WHAT IS SWADESHI? WHAT IS FOREIGN? continued
allowing manufacture of consumer goods in India. That was the beginning. So it was '84 that marked a watershed in Indian economic thinking and policy. Unfortunately for him, within a year or two of his coming to power, he got bogged down in all kinds of political controversies and nothing much happened thereafter. Also, the economic management was not of very high quality. All that was achieved was because we were really importing a great deal. Not merely that, but most of the borrowing that we were doing overseas was public-sector borrowing, for the government, on short-term basis. Now in the 1950s, '60s, '70s we were getting soft, lowinterest loans from IDA, from the World Bank. This began to change in the 1980s, because China became a high priority [for international lending institutions]. India became a much lower priority. The average borrowing of India in overseas markets began to become of shorter duration and of higher expense, higher interest rates. That was the problem by the time we came to 1990. In 1990-91, of course, you had the Gulf War. Within India, there were serious problems, because of MandaI and Masjid and so on.This frightened people who lent money to India. They began to refuse to roll over their loans, and that brought about the full-fledged crisis in 1991. That was part of the problem. So suddenly because of the external [debt] crisis in 1991 we had no alternative but to push through into this opening up of our economy.
And this opening meant easier accessfor MNCs and joint ventures-fOr fOreign capital. How does fOreign capital d£:Velopa nation? Look at the United States) fOreign capital played a crucial role in the 19th century in its becoming an economicgiant. Uils it mainly British capital? RAO: Mainly British. A fair amount of German and French, but primarily British. The British had enormous investments in America in the 19th century. But once the initial investments had come in, the American resource situation was so fantastically rich that the kind of savings that were available domestically really moved the economy very much forward. But there is no doubt at all that the American economy was fueled, to start with, by foreign savings.
Looking at India) from your personal experience of working with Hindustan L£:Ver;how dofOreign investors benefit the country? Do they bring in any negative baggage? RAO: I must tell you a story. In 1993 the Deendayal Research Institute, which is the so-called think tank of the BJP and the RSS, invited me to give a talk to them about Indian economic reforms. And I said to them: "Look, I don't agree with you chaps. I'll say things that you don't want to hear." They said: "No, no. That's just what we want."
"In Indiaforeign investment is less than one percent of the total investment today. In China it is 13 percent, in Singapore it is 30 percent, in Malaysia 50 percent." -S.L. Rao
This was the time when some BJP leaders were talking of swadeshi and making appeals not to buy things like Lux toilet soap. So, in the course of my talk, I asked: "Please tell me what is Indian and what is foreign? Lux toilet soap is distributed by two million retailers in India who make money. It is manufactured by Indian workers, Indian managers, Indian directors, Indian chairman. The packaging material is made in India, the oil is bought in India, the perfume is now made in India. There is only one foreigner on the board of Hindustan Lever. Against that there are 34.Indians in top Unilever positions in the world. So what is swadeshi?" At that time Tatas and Lever were talking about merger; the Tata soap company being bought up by Lever. So I said: "Until yesterday Hamam soap, which is a Tata product, was an Indian soap and you said, 'Buy Hamam, don't buy Lux.' Tomorrow ifTata soap company is taken over by Hindustan Lever, are you going to turn around and say, 'Don't buy Hamam because it's become a foreign soap?' " I also told them the story ab_outLos Angeles. A few years ago the Los Angeles Corporation, whatever it is called, was buying some earthmoving equipment. This was the time when there was a lot of hostility toward·Japan [because of its restrictive trade practices] and the slogan was "Buy American." So, they became very patriotic and decided to buy Caterpillars. Then they got egg on their face when somebody pointed out that if you dissect the components of the