Looking backward in India

India's recent drive toward economic liberalization is a remarkable success story in the developing world. With overseas investment pouring in, the economy has boomed. But now many of India's gains are imperiled by a recrudescence of nationalist sentiment that threatens to drive foreign companies away. Fear of economic colonization is as old as India itself, but India's leaders must transcend these anxieties if future progress is to be secured.

The focus of the latest anti-foreign hysteria is a proposed $2.8 billion power plant to be constructed outside Bombay by a consortium of American companies led by Enron Corp. of Houston, a large natural gas supplier. The plant would be the biggest foreign investment in India since the economy started opening up five years ago. It is also desperately needed.

Construction began earlier this year in Maharashtra state. But in March, the ruling Congress Party was swept from power in Maharashtra by two Hindu revivalist parties, which charge that the plant was a sweetheart deal and want to cancel it. They also complain that foreign investment has hurt India's poor. Suddenly, potential investors are wondering if India is reverting to the days when Prime Minister Indira Gandhi expelled Coca-Cola, IBM and other big American companies, closing the country off economically for two decades.

This would be a startling reversal. In recent years, even the Communist Party has begun to welcome foreign investment. It is an especially ugly paradox that Mohandas Gandhi's inspiring independence-era cry for swadeshi, or self-sufficiency, has now been picked up by his old enemies, the Hindu chauvinists. Leading the charge is the Shiv Sena, a party with links to the goons who carried out the anti-Muslim riots in Bombay a few years ago.

Though committed to canceling the power plant, the leaders of Maharashtra could still support a face-saving deal, perhaps persuading the Enron consortium to charge lower prices for power. The government of Prime Minister P.V. Narasimha Rao should continue to support the project by threatening to override any cancellation by the state government. But the ideal outcome would be for a show of political maturity by the other opponent of the plant, the Bharatiya Janata Party or Indian People's Party.

With the Congress Party splintered, the Bharatiya Janata stands a good chance of coming out on top in the next national elections. The Bharatiya Janata could gain respectability -- and save the project -- by showing that it can put national interests ahead of sectarian impulses.

-- The New York Times