India Post Pittsburgh

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The question raised was as big as which way the world is going. Given the G20 gallery, not too big a question perhaps. But that question, raised in Pittsburgh, has been answered in Surat - in some ways at least, and for now. Where India will find itself located on that spectrum from survival to success will all depend - and really all of it - on how much of a Surat India can do in the face of Pittsburgh.

Just about every exporter around the world had made it their business, or their business dream at the least, to sell to America, confident of an unending American inclination to go on borrowing when they do not have, in order to buy what they do not need; or could at the least do well without.

It was after all, The American Way. No more, said, President Barack Obama, looking around him at leaders of those selling and investing countries gathered around him at the G20 summit.

For America to have said 'no more', even if that translates only into 'less of the same' is revolutionary, no less. The US now has savings of 5 percent or thereabouts, IMF chief Dominique Strauss-Kahn reminded everyone in the run-up to the summit. That, in a nation that did not have 'savings' in its vocabulary a year back.

US treasury secretary Tim Geithner took quite simple note in Pittsburgh of that seismic change. After, he said, "a long period of time living beyond our means, you see people already changing behaviour. That's one reason why we can stand here today and express some measured optimism about our capacity to put in place a more sustainable recovery."

So, the US has done enough of borrowing to buy, from countries principally such as China. Now China and its fellow and lesser emerging economies must sell to themselves, and buy more the other way to make it all more sustainable. Simple in essence, momentous in impact.

Suits everyone too - or does it. The Surat diamond industry collapsed last year after the traditional diamond markets in the US, Japan and Europe were slapped by the recession into near stillness. Surat would naturally be hit, because eight out of ten diamonds sold around the world are cut and polished in Surat.

That business is reviving now, not due to those weedy green shoots of recovery sprouting up here and there; it's on the strength of new demand in Hong Kong, China - and India itself. The diamond mela in Hong Kong in recent days has delivered promise of stronger revival to come from Asia, replacing the US.

This, then, is what Geithner was talking about in Pittsburgh. America has its savings, India its sales; the one contains its debts to cut deficit, the other revives its capacity to bring income.

Because it's really these everyday things it's all about. The Americans have been borrowing to buy Japanese cars, Indian diamonds, Asian flat-screen televisions, and Chinese just about everything. And the dollar earnings from these sales then go into banks that then place money in US Treasury dollars, that then facilitate more borrowing and yet more spending.

Time, as the G20 leaders said, and this is about the first thing they said, "to turn the page on an era of irresponsibility" and work for "balanced global demand". Those words "balance" and "balanced" figure 70 times in the final leaders' communiqué from Pittsburgh. Now that Americans are crying out for balance, it would be right not to quarrel with the many who are forever boring you with wisdom about the changing world order.

Nobody was of course crying foul in the developed world when the imbalance was to their advantage. The Pittsburgh summit stands out as the sharpest yet of the many pointers around how much, and how rapidly, China alone has changed all that.

China has by now 2.1 trillion dollars (a trillion is a million million) in foreign exchange reserves; the US has a budget deficit of 1.6 trillion dollars. A digital clock installed on the Avenue of the Americas in New York recorded on September 15 that the US national debt was 11.7 trillion dollars, close to 90 percent of GDP, up sharply after stimulus packages to deal with the financial crisis. Seventy times, then, may not be enough for the US to want to say "balancing" in one communique.

What's worrying is what it will take now to get that rebalancing in place as the US and other developed nations want it. And there are warnings of that enough within the apparently innocuous language to come out of Pittsburgh. The dangers are close by, as early as the trade ministers meeting due in Geneva at the end of November.

The G20 leaders agreed in Pittsburgh to "promote more balanced current accounts and support open trade and investment to advance global prosperity and growth sustainability, while actively rejecting protectionist measures." Some key words here that must sit bold in the eyes of developing countries. Supporting open trade...that's what the World Trade Organisation (WTO) talks are all about, the Doha round as it is called because the talks began in the Qatar capital Doha in November 2001.

The leaders emphasised, as agreed earlier at the G8 summit in L'Aquila, to get that trade deal in place, and in a new push, agreed that ministers should take stock of the situation "no later than early 2010" after agreeing a programme at the Geneva meeting. The sudden acceleration comes after years of those talks going nowhere, principally because of India and the U.S.

Agriculture is the big sticking point. The developing countries want the EU and the US to cut if not drop those hundreds of billions of dollars paid in subsidies to rich farmers that make exports from the developing world uncompetitive. At the same time they are resisting pressure from the developed world to open their markets under non-agricultural market access (Nama as it is called).

There are a few thousand nuances to all this, but essentially the developed world wants to go on paying taxpayer money to keep their farmers going, and want countries like India to free their markets of restrictions and tariffs to let in industrial goods manufactured abroad. This could ruin much of Indian industry. The last trade minister, Kamal Nath, to his credit, blocked any such agreement on the grounds that no deal is better than a bad deal.

New governments in both the US and India may help swing through what G20 leaders agreed should be an "ambitious and balanced" deal. To get that deal through India may have to give up on issues it has stood firm by all these years, no one know yet what these might be. But it may point to Nama; rebalancing as the US and other developed countries see it necessarily means they want also more access to markets in developing countries for industrial goods from their countries that are selling much less now as people save more.

Letting in unsold cars from Detroit into India at no or minimal tariff may help feed snobbery in south Delhi and south Mumbai; but it can be ruinous for the economy.

The developed and the developing have been fighting it out over all this through the Doha talks. That they are now together in the G20 club will not erase the issues they have been contesting.

Pittsburgh has been a pointer to tough days ahead; India has its task cut out in standing its ground in Geneva while getting more of the country and its businesses to do a Surat. One of the smartest collective actions ever undertaken by Indians may have been to make sure Manmohan Singh is still around at a time like this; India has probably never needed him more.