Over 100
dead in Pakistani
terrorist strike

business in
state of flux

India takes

These are a sampler of several thousand published articles by Minhaz Merchant in The Times of India, The Times, London, DNA, The Economic Times and other newspapers and magazines.


The realpolitik of modern sport
Thursday, August 30, 2018

As the 2018 Asian Games in Indonesia approaches its climax this weekend, India and Pakistan would have played each other in, among other team sports, hockey and volleyball. Following Imran Khan’s election as Pakistan Prime Minister, a strong lobby has sprung up for resumption of bilateral cricket between India and Pakistan. The argument is simple: we play Pakistan in multilateral sports. Why not bilaterally?

The argument is disingenuous on several counts. Sport has been used successfully by democracies as a weapon against injustice in dictatorial regimes. The West boycotted South African sport to pressurise the white supremacist government to dismantle apartheid. It took over 20 years of sustained sporting and political isolation to finally liberate South Africa from a noxious white racist regime and free Nelson Mandela from 27 years in prison. India forfeited the opportunity to win its first Davis Cup tennis trophy when it refused to play South Africa in the 1974 final. South Africa was expelled from the International Olympic Committee (IOC) in 1970. FIFA, to its credit, expelled South Africa as early as 1963.

With Pakistan, the issue is far more serious. Since 1989, the Pakistani army has used terrorism against India as an instrument of state policy. Thousands of Indian soldiers and civilians have been killed over the past 29 years by Pakistani terror proxies. Why then did India not boycott bilateral cricket with Pakistan till 2012-13? The answer is that India is a soft state. It lives in the hope that diplomacy, people-to-people contacts, trade and other confidence building measures (CBMs) would change Pakistan’s violent behaviour. Through the 1990s and 2000s, leaders across the political spectrum, from Atal Bihari Vajpayee to Dr. Manmohan Singh, tried to build bridges with Pakistan.

But Pakistan is ruled by an Army that sees India not so much as an existentialist threat, but as a financial resource. The Pakistani Army’s bloated defence budget is nearly 4 per cent of GDP — compared to India’s defence budget of 1.6 per cent of GDP. This can only be justified by setting India up as an existential enemy. Without India, the Pakistani Army’s senior officers, who siphon off large parts of the defence budget, would be forced to consign themselves to a vastly more modest lifestyle.

India’s policy-making establishment, ranging from bureaucrats in the defence ministry and intelligence services to political leaders and elements among armed services officers, has been blind to Pakistani chicanery. Bus trips to Lahore, summits in Agra, invitations to prime ministerial oath-taking in Delhi, and impromptu stopovers in Lahore were met with terror attacks.

The penny began to drop after 2012-13, when the Manmohan Singh government allowed the last bilateral cricket series with Pakistan to take place in India despite strong criticism over Pakistan’s inaction in the 26/11 Mumbai terror attack. The Congress lost power soon after. Since the NDA government took office in 2014, the question of resuming bilateral matches with Pakistan has been periodically raised by leaders from both the Congress (Rajeev Shukla) and the BJP (Anurag Thakur). The Narendra Modi government has had the good sense to ignore their entreaties. It has not permitted the forthcoming cricket Asia Cup, which features games between India and Pakistan, to be held in India. The United Arab Emirates will host the multilateral contest in September. Pakistan is obsessive about resuming bilateral cricketing ties with India. Its cricket board is bankrupt. No international cricket team has played a Test match in Pakistan since the 2009 terror attack on the Sri Lankan cricket team.

Proxy terrorism with few casualties among Army regulars, serves the Pakistani army’s purpose of maintaining its centrality within the country and retaining access to financial resources. But Pakistan also craves respectability. It is widely disrespected. Neighbouring Afghanistan despises it. The United States distrusts it. Resuming official talks with India along with bilateral sporting links would afford Pakistan a patina of respectability. For Islamabad, terror and talks are mutually inclusive. The Indian lobby that believes talks will end terror falls into Pakistan’s trap by propagating Islamabad’s fraudulent narrative. The Modi government’s blow hot, blow cold policy on Pakistan has given this narrative fresh legs. By not withdrawing most favoured nation (MFN) status to Pakistan, the government has strengthened the narrative.

Emboldened, the pro-Pakistan lobby in India asks: why boycott only bilateral cricket with Pakistan? Why not ban hockey and other sports as well? In fact, bilateral hockey matches between India and Pakistan have belatedly been put on ice. In most sports, including the ongoing Asian Games in Indonesia, India plays Pakistan only multilaterally. Bilateral contests are increasingly rare.

Playing bilateral cricket, hockey and other sports with Pakistan for decades did nothing to stop terror attacks on India. Why would resuming bilateral sports with Pakistan stop terror attacks now? Quite the contrary: Pakistan would gain the respectability and false equivalence with India it craves, without ending its state policy of sponsoring lethal terror attacks against India that suits the Pakistani Army’s pathological agenda.

Pro-Pakistan lobbyists repeat ad nauseam: don’t mix politics and sport. For them, here’s a lesson on the subject from the late Nobel peace laureate Nelson Mandela: “Sport has the power to change the world. I became president of South Africa because of the sports boycott.”

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PM Modi's unfulfilled pledge Maximum governance, minimum government
Instead of turning India into a nanny state, the government should concentrate on its real job: good governance.
Wednesday, August 29, 2018

A nanny state is good for no one: citizens or government. It is good though for one group: regulators.

India suffers from too many laws, too little enforcement. The Narendra Modi government has done well to repeal over a thousand colonial-era laws. Hundreds more though remain on the statute books.

Some of the worst like Section 377 of the Indian Penal Code should have been repealed years ago. They await the Supreme Court’s final verdict while a nervous government fiddles on the sidelines, hoping the apex court will deflect the political heat from the BJP’s right-wing vote bank where homophobia remains disgracefully strong.

The government’s attempt meanwhile to regulate social media has been quickly aborted. Fake news that incites violence is a worldwide problem. The answer, however, is not to block mobile apps but to improve enforcement of existing laws on cybercrime.

All social media platforms have toughened their internal mechanisms to check abuse and incitement to violence. WhatsApp, Facebook, Instagram and Twitter can be expected to behave responsibly but Telegram and sites in the dark web are often beyond the pale. What can’t be controlled at source must be checked by fast, firm but fair policing. A blanket block of mobile apps that the Department of Telecommunications (DoT) sought is not workable.

As Business Standard reported: “Telegram claims its cloud chat data is stored in multiple data centers around the globe that are controlled by different legal entities spread across different jurisdictions. The relevant decryption keys are split into parts and are never kept in the same place as the data they protect. As a result, several court orders from different jurisdictions are required to force them to give up any data. ‘Thanks to this structure, we can ensure no single government or block of like-minded countries can intrude on people’s privacy and freedom of expression,’ Telegram explained on its website.”

It is through its proposed e-commerce regulation though that the government has revealed a nanny approach. The draft e-commerce policy is currently open for public review. The centerpiece of the policy is a proposed cap on e-commerce discounts. Nothing could be more self-defeating and consumer-unfriendly.

India’s e-commerce market is still small compared to America’s and China’s. Yet it has grown from $14 billion in 2014 to $50 billion in 2018 because the government kept its nose out of what is not its business. Without governmental interference, the India Brand Equity Foundation estimates that the country's e-commerce market will quadruple to $200 billion in 2026.

By putting a cap on e-commerce discounts, the government could put a cap on that unfettered growth. The idea clearly is to protect small kirana stores from price gouging. But as the experience of Walmart-Flipkart and Amazon India shows, kirana stores benefit by partnering with e-commerce sites which play the role of wholesalers, buying inventory and letting market forces operate.

Regulation in the public interest is important but not at the cost of public interest. Internet users in India are estimated to rise from 494 million (as of June 30, 2018) to 829 million in 2021. They can be an economic force multiplier across sectors – consumer and business.

E-commerce is an enabler in this transformation. It has brought tier-2 and tier-3 towns with rudimentary retail infrastructure into the mainstream. A buyer in under-retailed Palitana in Saurashtra can in minutes, buy and have delivered in days to her doorstep, a choice of home appliances and other products. E-commerce leaps over physical boundaries and infrastructure in small towns, providing choices and discounts.

What could be more open, transparent – and democratic? Putting a cap on discounts will put a brake on e-commerce growth. It will not necessarily help kirana stores the government seeks to protect but it will inevitably hurt consumers and the broader economy by dampening demand.

Over-regulation is the worst form of economics. It adds a layer of discretionary power to the nameless, faceless bureaucrats and impedes the growth of free markets.

The nanny state makes a cameo appearance in other ways. Like a Shakespearean tragedy, former finance minister Pranab Mukherjee’s 2012 retrospective tax law continues to haunt India. Many believe that this one piece of obtuse legislation has done more to discourage foreign direct investment (FDI) in India than any other single factor.

The retrospective law should have been repealed in July 2014 when then finance minister Arun Jaitley presented his first interim Union Budget. Only lawyers have benefitted since 2012 from endless litigation by Vodafone, Cairn India and others. A nanny state which lacks self-confidence hides behind such self-destructive legislation.

The Modi government has done some stellar things. Apart from its various welfare schemes (too many to mention but several of outstanding merit), the 2016 Insolvency and Bankruptcy Code (IBC) stands out as a game-changing reform.

Here too though, the law intrudes. Over 500 cases relating to non-performing assets (NPAs) are before the National Company Law Tribunal (NCLT) but only a handful have been resolved. Litigation continues to stall processes that the IBC had mandated must be completed in 270 days.

Waking up to the possible misuse of India’s clogged courts to sabotage the IBC, the government is planning to set up special courts to deal with IBC cases. In other countries, commercial courts have long dealt with business disputes. The IBC is now likely to lead to what in effect will be a separate commercial court system that will relieve the pressure on our regular courts burdened by over three crore pending cases.

After 71 years of socialism, bureaucracy and stifling controls, the government must stop hand-holding citizens. In a free society, the government empowers citizens by reducing the role of government so that it can concentrate on its real job: good governance.

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Myth & reality of Modicare
Thursday, August 23, 2018

HE imminent launch of Ayushman Bharat, popularly known as Modicare, has critics bristling that it is another jumla. They are wrong. Implemented properly, Modicare could revolutionise healthcare for the poor. The first myth is about budgetary allocation: `10,000 crore a year is far too little, critics say, to cover 50 crore people. Let’s do the math. Modicare is a health assurance scheme. Financial allocations are based on premiums. Each of the 50 crore people covered by the scheme — half of India’s adult population — will have an assured medical cover of `5 lakh. The average premium insurance companies typically charge for a person aged between 30 and 40 years is around one per cent of the amount covered. Oriental Insurance Company (OIC), for example, has bid at an effective premium rate of 0.72 per cent for Modicare.

Centre & states

Modicare coverage premiums will be shared between the Centre and the states in a 60:40 ratio. MoUs have been signed by 26 states so far. Some (West Bengal, Jharkhand, Nagaland and Manipur) have opted for a traditional insurance model. Others (Uttar Pradesh, Uttarakhand, Tripura and Himachal Pradesh) have chosen a Trust model, bypassing insurance companies and using Third Party Administrators (TPAs) to settle claims from a Trust corpus made up of contributions from the Centre and the state in the 60:40 ratio. Yet others (Gujarat and Chhattisgarh) have opted for a hybrid model, combining a portion of coverage from public and private sector insurance companies and a portion from their own Trusts. To insure 50 crore Indians (in effect 10 crore families), certain rational assumptions have to be made. First, not all 50 crore people are likely to fall ill and need hospitalisation in a single year. A high estimate would be 20 per cent (or 10 crore) claimants every year. Second, not all these 10 crore patients are likely to use the full coverage of `5 lakh available to them. A rational estimate, given that the majority will be treated in hospitals in small towns where medical costs are low, is `2 lakh per patient per year, cutting actual reimbursements significantly. This adds up to 10 crore people using on average `2 lakh coverage per year or `20 lakh crore. The effective annual premium at an average of 0.7 per cent would therefore be `14,000 crore — not far from `10,000 crore budgeted under Ayushman Bharat for 2018-19. This budget may rise in future years but the range is well within the allocated parameters. The critics of Modicare are on firmer ground over the poor health care ecosystem in rural and small-town India where hospitals and health care centre are few (if any) and in appalling condition. Building health care centres across India where 50 crore patients eligible for Ayushman Bharat can be treated is the real challenge for Modicare, not budgetary allocations. Building healthcare infrastructure is a daunting task. But without it, Modicare will be hobbled. The Union Health Ministry along with its counterparts in the states must take up this task on an emergency basis to allow the full benefits of Modicare to flow to India’s poorest families who have been without assured medical care since Independence.

Selection criteria

How will 50 crore claimants be chosen for eligibility in Modicare? The criteria for selection will be based on deprivation parameters in the Socio-Economic Caste Census (SECC). Modicare differs from medical insurance currently available from dozens of insurance companies in several ways. It includes pre- and posthospitalisation costs. It also includes treatment for pre-existing diseases — a key departure from medical insurance schemes offered by public and private sector insurance schemes. Building modern health care centres in tier-2 and tier-3 cities to which the rural population has easier access is critical. Without such secondary and tertiary health care centres, Modicare will be severely handicapped. Besides, if the construction of hospitals and health care centres goes apace, there will be a surge in new employment opportunities in the infrastructure and heath care sectors. The demand for doctors and nurses will rise, allowing medical expertise to percolate to underserviced areas in the country.

Difficult issue

Universal healthcare is a difficult issue worldwide. In the United States, Obamacare has proved unpopular and has been systematically dismantled by its harshest critic, President Donald Trump, without a satisfactory alternative being put into place. In Britain, the National Health Service (NHS), established by the post-war Labour government in 1948, is passing through a crisis. The annual NHS budget at £120 billion accounts for 7 per cent of Britain’s GDP. The infrastructure is overstretched with waiting periods for surgeries routinely measured in months, not days. Yet the NHS is a relative success, providing medical care from birth to death. It is not based, like Modicare, on an insurance model. In India, an NHS-type health care infrastructure at 7 per cent of GDP would cost `15 lakh crore annually — nearly the size of the entire Union Budget. In that context, Ayushman Bharat’s insurance-based scheme is a strategically sound way to match available resources in a poor country with health care facilities every Indian deserves. Modicare will be judged on outcomes. And outcomes depend on professional implementation. Among dozens of welfare schemes launched by the NDA government, Modicare might well prove the most pivotal, given the potential impact it can have on the nation’s health.

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Why Modi's India is not a republic of fear
If the BJP leader wants to forge his own legacy, he must make the republic of hope the reality for all Indians and the republic of fear a fantasy for those who see fear lurk everywhere and hope nowhere.
Wednesday, August 22, 2018

Nothing concentrates the mind like fear. And it is fear that will be the weapon of choice for both the BJP and the Opposition as we head into election season.

Active campaigning for assembly elections in Rajasthan, Madhya Pradesh, Chhattisgarh and Mizoram will begin shortly. The 2019 Lok Sabha election looms. Fear will be the primary emotion the BJP and the Opposition will invoke among the electorate.

Pratap Bhanu Mehta, vice-chancellor of Ashoka University, wrote darkly in The Indian Express on the pathology of fear: “But the second biggest omission (in Prime Minister Narendra Modi’s Independence Day speech) was any acknowledgement of the emerging republic of fear being crafted as we speak: Dissenters are at risk, minorities marginalised, new forms of violence are taking shape, a new lumpenism is becoming the norm under state patronage, institutions are being used to stifle freedom of expression, there is an impatience with checks and balances, and the slow spread of an insidious communal poison in society. Modi was not expected to acknowledge any of these lurking dangers, or even give a solemn commitment to fight them.

“Rarely does an Independent Day speech touch upon such lurking threats to the republic. But in even scarcely acknowledging these burgeoning fears, Modi was doing two things. First, he was saying, all those of you who experience this fear are outside the pale of acknowledgment: You are simply refusing to get onto the fantasy of hope. Second, in not addressing those fears he was in effect signalling that the republic of fear is as much an acceptable prong of politics as the fantasy of hope he holds out.”

Let’s examine each of Mehta’s propositions.

Is India an emerging republic of fear as Mehta warns grimly? There’s no doubt that incidents of cow vigilantism and lynchings have caused great alarm among Muslims. The media has played its part. Cow smuggling, a thriving industry which in turn creates the cow vigilantism industry, gets short media shrift. But does cow smuggling justify cow vigilantism? Obviously not. It points to bad law enforcement that allows both crimes to occur under silent political patronage.

What else adds to the palpable fear Mehta invokes? The “slow spread of an insidious poison in society”, he writes. Mehta is right and wrong. He’s right about the slow spread of communal poison in society. He’s wrong about its provenance.

The insidious communal poison was spread decades ago. Gujarat, Maharashtra and Uttar Pradesh experienced communal riots on a vast scale. Almost all of them took place under Congress governments at the Centre and in the states.

If anything, communal riots have reduced during the last four years. Cynics scoff: that’s because Muslims have been browbeaten by the Sangh Parivar’s violent fringe groups. They no longer dare to riot because the hard Hindutva government emboldens their attackers.

Writing about the slow spread of “insidious communal poison” in society, Mehta says Modi “is not expected to acknowledge any of these lurking dangers, or even give a solemn commitment to fight them”.

The key phrases are “not expected to” and “lurking dangers”. If you want to invoke fear, that is a masterclass in using insidious language that makes fear a self-fulfilling prophesy: your protagonist is peremptorily dismissed as “not expected” to do the right thing despite the “lurking danger”.

Mehta proceeds with his dystopian prognosis: “In not addressing those fears (Modi) was in effect signalling that the republic of fear is as much an acceptable prong of politics as the fantasy of hope he holds out.”

For Mehta, in the Modi Sarkar fear is real, hope a fantasy.

I’ve often criticised Modi on these pages for his real shortcomings – and there are many. But to say that fear in India today is the reality and hope a fantasy is nonsense.

Of course, cases of lynchings and vigilantism are condemnable. But it is not the first time they have taken place in India. It will not be the last, whoever is in power. India’s torn communal fabric tore many decades ago.

Does that mean Hindu-Muslim relations can never be repaired? Of course it doesn’t. But Mehta’s insinuation that an Opposition-led front can transform his “republic of fear” into a “republic of hope” is itself a fantasy. A quick look at the communal violence in West Bengal under the Trinamool Congress (TMC), a leading member of the Opposition front, will rapidly puncture that fantasy.

That doesn’t mean Modi needs to do nothing to right many of the wrongs of this government. Let’s list them.

First, he must speak more – and not only from the ramparts of Red Fort or through maan ki baat. It remains unacceptable that the prime minister hasn’t held an open, interactive press conference since taking office. Blaming the “biased” media is no excuse.

The media, for good or bad, is the fourth pillar of democracy. In India the mainstream media has lost the trust of readers and viewers. The media in the United States, if anything, is even more polarised and contaminated. That doesn’t prevent US President Donald Trump answering questions from the press, however confrontational the interaction. The mainstream British media is equally distrusted by the British public. Yet Prime Minister Theresa May wouldn’t dare not hold regular press conferences.

Modi’s second shortcoming is his long silences over acts of violence. They embolden lumpenism. Several BJP MPs and MLAs continue to encourage with provocative statements violence by fringe groups.

Why does Modi not restrain them more effectively? Because they play to the drumbeat of the hard Right that is a key BJP vote bank. The Congress-Left-TMC-RJD-SP secular front has coddled its Muslim vote bank for decades. The BJP has learnt the art and science of polarisation from practised masters. That is not a justification for counter-polarisation. Modi must rise above such prejudice.

Atal Bihari Vajpayee rose above the narrow-mindedness of his alma mater, the RSS, and forged a legacy. We live in a vastly different era. If Modi wants to forge his own legacy, he must make the republic of hope the reality for all Indians and the republic of fear a fantasy for those who see fear lurk everywhere and hope nowhere.

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Imran Khan versus Pakistan Army
Imran Khan, sworn in as Prime Minister of Pakistan on Saturday, August 18, is widely regarded as a puppet of the Pakistan Army. That is only partly true for three reasons.

New Indian Express
Sunday, August 19, 2018

Imran Khan, sworn in as Prime Minister of Pakistan on Saturday, August 18, is widely regarded as a puppet of the Pakistan Army. That is only partly true for three reasons. First, Imran has a mind of his own. He opportunistically used the army’s clout to win the general election just as the army used him to coalesce the deadly triumvirate that rules Pakistan: the Islamic clergy, terrorist organisations and a pliant judiciary. Second, a closer study of Imran’s politics suggests he will clash with the army sooner rather than later. For example, Imran wants to open Pakistan’s 2,300-km border with Afghanistan.

The Pakistan Army wants to close it with a fence. Imran is vicariously anti-American at a time when the Pakistan Army is trying to repair relations with Washington. Imran wants to spend more money on education and healthcare. The Pakistan Army wants to spend every spare rupee (and there aren’t many) on the defence budget from which it siphons off large sums.

Imran entered politics tangentially through his interest in health care, building a cancer hospital in memory of his mother, who died of the disease. He is at some point likely to challenge the army’s constantly spiralling defence budget that is now nearly 4 per cent of GDP and has made Pakistan Army officers the country’s wealthiest land owners and businessmen.

There is a third reason, though, why Imran will remain a puppet of the powerful army and Inter-Services Intelligence (ISI) for at least a while. He knows what the army does to prime ministers who don’t toe its line. Nawaz Sharif defied the army and has been reduced to a cipher in prison. Benazir Bhutto defied General Pervez Musharraf and was assassinated.

Her father Zulfiqar Ali Bhutto was hanged by General Zia-ul-Haq. So Imran will tread cautiously. If he outlives his utility value, he will be sidelined like other Pakistan Army puppets or protectees, including, most infamously, Dawood Ibrahim. Imran’s party, Pakistan Tehreek-e-Insaaf (PTI), doesn’t have a majority in the National Assembly. Terror groups and religious extremists support him in parliament. Shackled by needing to run a minority government, Imran is vulnerable to being remote-controlled by the army.

What kind of prime minister will Imran make? The Economist minces no words: “Mr. Khan who has seldom attended parliamentary sessions and who has described the National Assembly as ‘the most boring place on earth’, must find a sense of dedication, detail and compromise that has evaded him till now. He must learn to work with a political class he has only slammed. And he must gently let down his most enthusiastic supports from the irresponsible highs he generated for them—for instance, by promising to end corruption within 90 days.”

For India, the key question is: will terrorism abate under Imran’s prime ministership? The short answer: no. The Pakistan Army controls terrorism against India and Afghanistan. The prime minister has no role in abating or increasing it. Two facts, however, may affect Pakistani-sponsored terrorism in Jammu and Kashmir. One, the Financial Action Task Force (FATF) has already greylisted Pakistan over money laundering for terrorist activities. An Asia-Pacific Group delegation of the FATF visited Pakistan earlier this week to examine what steps Islamabad has taken to clean up its act. If the number of terrorists groups that continue to receive finance from Pakistani sources is any indication, then blacklisting Pakistan at next year’s FAFT meeting could be on the cards.

Blacklisting will be devastating for Pakistan’s economy. Its foreign exchange reserves have plunged below $9 billion (by way of comparison, that’s 2 per cent of India’s forex reserves). An International Monetary Fund (IMF) bailout is inevitable. But the IMF loan will come with conditions of strict spending restrictions that Imran will find hard to swallow.

The fear of blacklisting, though, could moderate Pakistan Army-abetted terror attacks on India. Ceasefire violations across the Line of Control (LoC) have already reduced significantly. Since Governor’s rule was imposed on June 20, terror attacks in Jammu and Kashmir too have declined, with Indian security forces using search-and-destroy tactics with greatly improved effectiveness.

The other key reason why Imran’s prime ministership may bring a relative lull to the Pakistan Army’s terror attacks is its deteriorating relationship with the US. For the first time in over 60 years, the US International Military and Education Training programme that conducts training for armed forces from around the world at US military facilities will bar Pakistan Army participation. China has, meanwhile, begun to pull back some of its investments in the China-Pakistan Economic Corridor (CPEC). Beijing recently refused to provide a soft loan in lieu of the IMF bailout. Pakistan’s debt burden to China due to the CPEC is already causing Pakistani commentators to question the viability of the debt-laden infrastructure project.

In the short term, Imran will be a ventriloquist for the Pakistan Army, parroting its line on Kashmir. Rawalpindi wants a resumption of dialogue with India, but along with a continuation of terror. In the dialogue, it wants three issues to be discussed: Kashmir, Siachen and Sir Creek. For India, Siachen and Sir Creek are closed chapters. Kashmir is relevant only in the context of ending Pakistan-abetted terrorism in the Valley. The divergence between the two sides will ensure that no meaningful dialogue can take place till Pakistan ends its criminal use of terror as state policy.

The generals in Rawalpindi have ensured that Imran’s PTI, lacking a majority in the National Assembly, remains at the mercy of its extremist allies. It is a matter of time before Imran Khan Niazi (that’s his full name) revolts against the army’s authority. The inevitable clash can have only one winner and history tells us it won’t be Imran.

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Mamata’s Banerjee positioning herself as the head of the ‘Grand Alliance’ before 2019 LS po
Thursday, August 16, 2018

West Bengal Chief Minister Mamata Banerjee has set her sights on leading the Opposition mahagathbandhan in what could well be an early Lok Sabha election. With Congress President Rahul Gandhi and UPA Chairperson Sonia Gandhi backing her over BSP leader Mayawati, the question is whether, as Prime Minister Narendra Modi said dismissively in a slew of recent interviews, such a mahagathbandhan would merely amount to “political adventurism”.

Banerjee though has already begun displaying a putative national leader’s airs. She was among the first to arrive in Chennai for DMK patriarch M Karunanidhi’s funeral. She does the rounds of Delhi’s power corridors on a regular basis. Most tellingly, Banerjee has acquired a taste for dynasty — the hallmark of a politician aspiring for a national role.

The recent birthday party of her nephew Abhishek Banerjee’s five-year-old daughter was held at a massive ground that normally hosts wedding receptions. The entire TMC leadership was in fawning attendance, missing Parliament for the day. As one newspaper reported: “Last month, on July 25, there were almost no TMC MPs to be seen in the Parliament. Even TMC leader in the Rajya Sabha Derek O’Brien was missing, as were other notables. Mamata Banerjee’s parliamentary brigade had flown to Kolkata to attend the birthday party of five-year-old Azaana Banerjee. The turnout at the party, which included state ministers, leading bureaucrats and the who’s who of Kolkata, indicated very clearly that Abhishek is Mamata’s heir apparent. Most of the guests were adults, who simply wanted to mark their presence.”

Abhishek Banerjee, firmly ensconced as Mamata’s heir, has a peculiar way of expressing the TMC’s philosophy. Addressing a party event, Abhishek reportedly thundered: “No one, other than Mamata Banerjee, had raised her voice on behalf of the common people of the state. As long as Mamata Banerjee is here, if you dare to show your eyes, we will gouge them out and throw them on the road. If you raise your hand, we will sever it from your body.”

What sort of national leader would Mamata Banerjee make? Her economic policies would be largely guided by what she has achieved in West Bengal. In 2011-12, when she assumed office, the state’s GDP was Rs 5.38 lakh crore. In 2017-18, it has nearly doubled to Rs 10.49 lakh crore, a compounded annual growth rate (CAGR) of 11.5 per cent. The state’s debt though has ballooned from Rs 1.93 lakh crore in 2011 to Rs 3.93 lakh crore in 2017. Interest payments bite deeply into tax revenue.

On relations with Pakistan and China, Banerjee’s inexperience would be exposed. She is prickly and recently cancelled at the last moment an official visit to China because “senior” officials of appropriate rank were not available to meet her in Beijing. The Chinese have promised new dates, but none have so far been forthcoming. Banerjee’s stand on Teesta river water sharing could prove a flashpoint with Bangladesh. Her relationship with Prime Minister Sheikh Hasina is at best formal, with an undercurrent of mistrust.

Banerjee’s position on Pakistan is less clear. While she depends on the 28.5 per cent Muslim vote in West Bengal to stay in power, Pakistan cannot expect a radical change from her in India’s policy. She backs a resumption of dialogue with Islamabad though, as the leader of a disparate coalition that could be an early fatality, given the Pakistan Army’s continuing terror attacks on Indian soil.

It is with the United States and other global powers like Russia that Banerjee’s lack of foreign policy experience will be most apparent. As chief minister, she has not travelled frequently, unlike Modi, who as chief minister of Gujarat for over 12 years had met senior leaders in the United States, China and Japan several times before he took office as prime minister.

Repairing India’s fractured social cohesion is where Banerjee may believe she stands the greatest chance of success. Her stand on the National Register of Citizens (NRC) though could alienate Assamese-speaking Muslims. The backlash will be swift if the mahagathbandhan she leads disintegrates — as it inevitably will, given the ideological and personal differences between its constituents.

Watching from within the grand alliance will be the Gandhis. Rahul will treat Mamata very much like Sonia treated Deve Gowda and IK Gujral during the 1996-98 United Front government (which the Congress supported from the outside before toppling it) — night watchmen awaiting the return of the original dynasty.

The clashing ambitions of Mayawati and Akhilesh Yadav will complicate matters further. Mayawati is close to sealing a deal with the Congress on an alliance in Madhya Pradesh and Chhattisgarh, which have a significant Dalit electorate. Akhilesh is meanwhile holding fast to the SP’s Muslim-Yadav (MY) vote bank and could see Mamata as a rival for his own future national ambitions.

A violent brand of “secular” politics has propped up Mamata in West Bengal and demolished the thuggish Left and the clueless Congress,

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Independent Suit-Boot India
Rahul Gandhi, the latest in this line of dynasts, should be the last person to begrudge India’s poor the aspiration to an assent up a socio-economic ladder his own family climbed a century ago

Wednesday, August 15, 2018

An exchange between India’s first prime minister Jawaharlal Nehru and legendary industrialist JRD Tata is illuminating. The two men, acknowledged as architects of modern India, had a close but at times frosty relationship. Nehru was a Fabian socialist, Tata an unabashed capitalist.

The exchange between them, published in Gita Piramal’s book Business Maharajahs, reveals Nehru’s mindset and why India spent 44 post-Independent years till 1991 in povertarian socialist economic policies: “JRD remembered one particularly sharp exchange of words. Nehru told me, ‘I hate the mention of the very word profit.’ I replied, ‘Jawaharlal, I am talking about the need of the public sector making a profit!’ Jawaharlal came back: ‘Never talk to me about the word profit, it is a dirty word.’”

If Nehru considered “profit” a dirty word, daughter Indira Gandhi took the prejudice further. She nationalised banks, raised the income-tax rate in the highest bracket to 97 per cent and established the Licence Raj. Crony capitalism now grew deep roots. To his credit, son Rajiv Gandhi did try to prise the economy from the grip of crony capitalists. Their success lay more in their proximity to the corridors of power in Delhi than on merit. Most of Rajiv’s early ‘A’ team was made up of private sector executives like Arun Nehru and Arun Singh. They were soon swept away by the crony ecosystem that lived on patronage and favours.

Congress President Rahul Gandhi seemed to understand his father’s unfulfilled ambition to create a merit-based system, shorn of patronage and nepotism. He started an infotech company with its headquarters in Mumbai, far from the labyrinithic machinations of Delhi. But he was quickly co-opted by dynastic politics. Fourteen years after he “inherited” the Amethi parliamentary constituency from his father in 2004, Rahul has regressed all the way back to grandmother Indira Gandhi’s politics of poverty.

The symbolism of povertarian politics remains strong in India even 71 years after Independence. By calling Prime Minister Narendra Modi’s government a “suit-boot sarkar”, Rahul changed the economic narrative. Unlike Rahul, Modi grew up in relative poverty. He knows how the poor live, their hopes, needs and dreams. Aspiration is the bedrock of the poor. Every parent wants his or her child to have a better life, a better education, and better opportunities.

For Rahul a kurta-pyjama is a form of inverted snobbery: he can afford Savile Row suits. For those who can’t, aspiration drives them. At the time Nehru told JRD Tata that profit was a dirty word, more than 60 per cent of Indians lived in dehumanising poverty. For them profit was not a dirty world. It was an escape from poverty and the route to a better life for themselves and their families.

Modi, despite his street-smart shrewdness, fell into Rahul’s trap. For two years after the suit-boot sarkar taunt, he embraced Nehruvian povertarianism. It was only last month that he gathered the courage to publicly praise industrialists as creators of wealth for middle-class shareholders and of jobs for millions across socio-economic demographics.

The economist Swaminathan S Anklesaria Aiyar wrote cuttingly in The Times of India: “The Left – including Rahul Gandhi – may pretend that the source of all corruption is the suited-booted businessman. Yet the thrashing of Rajiv Gandhi in the 1989 election and of Sonia in 2014 flowed from voter conviction that the biggest crooks were those in khadi and Gandhi caps. The second term of the UPA government from 2009 to 2014 was marked by scams galore, and a massive anti-corruption agitation led by Anna Hazare that finally cooked Congress’ goose. In (this) era, which Congress still extols as the great socialist legacy of Jawaharlal Nehru and Indira Gandhi, free business decisions and competition did not exist. Every industrial licence was a favour bestowed through political discretion, and not competitive rules. Every import licence, every foreign exchange allocation, every clearance and permit was a favour.”

Modi’s rediscovery of India’s wealth-creators is notable. And yet it should not blind him to the remnants of cronyism that still exist in the system. The Licence Raj is gone. Businessmen and their proxies no longer prowl the corridors of North Block. Industrialists don’t need to meet the prime minister who actively discourages such meetings. But the bureaucracy, used to decades of cronyism, remains hidebound. Decisions still take far too long. Procedures, despite Modi’s efforts to introduce technology and transparency into processes, remain discretionary and arbitrary.

Hope lies in the emergence of a new generation of start-up entrepreneurs. They have turbocharged the economy with innovation, creating new opportunities and levelling the playing field. Logistics firms are paying non-matriculate delivery boys an unheard of Rs. 40,000 per month. Incentives for fast delivery can raise that salary package by 100 per cent.

This is aspiration at work. Young men are moving into the middle-class faster than they could have imagined. Meanwhile, the online hospitality and health care sectors have created opportunities for young women, making them economically independent. No longer are they tied to the tradition of an early arranged marriage. No longer too are daughters considered a burden on a family. They are a boon.

As aspirational India expands to smaller towns, the social transformation it will bring about can be a significant collateral benefit. Those born with a silver spoon often patronise the poor, denying them the same privileges they themselves take for granted. Rahul Gandhi’s family co-opted the suit-boot business class for decades. It is time, as India enters the 72nd year of its Independence, that every Indian, however poor, has the opportunity to aspire one day to join that class.

Rahul should remember that the Nehrus themselves emerged from near-penury in the 19th century to become a suited-booted family during the British Raj. Motilal Nehru grew up in relative poverty, his family uprooted from Delhi following the uprising of 1857. It took Motilal decades of aspirational legal practice in Allahabad to establish the Nehru dynasty. Rahul Gandhi, the latest in this line of dynasts, should be the last person to begrudge India’s poor the aspiration to an assent up a socio-economic ladder his own family climbed a century ago.

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Why 2019 will see a 'khichdi' government, but cooked in Modi’s kitchen
The Mamata-Mayawati-Rahul-Akhilesh-Pawar-Gowda national mahagathbandhan is likely to fall short of a clear majority.
Friday, August 10, 2018

The 2019 Lok Sabha election could prove the hardest to predict in decades. The Narendra Modi wave has subsided to a ripple. The anger against the Congress-led UPA’s decade of corruption has quietened. In the absence of the two waves that fed off each other in 2014 and lifted the BJP to an historic majority in the Lok Sabha, the 2019 general election will be the most open since 1996.

For the BJP, a realistic strategy must accept the fact that 272 Lok Sabha seats in 2019 are out of reach, whatever party president Amit Shah may say publicly about winning 300 seats.

Shrewd as ever, NCP leader Sharad Pawar, in an interview to a daily last week, said: “I have contested 14 elections. My observation on (an) election is it is ultimately hawa, a mahaul, an environment, gets created. The mahaul today is in not in favour of the Modi government. Day by day it is going against them.”

This analysis is not a projection, but a rational target for a party that has lost electoral momentum in key states like Uttar Pradesh, Rajasthan and Madhya Pradesh. Much will depend on Modi’s campaigning. He intends to address 50 rallies in the run-up to the four state elections later this year — but the real action will begin in January 2019.

The Congress will attack the BJP on corruption and cronyism. Modi will campaign on his five-year performance.

The 2019 Lok Sabha election will be won or lost on a combustible mix of chemistry and math.

Break up the key BJP-leaning states into three focus groups:

1) Maximum focus states: Uttar Pradesh, Bihar, Gujarat, Madhya Pradesh, Chhattisgarh, Rajasthan, Maharashtra and the Northeast.

In these seven states and one Northeastern region, the BJP won 212 Lok Sabha seats in 2014 of the 284 seats on offer. In 2019, it can realistically hope to win at most 170 seats: UP (35/80), Bihar (20/40), Gujarat (23/26), Madhya Pradesh (20/29), Chhattisgarh (8/11), Rajasthan (18/25), Maharashtra (26/48) and the Northeast (20/25).

The BJP will lose a big chunk in UP on account of the SP-BSP-Congress alliance, suffer erosion in Madhya Pradesh, Rajasthan, Gujarat and Chhattisgarh, and make up a bit of that in the Northeast.

2) High focus states: Jharkhand, West Bengal, Odisha, Haryana, Delhi, Himachal Pradesh, Karnataka and Uttarakhand. In these eight states, the BJP won 54 Lok Sabha seats in 2014 of the 131 seats on offer. In 2019, it can realistically target to win 45 seats: Jharkhand (7/14), West Bengal (6/42), Odisha (6/21), Haryana (6/10), Delhi (3/7), Himachal Pradesh (3/4), Karnataka (10/28) and Uttarakhand (4/5).

BJP president Amit Shah hopes to win more seats in West Bengal and Odisha than projected here, but that may prove optimistic.

What do we have so far?

In maximum focus states, the BJP could win 170 seats. In the high focus states it could win 45 seats. Total: 215.

Now to the final group of targeted states.

3) Medium focus states: Goa, Jammu & Kashmir, Sikkim, Punjab, Tamil Nadu, Andhra Pradesh, Telangana and the Union Territories. In these states and UTs, the BJP won 15 seats out of 109 on offer in 2014. What is it likely to manage in 2019? Goa (1/2), J&K (2/6), Sikkim (0/1) and UTs (4/6). That makes it seven seats in the two small states, Sikkim and six UTs (Lakshadweep, Puducherry, Chandigarh, Dadra & Nagar Haveli, Daman & Diu and Andaman & Nicobar). A sprinkling of seats from Punjab, Andhra, Telangana and Tamil Nadu could add another six seats to the BJP tally, taking it to 13 seats from the final group of targeted states.

The grand total from the three focus groups: 228 Lok Sabha seats (170+45+13).

Near election time, can Modi’s chemistry and Shah’s booth-level math increase that tally significantly? Improbable but not impossible.

Now turn to crucial ally management. The BJP will need at least 44 seats from allies to wring a majority of 272 seats in the Lok Sabha. Significant ally potential lies in six key states: Bihar, Maharashtra, Telangana, Punjab, Andhra Pradesh and Tamil Nadu. In Bihar, the JD(U) and smaller BJP allies could contribute around 10 seats despite the RJD’s resurgence, giving the NDA 30 out of the state’s 40 seats.

In Maharashtra, following last week’s civic body results in Jalgaon and Sangli where the BJP trounced the Shiv Sena, the Congress and the NCP, the Sena will contest separately from the BJP but, as it did in the December 2014 Assembly poll, join the NDA in a post-poll alliance, contributing around eight of Maharashtra’s 48 seats to the NDA pool.

In Telangana, the Telangana Rashtra Samiti (TRS) could sweep the state with up to 14 of 17 seats but may well jump aboard the NDA bandwagon where federal bounties await it.

In Punjab, the Akalis will remain anaemic but bring in around three of the state’s 13 seats. In Andhra, the YSR Congress again could contribute a handful of seats to the NDA if its rivalry with the Telugu Desam Party (TDP) is astutely leveraged by the BJP.

Finally, in Tamil Nadu, an MK Stalin-led, post-Karunanidhi DMK should win the state in a possible alliance with Kamal Haasan. The BJP will have to extract whatever electoral crumbs the fatally wounded AIADMK (and a reluctant, fence-sitting Rajinikanth) can offer.

Thus, the NDA ally count could look like this: JD(U) and smaller parties in Bihar: 10; Shiv Sena 8; TRS: 14; Akalis 3; YSR Congress 2; AIADMK 5. That adds up to 42, taking the putative NDA tally to 270 Lok Sabha seats (228 + 42) as a best estimate for 2019. Independents may need to be inveigled but a clear majority will elude the NDA.

Will that stop Modi in his tracks?


Will it give him a second term? Possibly.

Will it make him a more collaborative, conciliatory Prime Minister? Probably.

What about the Mamata-Mayawati-Rahul-Akhilesh-Pawar-Gowda national mahagathbandhan?

It too is likely to fall short of a clear majority — and by more than the NDA’s handful of seats.

Get ready then for a khichdi government — but one cooked in Modi’s, not Mamata’s, kitchen.

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Why India needs an expanded Lok Sabha
In the 2019 election, 545 MPs will represent over 1.30 billion people in Lok Sabha; each MP representing 23.85 lakh citizens.

Thursday, August 9, 2018

More than four years after it took office, the Narendra Modi government has yet to finalise the appointment of a Lokpal. Vacancies among Central Information Commissioners (CICs) are rising. Several high courts and lower courts remain short of judges. All this adds up to a governance deficit which can be even more damaging than the fiscal deficit. The Modi government inherited a broken economy, packed with cronyism, nepotism and corruption. Modi said recently that on taking office had he revealed the full extent of the parlous state of the economy, global investors would have fled.


That line of reasoning is now wearing thin.

The quality of governance rests on three key pillars: Parliament, judiciary and law enforcement. Sweeping parliamentary reforms are overdue. In India’s first Lok Sabha election in 1952, 489 Lok Sabha MPs represented a population of 361 million. On average, each Lok Sabha MP represented 7.38 lakh citizens.

In the 2019 Lok Sabha election, 545 MPs will represent a population of over 1.30 billion. On average, therefore, each MP will represent 23.85 lakh citizens — three times as many citizens as in 1952.

What India needs is an expanded Lok Sabha with smaller, delimited constituencies — and most radically of all, a severely truncated Rajya Sabha.

The Lok Sabha is the chamber that matters. The Rajya Sabha’s raison d’etre is to represent the voice of Indian federalism through the states. That is no longer a strong argument. It was relevant in the first few decades of Independence when regional parties were few and weak. Now virtually every state has a regional party represented in the Lok Sabha.

The Rajya Sabha is a sinecure for retired politicians, a backdoor entry for those who can’t win elections, and a grace-and-favour avenue to reward loyalists.

If we can’t scrap the Rajya Sabha altogether, reduce it to 100 MPs, change the rule that the Chairman can’t marshal out disruptive MPs (which the Lok Sabha Speaker can, but doesn’t) and disallow it from holding up legislation (currently it is barred only from blocking money bills).

The House of Lords in Britain has undergone reforms that have reduced its importance. It can no longer hold up legislation adopted by the House of Commons beyond a specified period.

A fish rots from the head down.

If Parliament remains unreformed, the entire body politic, including civil society, will be infected.

The second pillar on which good governance rests is the judiciary. In India, the judiciary suffers from two fatal flaws. First, India is one of the few democracies where judges in the Supreme Court pick themselves. The Collegium functions like a brotherhood. It may quarrel among itself, publicly and privately, but it holds fast to the Supreme Court’s decision in 1993 to arrogate to itself the right to pick those who will occupy its benches.

In the United States, there is a complex process to appoint life-long judges in the Supreme Court who are first nominated by the President and then go through rigorous grilling in the Senate. The recent rejection by the government of dozens of advocates applying to be judges after being recommended by the Supreme Court highlights the weakness in the Indian system. Several applicants were the sons, daughters, nephews or brothers-in-law of sitting judges, revealing the deep rot of nepotism in the judiciary.


The second fatal infirmity in the Indian judiciary is the practice of endless adjournments and appeals.

In the Vijay Mallya case, currently being tried in the British High Court, his right to appeal the High Court’s verdict was firmly refused.

In India, appeal is automatic. While an appellate jurisdiction is necessary, it should not be automatic, allowing litigants to prolong cases indefinitely.

The third vital piece in the jigsaw of good governance is law enforcement.

Most of the problems that have bedevilled India over decades have to do with bad policing. The Modi government, like all previous central governments, argues that policing is a state subject. However, even in the 20 states it governs, the NDA government has ignored the Supreme Court’s 12-year-old directive on police reforms. In truth, no government has the stomach for police reforms.

The current system where law enforcement is corrupt, incompetent and nepotic suits the ruling dispensation. But it exacts a heavy toll on the country. Local MLAs bully or co-opt police officers. The result: tardy investigations and low conviction rates. By controlling transfers and promotions, politicians subvert law enforcement.


When the three pillars of governance — Parliament, the judiciary and law enforcement — are rusted, democracy is diminished. The Modi government inherited this corroded infrastructure of governance but has not done enough to remedy it.

With four key state Assembly elections looming, the government’s attention will shift from policymaking to campaigning. The Modi government came to power in May 2014 on the crest of two waves — anti-Congress and pro-Modi. It can’t bank fully on either in 2019. If it had undertaken bold financial reforms on personal and corporation tax, the economy would have ridden a consumption boom, fuelling faster growth. Good governance itself adds percentage points to economic growth and builds a more just society. That now must await a new government next year. Modi’s biggest advantage is the indifferent quality of leadership in the Opposition. That will likely win him a second term. But if good governance is not fixed, that will amount to five more years of missed opportunity.

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India's Quantum Leap
How should the government accelerate India's quantum leap to middle-income status?

Saturday, August 4, 2018

Much has been written about India leap-frogging over France to become the world's sixth largest economy. And by the end of 2018, India is estimated to surpass Britain as the world's fifth largest economy.

Cynics (and India has more than its fair share) say GDP is not the real issue. France and Britain each has one-twentieth of India's population. Per capita income is therefore what really matters. On that metric India is still among the world's poorest countries with a per capita income of just under $2,000 (Rs. 1.38 lakh). France and Britain each has a per capita income of $40,000.

All of this misses three vital points. First, per capita income should be measured in purchasing power party (PPP) terms just as GDP routinely is by both the International Monetary Fund (IMF) and the World Bank. In PPP terms, the World Bank estimates Indian GDP for 2017 at $9.45 trillion compared to $2.6 trillion in nominal terms at current exchange rates, placing it as the world's third largest economy behind China and the United States and ahead of Japan, Germany and Britain. Per capita income (PPP) in India thus concomitantly rises from $2,000 in nominal terms at current exchange rates to over $7,000.

This is tricky territory. At current exchange rates, India is a low-income country. By PPP norms, now widely used by the IMF and World Bank, India is a middle-income country. This may be statistically correct but it doesn't factor in inequality of incomes in India which are among the highest in the world. India has the third largest number of global billionaires but also the largest number of the most desperately poor people in the world. The middle-class meanwhile is growing, skewing per capita income figures further. Recent estimates place the number of Indians living in extreme poverty at a figure significantly lower than 21 per cent, the Suresh Tendulkar benchmark.

According to the economist Surjit Singh Bhalla writing in The Indian Express, "The NSSO-CE surveys form the basis of calculations of absolute poverty, an important and political economic variable in India. When the findings of NSSO-CE 2017/18 are released, they will mark an important departure of India from an absolute poverty obsessed poor country, towards a middle-class middle-income economy. It is not clear whether this fact has been absorbed by the Indian public, or Indian politicians. But absorb it they will, especially when the 2017/18 survey indicates that absolute poverty in India, according to the official Tendulkar poverty line, is in the low single digits."

Bhalla goes on to say that if per-day consumption is raised to realistic levels, the ratio of Indians mired in poverty would rise to 33 per cent, well above the old Tendulkar estimate: "The absolute poor in India today should be defined as those with a consumption level less than Rs. 75 per person per day. This means that, at present, a third of the Indian population is absolutely poor."

The second key point missed by analysts in the GDP vs. per capita income debate is that India's population is rapidly approaching a plateau. The next national census in 2021 will likely estimate India's population at between 1.35 and 1.40 billion. But fertility rates in India have already fallen below 2.1 children per woman - the replacement rate. India's population is thus likely to plateau at around 1.50 billion by 2030. China's population has already plateaued at just under 1.40 billion.

This has important consequences on per capita income. If Indian GDP growth continues at an average of 7.5 per cent a year on near-zero population growth, future per capita income (measured as a fraction of GDP against population) will increase far more rapidly than it has in past decades. China has already benefitted from this spurt in per capita income with its population having plateaued. India will now reap the same benefit.

The third key issue missed in contemporary analysis is the impact of a young, productive workforce on GDP growth and increase in per capita income. While India's demographic dividend hasn't yet been the boon it was expected to be due to low skill levels among the young, productivity is set to rise as education opportunities, including in vocational training, expand. Thus, while per capita income is a crucial metric in India's transformation from a low-income to a middle-income country, a linear analysis will not capture the complexity of India's nuanced social and economic growth. India's growth is moving along three parallel tracks, each at a different trajectory. The first is growth at the top of the socio-economic pyramid, the second in the aspirational middle layer, and the third along the large base of the pyramid comprising the poor.

What then of the future? How should the government accelerate India's quantum leap to middle-income status? Increasing GDP growth to over 8 per cent is clearly essential. At that level of annual growth, GDP will double every nine years and quadruple in 18 years. At current exchange rates, India's nominal GDP (excluding inflation) after 18 years will be $10.40 trillion, roughly similar to China's nominal GDP today ($11.20 trillion). By PPP norms, India's GDP after 18 years will quadruple from today's $9.45 trillion to around $38 trillion, higher than China's GDP (PPP) today ($23 trillion).

But the real takeaway will be in per capita income growth. With near-zero rise in population after 2030, Indian GDP per head will spurt. Meanwhile, China's rapidly ageing population will cause a fall in GDP growth. Weighed down by its inflated public debt, long-term Chinese GDP growth is set to fall to 4.5 per cent a year - nearly half India's default growth trajectory.

None of this of course will come about if the government doesn't keep its eye on the ball and double down on reforms - tax, labour, agriculture, exports and governance. India is ready to make a quantum leap out of the low per capita incomes that have consigned several hundred million Indians into dehumanised poverty. The purgatory could end in less than two decades if leaders across parties focus as much on economic policy as they do on populist politics.

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The cure for India-China relations
The success of a recent Chinese movie is a reminder of how soft power can be as effective as the projection of hard power

The New Indian Express
Saturday, August 4, 2018

A Chinese film called Dying To Survive could do more to improve India-China relations than all the summits between Prime Minister Narendra Modi and President Xi Jinping put together. The film tells the true story of Lu Yong who was arrested for importing inexpensive cancer drugs from India to save the lives of critically ill Chinese patients. The prices of cancer drugs in China are among the highest in the world. The film, made just on a budget of $15 million (Rs 103 crore), saw a record $200 million (Rs 1,380 crore) in box office sales in its opening weekend.

“The story of Lu Yong is remarkable. In 2002, he was diagnosed with leukaemia and was prescribed Gleevec, which cost approximately 25,000 Yuan (Rs 2.5 lakh) a bottle. After spending nearly Rs 70 lakh of his own money, Lu switched to Veenat, an Indian cancer drug which is not only as effective as Gleevec but also sold at one-tenth of the price. Besides treating himself, Lu also made it his mission to assist hundreds of other cancer patients by selling them Veenat. In 2014, the Chinese authorities arrested him. According to China Daily, however, the Chinese Supreme Court took a lenient view of Lu’s case considering his health and the fact that he had helped hundreds of other patients. Many scenes were shot in Mumbai, from where the drugs are smuggled in ships to Shanghai,” writes Rinchen Morbu Wangchuk in The Better India.

Dying To Survive was screened in China despite it projecting the Chinese government in poor light. Chinese audiences have lapped up the message in the film: Indian pharmaceuticals save Chinese lives. Coming on the heels of the success of Aamir Khan’s Dangal, “cultural diplomacy” is clearly a new weapon in India’s armoury as India-China relations—following US President Donald Trump’s fierce trade war on China—embark on yet another reset.

The BRICS summit in Johannesburg last week underscored the new warmth in India-China ties. Beijing needs India’s support on global trade more than ever. One reason why Chinese censors allowed the screening of a film like Dying To Survive, is because Beijing needs to keep its ammunition dry for the forthcoming battle against Trump’s trade war. If the US carries out its threat to impose tariffs on all $507 billion worth of Chinese exports to the US, the Chinese economy will be severely hit with long-term annual GDP growth estimated to fall below 4.5 per cent.

India finds itself in the flattering position of being the third angle in the US-China-India triangle. Both Washington and Beijing need India in their respective camps as their battle for economic supremacy intensifies. As the reaction to the movie suggests, Indian soft power has been poorly used in diplomacy. After Lu Yong’s story went viral, several Chinese companies sprang up in Shanghai offering medical tourism visas to India. The Chinese tourists travel to India to buy generic cancer and other drugs in bulk. The Indian pharmaceutical industry, which exports pharmaceuticals valued at a miniscule $27 million to China’s $110 billion pharma market, has woken up to the potential for a quantum jump in exports of generics.

But it is on the evolving geopolitics of the region that India’s soft power can have the maximum influence. India has traditionally punched below its geopolitical weight. The Ministry of External Affairs is understaffed. The total number of IFS officers, according to a written reply by Minister of State for External Affairs V K Singh in Parliament on January 3 is only 941. The total strength of India’s diplomatic corps is 2,700. In contrast, China has 4,500 diplomats posted worldwide. Japan has 5,700, France, 6,000 and the US, 20,000.

Modi and Xi have met three times in the past four months—at their informal summit in Wuhan, during the SCO meeting in Qingdao, and at the BRICS summit. China’s tone has softened considerably. The Chinese foreign ministry says India and China must work together to establish a globalised trading order—a reaction to America’s assault on Chinese exports and rampant intellectual property theft. Xi has meanwhile confirmed that he will travel to India in early 2019 to meet Modi for their second post-Wuhan informal summit.

The emergence of Imran Khan as Pakistan’s prime minister-designate has added a new dimension to the rapidly evolving India-China relationship. Imran’s proximity to Islamist terrorists worries Beijing. China though, is enthused by Imran’s strident anti-Americanism that has marked his politics for years. Hard-headed Chinese strategists already deal directly with the Pakistani military that calls the shots on security and foreign policy. With Imran, the conversation with the Pakistani army will be even more direct. China has cracked down hard on Islamists in Xinjiang. The Belt and Road Initiative runs through Muslim-majority countries in Central Asia and could counter long-term Islamist influence seeping across the borders of north-western China into Xinjiang.

Even as Dying To Survive is set to cross a record $500 million (Rs 3,400 crore) in box office collections this month, the message of how the lives of cancer patients are saved by Indian generics has created huge interest among ordinary Chinese in India’s thriving generics pharmaceutical industry. While US companies charge exorbitant prices for life-saving drugs, Indian firms like The Serum Institute acquired global recognition over a decade ago for providing AIDS medicines at $1 a shot to African patients, garnering enormous goodwill. The movie is a reminder to India’s hidebound MEA bureaucracy on how soft power can be as effective as the projection of hard power—so successfully achieved at Doklam—in India’s evolving relationship with China.

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The deafening echo chamber Why it's vital to open up areas of discussion to those who disagree
Until journalists, activists and authors learn to engage with those who hold different views, the level of intellectual debate will continue to fall.
Friday, August 3, 2018

The voice at the other end of the telephone line was quietly professional. "We'd like you to speak at the opening session of our conference."

I discovered, as the conversation progressed, that the conference was a perfectly respectable event with a right-wing slant. "Please invite left-wing intellectuals," I urged. "Don't make this an echo chamber where people with similar views speak to one another."

"But they refuse to come," the organiser lamented. She continued despairingly: "When a well-known left-wing consulting editor of a leading broadsheet newspaper heard that she was on the same panel as a US-based right-wing academic, she cancelled on the morning of the conference. That's how bad the situation is."

Bad it is.

The echo chamber syndrome has lowered the standard of debate on television. At book launches, you can tell who will be present based on the author's views. If there's an Arun Shourie around, you can be sure there'll also be BJP rebel Yashwant Sinha, a retinue of loyalist Congress leaders and a group of left-wing journalists and JNU activists. The same applies to the launch of a book by a Narendra Modi or BJP supporter. Saffron will be the colour of choice in the echo chamber.

On social media, people unfriend or unfollow one another over political differences. When Congress president Rahul Gandhi said several years ago that power was poison, he was right. Indian politics has been injected with poison and as the 2019 Lok Sabha election draws near, the malignancy is increasingly visible in mainstream media. An analysis of TimesNow and Republic TV's coverage of Rahul Gandhi, for example, would reveal a large negative bias. At the other end of the spectrum, coverage of the BJP government and Prime Minister Narendra Modi by NDTV would show an equally sharp negative bias.

Print journalists haven't remained unaffected. The big newspapers tend to be as neutral as possible - but ideological prejudice bubbles just beneath the surface.

The affliction is global.

A recent Harvard survey revealed that an unprecedented 93 per cent of CNN's coverage of the Donald Trump presidency was negative. The Washington Examiner, analysing a report by the Harvard Kennedy School's Shorenstein Center on Media, Politics and Public Policy, wrote: "The Harvard researchers found that CNN's Trump coverage was 93 per cent negative, and seven per cent positive. The researchers found the same numbers for NBC. The Harvard team found that CBS coverage was 91 per cent negative and 9 per cent positive. The New York Times coverage was 87 per cent negative and 13 per cent positive. The Washington Post coverage was 83 per cent negative and 17 per cent positive."

As politics gets more polarised, the echo chamber closes up on itself. When there is no exchange of views, the discourse suffers first and most.

Prime Minister Modi has worked harder than many of his predecessors to implement innovative welfare and infrastructure schemes. But he has erred by not engaging with the media interactively. When he has granted interviews, it has been to friendly channels that echo his views. Being enclosed in an echo chamber, the cut-and-thrust of an interview is blunted.

Modi regards the Indian media as hostile to him. That isn't strictly true. Leading newspapers give him largely uncritical coverage. But a significant section of print and broadcast media (The Telegraph, The Hindu and NDTV, for example) as well as a plethora of left-leaning websites (The Wire, Scroll and AltNews among others) redress the balance with strong, often relentless criticism.

