[Congressional Record Volume 150, Number 72 (Thursday, May 20, 2004)]
[House]
[Pages H3495-H3496]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      AMERICAN INVESTMENT IN INDIA

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from California (Mr. Dreier) is recognized for 5 minutes.
  Mr. DREIER. Mr. Speaker, because the issue of American investment in 
India has been a particular point of debate here in the Congress, I 
want to say a few words about the recent elections in India and what 
they portend for Americans and Indians alike.

                              {time}  1945

  For many months now I have been talking about how our Nation's 
success in a 21st century economy is going to hinge on companies that 
are successfully able to invest and compete globally. It is these 
companies, the ones who invest in emerging overseas markets, that use 
global investment to maximize their efficiencies and create new 
opportunities right here in the United States.
  Economic isolationists have tried to claim that investment in India 
is bad for Americans. They have claimed that new job opportunities in 
cities like Hyderabad and Mumbai mean job losses here at home. They 
have tried to tell the American people that we cannot compete with a 
growing Indian middle class.
  As economic news from India, such as the 10 percent GDP growth rate 
last year, grew brighter and brighter, the isolationists' predictions 
of gloom grew darker and darker.

[[Page H3496]]

  Then something unforeseen happened. Contrary to predictions, the 
Indian parliamentary elections resulted in the defeat of the BJP and 
Prime Minister Vajpayee, who had made market reform a pillar of his 
economic policy. A new party now claims the seat of prime minister and 
is working to build a majority coalition in the legislature.
  The sudden, unexpected change made investors nervous and sent them 
into a large selling spree, in fact, the largest sell-off in the 129-
year history of their market. The Sensex, the Bombay Stock Exchange's 
benchmark index, shed over 11 percent of its value on Monday, following 
6 percent losses on the previous Friday. The 2-day loss to investors 
was over $65 billion.
  Now, I am certainly not prepared to write off economic growth in 
India just yet, and despite the recent dismal days for the market 
there, I do not believe the Indian people are either; but the sudden 
uncertainty over India's long-term economic outlook reveals what this 
debate on foreign investment should have been about all along. The 
threat to the U.S. economy was never, never that the India economy is 
growing too much. The danger is that it might not be able to sustain 
and continue such economic growth.
  This was a lesson we all learned, or should have been learned, in the 
1980s. The economic isolationists told us that the rapidly expanding 
German and Japanese economies were going to devastate us, leaving 
America in the economic dust. But we soon discovered that if those two 
countries posed any economic threat to the U.S., it was that they were 
not able to sustain their economic growth.
  Although the economic prophets of doom may have substituted India or 
maybe China for the Germany and Japan of the 1980s, the fundamental 
economic lesson is the same today as it was 20 years ago: Rapid and 
sustained growth by emerging trading partners is unquestionably in our 
best interest. A strong and growing Indian economy provides 
opportunities for U.S. companies to invest and become more competitive 
and create jobs right here at home. A growing Indian middle class 
demands more and more U.S. goods and services. And a prosperous India 
helps bring stability to that region of the world.
  Most important, growth and job creation is helping to lift millions 
out of poverty in India, another compelling reason for us to encourage 
a thriving Indian economy, not a weakened one.
  It is vitally important that we encourage India's new leadership to 
continue the market reforms that have successfully put India on the 
path to economic strength. So far, there have been some promising 
signs. The new governing Congress Party has pledged to continue the 
economic liberalization efforts of their predecessors. It is worth 
noting that this is the party that first introduced market reforms 
under Mr. Singh, who will likely be the new prime minister, back in the 
early 1990s.
  Like the U.S. workers and consumers who have benefited from a 
stronger Indian economy, the 250 million Indians who are living in 
poverty have everything to gain from opening their markets even 
further. India has made tremendous strides in liberalizing its economy, 
but the fact is that India's economy is still not open enough. 
Significant obstacles to U.S. participation in India's economy persist: 
nontariff trade barriers, high tariffs, and weak protection of 
intellectual property rights, to name just a few.
  The greater liberalization of the Indian economy will have a 
significant and positive impact on Americans and Indians alike. As the 
new government organizes and sets an economic agenda, I urge them to 
continue the work they began over a decade ago.

              [From the Wall Street Journal, May 17, 2004]

                             India Dimming?

                          (By Swapan Dasgupta)

