India in the world

The economic slowdown of last year worried all and sundry. All global summits and interactions were dominated by efforts of finding a solution to this crisis. But there is one more threat that is bothering everyone which was talk of the town at every meet and that is climate change. India did well at some places, but the over all climate was gloomy.

Consumer Electronics Show at Las Vegas: India attracted much attention at the CES, one of the world's largest trade fairs. India was seen as a viable market by companies like FlatWire Technologies and iGo.

Among 3D televisions, gaming technologies and dancing robots, many products and booth sizes reflected the austere economic times. Queues for cabs and shuttle buses were shorter than last year.

Arizona-based iGo launched a laptop charger with green technology, which charges devices and retains power for coffee makers and others, even after virtually eliminating consumption of vampire power.

There were 2,700 exhibitors, 300 less than last year. The number of attendees was also down to 130,000 from 141,000. These were manufacturers, retailers, buyers, press and analysts from 140 countries.

World Economic Forum: The WEF took place in Davos-Klosters, Switzerland from January 28 – February 1, 2009. The global financial meltdown continued to throw up new questions on economic policies, particularly regulation. One of cochairs warned that resolution of current global financial meltdown will take long if drastic actions are not taken. HSBC Group Chairman and another co-chair Stephen Green said that the process of reforms has to continue and the world community has to realise that the global economy needs re-balancing. Maria Ramos, co-chair from South Africa, said it is interesting to see Keynesian economics back after being out of fashion for 20 years.

Anand Mahindra, co-chair from India, hoped that multistakeholder solutions will emerge to deal with the crisis. "You have to know and have a consensus where you are heading. The endgame has to be a new world, so you have to collectively define it and then only you start growing together. There has been a lot of speculations over the last few months about whether India and China could decouple and toe the boat of world to safe harbour, he said. "The answer unfortunately is no. I think it is correct that nobody of any significance is decoupled."

The common themes that ran through the meetings were the limited capabilities of the governments to deal with the crisis, the urgency for a global breakthrough and the threat of a backlash to the excesses of Wall Street.

Speaking on Satyam, the country's government and corporate leaders described the multi-crore Satyam scandal as a one-off incident and said bigger frauds have happened in other countries and assured the global audience that India's regulatory systems are strong. Mallika Sarabhai received the Crystal Award at the World Economic Forum. She said: "I am told that every year all they (at the WEF meetings) would talk about was stocks and shares, and suddenly this time they are talking about injustice and so on. It required a crash to make people think of 70 per cent of the world that is in a financial crisis all the time, then I think it is a great thing."

Exposing Swiss Bank: One of the major news of the year was controversy over secrecy clauses of Swiss bank. Swiss bank accounts have always been synonymous with secrecy. The US government asked Switzerland’s banking major UBS to reveal names of American accountholders. The US administration filed a lawsuit against the Swiss bank, demanding the entity to provide details of as many as 52,000 accounts.

This led to many other countries, including India, ask for information on their citizens. Seen as a safe haven for the super-rich to stash away their wealth, Swiss accounts have always been shrouded in secrecy. The Indian government has approached Germany to know whether any Indian is an account holder in the Switzerland branch of Germany-based Liechterstein Bank. "The Central Board of Direct Taxes is pursuing the matter, so is our ambassador to Germany," Bansal recently said in the Rajya Sabha replying to a debate on the Prevention of Money Laundering (Amendment) Bill.

Switzerland’s financial regulator – Swiss Financial Market Supervisory Authority (FINMA) - noted that charges of tax fraud against UBS could have even put the very existence of the entity at risk. The regulator pointed out that to avert drastic consequences related to the tax fraud charges, it has asked the Swiss bank to give away limited data about clients to the American authorities.

