India must downsize for region

Mark Tully  New Delhi, May 3, 2012 | UPDATED 11:53 IST

Some years ago I asked an economist from the Asian Development Bank why South Asia’s nations didn’t do more business with each other. He replied, ‘Because India is not good at downsizing with its smaller neighbours’.

In spite of SAARC and its offshoot SAFTA, the South Asian Free Trade Area, trade within the region is a pathetic 5 percent of the total trade. In neighbouring ASEAN it’s 25 percent. No wonder India has adopted a Look East policy. There doesn’t seem to be much point in looking nearer home.

That may seem to be a rather pessimistic assessment. After all India has agreed to withdraw duty on all major items Bangladesh exports, including garments. Pakistan has switched from a not very lengthy list of imports it allows from India to a comparatively short negative list. But a visit to Dhaka has convinced me that India still has a lot of downsizing to do before South Asia catches up with other areas which have demonstrated the benefits of intra-regional trade.

Bangladesh

Down-sizing would involve India taking into account the politics of neighbouring countries. It must accept that because of its size, stability, and federal nature it has more room for compromising on its interests than smaller and more fragile democracies have. Compromise is often regarded as a pejorative word, but it isn’t, or at least it’s not necessarily. After reaching a compromise in his first case in South Africa Mahatma Gandhi became a firm believer in the search for mutual accommodation.

Manmohan Singh went to Dhaka in September to consolidate the most positive stage in Indo-Bangladesh relations since the brief Indira Gandhi-Sheikh Mujib honeymoon. In that city I came to learn the new deal was nearly derailed by the Indian decision to go back on the Teesta waters agreement. India didn’t even bother to inform Bangladesh about this major setback until the day before the two Prime Ministers were to meet in Dhaka. Manmohan Singh did not take account of the risk it posed to Sheikh Hasina’s ability to sell the deal she promised on security, borders, trade, transit, and water when she visited Delhi in January 2010.

Bangladesh politics are a tale of two ladies. Sheikh Hasina’s rival Khalida Zia heads the Bangladesh Nationalist Party. To her nationalism means anti-Indianism. As soon as Sheikh Hasina cleared the way for a new deal by responding to India’s security concerns and expelling prominent members of ULFA Khalida Zia started talking of a sell-out. The failure of the Teesta water agreement was grist to her mill. Hasina had to react and therefore went slow on the crucial transit agreements. They could benefit enormously the North Eastern States which are in such urgent need of development. The Daily Star , Bangladesh’s biggest selling English daily published an editorial on the Teesta agreement failure headlined ‘We have been let down’.

If it is to downsize India also needs to bring its unruly bureaucracy under firmer control. A prominent Bangladesh businessman showed me a list of obstacles that had to be negotiated by anyone wanting to do business with India. First comes the far from satisfactory visa situation. According to the businessman multi- entry visas are rationed. Bureaucrats love rations because they create complications and opportunities to exercise power and extract perquisites.

Inevitably there are complaints about Customs’ delays and corruption. The only rail link between Bangladesh and India which connects Dhaka with Kolkata has been rendered virtually unusable by inordinate delays at the border. For months now officials of both sides have been negotiating an agreement which should be very simple – to clear passengers and their luggage while the train is travelling. Thousands of cattle manage to cross the Indo-Bangladesh border every day without passports, visas, or customs clearance. That just shows how easy it is to smuggle across the border and demonstrates the futility of all the hassles the customs put railway passengers through.

Complaints

Then on the list there are complaints about documentation and certification. One complaint relates to a rule imposed under India’s Prevention of Food Adulteration Act which deals with packing and labelling of food. This rule apparently has, ’30 provisos and provisos within provisos. In addition there are also cross- references to other rules.’ At one stage India insisted that every jute bag imported from Bangladesh should have a label machined into it stating its country of origin. This absurdity has now been removed.

Of course it takes two hands to clap and Indian exporters doubtless have a long list of complaints about Bangladesh’s handling of their exports. The babu mentality is a common feature of South Asia. Nevertheless here again is a case where India could take the lead. It could unilaterally simplify its procedures and speed up the bureaucratic procedures.

Generosity

Now India has another test of its willingness to downsize. How generous is its response to Pakistan’s gesture going to be? Will Pakistan’s move lead to a significant increase in trade between the two countries or will India’s politicians and bureaucrats throw this opportunity away? Will India once again fail to downsize? Will goods still just trickle across the Wagah border in spite of the brand new facilities there?

I have often said that in relations between the countries of South Asia the burden of generosity lies on India’s shoulders. I expected the Editor of Bangladesh’s The Daily Star to approve but Mahfuz Anam was annoyed. ‘It’s not a matter of a burden’, he shot back ‘it’s a question of self-interest. A more cooperative India is in India’s interests because an increase in trade is in its interests.’ Will the initiatives both Bangladesh and Pakistan have taken awaken India to that reality, and lead it to downsize?

– The writer, a well known commentator, has just returned from a visit to Bangladesh