       The Indian election upset that has unseated Prime Minister 
     Atal Bihari Vajpayee may have one unintended victim: John 
     Kerry. After making the loss of American jobs from 
     outsourcing to countries like India a key part of his 
     presidential campaign, the Democratic challenger may no 
     longer have an easy scapegoat to rail against. Now, his 
     suspicion of tech-savvy Indians who are speeding up their 
     country's global integration will be shared by the new 
     government in Delhi.
       The world's largest democracy has given an astonishing 
     verdict in an election whose outcome was thought to be a 
     foregone conclusion. The voters rejected the Bharatiya Janata 
     Party-led alliance that had governed since 1998. The winner 
     was a combination of the Congress Party led by the Italian-
     born Sonia Gandhi, a doctrinaire Marxist bloc, and a motley 
     group of regional outfits that have come together to assemble 
     an alternative government.
       India is no stranger to crazy coalitions forged out of 
     sheer expediency. Since 1989, when Rajiv Gandhi was voted out 
     of power, it has witnessed a series of coalition governments. 
     What marks the latest experiment is not merely the uniqueness 
     of a naturalized citizen at the helm--a development that has 
     contributed to a flurry of Italian jokes being circulated on 
     the mobile phone circuit--but the circumstances of its 
     creation.
       In the past, incumbents have been voted out for either 
     their high-handedness or the perceived corruption of their 
     governments. This was the case with Congress Prime Ministers 
     Indira Gandhi in 1977, Rajiv Gandhi in 1989, and Narasimha 
     Rao in 1996. This time, the rejection of Mr. Vajpayee was 
     grounded in policy. The 2004 election was dominated by two 
     themes: his leadership and the slogan ``India shining.'' This 
     last may have been the creation of a clever copywriter, but 
     it reflected the difference the Vajpayee government made over 
     the past six years.
       Aimed at kindling patriotism with feel-good economics, 
     ``India Shining'' stressed India's IT and telecom 
     revolutions, the roads program that will link the four 
     corners of India, and the promise of becoming a global power 
     by 2020. Deputy Prime Minister L.K. Advani, the government's 
     ideologue, went on a bus journey across India publicizing 
     ``India Shining'' and promising a government that would 
     unleash India's potential and creative energies. To gum-
     chewing 21-year-olds working in call centers and poor farmers 
     in drought-affected India, he invoked the same vision of 
     India as one of the five largest economies in the next 20 
     years.
       Traditionally, capitalism in India has lacked political 
     advocacy. The BJP, a party that built itself on Hindu 
     nationalism, tried to break the mold by grafting the image 
     of a tremendously successful 79-year-old Mr. Vajpayee onto 
     a buoyant economy. For years, intellectuals had complained 
     about development not featuring on the election agenda. 
     The BJP leadership tried to talk real economics to an 
     electorate used to being promised state jobs and welfare 
     schemes.
       The outcome was a debacle on a scale that baffled pollster 
     and politician alike: Mr. Vajpayee was swept out of office. 
     In simultaneous local polls held in the southern states of 
     Andhra Pradesh and Karnataka, two of India's most ardent 
     champions of the IT industry, chief ministers Chandrababu 
     Naidu and S.M. Krishna, were roundly defeated. Mr. Naidu was 
     attacked for having more time for Bill Gates than for farmers 
     and mocked for having transformed the state capital Hyderabad 
     into ``Cyberabad.''
       As the results poured in, the political class seemed united 
     in treating the verdict as a resounding rebuff of ``India 
     Shining'' and its symbols. On the TV, commentators joined 
     politicians in interpreting the verdict as a rejection of the 
     Vajpayee government's pro-business policies. ``You can't 
     build highways bypassing the slums,'' concluded one critic of 
     the BJP. Even the BJP's own allies were scathing. Dripping 
     with sarcasm, Bal Thackeray, chief of the ultra-Hindu Shiv 
     Sena, thanked Finance Minister Jaswant Singh and 
     privatization czar Arun Shourie for contributing to the 
     Congress victory.
       Predictably, the left is gung-ho. With the Congress 
     dependent on its 60 legislators for a majority, the two 
     Communist parties are expected to put their regressive stamp 
     on economic policy. Even before the celebrations were over, 
     leftists called for an end to the privatization of the public 
     sector, the abolition of the Disinvestment Ministry and a 
     review of the reforms program. Regardless of whether or not 
     the left joins in government, it will leave its antediluvian 
     mark on the policies of the new regime.
       An already jittery stock market panicked. On Friday, the 
     Bombay Sensex fell 6% in one day and wiped out $22 billion of 
     investors' wealth. Since the specter of political uncertainty 
     and a possible defeat for Mr. Vajpayee first appeared on the 
     horizon, the Sensex has fallen from 5712 and April 27 to 5069 
     on May 14. Foreign institutional investors have pulled out 
     millions of rupees from the markets since the election 
     results.
       The fear of capital flight may quiet the left for a bit, 
     but it is going to be a temporary respite. The manner in 
     which the verdict has been interpreted will also encourage 
     the old-style socialists within the Congress to press for 
     higher taxes on corporate profits and luxury goods, as well 
     as for more subsidies and government expenditure on welfare 
     projects. The Vajpayee government's initiatives for the 
     creation of world-class highways, reduction of the role of 
     government and the cautious initiation of labor reforms look 
     set to be modified, if not completely junked.
       Over the past six years, India has tried to dance to a 
     different tune. The Vajpayee government encouraged modernity 
     and entrepreneurship, and boosted the self-confidence of a 
     growing middle class. It tried to turn the country away from 
     a Third World trajectory, from the sloth and mediocrity of 
     the past, into a new India that is so feared by 
     protectionists in the U.S. and Europe. Well, those 
     protectionists can breathe a little easier now. India's 
     ancient regime has struck back with a vengeance.

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