R Ravimohan: Is India Asian? Basic lessons in geography

The Asian Currency Unit initiative is gathering momentum, and it is really important for India to be part of that initiative.

By all accounts India is now acknowledged as one of the leading emerging economies and has proved to be a hot favourite investment destination. But the cohabitants in our continent, the mighty Asia, do not seem impressed. India is not included in any Asian agenda. More alarming, mandarins in India are also ignoring this, Nero style, as important developments keep bypassing India. As a result, whether it is a nerdy study of the development agencies of Asian financial markets or the more influential Asian Currency Unit (ACU) or Asian Bond Fund dialogues, India is nowhere in the picture. One could have let it pass, putting it down to the Great Indian Big Ego, but for the unacceptable asymmetry produced by the regular featuring India in uncomplimentary lists and indices, such as corruption, inefficiency, unhealthiness, and so forth. This constantly creates a negative perception about India that does unfathomable damage to our country's franchise, despite remarkable progress on economic, technological, and social fronts. To stop undermining the country's reputation for high-quality service and delivery standards, innovations, and relevance to the larger humanity, it is important that we undertake a comprehensive and aggressive outreach programme to get us included in international forums so that they may serve as a platform for presenting the more favourable holistic image about India.

In addition to the various financial programmes, Asean and the Asean+3 group also give India a miss. The ACU initiative is gathering momentum, and it is really important for India to be part of that initiative. In fact, India, with its size and economic power, should be one of the key drivers of this initiative, and not a mere passive participant. Admitted, the ACU is a distant, if achievable, goal. The point is not the ACU itself, but the lack of India's leadership in shaping thoughts around this initiative. Singapore, Japan, China, and Malaysia seem to have taken the lead in these debates and are now almost seen as the natural leaders in this regard. India, by contrast, is not even seen as a country whose currency will be included in the formation of the ACU.

The motivations for the ACU are to strengthen cross-border investments and trade among Asian countries. The advantage of the fact that the rupee is a dominant part of the ACU is that it will bring much greater stability to the exchange rate, making it far easier to trade with and invest in India, much like the position the French franc and deutschmark had obtained. However, if the Indian rupee gets included as a "uppu-ku-chappani" (a Tamil expression which roughly translates into being condescendingly included as a twelfth man!), then our exchange rate will yo-yo not only to our variables but also to those of the stronger components of the ACU such as the renminbi, yen, and Singapore dollar. Given the diversities and disparities in the region, there are much more challenges in creating the ACU than was for the euro. Also, political convergence needed for this is perhaps years away. So now the thought is to create a unit of currency as a parallel trading-oriented one. The idea is to have a well-designed basket that does not play as adversely to the dollar as each of the home currencies. If this choice was available, then traders might have preferred this currency to have their trading exposure. Once again, the constitution of this basket is a critical step where India needs to be centrally engaged.

These kinds of issues are regularly discussed in the ASEAN +3 fora. The ASEAN +3 group of finance ministers meet on a regular basis. They have formed working groups that are more or less permanent to tackle issues of this nature. India needs to be part of these groups and discussions, or else it will be at a serious disadvantage in its ability to influence such thought processes. Other initiatives being envisaged by these groups are creating a pan-Asian capital market, Asian Bond Market, and an Asian Credit Rating Agency.

Though India has taken initiatives in this regard, these are certainly not commensurate with its rightful position as a leader. India has behaved as an underdog for decades. But there is evidence that it wants its image changed from a country seeking alms to one ready to provide protection and leadership. The proactive leadership provided by India in the region in the aftermath of the Tsunami, to the exclusion of western aid, was a telling change in the foreign policy stance of India. That needs to be consistently replicated across all spheres. It is laudable that we are rigorously pursuing a place in the UN Security Council. But getting successful in a number of other efforts, especially those closer home, is also important. Indeed, getting into various Asian fora and then getting them to support us is important, as we might then count on their support. The recent win of the South Korean candidate as the UN Secretary General, much to the disappointment of many Indians, is a good case in point. South Korea proactively wound its way into the ASEAN +3 group and thus has a more familiar image among these countries.

Indeed, I am very surprised to learn that the geography taught in the Far East seems to emphasise that the Asian continent is along the Pacific rim only. As the Chairman of the Best Practices Committee (Association of Credit Rating Agencies in Asia""ACRAA), I can testify to the constant trouble we go through in convincing our counterparts from Japan, the Philippines, and other Far Eastern countries to consider us and the Middle East as part of Asia! Indeed, Asia has a lot to benefit by including, nurturing, and celebrating the larger Asian continent that we have all been raised to think as the right geography. This continent can then be the host to two of the biggest economies (Japan and China), two of the fastest-economies (India and China), three of the most competitive exporters (China, Taiwan, and South Korea), the biggest energy reserves (the Middle East), and the fastest- growing markets (the whole of Asia). India needs to be one of the natural leaders in that scheme of things.

This is not just an economic agenda. While we in the economic front feel the brunt of it, clearly the whole nation is affected since the programmes that bypass our country are not merely economic in nature.