Three Cheers For Non-Reciprocity

The idea is that India is internationally weakened by squabbling with its neighbours, and can only gain by burying the hatchet and getting closer to them. He expressed the idea infelicitously when he said he did not believe in reciprocity. What he meant by that was two things. First, Indias interests are served if neighbouring countries feel less threatened by it, and trust it more. They may be made to feel more secure by non-reciprocal actions by India. And second, that the closer Indias economic relations with its neighbours, the more difficult it becomes for either to take hostile action against the other. If Bangladesh earns 60 per cent of its foreign exchange from garments, and if they are made out of Indian fabric and yarn, there is no way Bangladesh can contemplate harm to India in a hurry. It may continue to have its strident mullahs and Pakistani agents, but they will not matter in material terms if the Indian and Bangladeshi economies are closely interconnected.

This idea was brought brutally home when Chandra Shekhar cut off oil supplies to Nepal in 1990. The poor country had nowhere to go. China, whom it considered a greater friend, could not supply oil products across the Tibetan plateau; in any case, the Lhasa-Khatmandu highway which China built with such fanfare in the 1960s is in poor repair. So within three weeks Nepal capitulated. Since then, Nepal has maintained studiously friendly relations with India even when it has had a communist government.

Nepal, being land-locked and Himalaya-locked, has no choice. All other neighbours of India are maritime nations, and have choice. So Chandra Shekhar tactics do not work against them. The Farakka affair is a case in point. For over a decade India took all the water it wanted from Farakka; it turned a few million hectares in Bangladesh infertile. But that only made Bangladesh more recalcitrant. Bangladesh developed two major industries: garments, and foreign aid. Today Bangladeshs biggest industry is non-government organisations which live on foreign aid. With all the foreign aid flooding the country, Bangladesh could say boo to India. Pakistan has been saying boo for so long that it has virtually forgotten other words in the language.

With these countries which have options, India can achieve nothing by threats. Especially not with Pakistan, which may well have a nuclear arsenal that is superior to Indias. With them, non-reciprocal friendly initiatives are the first step towards an economic relationship which would raise the cost of hostilities to an impossible level.

So while Gujral was foreign minister, he went about offering trade concessions to neighbouring countries. Here he was handicapped by the primitive thinking in the economic ministries, which still live in the reciprocal age. So he could only exchange lists of concessions and pretend he was getting something in return. But the fact is that Nepal, Bangladesh and Sri Lanka are all running big trade deficits with India. After the devaluation and liberalisation in 1991, India became the cheapest source of many goods for these countries. But it also refused to import the goods they produce jute goods in the case of Bangladesh and tea in the case of Sri Lanka, for instance. So they could not increase their exports to India. As long as India remains their cheapest source, the more they export the more they will import from India; thus most of the imports into India will turn into exports from India.

But why should we import jute goods from Bangladesh or tea from Sri Lanka? Because the governments primary duty is towards the 900 million Indians who are consumers, and not the few that are producers. If Bangladeshi gunny bags or Sri Lankan tea are more expensive, no one in India will buy it. If they are cheaper, Indian producers should reduce their costs and compete against them for the Indian market.

So I hope that now that Gujral is prime minister, he will introduce a more comprehensive free trade regime with the neighbouring countries. The goods they produce with little import content Sri Lankan tea, rubber or palm oil, Bangladeshi jute and jute goods, Pakistani rice, cotton and textiles etc should have entry into India free of licensing and duty. Goods that they produce with a significant import content should be free of import licensing and should bear duty equivalent to the import content multiplied by the difference between their rates of duty and Indias on those imports, if their duties are lower.

In giving these concessions India should not only not look for reciprocity, it should also forget about simultaneity. In other words, it is necessary to introduce these concessions for Saarc as a whole; it should be done for one country at a time, so that it whets the appetite of other countries and makes them see the sense in getting closer to India. Saarc was a mistake from the day it was created, and the earlier it is buried, the better.

It is not necessary to confine non-reciprocity to trade. It can be extended to many other relationships. Gujral tried to extend it to visas. It is a good idea to persuade people of certain kinds to come to India businessmen, academics, artists, performers. These should be given not just visas, but free entry into corresponding Indian professions they should be given automatic long-term work visas. And correspondingly, jobs in educational and cultural institutions should be opened up to all South Asians.

Money has no colour. Capital and money markets in the neighbouring countries are less developed than in India; the stock market in Bangladesh crashed recently after gross manipulation by speculators, a number of whom have been jailed. Investors in the neighbouring countries have a poor choice within those countries, and would be tempted to invest in India if the markets here are more secure and better regulated. These investors should be given the same right to invest as non-resident Indians.

The same applies to educational institutions. At present the home ministry approves applications of all students wishing to study in India. It is extremely tardy and obstructive, and all it is doing is to curb the growth of a potential large and lucrative export industry. The home ministrys authority was extended to academic exchanges in the days when the CIA used to use American academics for spying. Now it has developed far more effective techniques; and it no longer matters what it knows. Hence all the curbs on the entry of students and teachers imposed by whatever ministry be it home, education or foreign affairs should be removed.