THE US Administration is adopting a wait-and-watch approach to the formation of a new government in New Delhi. Washington hopes to engage a BJP-led government in strategic discussions as soon as it is formed. At the same time, however, US policy planners and observers are voicing concern about the party's more 'intemperate' posture on security issues. On foreign investment, analysts feel that political stability and confirmation of economic reforms would be the key, not the ideological character of the government.
A senior Clinton administration official stresses that campaign statements on the strategic weapons issue should not be taken at face value. "Certain parts of the administration were getting exercised by the rhetoric, but we understand that the BJP was playing to a national audience," he says. "However, if the BJP wants to have an effective foreign policy, if it wants to join the UN Security Council and ASEAN, it will have to adopt a more moderate stand on strategic weapons. We have tried to encourage better relations between India and Pakistan, such as supporting the Gujral doctrine, pushing for secretary-level talks. Now we have to wait and see." He expresses concern over the "talk of inducting nuclear weapons. What do they mean by inducting? Are they talking of actual deployment?"
But Sumit Ganguly, professor of political science, Hunter College, City University of New York, feels that the rhetoric must be disregarded. Says he: "The BJP will not test, will not deploy missiles, but will probably provide more money for Agni and missile development, which in any case is a sovereign decision." To test or deploy would have an immediate effect on the region and beyond, whereas quietly increasing the defence budget is easier to do. Fiscal constraints would be the only factor holding the government back.
Others warn of possible consequences. Michael Krepon, president of the Henry L. Stimson Centre in Washington, which researches arms control, feels that any decisions on the security front would have a direct bearing on the two essential elements for a BJP government to succeed—maintaining economic growth and domestic tranquility. "If they start brandishing nuclear weapons or stirring up communal differences, they are going to invite trouble."
Krepon adds that a confrontationist nuclear posture "will have serious negative consequences in terms of foreign investment". Says he: "Capital can flow anywhere. There are a number of places capable of providing good returns, including India. To the extent to which India looks like it is being overcome by swadeshi rhetoric on the bomb, capital will flow elsewhere."
In fact, there is near unanimity that it would be a mistake for the BJP to start telling international investors what sectors they could invest in and what is out of bounds. The administration official warns that such a thing would "prejudice international investors." Agrees Ganguly: "The BJP will have to recognise that, short of foreign investment, it cannot get the growth rate it wants. If it continues with the swadeshi rhetoric, it is likely to send a chill through US corporations."
Then there is the likely political instability. Joydeep Mukherji, an analyst at Standard & Poor's in New York, says a weak government "could delay reform, which the previous government talked about but could not deliver, such as liberalising the domestic market for insurance, reforming the public sector, privatisation, making the civil service more efficient, public sector pricing, etc. The primary concern for foreign investors is going to be the longevity and stability of the government rather than its ideological complexion. I see no fundamental change in policy. The far bigger danger is that they will act too slowly and react too slowly and not go ahead with urgent reforms."
Mukherji feels that it would be very damaging for the BJP to try to change anything that has been signed into law by previous governments, such as agreements with the WTO and other international bodies which set the rules for foreign trade and investment. "This would severely restrict India's access to foreign capital," he warns.