INN Digest [II] - Mar 22
Uma Ramamurthy
Today's News Topics:
Kashmiris accuse Indian Forces of burning five civilians to death
Indian border attacks on rise, Pakistan says
Top Kashmir leader killed by militants, Officials
India bans Dalai Lama from World Tibet Conference
At least 8 killed and 10 wounded in Kashmir
Solarz drops bid to become Ambassador to India
Smoke and greasy fingers threaten India's Taj Mahal
Pakistan bans book offensive to Sikhs
Buddhists
Firing kills at least seven leftists in Bihar
'Concern' expressed over transfer of sophisticated weapons to Pakistan
U.S. Defence Official in line for New Delhi posting
The India Growth Fund extends subscription period
Pakistan's Foreign Secretary refutes Indian claims on Kashmir Resolution
With steady liberalization, India could rival China as a new economic force
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Date: Mon, 21 Mar 1994 21:29:11 -0500 (EST)
From: "Sukhjinder S Bajwa" <ba...@asd.enet.dec.com>
Subject: Kashmiris accuse Indian Forces of burning five civilians to death
#1 KASHMIRIS ACCUSE INDIAN FORCES OF BURNING FIVE CIVILIANS TO DEATH
SRINAGAR, India (AP) -- Residents in Jammu-Kashmir state accused Indian
forces of burning five civilians to death Saturday in retaliation for a
rebel attack. It was the second such accusation in two days.
The army denied involvement.
Three homes caught fire early Saturday in Bijbehara, a town 22 miles
south of Srinagar. Five people were killed, including three children,
police and witnesses said.
Witnesses, speaking on condition of anonymity, said troops set fire to
the homes to retaliate for a mine blast in a nearby village several hours
earlier that killed or wounded several soldiers.
On Friday, witnesses said troops killed eight civilians in the town of
Anantnag after their convoy was ambushed by rebels and one soldier was
killed.
Police in Srinagar, the capital of Jammu-Kashmir, confirmed the civilian
deaths but said they could not confirm that troops had attacked them.
Nearly 8,500 people have been killed in Jammu-Kashmir since 1989, when a
guerrilla war began in the only Muslim-majority state in predominantly
Hindu India. Many people in the valley support the guerrillas, who are
fighting for independence or to become part of Pakistan.
#2 INDIAN BORDER ATTACKS ON RISE, PAKISTAN SAYS
RAWALPINDI, Pakistan, March 19 (Reuter) - Indian forces fighting a
separatist revolt in Kashmir have increasingly violated a ceasefire line
dividing the disputed Himalayan region, a Pakistan army spokesman said on
Saturday.
He told reporters that the Indian attacks across the United
Nations-monitored line targeted mainly civilians.
"Every day three to four casualties take place," said Major-General
Khalid Bashir, who put the total of killed and wounded on the Pakistani
side at between 500 and 600 over six months.
He said Pakistan had no plan to evacuate civilians from the border,
which has been tense throughout the four-year-long revolt by Moslems
seeking independence or union with Pakistan.
For its part, India argues the guerrillas have been armed and trained
by Pakistan and are using terror to force Kashmiris to support their cause
as well as driving out both Hindus and Moslems who want the state to remain
part of India.
Pakistan denies the charge, saying its support for the militants is
only moral and political.
India rules two-thirds and Pakistan the rest of the former princely
state, over which the two countries have fought two of their three wars
since becoming independent of Britain in 1947.
The frequency of violations by small arms and mortar fire had
increased in recent months with areas projecting into the Indian-controlled
territory being more vulnerable, Bashir said.
Reduction of Indian troops in Kashmir is one of four demands made by
Pakistan. Others are release of political detainees, permission to human
rights groups to visit Indian Kashmir and withdrawal of what Islamabad
calls draconian laws.
Police and hospital sources in Indian Kashmir say more than 16,000
people have been killed since the guerrillas launched the uprising in early
1990.
#3 TOP KASHMIR LEADER KILLED BY MILITANTS, OFFICALS
By Yusuf Jameel
SRINAGAR, India, March 18 (Reuter) - Police and paramilitary forces
began a manhunt for suspected secessionists who shot dead a former speaker
of the Jammu and Kashmir legislature on Friday, officials said.
Wali Muhammed Itoo, 53, former speaker and leader of the regional
National Conference was shot as he left a mosque, after offering prayers,
in Jammu, the winter capital of the state. He was rushed to the local
hospital, but later died.
