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Business Commentary/Ashok Mitra

BJP will kneel before World Bank, and tout it as swadeshi

Atal Bihari Vajpayee is a part-time poet. So it is understandable the philosophy of a certain 19^th century poet holds an appeal for him.

"Do I contradict myself? Very well, let me contradict myself," said Walt Whitman in a ferociously combative verse. Post-Pokhran, Vajpayee, in the first cringing letter he wrote to the United States president begging forgiveness for the explosions, could not have been more explicit: it is not so much Pakistan, but the threat materialising in the form of the abominable dragon of the northern neighbour, he explained, that impelled New Delhi to "weaponise" its nuclear capability.

Not so, says a chastened Indian prime minister a month later: the explosions were never intended to challenge the great People's Republic of China, with whom India is determined to develop top quality friendship and understanding. Call it contradiction, or call it retraction, Vajpayee is aware that one gambit has failed and it is season to think up another.

Have a heart though, this ought to have been no moment for Bill Clinton to try out a cruel joke at India's expense. India and Pakistan must not, in his view, waste any more time; they must forthwith settle their problems with each other peacefully, and they should call in China to act as amicus curiae.

This proposal, Indian spokesmen were quick to respond, was outrageously insulting; even if the threat perception business is not raked up, how are Indians to forget that China was not only the main supplier of nuclear technology and material to Pakistan, but is also reported to be engaged at this very hour to improve the latter country's missile delivery system? Dash it, how could China in these circumstances arbitrate between India and Pakistan? How could the great United States of America stoop so low as to indulge in such a crude joke?

The overt insult apart, there is a further significance implicit in the American suggestion. A decision has apparently been reached by the US administration to allow China to assume the position of a major player in affairs concerning Asia, particularly South Asia.

The May explosions have therefore brought in their wake several disappointing tidings one after another. First, Pakistan's almost instantaneous response by detonating its nuclear device has put paid to the Indian aspiration to score a few substantive points over the neighbouring country in the game of comparative defence preparedness.

Second, the dream of forcing entry, on equal terms, in the exclusive nuclear club is shot into pieces: even if India now signs the Comprehensive Test Ban Treaty in the manner of a meek mouse, the situation will not change, both India and Pakistan will continue to be regarded as pariah states. The glory of arrival at the pinnacle has tickled the jingo spirit at home, but it has contributed nothing in the way of added international accolade or prestige.

The third unwholesome spin-off is China's gaining further ascendancy in the Asian skies, a happening precisely the reverse of one of the intended objectives behind the Pokhran II explosions, followed by the shocking American suggestion that henceforth China will adjudicate on India-Pakistan affairs, including Kashmir. Topping all other considerations is the threat of sanctions by the G-8 nations and the international financial institutions they control.

The overall effect of the economic consequences for the nation of the sanctions is, even as late as today, only dimly perceived by the ruling establishment in New Delhi.

As far as it went, swadeshi was a catchy enough electoral slogan. But it did not go very far, and the bulk of the swadeshi lobby, once the interests of the Bombay Club have been protected in large measure by the Budget, would not mind much to cross over to full-fledged videshi allegiance.

The infrastructure of the Bharatiya Janata Party's political strength is made up of layers and layers of middle class urban and rural support.

Swadeshi is alright, but their eyes are agleam with avarice for the foreign goods the satellite television channels advertise day and night. This was once upon a time the Congress's support base; in democratic politics the winner however takes all.

The "reforms" are, in that sense irreversible. The government will not only not dare to tinker with the ongoing process of liberalisation for fear of raising the hackles of the International Monetary Fund-World Bank combine; it will also have to take cognisance of the preference schedule of the opinion-makers in the country, including the media. The halving of the countervailing import duty of eight per cent proposed in the Budget is proof of the clout of the liberalisation lobby.

The ministry of finance in any case will fight tooth and nail on any suggestion to impose curbs on imports or reintroduce any other restrictionist measures on the exchange front.

Speculative pressures intensifying against the rupee, because of developments following the announcement of sanctions, are seemingly of no concern to the finance minister. Swadeshi be hanged, he is the last-ditch promoter of the free market ideology in all spheres including currency transactions as well.

The stability of the market, he has gone on record, is to him more important than the stability of the rupee. There is perhaps a lingering illusion that a falling rupee will push exports and bring in some extra foreign exchange to the country. Evidence of recently history does not support this optimistic hypothesis: since 1991, the rupee has been devalued to the extent of 150 per cent, but with no sizeable impact on exports.

And yet, there is no question the government faces an intense dilemma. It has still $ 25 billion of foreign exchange reserves in the kitty with which to defend the value of the rupee.

There is, however, a danger that speculators arrayed against the rupee are so strong that, even after throwing in most of these reserves in the maelstrom of the currency market, the sinking of the Indian currency cannot be avoided. The rupee has sunk and the reserves have touched the bottom; the government conceivably wants to avert such a denouement.

Does it have too many alternatives at its disposal? It is lunacy to assume that the G-8 sanctions and the judgment of the credit rating agencies like Standard and Poor and Moody's notwithstanding, direct private investment will flow in gushingly as to more than compensate for the blockade of the government-to-government financial accommodation.

The sentiment in the share markets is also bound to continue to be bearish. The tendency could spread among foreign institutional investors and non-resident Indians to repatriate, in view of the falling rupee, their short-term investments in India. The foreign exchange holdings will therefore be further squeezed. This in turn will itself drag down the external value of the rupee even more.

India is famous for lolling in contradictions. It is, let us not forget, the land of tolerance and easy virtues. Since principles and ideology have currently a low premium, one can travel from the Janata Dal to the Rashtriya Janata Dal to the Bahujan Samaj to the BJP in the course of a single day's permutations; not one eyebrow will be raised.

Similarly, you can be a paid minion of a leading capitalist family, serving its cause faithfully and well, and at the same time officiate as general secretary of the Samajwadi Party.

Contradictions have been reduced to such a triviality that the daughter of the said capitalist family can be seriously considered for a seat in Parliament on the Samajwadi Party ticket thanks to the efforts put in by the minion.

Therefore it should not cause any surprise if sooner or later, sooner rather than later, hemmed in on all fronts, the BJP-led government will totally capitulate to the G-8 nations and the World Bank-IMF combine.

The videshis will take charge of the economy lock, stock and barrel; with no sign of discomfort, our government will call that a great swadeshi conquest. At that juncture, the rupee will perhaps settle at 75:1, or, if you prefer round figures, 100:1.

Ashok Mitra