The polarisation is so complete that at journalist Karan Thapar's book launch last week, it appeared a Congress and Left summit was in progress with UPA allies scattered around, awaiting the arrival of Congress president Rahul Gandhi to address this echo chamber. Rahul, of course, wouldn't be caught dead speaking at the book launch of, for example, Bibek Debroy who has translated 12 volumes of the Mahabharata from Sanskrit to English, a task slightly more difficult than writing a gossipy memoir.

As columnist Malavika Sangghvi wrote in The Hindustan Times: "Wednesday evening's launch of Karan Thapar's Devil's Advocate at a Delhi five-star was a gathering of the tribe with former PM Dr Manmohan Singh and former CM Sheila Dikshit, along with a host of Congress leaders, in attendance to hear Rahul Gandhi's address. It was a little like the ghost of Times Past — a Lutyens' love fest for all those people who'd sat it out patiently in the Opposition praying that their supreme leader would get 'woke' soon! And lo and behold after his Lok Sabha 'speech-and-hug' double whammy, Gandhi appears to be 'woke' enough. As for Thapar's book, our Delhi source was dismissive. Like a Doon School essay, he sniffed. 'Full of Pinky Bhutto this and Pinky Bhutto that'. Thapar, as he has often reminded us, shared his Oxbridge years with the late Benazir Bhutto."

The right-wing must bear much of the blame as well. The annual India Conclave organised by the India Foundation is the ultimate echo chamber. Held in Goa every year, I resisted attending for several years but was persuaded last December to take part in a panel discussion. Well-organised though it was, the right-wing echo chamber was self-defeating. My entreaty that even left-wing guests from JNU should be invited was met with a shrug.

Until journalists, activists and authors learn to engage with those who hold different views, the level of intellectual debate will continue to fall.

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Catching India’s fugitives
Thursday, August 2, 2018

he noose is tightening around three of India’s most wanted economic fugitives: Vijay Mallya, Nirav Modi and Mehul Choksi. One new legislation is likely to achieve what years of fruitless policing haven’t: the Fugitive Economic Offenders (FOE) Bill which was passed recently by both houses of Parliament.

The implications of the legislation aren’t lost on Mallya. Extradition notwithstanding, he has begun making preparations to return to India before the deadline of August 27, 2018 set by the PMLA-designated special court. If Mallya doesn’t present himself to the court on that date, his Indian assets can be seized without further notice. Mallya has enough liquid assets in the form of equity shares in listed companies (United Spirits Ltd. and United Breweries Holdings Ltd.) as well as prime properties to pay off the roughly Rs 12,500 crore he owes to banks, employees, vendors and statutory authorities.

Nirav Modi presents a more complex problem. As in Mallya’s case, he was clearly tipped off by rogue elements in the CBI and ED. He fled India weeks before Punjab National Bank (PNB) lodged its complaint against him. Mallya too had left India a day before he was likely to be arrested.

Mehul Choksi planned his escape even earlier. Top jewellers who know Choksi well reveal that Choksi’s companies have been bankrupt for years. They carried on business on the back of fraudulent Letters of Understanding (LoU). Choksi was tipped off by rogue officers in the investigative agencies as early as September 2017. He began preparations to acquire a passport from the twin-island state of Antigua and Barbuda months before the agencies discovered his fraudulent transactions and raided his companies.

But like Mallya, bad news now awaits both Choksi and Nirav Modi. Pressure is mounting on the Antigua government to send Choksi to India to face trial. The Caribbean island, which is a member of the Commonwealth, has a strong Opposition and press. Both have excoriated Antigua’s Prime Minister Gaston Browne and Foreign Minister E Paul Chet Greene for protecting Choksi. Taking a leaf out of the JNU playbook, Choksi has said he fears being lynched if extradited to India. There is of course no extradition treaty between India and Antigua. Choksi can be deported only if India can show credible evidence that he committed financial fraud in India.

Notoriously slow and riven by internal rivalries, the CBI is still putting its case against Choksi together. Its tardiness almost helped Mallya evade justice. Fortunately, Britain’s Crown Prosecution Service (CPS) extracted the necessary evidence from the CBI in time to indict Mallya. The British High Court last week denied Mallya permission to appeal its recent verdict that allowed British authorities to enter and seize goods in the fugitive’s UK properties.

While Choksi is unlikely to get relief from the Antigua government for much longer, Nirav Modi could be in even more immediate trouble. A bankruptcy court in New York last Thursday ‘recognised’ PNB’s claims on the proceeds of any US assets sold by Nirav. The court also ordered summons to examine Nirav and four associates for alleged financial fraud. Nirav Modi will now be forced to appear before the US bankruptcy court when he will be grilled over PNB’s allegations of fraud.

Of the three fugitives – and there are dozens more who have fled India but are not as well known – Mallya ironically may appear the cleanest, if that’s quite the right word. He allegedly engaged in money laundering, siphoned off funds that belonged to his companies, cheated employees by not paying their salaries, cut TDS but did not credit it to the government, defaulted to vendors, and led an extravagant lifestyle while his employees suffered. All of this reflects criminality bordering (in the case of unpaid employees) on cruelty. But what Choksi and Nirav Modi have done is of a different dimension altogether. For years they defrauded clients by selling them fake diamonds for a fortune, cheated banks with fraudulent LoUs and planned their escape from India months in advance. The sheer venality of their criminal actions surpass even the malevolence of Mallya.

There is of course a deeper lesson to be learnt from all this. India’s investigative agencies are corrupt and incompetent. They are fissured by rivalries between senior officers. The open battle between CBI Director Alok Verma and Special Director Rakesh Asthana has brought discredit to India’s premier investigative agency. The war between the ED’s joint director Rajeshwar Singh and Finance Secretary Hasmukh Adhia is equally tawdry. In both cases serious allegations of complicity with economic fugitives like Mallya and Choksi have been made.

The Prime Minister’s Office (PMO) must take the blame for first, not imposing discipline on its IAS and IPS officers and second, for not instituting sweeping police and administrative reforms to improve the efficiency of India’s top two civil services. In Gujarat, as chief minister, Narendra Modi held an iron grip on the bureaucracy. It got work done. At the Centre, the bureaucracy and investigative agencies, wracked by corruption and cronyism, have so far resisted Modi’s efforts to tame them. But tame them he must. Otherwise there will be more Mallyas, Choksis and Nirav Modis laughing all the way to the bank.

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India’s Buzzing Startups
The total Indian e-commerce market is expected to be worth $57 billion by 2021

Monday, July 30, 2018

When I received my first venture capital (VC) cheque in May 2000 for a new media startup, no one used the word startup. There was no real ecosystem for startups. I had earlier divested equity in my first media firm, Sterling Newspapers Pvt. Ltd, to the Indian Express group in an entirely old-fashioned promoter-to-promoter transaction.

At the beginning of the new millennium, things began changing. The first glimmer of the future had come in 1999 when serial entrepreneur Rajesh Jain sold his website for Rs 499 crore – a stunning coup at the time. In the two decades since, Indian startups have come of age. Not a day goes by without a raft of VC, private equity (PE) and angel funding deals being announced. In the first six months of 2018, 411 startup deals valued at $3.6 billion were struck. Unlike 2017, most were small-ticket deals in food tech, artificial intelligence, automation, online education, logistics, finance and healthcare.

Between 2014 and 2017 startup deals were driven by big e-commerce players like Flipkart and Snapdeal as well as e-payment firms such as Paytm. Calendar 2018 is likely to end with over 1,000 startup transactions or three a day, most in the golden triangle between Bengaluru, Mumbai and Delhi/Gurugram. Older startup deals are meanwhile maturing with big exits. Walmart’s acquisition of 77 per cent of Flipkart’s equity for $16 billion, valuing the 11-year-old startup at $21 billion, is likely to close by the end of this year.

The Economist in its July 7, 2018 issue called the Indian startup ecosystem “the world’s most vibrant tech scene after America and China”. Some of today’s deals point to where that ecosystem is heading. For example, unicorns valued at more than $1 billion are proliferating. The latest startup to join the billion-dollar club is Automation Anywhere, a robotic process automation (RPA) platform. It recently raised $250 million, valuing the firm at $1.80 billion.

The importance of startups to the broader economy can’t be overstated. Apart from innovating world-class technology, they create jobs. For instance, online insurance aggregator PolicyBazaar plans to hire 2,500 people in fiscal 2018-19 across functions – technology, customer service and digital marketing. The food tech sector is particularly vibrant. Swiggy and Zomato are battling it out for primacy in the food delivery space. Both are advertising heavily in print, television and social media. Flipkart and Paytm, among “mature” startups, are cranking up volumes. Flipkart is expected to treble its gross merchandise value (GMV) to $17.6 billion by 2020-21. American rival Amazon is virtually neck-and-neck with Flipkart in GMV metrics. Both are hiring staff copiously, giving the overall economy a lift.

The total Indian e-commerce market is expected to be worth $57 billion by 2021. Flipkart’s biggest revenue earner is, not surprisingly, mobile phones followed by white goods, home appliances, fashion and the fast-growing grocery vertical. Online payments is likely to form the firm’s next big bet. The sector is currently dominated by Paytm with several others making rapid strides to tap finance-deficient tier-two and tier-three towns. Meanwhile, the Unified Payment Interface (UPI) is setting new records. Month-on-month transaction growth spurted 30 per cent in June 2018. The instant bank-to-bank fund settlement interface recorded 246.3 million transactions in June 2018 worth Rs 33,288 crore. On a year-on-year basis, UPI has zoomed 2,000 per cent in transaction volume.

Paytm, PhonePe and Google’s Tez continue to lead the online payments industry. Of the 246.3 million transactions done through the UPI interface, 148 million transactions were done by Paytm and Tez. Paytm claims to have reached a run rate of five billion annual transactions with a flow of $50 billion through its platform. The company reported that “a bulk of these transactions are originating in tier-two and tier-three cities like Surat, Durgapur, Meerut and others with more than 25 per cent of the users using Paytm in regional languages”.

The elephant in the buzzing Indian startup room is Amazon. Jeff Bezos is determined to dominate e-commerce in the Indian market. With US tech and e-commerce firms blocked in China, India is the market every global firm covets. Amazon has revved up its PrimeNow app. Currently available in Mumbai, Delhi, Bengaluru and Hyderabad, PrimeNow offers lightning fast home deliveries in two hours. Fresh grocery deliveries are especially popular, giving startups like BigBasket a run for their money.

When N.R. Narayana Murthy, one of the founders of Infosys, was asked about the company’s success, he said it happened not because of but despite the government. Murthy was reminding his audience that the best government is the least government. For startups that is the key. The success of large entities like the Indian Space Research Organisation (ISRO) and the Delhi Metro is due to the fact that scientists and technocrats run them. The government has a minimal operational role.

If there is one potential speed breaker the Indian ecosystem faces, it is tax and regulatory uncertainties. The bizarre proposal to treat domestic VC/PE investment in startups as taxable income rather than tax-free capital has thankfully been laid to rest before it could cause serious damage. Other concerns remain. For example, e-kyc norms for online payment banks and e-wallets are an unnecessary bureaucratic hurdle that can slow the development of a truly digital society.

Indian startups are still small in size compared to their American and Chinese peers. But the US had built a big lead with its Silicon Valley ecosystem that drew on tech talent from around the world, a clutch of top class universities like Stanford and CalTech as well as deep-pocketed VCs who backed innovation. India is still building that interlinked network of universities, investors and entrepreneurs.

China has created an entirely different model by restricting foreign firms and in effect subsidising domestic tech giants like Alibaba, Tencent and Baidu, protecting them from global competition. Paradoxically, Chinese firms are among the largest investors in Indian startups like Paytm.

India has wisely followed the US model of keeping innovation open to the world. That is the right way forward. The rewards may today be smaller than China’s but they will foster a broader, more democratic startup ecosystem.

Follow@minhazmerchant on twitter


Lok Sabha election 2019 Opposition's pre-poll nationwide grand alliance may prove counter-productive
A more sensible tactic for the Congress would be to nurture two parallel national alliances.

Thursday, July 26, 2018

here’s a narrow pathway for the Opposition to secure a majority in the 2019 Lok Sabha election. That route involves a split-mahagathbandhan strategy rather than a pre-poll nationwide grand alliance with ideologically inimical political parties, which could prove counter-productive.

For the Congress, a more sensible tactic would be to nurture two parallel pre-poll national alliances. The first would be a Congress-led UPA front comprising the Left, NCP, DMK, JD(S), RJD, NC and smaller parties. This shrunken UPA today accounts for around 75 seats in the Lok Sabha.

Poll maths

The second thread of the parallel grand alliance would comprise independent regional parties: SP, BSP, TMC, TDP and other smaller outfits. Together they account for 65-odd seats in the Lok Sabha.

The two strands of the UPA and the federal front, thus, today, command about 140 Lok Sabha MPs — far short of a majority.

What are their prospects to cross 272 Lok Sabha seats in the 2019 general election?

Consider first the qualitative argument.

If the two strands come together before the poll to form an octopus-like, hydra-headed front with several strong-willed leaders like Mamata Banerjee, Akhilesh Yadav’s extended family, Lalu Prasad’s equally large family, Mayawati, K Chandrashekar Rao, Chandrababu Naidu, Sitaram Yechury and Sharad Pawar, an implosion can’t be ruled out.

However, if the two strands — UPA and the federal front — contest separately but with seat adjustments, coming together post-poll, their chances brighten.

Now consider the math.

If the Congress can’t breach the 100-seat mark in 2019, the UPA could end up with less than 130 seats notwithstanding the DMK’s likely sweep in Tamil Nadu.

Meanwhile, the federal front will depend on the SP, BSP and TMC to bring in the big numbers along with the TDP and smaller parties.

Thus, the federal front could end up with around 120 seats, adding up to 250 for the two alliances — tantalisingly short of 272 seats in a post-poll bid to form a non-NDA, mega-coalition government.

However, if the two groupings contest the 2019 Lok Sabha election with a pre-poll mahagathbandhan, they could damage their prospects further for two reasons.

First, it will be seen as a ‘Modi versus the Rest’ battle that may fit into the BJP’s electoral playbook.

Second, in key states (excluding UP) the mega-alliance partners could cannibalise each other’s votes.

Their joint seat tally may fall well below 250. Where does this leave the BJP-led NDA? In a quandary.

There’s little doubt that the BJP will be hit in Uttar Pradesh,Rajasthan, Madhya Pradesh and Chhattisgarh. Other weak spots are Haryana, Punjab and Delhi.

Neutral parties like the BJD, TRS and AIADMK (though fatally weakened) could burnish the NDA’s numbers but not by much. If the Congress-led UPA and federal fronts garner 230-250 seats between them and the neutrals hold 25-50 seats in balance, the BJP-led NDA will be left with barely 250-odd seats.

Hung Parliament

In a classically hung Parliament where two groupings have a similar number of seats and are each short of a parliamentary majority by a few dozen MPs, crossovers can take place. The most likely targets for the NDA are TRS in Telangana and YSR Congress in Andhra Pradesh. They could deliver 20-25 seats between them and may well be amenable to a modus vivendi with the BJP.

What do these permutations mean for Rahul Gandhi?

Senior UPA leaders like the NCP’s Sharad Pawar, himself a dark horse for the top post, are unenthusiastic about Rahul as PM but can be persuaded. The real hurdles for Rahul lie within the federal front.

The BSP has blown hot and cold over Rahul as PM. Mayawati sacked the vice-president of her party, Jai Prakash Singh, for declaring: “Had Rahul Gandhi looked like his father (Rajiv Gandhi), he could have had a chance of success in Indian politics but he turned out like his mother (Sonia Gandhi), who is a foreigner. His blood is foreign. I can tell you with all surety that Rahul Gandhi can never succeed in Indian politics.”

Piecemeal alliance

Mayawati has kept her options open by refusing to do piecemeal alliance deals with the Congress.

In Rajasthan, Sachin Pilot is confident of a go-it-alone victory.

In Madhya Pradesh and Chhattisgarh though, the Congress is keen on a seat-sharing alliance with the BSP to consolidate Dalit votes.

If push comes to shove, however, Mayawati will back Rahul as PM in return for plum posts once her party garners 20-odd Lok Sabha seats in UP, following an alliance with the SP and Congress.

With an eye on 2024, Rahul though is prepared to concede the prime ministership in 2019 to anyone from the federal front — Mamata, Mayawati or even a dark horse as long as Modi is kept out.

The BJP knows it will lose close to 50-70 seats in UP, Rajasthan, MP and Chhattisgarh.

It is banking on making up some of that loss in Odisha, the Northeast and West Bengal. If the BJP falls far short of 272, Modi would prefer a spell in the Opposition. The UPA and the federal front would then patch together 250-odd seats, form a minority government, quarrel over the prime ministership, and in less than two years collapse under the weight of their own contradictions.

In a 1996-98 redux, disenchanted voters would then elect the BJP back to power in 2021 with Modi returning as prime minister.

Don’t bank on it, but don’t rule it out either.

Follow@minhazmerchant on twitter


Lethal in-swinger, deadly outlier - The evolution of Imran 'Taliban' Khan
If the cricketer-turned-politician wins the the blood-soaked Pakistani general election, India will have to raise, not lower, its guard.
Tuesday, July 24, 2018

If Imran Khan wins the blood-soaked Pakistani general election on Wednesday, July 25, India can expect more, not less, state-sponsored terrorism from Pakistan.

The Pakistan Tehreek-e-Insaf (PTI) leader goes by many names: Taliban Khan and Mullah Khan are the more polite ones. At Oxford University, he was known as “Im the dim”. But his talent as a cricketer emerged early.

I first saw Imran bowling in a Test match against England on TV in the common room of West Buckland School in Devonshire where I was a student. Imran was making his Test debut in the three-Test series against England in 1971. He was 18. But even then he looked every bit the star in the making. A slightly loping run-up, but a smooth bowling action, allowed him to move the ball both ways. Later, he developed a lethal late inswinger.

As we toured the English countryside playing various other schools in cricket matches and an annual game against an MCC youth team, we tried to copy the Imran style: long, flapping hair, whiplash bowling action and piercing gaze. Did we think this 18-year-old would go on to become one of the world’s greatest fast bowlers, a handy all-rounder and Pakistani Test captain? Perhaps.

Did we in our wildest imagination think he would one day be prime minister of Pakistan? Absolutely not.

Enough has been written about Imran’s life after a stellar 21-year Test career – as activist, philanthropist and politician. What should concern India now is the real prospect of Imran becoming Pakistan’s next prime minister following the July 25 general election. In effect, that would mean installing the rogue Pakistani army in the prime minister’s office. The army already controls the prime ministership. With Imran, it will control the prime minister.

Vikram Sood, the former chief of Research and Analysis Wing (R&AW) recently published a fine book, The Unending Game: A Former R&AW Chief’s Insight into Espionage, in which he analyses the role of the ISI in making Pakistan a haven for terrorism. In an article in The Economic Times on July 21, Sood elaborated on the dangers an Imran Khan prime ministership poses to both India and to Pakistan itself.

Sood wrote: “Imran Khan is the frontman, and he is backed by radical Islamist leaders like Maulana Fazlur Rehman Khalil of the Harkat-ul-Jihad (banned by the UN). Other (backers) are from the ultra-right wing Milli Muslim League (backed by Lashkar-e-Taiba), Ahle Sunnah Wal-Jamaat, formerly known as the radical sectarian Sipah-e-Sahaba, and the Barelvi Sunni Islamist group, Tehreek Labbaik Ya Rasool Allah. They are all expected to bat for the PTI by drawing away voters from the Pakistan Muslim League (Nawaz). Not for nothing is Imran Khan also referred to as Taliban Khan.”

In an unprecedented move, condemned by most political parties, the Pakistan Election Commission has given the Pakistani army the judicial powers of a magistrate to “hold on-the-spot trials of people breaking the law and sentencing them”. The only political party to support the controversial move? Imran Khan’s PTI.

No Pakistani prime minister has been allowed by the army to complete his or her term. Imran will be no different if the PTI wins the general election. Though he is the army’s candidate (he is already widely dubbed the PM-elect), Imran will eventually outlive his usefulness to the Pakistani army and be discarded or put to pasture. The army does this with all the stooges it picks. Dawood Ibrahim today is a virtual prisoner of the ISI, allowed to continue his various illegal businesses, including match-fixing, smuggling and hawala, but is no longer useful in the ISI’s terrorism strategy targeting India.

The Kashmir question

The Pakistani general election comes at a crucial time for Jammu and Kashmir (J&K). It is now just over a month since the Mehbooba Mufti government fell and governor’s rule was imposed. During the ill-advised PDP-BJP alliance government the Indian army fought Pakistan-sponsored terrorism with one hand tied behind its back. It has now been freed of such political interference.

In the five weeks since governor’s rule came into effect, terror attacks have reduced significantly. Between April 17 and May 16, 2018, 25 terror incidents were recorded, according to the ministry of home affairs (MHA). Between May 17 and June 16 (during the Ramzan “ceasefire” period), 66 terror incidents were recorded – a rise of over 100 per cent.

Since governor’s rule was imposed on June 20, the number of both terror incidents and stone pelting have declined sharply. As The Statesman wrote on July 21: “Stone pelting at the security forces in Kashmir has to a great extent vanished as Jammu and Kashmir on Friday completed one month of Governor’s rule. Incidents of stone pelting at security forces and waving of Pakistani and ISIS flags had become a daily routine in the Valley during the three years rule of the PDP-BJP government. Stray incidents of stone pelting are now being witnessed at the sites of encounters between the security forces and terrorists where miscreants among residents of neighbouring villages emerge to make attempts for escape of the terrorists.”

Ceasefire violations too have decreased over the past few weeks. They had peaked in May 2018 but after Pakistani Rangers hoisted the white flag and the Pakistani DGMO sought a meeting with the Indian DGMO, Pakistani mortars have fallen largely silent. The abduction and murder of J&K police constable Mohd. Sameer Ahmed Shah last week in Kulgam suggests that terrorists, thwarted by tougher counter-terror operations, are increasingly relying on attacking vulnerable targets like policemen on leave at home.

Those who say a “muscular” strategy alone will not work in J&K deliberately distort India’s current strategy: tough counter-terrorism alongside a strong development agenda. The new power plants in Kishanganga, the Jammu-Srinagar tunnel-cum-highway and other civil projects will deliver prosperity and jobs to Kashmiris when the Valley is no longer held hostage to Pakistan-sponsored terrorism.

The fall of the Mehbooba-led government has also led to a revival of long-delayed cases against separatist leaders by the National Investigation Agency (NIA). If the sources of funding for these conduits of terrorism are choked, violence in the Valley will decline.

The prospect, meanwhile, of a re-alignment of political forces in J&K led by Sajjad Lone and breakaway PDP members backed by the BJP could spell an end to the toxic dynastic duopoly of the Abdullahs and Muftis. Cynics say Lone, who was himself once a separatist and lost his father to terrorism, will be no better than the separatist-leaners he might replace. This is moot.

The three issues that should concern Indian policy-makers now are accelerating funding for development projects in both the Valley and Jammu, rehabilitating exiled Pandits, many of whom live in abysmal conditions in camps in Delhi and Jammu, and continuing an unyielding strategy against Pakistan-abetted terrorism.

If Imran Khan does win what is certain to be an army-rigged general election on Wednesday, India will have to raise, not lower, its guard.

He may have been “Im the dim” at Oxford, but Taliban Khan will owe a debt to the Pakistani army if he becomes prime minister.

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Apex court gives BCCI a free pass
If the SC allows the key Lodha reforms to be diluted, the cricket body will revert to being the unaccountable, opaque body it has ever been

New Indian Express
Saturday, July 21, 2018

When the Supreme Court first took on the task of reforming the Board of Control for Cricket in India (BCCI), hopes were high that India’s richest sports body would finally be held accountable to its principal stakeholder: spectators.

Without India’s humongous television audience, the BCCI would not control 70 per cent of worldwide cricket revenue. That quasi-monopoly has made the BCCI wealthier but not more transparent. The Supreme Court was supposed to reform an organisation that for decades has defied authority, resisted coming under the RTI Act and refused to shed the cloak of opacity.

Following the Justice Mukul Mudgal report on match-fixing in the Indian Premier League (IPL) in 2013, the Supreme Court appointed former Chief Justice of India R M Lodha to recommend a comprehensive reform plan for the BCCI. A Committee of Administrators (CoA) was established to ensure the Lodha Committee’s recommendations were implemented. More than two years later, the issue remains unresolved. Headed by former Comptroller and Auditor General Vinod Rai, the CoA has been diligent but ineffective in imposing the Lodha Committee’s recommendations.

As expected, the battle-hardened BCCI has proved to be a tough nut to crack. It has used every artifice to stonewall reforms. The CoA has not been blameless either. Its four-member committee has been reduced by two with no effort made to replace Ramachandra Guha (who resigned on 1 June 2017) and Vikram Limaye (who left shortly thereafter).

The result: the BCCI’s acting secretary Amitabh Chaudhary has engaged the CoA in a battle of attrition. Instead of holding the BCCI’s former administrators in contempt for not implementing the Lodha reforms, the Supreme Court is planning to dilute two of the committee’s key recommendations at its next hearing. These two reforms strike at the heart of the BCCI’s opaque structure and the grip powerful politicians have over its finances.

The first is the “cooling-off” clause that was integral to the Lodha reforms. At its hearing on July 6, a Supreme Court Bench comprising Chief Justice Dipak Misra and Justices A M Khanwilkar and D Y Chandrachud observed that it “would consider” waiving the cooling-off period. The cooling-off clause prohibits a BCCI office bearer from holding a position in the body for three years between consecutive terms with a maximum overall tenure of nine years and an age cap of 70 years.

This would limit the near-lifelong, lucrative sinecures the BCCI offers politicians and their acolytes. Politicians like Rajeev Shukla and Sharad Pawar would, for example, be affected by this reform. Astonishingly, the Supreme Court seemed to lean towards just the fudge the BCCI seeks: waiving the three-year cooling-off period if the office bearer contests for a different post. Thus a secretary after completing his tenure could continue holding office in the BCCI as a treasurer.

The second reform in danger of being diluted is the one-state, one-vote recommendation. Due to legacy issues, certain regions have more than one vote (for example, Maharashtra and Mumbai). The Lodha Committee’s recommendations seek to end this anomaly and democratise the voting process across India. The BCCI, hostage to regional interests, has fought relentlessly against this reform. The Supreme Court, after two years of denying the BCCI any latitude on this clause, has done an abrupt about-turn. It observed at its last hearing: “No state should be deprived of their voting rights but there are age-old associations which have contributed to the growth of cricket in the country and they should also not be deprived.”

This plays right into the hands of regional politicians who have for decades enjoyed multiple voting rights. With the cooling-off reform also likely to be axed, the politicians who have made the BCCI a haven of cronyism will have the Supreme Court’s sanction to overturn the Lodha Committee’s key reforms. The reformed constitution of the BCCI now awaits the Supreme Court’s final order. The Lodha Committee had recommended that politicians and bureaucrats should be barred from holding posts in the BCCI. The idea was to professionalise the body, as cricket boards in Australia, New Zealand and England have done, by loosening the grip of vested political interests.

At its hearing almost exactly two years ago, the apex court ordered a complete overhaul of the BCCI on the basis of the Lodha Committee’s recommendations. The unconscionable delay of two years in deciding the case has allowed vested interests acting on behalf of both the BJP and Opposition to make a mockery of the Lodha reforms. The country’s Assistant Solicitor General Tushar Mehta had the gumption to argue in favour of allowing politicians and bureaucrats holding office in the BCCI at the July 6 hearing in the apex court. Appearing for the Maharashtra and Gujarat state cricket associations, the ASG pleaded: “The court would do a serious injustice to people if they are not allowed to use their expertise and experience in cricket administration just because they are holding public office.”

If the apex court allows the key Lodha reforms to be diluted, the BCCI will revert to being the unaccountable, opaque body it has been since it was registered as a ‘society’ in Tamil Nadu in 1928. Sullied by allegations of match-fixing, dope testing violations and financial irregularities, it will soon be business as usual for the BCCI.

The Lodha reforms were the last opportunity to cleanse the BCCI. We will know shortly if the Supreme Court has imposed its will—and the will of the public—on the BCCI. Failure to do so will be a disservice to the public.

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Time for BJP to mend fences
Friday, July 20, 2018

In a recent editorial page article titled How the world sees India for a renowned newspaper, the respected former foreign secretary Shyam Saran wrote the following, with anxiety lacing every word: “(India’s) reputation lies somewhat tarnished by the conduct of what I still believe are elements who do not represent mainstream opinion in this country. But the world hears those who shout the loudest and sees those who act with violence. We must assert the values and principles that lie embedded in our Constitution and resume our journey towards the India that its enlightened framers envisioned. Only then will the world see in us the qualities of a Vishvaguru.”

Shyam Saran’s advice is wise. The Supreme Court this week urged the government to consider an anti-lynching law. But the reason India must build a society with zero tolerance to lynchings and mob violence is not because that will meet the approval of the world as Mr. Saran suggests. It is because it is right.

Since Independence, India has sought global approval. Mahatma Gandhi backed Jawaharlal Nehru over Sardar Vallabhbhai Patel as India’s first prime minister not only because Patel was much older than Nehru and in poor health but because Nehru had a global appeal. Patel was a man of the soil. Nehru had the polish and intellectual dexterity to impress the rest of the world.

The same thinking rules the Indian establishment today: we must be seen as a moral, responsible and righteous nation. India did not sign the non-proliferation treaty because it was brazenly discriminatory, allowing nuclear powers like the United States to possess 10,000 nuclear warheads while demanding India abandon its nuclear weapons programme. The US-led West imposed sanctions on India. For decades. India was starved of uranium supplies for its nuclear power plants from even supposedly friendly countries like Canada and Australia. When India carried out its Pokhran-2 nuclear test, the Bill Clinton administration imposed harsh sanctions on India. Those were lifted only when George W. Bush negotiated a complex civil nuclear deal with the Manmohan Singh government in 2005.

For a rising power like India, global reputation matters but not to the extent India’s foreign establishment imagines. Shyam Saran is right though when he writes: “A wave of regressive tendencies is evident in our country and Nehru’s advocacy of instilling a ‘scientific temper’ among the people of India sounds oddly out of place in this environment.”

Individual cases of violence have increased since the Narendra Modi government took office in May 2014 but the dire communal riot-after-riot prediction made by the Opposition has been proven wrong. Cynics say that’s because the BJP now rules in so many states that Muslims have been browbeaten into keeping the peace.

There’s no doubt that religious symbolism has become ubiquitous after the BJP’s electoral victory in 2014. As we approach the 2019 Lok Sabha poll, that symbolism will become stronger. The Supreme Court’s verdict on building the Ram Mandir in Ayodhya may be the spark that ignites Hindu revivalism. The Congress has, therefore, tried every trick in the book to delay the verdict beyond May 2019. The Supreme Court is unlikely to oblige.

Meanwhile, the proposed Ramayana train will stoke passions further. The distribution of the Gita in schools has drawn the standard response from the Asaduddin Owaisi-led AIMIM which sought distribution of the Quran as well to schools. This leads to a battle of polarisation and counter-polarisation. A polarised society is a double-edged sword. It can translate into electoral advantage but carries a societal cost no party in India can afford.

The BJP though must shed its complacency. Its allies continue to fret. While the JD(U)’s Nitish Kumar has been mollified after his meeting with BJP president Amit Shah last week, seat-sharing in Bihar remains difficult terrain for both parties to navigate. The Shiv Sena provides an entirely different challenge. Uddhav Thackeray is furious at the casual treatment his party has received in the NDA. But it knows that there is no life for the Sena outside the NDA. It will stay in an acrimonious marriage with a partner who has usurped much of its Hindu majority vote.

Other BJP allies are unhappy or have left (TDP). The BJP’s chances of returning to power in 2019 will depend on how many allies it can retain and how many new ones it can attract. The TRS, BJD and AIADMK are prime targets despite their leaders’ anodyne comments on tying up with the BJP.

As Shyam Saran concludes: “What has distinguished India through the ages is the culture of curiosity and deep reflection, the spirit of questioning and dissent and these are precisely the values we need to make India a modern and flourishing democracy. Yes, we have inherited many negative and regressive social attitudes from the past, yet our future lies not in indulging them but in confronting and eliminating them.”

The BJP indeed inherited ills from the past but it has failed to fix many of them. It has a very small aperture of opportunity left to do so. Politics is the art of the possible but for the BJP those possibilities are shrinking rapidly.

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Shashi Tharoor's 'Hindu Pakistan' analogy is an electoral gift to BJP
The Congress MP's remark, like Mani Shankar Aiyar's chaiwala jibe, may to the party's dismay dent its chances of winning.
Sunday, July 15, 2018

Has the Congress MP from Thiruvananthapuram, Shashi Tharoor, just handed the BJP an electoral game-changer ahead of the 2019 Lok Sabha poll? Mani Shankar Aiyar did much the same, mocking Narendra Modi as a chaiwala ahead of the 2014 Lok Sabha poll.

There are nine months to go for the next general election and public memory is short. But Tharoor's remark could remain a festering political wound.

Here's what Tharoor said in his speech on democracy and secularism: "If they (BJP) win a repeat in the Lok Sabha, our democratic Constitution as we understand it will not survive as they will have all the elements they need to tear apart the Constitution of India and write a new one. That new one will be the one which will enshrine principles of Hindu Rashtra, that will remove equality for minorities, that'll create a Hindu Pakistan and that isn't what Mahatma Gandhi, Nehru, Sardar Patel, Maulana Azad and great heroes of freedom struggle fought for."

I've often written here in favour of a Bharat Rashtra as opposed to a Hindu Rashtra which does Hinduism no credit. My admiration for Hinduism has been recorded on these pages as well. A Bharat Rashtra is a Hindu majority project with minorities forming an integral part. They must be empowered, not appeased, as the Congress has done for decades. Minorities must put India first and keep their religion private - as should Hindus.

In a modern society, nation building is a public endeavour, religion a private one. This applies to all non-Hindus as well - Muslims, Christians, Parsis, Jews, Sikhs.

Why is Tharoor's "Hindu-Pak" remark both factually inaccurate and ill-timed?

First, in Pakistan they don't just discriminate against minorities as Tharoor euphemistically claimed in his speech. They kill them. Ahmadiyyas are hunted down - the law allows their persecution. In India, even after 10 years of BJP rule over two decades from 1998 to 2018, minorities receive rights that often exceed those accorded to Hindus.

Second, in Pakistan the army controls the entire country. In India, the army in contrast suffers routine vilification at the hands of sundry politicians, activists and NGOs.

Third, changing the Constitution, as Tharoor fears the BJP will do post-2019, is actually a bad Congress habit. Former Prime Minister Indira Gandhi didn't just change the Constitution. She suspended it in 1975. The BJP is overtly religious (which is not a good thing) but subverting the Constitution isn't its core competency.

The Hindu-Pak comparison is odious. Tharoor knows it. So why did he make it? In the mistaken belief that it would win favour with his party, which has relentlessly condemned the RSS and Hindutva. But Rahul has belatedly realised that too much Hindutva-bashing can prove electorally damaging. That message lies unread in Tharoor's inbox.

The Congress president has lately also become somewhat schizophrenic. He can't decide whether the Congress is a party that appeases Muslims and Christians (to inveigle 18 per cent of their pan-national vote) or a born-again Hindu-leaning party that requires him to temple-hop. When Tharoor's Hindu-Pak speech went viral, Rahul ordered the party to distance itself from his remark.

It was the sort of thing the bipolar Congress has become accustomed to doing with party members who cross the red line. It goes something like this: "We are an inclusive party with a solid minority vote bank but we must not upset the Hindu majority too much. An anti-Hindu pinprick once in a while to placate the minorities is fine. Just don't overdo it. We need Hindu votes too."

The Congress therefore regularly "distances" itself from incendiary comments by a Mani Shankar Aiyar (suspended indefinitely after his Pakistan bon mots), Sanjay Nirupam and Sandeep Dikshit (both serial offenders against the Indian army) and now Shashi Tharoor who puts a foot in his mouth as a reflex action.

Since I've edited over 120 of Tharoor's columns in my publications over more than a decade, I can say he is mostly well-meaning. He made the leap from being an international civil servant for 29 years to the rough-and-tumble of Indian politics with sangfroid. As a long-time United Nations employee, Tharoor was used to obeying orders. He served then UN secretary-general Kofi Annan with steadfast loyalty during the oil-for-food controversy that roiled Annan's office. He has carried forward that sense of loyalty to his new boss in the Congress which he joined in 2009 after retiring from the UN in 2007.

How will Rahul position the Congress ahead of the slew of Assembly elections later this year and the Lok Sabha poll in 2019? He seemed to veer towards the religious centre when he visited temples across Gujarat and Karnataka, softening the Congress' pro-minority image. Moderate Hindus were his target.

Hindus are divided across caste, region and language. That makes the BJP's task difficult. Rahul has shrewdly used the Dalit card against the BJP. Dalits make up 17 per cent of India's electorate. They don't vote as a bloc like Muslims. Many are electorally tied to regional leaders like Mayawati. Rahul's ploy is to prise open the crevice of distrust between Dalits and the BJP. With Muslims, Dalits and moderate Hindus on its side, the Congress believes it can add significantly to its 2014 vote share of 19 per cent.

From 1998 to 2014 the Congress national vote share has oscillated between 19 per cent and 28 per cent. In 1998 it won 25.82 per cent, in 1999 28.30 per cent, in 2004 (when it seized power) just 26.53 per cent, and in 2009 (when it retained power) 28.55 per cent. Its vote share plunged to 19 per cent in 2014 with the Congress sinking from 206 Lok Sabha seats to 44.

Rahul believes the Congress will at least double its 2014 seat tally in 2019. Tharoor's Hindu-Pak analogy, like Aiyar's chaiwala remark, may to the Congress' dismay arrest that rise.

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How India can benefit from Trump's trade war on China
While Beijing and Washington contest the future, India must use this window of opportunity to create its own global nous.

Friday, July 13, 2018

China and the United States are embroiled in a trade war that will shape the geopolitics of the world deep into the twenty-first century. The issue between Washington and Beijing isn’t just China’s $350 billion (over Rs 24 lakh crore) trade surplus with the US. It is about future global economic supremacy.

Iranian crude

China is a unique global power. It has built its own ecosystem and barred virtually all Western influence. It restricts the operation of foreign companies. It tightly controls the banking sector and stock market. It bans Google, Facebook, YouTube, Instagram and Twitter.

That has helped local social media sites like WeChat and Weibo become domestic giants. Chinese e-commerce platforms like Alibaba have a market value of $500 billion – within striking range of the market value of Apple and Amazon.

The rise of China has been astonishing. It has in less than 20 years built the world’s fastest supercomputers, world-class universities and outstanding infrastructure. China’s defence budget is the world’s second-largest. Its navy is positioned to challenge the US navy not only in the South China Sea but in the entire arc between the Indian and Pacific Oceans.

China, like the US during its expansionary phase in the twentieth century, is a predatory power. The US invaded other countries at will, imposed wars on them and ran the world’s economy through the World Bank and the International Monetary Fund. It used the United Nations to legitimise harsh economic sanctions on countries it saw as a threat to its hegemonic world order.

China fully expects to construct a China-led world order by 2049, the 100th anniversary of the formal establishment of the People’s Republic of China (PRC). By launching a trade war on China, US President Donald Trump though has signalled America’s intent: the US can impose tariffs on Chinese exports worth $500 billion.

In retaliation, China can impose tariffs on US exports worth only $137 billion given the trade imbalance between the two countries. It is estimated that the trade battle will shave one per cent off China’s export-led GDP in 2018-19. American GDP is estimated to fall by only 0.2 per cent.

India has stayed largely out of the way of the battle between two countries with which it has a set of multi-dimensional relationships. Iran, not trade, is a deal-breaker with the US. Trump is obsessively anti-Iran. By November 2018, India will need to cut to near-zero its oil imports from Iran or risk certain US sanctions on Indian oil companies.

While Iranian crude can be replaced with Saudi and UAE crude, Chabahar port in southern Iran that India is developing as a counter to China’s Gwadar port in Balochistan, could be a victim of US-Iran tensions.

Quick escape

Over the next few days Trump will scythe his way through meetings at NATO headquarters in Brussels, in Brexit-torn Britain and a much-anticipated quasi-summit with Russian President Vladimir Putin in Helsinki. In Brussels, on July 11-12, Trump will hector his NATO allies to take out their cheque books and spend at least 2 per cent of their GDP on defence.

In Britain, he will spend barely 30 hours on July 12-13 to lecture British Prime Minister Theresa May on postBrexit Britain and meet Queen Elizabeth II at Windsor Castle.

Trump will make a quick escape from the stiff formality of royalty for a weekend of golf at his own golf resort in Scotland before flying to Helsinki for the pivotal meeting with Putin on July 16.

President Xi Jinping will be watching all this carefully. He thought he had charmed Trump into being a friendly collaborator in China’s rise when he was lavishly hosted by the US president at his Mar-a-Lago retreat in Florida last year. That hope has been dashed by the unprecedented trade war Trump has unleashed on China. Beijing denounced it as “the largest trade war in economic history”.

Utilising chances

India’s strategic thinkers have traditionally been slow to utilise opportunities geoeconomic events throw up.

One reason why China has adopted a softer line with India in recent months over the disputed border along the line of actual control (LAC) is to wean India out of America’s orbit of influence. Though India’s economy is one-fifth of China’s and one-tenth of America’s, both countries know that 20 years from now India will form the third pivot in great power relations.

Britain is a spent force. The European Union is toothless. Russia is ageing. In less than 10 years India will overtake China as the world’s most populous nation. Its GDP will still be significantly smaller than China’s and America’s but larger than Japan’s and Germany’s as it emerges as the world’s third-largest economy. Without strategic planning, India will stumble into the status of a swing global power within a generation.

As the China-US trade war escalates, India must rethink its long-term strategy with both superpowers. US-China relations are moving into a long-term mode of confrontation.

India must be quietly assertive across a range of issues. With the US, concede on Iran but stay firm on defence ties with Russia over the S-400 missile defence system. With China, downplay differences over the Dalai Lama and Taiwan but double down on Beijing’s unprincipled support of Pakistani terrorists like Masood Azhar.

While Beijing and Washington contest the future, India must use this window of opportunity to create its own global nous.

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Has the noose really tightened around Vijay Mallya
British justice is relatively swift, but it does not move at the speed India would like it to.
Wednesday, July 11, 2018

The quiet, green village of Tewin has been Vijay Mallya’s home for over two years. His fortified mansion hires locals and provides an economic fillip to this Hertfordshire county that is prosperous, but like the rest of Britain looking anxiously at an uncertain post-Brexit future. Mallya’s presence is not entirely unwelcome. His Force India Formula 1 team has many local followers.

The protracted battle waged by the Indian government to bring Mallya to justice took one small step forward with the British High Court allowing 13 Indian banks to enter several of his British properties (including his Tewin mansion) and, following approval from the appropriate authority, seize the goods and other material in them.

Does the order bring Mallya any closer to being extradited? The short answer: no.

First, Mallya has appealed against the court order. Till the appeal is heard, it’s status quo. If Mallya loses his appeal, he can move Britain’s Supreme Court and after that the final arbiter, the House of Lords.

British justice is relatively swift, but it does not move at the speed India would like it to — potentially depriving the Narendra Modi government of a key victory over an economic offender by bringing him back to India before the 2019 Lok Sabha election.

More promising for the Modi government is the order passed by India’s Prevention of Money Laundering Act (PMLA) court under the new fugitive ordinance. The court has ordered Mallya to be present in the court on August 27. If he doesn’t comply, his assets in India will be seized without further notice.

This is the order that worries Mallya, not the British court’s seizure judgment. His Indian assets are far more valuable than his British assets most of which (including the Tewin mansion) are anyway not on his name.

What the PMLA court judgment does is give Mallya the option to appear before it on August 27, and voluntarily allow the sale of his Indian assets. If Mallya fails to appear before the court, those assets (amounting to over Rs 12,500 crore) will be sold under the supervision of the court.

Mallya knows this. It is no coincidence that he filed an application before the Karnataka High Court on June 22, 2018, to pledge the sale of his “available assets” totalling Rs 13,300 crore.

What Mallya wants is to avoid returning to India and being arrested. He has accepted that he will have to pay the banks what he owes then — a principal amount of over Rs 6,200 core which, with several years’ accumulated interest, totals just under Rs 10,000 crore. In addition, he will have to pay (again with accumulated interest) employees’ salaries, TDS and service tax dues, airport rentals, vendors’ outstandings and myriad other debts associated with Kingfisher Airlines.

Defenders of Mallya say he has been singled out for harsh treatment. Under the Insolvency and Bankruptcy Code (IBC), banks have given other defaulting promoters debt haircuts ranging from 10 per cent to 83 per cent. Mallya has been given no concessions.

he reason for this is obvious: Mallya fled India; other defaulting promoters submitted themselves to the IBC process. Despite being given several opportunities to return to India and negotiate a settlement with banks, Mallya refused to do so. Instead he offered two years ago to pay just over Rs 4,000 crore, refused to return to India to face criminal cases filed against him and confined himself to writing open letters to the prime minister and finance minister.

In Britain, meanwhile, Mallya leads an extravagant, even ostentatious lifestyle. In India, his unpaid employees remained unpaid. One family member of a former Kingfisher employee, facing a severe financial crisis, committed suicide.

How will the Mallya story end? And what impact will its outcome have on the status of other economic offenders like Nirav Modi, Mehul Choksi and Jatin Mehta?

Mallya will resist returning to India. He will allow his assets to be seized. Those pledged by him as collateral personal guarantees to banks have already have been attached. They will now be sold under court supervision. Banks and other creditors, including employees, will receive their dues with interest. But Mallya may not return to India — yet.

Once the recovery process is over though, he will attempt to extinguish his fugitive tag. That could pave the way for his return to India. He may, however, still face criminal charges pending against him for being a wilful defaulter. Tewin might host him for a while longer.

Mallya’s key assets that will be used to pay bankers and other creditors are his liquid shares in United Spirits Ltd and United Breweries Holdings Ltd. Both companies are now run by multinationals Diageo and Heineken respectively. Their market value has more than doubled since they took over management control form Mallya.

Ironically, Mallya’s ability to pay off his creditors is due to the rise in the market value of his two flagship companies where he has ceded control.

Does that make Mallya a pauper? Not by a long shot. His non-pledged assets in India are still substantial. His overseas assets include breweries and the Force India Formula 1 team. At the end of the protracted battle, Mallya will still be a billionaire with a net worth of around $ 1 billion (Rs 6,900 crore) even after paying off his entire debt of around Rs 13,000 crore.

More importantly, how will the resolution of the Mallya case affect the ongoing prosecution of Nirav Modi, Mehul Choksi and others? The red corner notice issued by Interpol will restrict Nirav’s movement, but extradition may be far trickier. Even in Mallya’s case, extradition — despite concerted efforts by the Indian government through the Crown Prosecution Service (CPS) – is unlikely to succeed.

The laxity shown by Indian investigation agencies that allowed fugitives like Mallya, Nirav Modi and Choksi to flee India is a systemic flaw. Rich offenders get away. The poor often stay in prison as undertrials for longer than even the maximum sentence they would have received had they been convicted.

The Modi government needs to show results in its fight against corruption with a high-value captive like Vijay Mallya, or a Nirav Modi.

India’s rusted, slow-moving, unreformed judicial system could yet deny it that prize.

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A tale of two Aurangzebs
The Opposition claims minorities have been marginalised after 2014. But if the underlying causes are ignored, the symptoms will worsen

New Indian Express
July 7, 2018

Aurangzeb, the sixth and last emperor of the Mughal Empire, is more vilified than his five ancestors put together. Does he deserve such vilification? Aurangzeb plundered the port of Surat, reimposed the hated jizya tax on non-Muslims that his great-grandfather Emperor Akbar had abolished and destroyed thousands of Hindu temples. Within decades of his death in 1707, the Mughal Empire collapsed. Aurangzeb’s cruelty towards his own family and ruthlessness towards his subjects makes him a villainous figure in contemporary history.

But there of course is another Aurangzeb, the Kashmiri jawan abducted, tortured and killed by Pakistani terrorists last month. Aurangzeb served with 44 Rashtriya Rifles. He was kidnapped on the way home from his Army camp during Ramzan while the unilateral “ceasefire” declared by Indian security forces was still in place.

Rifleman Aurangzeb’s calm demeanour as his captors interrogated him on camera minutes before killing him was a chilling reminder of the daily dangers Indian soldiers face from Pakistan’s proxy terror war and the heroism of young jawans.

But the story of the two Aurangzebs separated by over 300 years of history highlights India’s struggle to fight both terrorism and communalism. Terrorism is a black and white issue; communalism has several shades of grey. The Congress and Left claim that since the Modi government took office, minorities have been marginalised. Many live in fear. Their livelihoods, for example, in the meat processing and leather industries have been severely hit. A Hindu Rashtra will overturn India’s long history of pluralism. The BJP does not have a single Muslim MLA in Uttar Pradesh or Gujarat among its over 400 MLAs in the two states put together. The Congress and Left are right in identifying these symptoms but wrong in ignoring their causes. Until these are remedied, the symptoms will get worse, not better.

Mahatma Gandhi was a saint but like all saints he had his foibles. Early in the freedom movement, soon after his arrival in India from South Africa in 1915 at the age of 45, the Mahatma (a title he had yet to acquire) cast his lot with the global Muslim brotherhood. The Ottomans had been defeated along with their German allies in the First World War in 1918. The centuries-old Caliphate, the centre of Islamic authority as the Vatican is of Catholicism, was abolished in 1924. Gandhi had thrown his considerable moral weight behind Muslims in India between 1919 and 1924 with the India-centred Khilafat movement to press Britain to revive the Caliphate in Istanbul.

Though the movement failed, Gandhi was making a shrewd calculation. He knew the sheer number of Muslims in India (nearly a third of British-occupied India’s population) meant that Muslims had to form an integral part of the freedom movement. Their cooperation was essential. The Muslim League’s later betrayal of Gandhi, Nehru and Patel was still over a decade away.

Gandhi believed he understood the Muslim mind. For nearly 200 years, from Emperors Babur to Aurangzeb, the Mughals had ruled India. The British filled the vacuum after 1757 following the decisive battle of Palashee in Bengal. Hindus silently welcomed the British triumph over the debauched Nawab of Bengal Siraj ud-Daulah, helped by the turncoat Mir Jafar Ali Khan. Many of the Nawab’s Hindu subjects regarded the British as a means to eliminate Muslim rule for good.

But 170 years after Robert Clive’s victory over the Nawab of Bengal, Gandhi realised Muslims in the British Raj could be more useful in the freedom struggle as allies rather than as enemies. Gandhi had no delusions about the fealty of Muslims for his mission. As 1947 approached, Jinnah would prove him right. But for Gandhi Muslims had two uses: one, to help India end British rule just as mercenary Hindu soldiers in the British Indian army had helped the British end Muslim rule. The Mahatma had more of the Machiavelli in him than most realised.

There was a second reason why Gandhi wooed Muslims despite their leaders’ betrayal over Partition. That reason was purely pragmatic. After Independence, Hindus and Muslims would have to live together in peace if India were to fulfil its potential as a liberal, plural democracy. Gandhi knew Muslims and Hindus suffered from a complex. Muslims still thought of themselves as rulers despite the 190-year British interregnum. They demanded and got special privileges—minority institutions, opaque Wakf boards and immutable personal laws.

For Gandhi, Nehru, Patel and Ambedkar these were necessary compromises to ensure India emerged united from the trauma and bloodshed of Partition. Gandhi recognised too the complex Hindus harboured: victimhood. Their subjugation over centuries of often brutal Muslim and British rule had created a deep well of grievance among Hindus. He needed to balance the interests of both communities to secure India’s long-term future. By mollifying the Muslim minority, Gandhi unwittingly but not entirely unknowingly invoked Isaac Newton’s third law of motion: every action has an equal and opposite reaction. It is no coincidence that Gandhi’s Khilafat movement from 1919-1924 to save the Ottoman Caliphate in Istanbul sparked Hindu revivalism. It is no coincidence either that the RSS was founded in 1925. Hindutva had arrived.

It would take another 73 years for revivalist Hinduism to win political power in 1998. Atal Bihari Vajpayee was cast in a quasi-Nehruvian mould. Under him, the historical balance of power between Muslims and Hindus stirred but didn’t shake. Sixteen years later in 2014, when Narendra Modi rode to power, the old order did shake.

We began with two Aurangzebs, set apart by over 300 years. The Congress recently compared Modi to the early Aurangzeb. Were he alive, the Mahatma would have told the Congress that by doing so it was, once again, risking invoking Newton’s law.

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Finding the middle ground
British justice is relatively swift, but it does not move at the speed India would like it to.

Thursday, July 5, 2018

There was liberal outrage last week when Uttar Pradesh Chief Minister Yogi Adityanath refused to wear a skull cap offered to him at poet-saint Kabir’s mausoleum. I believe a Muslim should willingly place a tilak on his forehead in a temple just as a Hindu should put on a skull cap in a mosque.

The first principle of liberalism is establishing a democracy of opinion. Being an editor means giving diverse viewpoints equal prominence on your platform. In the publications I’ve edited and published, for example, I gave equal footage to columnists with varying ideologies, ranging from LK Advani to Shashi Tharoor.

A fundamental mistake ideologues on the Left and Right make is aligning their views on different issues through their ideological prism. The correct approach should instead be issue-based. For instance, on gender equality, the Right and Left should have a convergence of views. Patriarchy must be fought by all, irrespective of their political ideology. Similarly, on issues of communal violence, rape, law and order and national security, the Right and Left must converge at the Centre. The issue matters, not the ideology. It is the issue that must determine the response.

The second fundamental mistake ideologues make is drawing a false equivalence where there is none. Those on the Left undermine their liberal credentials by equating ‘radical jihadist forces’, as one journalist recently did, with ‘radical Hindutva forces’. The comparison is asinine.

Hindutva must obviously be open to criticism and reform. Its patriarchal ideology is regressive and lacks a scientific temper. It also sprouts radical fringe groups who target journalists and rationalists. These, however, are confined to relatively few incidents of criminality, which rightly are being investigated and prosecuted. In contrast, jihadist terrorism is a global project: brutal and driven by a false reading of the Quran. Equating Islamist terrorism with Hindutva radical groups displays both bias and ignorance.

The third mistake ideological fundamentalists make is selective outrage. The Left outrages, as indeed it should, when a Muslim or Christian is lynched. It does not outrage when a Hindu is lynched. The Right does the exact opposite. Reactions to the Kathua and Mandsaur rapes, though the circumstances surrounding them are entirely different, underline this dysfunction.

The Left leapt to the defence of External Affairs Minister Sushma Swaraj when she was trolled by the Right over a controversial passport case, involving an inter-faith couple. But the same Left outrage is conspicuously absent when Prime Minister Narendra Modi is trolled and abused virtually daily. Such selective outrage damages the liberal cause. On specific issues, such as foreign investment, those on the Left should embrace a sensible Right-of-Centre approach: FDI provides jobs, upgrades technology and develops skills in the local workforce. Similarly, those on the Right should abandon their stand against decriminalising homosexuality and adopting a progressive Left-of-Centre view on individual rights.

That is the missing middle ground. The divisions within the Indian society have widened since Prime Minister Narendra Modi took office in 2014. But the reasons are not those advanced by the Left. For 67 years, India lived by what can be described as the Nehruvian consensus. At home, we were socialists with maximum rates of income-tax in the 1960s, set at 97 per cent. Abroad, we were non-aligned and morally responsible global citizens. At home, we were pointedly secular, ensuring Muslims were protected, never mind that they remained poor and backward. Abroad, we were self-sacrificial in the finest Hindu tradition, graciously giving up our United Nations Security Council (UNSC) seat to China and urging the United Nations in 1948 to mediate over Kashmir.

That moralistic, self-denying Nehruvian tradition was seemingly broken by the arrival of Narendra Modi. But only seemingly. After a brief flurry of upending some elements of the Nehruvian consensus, Modi turned out to be a closet Nehruvian himself. He kept the public sector that Nehru had painstakingly built intact and even expanded it. He preserved the Nehruvian ‘steel frame’ of the bureaucracy and gave it even greater sheen. He promoted Nehruvian socialist policies for the poor, replete with subsidies, farm loan waivers and universal health insurance.

All of this has confused the Left and the non-liberals who inhabit it. On the one hand, Modi remains silent on lynchings by cow vigilantes. At the same time, he takes the constant mocking, taunts and abuse from the Opposition in his stride. Nehru was notoriously thin-skinned to the slightest criticism, though he professed to encourage it. Modi doesn’t seem to care either way. This confuses journalists bred on an ecosystem of cronyism and corruption. That’s over. The response is venomous. Every other article that begins with a meandering laundry list of unrelated issues contrives to relate it back to Modi.

Modi should attract the blame for many things — not addressing a single interactive press conference in over four years, for example. But such is the trauma in the Left-illiberal cabal over the forfeiture of their crumbs from the old ecosystem that its members almost hypnotically draw Modi into everything they eviscerate in print or on television. To them, Modi as prime minister is bad enough. A Nehruvian Modi, treading the middle ground, is almost unbearable.

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The West needs rising India - but it can't stand the thought
Foreign media has for long taken western geopolitical, military, intellectual and cultural hegemony for granted.
Tuesday, July 3, 2018

Two recent reports have underscored Indians’ misplaced sensitivity to foreign criticism. The first was a biased and inaccurate report by the United Nations Human Rights Council (UNHCR) on India’s role in Jammu & Kashmir. Lt General (retd) DS Hooda, who oversaw the surgical strike on Pakistan-occupied Kashmir (PoK) in September 2016, was right when he dismissed the report with five words: “It belongs to the bin.”

The second report came from the Thomson-Reuters Foundation. It termed India the “most dangerous country in the world for women” – more dangerous, it said, than Syria, Somalia and Pakistan. The survey was based on the perception of 548 “experts”. There was no data and no ground reportage. It too belongs to the bin. Rebutting such an obtuse report perversely affords it credibility.

India has many flaws. Poverty, especially in tribal and Adivasi belts, is a blight. Law and order exist sporadically. Violence is endemic. Women remain unsafe in a still largely patriarchal society. Dalits in many parts of India live in fear. Minorities feel marginalised. Rural and urban sanitation is rudimentary. Civic misgovernance has reduced cities like Mumbai into teeming cauldrons where billionaires and the homeless live side by side in luxury towers and slums.