Police and paramilitary forces sealed the Talab Khatikan area, where
the mosque is located, and raided a number of suspected hideouts of Moslem
secessionists who have been battling the Indian government for the past
four years.
Some arrests were made though the assaillants have not yet been
caught, police said.
Minority Unity Forum, a little-known militant group, which Kashmir's
principal guerrilla organisation Hezb-ul-Mujahideen says is its associate,
claimed the responsibility for Itoo's killing.
Police and hospital sources say that more than 16,000 people have died
in the four year old rebellion against the Indian government.
Two-thirds of Kashmir is under Indian control, while the remaining is
with Pakistan. India accuses Pakistan of arming and aiding Moslem
militants, a charge that Pakistan denies.
Itoo was among the many pro-India Kashmiri politicians who moved
residence to Jammu from Srinagar, since the rebellion broke out.
Several National Conference leaders have been killed by Moslem
militants in the northern parts of the state, but Itoo's killing was the
first in Jammu, the largely Hindu city of the state which is considered to
be a safe place.
In Anantnag, south of the state's summer capital of Srinagar, the
paramilitary Border Security Force (BSF) allegedly killed seven people in
retaliation to an attack by Moslem secessionists.
Police said a BSF patrol was ambushed in the city's Mominabad locality
by Moslem secessionists who fired with automatic rifles, leaving two
troopers dead and six injured.
Though BSF officials refused to comment on the incident, a police
spokesman in Srinagar said that paramilitary troopers were returning after
conducting search operations near Anantnag when they were fired upon by the
militants. Seven civilians and two troopers died in the ensuing battle, he
added.
Security has been beefed up in the state following Itoo's killing and
a call for a strike by the All Party Hurriyat (Freedom) Conference, an
umbrella organisation of more than 30 Kashmiri political and religious
parties, on Saturday.
The Hurriyat has called the strike to protest against the arrest of
Javed Mir, the acting president of the Jammu and Kashmir Liberation Front
by BSF troopers early this week.
#4 INDIA BANS DALAI LAMA FROM WORLD TIBET CONFERENCE
NEW DELHI, March 18 (Reuter) - Delegates to an international conference
on Tibet accused the Indian government on Friday of discouraging the Dalai
Lama from attending.
The speaker of Tibet's India-based parliament in exile, Samdhong
Rinpoche told Reuters the Dalai Lama had been asked by Indian officials not
to attend the meeting.
"His Holiness has never embarrassed the Indian government. So he
decided not to come," Rinpoche said.
Delegates accused New Delhi of seeking to scuttle the three-day World
Parliamentarians Convention on Tibet (WPCT) by denying visas to many
prospective delegates.
"His Holiness the Dalai Lama has been told in no uncertain terms that
he should not participate in the conference," Indian opposition deputy
George Fernandes told delegates.
Out of some 100 parliamentarians invited from 35 countries only 52
were able to make it.
"More parliamentarians from many more countries would have been here
if the government had not put obstacles in their way," Fernandes said.
The Dalai Lama, Tibet's spiritual leader, has been living in India
since a failed 1959 uprising against Chinese rule forced him to flee his
country.
There was no immediate comment from Indian officials about the alleged
ban on the Dalai Lama, but a government minister told parliament on
Thursday that the WPCT meeting would be "embarrassing" for India.
WPCT delegates said they would discuss the Dalai Lama's latest
position on Tibet's independence during the three-day conference, the first
such to be held on the issue.
The Dalai Lama last week said he might have to abandon his non-violent
pursuit of talks with China on the future of Tibet unless international
pressure brought Beijing to the negotiating table.
Delegates urged their governments to respond positively to the call.
"He must not be down-hearted. We must not let him be down-hearted,"
former British minister Lord Ennals told the conference, referring to the
Dalai Lama's statement.
India and China fought a brief border war in 1962, freezing their
relations for more than two decades. But the two countries signed a
pathbreaking border agreement in September last year.
Despite differences with China, India, under attack on alleged rights
violations by its troops in Kashmir, has recently moved close to Beijing on
the issue.
Said Lord Ennals: "India had once held the high moral ground on human
rights. It is a tragedy that those days have gone...It is sad that India's
name should appear supporting China on human rights."
