By Kenneth J. Cooper
Washington Post Foreign Service
Sunday, December 14, 1997; Page A30

NEW DELHI—While the nimble tiger nations of Southeast Asia lick their wounds from a regional financial crisis, India's economy has lumbered along like an elephant, its plodding pace hardly affected by the turmoil.

India has been insulated from the financial turmoil afflicting its smaller, faster growing neighbors partly because its economy remains less open to international market forces despite six years of halting reforms. Government officials, guided by the principles of caution and stability, have kept a tight rein on the debt and currency speculation that have caused problems from Korea to Thailand.

After suffering years of unfavorable comparisons to Southeast Asia, some political leaders here in the Indian capital have suggested that the region's trouble vindicates India's relatively slow pace of economic change. Caretaker Prime Minister I.K. Gujral said as much last week at an international conference here on India's economy, saying the country is justified in not "spurning caution" in moving more quickly toward a market economy.

But the director of the Geneva-based World Economic Forum, the conference's sponsor, opened the three-day meeting of business and government leaders by describing such reactions as "disturbing" because Indian leaders "might be getting the wrong message from this crisis."

Director Claude Smadja said that "the Asian crisis is putting more pressure on India to put its act together in an even more decisive and coherent way" or face the loss of export markets and foreign investment.

So far, the crisis's greatest effect in India has been on its stock markets, which last month experienced a net outflow of foreign investment for the first time since they were opened to international traders in 1993. The net loss approached $150 million.

The overall impact on the Bombay stock market, India's largest, has been moderate. Its benchmark index has declined 20 percent since August, less than the 30 percent to 50 percent drop at most exchanges in Southeast Asia during the same period. Merrill Lynch & Co., the brokerage firm, recently recommended India, along with Hong Kong and Taiwan, as among the best Asian stock prospects next year. Smadja and other analysts are not as bullish, however.

Besides foreign investment in its stock markets, India could lose direct investment by Southeast Asian companies. South Korea, the hardest hit by the crisis, has been the third-largest investor in India, after the United States and Britain, since the partial economic opening of 1991.

Several analysts have predicted that the devaluation of Southeast Asian currencies by as much as 50 percent would make the region's exports -- particularly textiles and rice -- less costly and more attractive than India's. Growth in India's exports this year has already dipped to 5 percent, down from a 20 percent increase last year.

But Soumilya Datta, research director in the London office of Citicorp, the American bank holding company, said that about half of Indian exports "do not suffer from a competitive disadvantage with Southeast Asia after the devaluations."

India's rupee has fallen only 8 percent since August, a decline triggered mostly by political instability and the currency's overvaluation -- not by speculation by international traders, as in Southeast Asia. The government bans foreigners from dealing in India's money market.

That is not the only part of the economy that remains protected, Datta concluded in a new report on India's corporate bonds.

"The most fundamental structural difference in the economy and business environment of India compared to those of wounded Asian tigers is that India's vast domestic market is still largely protected and untapped," Datta said. "It is far less exportdependent. In addition, its corporations are insulated from the true competitive force of free international trade. In that sense, it's more like China than like the Southeast Asian countries."

Gujral and other Indian political leaders may take comfort in their country avoiding the kind of economic shock those countries are undergoing. But India also has not benefited from the long-term growth generated by those nations' more open economies. During the last two decades, Malaysia, for instance, has sharply reduced poverty -- a major, unfulfilled goal of successive Indian governments.