And yet, amidst these blights, there is an inevitability about India’s rise. There are two principal geographies western investors can today profitably invest in: India and Africa.

China has grown beyond their reach. Europe and North America are saturated and offer low returns on investment. South America is beset with internal strife and economic mismanagement. Africa has enormous potential but political instability is a dampener. Besides, the continent has 54 countries with different laws and levels of development.

In contrast, India is poor, underdeveloped but stable. Its judicial system is ponderous and often corrupt. Some of its tax laws are regressive and unnecessarily complex. The bureaucracy forms an impenetrable wall. Corruption at state level remains endemic.

And yet, foreign investors flock to India.

They brave poor infrastructure and tricky tax laws because there is no alternative. I once asked an American private equity (PE) investor on a flight to Mumbai why he was so keen to invest in India. As the aircraft made its descent to the Mumbai airport, he pointed to the phalanx of slums not far from the runway.

“That’s why we are here,” he said. “India needs infrastructure, housing, development – lots of things. The middle-class is large and growing. The start-up ecosystem is great. The number of unicorns worth over $1 billion is set to explode.

"In Switzerland, my return on investment is 0.5 per cent a year. In India I’m doing 12 per cent – even after currency depreciation – consistently year after year. No other country gives me that kind of return on investment.”

The West needs India’s markets every bit as much as India needs western technology. But here’s the catch: India can buy technology globally; the West can’t find another stable, democratic, large, underdeveloped country to invest in for the long term.

Foreign media has for long taken western geopolitical, military, intellectual and cultural hegemony for granted.

First, China challenged it. Now India is set to do so.

In less than a generation, the centre of gravity of global power will be shifted decisively from the West to the East. Of the world’s four largest economies, three will be Asian: China, India and Japan. By purchasing power parity they already are. As economic power shifts to the East, so will hard and soft power.

The 400-year-long supremacy of the West, built on slavery and colonialism and the industrial revolution that fed off both, will gradually end. A return to the world order of the 1600s will again see the rise of three civilisational strains that lay dormant for centuries: China, the heirs to the Ottomans, and the Indian subcontinent.

There, of course, are caveats. The Ottoman heirs in the Middle East will need to reform Islam to take their place on the new global high table. India, denuded by the Mughals and the British, will continue to rise at its own slow pace. China has already risen. Of the world’s 20 most valuable companies, nine are Chinese, eleven American.

All of this worries the West whose media and NGOs drip venom at every opportunity. Racism is unacceptable in polite western society but beneath the surface it is alive and well. Cultural racism in movies and TV takes the shape of characters like Apu in The Simpsons.

As actor Priyanka Chopra once said: “I was bullied over Apu. He was the bane of my life growing up (in the US). I was always asked when I was in high school, like at 14, 15, why I didn’t speak like that or did I find gold in my rivers? Did we go to school on elephants? I always had questions like that.”

The treatment of Aborigines in Australia, the “White Australia” policy till the 1960s, British-Dutch apartheid in South Africa, the invasive colonisation of Asia, Africa and Latin America, the near-extermination of “Red” Indians in the US, and the greatest crime of all – the Atlantic slave trade with its hub in Liverpool – disgrace Western claims to civilisation.

The tide though is turning and the West, after four profitable centuries, needs India in a world where the playing field is rapidly levelling. There are no colonial dividends anymore, no free land to appropriate in the Americas, and no bonded slave labour from Africa.

In the new world, the West has to compete on equal terms with the rest. It will come off second best. The supercilious western media, global bodies like the UNHRC, headed by Middle Eastern stooges, and NGOs like Amnesty will continue to churn out reports that belong to the bin.

The rich but declining West can’t bear the thought that it will need poor but rising India, more than India needs it.

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Ironing Out GST’s Wrinkles

Sunday, July 1, 2018

Albert Einstein often said the clever simplify the complex while the rest complicate the simple. The Goods and Services Tax (GST) was implemented one year ago amidst much fanfare at a midnight gathering of the country’s leaders in the central hall of parliament. The objective was to collapse multiple state and central taxes into one broadbased nationwide tax. GST would therefore subsume VAT, service tax, excise and CST. The idea was to simplify the complex.

Has GST lived up to its promise? The first year of such an overarching tax reform is bound to undergo teething problems, especially in a fractious democracy like India’s where regional satraps fiercely guard their states’ tax revenue. The fact that the government was able to get all states and union territories on board was itself a significant achievement. But the hidden hand of the bureaucrat which determines the devils in the detail has complicated what should have been a clean, simple GST regime. Einstein would not have been pleased.

Most truckers though are a happy lot these days. Post-GST, their travel time across inter-state borders has fallen by over 25 per cent. Transporters are saving fuel. Drivers are saving money. Before GST was introduced, they would wait for hours at state check points. One driver said he once sat, ate and slept in his truck for 36 hours at a state border post. Now the checkpoints have gone. The need to bribe officials is over. But there is one niggle: flying squads of RTO inspectors who extract their pound of flesh. Overall though, GST has been a boon for the transport and logistics sector. As smaller towns assume greater importance in India’s economy, the sector will become a key driver of GDP growth.

Not everyone is happy. E-way bills continue to demand complex documentation, slowing down transport time. E-way bills for goods over Rs. 50,000 were introduced earlier this year to curtail tax evasion. They have succeeded to some extent in doing that but the price has been fresh delays at checkpoints. For small traders, even the task of generating an e-way bill can be onerous. Anil Bhardwaj, secretary-general of the Federation of Indian Micro and Small & Medium Enterprises, told a newsmagazine that small traders face new problem in creating e-way bills: “For instance, a lathe machine operator with his limited means and learning is now required to make an e-way bill through the internet. For this, he needs a computer and someone to operate it. In effect, the cost of operation for micro industries has gone up. They don’t understand the new system. It’s difficult for them to employ someone for just this purpose. It eats into their thin profit margins. Sometimes the cost of hiring someone may be more than what the company earns.”

One year on, many of these wrinkles in GST need to be ironed out. The key issue is complex paperwork though the government has promised to shortly introduce a modular, single-page, user-friendly document for all GST transactions. Finance Secretary Hasmukh Adhia, who has midwifed the GST project, says: “There will always be initial glitches. All the glitches are now over and we are in a smooth phase of implementation.”

Several small traders aren’t as sanguine. Their complaints range from the multiplicity of tax slabs to complex documentation. Some of the problems are bureaucratic in nature. As the analyst TNC Rajagopalan observed in Business Standard: “There are problems with the formulae for refund of unutilised input tax credit on account of zero rated export, tax on recoveries from employees such as for canteen food, double taxation on ocean freight, unrealistic conditions for rebate of taxes paid on export goods, unnecessary restrictions for grant of upfront exemption for import by exporters and so on. A recent problem is different interpretations by the Authority for Advance Ruling in various states.”

The GST Council will meet on July 21 to sort out some of these issues but placing petrol and diesel under GST is not on the cards. Adhia says the reduction in fuel prices under GST would be marginal. The government expects crude oil prices to soften following the decision by Saudi Arabia and Russia, the world’s two largest oil exporters, to increase production among OPEC member by between 7,00,000 and one million barrels a day. US President Donald Trump has been relentless in his criticism of high oil prices and wants to see them fall below $70 a barrel, a price both OPEC and America’s shale oil industry would be comfortable with.

New-economy priority

One new-economy sector that the government has been keen to promote by placing it under a relatively low GST slab of 12 per cent is electric vehicles (EVs). Finance Minister Piyush Goyal told me in a recent conversation that the government wants to push EVs rather than hybrids which he says is a 20-year-old technology. As a result, the GST slab on small hybrid cars has been fixed at 28 per cent and the rate for large hybrids at 43 per cent.

Dismissing criticism of the high GST slab on large hybrids, Goyal emphasises that EVs, not hybrids, are the future: “Hybrid is an old intermediate technology. It has been prevalent since the 1990s and has not really taken off since its inception. EVs are the future and will soon replace both conventional and hybrid vehicles. There is no rationale in incentivising an old, replaceable technology. With the GST slab of just 12 per cent, the EV industry has seen a rapid ramp-up with sales of EVs increasing more than four times over the past year. For faster adoption of electric vehicles in the country and for setting up a robust manufacturing base enabling job creation, the GST tax rate has been kept at a modest 12 per cent.”

However, early reports on the first batch of EVs delivered to the government by the Tatas and Mahindras have not been encouraging. During testing, they ran for less than 80 km on a single charge. The two companies are now revamping their EVs and calling upon the government to help set up a nationwide battery charging infrastructure to meet the Narendra Modi government’s ambitious target of an all-EV passenger vehicle sector by 2030.

MSME woes

Meanwhile, several sectors like real estate and MSMEs have been buffeted by GST. Rasesh Shah, president of FICCI, in a thoughtful article in The Times of India wrote: “To make the GST reform truly effective and to really make it ‘one country one tax’, both central and state governments must recognise the need of eventually bringing the excluded sectors like petroleum and real estate within the ambit of GST. The next step would be to consider converging the existing band of GST rates to three, in line with international standards. This will help to resolve interpretation issues regarding classification of goods and consequently reduce complexity and probability of disputes, eventually leading to simplification.”

Apart from the real estate sector, small textile units have also been severely affected by GST. Jobs have been lost. Slow refunds have hit cash flows. While transporting textiles to markets across states has cut logistics costs and time by up to 30 per cent, the entire GST process is seen by small-scale manufacturers – who form the spinal cord of Indian industry – as cumbersome. It affects efficiency and consumes productive time.

GST revenue has been another bone of contention. After hovering around Rs. 90,000 crore a month, it is expected to average just over Rs. one lakh crore a month in 2018-19. Even that would be disappointing. The government would by this measure collect around Rs. 12 lakh crore in GST revenue annually. But with the bulk going to the states and some towards refunds, the Centre could end up with less than Rs. 5 lakh crore a year. With service tax alone having generated nearly Rs. 3 lakh crore in 2016-17, the one-nation, one-tax principle, subsuming service tax, excise duty and other levies, was expected to be significantly more buoyant.

One reason for the lack of buoyancy in GST revenue is pointed out by Kerala’s Finance Minister Thomas Isaac. In an interview with a newsmagazine, Isaac said: “We had big expectations of buoyant revenues, falling prices and improvement in ease of doing business, but none of this has really materialised. Revenues are not buoyant because there are terrible leakages. As the whole system is not in place today, even if you decide on the returns form, one doesn’t fully know if the annual returns will be enforced this year. There have been no gains to the consumer despite a very significant fall in the tax burden. Rarely have price come down. And the anti-profiteering mechanism to protect consumers has not been very effective.”

Tax evasion is an art and science in India. GST has to come to terms with that culture and plug leakages as the second year of GST’s rollout gets underway. The first wrinkle the GST Council at its next meeting must iron out is collapsing multiple tax slabs to three. Outgoing chief economic advisor (CEA) Arvind Subramanian at a media event was emphatic about rate simplification: “I think the 28 per cent rate has to go. The cesses may have to remain, but there should be just one rate on cesses. Today, we have GST rates of zero, 3 per cent (for gold), 5 per cent, 12 per cent, 18 per cent and 28 per cent. We need to rationalise but at the first instance the 28 per cent rate should go.”

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Will Tesla Make in India
Saturday, June 30, 2018

Elon Musk is one of America’s most controversial technology business leaders. No entrepreneur since Apple’s Steve Jobs, who died in 2011, has quite captured the world’s imagination.

Musk ignited the electric vehicle (EV) revolution with Tesla. His other marquee company, SpaceX, is doing the same with rocket technology. But there is a growing army of critics who say Musk’s hard-charging style could drive Tesla into bankruptcy. Last month activist shareholders led by CtW Investment Group tried to oust Musk as chairman of Tesla, citing the company’s poor financial performance and behind-schedule deliveries of Tesla’s EVs. The rebellion failed. Musk comfortably won the shareholders’ ballot at Tesla’s annual general meeting.

With Maruti announcing the launch of an entire EV ecosystem of cars, batteries and charging stations by 2020 and Mahindra and Tata also accelerating their EV plans, the fate of Tesla matters to the Indian automotive industry. If the pioneer fails in its home market, it could dampen sentiment for the most important evolution in the industry since Henry Ford began mass assembly line production of cars a century ago.

The Indian government is following Musk’s progress closely after he said recently that India’s regulations were not “conducive” for Tesla to begin operations in the country. Musk tweeted: “Would love to be in India. Some challenging government regulations, unfortunately. Deepak Ahuja, our CFO, is from India. Tesla will be there as soon as he believes we should.”

Musk had been keen to invest in India from as early as 2016. He spoke of building a giant lithium-ion factory (known as a Gigafactory) but the onerous regulations imposed by India’s leviathan bureaucracy clearly put him off. In May 2017, Musk had tweeted with a trace of disappointment: “Maybe I’m misinformed, but I was told that 30 per cent of parts must be locally sourced and the supply doesn’t exist in India to support that.”

Tesla itself has a bagful of problems to worry about at home. In a searing article last month, The Economist wrote: “In April 2018 Adam Jonas of Morgan Stanley said the next three months would be the ‘most critical time in Tesla’s history’ since launching its upmarket Model S six years ago. The move from a niche in expensive electric cars to bringing battery power to the masses has been troublesome, to say the least. The firm had once hoped to be making 10,000 of its cheaper Model 3s a week by the end of 2018. But difficulties with a highly automated production line mean that just over 2,000 are rolling out of the factory each week. Even a revised goal of 5,000 looks distant. As a result, cash is draining away. So are top executives. Around 20 have departed since the start of 2017.” At last week’s annual shareholder’s meeting, Musk brushed aside such concerns. He said Tesla would show profits in the July-September 2018 quarter, reversing years of humongous losses.

Meanwhile, Tesla is not the only global tech firm complaining about the “unease” of doing business in India. Apple, for example, has long wanted to make iPhones in India but the 30 per cent local sourcing condition has stalled its plans. Union Minister for Information Technology Ravi Shankar Prasad, when confronted by Apple’s reservations to make India a production hub for its iPhones, said India was negotiating with the Silicon Valley company with an “open and flexible” mind. He added: “We are in the process of serious engagement with Apple. Let us await their response. I can only tell you, Apple will not be a loser in India … but let us wait for the formal proposal. Naturally, incentives cannot be in a manner that dislocates the current players. But we are open and flexible in case of Apple (and) what they bring to the table.”

India climbed 34 places in the World Bank’s 2017 Ease of Doing Business (EDB) rankings but as any entrepreneur will attest, state-level permissions to start a business remain unnecessarily tiresome. The Centre has taken bold steps to amend the Companies Act and lift roadblocks in the way of incorporating new firms. But regulations like the 30 per cent local sourcing conditionality prevents India from developing into the low-cost, high-value manufacturing centre it could be.

Tesla and Apple are two of the world’s most high-profile companies. If they are hesitating to set up manufacturing facilities in India, clearly there is a deep-rooted, systemic problem in the decision-making establishment. Interestingly one of the most successful technology-driven entities in the country is the Indian Space and Research Organisation (ISRO). Its success offers a clue: ISRO is headed and run entirely by scientists. It has acquired a global reputation for low-cost, highly reliable space launches.

Government decisions often send contradictory signals. India’s military preparedness has been a particular victim. The recent migration from Make1 to Make2 in defence contracts is a case in point. Contracts for weapons systems have been cancelled to the delight of top Indian private sector defence firms that had either been disqualified in the Make1 pre-bids or lost out during the bids. Such malignant corporate rivalry delays critical defence equipment at a time when India faces hostile neighbours on both the western and eastern borders. Fresh bids under new rules of Make2 will now be called, delaying critical weapons systems.

The bureaucracy in the Ministry of Defence (MoD) is notorious for holding up contracts, changing rules midway, and allowing arms dealers (though they are officially banned) free rein. This has led to the MoD being the crucible for the maximum number of corruption cases over the decades – starting with the Bofors howitzer and followed infamously by Scorpene submarines and AgustaWestland VVIP helicopters. It is this combination of inconsistent regulations, corruption and private sector cronyism that has forced iconic firms like Tesla and Apple to think twice about setting up manufacturing facilities in India.

If Prime Minister Narendra Modi’s ambitious Make in India scheme is to succeed and attract the Teslas and Apples to the country, India’s corroded ecosystem of cynical bureaucrats, corporates and politicians must be reformed. That is a challenge the PM will have to meet head-on.

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How BJP is repeating the same mistakes that eroded Congress' vote bank
A campaign for building the Ram Mandir will win votes but cow vigilantism will not.

Thursday, June 28, 2018

For the Congress and its all-weather allies, communal polarisation has run its course.

Reaching its peak under party president Sonia Gandhi between 2004 and 2014, the Congress became stigmatised as an anti-Hindu party. Rahul Gandhi was quick to recognise the dangers of alienating 80 per cent of India’s population.

He crafted twin strategies to overcome the problem.

First, he declared himself a janeu-dhari Hindu, emphasising his Brahmin roots.

Second, throughout the Gujarat and Karnataka Assembly election campaigns, Rahul made it a point to visit temples to establish that he was in fact a Shiva bhakt and not, as rumours suggested, a closet Christian.

Grim realism

The mask dropped soon enough.

Incensed by former president Pranab Mukherjee’s visit to RSS headquarters in Nagpur, Rahul resumed his attack on “Hindu terror”.

He defiantly chose to stand trial in the defamation case filed against him for alleging that the RSS was responsible for Mahatma Gandhi’s assassination. The Congress takes to communal polarisation as naturally as a duck takes to water.

There may be periods of remission but the affliction inevitably returns. Rahul’s fall-back strategy is to exploit the sharply divided Hindu electorate — Dalits, OBCs, EBCs, Thakurs, Brahmins and other castes — to overcome the potential electoral damage of the Congress being stereotyped as an anti-Hindu party.

He did that successfully in Gujarat with the Jignesh Mewani-Hardik Patel-Alpesh Thakor alliance. The Congress will deploy the same strategy in as many states as possible in the 2019 Lok Sabha election.

Rahul’s high-risk strategy to once again let the Congress be seen as a pro-Muslim, pro-Christian, anti-Hindu party has a grim realism to it.

Sonia and Rahul are willing to play second fiddle to regional leaders, using them as battering rams against the BJP in 2019.

Just as it did in Karnataka, the Congress will cede leadership to a smaller ally in state after state to deny the BJP the fruits of office.

It will meanwhile bide its time. That strategy may unravel. BSP leader Mayawati has poured cold water over Rahul’s plan to fight the Madhya Pradesh Assembly election in alliance with the BSP.

Mayawati says the BSP will contest 60 seats on its own in the state, splitting crucial Congress votes and indirectly helping the BJP.

Trinamool Congress chief Mamata Banerjee has likewise geared up to fight the Congress-Left alliance in West Bengal where the BJP emerged as the second largest vote-getter in recent panchayat polls despite organised violence denying its candidates a chance to contest in several districts.

The Congress strategy thus carries an obvious danger: regional obsolescence. As it concedes ground to regional leaders like the SP and BSP in Uttar Pradesh, the Congress will find itself reduced to irrelevance.

In UP, for example, the SP-BSP alliance plans to allot the Congress just two of the state’s 80 seats —Rae Bareli and Amethi. As recently as 2009, the Congress had won 21 Lok Sabha seats in UP.

Electoral abyss

Such self-marginalisation can lead the Congress into an electoral abyss. But the antipathy Rahul and Sonia have for Modi is so overpowering that self-harm is a price the Gandhis are prepared to pay for the ejection of a man who has treated them with a withering contempt they have never before encountered in Indian politics.

The BJP’s reverse Hindu polarisation has meanwhile worked in fits and starts.

It was a combination of anger against the decade-long, scam-tainted UPA government and Modi’s promise of vikas that created the 2014 tsunami for the BJP.

Communal polarisation played a part but a relatively small one.

The BJP will err grievously if it thinks Hindu polarisation is its main weapon in 2019. The same law of diminishing returns that eroded the longstanding Congress strategy of pro-minority polarisaiton will affect the BJP as well.

Over 100 million new voters who were between the ages of 13 and 17 in 2014 will be eligible to vote in 2019. Like other young Indians, they seek jobs, financial security for their families, safety for women and an aspirational lifestyle.

To stay in power, the BJP must understand this demographic. It must change its mindset.

A campaign for building the Ram Mandir will win votes but cow vigilantism, lynchings, violence against inter-faith couples and regressive ideas on the LGBT community will not.

The 2019 general election will be won or lost on the Modi government’s five-year performance, not communal polarisation. Modi knows this. Hence his relentless recent focus on monitoring progress of the dozens of welfare schemes the NDA government has implemented.

Hubristic rule

While the Congress displays an arrogance that stems from decades of political power, the BJP suffers from a sense of grievance. The grievance flows from resentment against centuries of subjugation by Muslim invaders, followed by British colonists. It makes their reactions to issues overly defensive. Congress leaders harbour no such diffidence. They abuse political opponents and expect to get away with it: Rahul Gandhi, Sonia Gandhi, Digvijaya Singh and Sandeep Dikshit are examples.

BJP leaders too abuse but do not get away with it. The media, activists and the Opposition roasts them, and rightly so. The BJP lacks finesse. Even when the Congress and the BJP polarise Muslims and Hindus respectively, the Congress does so with an insouciance born of decades of hubristic rule.

The BJP, in contrast, polarises with the nuance of a bludgeon. In 2019, a bludgeon will not work. The electorate has outgrown it.

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Here's why Emergency won't ever happen again
The anniversary should not be an opportunity for BJP to score political points over Congress, but reflect within.
Monday, June 25, 2018

The full force of the Emergency, declared by then Prime Minister Indira Gandhi on June 25/26, 1975, struck me one day at dawn.

Two CID men in safari suits rang our doorbell. Ushered in, after showing their official identification cards, they told my bemused parents that they had come to interrogate me.

I was still a student but had begun writing articles for The Times of India and other newspapers, including the New York-based India Abroad. One particular piece might have drawn the ire of the government censors.

Woken up and bleary-eyed, I explained to the two CID officers in plain clothes that they were wasting their time. They told me they had received a tip-off about my articles and asked me to be careful what I would write in future. “People are being jailed for writing against the Emergency,” they warned me before leaving.

Over 1,00,000 people were in fact jailed. Among them were Atal Bihari Vajpayee, Jayaprakash Narayan, LK Advani and a young Arun Jaitley. Also jailed were those whose names will strike a bell in today’s Opposition — HD Deve Gowda, Lalu Prasad Yadav and MK Stalin.

The Emergency is justified today in certain quarters as being the natural outcome of the political turbulence of mid-1970s. Many students deliberating on careers at the time were drawn to journalism, social and public sectors so that they could fight the anti-democratic forces that had unleashed the draconian Emergency.

It was a defining moment in India’s short history, just 28 years after Independence. India Today was launched months after the Emergency was proclaimed.

For those who see a semblance of the Emergency in today’s polarised times, a reality check is necessary. During the Emergency, the Constitution was suspended, the Supreme Court superseded and personal liberties based on the principle of habeas corpus subverted.

To provide a sense of how draconian the Emergency was, The Hindu wrote this in August 2017:

“Over 40 years after the Supreme Court’s darkest hour when it said citizens have no right to life and liberty during the Emergency period, a nine-judge Bench condemned the decision in the infamous ADM Jabalpur case, better known as the habeas corpus case, as ‘seriously flawed’. Of the five judges on that Bench, only Justice H R Khanna had dissented with the majority opinion of then Chief Justice of India AN Ray and Justices MH Beg, YV Chandrachud and PN Bhagwati. Justice Khanna’s dissent cost him the chief justiceship. He was superseded by Justice Beg, following which Justice Khanna resigned. Now, for the first time in the Supreme Court’s history, a nine-judge Bench, led by Chief Justice of India JS Khehar, officially condemned the Supreme Court’s majority opinion in the habeas corpus case. The judgment authored by Justice DY Chandrachud, who incidentally is the son of Justice YV Chandrachud, ‘expressly overruled’ the 1976 majority judgment and removed a long-pending taint on the Court’s history as a people’s champion.”

Those who compare the intolerance of today with the Emergency are either ignorant or biased. Journalists and activists mock Prime Minister Narendra Modi daily. Websites are full of stories on cow vigilantism, Dalit lynchings and other crimes, attributing them to the policies of the Modi government.

And that is as it should be: it is how free media in a democracy functions.

Freedom of speech, crushed under the Emergency, has never been stronger. The Modi government has been slow to condemn many incidents of egregious violence against Dalits, Muslims and others. Some are fake news. Some are not. In most cases though, they are met with silence from the government. It is left to a BJP MP or MLA to provide a loose canon justification.

But none of this portends a draconian state, simply a clueless state. Obviously, in 2018 we must set the bar high.

Till 1975-77, the two Emergency years, there had never been a non-Congress government. In the 30 years between 1947 and 1977, Jawaharlal Nehru and Indira Gandhi had been prime ministers for a collective 28 years. India knew no worthwhile Opposition. The government in the only Communist-ruled state, Kerala, had been dismissed in 1959 and President’s rule was imposed. (Mrs Gandhi was Congress president then – Nehru had sown the seed of dynastic politics.)

What lessons can the Modi government learn from the Emergency that tore Indian democracy into shreds 43 years ago this day?

First, while our democratic institutions and civil society are too strong today to let it happen again, they must be further strengthened, not weakened. A high bar demands that governance must be more transparent. The appointment of a Lokpal and CICs has long been kept in abeyance. That damages the government’s credibility, casts aspersions on its intent, and undermines the institutions of democracy.

Second, the judiciary must be less opaque. It is today caught in a war of attrition with the government over the memorandum of procedure (MoP). When trust between two key pillars of a democracy – the Executive and the Judiciary – erodes, democracy is weakened.

Third, inclusive governance must be a priority. Polarisation for votes has long been a Congress project. It collared the minority vote bank in the 1980s before regional parties got into the act and usurped a part of that vote bank. The BJP has learnt from the Congress.

LK Advani’s rath yatras from 1990 onwards (many of which a young Narendra Modi organised) polarised Hindu votes, allowing the BJP to form the first full-term non-Congress government led by Atal Bihari Vajpayee in 1999 (the 1998-99 BJP-led government was shortlived).

As India becomes more prosperous, as poverty levels fall, religious polarisation will offer diminishing returns. Millennials have a different set of aspirations from their parents. They want jobs. They are religious but not dogmatic. The BJP must reinvent itself or it will soon be seen as a party of grumpy old men, full of grievances and self-pity.

The RSS, too, must reform. Glorifying India’s past is fine. But we live in the present and must mould the future. Hold symposia on Indic culture by all means. But also hold symposia on space research, electric vehicles, artificial intelligence and the exciting new discoveries in life sciences that could dramatically alter human lives in the next two decades.

The Emergency of 1975-77 happened because democracy was hijacked by the dynastic arrogance of Indira Gandhi. Sycophants like Dev Kant Barooah, who was the party president at that time, declared “India is Indira, Indira is India”. Modi must avoid such flattery from within his ranks. He is a self-declared pradhan sevak. His second term, if he gets it, will decide the course India takes for the next decade.

The 43rd anniversary of the Emergency should not be an opportunity to just score political points over the Congress, but reflect on how the BJP government can return to first principles: less government, more governance.

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Decoding Mamata’s secularism
Like other ‘secular’ politicians, West Bengal’s chief minister hasn’t understood the difference between appeasement and empowerment

New Indian Express
Saturday, June 23, 2018

At an Eid celebration rally last week on Kolkata’s Red Road in front of a teeming crowd of over two lakh people, West Bengal Chief Minister Mamata Banerjee asked angrily: “Does loving Hindus mean you have to hate Muslims?”

She was reacting to charges of minority “appeasement” that have increasingly been levelled against her government. Banerjee’s speech was interesting for two reasons. First, she delivered it in Hindi, not Bengali, aiming her words therefore at a national audience. Second, in keeping with her growing national ambitions, she took pains to explain her politics to a wider Hindu audience not present at the event.

She said: “Many accuse me of Muslim appeasement. My question to them is whether loving Hindus means you have to hate Muslims? This is an insult to you. To all of us. This is an insult to humanity. This is an insult to justice. Those who say I appease Muslims are friends of neither Hindus nor Muslims. I go to mandirs, masjids, gurdwaras. I have done so from the beginning of my political life.”

Her political life is about to take a decisive turn. Banerjee is positioning herself as an alternative to both the BJP and the Congress. But to graduate from being a fiery regional satrap to a sober national leader she will need to learn from Prime Minister Narendra Modi who made that transformation successfully. He was a strong chief minister of Gujarat for over 12 years before leveraging a muscular Hindu nationalism to create a tsunami for the BJP in the 2014 Lok Sabha polls.

For Banerjee, the transformation will be far harder. Outside West Bengal, she is reviled as a politician who has allowed the state to descend into communal violence worse than anything seen even during the Left’s 34-year blood-soaked tenure. If Banerjee is to be a national leader, her self-styled secularism will come under close scrutiny. Like other ‘secular’ politicians, she woos Muslims by funding madrasas and mosques. She complains that others call this appeasement. But it is. Most politicians of her ilk haven’t understood the difference between appeasement and empowerment. Muslim leaders—political and religious—are complicit in this trickery. It suits them to keep the faithful appeased but not empowered.

Empowerment involves integrating Muslims into the mainstream, burnishing their talent, and using it to advance both their professional interests and national interest. Secular leaders have done the exact opposite. Muslims remain poor. They get low-paid jobs. They are discriminated against in housing and bank loans. The result: During the Congress’s decades-long rule at the Centre and states, Muslims have retreated to what are politely called community enclaves but in reality are ghettos where they seek safety and support from other Muslims. It is the single biggest disservice the Congress has inflicted on the community it professes to protect.

Can Banerjee overcome the secular trap? Can she empower Muslims? Banerjee sees an opportunity for herself in next year’s Lok Sabha election that could have shades of the 1996 general election. In 1991-96 the Narasimha Rao-led Congress had 250-odd seats in the Lok Sabha, not unlike the BJP today with just over 270 seats. In the 1996 Lok Sabha poll, the Congress’s tally slipped to 140 seats. The United Front government, comprising parties ranging from the Left to old-school socialists and led by Deve Gowda, cobbled together 192 seats. It was supported from the outside by the Congress with its 140 seats.

Banerjee hopes for something similar in 2019. She expects the BJP, confronted by straight fights in around 403 seats (her estimate) to fall below 150 Lok Sabha seats and a third front led by her to win at least 200 seats, triggering a 1996 redux with the Congress supporting her from outside.

Three assumptions underpin her calculations. One, Rahul Gandhi and Sonia Gandhi are so obsessed with defeating Narendra Modi that they will agree to contest only 250 out of 543 Lok Sabha seats in 2019 to give their regional allies a chance to checkmate the BJP in key states and boost the regional front’s tally to over 200 seats.

The second assumption is that rival leaders with national aspirations like Mayawati will play along. The BSP’s cooperation in states across northern and western India is crucial for Banerjee’s national project to succeed. The Samajwadi Party’s Akhilesh Yadav has agreed to give Mayawati 45 out of Uttar Pradesh’s 80 seats, keeping 35 for the SP and none at the moment for the Congress. After hard bargaining, the two fiefs of Rae Bareli and Amethi will obviously be ceded to the Gandhis but not much else.

The third assumption is the trickiest: the BJP may lose up to a total of 75 seats in Uttar Pradesh, Madhya Pradesh, Gujarat, Rajasthan, Chhattisgarh and a few other states but could make up over half that loss with gains in Odisha, the Northeast, West Bengal, Telangana and Andhra Pradesh. Confining thererby the net loss to 35-40 seats, the BJP could still sneak through with 240 seats. Disgruntled allies like the Shiv Sena, JD(U) and LJP, along with the Akalis and others, could make up the numbers.

Banerjee’s speech was an attempt to not only appeal to a national audience but also soften her pro-Muslim image. In West Bengal, where Muslims form nearly 30 per cent of the electorate, being pro-Muslim works. In India, it may not. Reading between the lines, Banerjee was at pains to define her version of secularism ahead of 2019: “I go to temples, masjids and gurudwaras,” she said, aiming her words at a wider national constituency.

Like other leaders who preach secularism and practise the opposite, Banerjee too has failed to bridge the divide between appeasing and empowering India’s minorities.

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For Pakistan, terrorism is a state-sponsored business
June 22, 2018

Some call it a “blood feud”. They are dead wrong. India and Pakistan are not caught in some existential Punjabiyat love-hate relationship. Pakistan is a state sponsor of terrorism. No other nation has used terror so ruthlessly as an instrument of state policy as Pakistan has done for decades — principally against India but also against Afghanistan.

For Rawalpindi terrorism, at its core, is a successful business model. The Pakistani army’s senior officers, retired and serving, own a third of the country’s land through benami entities. At one level, the army operates like a multinational corporation. It has a professional chain of command, discipline and frequent training exercises. At another level, it operates like a mafia, ordering assassinations of journalists and activists.

The Pakistani army’s Inter-Services Intelligence (ISI) subverts, co-opts and kills with ruthless efficiency. It positions India as an enemy to justify the country’s bloated annual defence budget. Pakistan spends 3.6 per cent of its GDP on defence – twice India’s expenditure of 1.7 per cent of GDP. A large portion of the budget is siphoned off by the Pakistani army’s top brass and shared down the ranks in time-honoured style. This system of patronage ensures loyalty.

A small portion of Pakistan’s inflated $10 billion defence budget is earmarked for its outsourced terror wings: Lashkar-e-Taiba (LeT), Jaish-e-Mohammad (JeM), Hizbul Mujahideen and other smaller outfits. Another slice is set aside for Hurriyat leaders in the Kashmir Valley who, after buying land with the money, pass on just enough to recruit young stone pelters.

The ISI knows the value of messaging. To maintain the fiction of Kashmir being the core issue between India and Pakistan, it recognises that terrorism must be accompanied by effective communication. The ISI has a well-trained cadre of people who use the media to spread lies about how the Indian Army has brutalised ordinary Kashmiris. They appear regularly on Indian TV debates, accompanied by retired Pakistani armed forces officers and relatively unknown Pakistani journalists. Reputed Pakistani editors like Najam Sethi, who are not ISI ventriloquists, are rarely fielded in these debates. They have independent views. The ISI shuns them. So inexplicably do most Indian TV channels.

Indian channels instead provide oxygen to Pakistani non-entities who are briefed before each debate by their ISI handlers. Instead of inviting Afghan, Baloch and Bangladeshi journalists who can demolish the Pakistani army’s narrative, Indian channels allow themselves to become platforms for the ISI’s anti-Indian propaganda.

Money means everything to the Generals in Rawalpindi. They, however, go to great lengths to hide this sordid truth. They have ready sepoys in the form of a cabal of Indian journalists. The supply is plentiful, especially in Delhi. Some in the Indian media genuinely believe in the India-Pakistan “blood feud” myth. Others are simply vulnerable to the money on offer. Track-2 meetings are a special attraction for those seeking junkets abroad. These seminars are organised by obscure “peace” organisations but function under the watchful eyes of ISI handlers.

Pakistan is controlled by its army. Elections are a sideshow. The media is allowed some elbow room to propagate the fiction of press freedom in Pakistan but for all practical purposes it is closely monitored by the army. If a newspaper or TV channel crosses the boundary set by the army, it is clinically punished as Dawn, Pakistan’s most respected newspaper, and Hamid Mir of Geo TV discovered at different times for different reasons during the past year.

It is important in order for the Pakistani army’s business enterprise to succeed that terrorism against India flourishes and LoC ceasefire violations occur frequently. That keeps tensions at boiling point, the defence budget inflated and the Generals in Rawalpindi in good spirits. For them there is no better business than the business of proxy war. They know a real war with India would be ruinous for Pakistan. That is why they want terror and talks to go together. One keeps the fund pipeline open, the other gives Islamabad a semblance of international respectability by being hyphenated with India. India is Pakistan’s meal ticket and Kashmir the main course.

The last thing the Pakistani army wants is a final resolution to Kashmir. Take away the “dispute” and the army’s decades-long business model will collapse. Keep the pot boiling but never let it boil over. The more Indian journalists echo Pakistan’s “blood feud” theory, the more Islamabad justifies using the Kashmir Valley as a killing field to settle a “core dispute”.

Indian politicians have long fallen for the rakish charm of Pakistan’s crooked leaders. Indira Gandhi was blindsided by Zulfiqar Ali Bhutto into returning 93,000 Pakistani PoWs after the Bangladesh war. Her father 24 years earlier had made the historical blunder of approaching the United Nations after the 1947-48 war in Kashmir.

Every successive Indian prime minister has succumbed to Pakistan’s trickery. Atal Bihari Vajpayee, Dr. Manmohan Singh and now Narendra Modi have each tried and failed to appease Pakistan with Insaniyat, Punjabiyat and offers of friendship. Each failed to understand the Pakistani army’s mind: it wants trade and diplomatic engagement with India as part of a package deal that includes state-sponsored terrorism. Without that the Pakistani army’s lucrative business model would fall apart.

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Why Modi's government's Kashmir policy is deeply flawed
While Aurangzeb and Shujaat Bukhari were killed, the Pakistani army violated the ceasefire along the Line of Control during Ramzan at will.
Tuesday, June 19, 2018

The cessation of counter-terror operations by Indian security forces in Jammu and Kashmir during the holy month of Ramzan was an unqualified failure. Now that the hiatus is behind us, it is time to count the cost of an ill-conceived decision and consider the way forward post-Eid.

Between May 17, when the "ceasefire" came into operation, and June 17, when it was withdrawn, Pakistani Rangers and Pakistan-sponsored terrorists killed over 40 Indian soldiers and civilians and injured many more.

Over 1,00,000 people were displaced from border areas in Jammu, Samba and Kathua. The Pakistani army violated the ceasefire along the Line of Control during Ramzan at will.

The abduction and murder of rifleman Aurangzeb and the assassination of journalist Shujaat Bukhari point to critical gaps in security in the Valley. Terror outfits like the LeT, JeM and Hizbul Mujahideen used the Ramzan break to regroup just when the security forces had them on the run.

On two occasions in the last few weeks, the Pakistani DGMO raised a white flag, appealed for a meeting with the Indian DGMO and pledged to honour the 2003 ceasefire agreement. Honour though is an attribute the Pakistani army is unfamiliar with: within days following each flag meeting, Pakistani Rangers violated the ceasefire, killing BSF personnel, including an assistant commandant, Jitendra Singh.

The Indian government's response to Pakistan's longstanding cross-border venality has been muddle-headed. Pakistan has been waging an undeclared war on India through proxy terrorists since 1989. India has lost countless lives and been hyphenated with a rogue nation with 11 per cent of India's GDP and 2.5 per cent of its foreign exchange reserves among other disparities.

Inexplicably, the Indian government retains Pakistan's most favoured nation (MFN) status, giving Pakistan a measure of legitimacy. It maintains cross-LoC trade, which allows Pakistan and Indian smugglers free rein. It continues to host a full-fledged Pakistani embassy in New Delhi teeming with ISI agents who subvert and co-opt Indian journalists, bureaucrats, retired armed forces officers and activists.

The Pakistani strategy pays rich dividends. Global NGOs routinely excoriate India for human rights violations without contextualising Pakistan's malign role of sponsoring terror in the Valley which compels the Indian Army to use force when attacked by terrorists or mobs of stone pelters.

Post-Eid, what strategy does the Indian government have in J&K? There appears to be none.

On the one hand, interlocutor Dineshwar Sharma represents the government's dovish line. He has spent the better part of the year pleading to be heard by anyone who will listen. The Hurriyat leaders, who are Pakistan's overground terrorist handlers and fund conduits, treat him with disdain. Pakistan looks upon him with barely restrained glee as one more sign that India is a soft state which, even under Prime Minister Narendra Modi, will never bite the bullet on Pakistan-sponsored terrorism in Kashmir.

The problem is aggravated by the BJP's alliance with the PDP. Chief minister Mehbooba Mufti has a voter base comprising hardliners. They resent their party's alliance with what they consider a "Hindu nationalist" party.

They have a soft corner for the Hurriyat. They want more, not less, autonomy. They make a political issue of opposing the abrogation of Article 370, despite knowing perfectly well that abrogation is impossible in practice for two reasons.

First, it needs the approval of the J&K Assembly, which will never give it. Second, the BJP set aside specifically for J&K its national manifesto (which pledges to abrogate Article 370) when endorsing the alliance of government document with the PDP in 2015.

To preserve her vote share in a future Assembly election (polls are due in December 2020 at the latest but, if the alliance with the BJP crumbles, they could be held sooner), Mehbooba sits on an uncomfortable fence. In Delhi, she hews to the BJP's relatively hawkish line. In Srinagar, she courts the Hurriyat and Pakistan.

What should the BJP now do? First, recognise that a hybrid policy of appeasing separatists along with stop-start counter-terror operations won't work. Appeasement never works with a venal enemy. Former British prime minister Neville Chamberlain learnt that lesson at the infamous Munich Conference with Adolf Hitler in 1938. Britain wanted to avoid war at all costs. It continued to appease Hitler even when the Nazis occupied parts of German-speaking Czechoslovakia. Only when Poland was attacked — with whom Britain had a mutual defence treaty — did Britain declare war on Germany on September 1, 1939. Appeasement had failed.

Second, the BJP must come to terms with the prospect of abandoning its alliance with the PDP. The alliance has run its course. It has cost the BJP goodwill in Jammu. In the next election, the party will encounter the anger of Jammu's electorate, deeply upset with the Valley's growing Wahhabism. Walk out now, impose governor's rule and hope that you can recoup some of your lost credibility in Jammu before the next J&K Assembly election. The Valley in any case is a lost cause for the BJP.

Third, the central government must focus on investing in J&K's infrastructure. The Kishanganga hydroelectric power plant, which will generate 330MW of electricity, the tunnel-cum-highway connecting Jammu and Srinagar and new-economy jobs for youth are what J&K needs. It does not need an interlocutor who nobody talks to but whose presence allows Pakistan to thumb its nose at India's position that talks and terror can't go together.

What Pakistan especially covets are Track-2 talks between Indian and Pakistan do-gooders — mostly retired men with little else to occupy themselves besides swapping nostalgic tales over kebabs in Bangkok or Istanbul.

India's Pakistan policy is neither muscular not conciliatory. It falls between two stools much to Pakistan's delight which profits from such hyphenated ambivalence. But Pakistan's own time is running out. A messy general election looms next month while the Financial Action Task Force will meet in Paris on June 24 to consider blacklisting Islamabad, leading to global financial sanctions on Pakistan.

Despite India's meandering policy on Kashmir and Pakistan-abetted terrorism, external circumstances may yet rescue it from failure.

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What we know about 2019 general elections as things stand of today
A Modi-II government, if it is formed in 2019, will likely resemble a UPA-II government when the Congress won 206 seats and its allies lifted it past 272 seats.

Thursday, June 14, 2018

Karnataka chief minister HD Kumaraswamy is a worried man. Three weeks after he took the oath of office in front of a gaggle of Opposition leaders, eager to make the Congress-JD(S) alliance a template for an assault on the Narendra Modi government in the 2019 Lok Sabha election, the experiment is beginning to wobble.

With just 37 seats in the Assembly but the chief ministership in the bag, the JD(S) was always going to be the tail that wagged the alliance dog. Unfortunately for it, the Congress has sunk into old habits. Its win yesterday in the Jayanagar constituency, earlier held by the BJP, has emboldened it.

There are almost as many claimants for ministerships as there are Congress MLAs. Lingayat leader MB Patil, who helped former chief minister Siddaramaiah split BS Yeddyurappa’s Lingayat vote, has been sidelined. Siddaramaiah himself has lost his swagger. He was defeated in one of the two seats he contested (Chamundeshwari) and barely scraped through in the other (Badami). He has been noticeably absent in the internal jockeying for ministerships among Congress MLAs.

Rotational ministers

With six of 22 portfolios still up for grabs, and more than 20 Congress MLAs vying for them, the high command (Rahul and Sonia Gandhi) has fallen back on using traditional Indian jugaad: rotational ministers. The tenure: six months.

In this bizarre proposal of musical chairs, a Congress MLA will, for example, be the housing minister for six months before being dragged away kicking and screaming from his portfolio to make way for his colleague waiting for his turn in a lucrative “ATM” ministry.

At Parsi weddings, it is a tradition for guests to be served dinner in batches. Even before the first batch finishes its “lagan nu bhonu”, a row of hungry diners lines up behind your chair, making clear that your time is up.

In Karnataka, the row of Congress MLAs lining up behind each ministerial chair appears equally incongruous. More pertinently, what does the shenanigans we’ve seen so far in Bengaluru presage for Opposition unity in the 2019 Lok Sabha poll?

The combined Opposition’s key problem is evolving a consensus around a face who will lead the front. As in Karnataka’s cabinet, there are more candidates than openings. The Congress is likely to emerge as the second largest party after the BJP in the 2019 Lok Sabha election. Rahul Gandhi, though, may not be an acceptable leader of a national mahagathbandhan.

Pitted one-on-one against Modi, he could lose rather than gain Opposition vote share. Mayawati will press her claim on the back of the Dalit votes. Mamata Banerjee has already displayed her willingness to lead the front. She has proposed one-on-one contests between the combined Opposition and the BJP in 400 seats. Her record in making West Bengal a hotbed of communal violence could, however, sharply erode her chances as the face of this variegated front.

The Shiv Sena, as usual fishing in troubled waters, has suggested Pranab Mukherjee as a consensus prime ministerial choice. Mukherjee’s office has denied any interest in the proposal, calling it “far-fetched”.

Daughter Sharmishta has said coldly that her father will not enter politics. By convention, former presidents are deemed apolitical. But in Indian politics, nothing is too far-fetched to morph into reality. Of course, the Congress high command will not countenance Mukherjee as prime minister after his visit to RSS headquarters in Nagpur.

Main problem

The BJP’s main problem, meanwhile, lies in its allies. It began 2014 with 24 allies, most of them small. Only the Shiv Sena (18 MPs) and the TDP (14 MPs) were in double digits.

The TDP is gone, but political manoeuvring may bring it back. The Sena has cried wolf so often that its threats to leave the NDA sound increasingly hollow. Its real ambition is to contest a large share of seats in the 2019 Lok Sabha poll — perhaps 24 of Maharashtra’s 48 — and it will probably get its way. But the Sena knows there is no life for it outside the NDA. Yet the BJP’s problems remain severe.

If the SP-BSP-Congress grand alliance in Uttar Pradesh gets formalised, the BJP will lose a torrent of seats in the state. In Madhya Pradesh, a Congress-BSP alliance could hurt it as well. The restless JD(U) needs to be carefully nurtured.

Coalition dharma

A key strategy is to tap informal alliances in Odisha (which will hold Assembly elections simultaneously with the Lok Sabha poll in 2019), woo the TRS in Telangana and do a tricky threesome with the TDP and YSR Congress in Andhra Pradesh.

All of these will require Prime Minister Narendra Modi and party chief Amit Shah to set aside hubris and embrace coalition dharma. A Modi-II government, if it is formed in 2019, will likely resemble a UPA-II government when the Congress won 206 seats and its allies lifted it past 272 seats. The Congress won just 28.55 per cent vote share in 2009 for those 206 seats. Not many at the time said that 72 per cent of India voted against the Congress. In Indian media and politics, double standards and hypocrisy are permanent companions.

With the Opposition’s alliance for 2019 in the balance, the eager-beaver leaders who gathered in Bengaluru three weeks ago at Kumaraswamy’s swearing-in will be watching the awkward pirouette between the Congress and the JD(S) in Karnataka with a touch of anxiety.

It could foretell the future.

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Why Modi government has been a disappointment
The PM has little time to live up to promises before the people announce their verdict in May 2019.
Tuesday, June 12, 2018

A chartered accountant who audits several medium-sized companies was scathing in his assessment of the Narendra Modi government. “Business is at a standstill,” he said. “The Goods and Services Tax (GST) has driven many of my clients out of business with its complex rates, compliance issues and stiff penalties.”

Who does he blame? “Without doubt,” he said, “the ministry of finance (MoF). It has imposed impractical regulations which have increased the discretionary power of tax officials. Now they openly threaten clients with arrest if they spot the slightest irregularity in tax returns. Of course, the arrests never happen. But these coercive tactics have opened up the floodgates to corruption.”

Arun Jaitley, back home from his kidney transplant, is seen by business people as part of the problem, not part of the solution. If Prime Minister Narendra Modi wins a second term – which is far from assured — he will need to appoint a new finance minister. Piyush Goyal, the interim finance minister, would be a pragmatic choice.

It’s of course easy to blame Jaitley and the bureaucrats in the MoF for a multitude of missteps. But the prime minister’s office (PMO) can’t escape responsibility. The prime minister has allowed the MoF to drift. This is inexplicable because many of the structural economic reforms Modi has initiated over the past four years stand out: legislating an insolvency code to cut bank NPAs, repealing hundreds of outdated colonial-era laws, wielding an axe on benami properties, establishing the Real Estate Regulatory Authority (RERA) to protect home buyers and pushing through a plethora of schemes to enhance financial inclusion, rural electrification and sanitation.

But the public perception of these reforms has been partially negated by failures on other fronts. Over-reliance on the bureaucracy has led to embarrassments like the Haryana sports department’s ludicrous attempt to “tax” athletes’ income. It took the usually somnolent Haryana chief minister Manohar Lal Khattar to rescind the order notified by principal secretary (sports and youth department) Ashok Khemka — but only after a media outcry. The government’s move, meanwhile, to appoint through lateral induction 10 technocrats as joint secretaries is long overdue. It will add specialised domain expertise to a bureaucracy made up of generalists.

Former RBI governor YV Reddy last week blamed the UPA government for letting bank NPAs get out of control between 2008 and 2014, but held the NDA government responsible for not acting quickly enough to stem the rot. There is now the ironic possibility of the following scenario playing out.

In 2014, Modi inherits a broken economy after 10 profligate UPA years. He takes five years to set it right. In 2019, he loses the Lok Sabha election and the UPA-led Opposition inherits an economy in the pink of health with annual GDP growth nearing 8 per cent, the fiscal deficit in control at 3.3 per cent and inflation well below five per cent.

Now, compare these key economic parameters of 2018-19 with 2013-14, the final year of UPA-2: GDP growth had plunged to 4.9 per cent; the fiscal deficit was an unsustainable 4.5 per cent; inflation was out of control at nearly nine per cent.

Thus, Modi would have spent five years laboriously fixing the broken economy he inherited in May 2014 only to hand it back on a silver platter to a putative UPA-led Opposition in 2019.

Modi has less than a year to escape this predicament. He should start with bold tax reforms. Assessees with taxable incomes under Rs 7.50 lakh contribute less than 10 per cent to direct personal tax collections. Exempt them from income tax. Two immediate advantages will flow from this one step without costing the exchequer significant revenue: first, ahead of the 2019 Lok Sabha poll, it will bring the deeply alienated middle class back on to the BJP’s side; second, it will allow the income-tax department to concentrate on high-value taxpayers, boosting the exchequer’s revenue.

United States President Donald Trump may behave like a geopolitical Godzilla-on-the-rampage but he has done wonders for the US economy in his 17 months in office. Unemployment is at an historic low (3.8 per cent) and GDP growth at an historic high of (over 3.2 per cent). By cutting corporate tax from 35 per cent to 21 per cent Trump has ensured that US companies have more funds to invest in new projects and at the same time hand their employees a wage rise. Low taxes are the route India’s finance minister too should take.

The next step the Modi government must take is to place petrol and diesel under GST. The states are finally coming around to accepting the fact that their current windfall taxes from VAT (which being ad valorem rises with every crude oil price hike and rupee depreciation) can’t punish consumers forever. Fuel under GST will not only cut prices for the millions of car and two-wheeler owners, but also cut transport costs for trucks and commercial vehicles, improving economic efficiency all round without the national exchequer losing significant revenue.

The more consumers save on fuel, the greater their purchasing power, boosting consumption and corporate profits, leading to higher corporate tax revenue. This virtuous cycle can change the mood of the nation across urban, semi-urban and even rural areas where lower fuel prices impact the cost of LPG cylinders, local transport and agricultural inputs.

The Modi government has been a disappointment over several issues, including its incoherent policy on Pakistan and Jammu & Kashmir as well as the talent deficit in the Union Cabinet. Ministers like Nitin Gadkari and Piyush Goyal have shown enterprise and innovation in their portfolios. They are the exception, not the rule.

The BJP came to power on the promise of "vikas". It pledged to protect the national interest after 10 years of a desultory, scam-tainted UPA government. Modi has little time — and even less elbow room — to live up to those two promises before the people announce their verdict in May 2019.

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India’s US-Russia dilemma
If India wants the US to be its principal defence partner, it has been warned to stop buying advanced Russian military equipment

New Indian Express
Thursday, June 8, 2018

As the Shanghai Cooperation Organisation (SCO) summit in the Chinese coastal city of Qingdao gets underway on June 9, Prime Minister Narendra Modi will face a piquant situation. Following his informal summit with Russian President Vladimir Putin in Sochi last month, Indo-Russian ties, which had been fraying for years as Moscow pirouettes ever closer to Pakistan, seem to be on the mend. Moscow has been upset with India’s deepening strategic partnership with the US which imposed harsh sanctions on Russia following its annexation of Crimea and invasion of east Ukraine.

To Washington’s dismay, India is planning to buy the advanced S-400 air defence system from Russia. Washington has been trying to dissuade New Delhi from acquiring sophisticated defence equipment from Moscow which would complicate America’s plan to integrate its weapons systems with India’s. America’s patience is now wearing thin. The Indo-US 2+2 dialogue, featuring the defence and foreign ministers of the two countries, is scheduled for early July in Washington. India’s proposed S-400 deal with Russia will weigh heavily on the dialogue. An advance team of US officials will arrive in Delhi next week, soon after Modi returns from the SCO summit, to discuss America’s Communications Compatibility and Security Agreement. Washington wants India to adhere to this protocol. The aim: better interoperability between the armed forces of the two countries, easing the way for the transfer of sensitive defence technology to India.

India’s defence ties with Russia pose a dilemma. The US knows that those ties go back decades but have loosened in recent years as India turns increasingly to Western defence technology. While US Congressional leaders are inclined to give India special concessions despite Washington’s otherwise fierce opposition to allies buying advanced Russian military equipment like the S-400, attitudes in the Pentagon have hardened. If India wants the US to be its principal defence partner, Washington has in effect warned New Delhi to stop buying advanced Russian defence technology.

The US says if sophisticated Russian equipment is operated alongside US defence platforms, sharing the latest US technology with India may not be possible. The pressure so far has been subtle but back-to-back meetings planned between US and Indian teams in Delhi next week and in Washington in July will clearly see a ratcheting up of the us-or-them ultimatum. In a rare gesture to India, the US last week renamed its Pacific Command (which comprises 3,75,000 military and civilian personnel) the US Indo-Pacific Command.

The move towards forging a closer defence partnership with the US began under Prime Minister Manmohan Singh in 2005 following talks over a US-India civilian nuclear deal. Russia, immersed in its domestic political problems as Putin consolidated power, initially paid little attention to the growing India-US relationship. However, once it had re-established itself as a global power after its strong intervention in the Syrian conflict, Russia has grown increasingly assertive. In a snub to India, it has begun to develop closer military ties with Pakistan.

The US-Russia dilemma is not the only diplomatic challenge for India. At the SCO summit, several geopolitical strands will need to be strung together. The first is Beijing’s continued support to Pakistan. Islamabad’s recent move to notify Gilgit-Baltistan, a part of Pakistan-occupied Kashmir (PoK), as Pakistan’s fifth province has drawn a strong protest from India. Forced to react, China has merely said that because the China-Pakistan Economic Corridor passes through Gilgit-Baltistan, it does not alter Beijing’s position that the dispute over J&K should be settled bilaterally between India and Pakistan.

India’s best strategy to counter complex regional challenges is to develop concentric, overlapping partnerships. The Quad alliance with the US, Japan and Australia is one. Another is the proposal to work with Japan to build a series of ports in the Indo-Pacific region. Japan is financing a $1.83 billion port in Dawei with participation from Thailand, Myanmar and India. China had earlier bid for the Dawei port but its high-cost loans led to the project being aborted. Japan offers far better credit terms. India’s partnership with Tokyo is essential to New Delhi’s Indo-Pacific strategy. Japan and India are also expanding an existing port in Trincomalee in Sri Lanka. Meanwhile, India and Indonesia are developing a naval port in Sabang at the entrance of the critical Malacca strait.

Pakistan will be a glowering presence at the SCO summit. It will shortly learn of its fate at the June meeting of the Financial Action Taken Force (FATF). Blacklisting looms. At the February plenary in Paris, the FATF had voted to greylist Pakistan for terror financing. It gave Islamabad four months to reform. That clearly has not happened. Hafiz Saeed remains free and spews terror venom openly. If blacklisted, Pakistan will join Iran and North Korea in a basket of just three countries denied international financing. Pakistan’s foreign exchange reserves have fallen below $10 billion and an IMF bailout is imminent. Blacklisting will block that bailout.

Will China and Saudi Arabia, which voted with other FATF members to greylist Pakistan in February, back Islamabad later this month? At the SCO summit, India has to play its cards forcefully with host Chinese President Xi Jinping. The message must be clear: those who back countries engaged in terror financing are complicit. That does not befit a nation aspiring to be a global superpower.

Russia is increasingly becoming a swing state in the SCO. It needs China to buy its oil and gas as Western Europe reduces dependence on Russian energy supplies. Heavily sanctioned by the West, Moscow needs as many powerful friends at it can get. The Modi-Putin summit last month might have been informal with no fixed agenda. But for Modi the agenda is clear: make India geopolitically indispensable to both Moscow and Washington.

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What will Pranab tell RSS
Thursday, June 7, 2018

At RSS headquarters in Nagpur today, former President Pranab Mukherjee will deliver a closely-watched valedictory speech. His former party, the Congress, is deeply upset with him for accepting the RSS’s invitation. Pressure was brought upon him by assorted Congress leaders to back out of the event.

But Mukherjee is a stubborn man. Many forget the deep hurt he felt on October 31, 1984, when following Indira Gandhi’s assassination, he was denied the prime ministership by a cabal of leaders close to Rajiv Gandhi. News of the assassination attempt had reached Kolkata where Mukherjee was campaigning with Rajiv. The two men, along with the Lok Sabha speaker Balram Jakhar and others, immediately flew back to Delhi. During the flight, news of Mrs. Gandhi’s death was confirmed. Confabulations began among the leaders on board the plane over who should succeed her as the prime minister.

