I had said in my last column (FE, November 10) that India?s interests lie in harmonising financial rules with growth and in stabilising the growth process. I have also said that India will find it possible to work with South Korean initiatives of rules-based policies, after taking care of the outliers. The FM largely supported this position in Seoul in October. Since the last week of October, however, events have moved fast. It is difficult to predict the outcomes and yet, the mindsets at play need to be recognised to understand the process better.
East Asians, particularly at the younger level, largely American-trained and brought up in the Washington Consensus tradition, talk straightforward neoclassical rules. The meltdown of the late nineties and the perfect storm of the last three years are just blips to be countered with transparency, safety nets and neoclassical trade policy rules. Even in the professional discussions at Seoul, it was obvious that the end of the tunnel was not clearly in sight, specifically in terms of well-thought out processes rather than so-called measures. But the policy baazar doesn?t go by all this. With deadlines for a communiqu?, who has the time anyway? As for the East Asian strategic policymaking framework, this narrative goes back a long way, including how South Korea adapted this framework and how Deng Xiaoping modified it. In 1982, I was the deputy leader of the first delegation sent to China after PN Haksar and a senior Chinese policymaker negotiated normalising relations. Deng was clear on the change China was to go through in the next three decades, offering a superb tour de force of strategic policies.
I saw the same mindset in South Korea in 1988. That year, their president sent an emissary to meet PM Rajiv Gandhi. They wanted to diversify their trade links beyond Japan and the US and saw the nineties as the decade of India. This was when the whole world still saw India as a basket case. I was sent by the PM. Park Sung-sang, then the central bank governor, in response to a question on comparative advantages said, don?t talk that language. Do what you want to do but do it well. Beginning with South Korea and Singapore, the concept of concentric circles of influence and prosperity is transformed today, as seen in India?s proactive stand in East Asia. As we build agreements with Malaysia and Japan, India?s strategic connections are important. But the interesting thing is that while at one level the Koreans and the Chinese at younger levels talk Bretton Woods rules, they still work with a strategic mindset. So, Korea?s topmost G20 meeting organisers, much to the chagrin of neoclassical commentators thronging the sidelines of Seoul, seriously talk of harmonising growth with financial rules. In one meeting, the reply to my question on the difficulties of doing this took the maximum time.
Finally, India is doubly blessed in all this. We know our neoclassical economics but apply it in a world inherited from Nehru Chacha. I say this knowing that he is not popular with some parts of the establishment. I agreed with IG Patel when he defended our policies on energy, the basket of currencies and agriculture in the early eighties and said our biggest mistake was to ignore Japan.
I am not at all surprised that the PM defended Ben Bernanke?s attempts at refuelling the American economy and saying that this is in global interest. He was setting the stage for India to matter this week. Another big change that not many understand is that Barack Obama has a vision and will fight for it. Its strategic implications are dimly seen, particularly after the shell-racking he got in his own words last week. But, as was the case with Rajiv Gandhi, Obama?s agenda is for the next few decades.
The author is a former Union minister