IPL broadcast rights to Sony for eight years: Last year when the twenty-twenty cricket tournament, Indian Premier League (IPL) became an instant hit with the crazy fans of the game, no one would have ever imagined that the very next year they would not see it at their home grounds. Yet, in an uncertain world anything is possible and after days of confusion,the second season of the league was held in South Africa. The Board of Control for Cricket in India (BCCI) decided so after failing to get security support from the government due to the general elections. While team owners were unanimous that it was better to have the tournament anywhere rather than not having it, some of the advertisers were disappointed that with the tournament being held overseas they had to re-work their plans.

For the BCCI it was not only the schedule and venue which was a headache, but it had also to knock the doors of court to settle broadcasting rights issue with Multi Screen Media (former Sony Entertainment Television). Ultimately, the two partners agreed for an out-of-court settlement with the latter bagging the rights for Rs 8,200 crore in a fresh nine-year deal running through to 2017. Realising that fighting it in the Bombay High Court will take long, when it actually cannot afford to lose more time, BCCI and MSM reached this agreement. . The new agreement, which was over twice the earlier deal signed last year for 10 years between the two parties, gave MSM the exclusive audio visual rights (in India) to all the 59 matches of the second edition of the cash-rich IPL.

Gas pipeline: Where’s India?: S-sanction hit Iran signed an agreement with Pakistan for exporting natural gas from its giant South Pars gas fields through a pipeline. India which was originally part of the US$7.4 billion Iran-Pakistan-India gas pipeline project, did not become part of the agreement but the Islamic nation has kept its door open for New Delhi joining at a later date.

With India boycotting trilateral talks for almost two years, Tehran and Islambad on May 24 inked a bilateral agreement. The deal was signed in Tehran by its President Mahmoud Ahmadinejad and his Pakistani counterpart Asif Ali Zardari, on the sidelines of a trilateral summit on Afghanistan security.

According to the agreement, Iran will initially transfer 30 million cubic metres of gas a day to Pakistan but will eventually double it to 60 million cubic meters per day. First gas is projected to be delivered in five years.

The WTO dilemma: Over 30 ministers met in Geneva in July 2008 and they continued to talk for nine days in search of a deal to break the duty and other barriers for the world trade, under the Doha Round of negotiations. The talks collapsed on the ninth day and the trade ministers packed up and left the headquarters of the World Trade Organisation in disappointment.

Apparently, India did not budge under the pressure of the US and stuck to its stand that it needs enough flexibility and room to safeguard its farmers in case agricultural imports surge after the Doha deal is reached.

The US led the tirade against India and other rich nations joined in asking New Delhi to take up a "leadership" role. They wanted India to open its markets. But when then Commerce and Industry Minister Kamal Nath stood ground and India was tagged with the image of a "fall guy".

Fourteen months after the July fiasco, ministers agreed again to meet. This time in New Delhi under a "bold" initiative of India which, somehow, wanted to get rid of the "fall guy" image.

Of course, that was not the only reason why commerce and industry minister Anand Sharma, under guidance of the Prime Minister's Office, went into the small details for being a good host to about 30 trade ministers, including the 'big bosses' – the US and the EU. The initiative paid off and Sharma called it a "breakthrough" because the key nations which wield enough influence on the rest of 153 WTO members, decided to send their negotiators to Geneva from September 14. Director General of the multilateral body Pascal Lamy commented, "We have not had real engagement (since July 2008). It is time to go back to real engagement".

The Delhi meeting also put a sense of urgency among the ministers into reaching the multilateral pact within 2010.

Who’s century is it?: China has been the fastest growing economy in the world for several years. India has caught up to be at number two, growing between six and eight per cent for the last seven years. Between them, they are home to a population of over two and half billion of whom hundreds of millions can afford a decent middle class life- style offering market opportunities to cross border companies. Yet neither India, nor China or for that matter, none of the other emerging economies like Brazil found place on the global architecture for economic cooperation. In a way, navigating the world economy was the prerogative of the Group of Eight, which had earlier expanded from the G-Five.