Throughout the flight, Mukherjee sat silently, alone in his seat, as the others argued back and forth about Rajiv’s claim to the prime ministership. Mukherjee clearly felt that, as the senior-most Congress cabinet minister, he should be the frontrunner, not the untested 40-year-old Rajiv. As I wrote in my biography of Rajiv Gandhi (published by Penguin): “In many ways, Mukherjee would have been justified in proposing that he be made the interim prime minister. This exhibition of political ambition was widely regarded as the reason for Mukherjee’s exclusion from Rajiv’s first post-election Cabinet, announced on January 1, 1985.”

Back in Delhi, Rajiv’s coterie, led by Arun Nehru, ensured Rajiv would succeed his mother as the prime minister even as Sonia tried in vain to persuade her husband not to accept the offer. She feared he, too, would be assassinated.

A few months later, I visited Mukherjee at his modest home to interview him for the Rajiv biography. He was out of favour with Rajiv’s inner circle, who did not trust him. Rajiv, to his credit, encouraged me to meet Mukherjee even though relations between the two men had soured and Mukherjee had left the Congress. He would return only years later.

Mukherjee was a picture of rectitude. Throughout the hour-long interview, he rarely betrayed signs of anger at being sidelined by the new Rajiv Gandhi government. Eventually, after Rajiv’s own tragic assassination in May 1991, Mukherjee became one of the key ministers in successive Congress governments. But his ambition to be the prime minister was left unfulfilled even as others like Narasimha Rao and Manmohan Singh were preferred over him.

The reason was plain: unlike the others, Mukherjee has a mind of his own — and he spoke it. Sonia eventually developed a cordial relationship with Mukherjee in UPA 1 and UPA 2, but the road for him beyond the home and finance ministerships was blocked. That is why he was persuaded in 2012 to retire with honour to the portals of the Rashtrapati Bhavan. It left the path open for younger, ambitious loyalist Congressmen if future opportunity beckoned and Rahul Gandhi, the heir, decreed it.

All of this explains the unease Congress leaders felt when Mukherjee decided to speak at today’s RSS function. They feared he would speak his mind, ventilating uncomfortable home truths. Besides, his very presence would validate if not endorse the RSS. The Congress has for decades demonised the RSS. It has done this partly out of conviction that the Sangh’s ideology is antithetical to the plural idea of India. But it also fears the RSS. The Sangh has a large and active cadre. Sonia was quick to recognise the electoral danger this posed. The Congress began a premeditated campaign to discredit the RSS during UPA1 by raising the bogey of ‘saffron terror’. While Rajiv had no particular animus against the RSS, Sonia and Rahul have demonised it ceaselessly to polarise Muslim and Christian votes.

The RSS has played into the Congress’ hands. It speaks of a Hindu Rashtra rather than an inclusive Bharat Rashtra. This makes it easy for progressives to dub the RSS as regressive and communal. The Congress’ own decades-old communalism, going back to the Shah Bano case in 1986, is camouflaged as ‘secularism’ when it is in fact the opposite.

Former finance minister P Chidambaram, who has no love lost for Mukherjee (and whose office in UPA 2 he had allegedly bugged), has said the former president should not have accepted the RSS’s invitation, but now that he has, he should tell it “what is wrong with its ideology.”

Here are three things that are unquestionably wrong with the RSS’s ideology and need to be corrected. One, it must allow women entry to, and leadership positions in, the main Sangh organisation (not just the separate mahila wing). A woman sangarchalak — unthinkable today — would lift the RSS into the 21st century. Two, the Sangh must abandon its mistrust of foreign investment. Contemporary swadeshi economics should embrace, not reject globalisation. Three, the RSS must be inclusive of all faiths — Christians, Muslims, Parsis, Jews. Many are former Hindus anyway. Embrace them and the RSS will emerge stronger.

I suspect Mukherjee will say all of this and more in his speech today. But he will couch it in the cautious language that has served him well in his long and illustrious political career.

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Catching Up With China
Democracy, while priceless, carries a cost. India has paid that price. It is time now to reap the benefits

Saturday, June 2, 2018

When the history of the 20th century is written, 1979 will count as a defining year. In 1979, the Iranian revolution overthrew the US-backed Shah of Iran and changed the complexion of Middle East politics. Ayatollah Khomeini usurped power and set off a 39-year-long confrontation with the West.

In 1979, at the height of the Cold War, the Soviet Union made the fatal mistake of invading Afghanistan. The United States, Saudi Arabia and Pakistan collaborated to create an army of jihadis to fight the Soviets who, finally defeated after a decade, retreated in 1989. Afghanistan was left with the detritus of trained terrorists with no one to fight. They drifted to Pakistan-occupied Kashmir (PoK) and, under the watchful eyes of the Pakistani army's criminally-minded Inter-Services Intelligence (ISI), were unleashed on the Kashmir Valley. In the 29 years since that sponsored insurgency began in J&K, Pakistan-abetted terrorism has metastasised into a malignant but unsuccessful strategy to bleed India by a thousand cuts.

In 1979 another seminal event too took place that few at the time paid much attention to: Chinese leader Deng Xiaoping introduced a series of economic reforms that would catapult China from an impoverished country with a per capita income lower than India's to the world's second-largest economy with a per capita income 400 per cent greater than India's.

India began its economic reforms 12 years after China, in 1991, but liberalisation has been halting and beset with political and bureaucratic roadblocks. As a noisy, multi-party democracy with plural ethnicities, India was always likely to implement economic reforms with caution. China in contrast had no such qualms. The Communist party's word was law. Dissenters were jailed or killed. Foreign competition was controlled by state fiat. Google, Facebook and Twitter remain blocked in China. That has allowed Alibaba, Tencent and Baidu to become global internet giants.

But this has come at a cost. Chinese society remains a prisoner to the state. It has taken US President Donald Trump's hardball tactics to force Beijing to cut back on import duties on foreign automobiles and other products. China has pledged to reduce its $375 billion trade deficit with the US by $200 billion though the timeline remains vague and the details scant.

Where does all this leave India? Liberalisation since 1991 has helped the economy nearly double its average annual growth rate to 7.5 per cent from the dawdling 1960s-1970s growth rate of 3.5 per cent. But liberalisation has also spawned crony capitalism and corruption. This spurted during the go-go decade of UPA 1 and UPA 2 between 2004-2014. Bank loans were granted on the basis of a phone call from the ministry of finance to the chairman of a public sector bank (PSB). That was the genesis of the NPA virus which laid many banks low and which the Insolvency and Bankruptcy Code (IBC) was designed to combat.

China's single-minded determination to focus on growth, infrastructure and education has paid huge dividends. Cities like Shanghai and Beijing now have per capita incomes of over $50,000, rivaling income levels in Switzerland and the United States. Vast swathes of the countryside though are still poor and China's average per capita income of $8,000 puts it in the category of a middle-income Latin American country.

And yet, prosperity is beginning to change the character and lifestyles of ordinary Chinese. In the 1980s, very few Chinese, estimated at less than 50,000, travelled abroad. Today the number of foreign trips made by Chinese tops an extraordinary 130 million a year - a moving mass of people equal to the combined population of Britain and France. According to Hyde Chen, an equity analyst with UBS AG in Hong Kong, "Historical experiences from mature economies suggest that household incomes of wealthy and poor areas in China will likely converge over time. In China, the income convergence is taking place at a fast pace, with the household per-capita income gap between lower-tier cities and tier-1 cities narrowing from 56 per cent in 2005 to 46 per cent in 2017."

China's urban-rural ratio has risen to 70 per cent compared to 82 per cent in the US. India lags behind at 33 per cent while middle-income Thailand is at 50 per cent. India's democracy is a short-term impediment to growth. But in the long run, freedom will prove priceless. China could at some time in the future discover that the cost of dictatorship can be a heavy social burden. After achieving a basic level of prosperity, history tells us that societies demand freedoms - of choice, dissent, liberty and electoral franchise. Without these, no amount of gleaming office blocks and superhighways can serve as compensation.

India's young workforce is now the world's largest even as China's workforce ages. But that demographic window will shut in 20 years as India to starts ageing. Tough economic decisions can no longer be allowed to be held hostage to electoral politics. What can India do to catch up with China on three key parameters: per capita income, urbanisation and education? In 1998, China began a campaign to create world-class universities. Within 20 years, several Chinese universities have climbed into the top 200 rankings of global educational institutions. Since university rankings are skewed towards research paper citations in peer-reviewed academic journals apart from the quality of faculty and infrastructure, Indian universities have lagged far behind.

To achieve the per capita income of a middle-income country like China ($8,000), India will need to grow consistently at 8 per cent a year for the next 20 years. Assuming India's population plateaus at 1.50 billion, nominal GDP will climb from $2.70 trillion today to $12 trillion in 2038 at fixed exchange rates. That would give India a per capita income of $8,000 - 20 years after China reached that landmark in 2018. By then, China growing at 5 per cent a year would have achieved a per capita income of $20,000. The disparity between China and India though would have nearly halved from 4:1 to 2.5:1.

Democracy, while priceless, carries a cost. India has paid that price. It is time now to reap the benefits.

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Modi and Amit Shah for the first time have something serious to worry about
The results of the by-polls, especially in Kairana, are a reminder that, against a united Opposition, the ally-short BJP will be severely tested in 2019.
Friday, June 01, 2018

The results in a slew of 15 by-polls across India carry an ominous message for the BJP: the tide is turning. The message for the Opposition is equally clear: unite to win.

The defeat of its candidate in riot-torn Kairana to the Opposition-backed Rashtriya Lok Dal will be especially galling for the BJP. It had won the constituency comfortably in the 2014 Lok Sabha election. Two things have changed since. First, 2014 was a Modi wave election: the BJP swept 71 out of 80 parliamentary seats in Uttar Pradesh and, with its allies, won 73 in all. Four years later, the wave is over, replaced by fatigue and ennui.

Second, in 2014, the vote was split by multi-cornered fights, allowing the BJP to win big in Kairana and across UP. In the Kairana by-poll, the Opposition fought as one block. Can the Opposition translate the same unity to the 2019 Lok Sabha election? In states where multi-party contests earlier split votes, it obviously can. Where there are largely binary contests, it may not work.

For the BJP, the usual excuses will be trotted out for the by-poll defeats and "introspection" promised. The win over the Shiv Sena in Palghar in Maharashtra will be used to prove that it can defeat even an estranged regional ally. That though emphasises the BJP's biggest failing in its four-year tenure: allies.

Prime Minister Narendra Modi and BJP party president Amit Shah have erred badly, possibly fatally, in their treatment of allies. Instead of regular quarterly meetings with NDA partners, the BJP has taken them for granted. Telugu Desam Party's (TDP) Chandrababu Naidu was snubbed when he pressed his demand for special status for Andhra Pradesh. Multiple efforts to meet the prime minister failed. His phone calls went unanswered. In the end, when Modi did meet Naidu, the die was cast. The TDP's exit not only reduced the NDA's numbers in both the Lok Sabha and Rajya Sabha, it emboldened other NDA allies to voice their grievances.

Smaller allies such as Ram Vilas Paswan's Lok Janshakti Party (LJP) and the Shiromani Akali Dal (SAD) have been complaining quietly of neglect by the BJP. Communication over strategy, discussions about the economy and tactics for future elections have rarely taken place.

The problem with the Shiv Sena is of an entirely different order. Uddhav Thackeray, who like his late father Balasaheb Thackeray, has never fought an election in his life, is a prickly individual. Amit Shah has given him short shrift over the years. When Balasaheb Thackeray was alive, the late Pramod Mahajan made it a point to pay his respects at Matoshree, the patriarch's residence, every time he was in Mumbai. Shah and Modi have largely ignored Uddhav. Moreover, the Shiv Sena believes its Hindutva appeal in Maharashtra is being undercut by the BJP. It therefore attacks its larger ally on a daily basis but hesitates to walk out of either the NDA at the Centre or from the Devendra Fadnavis-led Maharashtra government.

As Union transport and shipping minister Nitin Gadkari recently said, the BJP-Shiv Sena partnership is like an unhappy marriage - the partners can neither live with nor without each other. In such cases though, as the BJP should know, divorce eventually follows.

Nitish Kumar's Janata Dal (United) is yet another ally which feels poorly done by. The JD(U)'s defeat to the Rashtriya Janata Dal (RJD) in the Jokihat by-poll, however, leaves Nitish with few options. The RJD doesn't want him back and the BJP treats him like a regional leader past his best instead of what he is: a valuable ally.

Apart from Modi and Shah neglecting the BJP's relationship with its allies, the biggest cause of the party's waning popularity is the mismanagement of the finance ministry. The choice of Arun Jaitley as finance minister was always a poor one.

Jaitley has upset the middle-class (a strong BJP constituency) with his five mediocre union Budgets (including the interim Budget in July 2014). He has alienated traders (another powerful BJP constituency) with the unnecessarily complex rollout of GST. He has even managed to anger industrialists (who donate heavily to the BJP) with tax raids and intrusive tax laws that the Central Board of Direct Taxes (CBDT) has used to engage in what many have dubbed tax terrorism.

The mishandling of the fuel price rise is the latest proof of how disconnected the ministry of finance (MoF) bureaucracy under Jaitley is with ground realities. Reliance on the bureaucracy worked for Modi in Gujarat because in a state babus rarely defy orders. In Delhi, bureaucrats with old loyalties are often part of a corrupt ecosystem. They have delayed or upended many government proposals.

The malignant influence of the bureaucracy is equally visible in the recent order by the ministry of defence (MoD) to open cantonment access to civilians. This will make the families — women and children — of defence personnel vulnerable to terror attacks. Indeed, Modi's Pakistan policy has been inconsistent with Most Favoured Nation (MNS) status and Wagah border trade remaining unimpeded despite multiple Pakistan-sponsored terror attacks.

There's little doubt that Modi has led a corruption-free government and implemented innovative schemes on financial inclusion, banking reforms and rural electrification. But a truncated defence budget and poor spending on education and healthcare have been significant failures. The Nirbhaya fund remains unspent. A Lokpal is not yet in place after four years. And vacancies in the CIC have effectively hobbled the RTI.

None of these add up to maximum governance and minimum government. The results of the by-polls, especially in Kairana, are a reminder that, against a united Opposition, the ally-short BJP will be severely tested in 2019.

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Why too many PM aspirants will break Opposition unity from within
Rahul Gandhi finds himself strangely at odds with the very regional satraps whose support he needs.

Thursday, May 31, 2018

When BSP president Mayawati leant forward to touch foreheads with UPA chairperson Sonia Gandhi, as Trinamool Congress chief Mamata Banerjee looked benignly on in front of a gaggle of Opposition leaders gathered in Bengaluru to attend HD Kumaraswamy’s swearing-in as chief minister of Karnataka, few could have read what was passing through the Dalit leader’s mind.

Mission 2019

Two days later, it couldn’t have been clearer. On the eve of the BSP’s national executive committee on May 26, a senior BSP leader declared emphatically: “Mayawati will be prime minister of a united Opposition front government in 2019.”

Prime Minister Mayawati in 2019? The BSP does not have a single MP in the 545- seat Lok Sabha. Mayawati herself faces CBI investigations in a slew of corruption cases. Yet she regards herself as a serious contender for the prime ministership next year.

Mamata Banerjee, having successfully polarised West Bengal during the blood-soaked panchayat elections, harbours prime ministerial ambitions of her own. She can’t have been pleased by Mayawati throwing her hat so early into the ring.

There are others who will gnash their teeth silently. Telangana chief minister K Chandrashekar Rao, who has national ambitions as well, tried to persuade Banerjee to create an alternative non-NDA, non-UPA federal front. He didn’t bother to turn up at Kumaraswamy’s swearing-in, though Bengaluru is a short flight from Hyderabad.

Another notable absentee: Odisha chief minister Naveen Patnaik who fears the BJP is making deep inroads into his state. He backs KCR’s federal front and is prepared for a shot at the prime ministership if the dice falls in his favour.

Observing all this is the original Chanakya, Sharad Pawar, playing the role of master of ceremonies to the disparate group of Opposition leaders, hoping that if consensus among them fails to throw up a suitable prime minister in the evolving grand alliance, then with his vast resources and network he could offer himself as a compromise candidate.

Meanwhile, former Uttar Pradesh chief minister Akhilesh Yadav has decided to bide his time even though his party wants to project him as the face of the anti-Modi front and a consensus prime minister in 2019.

If the SP’s alliance with the BSP gives the combine over 40 of UP’s 80 Lok Sabha seats in 2019, Akhilesh will target the UP Assembly elections in 2022 to return as chief minister with the BSP as alliance partner in the assembly and Mayawati safely tucked away in Delhi, busy with her national ambitions. At 44, Akhilesh can afford to wait for a move from Lucknow to Delhi.

Lost amidst the regional leaders jostling for space is Rahul Gandhi, who has one eye fixed on 2019 and the other on 2024. If it hadn’t been for his quick decision to offer “unconditional” support to the JD(S) and back Kumaraswamy as chief minister, Karnataka could have fallen to the BJP.

That support is now under severe coalition test. Rahul, as the leader of the largest Opposition party with 48 Lok Sabha MPs, finds himself strangely at odds with the very regional satraps whose support he needs to be prime minister.

Rahul’s dilemma

Does Rahul have that support? It will depend on the numbers the Congress racks up in 2019. Anything less than 100 Lok Sabha seats will weaken his prospects. In such a situation, Rahul can at best reprise the 1996 United Front (UF) experiment when the Congress-supported Deve Gowda’s multi-party UF alliance from outside. As the largest (though with sub-100 seats) party, can Rahul insist on being prime minister? Unlikely, with Mamata pressing her claim too. Banerjee’s relationship with Sonia is warm, but with Rahul it is at best lukewarm.

Amidst all this fluctuating chemistry, how might the numbers in 2019 stack up? According to one analysis of India’s 36 states and union territories, a grand alliance between regional parties will cost the BJP 46 seats in UP, four seats in Madhya Pradesh, two seats each in Karnataka, Assam and Chhattisgarh, and one seat each in Punjab and Jharkhand.

There would be gains in Bihar, Odisha and parts of the northeast. Overall, the BJP could lose around 55-60 seats from its 2014 tally, dropping to 225 seats.

Two scenarios

Scenario 1: If the BJP wins more than 225 seats, it will scramble to form a government with NDA allies and independents. Such a government, dubbed Modi 2.0, could last its full term but will need to manage allies more sensitively.

Scenario 2: If the BJP wins between 180 and 200 seats, the Congress garners over 100 seats and regional parties win over 150 seats between them (principally the TMC, SP, BSP, DMK, JD(S), NCP and the Left), the BJP will have to sit in the Opposition while the Congress and its grand alliance partners work out their differences over who will be prime minister.

A spell in the Opposition will do the BJP a world of good. It will be able to ponder the missteps of its five-year tenure. After experiencing a few years of Rahul, Mayawati, Mamata, Akhilesh or Pawar as prime minister, the cry to bring Modi back could well erupt as it did for Vajpayee in 1998 after the UF government, under the late Prime Minister IK Gujral, collapsed when the Congress, true to type, for the second time in nine months, withdrew its support. History has an awkward habit of repeating itself.

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Modi At Four
Overall, India’s Pakistan policy under Modi has been inconsistent and incoherent

Tuesday, May 29, 2018

Drawing up a report card on Prime Minister Narendra Modi’s first four years in office presents a daunting task. Modi inherited a broken economy in May 2014: high inflation, low GDP growth, a distressed banking sector, and an unsustainable fiscal deficit.

Last year in a rare candid moment during an interview, Modi confessed that after he took office on May 26, 2014, the extent of the crisis-hit Indian economy shocked him. He said he did not make public the deep malaise in the economy and debt-laden banks in order to avoid panic among both domestic and global investors.

A year later, in May 2015, the Mumbai Press Club invited senior journalist Rajdeep Sardesai and myself to debate the first year of Modi’s prime ministership in front of an audience of over 150 editors and reporters. At the debate I likened the economy Modi had inherited to a truck with a broken engine, its chassis lying upside down. Even Sardesai, sitting on the dais beside me, couldn’t help but agree.

It has taken Modi four years to turn the truck around, repair it and get it back up to speed. In the process the Prime Minister has made mistakes but also achieved significant milestones across the economy, industry, banking, foreign policy and social sector schemes. On the following pages in this issue, distinguished personalities analyse the successes and failures of Modi’s first four years as prime minister. Here we examine specific sectors, policy decisions and landmark schemes that have made Modi one of India’s most proactive yet controversial prime ministers. Several dozen schemes have done well. Several more remain bogged down in red tape. Modi has less than 12 months to transform that red tape into the red carpet he promised four years ago.

The Economy:

GDP growth, after being punched in the solar plexus in 2017 by demonetisation and the implementation of an overly complex Goods and Services Tax (GST), is expected to rise to 7.8 per cent in 2018-19. In the run-up to the 2019 general election, Modi needs to show that he has been a good custodian of the economy. Interim Finance Minister Piyush Goyal, a chartered accountant, is result oriented and a good pick for the job. Though he will function as Finance Minister only till Arun Jaitley returns to work following his kidney transplant, Goyal could be just the catalyst the ministry of finance (MoF) needs at this crucial juncture.

Monthly GST collections in 2018-19 are expected to average Rs 1.02 lakh crore compared to the average of Rs 89,000 crore up to March 2018. Compliance has been simplified and e-way bills are mitigating tax evasion by traders. The government is meanwhile doubling down on its achievements in the plethora of schemes it has introduced over the past four years. Outcomes are now vital; metrics will be carefully measured by the Opposition and media in a febrile election year.

The government has increased farm credit from Rs 90,000 crore in 2017-18 to Rs 1,10,000 crore in 2018-19. The other big focus areas are highway construction, rural electrification and sanitation. The Insolvency and Bankruptcy Code (IBC) has been acknowledged as a landmark reform. Aadhaar has reduced pilferage of subsidies to beneficiaries among the rural poor though its use in non-essential services is being adjudicated by the Supreme Court. Digital connectivity has helped move India gradually to a less cash-dependent economy. Health and education remain under-budgeted though the National Health Protection Scheme (NHPS), dubbed Modicare, to be implemented from October 2, 2018, is an important step forward in providing healthcare to those who need it the most.

Foreign policy:

In recent weeks, the Prime Minister has recalibrated three crucial strands of Indian diplomacy. First, following his informal summit with Chinese President Xi Jinping in Wuhan, India-China relations are now on a more secure footing. Second, Modi’s visit to Russia on May 21 has smoothened emerging wrinkles in the close military and diplomatic relations between New Delhi and Moscow. Russia’s increasing closeness to Pakistan is a new factor in the complex geopolitics of South Asia. Russia, isolated by the US-led West, has concerns over India’s deepening strategic partnership with the United States. The Modi-Putin meeting is a key step towards allaying those concerns.

The third strand in the Modi government’s foreign policy faces severe challenges in the neighbourhood. Modi’s recent meeting with Nepal’s Prime Minister Khadga Prasad Oli has to an extent countered the Himalayan country’s broadening relationship with China. But Pakistan remains the sharpest thorn in India’s side. Islamabad continues to use terrorism as an instrument of state policy and will do so till that policy exacts an unaffordable price. Indian security forces have eliminated over 250 Pakistan-sponsored terrorists in Jammu & Kashmir over the past year. The PDP-BJP government though has made a strategic error in allowing a “conditional” cessation of counter-terror operations during the current month-long Ramzan period. This misstep will allow terrorists, till now under intense pressure from the Indian Army and the CRPF, to regroup.

Overall, India’s Pakistan policy under Modi has been inconsistent and incoherent. After the surgical strike in September 2016, infiltration across the Line of Control (LoC) has spiked. Terror attacks have increased and fatalities among Indian soldiers and civilians risen. In the final year of his first term, Modi must get his Pakistan policy right: prevarication and olive branches will not do.

As I wrote in my Mail Today column, long-lasting peace can be achieved only by the projection of strength: “What should India’s Pakistan policy be? Peace through strength has worked on the border. It can work on proxy terrorism if a clear-eyed policy is applied consistently. Modi must recognise that Pakistan’s sweet-talking diplomats are a cover for what former Pakistan envoy Husain Haqqani rightly calls the country’s jihadi-minded army. India has many options it can pursue. First, if there is another proxy terror attack on Indian soil, send Pakistan’s High Commissioner packing. Downgrade diplomatic relations. That is a policy every nation – from the US and Britain to Russia and Bangladesh – uses to deal with hostile countries. Second, build up the Indian Army’s capacity to deploy covert operations. In short, make Pakistan pay. India has been a victim long enough. Prime Minister Modi, of all people, knows that.”


Modi came to power on the slogan sabka saath, sabka vikas. But the overwhelming accent on winning elections has led the BJP to use caste and religion in electioneering. That has polarised sections of society. In turn, this has allowed the Opposition to dub the Modi government communal though its own self-declared secularism does not stand up to scrutiny. Modi, however, has worsened matters by declining to hold a single press conference in the last four years. In the absence of information, disinformation prospers. One-way communications through Maan ki baat, tweets and occasional one-on-one interviews with carefully selected journalists are no substitutes in a democracy for regular unscripted press conferences.

With the Opposition likely to present a united front in the 2019 Lok Sabha election, it is important Modi establishes a more potent and proactive communications strategy. Perception often decides close elections. The perception that the BJP is an open-minded, inclusive party needs to filter through to especially millennials, many of whom will be first-time voters in 2019.


Perhaps the one issue that will define Modi’s four years in power is the government’s performance on creating employment. Reliable statistics are hard to come by. Contrasting claims by various institutions show that between 1.4 million and 7.5 million jobs were created in 2017.

Demonetisation hit the most vulnerable job seekers – the young, poor and unskilled – the hardest as my analysis earlier this month confirmed: This is what I wrote: “How many jobs were created in calendar 2017? Mahesh Vyas, CEO and managing director of the Centre for Monitoring Indian Economy (CMIE), says 1.43 million. I spoke to Vyas to make sense of the dichotomy. The analysis that follows is based on the data spreadsheet Vyas sent me which contains detailed age group break-ups of those who are employed in the formal workforce.

“In Vyas’ recent article in a daily (May 1, 2018), the numbers for only three age groups (15-24, 25-64 and over-65) were published. An analysis of a more detailed age break-up in CMIE’s spreadsheet throws new light on two key issues: One, how many jobs, and in which age groups, were created (and lost) in calendar 2017? Two, how did demonetisation affect job losses — and which age groups were most affected by it? As CMIE’s Vyas writes in his piece, 11.83 million new jobs were created between January 2017 and December 2017 in the 25-64 age group. This age group comprises over 85 per cent (346.84 million) of India’s total formal workforce (404.91 million) as per CMIE data. The key 25-64 age group saw a near four per cent increase in job creation in 2017 despite demonetisation (11.83 million new jobs created in 2017 on a 2016 base of 335.01 employed). This suggests resilience in the Indian economy.

“Demonetisation, however, struck hard at the 15-24 age group (a loss of 7.22 million jobs) and the over-65s (a loss of 3.18 million jobs). Together, the very young and the very old lost 10.40 million jobs in 2017, largely due to demonetisation. The loss nearly wiped out the gains in jobs (11.83 million) among the 25-64 age group which comprises the vast bulk of India’s formal workforce. The net gain in jobs in 2017 was thus pruned to 1.43 million. Without such large job losses among the under-24s and over-65s, job creation in calendar 2017 would have been significantly higher.”

The successful outcome of the dozens of schemes launched by the government – ranging form Make in India and Jan Dhan Yojana to Swachh Bharat Abhiyan and Skill India – will be tarnished if more jobs aren’t created quickly enough to absorb India’s young workforce. Providing employment to this surging demographic is a key task for the Modi government. It is a metric that could define his tenure.

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Can Kim Jong-un rescue Donald Trump from impeachment
If the deal to denuclearise the Korean peninsula goes through, the two leaders could be in line to bag the Nobel Peace prize
May 29, 2018

If the off-again, on-again summit between US President Donald Trump and North Korea's Kim Jong-un takes place as scheduled in Singapore on June 12 and an historic agreement to denuclearise the Korean peninsula is reached, two of the unlikeliest men, Trump and Kim, could be in line to win the Nobel Peace prize.

The agreement could involve several drawn-out phases. North Korea has already destroyed its only nuclear facility at Punggye-ri. The destruction was witnessed by an escorted group of foreign journalists but awaits verification by international inspectors. Once verification is completed, the US will gradually reduce its military presence in South Korea from over 28,000 troops to around 10,000. A denuclearised Korean peninsula would eventually lead to negotiations over reunification between north and south. These could be tricky. China is cold to the idea of a reunified Korea which will remove North Korea as a buffer state against a US military presence in South Korea.

Nonetheless if the Trump-Kim summit takes place and is successful, it will mark a geopolitical turning point. It will rebalance power equations across the Indo-Pacific and beyond. However, even as President Trump prepares for a game-changing meeting with Kim, a sword of Damocles that could lead to his impeachment continues to hang over him at home. The sword is held by special counsel Robert Mueller III.

Mueller was appointed more than one year ago (on May 17, 2017) to investigate alleged collusion between the Trump presidential campaign and Russia that could have resulted in rival candidate Hillary Clinton's defeat. US attorney general Jeff Sessions recused himself from the probe citing conflict of interest. Ironically, Mueller has a serious conflict of interest himself. As FBI director for 10 years, he was James Comey's boss. Comey succeeded him as FBI director till he was sacked by Trump on May 8, 2017. Mueller and Comey were colleagues and close friends.

At the heart of Mueller's investigation into the alleged Russian collusion and obstruction of justice by the Trump campaign during the 2016 presidential election is Comey's role. Comey was investigating Hillary Clinton's e-mail server scandal through much of 2016. He announced at a press conference in July 2016 that while Clinton was "extremely careless" in handling her confidential emails, it wasn't a chargeable offence.

At the same time, Comey was also investigating presidential candidate Donald Trump. But he told no one about it till he was compelled to do so at a Congressional hearing in 2017. Comey meanwhile leaked a series of memos recording his version of confidential conversations with Trump shortly before he was sacked.

Comey leaked those memos (at least one of which was classified) to his friend Daniel Richman, a Columbia Law School professor. What Comey didn't disclose at the time was that Richman was also his personal attorney (that fact was revealed months later).

Richman leaked Comey's memos to The New York Times. That led directly to the appointment on May 17, 2017, of Mueller as special counsel to investigate Trump who had sacked Comey just eight days earlier. Conflict of interest? Unquestionably.

As US district judge TS Ellis told Mueller's team at a recent hearing in a case dealing with former Trump campaign manager Paul Manafort: "You don't really care about Mr Manafort, you really care about what information Mr Manafort can give you to lead you to Mr Trump and an impeachment."

Trump has muddied his own case by a string of strategic errors, including issuing contradictory statements over whether he knew about the $1,30,000 payment his personal attorney Michael Cohen made to adult star Stormy Daniels (real name: Stephanie Clifford) to buy her silence over an alleged affair in 2006 with Trump.

The feral media, led by The New York Times, CNN, MSNBC, The Washington Post and others, have carried a raft of stories that played up Comey as the nice guy who was wronged by Trump, the philanderer, liar and, in the unconfirmed words of former secretary of state Rex Tillerson and White House chief of staff John Kelly respectively, a "moron" and an "idiot". Over a dozen such stories were exposed as fake but the damage had been done.

Trump's alleged affair with Stormy Daniels meanwhile has brought back memories of how former President Bill Clinton was impeached following sexual harassment charges by Paula Jones and an alleged affair with White House intern Monica Lewinsky. Clinton's impeachment by the House of Representatives was set aside by the Senate.

Trump's detractors in the Democratic party are hoping that even if the Russia collusion and obstruction of justice charges don't stick, the Stormy Daniels affair could lead to the president's impeachment. As in Clinton's case 20 years ago, the impeachment move though will inevitably fail in the Senate where Republicans are in the majority but weaken Trump's authority and chances of re-election in 2020.

The appointment of former New York mayor Rudy Guiliani to Trump's legal team, which is negotiating a sit-down interview for Trump with Mueller, has raised further controversy. Guiliani's bruising take-no-prisoners style could backfire. If Trump refuses an interview with Mueller, the special counsel has threatened to subpoena him. In turn, Guiliani has warned that Trump will fight the subpeona all the way to the Supreme Court.

That could prolong the Mueller probe, polarising the country's already divided electorate ahead of the midterm elections to the Senate and the House of Representatives in November 2018.

Meanwhile, over a dozen Republican lawmakers have officially proposed Trump's name to the Norwegian Nobel Committee for the 2019 Nobel Peace Prize if the Trump-Kim summit leads to the denuclearisation of North Korea, an objective that has eluded successive US governments for decades.

Mortified at this development, the Democrats are urging Mueller to quickly bring charges against Trump on Russian collusion, obstruction of justice and the Stormy Daniels payoff which, they say, should be regarded as an illegal campaign contribution since it took place just weeks before the presidential election.

Impeachment or Nobel Peace Prize? Much will depend on how the historic summit with Kim in Singapore and Mueller's investigation in Washington unfold.

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Insolvency And Bureaucratic Code
In India, economic reforms begin with good intent only to flounder in the quicksand of corporate rivalry. The IBC is too important a reform to be held hostage to the darker forces that inhabit India's legal and corporate world

Saturday, May 19, 2018

The Insolvency and Bankruptcy Code (IBC) is one of the most farsighted economic reforms legislated by the Narendra Modi government. It promises to mitigate the principal weakness in the Indian economy - non-performing assets (NPAs) that have squeezed banks' capacity to lend to corporates. In turn that has dried up private investment by cash-strapped companies. This has dampened economic growth and job creation.

The Insolvency and Bankruptcy Code, legislated in 2016, was meant to strike at the root of the problem by establishing a legal mechanism that would help get bankrupt companies with unpaid bank loans but good underlying assets new buyers. Haircuts would vary. But the estimated Rs 9 lakh crore NPA deadweight would lighten significantly, enabling banks to restart corporate lending and get the economy up to speed.

The IBC has worked well so far with its first batch of 12 large bankrupt companies near to resolution. Time limits on completing negotiations between lenders (committee of creditors - CoC) and resolution professionals (RP), who jointly troubleshoot for buyers, sellers and banks, have concentrated minds. But as usually happens in India when lawyers, bankers, accountants and corporates enter into commercial disputes, a numbing bureaucratic mindset overtakes the process. Delays became endemic.

Anticipating this problem, the government in June 2016 had constituted the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) to resolve legal challenges by thwarted bidders for bankrupt companies. The mechanism has worked well - up to a point. The NCLT has eleven benches across the country, including a principal bench in Delhi. But no one quite anticipated the ingenuity and doggedness of Indian entrepreneurs. Several cases nearing resolution have been stymied by repeated appeals to the NCLAT. One of the most pernicious delays has been the never-ending battle for Binani Cement.

Both the Aditya Birla group's UltraTech Cement and Dalmia Bharat covet Binani Cement which has outstanding liabilities of Rs 7,290 crore. It admitted to insolvency proceedings at the NCLT's Kolkata bench in July 2017. Ten months later, things are back to square one. Dalmia bid Rs 6,932 crore for Binani and emerged the highest bidder, edging out UltraTech Cement by merely Rs 100 crore. The matter should have ended there and the resolution process completed.

But in India nothing is so simple. UltraTech upped its bid to Rs 7,960 crore. Binani's committee of creditors declined the offer because it was made after Dalmia was declared the winning bidder. The lawyers now got into the act. Former Attorney General Mukul Rohatgi, appearing for UltraTech, told the Kolkata bench of the NCLT that his client was prepared to outbid any revised Dalmia offer by Rs 500 crore. Oddly, the Kolkata bench agreed to re-open bidding, saying in its order: "It is made clear that if both (companies) are willing to participate in the bidding process, the committee of creditors is expected to allow both in the bidding process."

The Kolkata bench extended the resolution process to June 24, leaving the banks and its committee of creditors in a quandary. The creditors would welcome UltraTech's higher bid but a messy legal battle with the original bid winner could delay resolution - defeating the very purpose of the Insolvency and Bankruptcy Code legislation. Dalmia Bharat issued this public statement: "We are surprised by the order passed by the NCLT. In our view, any revised offer from an unsuccessful resolution applicant outside the resolution process cannot become a basis for setting aside the decision of the committee of creditors. We have strong conviction that we have followed the law as per due process and believe that we will eventually succeed. We will take all the appropriate steps required."

There are hundreds of insolvency cases before the NCLT. If one case causes delays due to an arbitrary order, a precedent will be set. The contest between Britain's Liberty House and the Tatas for insolvent Bhushan Power and Steel has followed a similarly rocky path. The committee of creditors rejected a proposal to initiate rebidding. Liberty House thought it could now go ahead with the purchase of Bhushan Power and Steel with an upfront payment of Rs 18,500 crore, considerably higher than Tata's offer of Rs 17,000 crore. But here too there's a twist in the tale.

State Bank of India is the lead creditor in this transaction. The SBI-led CoC had initially rejected the Liberty House bid because it came 12 days after the February 8, 2018 deadline. The CoC rightly disqualified the bid. Liberty House approached the NCLT to appeal the decision which passed an order to reopen bidding. A further legal challenge from the two thwarted early bidders, Tatas and JSW, will however delay the transaction instead of giving banks much needed NPA relief. The principle of accepting bids after bidding has closed though must be discouraged in future to ensure certitude and credibility of the IBC process.

Other speed breakers to a quick resolution involve Essar Steel and Ruchi Soya. They highlight how a progressive legislation can be muddied by lawyers, accountants, judicial officers and rival corporate houses. Arcelor Mittal, the world's largest steelmaker headed by Lakshmi Mittal, and Numetal, whose majority stake holder is Russia's VTB Capital, are competing fiercely for bankrupt Essar Steel's assets. Arcelor Mittal has bid around Rs 32,000 crore, a smidgeon higher than Numetal. Arcelor Mittal's eligibility has, however, been challenged in the NCLAT which will hear both bidders on May 17, further delaying the banks' debt resolution even as interest costs continue to rise.

Meanwhile insolvent Ruchi Soya, to demonstrate how the IBC can be derailed, has moved the Mumbai bench of the NCLT to reverse a Rs 48-crore debit entry made by ICICI Bank in the company's current account. Ruchi Soya owes banks Rs 12,000 crore. Senior lawyers are involved in the case which again will prolong a resolution of Ruchi Soya's liabilities to banks and other lenders.

In India, economic reforms begin with good intent only to flounder in the quicksand of corporate rivalry. The IBC is too important a reform to be held hostage to the darker forces that inhabit India's legal and corporate world.

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No, Walmart will not be bad for India. This is why
Indian market can reverse-colonise the world’s largest multinational corporations.

Thursday, May 17, 2018

Ever since the $21 billion (Rs 1.42 lakh crore) acquisition of Flipkart by Walmart was announced, passionate voices have decried the deal. Ironically, identical opposition to the acquisition has emerged from the Left and the Right. The common refrain: the East India Company is back and re-colonisation of India’s e-commerce marketplace has begun. Small Indian kirana shops will be driven out of business by Walmart’s notorious predatory practices and low-wage business model.

Collateral benefits

Walmart is the world’s largest company with annual revenues of $500 billion (Rs 34 lakh crore — eight times the turnover of the Reliance Industries). Its investment in Flipkart is the biggest M&A in India since the Vodafone-Idea merger. Walmart’s $21 billion valuation of Flipkart may seem high. It isn’t. The two Chinese Internet behemoths Alibaba and Tencent are valued at $500 billion each. Apple has a market value of over $950 billion (Rs 64 lakh crore) and Amazon of over $700 billion ( Rs 47 lakh crore). Flipkart has the potential, especially with its PhonePe and Myntra divisions, to rapidly scale up operations with Walmart’s large war chest. The US retailer has pledged to invest another $3 billion (Rs 20,000 crore) in Flipkart’s equity. Indian executives, including co-founder Binny Bansal and Kalyan Krishnamurthy, will continue to run Flipkart.

Critics say the money paid by Walmart to acquire a majority stake in Flipkart will go to foreign shareholders. They miss the point. Walmart’s acquisition of Flipkart will have collateral benefits. If the world’s largest company shows confidence in India’s economic future, then that will resonate across boardrooms globally. Will Walmart destroy the small Indian trader as many fear? Unlikely. Since liberalisation, foreign investments have strengthened rather than weakened local players. When McDonald’s entered India two decades ago, the fear was that small eateries would go out of business. In fact, McDonald’s was forced to Indianise its offerings with vegetarian burgers even as Indian fast food eateries offering dosas and traditional Indian fast food flourished. Similarly after Coca Cola acquired Parle’s soft drinks business in 1993, the US behemoth was forced to back local beverage Thums Up which continues to outsell Coca Cola — one of the very few cases worldwide where the local cola has overwhelmed America’s original Coca Cola.

By 2025, it is estimated that India will have nearly one billion Internet users. Companies like Flipkart and Paytm will be principal beneficiaries. Paytm’s largest investor Alibaba, along with its affiliate Ant Financial, holds nearly 50 per cent of Paytm’s equity. Japanese and other foreign investors hold another 38 per cent, making Paytm effectively foreign owned. Does that matter? It doesn’t.

Virtually the entire advertising industry in India has been foreign owned ever since 100 per cent FDI in the sector was allowed decades ago. Star Sports, which broadcasts the Indian Premier League (IPL), is owned by Rupert Murdoch who is in the process of selling parent company Fox to Disney, which in turn owns a large chunk of several film and entertainment channels in India. In short, foreign ownership of Indian companies is fairly common. From Vodafone to Hindustan Unilever, foreign-owned companies have long operated in India. They have provided jobs to Indians, created an enabling ecosystem for vendors and suppliers, and given consumers world-class products, services and technology.

Reverse colonialism

Critics point to how US President Donald Trump has blocked the acquisition of American chipmaker Qualcomm by Singapore-based Broadcom. Qualcomm is a rival of China’s Huawei in new generation wireless technology. If Qualcomm fell into Broadcom’s hands, Trump feared its technology could eventually land up with Huawei. That is the exception that proves the rule: barring high security sectors, the United States has among the world’s most open economies. Silicon Valley has been able to create world-leading innovations because it welcomes global investment, both inwards and outwards.

When foreign companies build infrastructure — bridges, highways, factories, housing, metros and sealinks — that infrastructure stays in India. During the British colonial occupation of India, Indian resources (labour and taxes) were exploited to benefit the British. Today, foreign investment in India deploys global funds to benefit Indians: employees, customers, suppliers, ancillaries, vendors. Opposing this reverse-colonialism shows how many Indian minds still remain prisoners of the past.

Growing economy

Ironically, the Left and Right are on the same side in opposing foreign investment in India. Communists despise open markets though their lodestars Russia and China have long embraced them. The Right, including the RSS, also opposes foreign investment in the wholly misconceived belief that it will subvert the Indian economy. In fact, India’s economy has been transformed following the PV Narasimha Rao-Manmohan Singh liberalisation of 1991-96. Though forced to open up the then bankrupt Indian economy by the International Monetary Fund (IMF), subsequent events have vindicated the move. The automotive, infotech and telephony sectors in India are today world class because international companies like Honda, Toyota, Vodafone and IBM entered a market dominated by rattling Ambassador cars and MTNL landline connections for which there were long waiting queues. In the 27 years since liberalisation, India’s economy has surged 30- fold from a GDP of Rs 6 lakh crore in 1991 to a GDP of Rs 180 lakh crore in 2017-18.

Those on both the Left and Right who worry about foreign investment damaging Indian firms are wrong. Obsessed with the East India Company syndrome, they overlook the fact that given its size and increasing sophistication, it is the Indian market that will reverse-colonise the world’s largest multinational corporations.

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Why Karnataka election has resulted in a political cliffhanger (and what it reveals about Modi and Rahul Gandhi)
By agreeing to play second fiddle to the JD(S), the Congress has displayed its frailty.
Tuesday, May 15, 2018

By offering unconditional support to the JD(S) and agreeing to back HD Kumaraswamy as chief minister, has the Congress given the BJP a taste of its own medicine in the Karnataka Assembly elections? In a topsy-turvy poll, the BJP emerged as the single largest party, but fell short of an absolute majority.

What next?

As per convention, the Karnataka governor must first call the single largest party or largest pre-poll (not post-poll) alliance to form a stable government. Only if that fails can the JD(S)-Congress post-poll alliance be given an opportunity to form the government. Events are moving at frenetic pace as all three contending parties race to the finishing line. The JD(S)-Congress seems well ahead.

Even if it fails to form the government, the BJP’s performance in Karnataka has re-established Prime Minister Narendra Modi’s ability to take an election by the scruff of its neck and turn it on its head. After the Gujarat setback last December, it was important for Modi to put his stamp on Karnataka. He addressed a flurry of 21 rallies over two weeks. Several months ago, the Congress seemed in pole position under a confident chief minister Siddaramaiah to win Karnataka in a canter. Modi’s blitzkrieg turned the tide, though the effort may prove fruitless.

Congress president Rahul Gandhi made Karnataka a Modi versus Rahul binary battle, pitching himself directly as a future prime minister. With three key state elections in Rajasthan, Madhya Pradesh and Chhattisgarh due in December 2018, the Congress president needed the momentum of a clear victory for the Congress in Karnataka. He didn’t get it.

Funding for the Lok Sabha election in 2019 is a priority for the Congress. Punjab has no money to spare. The only other states and union territories the Congress holds are Mizoram (which will go to polls in November 2018) and Puducherry. That explains the Congress’ desperation to accept Kumaraswamy as CM in a coalition government. It will keep the money tap open.

The Congress would have preferred to give the JD(S) outside support. The JD(S) though wants it to join the government. It hasn’t forgotten the Congress’ past record of pulling down HD Deve Gowda’s United Front government at the Centre in 1997.

What hurt the Congress in Karnataka is a triangular contest, with the JD(S) ironically cannibalising its seats. In Gujarat, where the contest was binary, the Congress stitched together a Dalit-OBC-Patidar coalition to give the BJP a scare. In triangular contests, the BJP tends to win. That must be the Congress’ key learning from Karnataka.

The BJP has its own worries. It is still a two-man party (Modi-Shah) as far as campaigning is concerned. That’s an unhealthy dependence. Between Modi-Shah at the top and a dedicated cadre of workers at the ground level, there is a wide gulf. To win the Lok Sabha election in 2019, the BJP will have to make key changes in its strategy.

In Uttar Pradesh, where it won 71 out of 80 seats, it faces the prospect of fighting a united Opposition of the SP, the BSP and the Congress. While a Modi versus rest contest could be turned to the BJP’s tactical advantage if Modi accuses the Opposition of duplicity for bringing together arch enemies Mayawati and Mulayam Singh Yadav, the BJP must be prepared for a loss of a large number of Lok Sabha seats in UP.

Rajasthan, Gujarat, Madhya Pradesh and Maharashtra, with little headroom left for the BJP to grow, will also bleed over a dozen seats between them.

The result in Karnataka thus assumes even larger significance. In the unlikely event of the BJP having managed to form the government ahead of the JD(S)-Congress alliance, it would have served as a beachhead for it in the South. Rajnikanth’s tilt towards the BJP is evident. If he enters the electoral fray in 2019, Tamil Nadu could be back in play for the BJP.

Non-UPA and non-NDA neutrals will be watching closely. The BJD, TRS and TMC are already discussing a federal front for 2019 separate from the Congress-led UPA. That will be music to Modi’s ears. It is the surest way to achieve triangular contests across key states, giving the BJP an edge, especially in Odisha.

Whoever eventually forms the government, the numbers in the 2018 Karnataka elections are an ominous portent for the Congress. In 2013, the Congress won 122 seats. It has lost around 45 of those seats. The BJP won 40 seats in 2013. It has gained 65 seats. Remarkably, the JD(S) has maintained its seat tally – losing just a handful of seats from the 40 it won in 2013.

Breaking the numbers down regionally, the BJP swept coastal Karnataka with over 53 per cent vote share. In the Mumbai Karnataka region, the BJP, against the odds, won 46 per cent vote share. Overall, the BJP and Congress clocked vote shares of 38 per cent apiece. But since BJP voters are concentrated in specific constituencies and Congress voters are evenly spread out across the state, the vote share-to-seat conversion favoured the BJP.

The worst outcome for the BJP now would be to take the Karnataka result, however government formation pans out, as an affirmation of its policies. It compromised with the corrupt Reddy brothers, sullying its anti-corruption credentials. It is fortunate that the Opposition, including the Congress, is seen as even more corrupt. But for the 2019 Lok Sabha election, the BJP will have to broaden its talent pool. The recent cabinet reshuffle is a sign that Modi recognises the importance of making changes in portfolios where some ministers have been incompetent, invisible or an embarrassment to the government.

Rahul Gandhi had made Karnataka a prestige battle. The outcome, with the Congress’ seat tally falling sharply, will dampen his prime ministerial ambitions.

By agreeing to play second fiddle to the JD(S), the Congress has displayed its frailty. Potential allies will have noticed that. They will be wary of hitching their wagons to it as the 2019 Lok Sabha election nears.

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British royalty’s German past
The royal wedding is expected to showcase the ethnic diversity of bride Meghan Markle. But subtle racism continues to infect British life

The New Indian Express
Friday, May 11, 2018

On 17 July 1917, an announcement from Britain’s royal family appeared in The Times of London: “Whereas we, having taken into consideration the Name and Title of Our Royal House and Family, have determined that henceforth Our House and Family shall be styled and known as the House and Family of Windsor. And do hereby further declare and announce that We relinquish and enjoin the discontinuance of the use of the Degrees, Styles, Dignities, Titles and Honours of Dukes and Duchesses of Saxony and Princes and Princesses of Saxe-Coburg and Gotha, and all other German Degrees, Styles, Dignities. Titles, Honours and Appellations to Us or to them heretofore belonging or appertaining.”

With the royal wedding between Meghan Markle and Prince Harry Windsor scheduled for May 19, it’s interesting to delve into why the British royals changed their surname in 1917 from the German Saxe-Coburg-Gotha to Windsor. The British royal family is in fact German. Queen Elizabeth II’s grandfather King George V spoke English with a guttural German accent. He was fluent though in German. During WW I, the British government, which had kept the royal family’s German ancestry well-hidden from the general British public, could no longer do so.

As a report by Susan Flantzer put it: “By 1917, anti-German sentiment had reached a fevered pitch in the UK. The British Royal Family’s dynastic name had gone from one German name to another, the House of Hanover to the decidedly more Germanic-sounding, House of Saxe-Coburg-Gotha. Many British people felt that this implied a pro-German bias. Even Prime Minister David Lloyd George remarked as he was on his way to see King George V, ‘I wonder what my little German friend has got to say.’ Letters were pouring into the Prime Minister’s office wondering how the British were going to win the war if the king was German.”

As WW I raged, not only did the British royals change their surname from Saxe-Coburg-Gotha to Windsor but they asked royal relatives to follow suit. First in line was the father of the last Viceroy of India, Lord Louis Mountbatten, a cousin of the British royals. The Mountbattens’ family name was the Germanic Battenberg. In English berg means mountain—hence the quick anglicisation to Mountbatten. Had the family retained its original name, the last Viceroy of India would have been Lord Battenberg and the British monarch at Indian Independence King George Saxe-Coburg-Gotha.

Why does all this matter? For several reasons. First, it exposes the deep hypocrisy and xenophobia of the British elite. Meghan, whose mother is black, is being projected as the symbol of plural, global Britain, at peace with its ethnic diversity. But subtle racism continues to infect British life at every level, from royalty to the yob on the street.

In his recent article in Vanity Fair, journalist Aatish Taseer, who had a three-year-long relationship with Princess Michael Kent’s daughter Lady Gabriella Windsor, exposed the petty racism that courses through the British bloodstream: “Princess Michael—recently in trouble again, for wearing a racist blackamoor brooch to her first lunch with Meghan—was famously scandal-prone. It was not that her father had allegedly been an SS officer, albeit a reluctant one; royals and Nazis go together like blini and caviar. It was that everyone above a certain age in Britain is at least a tiny bit racist. The colonial past made it almost second nature for Britons born at the tail end of the Raj to treat roughly a quarter of the planet as subject peoples. I was one of the first natives of that former empire to be dating a member of the royal family...(Princess Michael’s) pair of black sheep in Gloucestershire were named Venus and Serena.”

The racism drips down through the British establishment. Last week Britain’s Home Secretary Amber Rudd was forced to resign following the Windrush scandal. Dating back to 1971, the Windrush affair was a disgraceful British policy seeking “voluntary” deportation of black Commonwealth citizens who had arrived in Britain from 1948 to 1971 in response to Britain’s call to ease its post-war labour shortage. Around 1,30,000 mainly Caribbean immigrants are being targeted for deportation. Some have been placed in detention centres. British PM Theresa May as home secretary in 2012 tightened immigration rules. Her successor Rudd made it obligatory for landlords, employers and healthcare service providers to list immigrants who didn’t have paperwork when they arrived in Britain as children 60 years ago and now face deportation.

The Windrush scandal couldn’t have come at a worse time for next week’s royal wedding expected to showcase the ethnic diversity of bride Meghan. US President Donald Trump hasn’t been invited. Ironically, Trump is half-German and half-British himself. His mother Mary Anne Macleod sailed to the US from a small Scottish island in 1930 and in 1936 married his father Fred Trump whose family is from Bavaria in Germany. Like the British royals, the Trumps too changed their surname.

In his 2004 book, Trump: Think Like a Billionaire, Trump wrote: “A lot has been written about my family. A writer named Gwenda Blair spent twelve years on her thorough history, The Trumps: Three Generations That Built an Empire. She even traced our lineage back to 1608, when a German lawyer named Hanns Drumpf settled in the town of Kallstadt, forty miles west of the Rhine river. According to Blair, one of my ancestors, a winegrower, changed the family name to Trump at the end of the 1600s—a good move, I think, since Drumpf Tower doesn’t sound nearly as catchy.”

Meghan, the talented daughter of a mixed marriage, would smile indulgently were she reminded that if the British royals she’s marrying into hadn’t changed their surname 101 years ago, she’d be known from next Saturday as Princess Meghan Saxe-Coburg-Gotha.

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Karnataka heads for dead heat
Neither BJP nor Cong can afford to lose this election, which will set the template for other state polls

Thursday, May 10, 2018

Karnataka has never been as important to national politics as it is today. Neither the Congress nor the BJP can afford to lose what promises to be a cliffhanger assembly election on May 12.

For the Congress, retaining Karnataka will validate Congress president Rahul Gandhi’s recently declared prime ministerial ambitions. After he stitched together, with extreme cynicism, a successful Dalit-OBC-Patidar alliance in Gujarat, Rahul’s born-again Hinduism has been on display in Karnataka. Losing the state will stall the Congress’s momentum after recent bypoll victories in Rajasthan. Moreover, losing Karnataka will leave the Congress in power in just one big state — Punjab. Mizoram, the only northeastern state still with the Congress, goes to polls in November and the portents aren’t good for the incumbent government. Defeat in Mizoram would leave the Congress in power in just Punjab and Puducherry, out of India’s 36 states and union territories.

Karnataka matters to the Congress for another critical reason: winning it will set a template for the three big assembly elections due in December 2018: Rajasthan, Madhya Pradesh and Chhattisgarh. Rahul Gandhi and his team of advisors are hopeful of winning Rajasthan, and possibly Madhya Pradesh. That would create the momentum the Congress needs in the run-up to the 2019 Lok Sabha election.

Losing Karnataka would moreover erode morale among ground-level workers of the Congress in key assembly elections due later this year. Rivals Kamal Nath and Jyotiraditya Scindia have meanwhile signed a truce in Madhya Pradesh and accepted their new responsibilities as state party chief and campaign committee chairman, respectively. Sachin Pilot is already deeply embedded in Rajasthan where Chief Minister Vasundhara Raje faces strong anti-incumbency.

For the BJP winning Karnataka is equally critical. With over a dozen rallies to his credit, Prime Minister Narendra Modi has extensively covered the state. Losing Karnataka is not an option for the BJP: it would count as the first major electoral victory for Rahul Gandhi over the Prime Minister since becoming Congress party president even though the contest is being fronted by BJP party president Amit Shah and Karnataka Chief Minister Siddaramaiah.

Winning Karnataka is also important for the BJP’s southern strategy. With Tamil Nadu in turmoil, Kerala out of reach, Telangana on the margins and Andhra Pradesh in rebellion, the BJP needs a beachhead in the south. Opinion polls predict a dead heat with the Congress and the BJP winning around 90 seats each in the 224-seat assembly. HD Kumaraswamy’s JD(S) is projected to win over 35 seats and will be the kingmaker.

Displaying political intemperance, Rahul Gandhi mocked the JD(S) last month as the BJP’s ‘B’ team, imperilling the chances of a post-poll alliance with Kumaraswamy. The old animosity between former JD(S) leader Siddaramaiah and Kumaraswamy is another factor that could push the JD(S) into the BJP’s post-election embrace, making Rahul’s ‘B’ team claim a self-fulfilling prophecy.

That leaves Siddaramaiah with few options but to go for broke: a clean majority of over 113 seats for the Congress. Polls show the Congress slightly ahead of the BJP on vote share. The gap though is less than 1-2 per cent. That could be a bad omen for the Congress. Its voters are evenly spread across Karnataka. In contrast, BJP voters are concentrated in key constituencies. Psephologists reckon the Congress needs a 2-3 per cent vote share lead over the BJP to even out the skewed vote share-to-seat conversion ratio. Conversely, the BJP can equal or exceed the Congress’ seat tally even if it trails it marginally on vote share.

The 17 per cent Lingayat vote may play a less pivotal role than Siddaramaiah had hoped when he sought non-Hindu religion status for Lingayats, the community to which the BJP’s Chief Minister-aspirant BS Yeddyurappa belongs. Despite some Lingayat seers backing the Congress stand on a separate, non-Hindu religious identity, voters know it’s the Centre’s decision, not the state’s, and are unlikely to be swayed by rhetoric. Corruption will be a key electoral factor, along with caste arithmetic and emotive issues such as establishing Karnataka’s own flag and promoting anti-Hindi language parochialism.

For the Prime Minister, Karnataka is his sternest test since the December 2017 Gujarat election setback. He will focus on the economic and corporate turnaround that is now gathering pace across the country. Jobs though remain the BJP’s Achilles Heel. Here, too, there is light at the end of the tunnel. Reliance Jio announced last week that it plans to hire 80,000 people in 2018-19. Amazon and Foxconn in Telangana have huge expansion plans. Reliable statistics on jobs created annually since 2014 are hard to come by, but anecdotal evidence points to an incipient jobs uptick.

Karnataka has changed governments with metronomic regularity every five years. To end that trend, Siddaramaiah will have to pull more than one rabbit out of his hat. Rahul has outsourced the Karnataka election to his chief minister, but knows that defeat will be counted as one more failure under his dynastic leadership.

