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CII delegation under fire in US to justify optimism

Aziz Haniffa
India Abroad correspondent in Washington

A high-powered Confederation of Indian Industry delegation visiting Washington had its back to the wall in trying to justify its optimism regarding an ambitious 7-9 per cent growth rate of the India economy over the next few years. The scepticism arose from the fact that foreign direct investments, regarded as vital for the development of infrastructure, had waned considerably.

At a three-hour plenary session organised by the South Asia Program of the Brookings Institution, a leading public policy think tank in Washington, some American participants asked the delegation how India could record a growth rate over 6 per cent. They claim that FDI in infrastructure, particularly in the power sector, showed no signs of attracting foreign investment.

The delegation, led by the new CII president and vice-chairman of RPG Enterprises Sanjiv Goenka and CII director-general Tarun Das, was hard-pressed to explain why FDI in power sector would not worsen if Enron were to pull out of India.

Even former administration official Ray Vickery, ex-assistant secretary for commerce and the author of the much-touted report "10 Big Emerging Markets" that was published a few years ago and which included India and current officials like Matt Daley of the state department's Policy Planning Bureau, took the delegation to task saying that trade was abysmal and FDI in India, which was never significant to start with, has become even more insignificant.

The overall feeling was that the delegation was merely singing praises of the BJP-led coalition's commitment to reforms when there were no tangible signs of the economy going anywhere in terms of the growth rates that CII had projected and the power sector malaise was as bad as ever.

Goenka also admitted, "The real concern in front of us was the power sector. Reforms really need to take place and if we can achieve that, we can legislate rules and regulations that will attract higher investments in power and that in turn will see higher growth."

Acknowledging the fact that there are no opportunities to invest in power generation at present, Goenka added that this would be possible only after the state electricity boards become solvent.

There was also a consensus among the participants that if Enron pulls out of India, US investors would hesitate to invest in India's power sector.

Mark Riedy, a member of the board of the US-India Business Council, said he did not envisage any power plant in India for the next 10 years over 50 megawatts.

However, Goenka protested that India has not backed out of its contractual agreement with Enron and that "all the undisputed dues to Enron have been paid". He said that the Indian government and Enron were "willing to come to a reasonable agreement" on the Dabhol plant according to press reports.

Michael Gadbaw, vice president of General Electric and chairman of the India Interest Group -- a group of American companies with businesses in India -- complained that the political commitment of the present government and its predecessors was extremely weak.

"It could be measured really in terms of what the government says they want to do be it privatisation, foreign investment or economic growth," Gadbaw said. "If economic reform is ultimately a question of politics and if politics in India is all about elections, then why aren't elections ever about economics?" he asked.

To this, Das sprang to the defense of the National Democratic Alliance government asserting that since its advent there had been a sea change, "You see a huge commitment to business, to the private sector and to free enterprise." He added, "You see a government at the centre, which has made a complete U-turn in its commitment to economic reform. You did not expect this government to open up the insurance sector, nor did you think that defense sector would ever be opened up.

"What was the image? Swadeshi, isolationist, protectionist."

In response to complaints that India's pace of reforms is slow, Das reiterated, "We are not going to match your expectations on speed. We will do it our way. Things are happening a little faster than it used to, but maybe not according to your standards."

When the participants pointed out that India's trade has slipped, Das retorted, "you also went and hit yourself in the head with your sanctions." (The US government had imposed sanctions against India in the wake of the Pokhran nuclear tests in May 1998.) In what was termed as the "most spirited business parleys in recent years", it became extremely clear that though there has been a marked improvement in the political relationship between India and the US, the same cannot be said about American business with India. In fact, Daley predicted that these two tracks would proceed independently of each other.

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