Although he has powerful backers in New Delhi–notably the policymaker closest to Prime Minister Manmohan Singh, Deputy Chairperson of the Planning Commission M S Ahluwalia–US Treasury Secretary Timothy Geithner left Delhi empty-handed after a two-day visit beginning April 7. This was despite breathless commentaries in the local business press, which hailed the brief visit as a ‘major event’.
Others, disregarding the dense financial linkages between the US and China, spoke of how Geithner would give the Chinese a ticking off for their undervalued yuan. Although Geithner, as expected, visited Beijing after leaving India, leaks from helpful Indian officials stressed that the visit was ‘sudden and unplanned.’ Yet they were left waiting for news that he had, indeed, given Chinese officials a ticking off—news that never came.
Prime Minister Singh has thrown political caution – and some would say the interest of Indian entities – to the wind in opening the insurance and banking sectors of the economy to foreign (mainly US and EU) financial entities. He has been helped by the awe in which institutions such as the Reserve Bank of India still hold the Anglo-Saxon world. However, to most others, the 2008 financial collapse, followed by the visible tilt away from India of the Obama administration, have been reason enough to deny Geithner his substantial wish list. The fact that insurance premiums, especially in healthcare, have skyrocketed after the entry of international giants such as AIG, as well as the homing in of foreign banks on premium customers that has left the (more expensive to service) little guys to local institutions, has hardened attitudes from the usual Ahluwalia line of uncritical acceptance of US-EU demands.
Geithner’s financial constituency sees in rural India an immense market, one made attractive by the fact that the piling up of debt usually gets ‘solved’ by budgetary handouts. They are also interested in getting a significant slice of the healthcare budgets of the central and state governments, through much greater penetration and freedom from regulation than they enjoy at present. Financial analysts see a parallel between such demands and those made on Brazil and Argentina in the 1970s, which, once conceded, impoverished all except a small segment of the populations. Given the tenuous hold of Manmohan Singh’s Congress Party over the parliament (its majority is presently in single digits), it’s unlikely that the PM will any more be given the freedom to indulge his penchant for indulging Geithner.