On May 15, counting day, all roads though may lead to the JD(S)’s Kumaraswamy, who, in the event of a hung verdict, will hold the key to government formation. Rahul may yet live to regret his ‘B’ team taunt.

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Please keep Mohammed Ali Jinnah's portrait, banish his bigotry
All sensible Indians, Muslims and Hindus, should examine those ideas and demolish each, one by one.
Tuesday, May 8, 2018

The demand to remove Mohammed Ali Jinnah's portrait from Aligarh Muslim University (AMU) misses the point. The problem is not the portrait. The problem is the toxic ideas the portrait represents. All sensible Indians, Muslims and Hindus, should examine those ideas and demolish each, one by one. The portrait will then no longer matter.

Mohammed Ali Jinnah was an accidental Muslim. A Gujarati Khoja, his family, like most Khojas, had been recently converted to Islam from Hinduism. He spoke fluent Gujarati but not a word of Urdu. Jinnah disdained the traditions of both conservative Hindus and Muslims. He relished pork. He drank scotch. He affected the manner of an English gentleman: waistcoat, pipe and monocle.

As Akbar S Ahmed in his book, Jinnah, Pakistan and Islamic Identity: The Search for Saladin, wrote: "Jinnah's lifestyle resembled that of the upper-class English professional. Jinnah prided himself on his appearance. He was said never to wear the same silk tie twice and had about 200 hand-tailored suits in his wardrobe. In spite of his extravagant taste in dress Jinnah remained careful with money throughout his life (he once rebuked his ADC for over-tipping the servants at the governor's house in Lahore in 1947). In the early 1930s, Jinnah lived in a large house in Hampstead, London, had an English chauffeur who drove his Bentley and an English staff to serve him. There were two cooks, Indian and Irish."

When political opportunity beckoned in the late 1930s, however, Jinnah embraced Islam with fundamentalist fervour. It is Jinnah's bigoted ideas, marinated for decades after his death by Pakistan's generals and politicians, which have turned Pakistan into a failed state.

Those who blame Jinnah for Partition should thank him. Undivided India would today have been a simmering cauldron of 1.60 billion people: one billion Hindus, 550 million Muslims and 50 million others of various faiths. Muslims would have comprised over 33 per cent of India's population. That tinderbox could be lit with the smallest fundamentalist matchstick into unending civil war.

History teaches us that in a country where antagonistic faiths are roughly equal in number, religious violence can be endemic. Lebanon and Northern Ireland are two diverse examples. In poor, underdeveloped Lebanon, the population is 54 per cent Muslim and 40 per cent Christian. In developed, wealthy Northern Ireland, Protestants comprise 48 per cent of the population and Catholics 45 per cent.

In Lebanon, civil war raged between Muslims and Christians from 1975 to 1990, leaving 1,50,000 people dead. Deep religious and ethnic scars remain. Muslims and Christians view each other with suspicion even as Iran-backed Hezbollah, a Shia militia, now effectively controls the government in Beirut. Increasing Shia-Sunni conflicts have today led Lebanese Christians to forge secret alliances with both Muslim sects, leading to continuing communal and sectarian tensions.

In Northern Ireland, Protestants and Catholics fought each other for over three decades from the 1960s to the 1990s. More than 4,000 people were killed, including scores of British policemen. Northern Ireland's legislative assembly, Stormont in Belfast, remains suspended since January 2017 following renewed disputes between warring unionist Protestants (who want to stay within the United Kingdom) and republican Catholics (who want to secede from the UK and merge with Ireland).

So India must first thank Jinnah for insisting on Partition. He took with him most of his toxic thoughts to a country founded on theocracy and pre-programmed to fail.

An enduring myth is that Indian Muslims identify with Pakistan. The overwhelming majority doesn't. They regard Pakistan as an embarrassment to their faith. Only a small indoctrinated minority of Muslims, especially in states like Kerala, Jammu & Kashmir and West Bengal, see kinship with Pakistan. It is this tiny minority though that foments trouble. Many are paid agents of Pakistan's ISI. They infect campuses like Jawaharlal Nehru University, Aligarh Muslim University and Jamia Millia Islamia. Some mentor sleeper terror cells in J&K, Kerala and West Bengal.

Hindu extremists make things worse by turning into cow vigilantes, harassing Hindu-Muslim couples under the guise of love jihad and pushing for the cause of Hindu nationalism rather than of an Indian nationalism that is plural, inclusive, and safeguards national security.

This plays into the hands of the Left-Islamist narrative that right wing Hindu extremists are as dangerous as Islamist terrorists. Rahul Gandhi in 2006 fed into this twisted narrative by telling an American envoy that Hindu terror posed a greater risk to Indian security than Islamist terrorism.

Much of this impacts voting patterns. Indian Muslims don't trust the BJP. By denying tickets to Muslim candidates in Gujarat and Uttar Pradesh, the BJP has shown it has given up on the Muslim vote. That leaves Muslims with a Hobson's choice: vote for the Congress which woos them during elections but ignores them for the next five years or cast their lot with brazenly communal parties like the AIMIM, IUML, NCP, SP, RJD, TMC and NC. All are regional fiefs using Muslim victimhood to garner votes. Do they care about Muslims' prosperity? A visit to Hyderabad's old city, an Owaisi family fief, will provide a quick answer.

If Indian Muslims want to share in India's transformation over the next decade from a low-income country into a middle-income global power, they must integrate into the mainstream. Be Indian first, Muslim second.

The most successful and enlightened Indians - from Jawaharlal Nehru to APJ Abdul Kalam - put the nation above their religion.

If India's 200 million Muslims remain segregated, prosperity will elude them as it has for the last 71 years. Scan the media: Every day dozens of start-ups announce millions of dollars in venture capital funds. Spotting a Muslim entrepreneur among these young start-up innovators is like searching for a needle in a haystack.

So keep Jinnah's portrait. But integrate. Dump his theocratic bigotry that has brought Pakistan to ruin. Join the mainstream and embrace the idea of a plural India, not the fraudulent one you've been fed for decades.

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Truth behind how demonetisation impacted jobs in India
About 11.83 million new jobs were created in 2017, but the net gain was only 1.43 million.

Thursday, May 3, 2018

How many jobs were created in calendar 2017? Mahesh Vyas, CEO and managing director of the Centre for Monitoring Indian Economy (CMIE), says 1.43 million. Surjit Singh Bhalla, a member of the Prime Minister’s Economic Advisory Council, says 15 million. A lively debate has arisen over these conflicting claims.

The dichotomy

I spoke to Vyas to make sense of the dichotomy. The analysis that follows is based on the data spreadsheet Vyas sent me which contains detailed age group break-ups of those who are employed in the formal workforce.

In Vyas’ recent article in a daily (May 1, 2018), the numbers for only three age groups (15-24, 25-64 and over-65) were published. An analysis of a more detailed age break-up in CMIE’s spreadsheet throws new light on two key issues: One, how many jobs, and in which age groups, were created (and lost) in calendar 2017? Two, how did demonetisation affect job losses — and which age groups were most affected by it?

As CMIE’s Vyas writes in his piece, 11.83 million new jobs were created between January 2017 and December 2017 in the 25-64 age group. This age group comprises over 85 per cent (346.84 million) of India’s total formal workforce (404.91 million) as per CMIE data. The key 25-64 age group saw a near four per cent increase in job creation in 2017 despite demonetisation (11.83 million new jobs created in 2017 on a 2016 base of 335.01 employed). This suggests resilience in the Indian economy.

Demonetisation, however, struck hard at the 15-24 age group (a loss of 7.22 million jobs) and the over-65s (a loss of 3.18 million jobs). Together, the very young and the very old lost 10.40 million jobs in 2017, largely due to demonetisation. The loss nearly wiped out the gains in jobs (11.83 million) among the 25-64 age group which comprises the vast bulk of India’s formal workforce. The net gain in jobs in 2017 was thus pruned to 1.43 million. Without such large job losses among the under-24s and over-65s, job creation in calendar 2017 would have been significantly higher.

When we break up the 15-24 age group further into 15-19 and 20-24 subgroups that together lost 7.22 million jobs post-demonetisation in 2017, an interesting figure emerges: almost all of the 7.22 million jobs lost in this 15-24 age group were among 15-19 year-olds. This sub-group accounted for the loss of around six million jobs.

Now 15-19 year-olds are usually employed (as Mahesh Vyas agreed during our conversation) in low-paid jobs which require little education. Wages are usually paid in cash. Poverty drives teenagers to work rather than to study. It is this 15-19 age group with its approximately 6 million job losses (due largely to the effects of cash shortages following demonetisation in November 2016) that has skewed the job creation figures for calendar 2017.

Sample analysis

If we examine the total sample universe in the age group from 20 years onwards rather than from 15 years onwards by excluding 15-19 year-olds, the CMIE analysis looks very different: it reveals that an aggregate of over 7 million (6 million plus 1.43 million) jobs were created among those 20 years old and above right up to the over-65s. Why separate out the 15-19 year-olds from the analysis? Because those employed in the 15-19 year bracket accounted for just 14 million workers out of CMIE’s workforce base of over 400 million. Nearly half of these 14 million poorly educated youth (all teenagers) appear to have lost their jobs after demonetisation. Job losses in the 20-24 and over-65 age groups were far smaller. And in the key 25-64 age group, there was a large gain of 11.83 million jobs.

Skilling India

How quickly can jobs return to those in the 15-19 age group? Vyas says recovery is not yet discernible. It could be an important factor in the 2019 Lok Sabha election since many among the 15-19 year-olds will be eligible to vote. The loss of jobs in both the 15-19 age group and the over-65 age group totals nearly 10 million. These constitute among the lowest-paid jobs in the country. In contrast, the increase of 11.83 million jobs among the well-paid, professional 25-64 workforce (which accounts of 85 per cent of the total workforce) has ensured that the impact of demonetisation on the economy has been relatively modest – shaving around 1 per cent off GDP growth. GDP growth in 2017-18 is estimated at 6.6 per cent by the IMF, World Bank and Indian financial institutions compared to the 7.6 per cent growth predicted before demonetisation.

What next? To get job growth among the young rising again, the government must focus on vocational training, especially for those youth who have, for various reasons, been unable to complete their education. The Skill India mission is an important tool for this. Several corporates have adopted skilling workshops to upgrade employees into higher paid jobs. The Mudra scheme of providing small no-collateral loans to entrepreneurs could also be a game-changer if implemented well. It has the potential to be an employment force multiplier.

The fact that the 25-64 age group which comprises the overwhelming majority of the workforce created 11.83 million jobs is a healthy sign. It is by re-skilling the very young with little education but great untapped potential, who lost out after demonetisation, that could turn India’s jobs story around.

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Why Modi and Xi Jinping are new grandmasters of the geopolitical chess game
Afghanistan is where the winning moves will be made.
Tuesday, May 1, 2018

Chinese President Xi Jinping is a princeling: his father Xi Zhongxum was a senior political leader in the People’s Republic of China (PRC). Indian Prime Minister Narendra Modi comes from a humbler background, but the two men have one quality in common: ruthlessness.

The Modi-Xi bilateral in Wuhan marked only the opening move in an elaborate chess game between the duo.

Afghanistan is the chess board.

Xi wants India to join the Belt and Road Initiative (BRI), though China’s vice-foreign minister Kong Xuanyou said in Wuhan, “China won’t force it on India to or be too hard on it.”

Without India’s participation, however, the BRI will lack legitimacy. Kong’s statement is, therefore, more pragmatic than definitive.

Enter Afghanistan. Xi knows that the United States is already encouraging India to play a larger economic role in Afghanistan. The decision by Xi and Modi to work jointly on economic projects in Afghanistan satisfies three Chinese concerns and two Indian ones.

First, India-China infrastructure projects will indirectly draw India into the BRI which, as Xi announced late last year, will extend to Afghanistan.

Second, for that to happen, peace must return to Afghanistan with the Pakistan-sponsored Taliban joining an Afghan coalition government at some stage. The China-Pakistan Economic Corridor (CPEC), part of the BRI, already faces security threats from Baloch insurgents. Restoring peace in the region is therefore key to BRI’s success. India’s economic role in Afghanistan, now backed by China, can help.

Third, a deeper economic partnership in the region between India and China will, Xi hopes, help wean India away from the US orbit of influence. Xi is keenly aware that by 2030 the world’s three largest economies will be the United States, China and India. In this geopolitical triangle, China and the US will form the two largest angles and India the smallest. But though the smallest, India will be the swing power. Whoever it aligns with – China or the US – will have the edge.

Xi sees US-China rivalry in Cold War terms. As this century unfolds, India will increasingly play, in this new Great Power rivalry, the role Britain played during the Cold War between the US-led West and the Soviet Union. With Britain, an emasculated power, and Europe, entrapped in pacifism, India is the only regional power with a large economic and military presence that the US can rely on to counter China. Hence comes the carefully crafted change in India-US joint statements, highlighting the Indo-Pacific rather than the Asia-Pacific, giving prominence to the Indian navy’s strengths in the Indian Ocean Region (IOR). It is a doctrine that conflicts with Xi’s ambitions in the region.

Xi knows that India and the US are developing a strong strategic military partnership. That is why he played the “pan-Asian” card with Modi. In Wuhan, Xi spoke emphatically of China and India as Asian powers building a “globalised and multipolar world” together.

As a shrewd strategist, Modi sees two benefits from Xi’s gameplan. The first is neutralising Pakistan. While Xi has his own geostrategic reasons for drawing India into a pan-Asian orbit, Modi knows that joint India-China economic projects in Afghanistan will cool Pakistan’s fevered opposition to India’s growing role in a country Islamabad has long coveted as part of its strategic depth theory.

The second benefit for India in Xi’s new overtures is that a joint India-China co-operation lowers the temperature on the eastern front. With India’s military still under-equipped to fight a two-front war, a modus vivendi with Beijing will help the Indian Army focus on counter-terrorism operations in Jammu & Kashmir and infiltration of terrorists across the Line of Control (LoC).

Will Pakistan buy into the emerging India-China entente cordiale? Clearly not. But it may have little choice. Geopolitical alignments are changing rapidly. China and the US are locked in a trade war. China’s exports to the US are over $500 billion. China’s imports from the US, at $170 billion, are only a third of that. Beijing is, therefore, vulnerable to punishing trade tariffs that US President Donald Trump has threatened to impose.

Developments in the Korean peninsula have also worried China. The meeting last week between South Korean president Moon Jae-in and North Korea’s Kim Jong-un came as a result of US, not Chinese, pressure. The proposed Trump-Kim summit will sideline China. Beijing has been ruled out as a venue. Mongolia or Singapore is likely to be the venue for the historic summit.

As Jane Perlez wrote in The New York Times: “China finds itself removed from the center of the rapidly unfolding diplomacy, and is unusually wary about Mr. Kim’s objectives in reaching out to his nation’s two bitterest enemies (South Korea and the United States). With events moving so quickly, and Beijing finding itself largely left on the outside, analysts say China and its leader, Xi Jinping, must at least consider what they called worst-case contingencies. The loss of prestige is a big problem for China and Xi, who wants everyone else to view China as an essential actor of international relations. So China fears the outcome could be either a North Korea or a unified Korean Peninsula leaning toward the United States.”

A unified Korea could, despite Xi’s endorsement of the peace treaty between Moon and Kim, be a nightmare for Beijing. Since the 1950-1953 Korean war, China has used North Korea as a buffer state to keep 28,000 US troops stationed in South Korea at a safe distance. A unified Korea could bring them to China’s doorstep.

Increasingly isolated and in Trump’s crosshairs, Xi’s pragmatism has compelled him to launch his charm offensive and seek co-operation with India rather than confrontation. The possibility of Doklam 2 has significantly receded.

Modi’s next move on the chessboard will be interesting. Pakistan-abetted terrorism needs to end. Membership to the Nuclear Suppliers Group (NSG) and designating Masood Azhar as a global terrorist will form part of the agenda of future Modi-Xi meetings.

The balance of power between Beijing and New Delhi has shifted subtly. Both Xi and Modi know that Afghanistan is where the winning moves in this elaborate geopolitical chess game will be made.

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Air India Sale Hits Turbulence
Will the government, taken aback by the withdrawal of interest by both domestic and global carriers, change some of the restrictive conditions?

Friday, April 27, 2018

Trust the civil aviation bureaucracy to turn a good idea upside down. Air India's proposed sale is one of the Narendra Modi government's most sensible policy decisions. Burdened with unserviceable debt, a once-proud airline has been brought to its knees over decades of neglect. Its lucrative Gulf routes were given away to carriers from the Middle East. Successive chairmen - all bureaucrats with no domain knowledge of aviation - oversaw falling service standards and flight delays.

The decision to sell the airline was finalised nearly a year ago and IndiGo Airlines immediately showed interest. The Tatas (in partnership with Singapore Airlines) and Jet Airways too were keen to buy Air India (AI). Despite its debt overhang and annual losses, the airline had great underlying assets: profitable subsidiaries, legacy landing right at airports like London Heathrow, a large fleet of aircraft, and prime real estate across the country.

The Minister of State for Civil Aviation Jayant Sinha was initially upbeat. He said the sale would go through. There were buyers in India and abroad. Half of the airline's debt burden could be retained by the government, he said, and investment banks would soon be invited to bid for the mandate.

But within weeks the mood turned dark as the government unveiled its "conditions" for AI's sale. They were so onerous, so filled with 1970s bureaucratese and in many ways so irrational that the bidders quickly lost interest. IndiGo Airlines was the first to say it wasn't interested in Air India anymore. The Tata/Singapore joint venture and Jet Airways followed suit. The civil aviation ministry has put up a brave face but it's clear that unless the conditions of sale are significantly changed, AI's divestment will be a non-starter.

What is wrong with the AI draft sale document circulated by the civil aviation ministry? Examine the conditionalities in the document: "As a part of the disinvestment, 76 per cent equity stake in Air India Ltd along with Air India's 100 per cent equity stake in Air India Express Ltd and Air India's 50 per cent equity stake in AISATS (a ground handling JV with Singapore Airport Terminal Services) is being disinvested by the government of India. Air India has interests in other entities which are in the process of being transferred to a separate SPV (special purpose vehicle) and will not be a part of the proposed transaction."

The SPV is the key conditionality. It will not be offered for sale. The SPV will hold some of AI's most attractive assets: Air India Engineering Services, Air India Air Transport Services (the airline's local ground handling company), Airline Allied Services (the operator of feeder airline Alliance Air) and the Hotel Corporation of India. To make the deal even less attractive, AI's real estate assets will be spun off into a new company called Air India Assets Holding Ltd (AIAHL).

Potential buyers have been put off by what they see as the ministry's small-minded approach. One government official said dismissively of the 24 per cent residual stake in Air India that it will hold after the sale: "The government can exit at any time after the transaction, if it wishes." Reacting to the sale document, Jet Airways issued this statement: "We welcome the government move to privatise Air India. It is a bold step. However, considering the terms of offer in the information memorandum and based on our review, we are not participating in the process".

The deadline for submitting bids is May 14, 2018. Will the government, taken aback by the withdrawal of interest by both domestic and global carriers, change some of the restrictive conditions? It may not have an option. As it stands today, the AI sale proposal is in a state of induced coma. EY is the transaction advisor for AI. Any changes in the information memorandum of the bid document will be made by it under the supervision of a group of ministers chaired by Finance Minister Arun Jaitley.

What's on offer to buyers is a 76 per cent equity stake in Air India, a 100 per cent stake in Air India Express Ltd and AI's 50 per cent stake in AISATS. Air India has excellent assets but is grossly overstaffed. According to the information memorandum, buyers will have to take on debt of Rs. 33,389 crore. Another Rs. 15,389 crore will remain with the airline's new SPV, AIAHL, which will control assets not part of the sale offer.

Air India's market share has been gradually falling. It enjoys just 16.93 per cent domestic market share and an even lower 12.27 per cent international market share. Air India's loss of lucrative routes in the Gulf and elsewhere during Praful Patel's tenure as civil aviation minister in the UPA government was particularly damaging.

As I wrote on these pages on July 26, 2017: "Civil aviation minister Praful Patel disastrously merged Air India with Indian Airlines and gave away the merged entity's most profitable domestic and international routes to Emirates, Etihad, Jet and other airlines. From being India's national carrier, accounting for a third of the total passenger traffic, Air India today has under 14 per cent overall market share. If ever there was wilful destruction of India's two airlines - Air India and Indian Airlines - the Congress-led UPA government and its alliance partner, the Nationalist Congress Party (NCP), did an efficient hatchet job."

In 2016-17, AI made an annual loss of Rs. 5,765 crore on revenues of Rs. 22,177 crore - a negative margin of 25 per cent on sales. Much of the loss can be attributed to bloated overheads. But with powerful trade unions, a new buyer will find it difficult to cut staff levels. The government's approach to PSU disinvestment has often smacked of half-heartedness. Air India is a typical example. Instead of simplifying the sale process, the government has complicated it. By stripping the Air India group's ground handling, feeder airline and real estate assets, the price the government will eventually get will be far lower than it would have had it sold the whole AI group. Asset stripping is a bad ploy and will play poorly with global investors.

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Has rising turmoil really destroyed India’s growth story
Parties predicting doom and disaster today are the ones that have appeased, and not empowered, citizens for decades.
Friday, April 27, 2018

“Is the India story over?” asked an anxious foreign investment banker. “No,” I replied, “It’s just getting started.”

He shook his head disbelievingly. “The New York Times and The Washington Post are full of reports on the surge in violence against women, lynchings of Muslims and Dalits, ATMs running dry and rising protests everywhere.”

I asked him why he was visiting India. He looked sheepish. “Well, we’re investing in a bunch of start-ups. India has great long-term potential.”

That’s the rub. Long-term potential but short-term turmoil. Between these two narratives of contemporary India, is there a more nuanced middle ground?

The short-term narrative, of doom and disaster staring India in the face, is of course sheer nonsense. Violent protests and riots have been a part of the “India story” since 1947. In fact, before Independence, Hindu-Muslim riots were endemic. Those who grew up in Gujarat, Uttar Pradesh or Maharashtra know that communal riots were the rule, not the exception.

As Meena Menon writes in her book Riots and After in Mumbai (Sage Publishing): “For a while, Muharram became an annual excuse for riots between the Shias and the Sunnis and later cow slaughter, which was the background of the 1893 riots, continued to be the bane of law and order not only in Bombay city but in other parts of the presidency.

Riots broke out over seemingly trivial issues. Coming to the year 1927-28, the following facts stare us in the face. Between the beginning of April and the end of September 1927, no fewer than 25 riots were reported. Of these 10 occurred in the United Provinces, six in the Bombay Presidency, two each in the Punjab, the Central Provinces, Bengal and Bihar and one in Delhi. The number of riots during the 12 months ending March 31, 1929, was 22. The causalities, swelled heavily by the Bombay riots, were very serious, no fewer than 204 persons having been killed and nearly 1,000 injured.”

When a polarising leader like Narendra Modi became prime minister in 2014, reports sprang up in India’s polarised media – and several in America’s and Britain’s equally polarised media – predicting riot after riot.

After four years, have these doomsayers been proved right? According to IndiaSpend’s analysis of data sourced from the home ministry, communal violence did increase (by 28 per cent) between 2014 and 2017 with 822 recorded incidents. However, it was less than the decade’s high, recorded in 2008 under the UPA government, of 943 incidents of communal violence.

There is a larger point though. While communal violence has been a fabric of Indian life through the years, before and after Independence, as Meena Menon points out, the party in power after 1947 was mostly the Congress. Some of the worst communal riots took place on its watch, as Salman Khurshid’s recent mea culpa has underscored. And yet the Congress has nurtured a narrative that it is a “secular” party. In the Indian context that doesn’t mean – as it does, for example, in France or Britain, where church and state are strictly separate – that all religions are treated equally.

When Hindu personal law, for example, was codified in the 1950s by the Jawahalal Nehru government, Muslim personal law was left untouched. The secular Congress calls this being respectful of a community’s sensitivities. Others call it appeasement. Whatever the nomenclature, it hasn’t helped Muslims prosper even after seven decades.

In an oped in The Indian Express on April 20, 2018 titled “The Myth of Appeasement”, Christophe Jaffrelot and Kalayarasan advance a parallel secular narrative: “In the current debate on the place of the Muslims in India, one variable has not been factored in – their socio-economic situation – as if the dominant repertoire had shifted for good towards the politics of symbols and identity. In socio-economic terms, Muslims are losing ground rapidly, even if their situation is deteriorating more in northern and western India than in the south.”

The authors attribute this to majoritarianism and argue with statistics from the Indian Human Development Survey (IHDS) of 2004-05 and 2011-12 that the “socio-economic situation of Indian Muslims was less critical in 2004-05.” Since the two reference points are 2004-05 and 2011-12, the deterioration in Indian Muslims’ well-being took place during UPA1 and UPA2, which rather defeats Jaffrelot’s and Kalayarasan’s central argument.

The truth is that the socio-economic status of Indian Muslims has been falling for several decades. But, declares the “secular”Congress, that proves we haven’t appeased Muslims. If we had, they’d have been better off since we’ve been in government for 55 of India’s 71 years.

Like Jaffrelot and Kalayarasan, the Congress misses the point. Appeasement by definition cannot improve the status of Muslims because it amounts to tokenism. Only empowerment can improve lives. “Secular” parties have appeased, not empowered Muslims for decades, bringing them to the sorry state they find themselves in.

Is the majoritarian BJP any better for Muslims? Probably not. In any case, reversing over half-a-century of tokenism that has sequestered Muslims in socio-economic silos will take an age.

The doomsday narrative then hardens: under the BJP, violence against Muslims and Dalits, lynchings and rapes are rising uncontrollably. Even judges fall for this narrative. Last week, two Bombay High Court judges, Justices SC Dharmadhikari and Bharat Dangre, said during a hearing: “Secular people are not safe in the country. It is unfortunate that today the image of the country is such that those living abroad feel only crimes and rapes happen in India.”

It is a narrative that The New York Times has clutched with both grubby hands. An article by an Indian journalist recently warned the newspaper’s befuddled readers that India was descending into a “violent abyss”. Despite this atavistic narrative of “short-term turmoil” ruining India’s “long-term potential”, and despite the Modi government’s self-inflicted wounds like the ham-handed implementation of demonetisation and GST, India is the growth story, warts and all, that every global corporation wants to be a part of: short-term and long-term.

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Target is Modi, not CJI Misra
The New Indian Express
Thursday, April 26, 2018

The relentless Congress-led move to impeach Chief Justice of India (CJI) Dipak Misra, following the decision to take the matter back to the Supreme Court, may backfire on its proponents.

A political move to smear the judiciary by attacking the CJI without credible evidence received stern criticism from India’s most respected jurists, including Fali Nariman and Soli Sorabjee.

After the Chairman of the Rajya Sabha, Vice President Venkaiah Naidu, summarily rejected on April 23 the notice of motion to impeach the CJI, the Congress showed its ruthless streak. A livid Rahul Gandhi, the Congress president, ordered party MP and senior counsel Kapil Sibal to announce at a press conference that the vice president’s order would be challenged in the Supreme Court.

The irony of the move exposes the Congress’s duplicity. It moved Parliament because it was dissatisfied with the Supreme Court over many issues, including those raised by four members of the apex court’s Collegium. Now it is planning to move the Supreme Court because it is dissatisfied with the Parliament following the Rajya Sabha chairman’s order. Is there a method in this madness? The notice of motion to impeach the CJI was in any case invalid at inception because the Congress, by publicising its intention beforehand, violated the rules of procedure governing impeachment motions.

With critical Assembly polls due in Karnataka next month, the Congress has calculated that showing the BJP as being complicit with the judiciary will be electorally beneficial even if there is a public opinion backlash against its cynical tactics. The real objective of the impeachment motion is to intimidate the CJI into recusing himself from “sensitive” cases like Ayodhya-Ram Mandir which are being heard by his Bench. But Misra is made of sterner stuff. He has told colleagues that he will not recuse himself from any cases, and certainly not from sensitive ones, even as the Congress challenge wends its way through the Supreme Court.

A majority of senior lawyers in the Supreme Court have backed the CJI and condemned the impeachment motion which Opposition parties like the TMC, DMK and BJD refused to support. Senior Supreme Court advocate Rakesh Dwivedi was especially blunt: “Congress has fallen to an abysmal low in moving a motion of impeachment after the Supreme Court’s Loya judgment. Apparently it was issuing the threat of a motion to deflect the course of the judgment in the Loya case in favour of its political interest.

And when the judgment did not meet its expectations, Congress filed the motion. The move is also intended to delay hearing of the Babri Masjid case, over which Kapil Sibal made fervent pleas to the court. The motion is ill-advised and founded on baseless charges. Its purpose is only to compel CJI Dipak Misra to recuse. Congress knows no inquiry will end by the time the CJI retires. The party also knows it lacks strength in Parliament to succeed. So this is not an impeachment motion but a recusal motion.”

The real target of the Congress of course is not CJI Misra but the Narendra Modi government. The CJI is regarded as collateral damage. When a CJI-led Bench that included Justices Chandrachud and Khanwilkar dismissed the PILs filed by proxies of the Congress in the Judge Loya case, party President Rahul Gandhi was reportedly furious.

It was decided to file the impeachment motion the very next day, however negative the optics following the Loya judgment. Once the Rajya Sabha chairman rejected the notice of motion for impeachment, it was again Rahul who insisted on challenging the order in the Supreme Court where the matter will obviously be heard by a Bench other than the CJI’s. The challenge will almost certainly fail but drawn-out proceedings in the apex court are aimed at further humiliating the CJI.

Rahul moreover sees the legal process as a means to cast aspersions on the Modi government’s alleged influence over the apex court. Ever since he became prime minister in May 2014, the Congress, the Left and minority-leaning parties like the NCP and SP have spared no effort to discredit Modi. In the run-up to the 2019 Lok Sabha election, the Opposition has spotted a vulnerability in Modi.

The Gujarat Assembly result, with the BJP reduced to 99 seats, gave the first inkling of Modi’s fading electoral magic. Bypolls in Rajasthan, where the BJP was trounced, added to the hope that the Modi wave had ebbed. The Uttar Pradesh and Bihar by-elections, especially the BJP’s defeat in Chief Minister Yogi Adityanath’s Gorakhpur, convinced Rahul and his new coterie of advisors that it was time to deliver the knockout punch to Modi.

If CJI Misra finds in favour of building the Ram Mandir in Ayodhya before he retires on 2 October 2018, the surge in Hindu sentiment would tilt the 2019 Lok Sabha polls towards the BJP. It was thus critical to force the recusal of CJI Misra from the Ayodhya case—even if the motion to impeach him in order to achieve that objective is based on bogus grounds. This is the level to which Indian politics has sunk. For the Congress though, it’s not the first time it has tried to subvert the Supreme Court for political gain. Indira Gandhi did it in 1975 during the Emergency. Grandson Rahul Gandhi is doing it more subtly 43 years later.

Over the decades, the Congress has built up an ecosystem of journalists, bureaucrats, activists and lawyers to advance its causes, both legitimate and illegitimate. Most of these propagandists have revealed themselves in the current impeachment saga. When the ploy backfires on the Congress—as it inevitably will—this putrid ecosystem will discover that its days too are numbered.

Follow@minhazmerchant on twitter


What Modi can expect from Xi
Thursday, April 22, 2018

Does Prime Minister Narendra Modi’s hastily scheduled bilateral meeting with Chinese President Xi Jinping on April 27-28 in Wuhan presage a new beginning in the frayed Sino-Indian relationship? The two leaders are to meet in Qingdao for the SCO summit in June anyway – so why this sudden ‘informal’ bilateral? Discussions on the Modi-Xi meeting ahead of the SCO summit began in January in Davos and gathered pace recently. The signs were soon evident.

It’s not often that India’s external affairs minister, defence minister and national security advisor end up visiting the same country for high level talks within days of one another. NSA Ajit Doval made a discreet visit to China earlier this month followed by near-simultaneous visits by Sushma Swaraj and Nirmala Sitharaman this week. As the head of the proposed new Defence Planning Committee (DPC) comprising the three service chiefs and, among others, the defence, external affairs and finance (expenditure) secretaries, Doval is now not only the point man on border negotiations but also the key strategist leading India’s reset with China.

Swaraj and Sitharaman meanwhile have taken well to their complementary roles. Swaraj, on a four-day visit to China, met the rising star in the Chinese government, foreign minister and state councillor Wang Yi in Beijing on April 24. Sitharaman, in Beijing on the same day as Swaraj, meanwhile met Chinese Defence Minister General Wei Fenghe, at a venue, just miles away.

Important in themselves, the Doval-Swaraj-Sitharaman visits laid the ground for the Modi-Xi bilateral tomorrow. The meeting will be closely watched. In less than two months, the Financial Action Task Force (FATF) is scheduled to meet to consider whether Pakistan has done enough on terror financing to be spared blacklisting. At the February 2018 plenary of the FATF in Paris, China had surprisingly voted with the majority to greylist Pakistan. Only Turkey voted for Islamabad with even Saudi Arabia voting against.

China now holds the key to Pakistan’s possible blacklisting by FATF in June. Pakistan has clearly not done enough to tackle terrorism and terror financing. Hafiz Saeed continues to have free rein. Blacklisting would be a severe, even crippling, blow to Pakistan. Only two countries are currently on FATF’s blacklist: North Korea and Iran. Blacklisting cuts off international lending which Pakistan’s struggling economy badly needs. Foreign investment too would dry up.

Will Beijing let that happen? Almost certainly not. It has constantly defended Islamabad on terrorism, repeating the fiction that Pakistan is on the frontline of fighting terrorism, not perpetrating it. For China’s president-for-life Xi Jinping the Belt and Road Initiative (BRI) overrides everything. Pakistan sits on real estate that connects China by road, rail and sea to the markets of the Middle East and Africa. The China-Pakistan Economic Corridor (CPEC) is an integral part of the BRI.

China has even tolerated the arrest of its nationals in two recent incidents in Pakistan. In the first, a group of Chinese engineers working on the CPEC beat up Pakistani security guards and were arrested before being deported to China. Last week three other Chinese nationals were arrested by the Pakistan Airport Security Force (ASF) at Islamabad’s new airport for using a drone to photograph the airport. The drone was shot down by the police and the Chinese nationals taken into custody before being released with a warning.

None of this has deterred China from protecting Pakistan in international fora. And yet, China’s leadership is pragmatic. It knows India is a rising power. The recent Gagan Shakti military exercise involving hundreds of IAF fighter jets, 10,000 army troops and the navy’s warships was India’s biggest war game in three decades. It drew grudging admiration from the largely anti-India state media in China which said only the United States and India were capable of carrying out such large-scale, complex war games.

When Modi meets Xi tomorrow in Wuhan, both men will be aware of the changed balance of power in the region. It will also be weeks away from the first anniversary of the Doklam crisis in which India successfully stared China down. India has since toned down the rhetoric. The decision to shift from Delhi to Dharamshala two events celebrating the 60th year of the Dalai Lama’s arrival in India was conveyed in advance to Beijing. That set the tone for the Doval-Swaraj- Sitharaman meetings in China and opened the way for the Modi-Xi bilateral.

But Indian policymakers should harbour no illusions. Dealing with China requires patience, strategy and flexibility. Rapid developments are taking place across the region. A summit between US President Donald Trump and North Korea’s Kim Jong-un, scheduled for late May or early June, could dramatically alter the geopolitical equation in Asia. China increasingly wants to be seen as a responsible superpower, not a regional bully. Its protectionist trade standoff with the US and the growing strategic ties between New Delhi and Washington have forced Beijing to rethink its belligerent approach to India.

For India, as with everything to do with the inscrutable Chinese, the strategy must be a calculated mix of firmness and flexibility. In Wuhan, over the next two days, that is the approach Modi should adopt.

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Modi government report card Key achievements and failures
Rural electrification, road building have been major policy successes.

Thursday, April 22, 2018

Four words changed the political mood in 2015: “Suit-boot ki Sarkar”.

Rahul Gandhi, still derided as lacking in political acumen, had struck a nerve. Till then, throughout his twelve-and-a-half years as Gujarat chief minister and his first year as prime minister, Modi was regarded as a friend of big business. His economic policies were expected to be pro-capitalist: liberalisation on steroids. He dressed the part in monogrammed bandh galas and seemed more comfortable addressing NRIs in London and New York than in his constituency Varanasi (he visited the city for the first time, following his May 2014 landslide win, only in November 2014).

The suit-boot ki sarkar taunt changed that overnight. The expensive suits gave way to cotton Nehru jackets; big business was shunned; economic policies were increasingly aimed at the poor; the middle-class and small traders, the BJP’s core vote base, were sidelined

Modi had taken a sharp Left turn.

Povertarian politics, mastered by Indira Gandhi in the early-1970s, was back. Privatisation of PSUs? Off the table. Tax reform for the salaried middle-class? No longer a priority. Less bureaucracy? More.

Turning Left on economic policy didn’t mean Modi had entirely abandoned his natural reformist instincts. FDI was liberalised across sectors, start-ups encouraged, and big global defence deals signed.

Next month, Modi completes four years as prime minister. How has he done? Here’s an assessment of the government’s achievements, failures and works-in-progress.


The Insolvency and Bankruptcy Code (IBC) was legislated in 2016. By taking bank NPAs head-on, the IBC is proving to be a game-changer. Total bank NPAs are around Rs 9 lakh crore. The interest shown by leading Indian and global business houses (Tatas, Birlas, Vedanta and Britain’s Liberty House among others) in buying bankrupt companies with large bank NPAs but good underlying assets could, given sensible implementation of the IBC process, restore Indian banks to good health, enable them to restart lending to the corporate sector, and boost private investment. Clearly a blue-ribonned reform.

Rural electrification has been a major policy success. While last-mile connectivity has left many villages without power, the pace of rural electrification has been quickest in India’s history – pre- and-post Independence.

The pace of road building has been another outstanding success. Under the UPA regime, around 17km of roads were built per day. Currently, over 40 km of roads are being constructed daily. Moreover, if the methodology of counting road mileage constructed is changed to the globally recognised model of counting both lanes of a road and not just one, the figures would double under both NDA and UPA governments.

The National Health Protection Scheme (NHPS) is one of the boldest initiatives of the Modi government. It will provide medical insurance cover of Rs 5 lakh to 500 million low-income Indians. The scheme is budgeted to cost around Rs 10,000 crore annually (though critics say the cost could exceed Rs 80,000 crore).

Set to roll out on October 2, 2018, it is a long overdue step towards providing universal medical care. Setting up tertiary rural healthcare centres is obviously crucial for the scheme to work on the ground. It is a challenge the government faces given the rudimentary health clinics in rural areas and the shortage of qualified doctors.

The other key achievement during the NDA government’s first four years in office is Mudra Yojana, under which loans are given to small entrepreneurs with little or no collateral. The scheme is designed to produce an army of self-employed who in turn will create employment through their entrepreneurial ventures.

Other standout successes have been the Jan Dhan Yojana, which has created over 312 million new bank accounts, the direct benefit transfer (DBT) scheme, which has significantly cut pilferage, and subsidised LPG cylinders for the poor. Beyond these is the absence of corruption in the higher echelons of the government.

That’s where the good news ends. Corruption at lower levels remains endemic. It proliferates at state and local levels


A slew of governance failures have meanwhile taken the sheen off the Modi government. India’s defence budget has not kept pace with the country’s need to be prepared for a two-front war. Well below 2 per cent of GDP, a majority of the defence budget goes towards pensions, salaries and overheads to run a military of nearly two million men and women.

Many of the Modi government’s missteps have originated in the ministry of finance (MoF). Demonetisation was poorly executed by the MoF. GST is burdened by an unnecessarily complex architecture. New income-tax forms require details never sought before. The raid raj is back. The result: an alienated middle-class, aggrieved traders and unhappy businessmen. All this would have a silver lining if tax collections rose sharply. They have increased but not significantly compared to previous years.

The Make in India scheme has been a mixed bag. Private and foreign investors have reacted cautiously. To get things moving, the government is focusing on defence JVs in India, beginning with the Rafale deal.

Many of the government’s other schemes have been stalled by bureaucratic inertia. Some of the most poorly conceived policies have again come from the MoF: for example, the regressive long-term capital gains tax (which has slowed inflows into mutual funds) and a tax on angel-funded start-ups over Rs 10 crore whose shares are “over-valued”, according to the income-tax department (which, not being an investment bank, has no business determining the fair valuation of a start-up’s shares).

Works in progress:

Aadhaar, Swachh Bharat Abhiyan and the Ganga clean-up are three critical missions. Each has suffered a setback, but is back on track. Railway modernisation too is gathering pace. Several other initiatives remain to be activated: an enhanced MSP for farmers, rural housing, job creation, social inclusiveness, and law and order.

In its last year in office, the government must re-jig its communications strategy. It has talented professionals who could conduct daily briefings on current issues. A panel comprising the following could brief the media on a daily basis by rotation: Bibek Debroy (economics), MJ Akbar (foreign policy), Sanjeev Sanyal (banking), Amitabh Kant (governance), Piyush Goyal (investment) and Smriti Irani (politics). Perception is key. It will play a big part in 2019.

Overall, the Modi government has done well in patches, but failed in significant areas. Its electoral machinery is formidable. But after four years, judicial and police reforms remain in limbo, while a Lokpal is only now half-heartedly being put into place. Were it not for a fractured Opposition, the Modi government would likely be voted out in 2019.

It will take the combined efforts of Rahul Gandhi, Mamata Banerjee and Sitaram Yechuri to help the BJP escape that fate next year.

Follow@minhazmerchant on twitter


Why BJP-PDP alliance is on a knife-edge
The alliance was an attempt to find a third alternative for Kashmir.

Thursday, April 19, 2018

Has the BJP-PDP alliance run its course? The Kathua case is an inflection point. Chief minister Mehbooba Mufti would break the alliance in the blink of an eye but for her fear that a spell of Governor’s rule, followed by a mid-term Assembly election next year, would hand Omar Abdullah’s National Conference a landslide victory.

Borrowed time

The BJP is equally worried. Dissolution of the alliance would be a setback for its ambitions in India’s only Muslim-majority state. For now, despite the mass resignations of the BJP’s J&K ministers, ostensibly pending a cabinet recast, the alliance is safe. But it is living on borrowed time. By aligning with the BJP three years ago, the PDP lost a slice of its Muslim vote base.

Misgovernance over the past two years, following PDP founder Mufti Mohammed Sayeed’s death in January 2016, has further alienated the PDP’s vote-bank. Were elections held today, the National Conference would sweep the Valley. Mehbooba’s brother Tassaduq Hussain was echoing the general sentiment in the Valley when he told a daily last week: “PDP and BJP have ended up being partners in crime for which an entire generation of Kashmiris might have to pay with their blood.”

Watching from the sidelines is a predatory Omar Abdullah whose National Conference was voted out in December 2014 after six desultory years that witnessed, among other outrages, the death of over 100 Kashmiris in organised bouts of stone pelting in the summer of 2010.

It is Kashmir’s misfortune that its politics continues to be held to ransom by two dynasties — the Abdullahs and the Muftis — with no viable third alternative. The BJP-PDP alliance was an attempt to find that third alternative but was doomed from the start.

The BJP must accept part of the blame for the failure of the alliance government. It has broken its promise to resettle and rehabilitate Kashmiri Pandits. It has been slow to commit funds promised for Kashmir’s devastating floods in 2014. It has not improved the state’s civic infrastructure or invested sufficiently in healthcare and education.

Meanwhile, Pakistan has continued its insidious project to Wahhabise the Valley. The security forces have neutralised over 250 terrorists from the LeT, JeM and Hizbul Mujahideen. But such terrorists are expendable commodities for the Pakistani army. It has an endless supply of impoverished young jihadis whose “martyrdom” gets their families generous financial compensation in lieu of blood.

The root cause of Kashmiri’s descent into sullen anarchy is an incoherent policy on J&K followed by successive Union governments and the toxic nature of the state’s dynastic politics. Mehbooba inherited power from her father. She has made younger brother Tassaduq the state’s tourism minister.

The other Kashmiri dynasty is equally toxic. Three generations of Abdullahs have reigned over J&K since Independence. Any visitor to the state, with its shoddy infrastructure, could justifiably ask: what have the Abdullahs done for J&K since 1947? Srinagar once had theatres screening the latest Bollywood and Hollywood movies.

A wave of Islamisation has made Srinagar cinema-free in an era when even quasi-medieval Saudi Arabia has allowed cinema theatres in Riyadh for the first time since the 1970s. To be compared negatively with Saudi Arabia on cultural openness reflects the appalling governance inflicted on J&K over the decades by the state’s two prominent political dynasties.

The dynasts

Sheikh Abdullah had a tempestuous relationship with Jawaharlal Nehru who jailed him for several years. Farooq Abdullah had a more congenial relationship with Rajiv Gandhi — so congenial that the two were alleged to have rigged the 1987 J&K Assembly election, causing widespread anger and leading to the insurgency in the state in 1989. That insurgency is now in its 30th year and has caused far more blood to be spilt than Tassaduq fears a new generation of Kashmiris will have to shed.

Kashmiris know there is no better alternative for them across the border in Pakistan. They see how brutally Kashmiris are treated in Pakistan-occupied Kashmir (PoK). They have no wish to be Pakistan’s chattel.

Future tense

The pro-Pakistan flags and stone pelting on the Indian Army are choreographed by Pakistan’s agents in the Valley. The Hurriyat separatists are just the visible face of the terrorist-abettors Pakistan funds, trains and indoctrinates. Pakistan is not an option for Kashmir’s freedom-loving youth who yearn to join the IAS, play in the IPL and be a part of India’s vibrant tech start-up ecosystem.

They look at once-civilised Lahore and learn with horror that several shops in this beautiful Punjabi city now sport signs that say: “Ahmadis not allowed”. Pakistan’s descent into Islamist-driven sectarian chaos is gathering pace. Kashmiris want no part of this purgatory.

What next for J&K? Prime Minister Narendra Modi is unlikely to opt for Governor’s rule during a fevered election year. Unintended consequences may follow. The BJP-PDP alliance will hobble along as long as it can. Mehbooba, undeterred by the mass resignations of BJP ministers from her cabinet, will assert her authority within the alliance.

The BJP will emerge a loser in both the Valley, where it is reviled more than ever before, and in Jammu where its core voter base feels betrayed by its failure to honour its pre-election promises. The BJP-PDP alliance was a marriage of expedience. When you enter into such an alliance with one of Kashmir’s toxic dynasts, don’t expect to emerge unsullied.

Follow@minhazmerchant on twitter


Why BJP-PDP alliance is on a knife-edge
The alliance was an attempt to find a third alternative for Kashmir.

Thursday, April 19, 2018

Has the BJP-PDP alliance run its course? The Kathua case is an inflection point. Chief minister Mehbooba Mufti would break the alliance in the blink of an eye but for her fear that a spell of Governor’s rule, followed by a mid-term Assembly election next year, would hand Omar Abdullah’s National Conference a landslide victory.

Borrowed time

The BJP is equally worried. Dissolution of the alliance would be a setback for its ambitions in India’s only Muslim-majority state. For now, despite the mass resignations of the BJP’s J&K ministers, ostensibly pending a cabinet recast, the alliance is safe. But it is living on borrowed time. By aligning with the BJP three years ago, the PDP lost a slice of its Muslim vote base.

Misgovernance over the past two years, following PDP founder Mufti Mohammed Sayeed’s death in January 2016, has further alienated the PDP’s vote-bank. Were elections held today, the National Conference would sweep the Valley. Mehbooba’s brother Tassaduq Hussain was echoing the general sentiment in the Valley when he told a daily last week: “PDP and BJP have ended up being partners in crime for which an entire generation of Kashmiris might have to pay with their blood.”

Watching from the sidelines is a predatory Omar Abdullah whose National Conference was voted out in December 2014 after six desultory years that witnessed, among other outrages, the death of over 100 Kashmiris in organised bouts of stone pelting in the summer of 2010.

It is Kashmir’s misfortune that its politics continues to be held to ransom by two dynasties — the Abdullahs and the Muftis — with no viable third alternative. The BJP-PDP alliance was an attempt to find that third alternative but was doomed from the start.

The BJP must accept part of the blame for the failure of the alliance government. It has broken its promise to resettle and rehabilitate Kashmiri Pandits. It has been slow to commit funds promised for Kashmir’s devastating floods in 2014. It has not improved the state’s civic infrastructure or invested sufficiently in healthcare and education.

Meanwhile, Pakistan has continued its insidious project to Wahhabise the Valley. The security forces have neutralised over 250 terrorists from the LeT, JeM and Hizbul Mujahideen. But such terrorists are expendable commodities for the Pakistani army. It has an endless supply of impoverished young jihadis whose “martyrdom” gets their families generous financial compensation in lieu of blood.

The root cause of Kashmiri’s descent into sullen anarchy is an incoherent policy on J&K followed by successive Union governments and the toxic nature of the state’s dynastic politics. Mehbooba inherited power from her father. She has made younger brother Tassaduq the state’s tourism minister.

The other Kashmiri dynasty is equally toxic. Three generations of Abdullahs have reigned over J&K since Independence. Any visitor to the state, with its shoddy infrastructure, could justifiably ask: what have the Abdullahs done for J&K since 1947? Srinagar once had theatres screening the latest Bollywood and Hollywood movies.

A wave of Islamisation has made Srinagar cinema-free in an era when even quasi-medieval Saudi Arabia has allowed cinema theatres in Riyadh for the first time since the 1970s. To be compared negatively with Saudi Arabia on cultural openness reflects the appalling governance inflicted on J&K over the decades by the state’s two prominent political dynasties.

The dynasts

Sheikh Abdullah had a tempestuous relationship with Jawaharlal Nehru who jailed him for several years. Farooq Abdullah had a more congenial relationship with Rajiv Gandhi — so congenial that the two were alleged to have rigged the 1987 J&K Assembly election, causing widespread anger and leading to the insurgency in the state in 1989. That insurgency is now in its 30th year and has caused far more blood to be spilt than Tassaduq fears a new generation of Kashmiris will have to shed.

Kashmiris know there is no better alternative for them across the border in Pakistan. They see how brutally Kashmiris are treated in Pakistan-occupied Kashmir (PoK). They have no wish to be Pakistan’s chattel.

Future tense

The pro-Pakistan flags and stone pelting on the Indian Army are choreographed by Pakistan’s agents in the Valley. The Hurriyat separatists are just the visible face of the terrorist-abettors Pakistan funds, trains and indoctrinates. Pakistan is not an option for Kashmir’s freedom-loving youth who yearn to join the IAS, play in the IPL and be a part of India’s vibrant tech start-up ecosystem.

They look at once-civilised Lahore and learn with horror that several shops in this beautiful Punjabi city now sport signs that say: “Ahmadis not allowed”. Pakistan’s descent into Islamist-driven sectarian chaos is gathering pace. Kashmiris want no part of this purgatory.

What next for J&K? Prime Minister Narendra Modi is unlikely to opt for Governor’s rule during a fevered election year. Unintended consequences may follow. The BJP-PDP alliance will hobble along as long as it can. Mehbooba, undeterred by the mass resignations of BJP ministers from her cabinet, will assert her authority within the alliance.

The BJP will emerge a loser in both the Valley, where it is reviled more than ever before, and in Jammu where its core voter base feels betrayed by its failure to honour its pre-election promises. The BJP-PDP alliance was a marriage of expedience. When you enter into such an alliance with one of Kashmir’s toxic dynasts, don’t expect to emerge unsullied.

Follow@minhazmerchant on twitter


Meeting China’s Tech Challenge
China’s long-term mission is to replace the United States as the pre-eminent geoeconomic and military power. It won’t be easy. America’s defence budget is now over $700 billion – more than four times China’s

Tuesday, April 17, 2018

It pays to be a one-party Communist dictatorship like China. There’s no bureaucracy to delay weapons purchases, no consensus needed to cut bank interest rates, no Opposition to satisfy on foreign policy and no electorate to be held accountable to.

Since 1979, when Deng Xiaoping initiated economic reforms, China has in less than 40 years transformed itself from a low-income country (with a per capita income similar to India’s) into a middle-income country with a per capita income of over $8,000 – roughly four times India’s.

China now leads the world in artificial intelligence, machine learning, robotics, electrical vehicles, computing and telephony. It has the world’s fastest supercomputer, the Sunway TaihuLight, that can perform 93,000 trillion calculations a second. China’s high-tech giants Alibaba and Tencent are valued at over $500 billion, roughly 25 times the valuation of Flipkart.

But it’s in 5G broadband networks that China is racing ahead. While 4G networks in India still struggle with speeds far below 40 Mbps/second available in developed countries, 5G promises lightning-fast download speeds of 20 GB/second. The 2020 Tokyo Olympics will showcase a worldwide rollout of 5G broadband services with China in the forefront. Phil Twist, vice-president and global head of marketing (mobile networks) of Finland’s network equipment maker Nokia, recently sounded this warning: “China has announced nearly a year back the appropriate spectrum band for running 5G trials and it’s likely to be allocated in the second half of 2018, post-which, the pre-commercial 5G rollouts could happen by early 2019, whereas the Indian government is yet to announce its 5G roadmap or make the spectrum available.”

The problem in India of course is cash-strapped telecom firms. Spectrum auctions have been delayed because even the top three mobile network operators – Idea-Vodafone, Airtel and Reliance Jio – have sought time till 2020 to bid for 5G spectrum. By then, they hope, the ecosystem around 5G would have evolved, the technology standardised, and their own balance sheets strengthened. The Idea-Vodafone merger will make the Indian telecom market financially viable. All three major players are deep-pocketed. Idea-Vodafone has the Aditya Birla Group’s and Vodafone’s global resources to fund a 5G rollout. Reliance Jio is well-funded by its parent Reliance Industries while Airtel’s profitability should recover now that its Africa venture has turned the corner and the price war set off by Jio in India is easing.

Beyond 5G networks though lies a raft of innovations that China is pressing ahead with. China’s long-term mission is to replace the United States as the pre-eminent geoeconomic and military power. It won’t be easy. America’s defence budget is now over $700 billion – more than four times China’s. The US has troops, warships, nuclear submarines, missiles and air bases in every major region of the world: Western Europe, Japan, South Korea and the Middle East. Economically too, the US is booming. After eight years of sub-three per cent GDP growth under President Barack Obama, the economy is growing at nearly four per cent a year. Unemployment is 4.1 per cent, the lowest in decades. Chinese GDP is roughly half America’s at current exchange rates. Its growth rate is beginning to slow to around 5 per cent a year. Bad bank loans, empty ghost towns with unoccupied buildings and a looming trade war with Washington can derail the China story.

As Kenneth Rogoff, professor of economics and public policy at Harvard University, writes: “Many economists worry that robots and artificial intelligence (AI) will eventually take away most jobs, leaving most humans to while away their time engaged in leisure activities. As the rising importance of robotics and AI blunts China’s manufacturing edge, the ability to lead in technology will become more important. Here, the current trend towards higher concentration of power and control in the central government, as opposed to the private sector, could hamstring China as the global economy reaches higher stages of development.”

President Donald Trump has adopted new strategies to deal with China’s rise. He has vowed to punish China’s intellectual property theft. He is simultaneously pressing Beijing to de-nucleurise North Korea. A summit between North Korean leader Kim Jong-un and Trump is set for May 2018. India meanwhile has meandered over its policy towards China. Its flip-flop over celebrations to mark the 60th anniversary of the Dalai Lama seeking refuge in India from persecution of Tibetans by China is symptomatic of New Delhi’s flaccid diplomacy. It first appeased China by shifting the celebratory events from Delhi to Dharamshala. Faced with sharp criticism, it sent two senior leaders (BJP General Secretary Ram Madhav and Culture Minister Mahesh Sharma) to Dharamshala to join the celebrations, promptly angering China.

India’s first Prime Minister Jawaharlal Nehru is widely regarded as having been soft on China by in effect gifting India’s UNSC seat to Beijing in 1950. But Nehru provoked the Chinese with his “forward policy” on the border that led to the 1962 war. Nehru did not trust the Chinese “one bit”, according to a new book by G. Parthasarthy (GP) who in 1958, just a year before the Dalai Lama fled to India, was sent by Nehru as ambassador to China. GP’s son Ashok Parthasarthy (who was science and technology advisor to Indira Gandhi) quotes in the book from notes GP had made of a conversation in which Nehru said: “So GP, what has the Foreign Office told you? Hindi-Chini Bhai-Bhai? Don’t you believe it. I don’t trust the Chinese one bit. They are an arrogant, untrustworthy, devious and hegemonistic lot. Your watchword should be eternal vigilance. On important matters, you should send your telegrams only to me. You must ensure that Krishna (Menon) does not come to know of these policy guidelines of mine to you. Krishna believes that no socialist country (read China) would ever attack a non-aligned country (read India).”

Not much has changed since Nehru’s unflattering assessment of China except that Beijing is in the process of transforming itself into a technological and economic powerhouse. For Indian policymakers, it’s time to double down on the economy. It is in the realm of geoeconomics that the future battles over technology will be won or lost.

Follow@minhazmerchant on twitter


Liberal Right versus liberal Left The 5 commandments
There are several reasons why the world is turning Right.
Saturday, April 14, 2018

Globally, major democracies are today ruled by the Right: the United States (Republicans), Britain (Conservatives), Japan (Liberal Democrats), India (BJP), Australia (Liberals) and a raft of countries across Europe (Austria, Poland, Hungary and Italy). Note that Japan’s and Australia’s centre-right parties are respectively called the “Liberal Democratic Party” and “Liberal Party”.

So, are liberalism and the Right compatible? What are the values the liberal Right espouses? And the Left, which has arrogated liberalism to itself - just how liberal really is it?

There are several reasons why the world is turning Right. Disillusionment with the Left is surging even in Canada where Prime Minister Justin Trudeau, poster boy of liberalism, has in recent months seen his popularity plummet. Trudeau epitomises all that is right and wrong with the liberal Left.

For example, under the guise of inclusiveness, he has embraced Khalistani separatists. Trudeau’s visit to India was marred by the presence of a rabid Sikh separatist who, though not part of Trudeau’s official delegation, received a visa despite his extremist views.

And yet, Trudeau ticks all the right boxes of modern liberalism. He is determinedly plural: half his cabinet comprises women; several Sikhs head key ministries. He is gay-friendly, supports transgenders and doesn’t have a racist bone in his body. He is the anti-Trump.

