Saturday, September 09, 2006

keeping up with the joneses

When reporter Ed Luce (whom I've never met, in case you're fantasizing about some Year of Living Dangerously-esque foreign correspondents' club) launched his new book about India "In Spite of the Gods" last week, he made the interesting statement that India is unquestionably emerging as one of the most important countries in the world, but it remains strangely obsessed with getting the stamp of approval from its former colonizers and (increasingly) the good ole US of A. (Clearly I'm paraphrasing). I wasn't in attendance, so I'm not sure whether Luce elaborated on this point. But I think it bears some thought. In the arts, for instance, why is it that the true mark of excellence in Indian letters is a publishing contract from a house in the UK? Yes, there are at least two very good reasons -- the UK houses pay real money in advance and to a degree they have standards, while the Indian publishing business is a hair's breadth away from a vanity press. But I think it cuts deeper than that. Witness the fact that most of these books are peddling the same tired cliches about India--arranged marriages consummated under banyan trees or on the backs of elephants with lots of cardamom, coconut and chili thrown in for good measure. Each one of these very low brow books is greeted with great fanfare as though it has something new to say, when all but a very few are the made-for-television versions of better works. Representing a big market is great when it inspires a Nokia or Honda to come to India and open up a factory that employs thousands of people, despite an unfriendly business climate. But when it means publishers churn out execrable tripe and call it literature (OK, I won't name names), something has to be done.

Speaking of Nokia and Honda: now to touch on an area that Luce more likely had in mind.

One of India's public obsessions over the past four years that I've been paying attention is its dearth of FDI compared with China. I am nearly certain that this obsession is another manifestation of India's desperate need for validation from the West, stemming from countless articles comparing India's rise unfavorably to China's. But too little attention has been paid to the purpose and risks of massive FDI, as India races to keep up with the Joneses next door. Though it is more liberal today, China extracted MAJOR concessions from foreign companies for the first few decades that it allowed foreign investment, parlaying a foothold in its giant market for technology and preferential trading terms. Today, India appears to offer more sops to investors than China, without clarifying how it will benefit from the trade-off. Why? Is India's big market less attractive than China's? Is India in 2006 so much less a draw for capital than China in 1996? Moreover, is FDI the only way to growth?

The most recent manifestation of this way of thinking is the new "unlimited" policy for special economic zones. Not satisfied with an attempt to turn Mumbai into Shanghai (note the goal!), now India wants its own 4,000-odd SEZ to match the neighbors. And to do so, planners are willing to forego petty matters like collecting taxes while they make a few rich industrialists hundreds of times richer by giving them land to develop--in full knowledge that perhaps 65-75 percent of it will be turned into residential property or malls, rather than employment-generating industries. Bear in mind, folks: When China launched its SEZs, the government owned all property, there was 100% employment and housing for all and there was no such thing as a private residence.

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