#5 AT LEAST 8 KILLED AND 10 WOUNDED in KASHMIR
By QAISER MIRZA
Associated Press Writer
SRINAGAR, India (AP) -- Indian troops shot and killed at least eight
civilians and wounded 10 others today after being ambushed by Muslim
militants in Kashmir, witnesses said.
One soldier was killed and four others were injured in the ambush by the
militants who are fighting for independence from India.
In a separate attack today, suspected rebels fatally shot Wali Mohammad
Itoo, a former speaker of the state legislature, United News of India news
agency said. Itoo, 52, was shot from close range by four gunmen near the
city of Jammu, the winter capital of Jammu-Kashmir state.
The motive behind the assassination was not immediately known.
Nearly 8,500 people have been killed in Jammu-Kashmir, the only
Muslim-majority state in the predominantly Hindu India, since late 1989
when the Muslim separatist movement escalated into a guerrilla war between
militant groups and Indian forces.
The ambush and the killings by the soldiers occurred in Anantnag, 28
miles south of Srinagar, the state's summer capital.
Shortly after sunrise, dozens of the guerrillas fired machine guns at a
convoy of trucks and jeeps carrying the paramilitary Border Security Force
and army soldiers.
After the rebels fled, the troops fired on nearby homes and pedestrians,
the witnesses said in telephone interviews from Anantnag.
"The security forces went wild. They pulled boys out of their houses and
shot them in the streets. They even chased people who ran into other
peoples' houses. They shot them there and ransacked the houses," said
Bashir Ahmed Misger, a businessman in Anantnag.
The state Police Control Room said eight people were killed and 10
injured by Indian forces. But the spokesman did not know if the victims
were all civilians or if they included militants.
International human rights groups have accused Indian forces and
militants of kidnapping, torturing and killing civilians, but the Border
Security Force is often described as the worst offender.
#6 SOLARZ DROPS BID TO BECOME AMBASSADOR TO INDIA
WASHINGTON, March 18 (Reuter) - Former congressman Stephen Solarz
Thursday withdrew from consideration for the post of U.S. ambassador to
India, the White House announced.
In a terse statement, White House communications director Mark Gearan
said Solarz told Vice President Al Gore Wednesday he was no longer
interested in serving in New Delhi and that President Clinton "respects Mr
Solarz' decision."
Solarz had not been formally nominated for the post.
But he said he was told Sunday by Clinton national security aides
Anthony Lake and Samuel "Sandy" Berger of administration concerns that the
nomination could be derailed by questions over his role in helping a Hong
Kong businessman with alleged underworld connections obtain a visa, the
Washington Post reported in its Friday editions.
Solarz, a New York Democrat who lost his seat in the House of
Representatives in a 1992 primary contest, was recently cleared by the FBI
of any taint in the visa case.
But the FBI report on the case raised enough questions that
administration officials were fearful of a bloody confirmation battle, the
newspaper said.
Solarz also had written 743 bad checks in the House check-bouncing
scandal, making him one of the 22 top abusers of the now-defunct House
Bank.
"The president values Mr. Solarz' intellect, energy and expertise and
his service to the nation over the last two decades," Gearan's statement
said.
He said Clinton had asked Solarz to "use his considerable talents
helping to promote peace and reconciliation" in sub-Saharan Africa by
serving as the President's Special Representative on Sudan.
"Mr Solarz agreed to consider the request," Gearan said.
#7 SMOKE AND GREASY FINGERS THREATEN INDIA'S TAJ MAHAL
By Gill Tudor
AGRA, India, March 18 (Reuter) - From the timeless calm of the Taj
Mahal, the busy smokestacks across the Yamuna river look very far away.
But preservationists say pollution from industry, vehicles and a
nearby oil refinery -- not to mention millions of tourists -- threatens to
erode the 17th-century white marble monument and may already have caused it
permanent harm.
"There is damage to the Taj -- you can't get away from it," said Amita
Baig, an architecture consultant at the non-governmental Indian National
Trust for Art and Cultural Heritage. "We are terribly concerned."
Nearly everyone agrees the gleaming mausoleum, built in this north
Indian town by Mughal emperor Shah Jahan as a gesture of love for his dead
wife Mumtaz Mahal, should be protected.
But how bad the damage is, and whether it is irreversible, is a
controversial point. So is pinpointing the exact source of the pollution.
Baig said a government scientist surveying the Taj had concluded the
marble had lost some of its lustre.