Just as the Left can be nasty (Stalin and Mao murdered millions of their citizens in Russia and China, Castro impoverished Cuba and Hugo Chavez ruined Venezuela), the Right is often wrongheaded. The Rashtriya Swayamsevak Sangh (RSS) is certainly not a product of the liberal Right. It is not even particularly right wing either - a proposition that will shock its core believers.

Consider the RSS’ position on the economy and society. It favours a swadeshi economy, discourages foreign investment and does not allow women to be a part of the main organisation. They can only be members of the women’s wing. Disparate organisations, ranging from business bodies like FICCI to political parties like the BJP and the Congress, have a women’s division, but also allow women membership of the parent body. Many have gone on to head such organisations. The parent RSS though remains exclusively male.

On economic policy, the RSS is ideologically aligned with the Left – which too will shock those who hew to the Right. Both the RSS and the Left are stuck in the 19th century. The BJP’S economic instincts, in contrast, incline towards an open economy, free markets and foreign investment. That is why traders, businessmen and industrialists have long favoured it. Yet, over the last four years, the BJP’s economic policy has moved to the Left. Many of its non-ideological reforms like the Insolvency and Bankruptcy Code (IBC) have been game-changers. But its stupor over labour reforms and continuing inconsistency over tax policy betray confused thinking.

Consider now the five commandments of liberal governance to see whether the Left or the Right makes the cut.

Commandment One: A liberal, open economy must encourage competition and set fair rules. The Narasimha Rao government worked towards these criteria between 1991 and 1996. The Congress-led UPA in 2004-14 had good economic moments but was fatally compromised by corruption. The BJP-led NDA inherited a broken, institutionally corrupt ecosystem in 2014. It has been unable to fix it. That could prove its undoing.

Commandment Two: The judicial system must be firm, fair and fast. The Congress failed on all three counts. So has the BJP. As political theorist Francis Fukuyama wrote in The End of History and the Last Man, a successful country must satisfy three criteria: accountable governance, rule of law and transparent democracy. Neither Congress nor BJP governments have met these criteria.

Commandment Three: A genuinely secular, plural society does not discriminate on the basis of caste, religion or gender, does not appease minorities, does not instigate the majority, and keeps religion out of politics. The Congress has time and again failed these tests - from Shah Bano in 1985 to Batla House in 2008. The BJP has been even more brazen in using majoritarianism to win votes, taking the Congress’ decades-long appeasement of Muslims to an entirely different level by institutionalising polarisation.

Commandment Four: Foreign policy must be consistent and coherent. Left-leaning Congress did well to deepen the strategic partnership with the United States which the BJP has continued to strengthen. But the BJP-led NDA government has floundered badly on how to deal with Pakistan.

It tried conciliation but got Pathankot and Uri in return. It undertook a surgical strike but then followed a policy of reactive firing across the Line of Control (LOC) rather than proactive destruction of terror modules in Pakistan-occupied Kashmir (POK).

In Kashmir, the security forces have done well to neutralise nearly half of active LeT, JeM and Hizbul terrorists in the Valley. But with summer around the corner, the government’s carrot, in the form of interlocutor Dineshwar Sharma, is too small and its stick, held to ransom by alliance partner PDP, too ineffective.

Commandment Five: Leave the media well alone. Rajiv Gandhi tried to muzzle it with the anti-defamation act and failed. The UPA brought strict laws to curtail online freedom - and again failed. The BJP government fell into a trap of its own making when it was compelled to withdraw a circular on fake news. Fake news is a perishible commodity. It dies in the absence of oxygen. The government should steer clear of trying to demonise it. There are enough news warriors on the Right and Left who will do it for them.

In a truly liberal society, ideology does not decide who leans Right and who leans Left.

Issues decide where you stand on, for example, gender equality, freedom of speech, foreign investment, censorship, dissent, pluralism and national security. To be a true-blue liberal you should be equally comfortable with a Muslim man in a skull cap, a Muslim woman in a burqa, a Sikh with a kirpan and a Hindu with a trishul.

Liberal but naïve Hindus treat Muslims as if they were an endangered species like the black buck, needing constant care and protection. But what Muslims need is jobs, homes and prosperity. They want to be pulled out of the poverty and ghettos secular India has boxed them into for 71 years. Their mullahs won’t help them. Extremist Hindu groups won’t either.

Liberal but naïve Hindus will only prolong their misery by unwittingly setting them up against decent, moderate, but increasingly resentful Hindus.

Liberals reject prejudice, from wherever it comes. They welcome diversity. They support non-discriminatory civil common codes for Muslims and Parsis, for Hindus and Christians. They abhor appeasement and polarisation. They support rationalism and dismiss superstition. They are inclusive nationalists who put India first and their religious, caste, regional and linguistic identity last.

Those who don’t, whether on the Left or Right, are not liberals.

How Modi can make use of a colonial relic
The New Indian Express
Saturday, April 14, 2018

In 1949, PM Jawaharlal Nehru faced a dilemma. Should newly independent India continue to remain in the British Commonwealth? Indian nationalists had through the 1930s and 1940s fought against India’s future association with a body headed by an imperial power.

Nehru himself declared that India would have nothing to do with the last vestige of British imperialism. “Under no circumstances,” Nehru wrote, “is India going to remain in the British Commonwealth.” In 1949, circumstances changed and so did Nehru’s mind. The British, impoverished by World War II and in heavy debt to the US and India over war funding, were desperate to cling to a semblance of global power. The British government hastily renamed the ‘British Commonwealth’ the ‘Commonwealth of Nations’. Republics—as India was shortly to be—could remain as members. Previously only British dominions could.

The move was widely criticised in India. Nehru’s capitulation, as it was termed, allowed Britain to extend the myth of its imperial power. Nehru agreed to sign the London Declaration on 28 April 1949 which in part stated: “The government of India has … declared and affirmed India’s desire to continue her full membership of the Commonwealth of Nations and her acceptance of the King as the symbol of the free association of its independent member nations and as the Head of the Commonwealth.” In one fell blow, Nehru had accepted subservient status to an ejected colonial power by acknowledging the British monarch in perpetuity as head of an organisation of which India was one of dozens of past and present British colonies.

None of these thoughts will weigh on Prime Minister Narendra Modi’s mind next week when he attends the Commonwealth Heads of Government Meet (CHOGM) in London. King George was British monarch when Nehru signed the London Declaration 69 years ago to keep India in the British Commonwealth. Circumstances have again changed.

In 2018, India’s GDP ($2.80 trillion) will overtake Britain’s for the first time. Britain needs India far more today than India needs Britain. The UK government is struggling with grim post-Brexit calculations. When it officially leaves the European Union (EU) on 31 March 2019, Britain will rely heavily on countries like India, China and Japan for bilateral trade deals. British PM Theresa May has called for the emergence of ‘global Britain’—free of the EU’s stifling bureaucracy, laws and free borders. At their meeting in London, Modi and May will talk about trade, terror, immigration and much else.

As home secretary from 2010 to 2016, May cut immigration targets with a surgical knife. As PM, she continues to oppose immigration from both continental Europe and countries like India. She though needs Modi’s cooperation on striking a bilateral post-Brexit trade deal. Modi should hold firm. Britain has a vibrant Indian diaspora. Before CHOGM gets underway next Thursday, he will address events for Indians in Britain that promise to bring back memories of Madison Square Garden in New York. Modi’s popularity may have waned in India but he remains a crowd-puller with Indians abroad.

It is on terror though that Modi must press May most. Britain is a safe haven for pro-Pakistani jihadis and Khalistani separatists who use UK laws to avoid deportation, spew venom against India and serve as recruiters for Islamists and other separatists with links to terror modules in India. For Britain, Modi’s decision to attend CHOGM is a relief.

He skipped the last meet in 2015 and his predecessor Dr Manmohan Singh did not bother to attend two previous CHOGMs either. The plain truth is that without India the Commonwealth is a motley collection of white settlements (Australia, New Zealand, Canada), former British African colonies (Kenya, Tanzania, South Africa) and islands scattered across the Pacific and the Caribbean. India forms 55 per cent of the Commonwealth’s population. Along with Pakistan, Bangladesh and Sri Lanka, South Asia accounts for nearly 75 per cent of the Commonwealth.

Britain, soon to be shorn of Europe’s trading markets, is marketing itself to India. It wanted to set up a permanent Commonwealth Trade and Investment Centre in New Delhi to envelop India in an ever-tighter Commonwealth embrace. The Ministry of External Affairs was keen; the Commerce Ministry rightly shot down the proposal.

Far more useful is for India to use the Commonwealth proactively to advance its national interests. It can use the forum to corner Pakistan over its use of terrorism as state policy. Britain was one of the countries (along with France and Germany) that backed the US motion to greylist Pakistan at the Financial Action Task Force (FATF) meeting in Paris.

Pakistan was suspended from the Commonwealth in 1999 following General Pervez Musharraf’s military coup. It was readmitted in 2004 but again suspended in 2007 when Musharraf declared a state of Emergency. Following the restoration of what passes as democracy in Pakistan, the country was readmitted in 2008.

India has not effectively used the Commonwealth forum to hold Pakistan to account for using terror as state policy. To rescue next week’s summit in London from a meaningless talk-fest, Modi should put terror—especially Pakistan-sponsored terror—on the menu.

This could well be 91-year-old Queen Elizabeth II’s last summit as head of the Commonwealth. The 1949 Declaration mandates the British monarch will always head the Commonwealth. That should no longer be so, once the Queen’s reign is over. Future heads should be chosen democratically—a quality the Commonwealth prizes but, in this respect, flouts.

Nothing to offer electorate Opposition is perennially indulging in personal attacks instead of articulating alternative
The New Indian Express
Saturday, April 14, 2018

In an election year, policies are drowned out in the din of polemics. The run-up to the 2019 Lok Sabha election could be the most disruptive in decades. Three outcomes are possible: a slim NDA majority; a cobbled-together Third Front/UPA coalition; or a hung parliament.

Whatever the outcome, the level of political discourse has hit rock bottom. The history of political abuse can be traced back to 2007 when then Congress president Sonia Gandhi called then Gujarat chief minister Narendra Modi maut ka saudagar. Till then political exchanges had been relatively abuse-free. Even during the febrile atmosphere created in the media on the Bofors scam, lawyer Ram Jethmalani’s daily attacks did not descend into personal invective. Insults like neech and khoon ka dalal today flow freely from Congress leaders. The BJP, TMC, SP and others abuse copiously as well.

Lost in the bedlam is the articulation of alternative policies by the Congress-led Opposition. Party president Rahul Gandhi has made one major policy promise: reducing GST to a single tax rate slab. His policy positions on other key issues are vague or non-existent. A sensible way forward is to present to the electorate an alternative policy platform by establishing a shadow Cabinet. The Congress could then issue regular policy statements on issues ranging from Pakistan-sponsored terrorism, Kashmir, China, economic reforms, bank NPAs, a strategic partnership with the United States, communalism, federalism, labour laws, police reforms and law and order. Instead of this professional, institutionalised approach, what we get is polemical criticism, much of it personal. In response, BJP president Amit Shah compared the Opposition to a menagerie of animals climbing up a tree to escape a flood. None of this would be necessary if the Congress sets up a shadow cabinet advancing alternative polices in key areas. Consider these:

Defence: It is legitimate to criticise the NDA government’s approach to weapons purchases. Defence Minister Nirmala Sitharaman is trying to untangle the odious bureaucracy in the ministry of defence (MoD) that has for decades stalled the modernisation of India’s armed forces. Instead of suggesting a way forward, all the Congress has done is point fingers at the French Rafale fighter jet deal. During the tenure of Congress-led UPA defence minister AK Antony, India’s weapons purchases came to a standstill, except for redundant VVIP helicopters from AgustaWestland. Had it been in place, the Congress shadow Cabinet could have published a white paper on how it would handle the abysmally low levels of ammunition in stock, replacing outdated assault rifles and quickly building up India’s fighter squadron strength back to an optimal 42, which it last was in 1987.

Economy: Clearly, the NDA government’s economic policies deserve calibrated criticism. Finance Minister Arun Jaitley has delivered five uninspiring union Budgets. Labour reforms have been neglected. Tax policy has become more complicated rather than less. With Jaitley’s illness sidelining him for several weeks, perhaps longer, a re-jig of economic portfolios can’t be ruled out. This presents the Congress with an excellent opportunity to put forward its own ideas on economic, tax and labour reforms. Instead of a former finance minister ventilating in a weekly newspaper column, he should present a comprehensive report on the economic policies the Congress government would initiate if it were elected to office in 2019. His column brims with polemical criticism of the government’s economic policies, but offers little by way of cogent policy formulations.

Diplomacy: The thrust of India’s foreign policy under the Narendra Modi government has been patchy. On China and Pakistan, in particular, India’s policy has been both inconsistent and incoherent. After the well- executed surgical strike across the Line of Control (LoC) in September 2016, the government has failed to contain infiltration from Pakistan. The security forces’ success in neutralising over 250 LeT, JeM and Hizbul terrorists in Jammu and Kashmir has not been matched by political initiatives in the state.

The rehabilitation of Kashmiri Pandits, a key BJP electoral promise, has received scant attention. The alliance with the PDP has clearly failed. Stone pelting remains unabated. The beheading of a Kashmiri youth last week underlines the Wahhabisation of the Valley by the terror mercenaries of Pakistan.

The Congress has an opportunity to present its vision of bringing peace back to the Valley — on India’s terms. Rahul Gandhi is quarter-Kashmiri himself, but has shown little interest in the state. He visits temples in Gujarat and Karnataka when they hold elections. He should visit the Kashmir Valley and ensure his senior party leaders from the state, including Ghulam Nabi Azad, a former chief minister of J&K, come up with a cogent policy on dealing with both Pakistan’s venal sponsorship of terrorism and restoring peace across the state. India needs to hear coherent policy alternatives from the Congress-led Opposition, rather than polemical rhetoric. If it doesn’t offer an alternative governance narrative, it will be consigned to the back benches for five more years.

2019 general elections Why Rahul Gandhi and Mamata Banerjee are fit for each other
Both despise BJP.

Thursday, April 5, 2018

As she barnstormed through Delhi last week, Trinamool Congress (TMC) chief Mamata Banerjee met every Opposition leader except one: Congress president Rahul Gandhi. Between them, the Congress and TMC have 82 Lok Sabha MPs. They form the two largest Opposition groups in the lower house (excluding the AIADMK's 37 seats). In the event of the BJP-led NDA falling short of 272 seats in the 2019 Lok Sabha election, Mamata and Rahul will hold the levers of power. No other Opposition party except the DMK is likely to get more than 20 Lok Sabha seats in 2019.

Minority votes Mamata and Rahul would normally be a good fit. Each has a strong minority vote bank. Each despises the BJP. And each is family-led (Mamata's nephew Abhishek Banerjee is her de facto heir). But there are dissonances as well. The TMC is a single-state party. The Congress, in contrast, is trying to expand its shrunken national footprint with a strong performance in Assembly elections in Rajasthan and Madhya Pradesh later this year. It expects to win Karnataka next month and at least double its Lok Sabha tally in 2019 to 90-100 seats.

Mamata can at best hope to repeat her landslide of 34 seats out of West Bengal's 42 seats. She thus has two options for 2019. Option A is to form a non-NDA, non-UPA Third Front by breaking NDA allies like the Shiv Sena, tying up with Chandrababu Naidu's TDP and K Chandrasekhar Rao's TRS in the south, Naveen Patnaik's BJD in Odisha and the Akhilesh-Mayawati SP-BSP combination in Uttar Pradesh. She said last week in Delhi: "Mayawatiji and Akhileshji are strong leaders in UP and if they come together no one else can do anything. All of us are of the view that we should work together. This government has been discredited. Whether one agrees with it or not, the message about demonetisation, GST and bank fraud has gone down (negatively) to the people."

Mamata's math of course doesn't add up. All the regional parties together, even if they sweep their respective states, will be hard pressed to cross 160 Lok Sabha seats. To form a viable government this motely crew will need Congress-led UPA support. The atrophied UPA has only two parties which can hope to win a significant number of seats - the DMK in Tamil Nadu and NCP in Maharashtra. Mamata has been wooing both. But even with the DMK and NCP, a Mamata-led Third Front will still have less than 200 seats. In the end she will have to opt for Option B: Rahul Gandhi.

Without the Congress' estimated 90-odd seats, a viable Third Front is a chimera. Rahul himself has two options. One, to support a Third Front from outside as the Congress opportunistically did in 1996-98. Two, to join such a government and claim the prime ministership as head of the alliance's single-largest party. Both choices are fraught with obstacles.

Third Front A quarrelsome Third Front led by Mamata will disintegrate even more quickly than HD Deve Gowda and Inder Kumar Gujaral's United Front governments when the Congress pulled the plug on them. Mamata is acutely aware of this history.

Besides, in a putative Third Front there are almost as many claimants for the prime ministership as there are alliance partners. A menagerie of Mamata, Pawar, KCR, Mayawati and Akhilesh, with or without Rahul, will enthuse the BJP. It knows what usually follows such a coalition: a snap mid-term election. It happened to the Morarji Desai-led Janata Party in 1979 allowing Indira Gandhi to return to power in January 1980 with a clear majority. And of course it happened in 1998, vaulting the Atal Bihari Vajpayee-led NDA to six years in office.

Rahul knows that if he is part of a grand alliance of regional satraps with large egos and few seats, he will open the floodgates for a rejuvenated NDA-4 in 2020. Mamata has an even bigger problem.Can she transform herself from the leader of a regional party whose cadre has a legacy of violence into a national leader with a cogent vision? What is her policy position on Pakistan? On China? On Kashmir? On economic reforms? On global trade? On India's cold-start doctrine? If Mamata or Rahul aspire to hold high public office, they must spell out their specific policy agendas.

Finding Hinduism A Mamata-led Third Front carries other significant risks. Her pro-Muslim policies in West Bengal could polarise Hindu voters behind the BJP in 2019. Rahul recognises this danger, hence his recent discovery of Hinduism.Sonia knows the danger too: as she lamented at the India Today Conclave, the Congress is regarded as a "Muslim party". A Mamata-led Third Front with minority-leaning leaders like Akhilesh Yadav, Sharad Pawar and KCR could even frighten away moderate Hindus disenchanted with the BJP's four years in office. They may leap back into the BJP's electoral embrace. A Rahul-led front could fare no better: it carries the Congress' baggage of scams, dynasty and nepotism.

The NDA government's mixed record of achievements and missteps over the past four years has given the Opposition an opening for 2019. However, unless Mamata and Rahul learn to work together, that opening could quickly shut. When Mamata was asked why she didn't meet the Congress president in Delhi last week, she replied coldly: "I am in touch with him on text messages, sometimes."

Why Congress-led Opposition wants to impeach chief justice of India
The aim is to delay the verdict in the Ram Mandir case and tarnish Amit Shah's image in the Loya/Sohrabuddin case.
Wednesday, April 4, 2018

The conspiracy is intended to delay and subvert verdicts in two key cases being heard by a Supreme Court bench headed by the CJI. The first is about building a Ram Mandir in Ayodhya. The second is about the death of CBI judge BH Loya.

Why do these two cases worry Opposition leaders to an extent that they are prepared to go through the pretence of an impeachment motion against the CJI even though they know it will fall at the first hurdle? If, for example, the impeachment motion gathers the minimum required signatures of MPs in the Rajya Sabha (50) and the Lok Sabha (100), the chairperson of the upper house, vice-president Venkaiah Naidu, and the Speaker in the lower house, Sumitra Mahajan, can reject the motion at their discretion.

In the improbable event they don't, a three-member committee has to be formed to probe the charges against the CJI, prove those charges beyond doubt and present its findings to the two houses. A two-thirds majority in both the Lok Sabha and Rajya Sabha is necessary for the impeachment process to be successful. Since the motion is pre-ordained to fail, turn to the real reason why the Congress, Left, NCP and other Opposition parties want to go through this theatre of the absurd.

Ever since CJI Misra indicated a few months ago that he would like to fast-track the Ram Mandir-Ayodhya hearings, alarm bells began ringing in 10 Janpath and 12 Tughlak Lane. UPA chairperson Sonia Gandhi and Congress president Rahul Gandhi know that a Supreme Court verdict in favour of building a Ram Mandir in Ayodhya would set off a majoritarian Hindu wave in favour of the BJP ahead of the 2019 Lok Sabha poll.

The alarm bells rang even louder when CJI Misra dismissed all intervention PILs - and there were dozens - in the Ayodhya case. Had those PILs been impleaded, the Ayodhya verdict would have been inevitably delayed.

Enraged at the CJI's moves, the Congress has deployed its political ammunition built up over 55 years in power. Sonia and Rahul realise that the 2019 Lok Sabha election is the Congress' best opportunity to make a comeback.

That comeback could be stillborn if the Supreme Court rules in favour of building the Ram Mandir in Ayodhya. The impeachment motion is aimed at unnerving Misra into delaying his verdict till after the 2019 general election. Activists and friendly media have been co-opted to further this objective.

The NCP's lawyer-member Majeed Memon said grimly: "Several Opposition MPs, including me, have signed the petition to remove the chief justice." Trinamool Congress chief Mamata Banerjee was more cautious: "I can say that Trinamool Congress will go with whatever decision the other parties take on the impeachment of the CJI. After all, one cannot ignore what the four judges had to say."

What the other four Supreme Court judges said at their unprecedented press conference in January 2018 dovetailed nicely into the Congress-led Opposition strategy. They complained about the roster system and the assignment of key cases. But the hidden message was a statement of no-confidence in the CJI.

The chief justice was quick to disappoint the quartet. A month later he put up for the first time on the Supreme Court website the new roster. To their shock, the four dissenting senior justices were assigned land and civil cases. CJI Misra, in a clinical show of authority, confined all PILs and sensitive political cases to his own bench.

The second sub-text in the impeachment motion is the Opposition's decision to target BJP president Amit Shah. The Congress despises Shah. Rahul Gandhi and Shah do not even acknowledge each other, much less exchange courtesies, in Parliament. The Congress believes that if it can discredit Shah before the 2019 Lok Sabha election, it will slow the BJP's electoral momentum. This is why the Judge Loya incident is being fervidly played up by the Congress.

Judge Loya's death in December 2014 in Nagpur forms part of a key PIL being heard by a bench headed by CJI Misra. Judge Loya died following a heart attack. Nearly three years later, in September 2017, Caravan magazine carried a story linking Judge Loya's "mysterious" death to a case he was in the midst of hearing. The case involved the death in 2005 in an encounter with police in Gujarat of the notorious smuggler and criminal Sohrabuddin. Amit Shah was then Gujarat's home minister.

The allegations: one, that Sohrabuddin was killed in a fake encounter by the Gujarat anti-terror squad on Shah's watch; two, that Judge Loya's death during the trial of the Sohrabuddin case in which Shah was an accused and Loya the presiding judge seemed suspicious and unnatural; and three, that CJI Misra should assign the PIL questioning Judge Loya's death (and Shah's rapid acquittal by a judge who succeeded Judge Loya in the trial court) to another Supreme Court bench.

The chief justice did nothing of the kind. Instead he transferred all cases pertaining to Judge Loya's death pending in the Bombay High Court to a Supreme Court bench headed by himself. Dushyant Dave is the senior advocate at the forefront of the allegation that Judge Loya's death was suspicious and unnatural. CJI Misra told a livid Dave that his bench would examine the matter carefully and order an investigation into the case only if it was merited.

At every juncture, the Opposition fumes, the chief justice has acted arbitrarily. A close examination of the facts reveals it is the Opposition and its senior lawyers that have acted capriciously. For example, Judge Loya's death was certified as natural by two judges of the Bombay High Court (justices Sunil Shukre and Bhushan Gavai) as well as two district judges who were with Judge Loya in the hours just before and after his death. Caravan magazine in its latest issue has however continued to call Judge Loya's death suspicious, alleging that the post-mortem report was manipulated.

The Congress-led Opposition fears that both its pre-2019 electoral objectives - delaying the Ram Mandir verdict and tarnishing Shah over the Loya/Sohrabuddin case - could be negated by chief justice Misra. Hence the unrelenting attack on him through legal and media proxies.

CJI Misra retires on October 2, 2018. He could well deliver the Ayodhya and Loya verdicts before that. The process to impeach him is meant to derail both.

Rebooting Corporate India
To lift corporate India into a higher trajectory of growth, bank lending has to restart. Private investment has dropped precipitously over the past three years. Capital formation is down. The sa vings rate has sagged. All of these point to weak consumer demand and cash-strapped corporates

Monday, April 2, 2018

After a long corporate winter, is spring in the air? India’s corporate sector has been buffeted over the past three years by stormy winds from several quarters: demonetisation shaved consumer demand, GST disrupted the SME sector, and bank NPAs starved companies of funds. Investment in new projects plunged. Corporate profits stagnated. It is only in the last quarter that a semblance of recovery is visible. Green shoots, however, can wither. Private investment has atrophied over the years. Credit offtake is low, leading to working capital shortages for industry. This makes banking reform critical to nurse the corporate sector back to health.

Let’s start though, with some good news in the macro economy. Industrial growth in January 2018 more than doubled to 7.5 per cent over January 2017 (3.5 per cent). Manufacturing led the recovery. It nearly quadrupled the growth recorded in January 2017 (2.50 per cent) with a robust rise of 8.7 per cent. Even more encouraging, the capital goods sector, which mirrors industrial activity, spurted 14.6 per cent in January 2018 compared to a contraction of 0.6 per cent in January 2017. The investment cycle is likely to turn positive over the next few quarters if the early projections of a good Monsoon prove accurate, boosting rural incomes and spurring consumer demand. As corporate profits pick up, R&D budgets must rise. Without world-class R&D, Indian industry will lag behind the US, Europe, China and East Asia in fostering innovation.

The Goods and Services Tax (GST) remains a cumbersome work-in-progress. Small and medium companies complain about slow refunds, complex compliance rules and intrusive tax scrutiny. The introduction of e-way bills from 1 April, 2018 will add a new layer of complexity for small companies with inter-state businesses. According to a recent World Bank report, India’s GST has the second highest tax rate in the world and is among the most complex. A malign corollary of such complexity is the return of the “Inspector Raj” that spawns corruption and hurts business confidence.

The litmus test for a healthy, growing economy is of course, job creation. The Narendra Modi government’s target of generating ten million new jobs seems utopian. Consider the latest figures. According to the Labour Bureau’s seventh quarterly employment survey data released in March 2018, 1.36 lakh jobs were created in the organised sector in the July-September quarter of 2017 (the latest quarter for which data is currently available). Even factoring in the effect of demonetisation and GST on that quarter, the figure is clearly minuscule. But there are caveats. The data covers only eight industries in the organised sector which anyway accounts for a fraction of the country’s workforce. According to the Economic Census, there are 130 million employees in India. Of these, only 24 million are employed in the organised sector (firms with ten or more employees). That leaves 106 million employees in the unorganised sector. A new year-long survey which will cover firms that employ less than ten workers is to be launched in April 2018. B.N. Nanda, a senior labour advisor in the Labour Ministry, confirms: “It was decided to count jobs growth in establishments having less than 10 employees. The move will give a comprehensive picture of the job scenario in the country and may help settle the job growth debate in the country.”

To create ten million new jobs a year though, 130 million employees in the organised and unorganised sectors will need to expand at 7.5 per cent a year. In a vibrant economy that target is within reach if the vast number of self-employed are included, especially under the Mudra scheme which has generated “job creators” through small loans to entrepreneurs.

Bank on Growth

To lift corporate India into a higher trajectory of growth, bank lending has to restart. Private investment has dropped precipitously over the past three years. Capital formation is down. The savings rate has sagged. All of these point to weak consumer demand and cash-strapped corporates. That may be changing. Consumer demand is picking up as the impact of demonetisation fades. Banks are beginning to lend, but cautiously in light of the various scams that have seen bank NPAs ballooning. The Insolvency and Bankruptcy Code (IBC) is restoring confidence among both lenders and corporates. Debt-laden companies with strong underlying assets are being snapped up by leading companies in key sectors like steel, cement and infrastructure. This has the potential to clean up bank balance sheets replete with NPAs and allow them to boost corporate lending. Companies starved of capital can restart investing in stalled projects. The resulting growth in private investment will boost the economy currently over-dependent on government spending.

A key factor in reviving private investment in the economy, creating jobs and fuelling consumer demand is banking sector reform. Apart from the Insolvency and Bankruptcy Code which promises to alleviate the NPA problem and restore the momentum of bank lending to corporates, there is a growing clamour for privatisation of public sector banks (PSBs). In a thoughtful article in Mint on 13 March 2018, arguing for privatisation of PSBs, Infosys Chairman Nandan Nilekani wrote: “From 1947 to 1955, 361 private banks in India had failed, leaving depositors in the lurch. On the midnight of 19 July 1969, 14 of the largest commercial banks in India, which account for 85 per cent of all deposits, were nationalised. In the almost five decades since, we’ve managed to stabilise and expand access to banking to the people. India now has more than a billion bank accounts. From 2015, the Reserve Bank of India (RBI) has changed the way banks report their non-performing assets. This uncovered a mountain of bad debt, triggering the introduction of the new bankruptcy code in 2016. The recent announcements by RBI have brought a larger section of loan accounts into the new approach, which focuses on viability of borrowers.

“Given that financial inclusion and lending to the unserved is now possible with technology, the arguments for state-owned banks wither away. The market knows these truths and today HDFC Bank alone has a market capitalisation higher than the top 22 government-owned banks combined. The share of new loans issued by PSBs have dropped from 49 per cent in 2014 to just 28 per cent in 2017. The argument for privatisation, then, is simple. It is already creeping up on us, whether we like it or not. Technological disruption has made it even more critical. By divesting from PSBs, and yet devising a way to keep the upside of their future growth, the exchequer can still capture the value that is inexorably being eroded from these banks. Privatisation is no longer a question of if, but when.”

Privatising PSBs is as much a political as a financial decision. Public sector banks have long served as repositories for politicians to grant favours to businessmen. They have over the past five decades helped build an edifice of crony capitalism. The Nirav Modi, Mehul Choksi and Vijay Mallya cases are a byproduct. Many companies deeply immersed in debt received loans with little or no collateral resulting in the toxic NPA problem. Private banks like HDFC Bank, Yes Bank and others have been largely unaffected. Their systems are robust, technology world-class and management accountable. The case for a “Maruti” model for PSBs, where the government retains a minority equity stake but cedes management to professionals, could work both politically and commercially.

An encouraging sign for the Indian corporate sector is the buoyancy in the startup ecosystem. India is rapidly becoming the world’s third largest startup hub after the United States and China. Virtually every major global venture capital fund and private equity firm is scouting for investments in India. After a slow 2016-17, valuations are again rising. E-commerce remains strong. Food tech is resurgent. Artificial Intelligence, machine learning, online education, big data and logistics are red hot vehicles for domestic and foreign investors.

Adding to the funds flowing into the Indian corporate sector for startups is traditional FDI in infrastructure, manufacturing and defence. The government’s Ease of Doing Business ranking will however break into the top 50 (it is currently placed 100th) only when a red carpet replaces red tape for investors. This was Prime Minister Narendra Modi’s promise four years ago. While some rules for foreign investment have been eased, the red carpet awaits delivery. US-led protectionism meanwhile, poses a threat to Indian industry, especially if the principle of reciprocal taxation is implemented by Washington. With the US economy growing at over three per cent a year, the Federal Reserve is likely to increase interest rates, putting pressure on the rupee and the trade deficit.

Farm Crisis

Rural distress is real and growing. Land holdings are small. Local government machinery is slow and corrupt. Some farmers wait years to receive their dues on promised waivers. The 2018-19 Union Budget tried to address this problem by pledging a minimum support price (MSP) for crops at cost-plus-50 per cent. It though hasn’t clarified how “cost” will be computed amidst inputs like fertilisers, labour and levies. Over-dependence on the Southwest Monsoon has crippled Indian agriculture. Total foodgrain production in 2017-18 is estimated at a record 277.5 tonnes but is still less than half of China’s foodgrain output for roughly the same population. That reflects the scale of the problem facing Indian agriculture: low productivity, small, unremunerative land holdings, and corrupt local officialdom.

Between 2004 and 2006, the M.S. Swaminathan-headed National Commission on Farmers (NCF) submitted five comprehensive reports on reforming Indian agriculture. Father of the Green Revolution, Swaminathan’s reports covered every conceivable issue that afflicts Indian farmers: land reforms, crop insurance, food security, irrigation, farmers’ suicides, loans and much else. Most of Swaminathan’s suggestions remain on paper. Unless this changes, rural distress could emerge as the single most contentious factor in the 2019 Lok Sabha election. Farmers comprise 50 per cent of India’s electorate, a statistic every political party is now acutely aware of.

India’s corporate sector is deeply concerned about rural well-being. Consumption-led growth would be still-born if confined to cities and towns. Not only do 600 million Indians work on, or live off, the land, farm distress can slow sales of products ranging from tractors to fast moving consumer goods. Indian companies are on the cusp of change. New technology, a growing middle-class and economic reforms promise a revival in their fortunes after a winter chill of demonetisation and a clumsily implemented GST. Those wrinkles are being ironed out. But the green shoots of spring are still to sprout.

India's Geopolitical Balance
India is on its way to becoming the world's third largest economy

Thursday, March 29, 2018

The next few weeks will mark a flurry of global engagements for Indian leaders. Defence Minister Nirmala Sitharman is scheduled to visit China in April to rebuild confidence with Beijing following the Doklam stand-off. She will have the opportunity to gauge the mood in China after President Xi Jinping was nominated in effect as president-for-life.

External affairs Minister Sushma Swaraj will also visit China in April to meet the newly promoted Foreign Minister Wang Yi who is now also State Councilor. It is rare for a Chinese leader to hold two powerful posts. The State Councilor is the point man for border disputes and will play a leading role in the tense negotiations with India on disputes over Doklam and Arunachal Pradesh.

Prime Minister Narendra Modi, after holding firm over Doklam last year, clearly wants a thaw in the relationship with Beijing. He was among the first world leaders to call Xi to congratulate him on his elevation. Modi will travel to China for the SCO summit in June. A bilateral meeting with Xi has been confirmed.

Meanwhile, the four members of the Quadrilateral (Quad) alliance - India, the United States, Japan and Australia - are scheduled to meet soon. The agenda: balancing China's rise in the Indo-Pacific. Beijing has made three non-negotiable demands of the international community as it pursues its goal of restoring China to its rightful place as a global power. First, Taiwan must unify with mainland China. Second, the Belt and Road Initiative (BRI) should project Chinese economic power across central Asia, Africa and the Middle East. Third, the littoral states of the South China Sea must accept Chinese sovereignty over the artificial islands and infrastructure created by Beijing's aggressive maritime policy.

Confronted with a China that mixes diplomatic aggression with economic heft, India's work is obviously cut out. Hence the Sitharaman-Swaraj-Modi visits to China in quick succession. India has several arrows in its own quiver. It though needs a combination of imagination and firmness to use them against a country that likes to get its way by bullying or bankrolling rivals.

Xi is now the most powerful Chinese leader since Mao Zedong and Deng Xiaoping. He has routinely threatened Taiwan and has imposed a quasi-authoritarianism on Hong Kong which under the 1997 Sino-British agreement reverts to China in 2047. Xi told the 3,000 members of the National People's Congress after being crowned president for life: "Every inch of our great motherland absolutely cannot and absolutely will not be separated from China. All acts and tricks to split the motherland are doomed to failure and will be condemned by the people and punished by history."

Xi warned Taiwan that unification with the island was inevitable even though a majority of Taiwan's 23 million people favour continued independence. Xi was equally harsh on Hong Kong's independence movement and has placed China loyalists in key positions in the bustling mercantile city. Xi's distractions with Taiwan and Hong Kong can actually play into India's hands if the ministry of external affairs (MEA) employs a nuanced policy while dealing with China.

Washington's imposition of punitive tariffs on China for intellectual property theft have roiled relations between the world's two largest economies. US President Donald Trump says China is an unfair trader. Apart from imposing annual tariffs of $60 billion on Beijing, Trump has blocked the $117 billion takeover bid of Qualcomm by Singapore-based Broadcom and is keeping a close watch on China's telecoms giant Huawei. Beijing is worried but uses soothing words to calm fears of Chinese trade hegemony. Premier Li Keqiang said recently: "I hope both China and the US will act rationally, and not be led by emotions, and avoid a trade war. China's economy has been so integrated with the world's that closing China's door would mean blocking our way for development. China's aim is to ensure that both domestic and foreign firms, and companies under all kinds of ownership structure, will be able to compete on fair terms in China's large market."

India's deepening relationship with the US was underscored by National Security Advisor Ajit Doval's recent meeting in Washington with US intelligence and security officials. Doval has been involved in sensitive border negotiations with Beijing along with Mandarin-speaking foreign secretary Vijay Gokhale, a former Indian ambassador to China. The Indo-US strategic partnership is a thorn in China's side. Beijing sees it as a means to counter China's rise. China also recognises its own weaknesses. Its population is ageing rapidly. Mao's one-child policy has come home to roost. The elderly increasingly depend on welfare, placing a strain on national budgets. China's total debt is over 250 per cent of GDP. Its banks are over-burdened with bad loans. Annual GDP growth is slowing to six per cent and could dip further. Authoritarianism is rising. Thousands of protestors have been jailed for speaking out against the Xi government. Dissent is ruthlessly suppressed.

India's shambolic democracy is in stark contrast to China's disciplined but brutal one-party rule. India's foreign policy has historically stumbled while trying to tackle Chinese expansionism. Prime Minister Jawaharlal Nehru first tired to adopt a conciliatory approach with his Hindi-Chini bhai bhai slogan in the 1950s. But after the Dalai Lama was given refuge in India in 1959, Sino-India relations plummeted. Nehru's aggressive "forward" policy on the border was a classical military error: provocation without the means to back it up. The 1962 war that followed set Sino-India relations back by decades as Mao undertook the cultural revolution, purging millions.

In the new Xi era, much has changed. India is on its way to becoming the world's third largest economy. Its under-equipped armed forces are finally receiving some attention though budgetary allocations remain dismal. India's foreign policy, however, is maturing. It has built a network of alliances - BIMSTEC, Quad, BRICS - that coalesce both regional and global powers. China has many client states but few real allies. Its relationship with Russia remains transactional. In the wider world, India has allies to its east and west. It is India's foreign policy establishment though - for long timorous and hidebound - that must start punching at the country's true geopolitical weight.

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Modernising India’s armed forces

New Indian Express
Thursday, March 29, 2018

Defence Minister Nirmala Sitharaman said during a recent interview that India now has enough ammunition to fight an intense 10-day war. Just 10 days? Sitharaman is one of the Union Cabinet’s most hardworking and diligent ministers. But hard work and diligence may not be enough to deal with India’s chronically ill-managed Ministry of Defence (MoD).

The MoD had to make emergency off-the-shelf global purchases of ammunition to maintain high-intensity operations on the Line of Control (LoC) and international border (IB) as a contingency measure immediately following the surgical strike in Pakistan-occupied Kashmir (PoK) in September 2016. It is only after that, followed by a further increase in ammunition stock and new advanced weapons for the infantry, that the Indian armed forces can, according to the defence minister, fight an intense 10-day war on either the western or eastern front.

What if the war goes beyond 10 days? India’s MoD has had three ministers in the past four years: Arun Jaitley (twice), Manohar Parrikar and Nirmala Sitharaman. The rot in the MoD set in much before they arrived. The trauma of the Bofors scandal deprived India of new, advanced howitzers for 30 years. Between 2004 and 2014, Defence Minister A K Antony did little to streamline India’s weapons purchases. Submarine programmes like the Scorpene were caught up in scams while the number of fighter jet squadrons fell to 31 against the required strength of 42. The Narendra Modi government promised to reverse decades of drift.

On March 22, the MoD finally unveiled a draft of the Defence Production Policy 2018 (DProP 2018) which is ambitious in scope and intent. It mandates self-reliance by 2025 in fighter jets, tanks, missile systems, warships and autonomous weapon systems.

Sitharaman has tried to put weapons purchase systems back on track. But the absence of a senior military officer attached to the MoD remains a severe handicap. Bureaucrats in the defence ministry with shallow knowledge of military requirements often sit on files for months. They are one of the biggest obstacles in the path to modernise India’s forces.

Chief of Army Staff General Bipin Rawat has been expressing his dismay at the state of affairs. More formally, Army Vice Chief Lt. General Sarath Chand told the parliamentary standing committee on defence that the 2018-19 Union Budget’s allocation for the Army’s capital spending requirement on weaponry and force modernisation was inadequate.

Treating General Chand’s submissions with seriousness, the committee has prepared a draft report which says: “The Committee opines that keeping in view the likely cost escalation due to inflation, the increase over last year’s budget is quite minimal to meet requirements of capital acquisition and other works planned for 2018-19 ... The committee would like the Ministry of Defence to strongly put its case before the Ministry of Finance for adequate allocation of funds, commensurate with the requirement of modernisation and acquisition plans for 2018-19.”

Will things change? Unlikely. Such reports find an archival place in the black bureaucratic hole that the MoD is often likened to. The reference by the parliamentary committee to the ministry of finance (MoF) is particularly ominous. The bureaucracies in the MoD and MoF have deservedly acquired a reputation for being dismissive of budgetary requests by the armed forces. Unless the military has permanent representation in the MoD, this situation will not change. And change it must: Indian’s national security, especially at the LoC and IB, is at risk.

General Rawat has frequently spoken of the Indian armed forces’ readiness to fight a two-front war. But the reality is rather more grim. Soldiers complain of outdated assault weapons. Pakistan-sponsored terrorists killed in J&K are often armed with more sophisticated weaponry than the Indian soldiers’ weapons. Neglect extends to inadequate rations, poor living conditions in some Army camps and lax perimeter security. The terrain along the LoC is difficult to protect. But lack of modern firepower can affect troop morale.

In contrast, Chinese troops across the Line of Actual Control (LAC) and Pakistan’s Army regulars carry advanced weaponry. Chinese president Xi Jinping’s declaration of being prepared to wage a “bloody battle” may be rhetorical bluster but underscores the challenge India faces.

Sitharaman remains confident of a turnaround in the armed forces’ bid to modernise itself to fight more than just a 10-day war. Her target is to build up ammunition stocks for an intense 40-day war—a target that should have met a decade ago. Apart from involving the Indian private sector in defence manufacturing, Sitharaman is pushing government-owned defence organisations to speed up delivery schedules. Both Bharat Dynamics and Hindustan Aeronautics went public in March 2018. As listed companies, HAL and Bharat Dynamics will come under greater public scrutiny.

The key problem with India’s armed forces is civilian neglect over decades. In China, military officers are closely involved at every stage of weapons acquisition and modernisation. In Pakistan of course the Army sets its own inflated defence budget. Civilians play no role. India goes to the other extreme. The majority of the annual defence budget is swallowed up by salaries and pensions. At less than two per cent of GDP, there is just not enough money left in the defence budget to modernise the Army, Navy and Air Force. Bureaucratic shenanigans in the MoD compound the problem.

Sitharaman needs to tackle both problems—budgetary and bureaucratic—if India is to be fully prepared for more than just a 10-day war.

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Biggest let-down of Modi government is its failure to end tax terrorism
It’s no easy task to upset voters across such wide demographies.
Wednesday, March 28, 2018

It’s not easy to upset business tycoons, salaried employees and small traders all at the same time. Finance minister Arun Jaitley has, however, accomplished this feat with customary aplomb.

Businessmen say “inspector raj” is back with a vengeance. Demonetisation has had unintended consequences. Lakhs of Indian businessmen and traders proved more imaginative than the government had thought. They contrived to convert virtually all their black money to white, depositing crores of rupees in cash into their bank accounts, preferring the risk of income tax scrutiny and raids to losing unaccounted cash holdings.

Deluged with income tax returns that didn’t match assessees’ new black cash deposits, the authorities are now stuck in a quagmire of their own making. There just isn’t enough manpower to chase all the dodgy cash deposits. Those who took the risk of income tax scrutiny by declaring all their black money are busy “settling” matters. Since there are lakhs of such assessees, most slip through the net.

Distraught bureaucrats in the Ministry of Finance (MoF) have reacted in the time-honoured way of bureaucrats: raid and prosecute. Their victims have reacted in the way the Indian system works: go to court. With multiple tribunal appeals and court challenges available, black money-newly-turned-white in bank accounts is safe for an indefinite period of time.

Meanwhile, the tax terrorism the NDA government had pledged to end is back.

As TV Mohandas Pai and S Krishnan wrote acerbicly in The Economic Times on March 22: “One of the major promises made by the BJP government when it came to power in 2014 was to stop tax terrorism. Finance minister Arun Jaitley proclaimed before the 2014 election that tax terrorism was the biggest threat to India and he would stop it. The problem of tax terrorism persists in this regime as well. Tax disputes have risen massively due to high target setting by the political establishment over the years. The I-T department collects tax on a perverse assessment by force and when taxpayers protest, officers agree, but confess that they have a collection target to achieve. They instead suggest that taxpayers appear against the assessment and obtain refunds.

“When the NDA government came to power, the amount of tax disputes in March 2014 was Rs 4.10 lakh crore, which has gone up to Rs 6.10 lakh crore in March 2017, a 50 per cent increase. The FM also agreed that injustice was done to Vodafone, but has not remedied it yet. If promises made in Parliament are not kept, the credibility and trust in government will suffer. It’s time our FM kept his promise.”

While delivering his Union Budget speech in 2015, Jaitley promised to cut corporation tax from 30 per cent to 25 per cent. He still hasn’t done it. As a sop, in the 2018-19 Union Budget last month, Jaitley cut corporation tax to 25 per cent - but only for companies with an annual turnover of less than Rs 250 crore. This, Jaitley declared, covered 99 per cent of Indian companies. What he didn’t say is the remaining one per cent of companies with an annual turnover of over Rs 250 crore account for over 90 per cent of corporate tax revenue.

Why this sleight of hand?

Because extending the 25 per cent corporation tax rate to all companies would mean a loss of an unaffordable Rs 70,000 crore in revenue. By reducing tax to 25 per cent on 99 per cent of companies with an annual turnover below Rs 250 crore, but which account for only 10 per cent of corporation tax revenue, Jaitley got the optics right but broke his 2015-2016 Budget pledge.

Tax terrorism helps nobody. Most cases go into long-term litigation. They take years or even decades to conclude. India doesn’t have separate commercial courts (as, for example, Britain does) to fast-track revenue disputes.

Corrupt tax officers are delighted at this state of affairs. They raid businessmen on the pretext of post-demonetisation scrutiny. Avenues of “settlement” are kept wide open. Businessmen know this reality. That is why so many blithely deposited crores of black money into their bank accounts following demonetisation.

There is one silver lining though for the government - businessmen and traders who deposited large amounts in cash into their bank accounts but never filed tax returns in the past will now have to pay taxes regularly.

One business leader tells the story of a friend whose entire business is not on the books - there is ostensibly no revenue, no profits, no taxes, no factory. All transactions are done in cash. He now wants to go legit, but doesn’t know how. If he declares his factory, located in the hinterland where tax officials rarely venture, there will be back taxes and penalties to pay. If he doesn’t declare it, he risks being caught anyway as many of his customers are now GST-compliant. He will soon be outed based on matched invoices.

This then is the biggest benefit of GST – transparency.

Yet India remains under-taxed. Farmers pay no tax. There are some “no-go” areas where I-T officials admit they dare not venture. As one officer says sheepishly, “Some community enclaves don’t allow us to step in - they threaten violence. Business here carries on in cash. No books of account exist.”

Many of the scams unearthed over the past decade originated in the finance or defence ministry. It is here where the politician-bureaucrat nexus is most toxic. Scams where investigations have been mysteriously stalled include income tax cases against television channels and the national spot exchange (NSEL). The bank fraud by Mehul Choksi and Nirav Modi took place under the watchful eyes of the banking department which is a part of the MoF.

The MoF has in five Union Budgets over four years consistently disappointed salaried employees. Schemes that have succeeded - financial inclusion through Jan Dhan Yojana, Mudra loans for small entrepreneurs and direct benefit transfers (DBT), which sideline middlemen who used to siphon off subsidies for the poor - were created by the Prime Minister's Office (PMO). The MoF for its part stalled one rank, one pension (OROP) for several months, reduced defence allocations, delayed farm loan waivers and alienated small business traders with a needlessly complex GST.

It’s no easy task to upset voters across such wide demographies. This government has managed to do just that.

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GenY will shape 2019 polls

Thursday, March 29, 2018

First-time voters between the ages of 18 and 23 can swing the 2019 Lok Sabha election. A 23-year-old in 2019, born in or after April 1996, would not have been eligible to vote in the April-May 2014 Lok Sabha election. He or she will, however, be eligible to do so in the April-May 2019 general election, along with an estimated 100 million other 18-23 year-olds. The youngest in this bracket, born in or before April 2001, will be 18 years old when the 2019 Lok Sabha poll is held. These 100 million new voters could shape the general election given that they will comprise around 11 per cent of the total electorate estimated at 900 million Indians.

This could be tricky for both the national parties, BJP and Congress, as well as for regional parties. Globally, young people are anti-establishment. They lean Left, are liberal and iconoclastic. India though is different from the West where individualism trumps tradition and family. In India, the young tend to be less radical than their global counterparts. Family and religion matter far more. Obedience at home, rather than defiance, learning by rote in college rather than questioning teachers, belief in faith rather than agnosticism define Indian youth.

Rural youth are even more tradition-bound than their urban counterparts. Religion, caste and gender play an important part in their lives and in their voting preference. In a close general election, young first-time voters will form a key target for all political parties. According to the Election Commission of India (ECI), as of February 2018, over 40 million first-time voters had registered themselves in the 18-20 age group. When figures are updated for those in the 21-23 age group, that number will obviously swell. By early 2019, the full universe of 18-23 year-olds will be eligible to vote for the first time. Not all will register with the ECI, but going by the number who already have, 80-90 million first-time voters are likely to be registered by April 2019.

Young urban people consume social media in a big way — Facebook, WhatsApp, Twitter and Instagram. Online news, too, is a staple. The rural young increasingly use social media and online websites to get their news. Print and television remain important, but real time news on the internet shapes opinions fastest. The BJP had a headstart with its IT cell. The Congress has now caught up. But Congress’ challenge is to negate the impression that it is corrupt, dynastic and nepotistic.

Since 2013, Congress has shrunk from 206 Lok Sabha MPs to 48. In 2013, it governed 14 states. Today, it governs just four. The BJP in 2013 was in power in nine states. Today, it governs 20 states. But that shouldn’t induce complacency. In May 2018, Congress could well retain Karnataka and in December 2018 regain Rajasthan from the BJP. Madhya Pradesh, too, is in play. Thus, for both state assembly and parliamentary elections, India’s first-time voters could tip the balance.

What are the issues that concern young voters? The most important is jobs, especially for those in the 21-23 age bracket. For women, gender equality and safety is a key concern. Caste and community matter too. There is an undercurrent of resentment at SC/ST quotas that restrict both educational and job opportunities. Rising prices is another hot-button issue. With parents nearing retirement, youngsters in the low and middle-income groups are deeply concerned about the cost of living. With jobs scarce and wage increases muted, the state of the economy is a real electoral issue.

First-time voters in India are a curious mix of idealism and pragmatism. They accept the concept of arranged marriages and filial obedience, but seek politicians with a modern mindset. They dislike politicians who divide people on the basis of religion or caste, but paradoxically are themselves conscious of their own caste and religion. Few, especially in rural India, want to marry outside their community or caste. India’s young may be idealists, but a strong streak of tradition runs through them.

In a quasi-presidential contest between Prime Minister Narendra Modi and Congress president Rahul Gandhi, first-time voters would be expected to be attracted to Rahul’s relative youth. That wasn’t the case though in 2014 when a Modi wave swept Rahul’s party into virtual oblivion. Modi was an early adapter of social media and online messaging. Rahul has now beefed up his online presence, but the odium of dynasty and privilege remains.

First-time voters value integrity and merit in politicians. They frown on divisiveness and negativity. Performance, not lineage, matters. A good candidate can swing votes for a party. For the BJP, polarisation may work with older voters. The young care more about jobs, prices and performance. Modi is still revered as a doer. For Rahul, the slope is steeper. He has to live down ten years of UPA-led mis-governance and a reputation for nepotism that jars on the young. For regional parties that use caste and community to win votes, there, too, will come a point of diminishing returns. The old may still be swayed by divisiveness. The young may not. They hold the balance of the 2019 general election.

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7 key mistakes Modi has made for which BJP won't get the 282 seats it did in 2014
History has an uncomfortable habit of repeating itself.

Thursday, March 22, 2018

The BJP’s by-poll debacle in Uttar Pradesh and Bihar has thrown up three pieces of conventional wisdom. One, the Modi wave is over. Two, the BJP will get no more than 180 seats in the 2019 Lok Sabha election. Three, the combined Opposition will sink their ideological differences and come to power.

It’s impossible to predict an election result a year in advance. What’s certain though is the BJP will not win the 282 seats it did in 2014. Lightning doesn’t strike twice. The 2014 Lok Sabha poll brought two powerful forces together: a strong anti-Congress wave and an equally strong pro-Modi wave. They combined to form a tsunami that led to the BJP sweeping Uttar Pradesh, Bihar, Gujarat, Rajasthan, Madhya Pradesh, Chhattisgarh and Delhi.

Electoral tsunami
Such electoral tsunamis are rare. Even the sympathy wave caused by Rajiv Gandhi’s assassination in May 1991 didn’t help the Congress win a majority in the Lok Sabha. Prime Minister PV Narasimha Rao led a minority government for five years before India got its first khichdi United Front government in 1996 with HD Deve Gowda as Prime Minister, supported by the Congress from outside.

Will history repeat itself in 2019? If it does, look at the cast of characters who will be part of a new United Front melting pot: Mayawati, Akhilesh Yadav, Tejashwi Yadav, MK Stalin, Sharad Pawar, Assaduddin Owaisi, Omar Abdullah and Sitaram Yechury. The chef who will supervise the making of this khichdi government is, of course, Rahul Gandhi.

As he turns 49 next June, has Rahul’s time finally come? How will the Congress control the clashing egos of the more than dozen leaders of the new-look United Front? To complicate the broth, TMC’s Mamata Banerjee and TRS’ KCR are plotting to set up a non-BJP, non-Congress Third Front (TF).

In a best-case scenario, the Congress can hope to gain significant Lok Sabha seats from only seven states: Rajasthan, Madhya Pradesh, Gujarat, Haryana, Punjab, Karnataka and Kerala. It is locked in binary contests with the BJP in four of these states, with the Left in one (Kerala) and in multipolar contests in two (Punjab and Haryana). Doubling its 2014 tally to around 90 seats would be an optimistic outcome.

When it supported Deve Gowda’s UF government from outside in 1996, the Congress had 140 Lok Sabha seats. The various parties that made up the UF had 192 seats and the BJP 161 seats. In 2019, the combined Opposition (United Front plus Third Front) will likely account for 120-140 seats with the TMC, TRS, DMK, SP and BSP providing the bulk.

The small parties in the mix like the NCP, NC, AIMIM and the Left will top up the numbers. Lalu Prasad’s RJD in Bihar, despite its win in Araria and Jehanabad (but loss in Bhabua) in recent by-polls, is unlikely to get into double digits in the 2019 Lok Sabha election given Lalu’s conviction in yet another fraud case. The sympathy factor can wear thin.

Hung Parliament
With 120-140 seats in the UF-TF combine and 90 seats for the Congress, totalling 210-230 seats for the mahagathbandhan, the 2019 Lok Sabha election will obviously produce a hung Parliament. This accepts the prevalent hypothesis that the BJP wins 180-200 seats. With few reliable allies, the BJP-led NDA will thus be unable to cross 240 seats. Unattached parties like the BJD, AIADMK, TDP and independents will make up the rest and be the kingmakers. This, therefore, is what the 17th Lok Sabha in 2019 could look like: NDA 240 seats; Congress-led mahagathbandhan (UF+TF) 220 seats; others 85 seats.

Seven errors
Modi has made seven key errors that have brought the BJP to this pass. First, alienating NDA allies. Second, misallocating portfolios in the Union Cabinet. (Arun Jaitley would have been a better external affairs minister and Sushma Swaraj a better home minister. Ministers like Mahesh Sharma, Harsh Vardhan, Radha Mohan Singh and Uma Bharti have not distinguished themselves). Three, remaining silent on issues ranging from cow vigilantism to divisive remarks by party MPs.

Four, not holding daily media briefings by the PMO or MEA as every major country does — and as India did when Syed Akbaruddin was MEA spokesperson. Five, not submitting himself to regular press conferences with robust question-and-answer sessions.

Six, allowing the bureaucracy to slow down corruption cases against UPA-era offenders. Seven, following an inconsistent policy on Pakistan. The significant achievements of the Modi government — and there are many — have been submerged by these self-inflicted wounds.

Will the Rahul Gandhi-led Congress with, say, 90 seats be willing to support a new UF+TF government from outside? Will it seek the prime ministership for Rahul by dint of having the largest number of MPs in the mahagathbandhan? How will the ambitious leaders of the Opposition khichdi take to such an arrangement?

Rahul’s own reluctance to lead such a coalition could stem from the recognition that with 210-230 seats the mahagathbandhan will not be able to claim a working majority in the Lok Sabha without support from unattached parties like the BJD, TDP, AIADMK and independents.

With around 240 seats, the shrunken NDA will wait to pounce if a coalition government of over 20 parties collapses under the weight of its own ideological contradictions as it did in 1998. Six years of NDA government followed. History has an uncomfortable habit of repeating itself.

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Not Modi vs Rahul, but Bharat vs India will define real battle of 2019
With the four protagonists - Sonia, Rahul, Modi and Shah - suffused with hubris, the election campaign for 2019 will be long and brutal.
Wednesday, March 21, 2018

A sense of entitlement afflicts Indian politicians. UPA chairperson Sonia Gandhi is a victim. So is her son Congress president Rahul Gandhi. So are Prime Minister Narendra Modi and BJP President Amit Shah.

A sense of entitlement afflicts Indian politicians. UPA chairperson Sonia Gandhi is a victim. So is her son Congress president Rahul Gandhi. So are Prime Minister Narendra Modi and BJP President Amit Shah.

At the India Today Conclave last week, Sonia declared: "We will not let them (BJP) come back to power in 2019," as if proclaiming a royal decree.

In Singapore, around the same time, Rahul engaged in a verbal kerfuffle with author Prasenjit K Basu. The Congress president's body language, sipping water, legs crossed, as professor Basu repeated his question, radiated arrogance bred by an overweening sense of entitlement.

