If TRP ratings for TV
programmes were provided for the period September 26 2014 to September 30 2014,
I have very little doubt that TV News Channels (whether English or other Indian
languages) will receive higher ratings than the usual channels, whether these
be film or sports or entertainment channels. And it would all be due to one
person who has, probably, caught more eyeballs than any contemporary world
leader: Narendra Modi, Prime Minister of India. No Indian leader, since 24-hour
news channels began, has captured the air-waves in this manner. Mr. Modi’s agenda
has been filled with very high profile meetings in New York city culminating in
a couple of meetings with President Obama in Washington as well as a joint
article with the President in the Washington Post.
It is obvious that the USA attaches great significance to this visit by a man
who was once denied a visa.
The pièce de résistance of Mr. Modi’s USA trip has undoubtedly been his Madison
Square Garden (MSG) speech (though the event itself was very poorly organised
with very ordinary dances and even worse rendering of the
Indian national anthem). Mr. Modi’s oratory skills were on full display during
the general elections, but the MSG event was different. During
the elections, he had to vanquish a foe using his speaking skills. Here, he had
to use those skills to move an audience already in love with him. It was very
skilful and clever how Mahatma Gandhi – not exactly the darling of the Sangh
parivar – was co-opted, instead of the usual favourites like Sardar Patel or
Swami Vivekananda, to woo US-based Indians. The consummate performer that he
is, Modi had the audience eating out of his hands and knew exactly the buttons
to press to move the crowd, often to hysteria. But such adulation has its risks
since expectations raised so high can easily turn to impatience and extreme
disappointment. The risks are high since the announcements (can these be called
promises?) made by Modi were bold in the extreme. The merger of OCI and PIO
cards, while certainly helpful, is not path-breaking. The intention to merge
the two cards was announced by the UPA in 2012 (See here). The headlines
grabbing announcements were (a) providing toilets for all and cleaning the river
Ganga within five years and (b) providing homes for all by 2022. The latter is
reminiscent of the unrealistic overreach in the slogan of ‘Garibi Hatao’
(remove poverty) coined by Indira Gandhi. While no one can doubt the laudable
vision behind these promises, feasibility of such endeavours must be
established. It is not clear to me what the total resource cost of these
objectives will be or how these resources will be garnered to bring this vision
to fruition. I find it surprising that, in the euphoria of Modi’s performance,
questions regarding the implementation of such bold promises have not yet been
raised. Like the audience at the Madison Square Gardens, even veteran TV
anchors covering the Modi visit seem mesmerised and have forgotten that healthy
scepticism is a virtue as far as journalism is concerned.
The US administration
has always accorded very cordial receptions to Indian Prime Ministers going
right back to the time of Jawaharlal Nehru. During the last 30 years, most
Indian Prime Ministers have been honoured by White House State Dinner. The White Historical Association states:
A state dinner honouring a visiting head of government or
reigning monarch is one of the grandest and most glamorous of White House
affairs. It is part of an official state visit and provides the president and
first lady the opportunity to honour the visiting head of state and his or her
spouse...It is an event that also showcases global power and influence.
In the last thirty
years, the following Indian Prime Ministers have been so honoured:
- Rajiv
Gandhi when Ronald Reagan was in office
- Atal
Bihari Vajpayee when Bill Clinton was in office
- Manmohan
Singh when Barrack Obama was in office.
Further, four Indian
Prime Ministers in the last thirty years have addressed a joint session of the
US Congress: Rajiv Gandhi, Narasimha Rao, Atal Bihari Vajpayee and Manmohan
Singh (See here).
Mr. Narendra Modi’s Washington DC visit is relatively low key with neither a
state dinner nor an address to a joint session of the US Congress. But then not
every Indian Prime Minister received this honour during the first visit to the
USA. Mr. Modi’s initial meeting with President Obama has been quite like the first
round of a boxing match between two heavy-weights, with much circling round
each other, gauging each other’s strengths and weaknesses before making any
long-term commitments. However, it was quite extraordinary that there was no
joint press briefing by the two leaders at the end of their talks. Instead, a
closed room briefing was preferred with no members of the press present. Was
this done to avoid uncomfortable questions of the two leaders? This might well
have been the case given that international press would have not pulled their
punches unlike their Indian counterparts, which have become quite meek over the
last few months.
President Obama and Prime
Minister Manmohan Singh – possibly the only two intellectual heads of state in
the last 25 years – shared a special relationship built on Obama’s charisma and
intellect which had carried him to White House and Manmohan Singh’s accomplishments.
These accomplishments include his great track record as a
bureaucrat/administrator par excellence, as India’s finest Finance Minster and his
tremendous achievements as Prime Minister, especially with respect to the high
rates of growth of the Indian economy over his entire tenure (possibly barring
the last two years) and shepherding the Indian economy through the ravages of
the Great Recession. At a personal level, there need not be any animosity
between Obama and Modi since the original denial of a visa to him took place
when Bush was President though the situation was not altered even after Obama
assumed office. The general perception about Modi’s track record as the Chief
Minister of Gujarat and his impressive victory in general elections of 2014
certainly provide him the strength and credibility to meet Obama on an equal
footing.
Meetings between heads
of state certainly make for a certain spectacle and provide the “optics” – a
word that has recently become very dear to many TV analysts and anchors –, the
question that must be asked is: what specific purpose do such meetings serve? The
purpose of such meetings may be divided into political and economic benefits
gained by each country. Political benefits, while undoubtedly important, are
not easily measurable. Economic benefits, on the other hand, can be quantified
to some extent and this is what I propose to do. While there can be many
measures of economic benefits – foreign direct investment, migration into the
USA from India, for example – I will only focus on trade. What I will try to
examine is whether there was a change in the rate of growth of exports from
India into the USA and rate of growth of imports from the USA into India before
and after a Prime Ministerial visit to the USA. Given the data that are
available, I consider the following visits:
- Rajiv
Gandhi’s visit in 1987
- Narasimha
Rao’s visit in 1994
- A.B.
