Ramesh’s rules


India’s charismatic environment minister, Jairam Ramesh, survived the recent government reshuffle, despite rumours that his highly proactive defence of India’s environment would be his downfall. But no sooner was the reshuffle over than Ramesh found himself under renewed attack, this time from the powerful Reserve Bank of India.

In the quarterly review of the Indian economy released earlier this week, the bank noted that Foreign Direct Investment (FDI) to India fell by almost 36% between April and September, 2010, dropping from US$19.8 billion (130.3 billion yuan) in the same period of the previous fiscal year to US$12.6 billion (82.9 billion yuan). The bank report noted that India seemed to be suffering alone: flows to other major emerging economies were holding up. So what was going on?

Investors might point to many possible factors, such as the increasing difficulty of obtaining visas to India and the bureaucratic obstacles to investment that the ever inventive Indian civil service has created. The bank made some reference to India’s notoriously poor infrastructure, land acquisition difficulties and what it coyly terms “procedural delays”, but it also pointed a finger at Jairam Ramesh for pursuing what the report calls “environment sensitive policies”, which have affected “investor sentiment”. 

Among the investor sentiments negatively affected by environment sensitive policies was a highly controversial bauxite mining proposal in Orissa by the UK-based group Vedanta Resources, turned down by Ramesh last year. The proposal had attracted fierce worldwide criticism because, its critics argued, it threatened a number of vulnerable tribal groups and would desecrate land they considered scared.

The company, of course, argued that their project would bring prosperity where there was poverty, but the history and track record of such large-scale mining projects suggests that the beneficiaries are rarely local people. They tend to lose the environment on which they depend, without benefitting from any jobs that may be created.

The fate of the local people was one of the security considerations that informed Ramesh’s decision against Vedanta. India is suffering from a Maoist insurgency that feeds on the discontent of people who have been pushed off their lands to make way for big business and mining interests. The second security factor is climate security: the mining project would have destroyed large swaths of forest at a time when India is pledged to increase its forest cover.

It has not been proved that the minister’s defence of the environment has cost India FDI, but even if the bank’s assertions were true in the short term, Jairam Ramesh’s decisions in favour of environmental protection will carry long term benefits, both for the Indian economy and the people on the ground.