Modi tries to be humble most of the time but his hubris occasionally shows. For example, it was thoughtless to not take Andhra Pradesh chief minister Chandrababu Naidu's phone call for 16 hours even after two TDP ministers had resigned from the Union Cabinet or at a function to walk past senior BJP leader and mentor-turned-critic LK Advani without acknowledging him. Advani's anguished expression said it all.

BJP president Amit Shah does not even try to hide his hubris. This story may be apocryphal but when the BJP's then political strategist Prashant Kishor asked him following the party's stunning victory in the May 2014 Lok Sabha election, "what after May", Shah reportedly replied, "June". Kishore left the BJP but after unsuccessful stints with the Congress and SP may return to the BJP fold ahead of the 2019 Lok Sabha poll.

With the four protagonists - Sonia, Rahul, Modi and Shah - suffused with hubris, the election campaign for 2019 will be long and brutal. But make no mistake: The first dose of venom that has poisoned Indian political discourse was injected by Sonia in 2007 with her maut ka saudagar taunt. To call a sitting chief minister the "merchant of death" opened the floodgates to political abuse. It was soon the new normal. Just as it pioneered feudal dynastic politics (now embraced by every regional party), the Congress pioneered invective in India's political lexicon.

Sonia was also the first politician in the Congress to shrewdly recognise in 2007 the threat Narendra Modi posed. Modi was then a relatively unknown chief minister. But Sonia saw in him 11 years ago some of the same qualities she herself possessed: ruthlessness, cunning, decisiveness.

Congress leaders are better at lacing abuse with mordant humour. BJP leaders, hopelessly inarticulate, abuse without the benefit of clever nuance. In this "BJP Bharat" vs "Congress India" linguistic battle, India wins.

The Congress can taunt the prime minister and pretend it is banter. The leaden-footed BJP responds with rage, bereft of ameliorative cadence.

BJP's Assam leader Himanta Biswa Sarma last week called Rahul Gandhi a "feudal lord". For someone as steeped in privilege as Rahul, that's not an insult. In India being a feudal lord is not, for feudal lords, a bad thing.

Sarma's choice of words reflects the unequal battle between the Congress' India and the BJP's Bharat.

The Congress takes its feudalism for granted. It isn't embarrassed - though of course it should be - that one family has usurped a 133-year-old party. Feudalism breeds both arrogance and ignorance. It is this hubris which allows Sonia to say artlessly that she can envisage a future Congress with a non-Gandhi president. But as she knows perfectly well, since its founding in 1885 the Congress has had 60 presidents; 54 of them were not Nehru-Gandhis. The six who were: Motilal Nehru, Jawahalal Nehru, Indira Gandhi, Rajiv Gandhi, Sonia Gandhi and now Rahul Gandhi.

Sonia holds the dubious distinction of being Congress president for 20 years - the longest in the party's history, longer than Mahatma Gandhi (one year), Jawaharlal Nehru (eight years), Sardar Vallabbhai Patel (one year), K Kamraj (four years), Sarojini Naidu (one year) and Jagjivan Ram (two years).

India vs Bharat
How is the "idea of India" different from the "idea of Bharat"? The BJP's Bharat has a chip on its shoulder. Culture minister Mahesh Sharma wants to recapture India's "glorious past", which in itself is harmless enough, but an anachronism when it is the future that interests India's young. The Congress' India in contrast is a colonial construct: feudal, entitled and presumptuous. It is long past its sell-by date.

As I wrote in The Times of India (January 18, 2013), "In 1947, Mahatma Gandhi, freedom achieved, wanted to disband the Congress and form new political organisations to contest free elections. Sardar Vallabhbhai Patel agreed. Pandit Jawaharlal Nehru did not. Nehru's view prevailed. In 1969, Indira Gandhi split the Congress to sideline the syndicate of regional satraps led by K Kamaraj and S Nijalingappa. The organisational and state-level decline of the Congress began in 1969 though Mrs Gandhi's 1971 election victory and the euphoria over the Bangladesh war disguised it for years.

"Nehru inherited a colonial administration. After independence, it continued to serve the government in power. Colonial laws had been written to often protect British injustice, not deliver justice to Indians. Many remain cast in stone 150 years later, delaying and denying justice to ordinary Indians. Yet, Nehru did not impose chief ministers on states. The party's local organisation was given a relatively free hand to choose regional leaders. Indira Gandhi reversed that policy. She imposed state chief ministers, suspended intra-Congress elections, dismissed opposition state governments under Article 356, and undermined the judiciary."

If the Congress wants to re-establish its connect with Bharat's electorate, it will need to shed not only its feudal skin but make Sonia Gandhi's declaration come true: a future Congress without a Gandhi as either party president or prime minister. The last time that happened in recent decades was in 1992-1996 when PV Narasimha Rao was both prime minister and Congress president.

The Rao-led economic reforms transformed India. His was the new Congress that could have created a new India. Sadly but typically, the Congress has disowned Rao and that is why its idea of India is so deeply flawed.

A sense of entitlement afflicts Indian politicians. UPA chairperson Sonia Gandhi is a victim. So is her son Congress president Rahul Gandhi. So are Prime Minister Narendra Modi and BJP President Amit Shah.

At the India Today Conclave last week, Sonia declared: "We will not let them (BJP) come back to power in 2019," as if proclaiming a royal decree.

In Singapore, around the same time, Rahul engaged in a verbal kerfuffle with author Prasenjit K Basu. The Congress president's body language, sipping water, legs crossed, as professor Basu repeated his question, radiated arrogance bred by an overweening sense of entitlement.

Modi tries to be humble most of the time but his hubris occasionally shows. For example, it was thoughtless to not take Andhra Pradesh chief minister Chandrababu Naidu's phone call for 16 hours even after two TDP ministers had resigned from the Union Cabinet or at a function to walk past senior BJP leader and mentor-turned-critic LK Advani without acknowledging him. Advani's anguished expression said it all.

BJP president Amit Shah does not even try to hide his hubris. This story may be apocryphal but when the BJP's then political strategist Prashant Kishor asked him following the party's stunning victory in the May 2014 Lok Sabha election, "what after May", Shah reportedly replied, "June". Kishore left the BJP but after unsuccessful stints with the Congress and SP may return to the BJP fold ahead of the 2019 Lok Sabha poll.

With the four protagonists - Sonia, Rahul, Modi and Shah - suffused with hubris, the election campaign for 2019 will be long and brutal. But make no mistake: The first dose of venom that has poisoned Indian political discourse was injected by Sonia in 2007 with her maut ka saudagar taunt. To call a sitting chief minister the "merchant of death" opened the floodgates to political abuse. It was soon the new normal. Just as it pioneered feudal dynastic politics (now embraced by every regional party), the Congress pioneered invective in India's political lexicon.

Sonia was also the first politician in the Congress to shrewdly recognise in 2007 the threat Narendra Modi posed. Modi was then a relatively unknown chief minister. But Sonia saw in him 11 years ago some of the same qualities she herself possessed: ruthlessness, cunning, decisiveness.

Congress leaders are better at lacing abuse with mordant humour. BJP leaders, hopelessly inarticulate, abuse without the benefit of clever nuance. In this "BJP Bharat" vs "Congress India" linguistic battle, India wins.

The Congress can taunt the prime minister and pretend it is banter. The leaden-footed BJP responds with rage, bereft of ameliorative cadence.

BJP's Assam leader Himanta Biswa Sarma last week called Rahul Gandhi a "feudal lord". For someone as steeped in privilege as Rahul, that's not an insult. In India being a feudal lord is not, for feudal lords, a bad thing.

Sarma's choice of words reflects the unequal battle between the Congress' India and the BJP's Bharat.

The Congress takes its feudalism for granted. It isn't embarrassed - though of course it should be - that one family has usurped a 133-year-old party. Feudalism breeds both arrogance and ignorance. It is this hubris which allows Sonia to say artlessly that she can envisage a future Congress with a non-Gandhi president. But as she knows perfectly well, since its founding in 1885 the Congress has had 60 presidents; 54 of them were not Nehru-Gandhis. The six who were: Motilal Nehru, Jawahalal Nehru, Indira Gandhi, Rajiv Gandhi, Sonia Gandhi and now Rahul Gandhi.

Sonia holds the dubious distinction of being Congress president for 20 years - the longest in the party's history, longer than Mahatma Gandhi (one year), Jawaharlal Nehru (eight years), Sardar Vallabbhai Patel (one year), K Kamraj (four years), Sarojini Naidu (one year) and Jagjivan Ram (two years).

India vs Bharat
How is the "idea of India" different from the "idea of Bharat"? The BJP's Bharat has a chip on its shoulder. Culture minister Mahesh Sharma wants to recapture India's "glorious past", which in itself is harmless enough, but an anachronism when it is the future that interests India's young. The Congress' India in contrast is a colonial construct: feudal, entitled and presumptuous. It is long past its sell-by date.

As I wrote in The Times of India (January 18, 2013), "In 1947, Mahatma Gandhi, freedom achieved, wanted to disband the Congress and form new political organisations to contest free elections. Sardar Vallabhbhai Patel agreed. Pandit Jawaharlal Nehru did not. Nehru's view prevailed. In 1969, Indira Gandhi split the Congress to sideline the syndicate of regional satraps led by K Kamaraj and S Nijalingappa. The organisational and state-level decline of the Congress began in 1969 though Mrs Gandhi's 1971 election victory and the euphoria over the Bangladesh war disguised it for years.

"Nehru inherited a colonial administration. After independence, it continued to serve the government in power. Colonial laws had been written to often protect British injustice, not deliver justice to Indians. Many remain cast in stone 150 years later, delaying and denying justice to ordinary Indians. Yet, Nehru did not impose chief ministers on states. The party's local organisation was given a relatively free hand to choose regional leaders. Indira Gandhi reversed that policy. She imposed state chief ministers, suspended intra-Congress elections, dismissed opposition state governments under Article 356, and undermined the judiciary."

If the Congress wants to re-establish its connect with Bharat's electorate, it will need to shed not only its feudal skin but make Sonia Gandhi's declaration come true: a future Congress without a Gandhi as either party president or prime minister. The last time that happened in recent decades was in 1992-1996 when PV Narasimha Rao was both prime minister and Congress president.

The Rao-led economic reforms transformed India. His was the new Congress that could have created a new India. Sadly but typically, the Congress has disowned Rao and that is why its idea of India is so deeply flawed.

At the India Today Conclave last week, Sonia declared: "We will not let them (BJP) come back to power in 2019," as if proclaiming a royal decree.

In Singapore, around the same time, Rahul engaged in a verbal kerfuffle with author Prasenjit K Basu. The Congress president's body language, sipping water, legs crossed, as professor Basu repeated his question, radiated arrogance bred by an overweening sense of entitlement.

Modi tries to be humble most of the time but his hubris occasionally shows. For example, it was thoughtless to not take Andhra Pradesh chief minister Chandrababu Naidu's phone call for 16 hours even after two TDP ministers had resigned from the Union Cabinet or at a function to walk past senior BJP leader and mentor-turned-critic LK Advani without acknowledging him. Advani's anguished expression said it all.

BJP president Amit Shah does not even try to hide his hubris. This story may be apocryphal but when the BJP's then political strategist Prashant Kishor asked him following the party's stunning victory in the May 2014 Lok Sabha election, "what after May", Shah reportedly replied, "June". Kishore left the BJP but after unsuccessful stints with the Congress and SP may return to the BJP fold ahead of the 2019 Lok Sabha poll.

With the four protagonists - Sonia, Rahul, Modi and Shah - suffused with hubris, the election campaign for 2019 will be long and brutal. But make no mistake: The first dose of venom that has poisoned Indian political discourse was injected by Sonia in 2007 with her maut ka saudagar taunt. To call a sitting chief minister the "merchant of death" opened the floodgates to political abuse. It was soon the new normal. Just as it pioneered feudal dynastic politics (now embraced by every regional party), the Congress pioneered invective in India's political lexicon.

Sonia was also the first politician in the Congress to shrewdly recognise in 2007 the threat Narendra Modi posed. Modi was then a relatively unknown chief minister. But Sonia saw in him 11 years ago some of the same qualities she herself possessed: ruthlessness, cunning, decisiveness.

Congress leaders are better at lacing abuse with mordant humour. BJP leaders, hopelessly inarticulate, abuse without the benefit of clever nuance. In this "BJP Bharat" vs "Congress India" linguistic battle, India wins.

The Congress can taunt the prime minister and pretend it is banter. The leaden-footed BJP responds with rage, bereft of ameliorative cadence.

BJP's Assam leader Himanta Biswa Sarma last week called Rahul Gandhi a "feudal lord". For someone as steeped in privilege as Rahul, that's not an insult. In India being a feudal lord is not, for feudal lords, a bad thing.

Sarma's choice of words reflects the unequal battle between the Congress' India and the BJP's Bharat.

The Congress takes its feudalism for granted. It isn't embarrassed - though of course it should be - that one family has usurped a 133-year-old party. Feudalism breeds both arrogance and ignorance. It is this hubris which allows Sonia to say artlessly that she can envisage a future Congress with a non-Gandhi president. But as she knows perfectly well, since its founding in 1885 the Congress has had 60 presidents; 54 of them were not Nehru-Gandhis. The six who were: Motilal Nehru, Jawahalal Nehru, Indira Gandhi, Rajiv Gandhi, Sonia Gandhi and now Rahul Gandhi.

Sonia holds the dubious distinction of being Congress president for 20 years - the longest in the party's history, longer than Mahatma Gandhi (one year), Jawaharlal Nehru (eight years), Sardar Vallabbhai Patel (one year), K Kamraj (four years), Sarojini Naidu (one year) and Jagjivan Ram (two years).

India vs Bharat
How is the "idea of India" different from the "idea of Bharat"? The BJP's Bharat has a chip on its shoulder. Culture minister Mahesh Sharma wants to recapture India's "glorious past", which in itself is harmless enough, but an anachronism when it is the future that interests India's young. The Congress' India in contrast is a colonial construct: feudal, entitled and presumptuous. It is long past its sell-by date.

As I wrote in The Times of India (January 18, 2013), "In 1947, Mahatma Gandhi, freedom achieved, wanted to disband the Congress and form new political organisations to contest free elections. Sardar Vallabhbhai Patel agreed. Pandit Jawaharlal Nehru did not. Nehru's view prevailed. In 1969, Indira Gandhi split the Congress to sideline the syndicate of regional satraps led by K Kamaraj and S Nijalingappa. The organisational and state-level decline of the Congress began in 1969 though Mrs Gandhi's 1971 election victory and the euphoria over the Bangladesh war disguised it for years.

"Nehru inherited a colonial administration. After independence, it continued to serve the government in power. Colonial laws had been written to often protect British injustice, not deliver justice to Indians. Many remain cast in stone 150 years later, delaying and denying justice to ordinary Indians. Yet, Nehru did not impose chief ministers on states. The party's local organisation was given a relatively free hand to choose regional leaders. Indira Gandhi reversed that policy. She imposed state chief ministers, suspended intra-Congress elections, dismissed opposition state governments under Article 356, and undermined the judiciary."

If the Congress wants to re-establish its connect with Bharat's electorate, it will need to shed not only its feudal skin but make Sonia Gandhi's declaration come true: a future Congress without a Gandhi as either party president or prime minister. The last time that happened in recent decades was in 1992-1996 when PV Narasimha Rao was both prime minister and Congress president.

The Rao-led economic reforms transformed India. His was the new Congress that could have created a new India. Sadly but typically, the Congress has disowned Rao and that is why its idea of India is so deeply flawed.

Follow@minhazmerchant on twitter


Cleaning The NPA Mess
Non-Performing Assets (NPAs) are both a political and financial problem. Humongous NPAs were created during the UPA1 and UPA2 governments. But lax monitoring by the Reserve Bank of India (RBI) ensured they didn’t show up on bank balance sheets

Friday, March 16, 2018

“In this world, nothing is certain except death and taxes,” said Benjamin Franklin, one of America’s founding fathers. Add to that debt. For individuals, it can, beyond a point, spell trouble. For banks, when it goes bad, debt can be ruinous.

Non-Performing Assets (NPAs) are both a political and financial problem. Humongous NPAs were created during the UPA1 and UPA2 governments. But lax monitoring by the Reserve Bank of India (RBI) ensured they didn’t show up on bank balance sheets. Most remained hidden, allowing the UPA government to concoct the myth that the majority of NPAs have emerged during the current NDA government. That’s theoretically true – but simply because the Narendra Modi government, along with the Urjit Patel-headed RBI, have decided to take the NPA problem head-on.

Changed rules for recognising NPAs on bank balance sheets have seen bad debts, camouflaged in earlier years, come to light. Alarmed at the extent of hidden NPAs now under the disinfectant of sunlight, the Modi government in 2016 implemented one of the most significant reforms to clean up India’s banking system by legislating the Insolvency and Bankruptcy Code (IBC).

The IBC law is potentially a game-changer. It enables debt-laden companies to find buyers of their underlying assets through a relatively quick legal mechanism. Banks were coerced over the past decade by crony capitalism. Quiet, persuasive phone calls from the ministry of finance often led to loans being granted to companies with dubious balance sheets but friends in high places.

Inevitably, many of those loans turned sour. Till 2014, most banks were allowed by the RBI to follow relaxed NPA norms. When loans did qualify as NPAs, they were rolled over with fresh loans. That is how the Nirav Modi and Mehul Choksi letters of understanding (LoUs) were extinguished, in classical ponzi fashion, quarter after quarter. Sunlight shone on bank balance sheets only after 2014-15. Bad debts were now ruthlessly recognised as NPAs in bank balance sheets. Strict accounting standards were followed. The quantity of NPAs soared, galvanising the move towards the new insolvency and bankruptcy code.

Estimates of bank NPAs vary from Rs. 9 lakh crore to significantly lower numbers. Nonetheless, the NPA problem had by 2014 grown so toxic that private investment dried up. NPA-laden banks cut corporate lending. A domino effect set in. Infrastructure projects were stalled. Manufacturing activity slowed. The economy stumbled.

The Modi government inherited an economy with a broken banking system and corporates starved of new debt. Old debt, at relatively high-interest rates, meanwhile multiplied. To prevent rigor mortis in the economy, the IBC law was clearly an urgently needed reform. In the past year it has met with some success. Stressed assets at companies like Bhushan Steel and Amtek Auto are in demand because their underlying business holds promise. Banks are likely to receive repayment of a significant portion of their loans currently categorised as NPAs. That will strengthen their balance sheets as repayments will add to current quarterly profits and allow them to increase lending to corporates with sound business plans.

Amtek Auto has defaulted on loans worth over Rs. 12,500 crore. The company’s subsidiaries – Castex Technologies and Metalyst Forgings – will be sold separately. Together the Amtek Auto group owes Rs. 22,000 crore. The quick resolution to sell the company to the highest bidder, Britain’s Liberty House, will help banks recover a large portion of their NPAs. Bhushan Steel owes Rs. 44,000 crore. It is India’s largest manufacturer of auto-grade steel. Tata Steel outbid JSW Steel by offering lenders Rs. 34,800 crore upfront, an additional Rs. 1,200 crore to creditors and 12 per cent equity in the restructured entity to the lenders. This will enable banks and other lenders to recoup a majority of its NPAs in Bhushan Steel.

The Modi government has meanwhile provided relief to the cash-strapped telecom sector by raising spectrum caps and restructuring payment liabilities. Telecom firms have been hit by a race-to-the-bottom price war. They carry large debt liabilities which could roil banks at a critical time when the IBC is helping the corporate sector regain good health. Consolidation between Idea and Vodafone will help both to cut costs and recapture profits. Airtel has a robust model and will make up a troika with Reliance Jio and Idea-Vodafone to keep the telecom sector safe from the debt trap companies in disparate industries often find themselves in.

Unfortunately, like in most Indian reforms, the insolvency and bankruptcy code has run into legal and bureaucratic hurdles. Unsuccessful bidders are the first impediment. In several high-profile cases, they have petitioned the National Company Law Tribunal (NCLT). The Renaissance Group, for example, failed to win a bid for the assets of Electrosteel Steels. It has asked the NCLT to stop the “resolution professional” from negotiating with Vedanta and Tata Steel till its petition is resolved. Other major defaulting companies caught up in legal knots are Essar Steel and Binani Cement. The Aditya Birla group’s UltraTech was outbid by just Rs. 100 crore for Binani Cement by Dalmia Bharat Cement. It too has approached the NCLT for clarity on how the rival bids were evaluated. The Birlas claim that they received a single line email rejecting their bid with no details of how the bids were evaluated.

Despite these glitches, the IBC promises to be one of the most important financial reforms of the Modi government. If disputes surrounding winning bids for debt-immersed steel, cement and infrastructure companies are resolved speedily and professionally, both the banking and corporate sectors will benefit. Even if 50 per cent of the estimated Rs. 9 lakh crore NPAs is recovered, the gradual infusion of nearly Rs. 5 lakh crore into the banking system will clean up banks’ balance sheets, bolster their ability to lend again to corporates, and spur private investment in the economy.

For the future too, banks will have learnt some hard lessons. Their balance sheets strengthened and vigilance measures against fraud enhanced, Indian banks, past victims of coercive and politically motivated lending, could lead the economy back to an eight per cent GDP growth trajectory as new corporate investment kicks in.

Follow@minhazmerchant on twitter


Can dragon and elephant dance

New Indian Express
Thursday, March 15, 2018

China’s Foreign Minister Wang Yi chooses his words carefully. But as with all Chinese leaders, what he says isn’t necessarily what he means. Nonetheless, Wang’s comments last week at a press conference in Beijing are a departure from the hot-and-cold rhetoric emanating from China since the Doklam standoff was resolved with some loss of face for Beijing.

Wang said: “Chinese and Indian leaders have developed a strategic vision for future relations. The Chinese dragon and Indian elephant must not fight each other but dance with each other. If China and India are united, one plus one will become 11 instead of two.”

Elephants and dragons don’t make particularly good dance partners but Wang’s remarks have to be seen in the context of three recent events. The first is the harsh criticism Chinese president-for-life Xi Jinping has received for modifying China’s Constitution to abolish the two-term limit for president. The move has drawn criticism both globally and domestically. A rattled Chinese government has censored online commentary, even scrubbing words like “criticism”.

There is anger too within the larger Communist Party at the “speed, stealth and guile” with which Xi bulldozed the Constitutional change. The New York Times revealed the extent of the stealth: “Some 200 Communist Party officials gathered behind closed doors in January 2018 to take a momentous political decision: whether to abolish presidential term limits and enable Xi Jinping to lead China for a generation. In a two-day session in Beijing, they bowed to Xi’s wish to hold on to power indefinitely.

But a bland communiqué issued afterward made no mention of the weighty decision, which the authorities then kept under wraps for more than five weeks. The decision was abruptly announced only last week, days before the annual session of China’s legislature, the National People’s Congress. The delay was apparently an effort to prevent opposition from coalescing before formal approval of the change ...”

Xi’s unpopular power grab could backfire. Analysts are calling it a blunder that will constrain China’s rise as a superpower. Dissent could lead to civil protests though the government is known to ruthlessly put down any challenge to its authority. China’s domestic difficulties however have had a sobering effect on the government. Nitin Pai, founder-director of Takshashila Foundation, wrote insightfully on how social tensions in China could impact Beijing’s foreign policy: “The beginning of the end of China’s rise is not necessarily the beginning of China’s fall.

Even if the spiralling doesn’t go all the way down, it is almost certain that the favourable external environment—where the powerful West invested in China’s rise in the hope that this would bring the country into the international community—will no longer obtain. Trump’s trade tariffs and the increasing regional enthusiasm for political and security frameworks to balance China’s dominance will increasingly constrain Beijing’s policy space. Meanwhile, the domestic social consequences of slower growth—with the manufacturing, construction, real estate and infrastructure industries not growing as fast as before—will start kicking in.”

The last thing China needs today therefore is confrontation with India. It also partly explains Beijing’s decision to jettison Pakistan in the FATF’s vote to greylist Islamabad last month. (By then the decision to change China’s Constitution and effectively make Xi president for life had been made but not revealed publicly)

The second reason for Wang’s words is China’s realisation that India’s deepening ties with France could turn the tide in the Indian Ocean Region in New Delhi’s favour. India now has military access to French naval bases from the Indian Ocean to the Pacific: Reunion Island, Mayotte, French Polynesia, New Caledonia, Djibouti and Abu Dhabi. The Quad alliance between India, Australia, Japan and the US poses a further challenge in China’s maritime backyard.

The third factor behind Wang’s remarks is India’s decision to downplay the 60th anniversary of the Dalai Lama’s arrival in India. The Prime Minister’s Office has shifted celebrations from Delhi to Dharamshala. The Chinese, who regard the Dalai Lama as a Tibetan separatist, are grateful for the gesture. It has set the tone for Defence Minister Nirmala Sitharaman’s visit to Beijing next month. An India-China strategic dialogue is likely to be held soon. Prime Minister Narendra Modi is scheduled to travel to China for the Shanghai Cooperation Organisation summit later this year. He will also meet Xi on the sidelines of the G20 summit in Argentina and the BRICS summit in South Africa.

The Modi government’s China policy has moved from staying firm during the Doklam standoff and backing the Dalai Lama’s visit to Arunachal Pradesh in April 2017 to appeasing China over the Dalai Lama’s anniversary celebrations. Foreign Minister Wang is happy. “With political trust, not even the Himalayas can stop us from friendly exchanges. Without it, not even level land can bring us together,” he said.

Xi’s self-inflicted vulnerability has, however, opened the door for India to reset its China policy. Beijing clearly wants a phase of quietude with India as it resolves its own problems at home and with the West. India must now insist on China withdrawing its veto on India’s membership of the Nuclear Suppliers Group and designating JeM chief Masood Azhar as a global terrorist. China will not give up its aggressive expansion in the Indian Ocean or abandon Pakistan as an all-weather ally. But if India plays its cards well, the time is ripe for a more robust modus vivendi with Beijing that advances India’s national interest.

Follow@minhazmerchant on twitter


Decoding Trump’s trade war

Thursday, March 15, 2018

United States President Donald Trump may not be familiar with Chaos Theory, the science of mathematical deterministic dynamics, but his White House is a living example of it.

Chaos Theory is applied to unpredictable events. These could be weather systems, stock prices, traffic movements, and human behaviour. To understand President Trump’s behaviour, the principles of Chaos Theory can shed light on what appear to be thoughtless, random and unpredictable decisions, but sometimes lead to positive outcomes.

Consider two of Trump’s most controversial recent decisions: first, the imposition of 25 per cent and 10 per cent import duties, respectively, on steel and aluminium. A furious trade war looms. China, the European Union (EU), Canada, Australia, South Korea and India could be severely hit. The decision was unpredictable, random and disruptive – all elements of the Chaos Theory.

The second decision by Trump was even more unpredictable: the likely meeting between the US President and North Korean dictator Kim Jong-un in May 2018. After a year of exchanging insults and threatening to nuke each other, a meeting between Trump and Kim emerged out of diplomatic chaos.

In the US, most analysts are befuddled. To them the White House is a warren of dysfunctional officials. The departure of economic czar Gary Cohn over Trump’s steel and aluminium tariffs underscores to most commentators that Trump is the worst US president in history, a sort of train wreck happening in slow motion.

Trump’s tough, uncompromising stand on North Korea’s nuclear programme was ridiculed by Washington’s commentariat as dangerous and irresponsible. But it worked. From the chaos of sabre rattling, sanctions and threats emerged an unexpected outcome: Kim blinked.

The threat of nuclear war on the Korean peninsula has receded. Kim’s nuclear missile programme is on hold. A long-term rapprochement between North and South Korea, once thought impossible, is no longer unthinkable.

Can a similar positive outcome emerge from the looming chaos over trade? Already flexibility has been built into the steep tariffs that come into effect from March 23. Canada and Mexico have got a month’s exemption. Other allies and trade partners are likely to receive exemptions on a case-to-case basis.

When Trump suddenly announced the tariffs a few weeks ago, his own party was shocked. Over 100 Republican lawmakers opposed the move. Speaker Paul Ryan, a devoted Republican, publicly broke ranks with Trump. Few even in the White House knew of Trump’s impending announcement. Most aides tried to dissuade him from instigating a global trade war.

Trump ignored them all. Last Thursday, in an elaborate ceremony, he signed the new steel and aluminium tariffs into law. A week later, global tempers have cooled. Talk of a trade war is diminishing. Most affected countries have realised that the steep import duties are only the first move in an elaborate chess game. Trump wants to cut America’s huge trade deficit of over $800 billion. His weapon of choice: reciprocal tariffs. If China imposes a 25 per cent import duty on US cars sold in China, the US will impose a 25 per cent duty on Chinese cars sold in the US.

Elon Musk, head of Tesla and SpaceX, put the matter into perspective in a series of tweets last week, supporting Trump. He wrote that, yes, US cars pay 25 per cent import duty in China while Chinese cars pay just 2.5 per cent import duty in the US. That, he said, is unfair and unsustainable. Since Musk is possibly the most revered entrepreneur in the US since the late Steve Jobs, people are beginning to listen: maybe Trump’s trade war could, they think, from initial chaos lead to a fairer global trading system. It may or it may not. The jury’s out on that. Equally unpredictable is the outcome of the Trump-Kim summit. It may not even happen. Kim, like Trump, is unpredictable.

Chaos Theory does not guarantee good outcomes. It merely says random events can seem disruptive but there is often a method in the madness. Fractal Foundation explains how Chaos Theory works: “While most traditional science deals with supposedly predictable phenomena like gravity, electricity, or chemical reactions, Chaos Theory deals with nonlinear things that are effectively impossible to predict or control, like turbulence, weather, the stock market, our brain states, and so on. These phenomena are often described by fractal mathematics, which captures the infinite complexity of nature. Many of the systems in which we live exhibit complex, chaotic behaviour. Recognising the chaotic, fractal nature of our world can give us new insight, power, and wisdom. For example, by understanding the complex, chaotic dynamics of the atmosphere, a balloon pilot can steer a balloon to a desired location. By understanding that our ecosystems, our social systems, and our economic systems are interconnected, we can hope to avoid actions which may end up being detrimental to our long-term well-being.”

India needs to understand Chaos Theory. There is no more complex nation than India or more unpredictable political system than India’s. As the denouement of 2019 approaches, the BJP, Congress and others should watch closely how the chaos of the Trump White House plays out over trade and North Korea.

Follow@minhazmerchant on twitter


Why 2019 Lok Sabha battle will not be Modi versus Rahul Gandhi, but Bharat versus India
With the four main protagonists - Sonia, Rahul, Modi and Shah - suffused with hubris, the election campaign will be long and brutal.
Wednesday, March 14, 2018

A sense of entitlement afflicts Indian politicians. UPA chairperson Sonia Gandhi is a victim. So is her son Congress president Rahul Gandhi. So are Prime Minister Narendra Modi and BJP president Amit Shah.

At the India Today Conclave 2018 last week, Sonia declared: "We will not let them (BJP) come back to power in 2019", as if proclaiming a royal decree.

In Singapore, around the same time, Rahul engaged in a verbal kerfuffle with author Prasenjit K Basu. The Congress president’s body language, sipping water, legs crossed, as professor Basu repeated his question, radiated arrogance bred by an overweening sense of entitlement.

Modi tries to be humble most of the time, but his hubris occasionally shows. For example, it was thoughtless to not take Andhra Pradesh chief minister N Chandrababu Naidu’s phone call for 16 hours even after two TDP ministers had resigned from the Union cabinet or at a function to walk past senior BJP leader and mentor-turned-critic LK Advani without acknowledging him. Advani’s anguished expression said it all.

Amit Shah does not even try to hide his hubris. This story may be apocryphal but when the BJP’s then political strategist Prashant Kishor asked him following the party’s stunning victory in the May 2014 Lok Sabha election, “what after May”, Shah reportedly replied, “June”. Kishore left the BJP, but after unsuccessful stints with the Congress and the SP may return to the BJP fold ahead of the 2019 Lok Sabha polls.

With the four main protagonists - Sonia, Rahul, Modi and Shah - suffused with hubris, the election campaign for 2019 will be long and brutal. But make no mistake: the first dose of venom that has poisoned Indian political discourse was injected by Sonia in 2007 with her "maut ka saudagar" taunt. To call a sitting chief minister the “merchant of death” opened the floodgates to political abuse. It was soon the new normal. Just as it pioneered feudal dynastic politics (now embraced by every regional party), the Congress pioneered invective in India’s political lexicon.

Sonia was also the first politician in the Congress to shrewdly recognise in 2007 the threat Narendra Modi posed. Modi was then a relatively unknown chief minister. But Sonia saw in him 11 years ago some of the same qualities she herself possessed: ruthlessness, cunning, decisiveness.

Congress leaders are better at lacing abuse with mordant humour. BJP leaders, hopelessly inarticulate, abuse without the benefit of clever nuance. In this "BJP Bharat versus Congress India" linguistic battle, India wins. The Congress can taunt the prime minister and pretend it is banter. The leaden-footed BJP responds with rage, bereft of ameliorative cadence.

BJP’s Assam leader Himanta Biswas Sarma last week called Rahul Gandhi a “feudal lord”. For someone as steeped in privilege as Rahul, that’s not an insult. In India being a feudal lord is not, for feudal lords, a bad thing. Sarma’s choice of words reflects the unequal battle between the Congress’ India and the BJP’s Bharat.

The Congress takes its feudalism for granted. It isn’t embarrassed - though of course it should be - that one family has usurped a 133-year-old party. Feudalism breeds both arrogance and ignorance. It is this hubris which allows Sonia to say artlessly that she can envisage a future Congress with a non-Gandhi president. But as she knows perfectly well, since its founding in 1885 the Congress has had 60 presidents; 54 of them were not Nehru-Gandhis. The six who were: Motilal Nehru, Jawahalal Nehru, Indira Gandhi, Rajiv Gandhi, Sonia Gandhi and now Rahul Gandhi.

Sonia holds the dubious distinction of being Congress president for 20 years - the longest in the party’s history, longer than Mahatma Gandhi (one year), Jawaharlal Nehru (eight years), Vallabhbhai Patel (one year), K Kamaraj (four years), Sarojini Naidu (one year) and Jagjivan Ram (two years).

India versus Bharat

How is the “idea of India” different from the “idea of Bharat”?

The BJP’s Bharat has a chip on its shoulder. Culture minister Mahesh Sharma wants to recapture India’s “glorious past”, which in itself is harmless enough, but an anachronism when it is the future that interests India’s young. The Congress’ India in contrast is a colonial construct: feudal, entitled and presumptuous. It is long past its sell-by date.

As I wrote in The Times of India (January 18, 2013), “In 1947, Mahatma Gandhi, freedom achieved, wanted to disband the Congress and form new political organisations to contest free elections. Sardar Vallabbhai Patel agreed. Pandit Jawaharlal Nehru did not. Nehru’s view prevailed. In 1969, Indira Gandhi split the Congress to sideline the syndicate of regional satraps led by K Kamaraj and S Nijalingappa. The organisational and state-level decline of the Congress began in 1969 though Mrs Gandhi’s 1971 election victory and the euphoria over the Bangladesh war disguised it for years.

“Nehru inherited a colonial administration. After Independence, it continued to serve the government in power. Colonial laws had been written to often protect British injustice, not deliver justice to Indians. Many remain cast in stone 150 years later, delaying and denying justice to ordinary Indians. Yet, Nehru did not impose chief ministers on states. The party’s local organisation was given a relatively free hand to choose regional leaders. Indira Gandhi reversed that policy. She imposed state chief ministers, suspended intra-Congress elections, dismissed opposition state governments under Article 356, and undermined the judiciary.”

If the Congress wants to re-establish its connect with Bharat’s electorate, it will need to shed not only its feudal skin but make Sonia Gandhi’s declaration come true: a future Congress without a Gandhi as either party president or prime minister. The last time that happened in recent decades was in 1992-1996 when PV Narasimha Rao was both prime minister and Congress president.

The Rao-led economic reforms transformed India. His was the new Congress that could have created a new India. Sadly, but typically, the Congress has disowned Rao and that is why its idea of India is so deeply flawed.

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Modi has so far failed to cleanse India of deep state
Karti Chidambaram's arrest shows new intent and urgency, but there is much more that needs to be done.

Thursday, March 8, 2018

A key failure of the Narendra Modi government has been its inability - or unwillingness - to break the vice-like grip the deep state has over Indian policy-making and public discourse. The deep state is no leviathan monster. Rather it's an intricate network of politicians, bureaucrats, former judges, retired armed forces officers, senior lawyers, journalists, activists and power brokers.

Go-go years
For decades, this tight circle controlled India's political, economic and social narrative. Corruption and nepotism bound them together. Many were subverted by Pakistan's Inter-Services Intelligence (ISI) agency and toed the aman ki asha line. Maoists were lionised. Police officers who fought insurgencies and terrorism were prosecuted.

When the Sonia Gandhi remotely-led UPA government was in office, this powerful and incestuous cabal was in its element. Its members dominated Sonia's National Advisory Council (NAC). Journalists meanwhile, fell under the spell of public relations operators like Niira Radia.

Those were the go-go years of 2004-08. The global economy was on steroids. Foreign investors were pouring into India. The stock market boomed. The then finance minister P Chidambaram was the toast of the town. I interviewed him in his spacious North Block office in September 2004. For the best part of an hour, Chidambaram's eyes rarely left the television screen placed on the wall to his right, flashing the latest stock prices.

As S Gurumurthy, speaking recently about the deep state said, key appointments in the bureaucracy, judiciary and various institutions of governance like the Central Vigilance Commission (CVC), Comptroller and Auditor General (CAG), Central Bureau of Investigation (CBI), Enforcement Directorate (ED) and Central Board of Direct Taxes (CBDT) were made on the basis of personal connections and loyalty, not merit.

Those appointees, still occupy positions of authority. Gurumurthy is a former adviser to the late redoubtable Ramnath Goenka, founder of The Indian Express. A chartered accountant, Gurumurthy has audited the balance sheets of India's top companies. A single armed guard stands at the entrance to his office in Chennai where I interview him.

Much of the conversation is off-the record but I do ask him a question that puzzles many Indians: after nearly four years in power, why has the Narendra Modi government moved so slowly to indict, prosecute and jail obvious economic offenders across sectors - from real estate to television media.

Glacial speed
Gurumurthy answers with deliberate precision. He says the Modi government is moving carefully because of the deep state that still controls key levers of power: politicians, lawyers, judges, bureaucrats, media, NGOs.

Isn't it extraordinary, I ask him, that a shrewd politician and hard taskmaster like Modi hasn't been able to cut this cabal down to size? The rest of our conversation was off-the-record. On three occasions he requested the tape recorder be switched off while he spoke.

Corruption lies at the heart of the problem. Virtually every defence deal during UPA1 and UPA2 allegedly came with kickbacks in foreign tax havens. The money was round-tripped back to India in real estate companies and other businesses.

Corrupt politicians are the real owners of these companies fronted by benami "businessmen". Money was laundered by benami entrepreneurs, some of whom have been investigated for years at glacial speed. Even in the Karti Chidambaram case, courts have been "compassionate", to cite Gurumurthy, giving him leeway to travel abroad, agree to adjournments by Karti's legal team and delay court proceedings.

More worryingly is the surreptitious help the deep state, flush with ill-gotten wealth of the past and loyal to old masters, receives from within the Modi government. Most Modi cabinet ministers are sincere, honest and hardworking. But there are holdovers with loyalties to the past.

New intent

With one year to go for the next Lok Sabha election, what options does Modi have to cleanse the subverted ecosystem he inherited? He should focus on the finance ministry where much power resides. Then he should turn his attention to the defence ministry which is crucial to safeguarding India's national security and upgrading a deeply eroded military. Defence minister Nirmala Sitharaman is honest and able but does she have untrammelled authority?

Two recent episodes were disconcerting. First, the cloud over whether the defence minister gave Jammu & Kashmir chief minister Mehbooba Mufti permission to file an FIR against Major Aditya Kumar following the Shopian incident. This has belatedly been clarified with the J&K government telling the Supreme Court on March 5 that Major Aditya was not included in the FIR as an accused. The apex court has stayed the investigation till April 24.

The second episode concerns the defence ministry's mean-spirited decision to go ahead with imposing a cap of Rs 10,000 a month on educational grants to the children of armed forces martyrs. The maximum additional burden removing the cap would have imposed? Rs 3.20 crore. Despite representations by armed forces officers that the cap would affect the morale of soldiers facing Pakistan's mortar shelling across the Line of Control (LoC) and terror attacks in J&K, the defence ministry has refused to remove the cap.

It is such lack of common sense and empathy in government decision-making that the deep state thrives on. To end its influence, Modi must take the bull by the horns. Karti Chidambaram's arrest showed new intent and urgency. Much more remains to be done.

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Why NGOs must clean up their act
Unfortunately, the transgressors are large NGOs like Oxfam and Amnesty.
Tuesday, March 6, 2018

It's been a bad few weeks for NGOs. Oxfam is still reeling from the scandal that its senior staff used prostitutes for orgies during relief work in Haiti. Several senior Oxfam executives have been forced to resign. Chief executive Mark Golding made things worse by saying the matter had been blown "out of proportion to the level of culpability" and that no one had "murdered babies in their cots".

The sexual offences occurred over seven years. There were 87 incidents in which Oxfam staff was involved. Another 31 involved staff of Save the Children. Two involved Christian Aid.

Donors are fleeing. Sweden, a big donor, has suspended its funding to Oxfam till a full investigation is carried out to fix culpability.

Amnesty International has long been accused of wrongdoing and bias. The NGO was compromised way back in 1967 when it emerged that British intelligence had infiltrated the organisation, distributed secret funds and followed a political agenda during the Cold War. Amnesty's founder, Peter Benenson, was forced to resign.

Amnesty has since done outstanding work highlighting human rights violations. But it has a dark underbelly. In a devastating indictment of its modus operandi, a report by NGO Monitor said in 2014: "Despite Amnesty's influence, critical analysis of the organisation and its activities has been limited. The 'halo effect', which shields groups claiming to promote universal moral agendas and human rights from scrutiny because of a perceived impartiality, has insulated Amnesty from systematic critical assessment and reform, to its own detriment. As NGO Monitor's research has shown, the crisis is rooted in a number of structural problems, including consistent post-colonial ideological bias, a pronounced lack of credibility in research reports, moral inconsistency, financial instability and corruption, failure to act with transparency in critical organisational aspects, and friction between the London office and key national sections (particularly the US)."

Amnesty India's track record has hardly been stellar. Last month, it was forced to apologise for disseminating false news. Amnesty India's Twitter account posted the following: "Over 900 people have been killed in police encounters in UP between March 2017 and January 2018. NHRC says UP police are 'misusing their power in the light of an undeclared endorsement of the higher-ups'."

The UP police issued a strong rebuttal. Amnesty India was forced to delete its tweet since the falsehood it contained was so plainly evident. The political bias of Amnesty India has been apparent for years. The bias has deepened since it hired as chief executive a journalist who makes no bones about his visceral antipathy towards the Narendra Modi government and towards Modi personally. Balance and fairness are collateral victims.

They have seriously damaged Amnesty India's credibility.

Many Indian NGOs obviously do excellent work - Magic Bus, Pratham and Akanksha, among hundreds of others. Many unfortunately don't, raising questions of motive, bias and conduct.

Since foreign donors account for significant funding of Indian NGOs, political agendas can be quietly leveraged. The face is Indian, the donor hand often invisible.

A report in DNA in November 2017 underscored the dangers of such funding: "The central government on Thursday expressed concerns at news reports of the United States announcement to grant $5,00,000 for NGOs in India to reduce 'religiously-motivated violence and discrimination'. Though the ministry of external Affairs (MEA) limited its official reaction, saying it was awaiting details of the US move, senior officials quoted Foreign Contribution Regulation Act (FCRA) rules and said there was no question of allowing grants to any NGO working selectively. The Act permits only NGOs that have a definite cultural, economic, educational, religious or social programme to accept foreign contributions, that too after such NGOs either obtain a certificate of registration or prior permission under the Act."

Christian evangelist groups in the US have long been involved in funding "religious" Indian NGOs. Wahhabi elements in the Middle East, especially from Saudi Arabia, have funded madrasas in India. Some of those funds have found their way into terror modules operating in states such as Kerala and West Bengal.

The Indian government has over the past three years cancelled the licences of over 20,000 foreign-funded NGOs for violating FCRA. Among those shut down was the US-funded Compassion International. Demonstrating the lobbying power such NGOs enjoy in the US, over 100 American Congressmen, including Ed Royce, chairman of the House Foreign Affairs Committee, immediately wrote to home minister Rajnath Singh urging him to allow US-based charities to continue working in India.

A parallel ecosystem in India comprising activists, retired armed forces officers, former bureaucrats and the inevitable Lutyens' power brokers is activated every time dodgy foreign-funded NGOs are threatened with closure. Sections of the media build a crescendo of criticism while activists hold angry demonstrations. The Modi government has been a particular target of US-funded NGOs and their Indian supporters. It is easy to conflate the BJP's "Hindu" nationalism with religious discrimination.

NGOs generally serve an important purpose. Some are watchdogs of government violations of human rights. Others educate tribals, feed the poor, care for homeless children and often save lives. But a small minority has tainted the sector. Unfortunately, the transgressors are large NGOs like Oxfam and Amnesty.

Why have they been allowed to get away for so long? In an insightful article in Britain's The Spectator, Mary Wakefield wrote: "One of the oddest things about the Oxfam sex scandal is how little we all seem to care. Even now, the talking heads on TV find it hard to summon much outrage. I've been half hopeful that progressive millennials might adopt the aid world fiasco as a cause. No generation in history has been more alive to the problem of privilege and the rights of the vulnerable. So where are the woke? Are they sharing the Oxfam story? Are they making placards? Not as far as I can see. A fortnight ago I wrote in this magazine wondering why the #MeToo movement hasn't held the UN to account for the terrible crimes committed by peacekeepers against young girls in Africa and Haiti. These terrible crimes aren't historical or even rare. Last year the UN Secretary General confessed that there had been 145 incidents involving 311 victims in 2016. This, he said, was just the tip of the iceberg. He said it sadly, as if his hands were tied. Think of all those celebrity ambassadors to the UN: Angelina Jolie. Anne Hathaway. Cate Blanchett. Leonardo DiCaprio. Victoria Beckham. Emma Watson. Katy Perry. Imagine if they had used the platform of the Oscars to resign en masse until there's proper punishment for terrible crimes."

They of course won't resign en masse, or singly, as ambassadors to the UN. Nor will Indian celebrities, who otherwise support good causes, speak up about the bad eggs in the NGO basket. To clean up that basket, they should.

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Long Term Capital Loss
There are practical and philosophical reasons why the LTCG tax is a bad idea

Monday, March 5, 2018

One of the most puzzling proposals in the 2018-19 Union Budget was the imposition of long term capital gains (LTCG) tax. Finance Minister Arun Jaitley justified the move by saying that long term capital gains were the only assets exempt from tax.

The argument is spurious on two grounds. First, equity shares held for the long term are a hedge against inflation. With fixed deposit rates at an all-time low and taxable at over 30 per cent for many taxpayers, Jaitley has targeted the one asset that helps create individual capital. Second, the amount likely to be raised by the LTCG tax will be around Rs. 5,000 crore, according to economist Surjit Singh Bhalla.

Bhalla is a member of the Prime Minister's Economic Advisory Council (PMEAC). His views on the LTCG tax, which he calls "a bad idea", are trenchant: "The 2002 Kelkar report had advocated the abolition of LTCG tax, the abolition of dividend tax, the retention of short-term tax to 10 per cent and the introduction of the Securities Transaction Tax - STT. Average annual STT revenue has been around Rs 7,000 crore, and is forecast to be Rs 11,000 crore in 2018-19. Regardless of market direction, STT makes revenue for the taxman. Isn't it much simpler to increase STT by 25 per cent? This will yield Rs 3,000 crore more per year. It would seem prudent for the finance ministry to withdraw this LTCG tax proposal."

There are practical and philosophical reasons why the LTCG tax is a bad idea. In practical terms: for a small tax revenue benefit, the government has discouraged long-term investment in the stock market. That will diminish the attractiveness of Indian stocks among foreign investors. The protectionist decision by the BSE and NSE to end global trading in SGX Nifty and sensex futures in Singapore, Hong Kong and Dubai has compounded the problem for Indian stocks.

Equally disconcerting in the Union Budget, which will be discussed threadbare in the second part of the Budget session in parliament from March 16-28, is the move to increase customs duty on mobile phones, TV panels and other consumer items. This is ostensibly to discourage imports and encourage the Make in India initiative. The trend of hiking customs duties takes India back to the pre-1991 era when import duties were deployed to keep foreign goods out. The result was disincentivising competition. Local manufacturers became complacent. Prices rose. Quality fell. Jaitley is transporting India back to a swadeshi era which could be dubbed Make in India 1.0. The prime minister's Make In India 2.0 should certainly not be aimed at such damaging protectionism.

The way forward for any modern economy is openness. Even US President Donald Trump, known as an "America First" votary, has been forced to clarify that this policy does not imply "America Alone" but seeks fair and reciprocal trade tariffs. The slashing of US corporation tax from 35 per cent to 21 per cent has transformed President Trump's poll numbers. Before the dramatic tax cut in December 2017, Trump's favourability rating was between 35 per cent and 39 per cent. Once the corporation tax cuts led to US companies increasing their employees' pay cheques and bonuses, his poll ratings have leapt to between 41 per cent and 49 per cent.

Democrats, gung-ho about winning back their majority in the House of Representatives in the November 2018 Congressional mid-term elections, are now worried. The momentum has suddenly turned against them. Things worsened after the leader of the Democrats in the House, Nancy Pelosi, called the increase in employees' pay mere "crumbs". For middle-class Americans who have seen real wages stagnating for over a decade, the Left-of-centre Pelosi's comment was seen as patronising and insensitive. It could cost the Democrats the House later this year.

There's a lesson in this for the Narendra Modi government. India's tax policy has become a lightning rod to fuel anger among the middle class. While jobs remain scarce and fixed deposit returns low, the last thing Modi needs in an election year is a disgruntled tax-paying middle class.

Several other countries too are wrestling with tax reform. In Britain the debate is assuming greater urgency with the Brexit deadline looming on March 31, 2019. Public services in Britain are under increasing budgetary strain. Tax reform is a panacea. As The Economist wrote recently: "Almost every morning Britons wake up to another alarming story about their threadbare public services. Broadly speaking, a government can tax three things: income, consumption and wealth. Economists like taxes to be simple and to avoid unintentionally distorting behaviour. Where should the government cast its net? Any move to raise taxes on income has a cost. Research by the OECD suggests that income taxes, more than those on consumption and wealth, strongly discourage people from working, cramping economic growth. This implies that Britain's relatively low income taxes are a strength, rather than a problem to be fixed."

In India, tax reform is now a priority. GST will soon become compliance-friendly. Only one return will need to be filed every quarter in place of three every month for all companies, regardless of annual turnover. The number of tax slabs is also likely to be reduced, as I have argued on these pages in the past.

Given this, the LTCG tax is both baffling and regressive. RBI Governor Urjit Patel appears to agree. At a press conference following last month's monetary policy meeting, Patel said: "The taxation on capital in India is from several sources. You have the corporate tax rate, you have the dividend distribution tax rate. For dividend income above Rs. 10 lakh, you have the marginal tax rate, which is at whatever tax bracket people come in. You (also) have a securities transaction tax and you have a capital gains tax. There are five taxes on capital and that would obviously also have an impact on investments and savings decisions."

RBI governors are usually careful with their criticism of the government's tax policies. Urjit Patel's tangential comments on the LTCG tax and levies on other assets carry a nuanced message for the Modi government.

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A crack in China-Pak ties

Thursday, March 1, 2018

China’s vice-premier Wang Yang, speaking on Pakistan’s 70th Independence Day, said the relationship between China and Pakistan was “as close as lips and teeth”. Ostracised by most of the world, Pakistani leaders picked up the line gleefully. President Mamoon Hussain repeated Wang’s eulogy, adding to the lips-and-teeth metaphor by saying the two countries are linked by rivers and mountains.

What both Wang and Hussain didn’t mention is Mao Zedong, China’s revered (if despotic) leader, had first coined the lips-and-teeth analogy 50 years ago to describe China’s relationship with North Korea. Pakistan has taken North Korea’s place in China’s geopolitical affections. Pakistani lips though, as recent events have demonstrated, can be gnashed by Chinese teeth when the need arises.

It arose last week. At the 37-member Financial Action Task Force (FATF) plenary meeting in Paris, China for the first time broke ranks with its lips-and-teeth ally Pakistan.

The five-day session of the FATF, a global watchdog set up in 1989 to police terror financing and money laundering, placed Pakistan on the greylist for its role in funding terror groups like the Lashkar-e-Taiba (LeT), Jaish-e-Mohammad (JeM), Hizbul Mujahideen and the Taliban. Pakistan had been on the greylist from 2012-15 but only for money laundering. The impact on Pakistan’s economy during the 2012-15 greylisting was peripheral because the main focus of the sanctions was not terror financing.

In 2018, the focus is squarely on terror financing. Pakistan’s brazen support of LeT chief Hafiz Saeed and other terrorists who launch attacks on India and Afghanistan from Pakistani soil have roiled the FATF. On Tuesday, February 20, the second day of the FATF meeting in Paris, the United States tabled a motion to place Pakistan on the greylist. The US proposal was co-sponsored by Britain and backed by France and Germany. The move quickly ran into opposition from China, which blocked it. Turkey and the Gulf Cooperation Council (GCC), acting under Saudi Arabia’s directions (Saudi Arabia is only an associate member of the FATF and does not have a vote), also blocked the US motion.

This infuriated the Americans who were forced to withdraw the motion. India was meanwhile acting quietly with the US and the Europeans though keeping a low profile. On Thursday evening, US and Indian diplomats struck a deal with the Chinese. Beijing would drop its support for Pakistan in return for a larger future role in the FATF as vice-chair. US and Indian diplomats now began to work on the Saudi-backed GCC bloc which by Thursday night too agreed to drop its support for Pakistan. Only Turkey remained firm on blocking the US motion. But one vote is not enough to block a resolution at the FATF. Late on Thursday night, the US motion to place Pakistan on the terror financing greylist was passed in an extraordinary second round of voting.

This irrevocable decision will be formally announced at the June 2018 meeting of the FATF. Over the next three months, Pakistan’s actions against terror groups will be monitored by the FATF and the Asia Pacific Group (APG), the Asian unit of the FATF. Based on their report on Pakistani compliance, one of two options will be exercised: if Pakistani compliance on acting decisively against Hafiz Saeed and other terrorists is found to be satisfactory, Pakistan will be formally greylisted in June. If compliance by Pakistan is not satisfactory, it will be put on the blacklist in June which currently has only two countries (North Korea and Iran). There is no third option. In June, Pakistan will be either on the FATF greylist (if it complies) or on the blacklist (if it doesn’t).

The FATF meeting for the first time revealed cracks in the China-Pakistan relationship. Beijing has belatedly recognised that if it wants to be respected as a globally responsible power, it cannot be seen to perpetually support rogue nations like North Korea and Pakistan. Both countries, however, have geopolitical value for Beijing. North Korea is a buffer state against the proximity of 24,000 US troops currently stationed in South Korea. Pakistan is vital real estate for the Belt and Road Initiative (BRI) that will help China carve an economic pathway to Africa and the Middle-East.

But the Chinese are pragmatists. They worry about Islamist terrorism in their Xinjiang backyard. Their abandonment of Pakistan at the FATF plenary session opens up a sliver of opportunity in India’s own geopolitical calculations in the region. Saudi Arabia’s withdrawal of the GCC’s support to Pakistan at the FATF is also significant. It reflects the incremental success of Prime Minister Narendra Modi’s Middle East outreach.

But neither China nor Saudi Arabia can be taken at face value. Their support for India’s position against Pakistan is transactional. Indian foreign policy mandarins understand this. In a changing world order, the democracies of the US, Europe, Australia, Japan and India have formed a formidable axis. The authoritarian regimes of China, Russia, Saudi Arabia, North Korea and Pakistan remain a potent force. But as events at the FATF meeting in Paris underlined, the decks are increasingly stacked against those who finance, abet or condone terror.

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The liberal code of honour

The New Indian Express
Thursday, March 1, 2018

In the US the word liberal has acquired among conservatives the status of an insult. Liberals hate US President Donald Trump with a vengeance. But then liberals aren’t supposed to ‘hate’. That negative emotion is reserved for the Right. But the venom that pours out of Left-liberal politicians and the media in America would do fascists proud.

Therein lies the contradiction. Liberalism in the classical sense is tolerant of opposing points of view. But American liberals are intolerant, sometimes viciously, of opposing views. In India, the same contradiction exists. Some of the most venomous attacks on political opponents come from the Left. The Left in India regards itself as liberal. It is not.

Consider the stand of the Communist government in Kerala. It says there isn’t enough evidence to ban the Kerala-based Islamist group Popular Front of India (PFI). There is, in fact, overwhelming evidence against the PFI. An investigation conducted by a leading English magazine in October 2017 revealed shocking details of the PFI’s terrorist ideology: “The NIA has accused the PFI of terror links and hawala financing, charges that the group has denied ... Ahmed Shareef, its founder member and the managing editor of its mouthpiece Gulf Thejas, also confessed to illegal funding. ‘All over the world. That is the motive,’ Shareef told the magazine’s reporters (who were undercover) when asked whether the PFI worked on a hidden motive to establish an Islamic state in India.”

The Congress likes to think of itself as a liberal party. But it violates an important commandment of liberalism: tolerance to dissent. The Congress dynasty does not brook dissent. No senior Congress leader dared challenge Rahul Gandhi’s election as party president last December.

The BJP, while not perfect, tolerates dissent among its ranks. Yashwant Sinha and Shatrughan Sinha criticise Prime Minister Narendra Modi fiercely and incessantly. They face no disciplinary action. It is unthinkable for an enlightened Congressman like Shashi Tharoor, for example, to criticise Rahul Gandhi with such vigour. If he did, he would be expelled. That is leadership by fear and violates the fundamental principle of liberalism.

The RSS is not an exemplar of liberalism either. It is socially illiberal. It does not allow women membership of the main organisation. It has a separate women’s wing. But that is not liberalism. It is tokenism. The RSS will not be truly liberal till its sarsangchalak can be a woman.