But officials of the Archaeological Survey of India (ASI), which is
responsible for the upkeep of the Taj, say there is no evidence that acid
rain from industrial emissions of sulphur dioxide has eaten into the marble
surface.
"No major change has taken place," said R.K. Sharma, ASI's director of
science. "In some places there is some physical damage like pitting. But
that's quite common in any building which is more than 350 years old."
Sharma said the biggest immediate danger came from two main sources:
very fine dust which collects under the arches of the domed mausoleum, and
the ravages of the estimated 5,000 tourists, Indian and foreign, who visit
the Taj every day.
Unlike bigger airborne particles of sand, Sharma said tests had shown
the fine dust contained pollutants which could corrode the marble and gave
it a yellowish tinge.
Apart from vandalism by people carving their names in the stone, the
sheer number of visitors is also taking its toll.
Few can resist the temptation to run a hand over the exquisite carving
and stone inlay work inside the monument. The buildup of grime has turned
many areas to a filthy brown, made worse by years of incense burning inside
the tomb.
Painstaking cleaning methods developed by the ASI have restored many
areas, but some parts have been permanently stained. ASI chemist S.K. Singh
said some areas cleaned only last year were already getting dirty.
"If you don't stop people touching, it will become yellow again," he
said. "We can clean, but if something is cleaned very frequently it is
bound to get damaged."
Most arguments still focus on industrial air pollution.
Baig said there were about 405 small-scale iron foundries and
innumerable brick kilns in the Agra area, plus a big glass industry in
nearby Firozabad -- all of them fouling the air.
India's Supreme Court last August ordered closure of 212 factories in
the area, mostly small iron and glass plants, until they installed approved
pollution control equipment.
About half to three quarters of them have reopened with the equipment,
although state pollution control officers have not yet checked whether
emissions are within official limits.
Yogendra Kaushal, president of the National Chamber of Industries and
Commerce in Agra, said the court action cost thousands of jobs and
threatened the survival of small firms, which could not afford equipment
costing as much as 10 times their annual income.
Many local industrialists say they have been made scapegoats for what
they claim is greater pollution churned out by a state-owned oil refinery
50 km (30 miles) to the northwest at Mathura.
The Supreme Court warned this month it might shut down the refinery if
it failed quickly to curb its emissions.
But Baig said monitoring had shown that sulphur dioxide levels were
actually lower at Mathura than at Agra. "A much more intense problem for
the Taj is Agra itself, especially vehicles," she said.
Kaushal said the government should implement other ideas to protect
the Taj recommended by an official report in the late 1970s. These include
provision of reliable power supplies to Agra, to remove the need for diesel
generators, and diversion of heavy vehicle traffic on a by-pass around the
town.
The Agra Development Authority (ADA) says it is developing a "green
belt" round the Taj and planning an outer ring road.
Steps already taken include shifting a railway switching yard from
near Agra's historic sandstone fort, and limiting vehicle access to the Taj
itself.
Critics say the ADA's approach is inadequate, slow and piecemeal --
especially as booming tourism is bringing more and more visitors and
traffic to the already congested city.
"A lot of city planning has to be done at a much more dense level to
cope with this. It needs political will," Baig said.
Baig said all industries should ultimately be moved out of the city,
but they would have to be phased out gradually.
"You can't just say: 'I'm shutting you down tomorrow'," she said.
"It's a human problem as well -- you have to look at people's entire
livelihood."
#8 PAKISTAN BANS BOOK OFFENSIVE TO SIKHS
ISLAMABAD, March 17 (UPI) -- Pakistan banned a book Thursday because it
is considered offensive to Baba Guru Nanak, founder of the Sikh religion.
The Sikhs, both living in India and abroad, had asked Pakistan to ban
the book published by Sadiq Hussain, a Pakistani Muslim. Two militant Sikh
groups, who did not disclose their names, also announced a $483,000 dollar
reward for anyone who kills Hussain.
Hussain wrote the book more than 30 years ago and has died since then,
but the groups putting a price on his head were not aware that he had died.
The book, entitled "History of Warriors," has presented Nanak as a
warrior rather than a benevolent religious figure, as believed by Sikhs and
other religious groups in the Indian subcontinent.
Nanak is one of the few religious figures in the subcontinent who is
respected by all.
The controversy began when Indian newspaper Ajit published excerpts from
the book and Sikhs protested.
