INDO-US TRADE

Sky is the limit; fear about America 'baseless'

INDIA should now exploit to the fullest extent the opportunities being thrown by the New Strategic Partnership with the US unlike in the Cold War era when the country was closer to the erstwhile Soviet bloc, the policy that provided China an opportunity to open up and expand trade with the US. "Once the door is opened up fully and restrictions are taken away, I think the sky is the limit", says Mr. Ranjit Sen, President of the Indo-American Chamber of Commerce. In last two or three years the Indo-US trade has more than doubled and it is going to triple, he feels. "The fear that America will flood our market with their goods and take over everything is absolutely baseless. America will not gobble up. India has its inherent strength and probably if we assess product by product, service by service, a Free Trade Agreement between these two countries would be highly beneficial for Indian trade and industry. We have nothing to fear," he said in an interview with Amitabha Sen.

AS: How would you like to term the first phase of Indo-US relations under President Bush?

RS: In the first phase of President Bush so far as Indo-US relationship is concerned, one finds a significant change in the total approach towards our bilateral relationship. Going back a little, the first term of Clinton era was clouded in mistrust. Second term witnessed the Clinton administration opening up gradually. India also opened up with the collapse of the Soviet Union. So, the first term of President Bush was very good for India. India saw  lot of business in software, BPO, technology business and general trade. The Bush Administration has helped India a lot in achieving this. This is now an ongoing process.

In the earlier years the inaction between India and the US was largely due to political reasons Ė either of our govt. or the US govt. This inaction had been long standing in the way of expanding trade relations between our two countries. With the changing stands on both sides, the commerce and trade have started expanding. The initiatives being taken by the Vajpayee govt. are being taken forward further by the Congress led UDA government under the Prime Ministership of Dr. Manmohan Singh signifying continuity in the policy matters unlike earlier years when one government after coming to power used to change the previous governmentís policies.

AS: Now you find a stability in the Indo-US relationship?

RS: Yes. The stability is there now. The question is how far the political door will be opened by India and the US? The commercial people, the trade people, the technology peoplesí future plan and prospects would be largely influenced by that. Once the door is opened up fully and restrictions are taken away, I think the sky is the limit. In last two or three years the Indo-US trade has more than doubled and it is going to triple. I am confident about that. Things that did not take place in 30/40 years will now taking place in two-three years.

There are many facilities that India and USA enjoy in common. We are the two largest democracies. We both speak in English - for trade, commerce, politics. Our legal systems are  understood by each other which has a common source of English Law. All these give confidence  to both nations. The political will, not only of our govt., but our political parties as well, were very restrictive till Indira Gandhiís regime. With the collapse of the Soviet system, things have started opening up, The US government also has reservation on India even now because of policies like non-alignment, left influence and others.  Both had doubts so all the advantages were lost. But now large part of mistrust is gone.

AS: Are Indian business and trade ready to encash the opportunities with the opening up of the market?

RS: Indian businessmen will pick up very fast because they know where the demand is. On the one side there is China and on the other the USA. Indian business community knows that. But while Indian businessmen and trade are well aware of the US market, American aware ness of India is very poor. Another main advantages that India failed to realize till now is that the US is basically wary of  communists and being a buffer go between China, India could have enhanced trade with the US long ago. Today however the situation  has changed a lot. The Sino-Indian trade is also increasing significantly. But we had lost this opportunity while aligning with the Soviet bloc. Now the Soviet bloc has disintegrated and we are also often. Sooner we enter Free Trade Agreement with the US better for Indian and American businessmen.

AS: What could be the probable impact on the recent Defence cooperation agreement signed between India and the US  on Indo-US trade and economic relationship?

RS: The commercial and trade people need not be bothered for what is happening in the Defence front politically as long as that is advantageous to their trade. I am not talking about Defence supplies. But for SMEs, the next order of the day, the greatest  facility will be removal of restrictions as soon as possible. The question of arms deal, aircrafts buying are political matters. This is not an exception to India alone. It happens in all countries and such decisions are taken politically keeping in view various national and international factors. These are unavoidable. There is no denying the fact if you spend less in Defence more resources will be available for various developmental programmes but you cannot expect such an ideal situation because of complex international situation which has been aggravated by acts of terrorism. But by virtue of this Defence deal if commercial people can gain and do better trade with the US I would say let them do it.

AS: You mentioned about FTA. Do you think India is prepared for FTA as that calls for absolute free market economy? Is India up for that?

RS: Once upon a time you could not imagine that so many countries in Europe would open up their borders and would converge into one community called European Union for trade, commerce, currency and now  they are talking about common Constitution also. They are educated society, still it took lot of time to arrive at such a situation. The currency problem is yet to be solved and that shows that they want to  maintain their individual entity yet remain united. In our case it should take longer time to have FTA with the US but sooner it takes place, the better. It can happen very fast, because now many technologies and economic barriers are being hopped, skipped and jumped. What took 30 years before, it is taking three years today.

