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SANDERS: Riches of the Indies go on the block

- The Washington Times - Sunday, August 1, 2010

David Cameron, the United Kingdom's novice prime minister, couldn't have expected to re-establish "the raj." But he hoped to burnish the British commercial image during a summer doldrums India visit.

He came loaded for the proverbial tiger — the biggest delegation since Indian independence 63 years ago, including Cabinet ministers, businessmen and sports stars. It would take all that to halt the slippage in U.K. trade and investment being displaced, in part by the United States, and others — not the least, ironically, the Chinese.

But like other commercial (and diplomatic) hopefuls making the pilgrimage, Mr. Cameron ran into "The East Asia Company Syndrome" — fear that investment will lead to untoward foreign influence. Not least, too, he walked into the India-Pakistan feud that dominates every decision.

Despite elaborate apologies for "colonialism," he committed a public gaffe — as some of his American cousins too often have — criticizing, in this case Pakistani links to terrorism, before an Indian audience. Not only would it muddle his Pakistan stopover (where he hopes to talk eventual withdrawal from Afghanistan) but delicate ties to monitor the U.K.'s 2 million South Indian Muslims too often linked to domestic terrorism in all three countries.

Mr. Cameron could be excused for stumbling. The terrain is rocky with Indian Prime Minister Manmohan Singh balancing a constantly shifting coalition, with the heir of the Nehrus, the widow Italian-born Sonia Gandhi, backseat driver as leader of his National Congress Party. She grooms her son, 39-year-old Rahul, for the fourth dynastic generation founded by his great-grandfather, the sainted Jawharlal Nehru, followed by his daughter, Indira Gandhi (assassinated by her Sikh bodyguard), her son Rajiv (martyred by a Sri Lankan Tamil Tiger suicide "black widow"), and Rahul's father.

Mr. Cameron didn't manage to see either.

He was exploring abiding hope that the massive 2009 win of Mr. Singh's congress against the Hindu-revivalist but business-friendly Baharat Janata Party would bring a major overhaul of the Soviet-styled Indian economy. Mr. Singh, a planning bureaucrat until his conversion to market economics on the road to the 1990 Soviet implosion, promised to sweep away the babu (British Indian clerks) and socialist protectionism in his own left wing.

But more than one foreign investor is still waiting — not least major retailers, such as Wal-Mart, which have played an enormous role in China's export onslaught on world markets. Over the past year, Mr. Singh shelved opening retail, pension and insurance sectors, not able to play host to any and all investors, which has been so much the key to China's success.

Still, Asia's third largest economy hasn't done badly. The International Monetary Fund projects 9.4 percent growth for 2010, slackening to a still-impressive 8.4 percent for 2011.

New Delhi, like Beijing, had hoped to escape the worldwide recession. But exports crashed; there was capital flight (not the least India's oligarchic capitalists heading for secure Western investments, particularly in the U.K.). The government went to stimulus to prop up the 6.7 percent in 2008-09. That has brought a growing inflation challenge now running at over 10 percent and even higher food prices.

But the return to growth raises an overwhelming long-term geopolitical question: Is India the tortoise against China's hare? Can its more modulated program — governed by minimum accouterments as the world's largest democracy — produce sustained long-term development now that China's rickety high-pace structure is under increased pressure? And, never stated openly, can an alliance between a rapidly industrializing India and the United States and its partners — Mr. Cameron out front — counter what is increasing suspicion of Chinese intentions?

Debate often ignores India's problems, even though they are constantly ventilated by a free media and no surfeit of domestic critics. However, only a few note the backwardness of China's vast majority in capital-starved rural areas.

But the horror of India's 650,000 villages, including 410 million Indians living at subsistence level — out of a population of some 1.2 billion, soon to surpass China's 1.3 billion — is constant. Mr. Singh's subsidies to bankrupt farmers, egging on the inflation, and the leapfrogging technology — well over a half-million cell phones and 130 million TVs for villagers who often do not have safe drinking water — ameliorates but only highlights inequities of one of the world's most skewed income distributions.

But that is only the beginning of India's woes. Nihilistic self-styled Maoists — that the prime minister has labeled India's greatest security risk, replacing the usual "Pakistan" — are building in a dozen Indian states with a confused government alternately seeking federal and state solutions. A half-dozen local independence guerrilla movements operate in the northeast — too close to Chinese-occupied Tibet where New Delhi had a short and disastrous war with Beijing in 1962.

As China's growing naval forces encroach in the Indian Ocean which New Delhi considers home grounds, a massive military buildup is under way.

Mr. Cameron's old-school try — Eton and Oxford, don'tcha know — probably wasn't up to more than denting all this. But he did make the effort and is likely to be followed soon by others, the United States and Germany.

Sol Sanders, veteran foreign correspondent and analyst, writes weekly on the convergence of international politics and business-economics. Contact him via e-mail at solsanders@cox.net.

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