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The Rediff Interview/Economist Clyde Prestowitz
'India will be the biggest superpower'
March 29, 2006
When the man who likens the global economy to the Titanic bets on India, you have to sit up and take notice.
The man in question, Clyde Prestowitz, president of the think tank Economic Strategy Institute and one of America's top foreign trade experts, was a counselor to the secretary of commerce in the first Ronald Reagan administration.
In his own words, he is the 'product of a middle-class, conservative, super-patriotic, Republican, Born Again Christian family.'
But he is also one of American President George W Bush's severest critics. Perhaps the title of one of his books says it all about his opinion of Bush's worldview -- Rogue Nation: American Unilateralism and the Failure of Good Intentions.
In a speech to the Carnegie Council On Ethics and International Affairs, Prestowitz had an anecdote to sum how American trade deficit was leapfrogging. He said in 1981, then American secretary of commerce Mac Baldrige had offered him a salary incentive: 10 percent of the amount by which he reduced the trade deficit./P>
'Five years later, the trade deficit was $150 billion, I owed him (Baldrige) $15 billion, and so I got out of the government and wrote a book about Japan, and then founded this think tank, still working on the trade deficit,' Prestowitz added.
The outspoken economist was in Mumbai recently for the Asia Society's 16th Asian Corporate Conference, where in a session on India's economic future, he outlined why America was in self-destruct mode because of its trade deficit.
And on the sidelines of the conference, Senior Features Editor Sumit Bhattacharya buttonholed him into a quick interview.
Prime Minister Dr Manmohan Singh said India needs $70 billion foreign direct investment to sustain an annual growth rate of 8 per cent for the next five years. Do you see that happening?
It is not guaranteed, but I think it can be done. It is possible.
What are the hurdles?
There remain in India a lot of problems with regard to infrastructure, with regard to still substantial regulatory barriers… there remain a number of regulatory issues that are not just at the national level but also at the state level. As you know the rules in the different states are quite different and not always coordinated. This creates uncertainty and complexity, which is a bit of a deterrent to investment.
But I am investing in India, it is a very attractive opportunity, so I think with the right policies, with the right efforts, India can attract a lot of foreign investment.
We keep hearing from the West that India must accelerate its reforms. But will that not hurt India? Most of India lives in the villages.
You cannot lift them out of poverty without economic growth. And you cannot have economic growth without reform and deregulation. Of course, when there are dislocations, some efforts have to be made to smooth the pain of dislocation.
But I think it's a false premise that people will be hurt by reforms. Because they are being hurt right now for lack of reforms.
The West seems to have suddenly woken up to India's good qualities. When and why did this change in perception happen?
Till the nineties, nobody could come here to do business. So India was not on anybody's map. The reforms that India began in 1991-1992 changed the nature of the Indian economy - opened it up to the world.
The second big thing is the Internet. The Internet made it possible to tap into India's talent instantly, and from far away.
Third thing is the Y2K question in the US created a shortage of talent and people were looking around and they discovered India.
India was ready because the Internet was there, the reforms had been done, and so 'wow,' suddenly the world opened up.
You had said the Bush visit was a substantial foreign policy shift for the US which had favoured Pakistan. Would you please elaborate?
The big shift was on the part of India. India abandoned socialism. During the Cold War, India had a kind of leaning to the Soviet Union. Which is why the US leaned to Pakistan.
But those leanings were unnatural. India is a democracy, it shouldn't have been leaning to the Soviet Union; the US is a democracy, it shouldn't have been leaning towards Pakistan. The end of the Cold War removed the rationale for those leanings.
So opening up of the Indian economy, growing concern in the US about the power of China makes it more logical to develop a closer relationship with India.
I know you are not a Bush fan, but what's your take on the nuclear deal?
It is one good thing that Bush has done (laughs)!
You have written that India will overtake the US in 45 years.
It is going to be India's century. India is going to be the biggest economy in the world. It is going to be the biggest superpower of the 21st century.
You are confident about that?