economy range from 5 per cent growth to 7 per cent growth. But let's take 6 per cent as the figure -- if that is the figure that we see going forward -- then that looks pretty good against zero in other parts of the world," he argued.

"India, therefore, becomes a major positive influence in the recovery prospects of countries like the United States and this gives India the uniquely important position," he said.

Mulford observed that "Developing countries have tended to be recipients during times of difficulty, but this time, some of them may be stimulators and producers. That is an important thought to bear in mind when you are in the condition that the United States is today."

The envoy said, "India has to some extent been shielded from the global financial crisis by some of its own conservative approaches to things. For example, I have advocated financial liberalisation. (But) They have been protected by the fact that they did not liberalise in the direction that the United States did."

Mulford added, "Risk is still located in the banks that made the loans in India -- that's a major advantage today -- if you want to bring borrowers and lenders together. That's something we can't do in the United States with the structured loans and so on that have been put together."

"So, India's capital controls and other more conservative financial management tools of its markets, which it had depended on 1997 to avoid the risk and the worse effects of the Asian crisis -- which they sort of left in place and liberalised very slowly -- once again, has given it some degree of protection."

Mulford also advised the Obama administration that there's no denying that "India is going to be one of the top economies in the world in a certain period of time. And, like China, it will have to be dealt with by the United States in a fair and even-handed fashion."

"We will have to find ways for countries like this to be properly represented in international institutions," he said, and while acknowledging that "this will not be easy," warned that "it will be absolutely necessary and it would be better to seek to start on that resolution than to be forced later by events into a position where one is simply conceding what already should have happened."

Mulford also dismissed the theory that China had left India far behind, economically, militarily, and otherwise.

While acknowledging that "India and China are competing economically and there have  always been issues between the two countries," he held that "relations are really quite good (between them) and the economic relations have strengthened very sharply."

"China is probably going to become India's major trading partner in the next one or two years, surpassing the United States. The future of Asia is such that it can accommodate both countries," he predicted.

Mulford challenged the view that China is going to leave India behind in growth terms, and recalled when he was "struck the other day when I saw the monthly sale of handset figures that came out."

"I remember when China was selling 8 million handsets a month. And India caught up and passed them. I was surprised to see that in the most recent month, India had sold 15 million handsets," he said.

Countering the argument that India, as a democracy, tends to be more sluggish in growth and liberalisation than the authoritarian China, Mulford said, "Democracies grow and develop differently than more disciplined systems, but that doesn't mean that they don't ultimately get to the same place or even better places."

The Bush administration appointee also spoke at length about his style of operations, saying that "as far as being the ambassador is concerned, I treated the job basically as a CEO job, where you are in charge of a large number of divisions."

He pointed out that the US mission in New Delhi was second in size only to the US embassy in Iraq.

Mulford said the Indian mission "has 25 different agencies/departments represented in it, and I treated those groupings in sections as divisions with certain business interests and duties, and decided that if I was going to be ambassador, I would need to be on top of every single one of those, instead of focusing on the official side of the relationship."

One of the most important features of his tenure, believes Mulford, "that proved invaluable for US-India trade and commerce relations was the formation of the CEOs Forum".

"That created a dialogue between real CEOs -- not vice chairmen, nor regional presidents, but the people in major companies who make the strategic decisions and commit capital."

He said he stuck scrupulously to this proposal "in the sense that I felt it had to be CEOs -- we could accept no less. They would then come to the meetings and we have to keep it from being a government forum and that turned out to be successful because what happened was the CEOs began to share ideas, and it was a completely safe vehicle."

"There was no bureaucracy, there was no secretariat. There was just dialogue," he recalled.

Mulford acknowledged that "senior people from both governments came to those meetings in every case -- at least three cabinet level people from each side -- and the dialogue helped open conduits, and it helped to deepen relations."

He said he didn't know it would "continue or not, but the point is, it was something that was a strictly private sector oriented exercise," which had proved highly successful in moving the dialogue in the trade and commerce areas and catalytic in some of the policy changes at the government level.