AS: The general apprehension in India is that the domestic market and industry would suffer seriously if FTA is put in place. Your views please.

RS: This is the fear of of the politicians and certain section of industry who have all these years enjoyed protection and became inefficient.  The fear that America will flood our market with their goods and take over every thing is absolutely baseless. There are two points: whether we can do it very fast? Yes we can do it fast. Whether America will gobble up everything? No. America will not gobble up. India has its inherent strength and probably if we assess product by product, service by service, FTA would be highly beneficial for Indian trade and industry. We have nothing to fear.

Today America is scared of China, I am not talking about fear of  physical takeover but fear of economic risk. China is flooding the US market with their goods. India can do the same. America should be more concerned and not India. Why are we putting restrictions?  We should say we are ready. I do not think we will lose. If America wants FTA in various products, we should go ahead and we should take the risk. We also apprehend that Agriculture will suffer if we open the market. No.  After the Green revolution, we are producing enough foodsgrains. So far as agriculture subsidy being given to the exporters by the developed countries, subsidy has to be removed under the WTO rules. Itís a matter of time. This is a semi-legal matter which we can resolve, we can stop.

It is not possible for America to flood Indian market with foodgrains. Today Australian apple is coming, Chinese orange is coming. They are highly priced and who is buying them? A few people who can afford to buy that. Production of everything in India will be cheaper. We will have to think only about proper quality and service. If anybody is to fear about FTA between India and USA, it is USA to fear and not India.

AS: Do you find any major policy shift from the previous Vajpayee govt.? 

RS: I donít think there is much difference in the policy of UPA government led by Congress and the erstwhile Vajpyee govt, other than Hindutva. The PSU disinvestments implementation is being impeded by the Left. They are putting pressure on the UPA government not to implement it. This problem of the UPA govt. is understood by the US government. They are not fools not to understand this. They also understand the fact that Indian govt. has not backed out and the policy and the vision of liberalization or globalization is there. These are the hazards that governments suffer and this will go on. On the one hand the Left is welcoming American investments in West Bengal, on the other, they are impeding economic reforms in rest of India, thus following a double-standard policy. Besides political problems, labour problem is really a serious issue which is hampering our growth and development. Issues relating to the Exit policy, the Labour Policy should be sorted out by the Indian govt. at the earliest.

AS: India has started economic reforms in early 90s which is punctuated by protests, pressures by from various political parties, the Left in particular. Do you think reforms is possible without tears?

RS: Reforms without tears is not possible. Some people will cry. Some people who are not fit for the changing demand will always cry. We all will have to accept the fact. You cannot please everybody but the greatest good of the greatest number has to be seen. Even after 50 years of Independence we still have rural debt, we still have bonded labour, still foodgrains are rotting in warehouse, the uneven distribution of foodgrains still there. It is our own problem, created by us. No body has imposed this on us . We will have to solve it. It is a curse to us. It is our political system and bureaucratic system which is continuing to drag us down.

Reforms cannot  be done without tears. May be ironically Democracy is preventing reforms. If somebody reforms the system he will be voted out of power. Average people in rural India which constitutes 80 percent of our population still lives only on hopes. One party or alliance of parties comes to power with some pre-poll promises and when fails to deliver the goods. So, it is thrown out with the hope on another party. The circle goes on and on. 

AS: In such an economic scenario, can economic reforms succeed? 

RS: If we compare with Europe, what was it after the Second World War? It was devastated, it was rubbled. No agriculture, no industry, no housing. All flattened. From that stage they have grown to the stage you find today. In Second World War India was unscathed, not a blemish.  May be one little scratch and nothing else. From there if you see Indiaís progress and if you see Europeís progress, we have progressed little. Though today we rank tenth in terms of GDP in the world but this GDP is not shared by 80 percent people of the country. They are probably producing 80 percent of GDP but sharing only 20 percent of GDP.  This imbalance is continuing even today and much more significant is that this imbalance is not much different from what was 50 years ago in real terms, compared to the rest of developed world. 

AS: What is the potential of India as a resource supply source  for America? 

RS: America should realize the huge potential of Indian market. Itís more than a billion population market. It is unthinkable. If you want it to be created, the purchasing power of the people could be created fast. If you donít., then the country will continue to reel under what it was 50 years back. If there is cooperation between these two countries, cooperation in technology and services Ė Indian farmers can produce much better quality agro products. America has gone into different dimension of agriculture- they are concentrating more on research and development leaving behind primary things like production as it has become costlier there because of the labour cost. In India if we can do it at 50 percent of what agriculturists are getting in the USA, India will be a gold mine. The US is not looking towards India from salesmanís perspective. America is not a great exporter because their home market is so huge that they are not interested in exports. They are importing from every country in world and comparatively exporting less. Their balance of payment is adverse with almost every country.

