Now PM has to convince Sonia Gandhi that opening up is Good

As US President Barack Obama concluded his four-day visit to India this week, the question on everyone’s mind was whether India had been astute in dealing with him or got carried away with his oratory and charm.
Would India look out for its own economic interests while forging this new “defining partnership of the 21st century” that Obama talks of?
Arvind Panagariya, professor of economics at Columbia University, feels that the Obama visit has created an environment for significant economic benefits for India, and now it is up to the Indian government to take advantage of these opportunities by pushing ahead with reforms. At the same time, Panagariya says in an interview with DNA, India should be prepared to push back against protectionist measures that may arise in the US because of the persistent problem of unemployment there.
What is your assessment of Obama’s visit to India in economic terms?
The major economic gain is connected to the access to dual use technologies. Most other accomplishments fall in political, security and strategic areas, which indirectly create economic benefits by helping India rise globally.
What would Obama have hoped to gain specifically?
Perhaps reduced liability on the sales of nuclear plants, and opening of organised retail to foreign investors.
To what extent is Obama in a position to “prise open” the Indian market, and what would be the quid pro quo for India? Is it likely that India might sacrifice economic efficiency by letting political reasons guide its decision to open up to US products?
Any market opening including in the area of organised retail will be on a non-discriminatory basis and therefore to all trading partners, not just the US. As the last 20 years of external and internal liberalisation have shown, opening up largely works to improve efficiency.
There’s a perception that the US is offering empty promises on strategic issues like a UNSC seat at some indeterminate time while pushing for immediate economic gains. What’s your take on this?
Didn’t we eagerly seek the US backing for the UNSC seat?Now that we have it, how does this become an empty promise?Agreed, we are still some way from having the UNSC seat, but are we not closer to it than we were before the Obama visit?
Regarding the economic gains, you need to be specific.If you are referring to the $10 billion or so worth of contracts, I see them as win-win — they do not quite inflict a loss on us!
What does India need to do to boost trade for mutual benefit?
Undertake further economic reforms (including streamlining social programs to combat poverty) to boost growth and alleviate poverty.The larger our economy, greater the opportunities for all in our market.
What are the main hurdles that Manmohan Singh faces in pursuing this agenda and how can they be overcome?
The PM needs to convince Mrs Sonia Gandhi and his Cabinet that economic reforms of the kind he initiated in the 1990s are in the national interest.
Even as Obama wants open markets for US firms, there are concerns over increasing protectionism in the US. How much of an impact can this have on India and what can Indian negotiators do about it?
Indian companies and government have to keep the pressure up on the US to hold the line on protectionism.So far all countries have been quite successful in holding protectionism at bay despite the major global economic crisis. But this may change and vigilance is required.
As a last resort, India has to also be prepared to retaliate through its own trade sanctions if it is subjected to selective protection against its exports.
How can Obama change the negative perception about outsourcing that he had himself stoked earlier?
Rather than stoke the fears, he needs to explain to the American people the benefits of openness to trade and investment.
How do you view the Indian backing for the US move to pump $600 billion into the economy, which China is strongly opposing?
The Chinese vice finance minister has made a statement very similar to that of the Indian PM regarding the QE2 (Quantitative Easing Part 2). It is likely that the Indian PM offered a helping hand to a departing US President who had conceded on virtually all of India’s demands during his visit.
Moreover, given the capital controls at its disposal, India is better able to deal with the inflow of dollars. Unlike countries with full capital-account convertibility such as South Korea and Brazil, it does not face the tyranny of the impossible trinity.
What is the other significant area in which you expect the US and India to back each other at the G-20 summit?
They will work together to make progress on developing an improved global economic governance.
What are the potential gains and threats from granting the US wish for FDI in retail from the point of view of the Indian farmers, Indian consumers and Indian economy?
Indian farmers stand to benefit from improved supply chain; Indian consumers stand to benefit from reduced prices resulting from a more efficient supply chain management; and the Indian economy stands to benefit for both of those reasons plus expanded export performance since foreign retailers are well-placed to link our suppliers to the world market.