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Santa Claus State

Aid is a handy tool to boost strategic, business interests. Delhi's playing the game.

Santa Claus State
T. Narayan
Santa Claus State
In Kabul these days, many Indian telecom engineers visit a local dhaba for a vegetarian lunch every working day. Apart from giving them a warm welcome, the owner doesn't charge them any money. "Your country has given us planes and public transport buses. You Indians are our friends," is his reason for the generosity. Ever since the US carpet-bombed Afghanistan in late 2001, India has generated unparalleled goodwill among the local populace—from Kabul to Kandahar to Konduz. Even the Afghan government is impressed by the aid New Delhi has poured into their country. A Tata or a Leyland bus is a common sight on Kabul Roads and several private and state-owned firms are working on infrastructure projects in the country.

But let's be clear that India's help is not driven by purely altruistic reasons. It's being guided by the realisation that aid can become a handy tool to further both her geopolitical and business interests. "It's a case of maximising our gains using small doses of money in sensitive countries," admits a senior official in the external affairs ministry. For New Delhi, Kabul is the new preferred playground. It helps to increase our presence in Central Asia. The intention is to isolate Pakistan which, during the Taliban reign, believed that Afghanistan was under its sphere of influence. Obviously, this opens the gates for India Inc to sell its wares and invest in new markets.

Today, India's huge $93-billion forex reserves allows her to play this game aggressively in other regions. "Foreign exchange has ceased to be a constraint. We can afford to give aid. Also, we should be giving it, it's necessary to give both in cash and kind," affirms external affairs minister Yashwant Sinha. So, the MEA is honing its aid-Africa policy to help Indian products gain more access to those markets and make a few friends who may help her counter Pakistan's stance on Kashmir at multilateral fora. It's also looking at Iraq which, over the years, had become disenchanted with New Delhi. But, after the US invasion, cordial links with Baghdad are important in the light of the growing Pakistan-Saudi Arabia relations. In addition, it offers Indian firms with an opportunity to grab a slice of the huge reconstruction pie (at least $100 billion over the next 10 years) and control over a few lucrative oilfields.

"Right now, our rate of return on forex reserves is just 1-1.5 per cent. Using it as aid will give us higher returns, both morally and in terms of business," explains Surjit Bhalla, MD, Oxus Research. Adds the owner of a small Delhi-based firm which is doing a project in Afghanistan: "India is using the old Soviet way of buying friendship." Although the complexities and the challenges in each country are different, the perceived outcome in each case is the same.

Perhaps Africa offers the best example of the benefits that can accrue to India. Its countries are one of the largest consumers of pharmaceuticals (HIV, malaria and TB) with imports accounting for 90 per cent of the annual requirement of $32 billion. In contrast, India is expected to be one of the largest, and possibly the cheapest, producers of these drugs. So, it would make sense for poor African nations to source them from India, which now accounts for just about 1 per cent of the imports. The bitter truth is that, despite their high prices, western pharma firms monopolise this market.

"In Africa, especially the tropical and sub-Saharan region, the demand is driven by government spending or by various purchasing agencies and ngos," reveals Amar Lulla, Jt MD, Cipla, a large exporter-producer. A bulk of this spending is tied to bilateral and multilateral aid that is doled out or controlled by developed nations. Or it's given by large western corporates, ngos and charities. Inevitably, it's the western MNCs that get the orders. Studies show that the former French Western Africa imports 96 per cent of its requirements from western nations. "Indian firms have to break this glass ceiling; they need to push for a new relationship whereby the developed world provides the purchasing power to the African nations, who import cheaper drugs from countries like India," explains Amit Mitra, secretary general, ficci.

One mechanism for doing that is to win the "hearts and souls" of the people—as also the policymakers—in Africa through aid. Once New Delhi improves its relations with African leaders, it can convince them to change their suppliers. This has already started happening. For example, South Africa has begun sourcing HIV drugs from India, which forced western MNCs to slash their prices too. Other countries hit by the HIV menace are following suit. Even private ngos like the Clinton Foundation are buying these drugs from Indian firms, including Ranbaxy, Cipla and Matrix. For India, the diplomatic advantages can come in the form of wooing several Islamic African nations, and seeking their help during multilateral discussions and negotiations.

Despite such successes, some experts feel India can do more in this area. "We should go in for strategic and appropriate foreign aid, which will cost small amounts but create massive goodwill," feels Mitra. He points out that a mere $50-100 million would be enough in each country to create "high visibility". For instance, 20,000 low-cost houses in Kabul or hundreds of small gensets to solve the power problem in the city may be a good idea to get the people on your side. Bhalla too feels that India doesn't need to spend more than $1-2 billion out of its forex kitty to get the desired results.

But does the government have a coordinated plan? In some cases, the prime minister announced aid schemes in several countries that didn't fructify for months, even years. Add to that the problems faced by the private sector. Recently, Tata Motors' consignment of 35 municipality vehicles got stuck at the Indo-Pak Wagah border as the MEA had no idea that Pakistan had decided to retract its earlier permission to allow the lot to pass through its country. kec, which has bagged a $32-million electrical project in Iraq, faced a two-week delay in getting visas for its people.

Clearly, India is on the right path with its Track II aid policy. For it to be successful though, New Delhi needs to back that policy with the right facilitating mechanisms.
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