So, while it was the US where the global financial crisis erupted and worsened in Europe, people in all parts of the world, including India, China, Brazil – the mascots of emerging economies – suffered as their export markets melted and they found less of foreign direct investment for keeping up the growth momentum. Yet, they kept the momentum on, thanks to their vast domestic market and ability to keep the costs of production low.

But then, the wisdom finally dawned on the highly industrialised and rich nations as they realised that they have long saturated their growth potential. They thought they must look out and reach out to the dynamic world, which has to grow only, along with rising aspirations of its people.

It took three meetings of the Group of 20 at Washington, London and Pittsburgh to send G-8 into history. A larger and broader group is in the driver’s seat of driving the world economy. The message in the Leaders’ Statement at the end of the Pittsburgh meeting was mirrored in a While House statement which said, “Dramatic changes in the world economy have not always been reflected in the global architecture for economic cooperation. This all started to change today. The G20 leaders reached a historic agreement to put the G20 at the center of their efforts to work together to build a durable recovery while avoiding the financial fragilities that led to the crisis”.

Expansion of the G-8 into 20 is not symbolic. The evidence was in the Pittsburgh declaration which resolved that the developing countries should have more say in running of the multilateral financial institutions like the World Bank and the International Monetary Fund. Five per cent of the quota share of the developed countries in IMF would be shifted in favour of the developing nations giving them more voting rights.

So far India is concerned, Prime Minister Manmohan Singh should be a satisfied leader. After all, all that he wanted was heard and found a place in the G20 leaders’ declaration. The financial stimulus packages implemented all over the world, should not be abruptly withdrawn, that is what the Prime Minister insisted. The leaders agreed to do that, stating that the “exit strategy” would be determined in a coordinated manner. "In the short-run, we must continue to implement our stimulus programmes to support economic activity until recovery clearly has taken hold..." the leaders said.

Indo-Asean FTA: India has signed a free trade agreement (FTA) with the 10-nation Association of South East Asian Nations (Asean) in Bangkok, Thailand. The Indo-Asean FTA would eliminate tariffs in over 4,000 goods, out of the 5,000 that are traded, in phases over the next six to ten years. Tariff cut on around 600 products will be partial, while on 489 goods there will be no tariff cut.

Many have expressed their fears that signing of this agreement would harm India’s domestic economy, particularly agriculture and fishery, because markets will be flooded with competing foreign goods owing to tariff elimination on as many as 80 per cent of the goods that are traded between India and the Asean countries. Signing the agreement without proper discussions in the parliament has also irked many. Asean produces some of the crucial products that Indian producers depend heavily upon — tea, coffee, pepper, rubber, edible oil and marine products.

The big eight: The Group of Eight (G8) meeting brought the debate of nuclear issue into the fore. In a separate statement, the G8 banned the transfer of enrichment and reprocessing (ENR) items to countries which have not signed the Nuclear Non-Proliferation Treaty (NPT) that includes India. The ban, encouraged by the US itself, effectively violates the promise of full civil nuclear cooperation lying at the heart of the 2005 India-US nuclear deal.

It was less than one year ago the Nuclear Suppliers Group (NSG) waived its export rules to allow the sale of nuclear equipment, fuel and technology to India. The NSG has agreed to a full exemption allowing all kinds of nuclear exports, including sensitive fuel-cycle-related items and technologies, provided they were under safeguards.

The 123 agreement had the disadvantageous ‘right to return’ clause. Furthermore, the chance for India to enjoy enrichment and reprocessing (ENR) items sale was made quite remote and the provision for reprocessing of spent fuel was unrealistic from practical point of view. On the other hand, the NSG waiver made nuclear trade with US competitors, like Russia or France, more profitable for India. In short, the NSG exemption made American nuclear vendors less attractive than similar purchases from some where else. This realisation irked the US legislators. As a diplomatic solution, the Obama administration decided to delink the question of ENR sales to India from the NSG process.

The latest ban would however not restrict India’s ability to purchase nuclear fuel and reactors from the G8 or NSG countries, provided that the core bargain contained in the ‘India exception’ decision last year is not further diluted or tampered.