The long haul

IT WOULD APPEAR a natural inclination for spokesmen of the Government of India to exaggerate the economic significance of the first-ever India-European Union Summit which concluded at Lisbon on Wednesday. The idea that India and the E.U. can make a common cause on the issues relating to globalisation and particularly the contentious bid being made by the developed countries to induct labour and environmental concerns into the agenda of the WTO is inherently flawed. This is not, however, to detract from the value of periodic interactions, at the highest political level, between India and the 15-member E.U., for the purpose of strengthening and enhancing cooperation in diverse sectors such as industry, science and technology, education, health and tourism. As the Prime Minister, Mr. Atal Behari Vajpayee, pointed out, the E.U. is fast becoming a new ``pole'' in an evolving multi-polar world. It would therefore be in India's larger interests to fashion bilateral relations with the E.U. to accord with the changing realities of the international political and economic order. That the Lisbon Summit has heralded a new era of interaction between India and the E.U. needs to be acknowledged.

At the economic level, the E.U. represents a major trade partner of India accounting for as much as 25 per cent of India's total global trade. However in the post-liberalisation period, the E.U. has not been a predominant participant in foreign direct investment in India. The share of the E.U. has been less than 25 per cent of the total FDI approvals of $ 45.9 billions during 1991-98. In terms of actual FDI inflows, the situation has been none too heartening with the major E.U. countries - U.K., Germany, Netherlands and France, for example - contributing hardly $ 3 billions out of total inflows of $13.3 billions during 1991-98. At his interaction with the E.U. industrialists in Lisbon on Tuesday, Mr. Vajpayee seems to have conveyed his sense of dismay over the rather meagre translation of FDI approvals from E.U. into projects in India. Whether the E.U. business community itself was taken aback by the Indian Prime Minister's ``something must be done'' track or not, the fact remains that the disconcerting record of FDI inflows into India (in comparison with that of other developing countries such as South Korea, Chile, Thailand and Malaysia not to mention China and Brazil) has a great deal to do with policy vacillations and infirmities both at the national and State levels.

It is quite well known the India's enormous appetite for investments in infrastructure - telecom, hydro-carbon, highways, energy and ports - cannot be met except through multilateral and global FDI funding. Yet, the cobwebs in the policy regime have continued to deter foreign investors. The Governments, at the Centre, no less than those piloting the destinies of the people at the State level, have allowed themselves to be trapped in a schizophrenic mindset - talking bravely about reforms in the power sector, telecom, highways or whatever while tenaciously clinging to the institutional structures and subsidy culture spawned by the controlled economy paradigm of the past. It is all very well to broadcast the political hazards involved in a rapid thrust towards globalisation or the dictates of a vibrant democratic society forbidding economic reforms on a fast track. But to believe that foreign investors would willingly flock towards India at a time when many other developing countries are putting their acts together at a faster pace to attract FDI would be to foster illusory hopes. It is for Mr. Vajpayee and the members of his Cabinet as well as for Chief Ministers of the different States to clear the decks for more rapid FDI inflows in the country. There is certainly no danger of any foreseeable inundation through FDI!

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Section  : Opinion
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