Vajpayee’s visit in 2000 and 2001
- Manmohan
Singh’s visit in 2008 and 2010
Details of the data that
I have used and how the growth rates were computed are given in the Appendix. The
Appendix also gives details of the statistical results. A summary of results for
Indian exports to the USA and American imports into India is given below:
- Rajiv
Gandhi’s visit did not have a significant effect, either on the rate of growth
of exports or on the rate of growth of imports.
- Narasimha
Rao’s visit had an impact on both exports and imports with both rates of growth
increasing significantly after his visit. One could say that Indo-US trade as a
whole received a strong boost after his visit.
- A.B.
Vajpayee’s visits had no impact on Indian exports but rate of growth of US
imports into India increased significantly after both his visits. This would
imply that India’s balance of trade (export earnings minus import expenditure)
would have worsened after Vajpayee’s visits.
- Manmohan
Singh’s visit of 2008 led to a significant increase in the rate of growth of
Indian exports while there was no impact on imports. His second visit had no
discernible impact on either Indian exports or imports. This would imply that
India’s balance of trade improved substantially after Manmohan Singh’s visit of
2008 while the second visit seems to have had no impact.
The simple analysis
carried out in this note shows that Prime Ministerial visits, apart from their
political and diplomatic importance, have significant economic impact as well.
As Mr. Modi winds up his trip to the USA, there can be little doubt about its
political and diplomatic significance. The economic impact of his visit will
play out over the next few years. Mr. Modi has aggressively promoted the ‘Make
in India’ agenda with the objective of making India an attractive destination
for manufacturing. Labour reforms – a political minefield – are being
discussed. Simplification of bureaucratic procedures is in the offing and
overbearing laws and regulations are being pruned. All of these changes were
listed out by Modi, almost as promises, to the audience at Madison Square
Garden. There is consequently a palpable feeling of hope and expectations among
those who heard the speech. Corporate honchos in India have expressed the belief
that these changes will significantly improve the environment for doing
business in India. If the above changes do indeed materialise we should be able
to see the following in the near future:
- Improvement
in India’s ranking for ‘Ease of Doing Business’ as measured by the World Bank.
Currently, India ranks a dismal 134 out 189 countries.
- Consequent
to Mr. Modi’s visit to the USA, foreign direct investment (FDI) from that
country should start flowing into India. The level of FDI from the USA for
2012-13 stands at $ 478 million way behind FDI from the UK ($1,022 million),
Japan ($1,340 million) and the Netherlands ($1,700 million) (See RBI).
Mr. Narendra Modi’s
Washington and New York sojourn has sowed the seeds of change that may
transform India. We now wait, with bated breath, for the green shoots of
rejuvenation of the Indian economy to emerge.
APPENDIX
Trade
data are sourced from the United States Census Bureau. We use data from Exports from India, Imports
into India and India’s Balance of Trade.
A
trend equation, with intercept and slope dummies, is estimated from each Prime
Ministerial and each Presidential visit.
Table 1
Impact
on Indian Exports after Prime Ministerial/Presidential Visits
|
Visit
by PM or President
|
Growth
rate of Exports before visit (% per year)
|
Growth
rate of Exports after visit (% per year)
|
|
Rajiv
Gandhi’s visit in 1987
|
4.84
|
No
significant change
|
|
Narasimha
Rao’s visit in 1994
|
8.85
|
8.85
+ 2.35 = 11.20
|
|
A.B.
Vajpayee’s visit in 2000
|
10.47
|
No
significant change
|
|
A.B.
Vajpayee’s visit in 2001
|
10.25
|
No
significant change
|
|
Manmohan
Singh’s visit in 2008
|
10.95
|
10.95
+ 5.84 = 16.79
|
|
Manmohan
Singh’s visit in 2010
|
10.71
|
No
significant change
|
|
Bill
Clinton’s visit in 2000
|
10.46
|
No
significant change
|
|
George
Bush’s visit in 2006
|
10.75
|
No
significant change
|
|
Barrack
Obama’s visit in 2010
|
10.73
|
No
significant change
|
Table 2
Impact
on Indian Imports after Prime Ministerial/Presidential Visits
|
Visit
by PM or President
|
Growth
rate of Imports before visit (% per year)
|
Growth
rate of Imports after visit (% per year)
|
|
Rajiv
Gandhi’s visit in 1987
|
-5.47
|
No
significant change
|
|
Narasimha
Rao’s visit in 1994
|
4.76
|
4.76
+ 8.38 = 13.14
|
|
A.B.
Vajpayee’s visit in 2000
|
6.01
|
6.01
+ 10.67 = 16.68
|
|
A.B.
Vajpayee’s visit in 2001
|
5.79
|
5.79
+ 10.59 = 16.38
|
|
Manmohan
Singh’s visit in 2008
|
8.66
|
No
significant change
|
|
Manmohan
Singh’s visit in 2010
|
9.06
|
No
significant change
|
|
Bill
Clinton’s visit in 2000
|
6.01
|
6.01
+ 10.67
|
|
George
Bush’s visit in 2006
|
7.16
|
No
significant change
|
|
Barrack
Obama’s visit in 2010
|
9.43
|
No
significant change
|
