Riding the Elephant

A new era has opened up for India this morning with the US Senate’s approval of the two countries’ nuclear deal. India has attained a new level of international respectability and has access to nuclear power deals, and freedom to trade internationally in sensitive technologies .

In terms of historical importance, this stands alongside India’s economic liberalisation that began in earnest in 1991, which in turn was the biggest event since independence in 1947 – ushered in by Jawaharlal Nehru as India’s “tryst with destiny”.

The price India has to pay for its new status is a close diplomatic relationship with America that looks fine now but could prove restrictive in the future.

Whether the deal proves to have been worthwhile will therefore depend on how successfully the Indian government and its companies utilise the access to nuclear and allied technologies, especially to solve India’s dreadful power shortages, and how far the government manages to remain independent of the US in its foreign policy – for example on its close ties with Iran and Russia.
 
Both the 1991 and today’s events were ushered in by Manmohan Singh, now the prime minister and in 1991 the finance minister. But he was not the architect of the 1991 policy, though he is frequently given that title, because it had been designed earlier. Nor was he the instigator – that was Narasimha Rao, the prime minister who never gets the credit he deserves for appointing Mr Singh and telling him to get on with liberalisation and rescue India from a dire international financial crisis. (There’s a story that, when asked why he had chosen Mr Singh, Mr Rao said something like “because as a bureaucrat he’ll get the blame if it goes wrong but I’ll get the credit as a politician if it works” – how wrong he was!)

This time President Bush and his Secretary of State, Condoleezza Rice instigated the initiative, and were later backed up by Sonia Gandhi, president of the Congress Party and political head of the governing coalition. This paved the way for Mr Singh to introduce the deal.

But there is a major difference between 1991 and now. Last time Mr Singh toned down economic liberalisation as soon as Mr Rao decided that it was not good electoral politics. This time he has stuck to the deal, defying political opposition.

He let the tiresomely negative Left Front parties withdraw support from his Congress-led coalition, and then pushed the deal at the last minute, just before America’s imminent presidential elections. As a journalist used to writing a story right up to my editors’ deadlines, one has to admire Mr Singh’s sense of brinkmanship, reviving the deal when even the Bush regime thought it was dead.

What a surprise this is from an academic economist, former top bureaucrat, and reluctant politician. For most of his prime ministership, Mr Singh has been squeezed politically both by other ministers in the government, who have paid him scant respect and have preferred to cosy up to Sonia Gandhi, and by Mrs Gandhi herself who has always made it clear that she is in charge – she has a veto power over anything that the government does.

This time she let Mr Singh get on with his nuclear dream, but she also let it slide towards failure when faced with opposition from the Left, with whom she felt personally comfortable as allies. Rahul Gandhi, her son and the Congress Party’s anointed future prime minister, is reported to have tipped the balance by backing the deal and persuading his mother to let the Left withdraw. That gave Mr Singh the support he needed.

India can now move ahead on implementing its nuclear power programme. It wants to negotiate contracts quickly with French and Russian companies. France signed a civil nuclear co-operation deal on Tuesday and Areva is already talking to the government-owned Nuclear Power Corporation of India (NPCIL). Talks are also on with Rosatom State Nuclear Energy. And US firms such as GE and Westinghouse, which regard contracts as virtually their right, are in line – as are major defence companies such as Boeing and Lockheed Martin for aircraft and other deals.

India can also maintain its nuclear weapons programme, without international inspections, while knowing that the US will probably pull out of the deal if it ever conducts another nuclear test.

Indian companies will get large chunks of business constructing nuclear power stations and many will also benefit from being able to buy and sell high technology equipment in other areas that have been blocked for decades. The list includes companies such as Tata, Reliance (RIL), Larsen & Toubro, GMR, Hindustan Construction,  and Godrej, as well as NPCIL and other public sector corporations.

There will however be problems. It is relatively easy for India to run its relationship with the US while the current leaders are in power in both countries – and it has been in America’s interest to leave India relatively free while the deal has been going through. That though tells us nothing about how a future US government would react to India breaking ranks from an American line on, say, Iran.

But that’s for the future. Today India enters its new era and my guess is that history could well see Manmohan Singh as India’s greatest prime minister since Jawaharlal Nehru.