On Wednesday, Chief Minister of Indian Punjab Beant Singh banned the
book in his province and appealed to Pakistani Prime Minister Benazir
Bhutto to do the same.
An official press note issued Thursday evening said the government has
decided to ban the book because "it hurts the feelings of the Sikh
community."
The federal government has asked all four provincial governments and the
police to "confiscate all copies of this book if found in circulation
anywhere in the country," said the press release.
#9 BUDDHISTS
NEW DELHI, India (AP) -- Two groups of Tibetan Buddhists, who espouse
nonviolence, fought at a religious compound Thursday over competing claims
of who is the reincarnation of their leader.
Tibetan Buddhists believe their holy men are reincarnated. Four or five
years after one dies, monks begin searching for the child who will be their
leader, using mystical and other criteria.
The Kargyud sect, one of four offshoots of Tibetan Buddhism, has been
without a leader -- the Karmapa -- since 1982. Adherents have found two
children they claim are the next Karmapa - but there can be only one.
Monks from one faction assembled in a Buddhist compound near New Delhi
on Thursday to introduce their claimant, a 10-year-old boy.
Supporters of a rival claimant, an 8-year-old boy living in Tibet,
pushed past police and shoved through the gates of the building, smashing
windows and destroying property. They retreated under a hail of stones from
the roof.
The group that discovered the boy in Tibet say he is the next Karmapa
because he was able to identify possessions of the previous one. The other
faction says the previous Karmapa left a letter giving clues that led them
to the 10-year-old.
The Karmapa and the heads of the three other sects all observe the
authority of the Dalai Lama, the Tibetan spiritual leader who has lived in
exile since 1959.
#10 FIRING KILLS AT LEAST SEVEN LEFTISTS IN BIHAR
NEW DELHI, March 17 (Reuter) - At least seven leftists, including two
women, were killed and four others injured on Thursday when police fired on
a group in the eastern Indian state of Bihar, Press Trust of India (PTI)
said.
PTI quoted officials saying police fired when they were attacked by a
group of people belonging to the leftist Communist Party of India
(Marxist/Leninist) in the Bhojpur district of the state.
Four policemen, including a deputy superintendent, were injured in the
attack, PTI said.
It said police had gone to investigate a recent attack on a Bihar
state legislature deputy belonging to the Congress party when they were
attacked by the leftists.
PTI said the leftists had earlier welcomed the attack on the deputy,
who they claimed was campaigning against them.
#11 'CONCERN' EXPRESSED OVER TRANSFER OF SOPHISTICATED WEAPONS TO PAKISTAN
(MAR. 18) MIDDLE EAST INTELLIGENCE REPORT -
India has conveyed to the United States serious concern over the
transfer of sophisticated weapons to Pakistan, as this would affect the
security environment. The minister of state for external affairs, Mr. R.L.
Bhatia, informed the Rajya Sabha today during question hour that the
government's concern has been conveyed through various channels to the
Clinton administration. He said defense contacts between India and the US,
including high-level visits and information exchanges, were conducted on a
regular basis with a view to enhancing understanding of India's position
and concern. Mr. Bhatia said no date has been fixed for Prime Minister Mr.
Narasimha Rao's visit to Washington.
From Delhi Doordarshan Television Network in English Date 16 March 1994
#12 U.S. DEFENCE OFFICIAL IN LINE FOR NEW DELHI POSTING
WASHINGTON (MARCH 18) DPA - U.S. President Bill Clinton intends to nominate
a senior Defence Department official and career diplomat to be U.S.
ambassador to India, an important diplomatic post that has been vacant for
more than a year, according to news reports Friday.
The reports in The Washington Post and The New York Times said Clinton
will nominate Frank G. Wisner, who is now serving as undersecretary of
defence for policy.
Wisner is a career Foreign Service officer who has served as ambassador
to Egypt and to the Philippines.
Clinton, known for taking his time in filling appointed positions, has
been criticised for leaving the New Delhi post vacant for so long.
He had intended to nominate Stephen Solarz, a former Democratic
Congressman and staunch Clinton supporter, who was an acknowledged
authority on Asian affairs during his tenure in Congress.
However, Solarz's nomination, which was never officially sent to the
Senate, was delayed by investigations into his role in the House of
Representatives banking scandal and his efforts to obtain a U.S. visa for a
Hong Kong businessman with reputed ties to organisedcrime.