Indian Human Resource, is one of the greatest resources. More than oil, more than minerals and other resources- it is largely being neglected. India is in a position to cater to so many things, not only software. But for the govt. restrictions, India could have tapped the huge potential that the US market offers today. We could send carpenters, we could send taxi drivers, we could send nurses. There is need for basic facilities but because of VISA restrictions Indian can take on that service sector. American fear is that our people will go and not come back, so that is standing in the way. Probably these are things which should be addressed. If full human resource is harnessed then India should be in the first three in the world in terms of GDP. Such is the potential. 

AS: Talks are going on about fair globalization. How fair it could be? 

RS: Fair globalization. What is fair and what is unfair. There is  nothing which is totally fair or totally unfair. In the name of unfair globalization, just out of fear or only out of your own self reservation of our own government, we are disallowing free movement of trade and ideas. That itself is more damaging and self-defeating. That is more damaging than thinking that there is unfair globalization. 

We have to open up. The world today has to be one world and sooner that happens the better. And it has partly happened. Probably leaving Africa, others are coming together. Asia too has now come in the orbit with rest of the World and the western world has sat up and is worried about the emergence of a powerful Asia. That is good competition. Good competition is good for the consumers. Asia is in the orbit. The Eastern bloc also has come into the orbit of free trade and globalization. Western Europe was there. America was there. Africa has to come into the orbit and South Africa has to take the lead there. 

AS: Why American investments in China are far larger than in India? 

RS: While we have been continuing our love affair with the Soviet Bloc, China quietly opened up to the Western World and Asia. Though politically they are communists, but they made sure that politics does not interfere with the business world. Hong Kong is a glaring example. In India, in business, whatever you do, there is political interference or impediments. This process has been propelled by irresponsible trade unionism. This is not allowed in China. There is no trade unionism. America, Germany, France, UK all are aware of huge human resource available in India and utilizing that they can get things done -starting from tennis Rackets to shoes to machineries - at half the price. Large American and German companies are manufacturing products at half the cost in China and selling it back to India. We were closed. We did not allow them to set up facilities in India. I do not understand if some one wants to put in money in my country and if that helps in creating job opportunities why should we think that he has come to exploit us. We still have the bureaucratic set up, FIPB, to decide whether someone should be allowed to invest or not. After all, the people who will work in that industry, people who will supply raw materials or buy finished products are all locals. Whole economy will grow. That is why I call it insecure bureaucracy.  

Some political leaders fear that  that if Americans invest here, put up non-labour intensive projects, there would be huge job loss. Such wrong messages going out to the investors overseas is most damaging. There may be job loss in one or two industries but ultimately that would augment greater employment opportunities in industry down the line as a whole. The employment scenario in China is much better than Indiaís. Why? Because the country has allowed  FDI and allowed others to put in production facilities there. 

AS: Do you think India is over depending  on the US? 

RS: A sea change has taken place in the Indo-US trade relations in last two three years. The Indo-US trade has grown several times from US$5 billion to US$15 billon and now it is going to US$20 bn.  Currently India is having surplus balance of trade with America. India has to help out USA to reduce the trade gap. The question of over dependence does not come. Commercially we must know where to cooperate or where to cooperate less. This is part of the process. Are we not buying fighter planes from France?

We alone are not depending on USA. The whole world is depending on the USA. Can you cite one country which is not exporting to the USA. It is such a huge market. A time may come, when with the increase in purchasing power, India can become a mini USA. Who knows? Today US is superpower not only in armaments, but also in consumption of goods. I do not think Indian govtís decisions are prompted by the feeling that a super power like the US is behind it. Neither I think that it will do any harm if that kind of feeling influences Indian govt. Let us be open, transparent and frank and let us do business. With more business, will come more understanding. If Sino-Indian business grows, the border problems and other problems would disappear. Today the great control and power is economic power. Economic exchanges will dilute all other borders to a great extent.

Sky is the limit. Definitely the trajectory will be up, it  will be quite steep up. Indiaís trade with Europe is not going to grow that high because the Eastern bloc is opening up, which was not there before. Eastern bloc is attached to the Western bloc logistically. There labour is also cheaper. That huge labour force, huge skills so long suppressed have suddenly opened up and thatís near to Europe. Logistically, they will first make use of that, already they have started making use of that. India has lost many businesses in Europe. I think Europe will concentrate more within Europe and Asia will collaborate with the US. And that is happening. India must get on into this game. We are losing out to Thailand, we are losing out to Malaysia, we are losing out to Korea. We must get on into the game whereby our trade relations not only with the US, but with the Americas strengthen further.

So far Pakistan is concerned, the country commercially was never as important a market as India in the eyes of the US. Rather all these years India stayed away from the USA. Today I am happy to say that policies are positive and there I do not think that the Bush govt. and probably the govt. thereafter will have any reservations to do business with India. And let the Americans do business with India as well.

Let us follow the outcome of our PMís visit to the U.S. and hope the doors are opened wide for business to take place unimpeded. 

July 22,  2005