Solarz was cleared of wrongdoing in both investigations. However, the
reports said administration officials were concerned that formally
nominating him for an ambassadorship, which requires Senate confirmation,
would provide a forum for Republicans to attack the administration on
ethics grounds.
The reports said Clinton may still name Solarz as special envoy to
Sudan, an appointment that would not require Senate confirmation. dpa sc
#13 THE INDIA GROWTH FUND EXTENDS SUBSCRIPTION PERIOD
NEW YORK (MARCH 17) BUSINESS WIRE - March 17, 1994--The India Growth Fund
Inc. (NYSE: IGF) announced Thursday that the Fund and the Dealer Manager
have decided to extend the subscription period for the Fund's rights offer
to holders of the Fund's common stock. The expiration date of the rights
offer has been changed to 5:00 p.m., New York City time, on April 5, 1994.
In addition, the Confirmation Date has been changed to April 19, 1994.
Under the terms of the rights offer, the Fund has issued to its
shareholders rights to subscribe for an aggregate of 2,525,000 shares of
the Fund's common stock. Each shareholder has been issued one-half of a
non-transferrable right for each full share of common stock owned on the
record date. The rights entitle shareholders to acquire at the
subscription price one share for each whole right held. In addition,
shareholders who fully exercise all rights issued are entitled to subscribe
for shares that were not otherwise subscribed for during the primary
subscription. The India Growth Fund Inc. is a diversified, closed-end
investment company which commenced operations in August 1988 and which
seeks long-term capital appreciation through investment primarily in equity
securities of Indian companies. The Fund's investment advisor is Unit
Trust of India Investment Advisory Services Limited, a wholly owned
subsidiary of Unit Trust of India, India's largest mutual fund manager.
Shares of the Fund's common stock are listed on the New York Stock
Exchange. At the close of business on March 15, 1994, the net asset value
per share of the Fund was $21.85 and the last reported sale price on the
New York Stock Exchange was $24.25. This press release shall not constitute
an offer to sell or the solicitation of an offer to buy. --30--kk/ny
CONTACT: Mitchell Hutchins Asset Management Inc., New York
#14 PAKISTAN'S FOREIGN SECRETARY REFUTES INDIAN CLAIMS ON KASHMIR RESOLUTION
(MAR. 16) MIDDLE EAST INTELLIGENCE REPORT -
Foreign Secretary Shaharyar Khan has clarified that Pakistan has not
withdrawn the resolution on Kashmir tabled at the UN Human Rights
Commission in Geneva. In an interview with the ASSOCIATED PRESS OF PAKISTAN
in Islamabad today, he refuted the Indian claim that the resolution has
been withdrawn. The resolution was presented, but no voting was held on it.
However, it is still there as a document. Regarding the visit of Muslim
ambassadors, he said Pakistan had a clear commitment from the Indian
Government in which a visit by Mustim ambassadors to Kashmir was agreed
upon as a part of the understanding for not proceeding with a vote on the
resolution. Therefore, the Indian claim is incorrect in every respect.
Shaharyar Khan said that one of the two main objectives envisaged by
Pakistan by presenting the resolution at an UN agency was to stop the
oppression and violence against the people of Kashmir and violation of
their human rights. The other was to draw the world attention to the
Kashmir issue for the first time in 30 years. The foreign secretary said
that it is already clear that India is adopting a more transparent method
in dealing with the Kashmir situation as a result of the international
pressure. The group of International Committee for Red Cross, Amnesty
International, and the ambassadors based in Delhi has been invited to visit
Kashmir, and now the world community will strongly react to Indian
Government's atrocities and violence against the Kashmiri people. Moreover,
the world public opinion is now focused on India and the foreign office of
every country considers the treatment of the Kashmiri people as an
important issue of the international agenda.
------------------------------
Date: Mon, 21 Mar 1994 20:47:52 -0800 (PST)
From: vars...@titan.fullerton.edu (Suvrit Varshney)
Subject: India could rival China as a new economic force
#15 WITH STEADY LIBERALIZATION, INDIA COULD RIVAL CHINA AS A NEW ECONOMIC FORCE
The Economist April'94 Issue
Given steady liberalization India could rival China as a new economic force.
But its reckless budget spells trouble
OVER the past decade, there has been no serious contest between Asia's two
giants. China started its market reforms in 1978, and has since been haring
along. India, after small spurts of reform in the early and middle years of the
1980s, started again in earnest only in 1991. Its GDP growth has been
lumbering behind at an average of 3.1% a year since then (compared with
China's average over the same period of 10.9%). Still, as all children know,
the tortoise won in the end. As the economic and political risks in China
become even more evident, India's steadiness is looking increasingly
attractive to investors. That makes the Indian budget announced on February
28th especially worrying),for its suggests that the government is prepared to
risk stability for a burst of speed.
The flow of foreign money into India demonstrates investors new
interest. Some $1 billion poured into Indian stock markets in 1993, most of it
in the second half of the year. In January, Morgan Stanley launched the first
Indian mutual fund: hoping for $100m, it pulled in $300m within three days.
New foreign direct investment, into factories rather than equities-ties,
reached $900m last year, compared with $200m in 1992. Of course China is
in a different league: in 1993, it attracted 15 billion worth of direct
investment.
Yet sentiment is shifting. This year. investors are sounding warier
about China. India's political virtues were brought into sharp focus last
month at the Chinese new year, when 89 year old Deng Xiaoping was,
literally, held up in front of the cameras. China's government meant to
reassure the world that he was still active instead, it reminded foreigners how
feeble are the shoulders on which China's political order rests and how
uncertain the future once the battle for succession is joined. By contrast,
India's Narasimha Rao looks a solid sort of fellow. More important, his
survival matters less to India than Mr. Deng's does to China, for India settled
the question of political succession in 1947. Religious riots and sporadic
secessionism notwithstanding,:India's democratic system is secure.
Foreign businessmen are also attracted by the institutional depth which
India has and China does not. India has a well developed legal system and
courts that enforce it with reasonable objectivity. It has something like a
modern financial system, with stockmarkets on which over 6,000 firms are
listed, and a regulatory system that, prodded by recent scandals, is developing
into one foreign investors feel they can trust. For its part, China lacks an
independent legal system, a code of private property rights, an effective
central bank, developed financial markets, a banking system and bankruptcy
laws.
India's institutional maturity provided the government with the tools
for economic management. In 1991 it set out to use them to stabilize the
economy. Within two years it had shrunk the budget deficit from 8.4% of
GDP to 2.5%. By contrast, when overheating began to worry China's
government last year, Zhu Rongji, the country's new economic supremo,
threatened to "chop off the heads" of officials who defied his orders to
stem the flow of credit into the economy. Inflation is showing little sign of
responding to this subtle signal: in December 1993 when it was running at
17.6%, compared with 6.7% a year earlier.
India is solid, but has yet fully to unleash its entrepreneurial potential
China is more exciting but also more dangerous. Both countries are trying to
change. At the Communist Party plenum last November, China announced a
program to create a properly functioning central bank, foster an indepen-
dent banking system, develop commercial law and sort out the tax system.
These changes cannot be made quickly, or easily: there is currently a row
between Beijing and the provinces over a proposed new value added tax ;
confusion over a new capital gains tax is depressing China's fledgling
markets: and the commission trying to draw up a law to regulate financial
markets is struggling with a seventh draft. Meanwhile, however, India is
trying to throw away its solidity without being able to match China's vigor.
Growth or bust
The Indian government's priority is growth: while China is struggling to
hold its growth rate down to 9% in 1994, India's looks like ending up at
3.8% in the fiscal year that ends this month. Hence this dangerous budget.
While continuing to lit> liberalize the economy, the government seems to be
ignoring the need for fiscal responsibility, The target for the budget deficit
for 1993-94 was 4.7% of GDP: the outturn is likely to be 7.3%. There is no
suggestion of how the gap might be f illed. The government has done nothing
either to cut expenditure or to reduce its vast public sector. Inflation is
already running at 8.6%, up from 4.5% in the middle of last year..
The finance minister, Manmohan Singh, is hoping that growth will produce
the revenue to fill this budgetary gap. Optimists point to the 21% rise in
exports in the first ten months of 1993-94. Yet exports, which make up a tiny
proportion of India's GDP, say little about the big picture. Industrial
production as a whole has grown by less than 2% for the past two
years:good weather accounts for most of the recent growth in GDP.
India's impatience is understandable: it has been illustrating to watch its
great rival pull ahead. But if inflation and government finances get out of
control, the country could lose its reputation for steadiness. Asia's success
stories argue that macroeconomic stability is a necessary condition for long
term prosperity. The tortoise did not win by pretending to be a hare.
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End of India News Network Digest
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