Economic liberalism demands free trade and free markets. An open economy encourages foreign investment, builds economic diversity and spurs competition, efficiency and prosperity. The most successful entities in the world are diverse, competitive and rules-based. What makes the US the world’s economic superpower? An open economy, a cosmopolitan workforce and rules-based governance. Trump has been forced to dilute his protectionist economic policy.

He now accepts that skilled immigrants and low trade tariffs are good for America. While China (and to a lesser extent India) imposes punishing import duties, the US levies low or no customs duties on most imports. Diversity, openness and a rules-based order breed innovation. It would have been impossible to create Apple, Facebook, Google, SpaceX and Tesla in an illiberal ecosystem.

Liberalism revolves around gender equality as well. No society can be successful if it does not give half its population the same rights and opportunities as it does the other half. Even regressive countries like Saudi Arabia are waking up to this reality. Crown Prince Mohammad bin Salman is gradually easing the restrictions that imprison Saudi women in gender ghettos. They will now be allowed to drive, attend sports events and go out without a male relative chaperone.

Liberalism requires acceptance too of sexual orientation. No modern nation can discriminate against a significant section of its citizens on the basis of sexual orientation. Globally the best estimate for the LGBT population as a ratio of the general population is between 7 and 10 per cent. In India that number would add up to around 70 million adult LGBT citizens. They must enjoy the same rights as the rest of their fellow citizens. It is the government’s obligation to treat all citizens equally and fairly.

The extreme Right and Left have more in common than they realise. For example, the extreme Right is against foreign direct investment (FDI). So is the Left. Those who regard themselves as Left-leaning or Right-leaning are often not liberal by classical definition. There are five axioms of liberalism: Axiom one: No religion is exempt from criticism: neither Islam, nor Hinduism, nor Christianity. Blasphemy is not a taboo.

Axiom two: Shun violence. Argue with words, not guns. The answer to a book or film is another book or film, not a fatwa. Axiom three: Reject political dynasty. Feudalism and liberalism operate at opposite ends of the spectrum of a progressive, liberal democracy.

Axiom four: Don’t divide people on the basis of religion or caste. Whether you are a Hindu or a Muslim, you are Indian first, Hindu or Muslim second. The idea of a Hindu Rashtra is illiberal. The idea of a Bharat Rashtra is liberal. Muslims must abandon the illiberal idea of being Muslim first, Indian second. Be Indian first.

Axiom five: A liberal is tolerant. Even those on the hard Right and the hard Left must engage one another in civil debate. Words and reason, not abuse and invective, are the weapons of choice for liberals.

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Why Modi faces rocky road to 272 in 2019 Lok Sabha elections
The BJP has failed to deliver maximum governance and minimum government.
Wednesday, February 7, 2018

To win re-election in the next Lok Sabha elections, the BJP needs 272 seats to form a government without depending on an increasingly volatile set of NDA allies. Let’s do the electoral math by placing the country into four clusters: 1) north and west; 2) south; 3) east; and 4) Northeast and union territories.

Cluster 1: This comprises 12 states (Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh). Together they offer 259 seats.

In the 2014 Lok Sabha elections, the BJP won 205 seats out of its overall tally of 282 seats from this 12-state, 259-seat cluster. This is therefore the make-or-break cluster for the BJP. In 2019 though, it can realistically expect to win only around 150 seats from these 12 key north-western states. That’s a fall of 55 seats over 2014 due to strong anti-incumbency, the Congress’ resurgence and the BJP’s inept governance across the region. Can it make up this large decline in the other zones?

Cluster 2: The five southern states are unlikely to provide a cushion. The BJP won 21 out of 129 available seats in the south in 2014. Karnataka provided 17 of these. Again realistically, the BJP is unlikely to increase its tally significantly in 2019. Kerala may offer the odd extra seat. Karnataka could even slip a little, leaving the BJP with around 20 seats in the south. Together in the first two clusters, the BJP’s tally could therefore total around 170.

Cluster 3: The four key eastern states of Bihar, Odisha, West Bengal and Jharkhand could prove crucial for the BJP. In 2014, the BJP won 37 seats in these four states from 117 seats on offer. In 2019, it will rely heavily on seat-sharing with ally JD(U) to sweep Bihar. Odisha promises a rich harvest too with dissent at the top of Naveen Patnaik’s BJD giving the BJP an opening. West Bengal remains a distant prospect though the BJP is likely to make inroads as the Left continues to lose traction.

Meanwhile, with Jharkhand, where the BJP won 12 out of 14 seats in 2014, still a safe bet, the BJP could increase its tally in the 117-seat east cluster from 37 seats in 2014 to around 45 seats in 2019. Thus, the BJP’s overall tally in the first three clusters rises to around 215 seats.

Cluster 4: The Northeast has been a special focus for the BJP. In 2014, it won just eight out of 25 seats in the seven northeastern states and Sikkim - seven of them from Assam. The BJP-backed North East Democratic Alliance (NEDA) has changed the situation dramatically. The party can expect to raise its tally to around 14 seats in 2019. The seven union territories (UTs), including Delhi NCT, contributed 11 out of 13 available seats to the BJP in 2014. That total is unlikely to change much, though Delhi could swing partially towards the Congress, giving the BJP around 25 out of 38 seats on offer in the fourth cluster.

Thus, the four clusters, in a best-case scenario, are likely to provide the BJP with 240 seats in the 2019 Lok Sabha election (150+20+45+25). Caveat: a Mayawati-Mulayam-Congress mahagathbandhan, however unlikely, could significantly reduce the BJP’s tally in Uttar Pradesh, cutting its Lok Sabha numbers to the low 220s. Unpredictable events such as a positive verdict by the Supreme Court in the Ram Mandir case and escalation of a conflict with Pakistan could in turn change the electoral math in favour of the BJP.

Clearly, the BJP with 220-240 seats will not be able to form a government without the support of NDA allies. The Shiv Sena, TDP, LJP, SAD and others have varying degrees of problems with the BJP. To form a stable NDA coalition, the BJP would need at least 50 seats from its allies, taking the alliance’s tally to around 270-290. With the JD(U), but without the Shiv Sena, even that may prove difficult. The Rajinikanth factor in Tamil Nadu though could play a decisive role if he allies with the NDA, making Shiv Sena support redundant.

Now turn to the Congress. To win power, Rahul Gandhi will have to rely heavily on old and new UPA allies. Across our four clusters, the Congress will be lucky to win 85-90 seats overall. To be a credible challenger to form a UPA 3 government, the Congress will need the following eleven key allies: TMC, the Left, DMK, SP, RJD, BSP, JD(S), AIMIM, NC, NCP and TRS. Defections from the NDA’s disgruntled allies would be welcome. Again, taking a best-case scenario, despite the unlikely prospect of the BSP and SP as well as the Left and TMC cohabiting in UPA 3, the 11 key allies together with smaller Congress-leaning parties are unlikely to garner more than 120 seats.

Even if the Congress doubles its own tally to 90 seats, a putative UPA 3 would have only 210 Lok Sabha seats in all (90+120) - far short of a working majority.

The way forward for the Congress therefore is to win at least 150 seats on its own as it did in 2004. Then only will it be able to cobble together a workable UPA 3 coalition in 2019 with over 270 seats (150 Congress plus 120 allies).

In 2004, the Left with 60 seats supported the 145-seat Congress from outside. Other UPA 1 allies made up the numbers. In 2019, though relatively weakened, the BJP will still win far more than the 138 seats it won in 2004. At our estimate of 220-240 seats, the BJP can effectively thwart a potential UPA 3 - unless the Congress nearly quadruples its 2014 tally of 44 to well over 150.

There just aren’t enough UPA allies to make up the slack as there were in 2004 with the Left’s 60 seats plumetting in 2014 to just nine. In 2019, the largest UPA ally will be the TMC with 30-odd seats.

For the BJP, the message is clear. Five consecutive mediocre Budgets have alienated the middle class. They count for little electorally, but have a disproportionate influence on the political narrative.

The BJP’s policies over the past 45 months have been a mixed bag: in sum, it has failed to deliver maximum governance and minimum government. It has less than a year to reverse the slide. The Lok Sabha election may well be advanced to December 2018 along with the key state polls of Rajasthan, Madhya Pradesh and Chhattisgarh in order to mask strong anti-incumbency.

The BJP though does have one trump card: a still-anaemic Congress. But it can’t rely on that forever. To win re-election, the BJP will have to perform. Or perish.

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Sunjuwan Army camp attack Time to bite the bullet on Pakistan terrorism
The only losses that hurt the Pakistani Army are casualties among its soldiers, Rangers and members of its Border Action Team.
Monday, February 12, 2018

The Jaish-e-Mohammad (JeM) terror attack on an Indian Army station and family quarters in Sunjuwan, Jammu, killing five soldiers and one civilian, will meet a "befitting reply", said home minister Rajnath Singh.

But will it?

Retaliatory fire along the Line of Control (LoC) and the International Border (IB) has not stopped the Pakistani Army from firing mortar shells and even anti-tank missiles at Indian Army camps and civilian homes near the border. It hasn't deterred the Pakistani Army from infiltrating JeM and LeT terrorists into the Valley and now into Jammu to attack the Indian Army and its families.

Since the surgical strike on Pakistani terror launch pads on September 29, 2016, ceasefire violations by the Pakistani Army have more than trebled. Terror attacks too have spiked. Infuriated by the international humiliation it suffered as a result of the clinical surgical strike by Indian special forces, which killed dozens of Pakistani soldiers, the Generals in Rawalpindi have adopted an aggressive dual strategy. The Pakistani Army and Rangers have greatly increased the frequency and intensity of shelling along the LoC. They have also doubled the number of LeT and JeM terrorists infiltrating into the Kashmir Valley.

The Indian Army, CRPF and J&K police have hunted down these terrorists in increasing numbers. But for Pakistan, dead terrorists are a cheap commodity. The terrorists' impoverished families are compensated generously with money and land. Newly indoctrinated youth in Pakistan-occupied Kashmir (PoK) are quickly trained and dispatched across the border into India to strike pre-determined targets. Pakistan's undergraduate school of terrorism, the largest in the world, ticks along smoothly.

The only losses that hurt the Pakistani Army are casualties among its soldiers, Rangers and members of its Border Action Team (BAT) who specialise in beheading and mutilating their victims. That is why the surgical strike hurt Pakistan. Regular Pakistani soldiers were caught napping and killed in numbers. The retribution has been swift and sustained.

Was the surgical strike therefore a mistake? Clearly not. What has been a mistake is not following up the surgical strike with either one of these three options:

Option 1
India could have used the brief lull in hostilities in late 2016 after the surgical strike to initiate a structured dialogue that was suspended after the Pathankot attack in January 2016. The peace lobbies in both countries would have welcomed this move. So would the Pakistani government. The Pakistani Army would have approved it as well: it fits well into its well-established strategy of talks and terrorism going on together.

Talking to India gives Pakistan a cover of respectability. Terrorism meanwhile allows the Pakistani Army to maintain its primacy in Pakistan's fractured polity. It justifies its bloated defence budget. A permanent enemy, India, is necessary for the raison d'etre of a large, well-funded Pakistani Army.

But the Generals in Rawalpindi also want talks with India that are pre-programmed to periodically fail before being revived again due to pressure from India's influential peace-at-all-costs cabal. In short, an interrupted and interruptible dialogue, the precise reverse of the formulation by India's peace lobby.

Option 2
India's second option after the surgical strike is the one it has currently adopted: robust retaliation to Pakistan's terror attacks and ceasefire violations along the LoC and IB. The failure of this strategy should have become clear to the Indian government after practising it for nearly 18 months, following the surgical strike, with poor results. Retaliation fits into Pakistan's playbook. Low-intensity conflict allows it to attack the Indian Army with relatively light losses to its own forces.

Option 3
Between war and ad hoc retaliation of the kind that Rajnath Singh promises periodically ("befitting reply"), lies a large unexplored space. India already faces what in effect is an undeclared war by Pakistan. Over 80 Indian soldiers have been lost to Pakistani firing and terror attacks over the past 18 months.

Retaliation is not an answer to an undeclared war. To impose punitive costs on Pakistan and achieve effective deterrence to the unending cycle of violence, four steps are necessary.

One, downgrade diplomatic ties to consular level. There is no need to retain a full-fledged Pakistani high commission in New Delhi packed with ISI agents who subvert Indian politicians, bureaucrats, journalists, retired armed forces officers, activists and NGOs. This will send a message to the rest of the world that India means business.

Two, cut trade links with Pakistan, revoke its most favoured nation (MFN) status and stop the archaic ceremonies at Wagah and other border crossings. No one takes a nation seriously which maintains such fraternal and trade ties with a terrorist state.

Three, build that long-promised high-tech electric fence with sensors around every key army camp perimeter. The fence was promised two years ago after the Pathankot attack. Defence minister Nirmala Sitharaman finally announced last week that a Rs 1,487-crore budget for building the 9-foot-high electric fence has been approved. It will take 10 months to complete but will greatly enhance perimeter security around Army camps.

Four, surgical strikes across the LoC should be the norm, not the exception. In an undeclared war in which the Indian Army has lost scores of soldiers to Pakistani terror attacks and shelling, deploying special forces and air assets to destroy Pakistani Army positions that launch terrorists into India will not escalate matters. Remember: India too has nuclear weapons. Pakistan's nuclear bluff is just that - bluff.

In sum: Option 1 (retaliation) hasn't worked. Option 2 (talks) won't work - that's what Rawalpindi craves: talks and terror hand in hand for respectability and bloated defence funding respectively. Option 3 is the only real option left against a terror state that continues to wage an undeclared war on India.

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Benefits Of Strong Rupee
A weak rupee is an easy way of boosting export earnings. But as a 67-rupee-to-adollar rate in 2015 showed, exports can plunge even (SO)

Tuesday, February 13, 2018

Over the past six months, the Indian rupee has appreciated by nearly seven per cent against the US dollar. According to conventional wisdom, exports should have fallen. In recent months, the opposite has happened.  Exports had begun sliding from 2015 when the rupee was around 66-67 to the US dollar. Today, with the rupee having strengthened to 63-64 a dollar, exports have, against conventional wisdom, picked up.

Obviously macro-economic factors have played an important part in India’s poor export performance over the past three years. But it’s clear that a strong rupee is not necessarily an impediment to higher exports nor is a weak rupee a guarantee for higher exports. Apart from the state of the global economy, oil prices and macro-economic indicators, domestic productivity plays a large part in boosting export growth.  

A strong rupee has several advantages. First, it moderates inflation. Second, it lowers the cost of imports. For a country with a large trade deficit, running at over $150 billion (Rs 9.60 lakh crore) annually, a strong rupee is a boon, not a bane. Oil prices are climbing upwards of $70 a barrel. Gold has stabilised at over Rs 30,000 for 10 gms. These two commodities form the bulk of India’s import bill. The country imports 82 per cent of its crude oil. Gold remains a major attraction for households as a hedge against inflation.

India’s trade deficit is unlikely to dip soon. The government’s push to switch to electric cars and buses by 2030 will help reduce India’s dependence on oil imports in the long term. But as British economist John Maynard Keynes said, in the long term we are all dead.

The right level of currencies has lately become a contentious issue globally. US President Donald Trump has been accused of “talking down” the dollar, saying it will help US trade. The head of the powerful European Central Bank (ECB), Mario Draghi, said recently: “When someone says that a good exchange rate is good for exporters and good for the economy, that means (he is) targeting the exchange rate.”

Why is Draghi worried about a weak dollar? Because, he says, it has led to a strong euro. For deflation-hit Europe, that is unwelcome. A strong euro, Draghi contends, will “put a lid on inflation”. Surely that’s a good thing? Not for Europe. After years of low or no growth, the economies of the European Union (EU) are growing again. Draghi wants inflation to rise, prices to stabilise from stagnant levels and get the European engine, stalled for years, moving again.

Low inflation in Europe causes sclerosis. Moderate price rises are needed to boost a calcified continental economy. Hence Draghi’s prayer for a weak euro and higher inflation that will help him continue the monetary stimulus that the ECB has provided for several years following the Greek economic crisis. It is this stimulus, with the ECB printing unlimited euros to pump prime Europe’s stagnant economies, that has worked well. Most economies in the EU are now expanding, allowing Europe to kick the can of the 2014 euro crisis further down the road.

But what is sauce for Europe’s goose is not sauce for India’s gander. India for years had high inflation, high interest rates and high GDP growth. Europe has had low or zero inflation, low, zero or negative interest rates and low or zero GDP growth. The currency recipes for Europe and India are diametrically opposite.

India has for long been a victim of a “weak-currency” fetish. The country’s export lobby is strong. It clamours for a weak rupee despite the damage it causes to the trade deficit and the larger economy. Exports comprise less than 15 per cent of India’s GDP. Yet economic policy is often crafted keeping them and not the rest of the economy in mind. A weak rupee is an easy way of boosting export earnings. But as a 67-rupee-to-a-dollar rate in 2015 showed, exports can plunge even when the rupee is weak.  

India is not alone in its fetish for a weak currency. As Tokyo-based William Pesek, a former Bloomberg and Barron’s columnist, wrote in Mint: “China, India, Japan and South Korea had something truly extraordinary in common last year. Asia’s four biggest economies all saw significant currency gains. What’s peculiar, though, is the lack of panic. In years past, a 13 per cent surge in the won would’ve had Seoul throwing the full weight of the government at speculators. Far from losing its nerve, the Bank of Korea (BoK) on 30 November raised short-term interest rates for the first time since 2011. It was a sign of confidence that Korea’s growth is sound, a possible harbinger of things to come regionally. Are China, India and Japan about to follow BoK’s lead? Not anytime soon. But the tolerance in China and India of  last year’s roughly 6 per cent currency gains is reason to be optimistic about Asia’s 2018. We may be at an inflection point where the region decides that rising exchange rates can be an asset.”  

As a longtime votary of a strong rupee, I endorse Pesek’s conclusion: “It’s high time Asia took a page from, say, Germany, a high-labour-cost nation with a track record of adapting to strong currencies. Rather than bellyache, German manufacturers tend to employ that as an excuse to streamline corporate structures and raise productivity, thus boosting competitiveness. Likewise, executives from Shanghai to Seoul to Mumbai should respond to currency shifts with innovation and creativity. A rising exchange rate is, after all, a show of confidence from abroad. Optimism behind such capital flows would, over time, pull in more long-term investment, reduce bond yields and curb inflation.”

Indian policymakers, like their peers across Asia, need to recognise the power of strong currencies. But won’t cheaper imports hurt local Indian manufacturing? Not if Indian manufacturers improve productivity and quality rather than use a weak rupee as a crutch to gain greater competitiveness against imports. Currencies obviously reflect the difference in inflation between countries. But with inflation in India at reasonably low levels, it’s time to shed old fears over a strong rupee.

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Kashmir needs a fresh strategy

The New Indian Express
Thursday, February 15, 2018

The Indian government’s policy on Jammu & Kashmir (J&K) has oscillated between tough talk and weak action. The Narendra Modi government’s decision to form an alliance with the Peoples Democratic Party (PDP) has delivered mixed results. Midwifed by BJP General Secretary Ram Madhav and the PDP’s Haseeb Drabu (a former managing director of J&K Bank and now the Mehbooba Mufti-led coalition government’s finance minister), the marriage of convenience, consummated in February 2015 after two months of tortuous discussions between two ideological rivals, has frayed, possibly beyond repair.

What keeps the partners together is a combination of fear and greed. Both are mortally afraid of fresh elections that could sweep Omar Abdullah’s National Conference (NC) to power. The vote base of the PDP and BJP is deeply polarised. Both sets of voters resent their parties aligning with the other. Such disgruntled voters can only help the National Conference though its last six-year stint in government was marred by corruption and incompetence.

Apart from the fear of losing power prematurely—scheduled elections are due only in December 2020—BJP and PDP ministers are enjoying the fruits of power. The BJP has for the first time an administrative presence in the Valley. The PDP, after founder Mufti Mohammad Sayeed’s death two years ago, does not want to loosen its grip on a state it ruled with the Congress from 2002-08.

Three problems bedevil J&K. Each needs a robust response from the Modi government.
First, Pakistan’s continued abetment of terrorism in the Valley. While nearly 250 terrorists have been killed by Indian security forces over the last year, recent terror attacks underscore the threat Pakistan-sponsored terrorism poses in Kashmir. The PDP-BJP government has failed abjectly to de-radicalise the handful of areas in the Valley—and they are only a handful—infested by terrorists and their local separatist handlers. Pakistan-sponsored terrorists from the LeT and JeM have made these regions staging grounds for attacks on Indian security forces. Radicalised Kashmiri youth pelt rocks—not just stones—to help the terrorists escape.

Second, while attacks on Indian soldiers and civilians have been met with strong retaliation by the Indian Army, there hasn’t been a coherent strategy to proactively and unilaterally impose punitive costs on the Pakistani Army. Without doing so, terror from Pakistan will continue to torment J&K. Pakistan’s mortar and missile attacks across the LoC amount to an undeclared war. Indian policymakers must stop being in denial: you don’t fight an undeclared war by 2x retaliation. You do so by taking the fight to the enemy. The Generals in Rawalpindi know exactly where to draw the line—and the consequences for Pakistan if they don’t. The recent attacks on our Army camps serve at least one purpose: they will compel a somnolent NDA government to finally take the fight to the enemy.

The third problem that besets J&K is its tortured history. Ruled by Dogra Hindu kings for centuries, the Valley’s demographics have gradually changed. The Kashmir Valley in 1947 had a demographic mix of 70 per cent Muslims and over 20 per cent Hindus. Today it is 98 per cent Muslims and 2 per cent Hindus. The Valley’s Sufi culture has been replaced by a seething Wahhabism that emboldens stone pelters and alienates ordinary Kashmiri Muslims.

The government’s inaction on resettling Kashmiri Pandits, who gave the Valley its gentle, plural character, has convinced separatists that the NDA government has neither the political will nor the moral gumption to counter the creeping Islamisation of the Valley.

What then is the way forward? The situation in Kashmir could get worse before it gets better. The Army, Central Reserve Police Force (CRPF) and J&K police have borne the brunt of the stone-pelting mob culture Pakistan has nurtured in the Valley. Kargil war hero Lt. Colonel Karamveer Singh, the father of Major Aditya Kumar against whom the Mehbooba Mufti government filed an FIR following the death of three men among a lynch mob which attacked the Indian Army’s convoy in Shopian last week, won a reprieve from the Supreme Court on February 12 in his petition to quash the FIR.

Colonel Singh says his son was not even present at the scene of the incident and has been falsely implicated. Soldiers in the convoy were protecting themselves from a 200-strong lynch mob that surrounded the convoy. Rocks were being hurled at this Army convoy of three trucks that had got separated from the main convoy. It was trapped by the stone-throwing lynch mob. Eight soldiers in the convoy had already received serious head wounds.

Verbal warnings to the mob went unheeded. Firing in the air too did not deter the mob. Only then were the lethal shots fired to protect dozens of lives in the trapped convoy. The Court’s final verdict on Colonel Singh’s petition will also have an impact on the debate over the Armed Forces Special Powers Act (AFSPA) which gives legal cover to Army personnel in a crisis precisely like the one Major Aditya faced.

Politicians have played malignant roles in J&K since 1947. It began with the delayed accession of J&K to the Indian Union in October 1947 by Maharaja Hari Singh, followed by Pakistan’s manic invasion of the state in 1947-48 and Prime Minister Jawaharlal Nehru’s ill-advised reference of the “dispute” to the United Nations.

The rigged J&K Assembly polls of 1987, on the watch of Farooq Abdullah and Rajiv Gandhi, angered Kashmiris and set the stage for the post-1989 insurgency. The PDP-BJP alliance of (mis)governance is the latest blight to descend on the long-suffering Valley.

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The fight over Ram temple
The Congress president's embrace of his Hindu identity softens the charge that the grand old party is pro-minority and anti-Hindu.

Thursday, February 15, 2018

During waves of Islamic invasions of India over the centuries, thousands of temples were demolished. It is therefore incomprehensible why Muslims in India should oppose rebuilding temples. It would not be atonement for ancestral sins; it would simply be an honourable act.

But why insist on building a Ram temple at the site in Ayodhya where the Babri structure stood? There are two reasons. First, the Archaeological Survey of India (ASI) has proved conclusively that a temple once lay beneath the Babri rubble. Second, the birthplace of Ram holds special significance for Hindus. If Muslims are to help build a temple, what better place to build it than where devout Hindus believe Lord Ram was born?

The dispute over building the Ram temple in Ayodhya, currently being heard in the Supreme Court, terrifies some politicians. Arguing for delaying the apex court’s verdict to after the 2019 Lok Sabha election, senior advocate and Rajya Sabha Congress MP Kapil Sibal pleaded with the Supreme Court with folded hands for a long adjournment. The court dismissed his plea. It will continue to hear the case though not on a day-to-day basis. The next hearing is scheduled for March 14.

Chief Justice of India Dipak Misra has made it clear though that the case will be heard as a land-title dispute. Matters of faith will not be adjudicated. Who does the land title of the disputed site belong to? The Shia Wakf Board controversially claimed deed to the title. The claim was rejected by the Allahabad High Court in 2010. The court decreed that the disputed 2.77-acre site should be divided into three equal parts between the Sunni Central Wakf Board of Uttar Pradesh, the Nirmohi Akhara sect and Ramlalla Virajman. It is this verdict, arrived at by a 2-1 majority, that the Supreme Court will adjudicate.

The Shia Wakf Board supports building the Ram temple at the disputed site in Ayodhya. It says it will help construct a grand new mosque at a suitable site elsewhere, possibly in Lucknow. The Sunni Wakf Board is leading the Opposition to building the Ram temple at the disputed site. Several political parties with an interest in the Muslim vote bank have joined the Sunni Board in its strenuous opposition. They reject the ASI’s findings that a temple ever once stood there.

The Ram temple issue is an inflammable mix of history, religion and politics. With the Lok Sabha election due in April 2019 and possibly earlier, politics has taken centre stage. The BJP knows that Uttar Pradesh is vital to its chances of winning a second term. It calculates that keeping the Ram temple issue alive will help it cushion the impact of a possible, if unlikely, alliance between the BSP and SP-Congress in UP. Such an alliance could make it difficult for the BJP to capture the 60-plus seats it needs in UP to form a stable BJP-led NDA coalition government in 2019.

There are now three possibilities. One, the Supreme Court finds in favour of the Allahabad High Court’s judgement. That will hand two-thirds of the 2.77-acre disputed site to two Hindu organisations (the Nirmohi Akhara sect and Ramlalla Virajman). All parties in the dispute have agreed to abide by the Supreme Court’s ruling. If the apex court accepts the Allahabad High Court’s formula, the two Hindu groups will get two-thirds of the 2.77-acre site. The hardline Sunni Wakf Board will get the rest. This outcome will suit the BJP. It can showcase it as a victory for devout Hindus and energise its core voter base.

The second possibility is that the Supreme Court rejects the Allahabad High Court’s verdict on dividing the land into three equal parts. That will throw the matter back into the hands of the litigants for out-of-court negotiations that have sputtered on and off over the past few months. This will keep the issue alive and again help the BJP electorally.

That leads to the third possibility. If the Supreme Court delays its verdict beyond 2019, as Sibal has pleaded, the BJP’s more radical elements will attempt to force the issue by unilaterally preparing to lay the foundation of the Ram temple. They will transport bricks and other material to the site. The Yogi Adityanath government will not allow the devotees to do any actual construction. But the symbolism of a “saffron army” marching to honour Lord Ram in Ayodhya will pay the BJP electoral dividends.

The Ram temple controversy has also laid bare the schism within the Muslim clergy. The Shia Wakf Board vocally supports building the Ram temple at the disputed site. It has been in close touch with Sri Sri Ravi Shankar to seek an out-of-court settlement. It has sought a ban on the All India Muslim Personal Law Board (AIMPLB) which, along with the Sunni Wakf Board, strongly opposes building the temple at the disputed site in Ayodhya. The Congress’ battery of senior lawyers is meanwhile keen to put a brake on the Supreme Court hearing the case. It is keenly aware that, whichever way the gavel falls, Lord Ram spells electoral danger for the Congress.

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Will 'soft Hindutva' help Rahul Gandhi win 2019 Lok Sabha elections
The Congress president's embrace of his Hindu identity softens the charge that the grand old party is pro-minority and anti-Hindu.
Wednesday, February 21, 2018

Winning a general election needs a mix of chemistry and mathematics. Congress president Rahul Gandhi will need the right combination of both to lead a UPA 3 coalition to victory in the 2019 Lok Sabha elections.

The chemistry will come from the soft-Hindutva he has adopted since its relative success in the 2017 Gujarat Assembly election. He has continued to temple-hop in Karnataka which goes to the polls in April-May 2018. Karnataka is something of a quarter-final leading up to the December 2018 semi-final in Rajasthan, Madhya Pradesh and Chhattisgarh. If Rahul’s newly acquired Hindu-centricism works in Karnataka, he will double down on it in the three big states later this year before the 2019 Lok Sabha polls.  

The mathematics is more problematic. The Congress’ national voteshare has not gone beyond 28.55 per cent since 1991. It was 35.66 per cent in 1991 shortly after Rajiv Gandhi’s assassination, 28.80 per cent in 1996 when HD Deve Gowda presided over a United Front government, 26.14 per cent in 1998 when an Atal Bihari Vajpayee-led BJP stormed to power, 28.30 per cent when Vajpayee retained power after the Kargil war in 1999, 26.70 per cent when UPA 1 won back office in 2004, 28.55 per cent when UPA 2 retained office in 2009 and a miserly 19.52 per cent when it was decimated by the BJP in 2014.

How might the math work out in 2019? For the Congress to win power in the next Lok Sabha elections, it will need to win at least 150 seats as I explained here since UPA 3 allies are unlikely to contribute more than 120 seats. In order to win those 150 seats the Congress will need to clock a national voteshare of at least 27 per cent, a bit above the 26.70 per cent it won in 2004 when it captured 145 seats. 

The problem, often overlooked, is that Congress voters are widely diffused. BJP voters are more concentrated in specific constituencies. Hence, the BJP could win 282 seats in 2014 with a mere 31.34 per cent voteshare. The Congress, with its dispersed voters, would need over 35 per cent national voteshare (as in 1991) to win a similar number of seats. In 1991, despite winning 35.66 per cent national voteshare, the PV Narasimha Rao-led Congress won only 244 seats.

Will Rahul’s discovery of temples help the Congress bump up its voteshare from 19.52 per cent in 2014 to around the 27 per cent voteshare level necessary to get within striking distance of 150 seats in 2019? Voteshare-to-seat conversion anomalies and an increasingly fragmented polity make predictions hazardous.

Rahul may have grounds for optimism though. Three pieces of dice have recently rolled in his favour. First, the middle-class vote is up for grabs. Disillusioned with the Narendra Modi government’s tax policies, the small but influential Hindu middle-class could lean towards the Congress which it had rejected en masse in 2014.

Second, the charges of cronyism against the Modi government, however thin, will resonate in small-town India. Modi came to power because the Congress was irredeemably corrupt. Now if the Congress can show that the BJP is not much better, it will blunt the biggest instrument Modi used to bludgeon the Congress to defeat in 2014.

Third, Rahul’s embrace of his Hindu identity softens the charge that the Congress is a pro-minority, anti-Hindu party. The charge was particularly effective when an Italian-born Catholic, Sonia Gandhi, led the Congress. A born-again Hindu Rahul Gandhi can win over fence-sitting Hindus who have never been wholly comfortable with the RSS’ hard Hindutva and Hindu Rashtra doctrine.

That’s where the good news for the Congress ends. While the Congress probably needs a voteshare of at least 27 per cent or more to win 150 seats and stich together a workable UPA 3 coalition, the BJP’s concentrated voter base can ensure that it wins 220-240 seats with a similar voteshare of 27-28 per cent - despite losing one-tenth of its 2014 voteshare of 31.34 per cent. Remember too, that way back in 2004 it won 138 seats with just 22.16 per cent voteshare. Since then the BJP vote base has strengthened in key states like Odisha and West Bengal and in regions like the Northeast. A 27-28 per cent voteshare could take it to over 220 seats, the minimum necessary for Modi to form a stable NDA government.

Events too may work in the BJP’s favour. The growing crescendo over building the Ram mandir will give the party significant tailwind. An escalating conflict later this year with Pakistan will further coalesce the “hard” Hindi vote behind it. Vajpayee’s re-election in 1999 after the Kargil war is a potent reminder of how events can influence elections.

Messaging will be crucial in the run-up to 2019. The Congress has a roster of experienced hands to communicate its message: Kapil Sibal, P. Chidambaram, Manish Tewari, Abhishek Manu Singhvi, Shashi Tharoor, Jyotiraditya Scindia and Sachin Pilot at the senior level; Randeep Surjewala, Ajay Maken and Pawan Khera in the middle; and a smorgasbord of spokespersons who outmanoeuvre BJP spokespersons every night on news television.

The BJP’s most articulate ministers like Smriti Irani and Piyush Goyal are rarely fielded. Ravi Shankar Prasad and Prakash Javadekar sound defensive and didactic even when the facts are in their favour.

Above all, Rahul comes across as approachable. Modi, a brilliant orator in public, is increasingly seen as somewhat aloof. Not having regular structured press conferences is a strategic mistake. In the end, elections can be won and lost on perception.

However, despite its glib messaging, the Congress’ top leadership, including Rahul Gandhi, has not spelled out alternative economic or foreign policies. It is content to taunt the prime minister on Twitter, often in an embarrassingly juvenile manner. Several Congress leaders are tainted by allegations of corruption but the BJP’s amateur messaging allows them to point a finger of corruption at the BJP without the risk of three fingers pointing right back at them.

If the BJP loses the 2019 Lok Sabha election - and despite everything it probably won’t - it will have nobody to blame but those three limp fingers. 

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Modi government must accept blame for Nirav-Choksi bank scam
It's no longer enough to blame corrupt UPA-era holdovers or the Lutyens' ecosystem for today's frauds.

Thursday, February 22, 2018

Behind every financial scam in India lies the hand of a corrupt bureaucrat. They come in all shapes and sizes. Some are IAS, IPS or IRS. Others are government employees of PSU banks and financial institutions. More dangerously, they populate the corridors of power across state capitals and at the Centre. Many IAS/IPS/IRS officers are honest. Many more are not. Their patrons are politicians. The nexus runs deep.

Consider exhibit A: the Punjab National Bank (PNB) scam involving Mehul Choksi and Nirav Modi. The scam could not have occurred without the active connivance of senior PSU bank officials, IAS officers in the finance ministry, RBI officials and, at the top of the putrid food chain, a beady-eyed group of politicians.

Financial fraud

The facts in the PNB fraud are well established though investigations, raids and arrests continue. The scam began during the go-go years of UPA-I when it was open season for financial skullduggery.

Allahabad Bank is an unlikely player in the Nirav Modi-Choksi fraud case which has ballooned into a scam of over Rs 25,000 crore - three times larger than the amount Vijay Mallya owes banks, employees and myriad government entities.

Most of the fraudulent documents in the Nirav-Choksi scam were routed through PNB. But Choksi, whose Nakshatra, D'dmas and Gili brands had captivated the beau monde for decades, cleverly used the relatively low profile Allahabad Bank rather than PNB, India's second-largest PSU bank, to commit his fraud. His loan of Rs 1,500 crore, taken when the UPA-II government was in power, was speedily approved and never returned.

Emboldened by lack of action from the bank's senior managers, Choksi cheekily placed a top-up loan application for Rs 50 crore in 2013. Normally, such loan amounts can be approved at the general manager or zonal level. But Allahabad Bank's top management, aware that Choksi had not repaid his earlier Rs 1,500 crore loan, decided to get legal cover for itself for the loan by seeking board approval in order to limit its own liability if fraud in granting the original loan of Rs 1,500 crore was discovered later.

Ironically, placing the top-up loan of Rs 50 crore to the Allahabad Bank board sparked a series of events that led to uncovering not only Choksi's fraudulent dealings with Allahabad Bank but his nephew Nirav Modi's fraud in PNB. In August 2012, the government had appointed Dinesh Dubey, a journalist, to the board of Allahabad Bank. When Choksi's Rs 50-crore top-up loan application came up to the board for approval at its meeting on September 14, 2013, Dubey objected strongly. Why pay Choksi an additional Rs 50 crore when he had not repaid the original loan of Rs 1,500 core?

The Allahabad Bank board overruled Dubey. The loan was approved under instructions "from above", says Dubey. He wrote a dissent note.

Two months later, at a November 22, 2013 board meeting, Dubey again objected to the loan when it was discussed by the bank's directors for final approval. He wrote about possible irregularities in granting the loan in a letter to the RBI and the ministry of finance. P Chidambaram was then finance minister. Raghuram Rajan was RBI governor. Dubey received no reply from either. Instead, the finance secretary asked him to resign. Under pressure, Dubey resigned three months later in February 2014. Remember: Dubey had been appointed an independent director on the Allahabad Bank board to report on just these kinds of irregular transactions.

Finance secretaries

Exhibit B: The Narendra Modi government came to power in May 2014. The Nirav-Choksi fraud, however, continued. Oddly enough, a rapid succession of finance secretaries went in and out of the finance ministry just before and after Modi became Prime Minister: RS Gujral was finance secretary from July 2011 to November 2013 during the Dubey resignation issue. Sumit Bose was appointed finance secretary in December 2013. He retired on March 2014. Arvind Mayaram took over as finance secretary in April 2014. Modi became Prime Minister a month later. He now began to do some spring-cleaning in a ministry that had been headed by turns by Pranab Mukherjee and Chidambaram. The powerful and controversial Arvind Mayaram was transferred in October 2014 to the innocuous tourism ministry. Two weeks later, Mayaram was again transferred, this time to the minority affairs ministry.

Unholy nexus

But the spring-cleaning stopped as abruptly as it had begun. The Choksi-Modi bank scam meanwhile continued. In fact it increased in scope, size and audacity.

Letters of understanding (LoUs) worth several thousand crore rupees were fraudulently approved by PNB in 2015-17 under the NDA government.

By now the culprits had been tipped off. The Choksi and Nirav Modi families fled India weeks before PNB filed a complaint with the CBI. The same unholy bureaucrat-political nexus that allowed scams to flourish under the UPA government was allowing the scam to flourish under the NDA government and tip-off the scamsters. It is easy to pass on the blame for India's banking scams to the unholy nexus. But when Indians gave Narendra Modi his overwhelming mandate it was on the understanding that the nexus would be broken and cronyism stopped.

It's no longer enough to blame corrupt UPA-era holdovers or the Lutyens' ecosystem for today's scams. The Modi government is now part of the Lutyens' ecosystem. If it can't cleanse the ecosystem from inside, it has undermined its mandate.

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India needs to cut Pakistan off, end the farce of trade, sport and diplomacy
New Delhi must exhibit resolve and intent that it is serious about isolating Islamabad across the board.
Wednesday, February 28, 2018

Twenty-four hours after the attack by Pakistan’s terrorist-army on the an Indian Army station and family quarters in Jammu's Sunjuwan, defence minister Nirmala Sitharaman held a press conference.

She said: “Pakistan will pay a heavy price for this attack.” Revenge is a dish best served cold. But retribution for Sunjuwan will not end Pakistan-sponsored terrorism. It will not even mitigate it. Pakistan does not care about 3x or even 5x losses to its terrorists and soldiers who man terror launchpads in Pakistan-occupied Kashmir (PoK). For Islamabad, terrorism against India is low-cost warfare. But make no mistake: it is warfare.

India has always “reacted” to Pakistani terror attacks with retributive Army assaults. Pakistan absorbs those assaults, accepting them as a small price to pay for bleeding India.

Islamabad knows that it has a limited time window of about 10 years to practise this strategy. After that India’s economic and military superiority will place it beyond Pakistan’s reach. The GDP gap between the two countries is today 9:1. By 2028, at current growth rates, the gap will widen to 12:1.

Militarily, India’s 30-year-long stupor in modernising its air force, army and navy has ended. The IAF will by 2028 have close to a full strength of 42 fighter jet squadrons, several new nuclear submarines (currently being built at classified shipyards), warships, anti-tank guided missiles, nuclear-capable stealth fighters, Apache attack helicopters and mobile shoot-and-scoot howitzers with a 40-km shelling range.

Meanwhile, Pakistan’s nuclear bluff must be treated for what it is: bluff. India’s new low-yield battlefield nuclear weapons, along with its nuclear triad (air, land and sea), is a deterrent whose potency the generals in Rawalpindi will not dare to put to test.

But the real challenge today is to evolve and implement a comprehensive and coherent strategy to isolate Pakistan by every means available.

Last week in Paris, Pakistan was placed on the Financial Action Task Force (FATF) grey-list. Islamabad has a three-month window until June 2018 to end terrorist financing. If it fails to do so (as it inevitably will) harsh global financial sanctions will follow. They will cause Pakistan's fragile economy considerable pain.

“Being placed on the FATF watchlist will bring extra scrutiny from regulators and financial institutions that can chill trade and investment and increase transaction costs,” conceded a report in Pakistan Today. “Mike Casey, a partner at law firm Kirkland & Ellis in London, said being put back on the grey-list would heighten Pakistan’s risk profile and some financial institutions would be wary of transacting with Pakistani banks and counterparties. Others might elect to avoid Pakistan altogether, viewing the legal risks associated with doing business there to outweigh any economic benefits.”

What should India, the main victim of Pakistani terrorism, now do? The key is to execute a series of steps that, like a tourniquet, strangle Pakistan’s terror infrastructure by imposing progressively heavier costs on it. Half-way measures will no longer do.

India must move from a reactive military strategy to a proactive military strategy. In retaliation for the terror attack on the Sunjuwan Army camp and family station that killed six Indian soldiers and one civilian, the Indian Army pounded Pakistani posts in the Uri and Mendhar sectors, destroying both. An unconfirmed number of Pakistani soldiers and terrorists (there’s little differentiation between the two) have been killed in India’s retaliatory attacks. That hasn’t changed Pakistan’s terrorism-as-state-policy mindset. Nor will it.

What does a comprehensive strategy to isolate Pakistan involve? First, downgrade diplomacy. The Pakistan High Commission in New Delhi is a warren of subversion, packed with ISI agents. Downgrade it to a bare-bones consular status. Withdraw India’s high commissioner in Islamabad. Consular representation will do.

Even with downgraded status, certain arm’s length multilateral diplomatic engagements with Pakistan will take place. This week, for example, foreign secretary Vijay Gokhale will attend a 25-nation conference on Afghanistan in Kabul. A brief meeting on the sidelines of the conference between Gokhale and Pakistan’s foreign secretary Tehmina Janjua can’t be ruled out. This falls well within the new paradigm of downgraded diplomacy.

India must exhibit resolve and intent that it is serious about isolating Pakistan across the board. End the hypocritical access Pakistani artistes have to Bollywood. All take huge Indian fees but mock India when they return to Pakistan. Without exception, they never condemn Pakistani terror attacks on India.

But why, ask India’s Pakistan apologists, drag artistes into politics? Because it’s not politics. It’s terrorism.

South Africa was isolated by the world over its racist apartheid policy. India sacrificed a Davis Cup title by refusing to play South Africa (even though that country had never sent terrorists to kill Indians as Pakistan incessantly does). The pressure of isolation on South Africa paid off. The inhumanity of apartheid ended in 1991 and Nelson Mandela was sworn in as President in 1994.

What about trade, ask India’s Pakistan apologists? Why ban poor Pakistani filmstars when we still trade with Pakistan and haven’t revoked its most favoured nation (MFN) status? And hasn’t India invited Pervaiz Malik, Pakistan’s commerce minister, to India for the WTO mini-ministerial meeting in Delhi scheduled for March 19-20? He will doubtless have a congenial chat with India’s commerce minister Suresh Prabhu.

This reflects the failure of the Narendra Modi government’s confused Pakistan policy. Revocation of Pakistan’s MFN status must be placed high on its agenda as it enters the final year of its first term. Under WTO rules, revocation is legally justifiable based on non-reciprocity. Reciprocity was pledged by Pakistan in 1996 when India granted Islamabad MFN status. It was never implemented. It is time to end this farce.

While the 37 members of the FATF have taken Pakistan’s terror financing seriously and imposed sanctions on it which kick in from June 2018, India continues to soft pedal. That sends the wrong message to the world about India’s intent to deal effectively with the horrific nature of Pakistan’s continuing terror attacks.

Just how horrific those attacks are is reflected in this The Indian Express report: “Standing on a mountain, Silikote, a hamlet of 22 households, is overlooked by Pakistani army pickets across a ridge and is vulnerable even to small-arm fire from Pakistan. For the past five days, the village has been continuously hit by shells fired by Pakistani soldiers. ‘We have witnessed such intense shelling for the first time since 1999,’ says Ghulam Nabi Handoo. ‘We are lucky to be alive.’ Says Nazir Ahmad, from the same village: ‘We are dying every day. Is this life? Life there is hell. I think around 20,000 mortars were fired in an hour.’”

Such Pakistani army attacks on Indian civilians in villages near the LoC are trivialised by the daily retreat ceremony at Wagah and other border crossings. These must end immediately. They give Pakistan a false sense of importance and equivalence.

Meanwhile, the Modi government has got at least one aspect of its Pakistan policy right: it has fast-tracked hydro-electric power projects in J&K. They will now draw the full legally permissible quota of water under the Indus Waters Treaty (IWT). India had inexplicably under-drawn its legal quota for decades.

The Modi government’s Pakistan policy has been a disappointment thus far. It has a year to turn things around or Sunjuwan will not be the last Indian Army camp to be attacked by Pakistan’s army of terrorists.

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Empowering Women @Work
According to the World Economic Forum (WEF), India ranks 139th in women’s participation in the labour force. ... THE WEF survey ranks India a high 15th on the parameter of political empowerment

Wednesday, February 28, 2018

Women worldwide are an under-used and at times an under-valued asset. Some of the most successful countries globally have a high percentage of women in their workforce: Norway, Sweden and the Netherlands are examples.

India is a laggard. According to the World Economic Forum (WEF), India ranks 139th in women’s participation in the labour force. Ironically, the WEF survey ranks India a high 15th on the parameter of political empowerment. That is due to two reasons. First, the 50 per cent reservation for women in several Panchayats and Zilla Parishads across the country. Second, less happily, the presence of dynasts in Indian politics – wives, daughters, nieces and sisters.

Nonetheless, the overall picture that emerges from the WEF survey is worrying. Women in India rank 112th in “educational attainment” and 141st in “health and survival”,  pointing  to India’s abysmal healthcare facilities, especially in villages, with women bearing the brunt of poor medical care.  

India does a little better on wage equality, ranking 80th globally. The survey puts the median urban wage salary for Indian men at Rs 345.8 per hour and for Indian women at 259.8 per hour. The gender wage gap of around 25 per cent has remained steady over 2014-16. Slicing these numbers reveals interesting nuggets. The wage gap between Indian men and women falls to 21.5 per cent in the services sector. In manufacturing it rises to nearly 30 per cent. As India’s services sector grows (it currently contributes 60 per cent to GDP), women’s participation in the workforce will rise and the gender wage gap fall. Women are already closing the gap in industries like hospitality, travel, healthcare and media. India has the world’s largest number of women pilots. Several airlines fly with all-women crew – pilots and cabin attendants. In entrepreneurship too Indian women are beginning to do well. A Mastercard survey ranked Indian women 49th in business ownership.
At the Davos summit in January 2018, International Monetary Fund (IMF) president Christine Lagarde said India’s GDP could expand by 27 per cent if  “India’s women participate as much as men” in the workforce. It is in politics though where the main challenge lies. Only 11.8 per cent of Lok Sabha MPs (and 11 per cent of  Rajya Sabha MPs) are women. This despite the ubiquity of dynasty. Without women political dynasts, the numbers would be even lower. Out of 193 United Nations members, India figures in 148th place on political representation for women in legislatures.

The mothballed Women’s Reservation Bill which mandates a 33 per cent quota for women in the Lok Sabha has been sabotaged by regressive parties like the SP and RJD for over a decade. India has had a woman Prime Minister, a woman President and several women Speakers of the Lok Sabha. Most have been from political families. Women’s empowerment in politics is therefore, clearly trapped in feudal tokenism.  

Opponents of the Women’s Reservation Bill argue that the same feudal system will operate, albeit on a much larger scale, if one-third of the seats in parliament are reserved for women. Female relatives of male politicians will be nominated to constituencies and the Lok Sabha will be packed with mothers, wives, daughters, sisters and nieces of male political dynasts. That, they say, will defeat the very purpose of the Bill.

This is a self-serving argument. While feudal nominations will occur, 33 per cent reservation for women will open up opportunities for women professionals as well. With time, their presence will grow. Meritorious, self-made candidates will eventually weed out figurehead women dynasts during elections. The quality of  parliamentary debate will improve. In countries with significant women legislators, disruptions are less frequent.

The general bias against women though, remains strong in Indian society. A new global Women, Peace and Security (WPS) Index recently measured women’s well-being and their inclusion in justice. The index is headed by Iceland, Norway and Switzerland. India ranks a low 131st, underscoring the lack of justice and equality for women in both urban and rural India. Men of course are the societal problem. As many as 25 per cent of Indian men surveyed said it was “unacceptable for women to work”. The global average for such misogyny is 19 per cent. Canada scores the highest with 0 per cent men saying women shouldn’t work. Pakistan scores among the lowest: 73 per cent Pakistani men think women shouldn’t work.  

Sport is an area where Indian women have excelled in the past few years. From badminton and wrestling to boxing and cricket, Indian women have shown that given the opportunity and a level playing field, they can match or exceed the achievements of men. There’s no reason to believe the same principle cannot apply, with some caveats, to business and politics.  

Women obviously are wired differently from men. They have two X chromosomes; men have one X chromosome and one Y chromosome (which is one-third the size of the X chromosome). It though is the dwarf  Y chromosome that gives men testosterone. Confronted by the same crisis situation, a man will react with a “fight or flight” action while women will react with a “tend or befriend” response.  
These biological differences played a big part in demarcating gender roles in primitive societies. Hard labour, wars and hunting for food were at a premium. Men were providers and protectors. Held back by continuous pregnancies and child rearing, women had to accept a subservient role. As modern society and industry developed, the nature of work shifted from labour to skill. This is why  women in advanced economies are now  playing key decision-making roles. The old hunter-gatherer advantage men possessed over women is diminishing rapidly. Women’s genetic make-up predisposes them to soft skills. Companies globally recognise this and increasingly promote women to key leadership positions.  

Yet, as women progress, issues such as sexual harassment in the workplace need to be addressed. The “me-too” movement has highlighted the exploitation of  vulnerable women in Hollywood and corporate workplaces. In India, similar cases have begun to emerge, pointing to an old culture of misogyny that must be scrubbed as Indian women increasingly occupy positions of  leadership.  

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The Indian Economy Limbers Up
The Union Budget ... On February 1 ... will be the last in which Finance Minister Arun Jaitley can inject significant reforms

Wednesday, January 3, 2018

As the BJP and Congress internalise the lessons of the 2017 Gujarat assembly election, two questions arise. First, how will Prime Minister Narendra Modi calibrate his strategy for the final year of  his tenure? Second, can he balance the urgent need to focus on the economy with the task of  leading a strong campaign for a slew of eight state elections due in 2018? 

Clearly, the economy will weigh on his mind. Jobs are critical. Restoring growth to 7.5-8 per cent is equally vital. Gross Domestic Product (GDP) growth in 2017-18 will probably be around 6.70 per cent. That is a disappointing number but statistically the most likely outcome at the end of a difficult year. The GDP growth in April-September 2017 averaged six per cent. Assuming an average 7.30 per cent growth in the second half of the current fiscal (October 2017-March 2018), full-year GDP growth will at best settle at 6.70 per cent. 

An uptick in the economy can be driven when four factors converge: one, a rise in the savings rate; two, a spurt in consumer-led consumption; three, a rise in exports; and four, renewed bank lending to corporates to spur private sector investment. 

Recent figures on the economy present a mixed picture. Growth in the Index of Industrial Production (IIP) slowed to 2.2 per cent in October 2017 after recording a healthier 4.1 per cent growth rate in September 2017. The November 2017 IIP, following the festive season, could deliver better numbers. An early indication of that is the spurt in car sales in November 2017. A total of 19,39,671 vehicles (passenger, commercial, two-wheelers and three-wheelers) were sold in November 2017 against 15,63,658 vehicles sold in November 2016, a rise of 24.05 per cent.

Since the latter half of  November 2016 was affected by demonetisation, the comparison isn’t entirely fair. However, rising car sales do point to an overall increase in economic activity and consumption. This has a spin-off effect on ancillary industries that supply the automotive sector: steel, aluminium, rubber and carbon black. A key statistic in the November 2017 numbers for vehicle sales is the 50.4 per cent surge in commercial vehicles. This points to confidence in the transportation sector as government spending on infrastructure, including road building, gathers pace. 

The most important economic news revolves around jobs. According to the Manpower Group Employment Outlook Survey Q1/2018, hiring sentiment has strengthened for January-March 2018, albeit marginally. Clearly much more needs to be done to provide jobs for the millions streaming out of colleges and vocational institutes every year. The informal economy was severely hit by demonetisation and the rapid-fire rollout of the Goods and Services Tax (GST). It has still to fully recover. The formal economy is better off with FMCG companies like Hindustan Unilever (HUL) recording strong sales growth. 

Exports remain a worry. They are still below 2013-14 levels. Exports had peaked at $30.50 billion in March 2013. In October 2017, they fell to $23.10 billion. The GST has affected exporters severely. Before rules were tweaked on refunds, exporters suffered a huge backlog in delayed GST refund payments from the government. 
With crude oil prices rising, India’s trade deficit is widening. In a Bloomberg-Quint analysis, Azman Usmani wrote: “The trade deficit stood 25 per cent higher compared to last year at $14 billion, according to data released by the ministry of commerce. The trade gap had stood at $8.9 billion in September. The value of outbound shipments in October fell 1.1 per cent over last year to $23.1 billion. Indian exports have been on a downtrend since 2014-15, adversely impacted by a global slowdown, a sharp fall in commodity prices and currency fluctuations. It started recovering in July 2016 and had been on the rise since, but the growth was offset by India’s large import bill led by higher import of gold and oil.”

In an intensely political year, the Prime Minister needs to bring back the focus on the economy. The Union Budget, due on February 1, 2018, will be the last in which Finance Minister Arun Jaitley can inject significant reforms. He has little elbow room. By committing to a fiscal deficit target of 3.2 per cent of GDP when tax revenues, especially through GST, are straining to meet targets, spending on development schemes could atrophy. 

Corporation tax is set to come down to 25 per cent for all companies while individual income-tax rates will endure their customary annual tinkering. Jaitley’s five Budgets so far (including the July 2014 interim Budget) have been underwhelming. In 2019, the Budget, which will be presented just before the April-May Lok Sabha election, is likely to be a vote-on-account. So whatever economic vision the government wants to show will need to be displayed on February 1, 2018. 

The Confederation of Indian Industries (CII) has suggested a flat corporation tax rate of 18 per cent. The United States is set to move to a corporate tax rate of 21 per cent (from 35 per cent). By removing complex exemptions, a clean flat tax rate is easier to administer and will boost compliance. The revenue loss will be less than imagined. Companies today, with countless exemptions, pay an effective average tax rate of 24.5 per cent. A flat rate of 18 per cent would lead to a relatively small loss of revenue. Total corporate tax revenue in the 2016-17 Budget was Rs. 5.39 lakh crore. Shaving 6.5 per cent off that (24.5 less 18) would cause a loss of Rs 35,000 crore in tax revenue. Better compliance with a flat corporation tax rate of 18 per cent would make up this notional loss. 

Similarly, individual income-tax rates need to be simplified. The government has a tendency to complicate rather than simplify matters of revenue. This was starkly evident in the initial rules governing GST. Several tweaks later, GST is simpler, though much more needs to be done to reduce the number of tax slabs. Complexity increases the discretionary power of bureaucrats. Simplification reduces that power. It is the single most important reason that India’s tax code has resisted change over the years.

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2018 The Unfolding Agenda
India must be mindful that while the India-US strategic partnership auguers well, a nation’s strength rests on a growing economy, robust foreign policy and good governance

Wednesday, January 3, 2018

The next twelve months will be the most decisive in India’s recent political history. A slew of eight state assembly elections will set the tone for the 2019 Lok Sabha poll. Clearly, the BJP-led NDA government will have to move into overdrive in the final lap of its five-year term. 

Prime Minister Narendra Modi’s attention will again be divided between campaigning and governing. The first big-state poll, Karnataka, in April 2018 will be followed in December 2018 by three other key assembly elections in Rajasthan, Madhya Pradesh and Chhattisgarh. In between are elections in four northeastern states — Meghalaya, Mizoram, Tripura and Nagaland. Party president Amit Shah has already begun strategising for these as well as the 2019 Lok Sabha poll.  

For the Prime Minister, constant campaigning takes a toll. Though he is extraordinarily fit, Modi needs to build a strong second line of leadership. His Cabinet has some outstanding performers but also several laggards who have been given portfolios for political and coalition reasons. The demand to hold simultaneous parliamentary and assembly elections arises as a result of the packed electoral calendar. This year is a prime example. Barely weeks after a gruelling campaign in Gujarat, Modi and many key ministers will have to return to campaign mode: Meghalaya, Nagaland and Tripura hold elections in February-March 2018, followed shortly by Karnataka.   

In the northeast, the BJP-backed North Eastern Democratic Alliance (NEDA) has made significant inroads. The BJP runs governments in Arunachal Pradesh, Assam and Manipur. It would like to increase its footprint in sensitive border states. Modi will again be needed to give the electoral campaign a final push in early 2018. The six-month break from campaigning after April 2018 will be short-lived with Mizoram due for elections in November followed by Rajasthan, Madhya Pradesh and Chhattisgarh in December.  

Karnataka especially will need Modi’s time, energy and attention. Infighting among local BJP leaders has muddied the party’s chances of winning back the state from the Congress. The narrow victory in Gujarat will cast a long shadow over Karnataka. A turbocharged Rahul Gandhi will campaign as fiercely in the Congress’ lone southern bastion as he did in Gujarat. With the wind under his sails, Rahul knows the Congress cannot afford to lose Karnataka. If it does, it will be left with just Punjab and a smattering of northeastern states.  

For Modi, winning Karnataka is equally important. After the Gujarat setback, he needs to re-establish the BJP’s electoral muscularity. Besides, the BJP needs a southern beachhead.

Tamil Nadu is in an existential crisis. Kerala remains beyond bounds for the BJP. Telangana is firmly in TRS hands. Andhra Pradesh, under Chief Minister Chandrababu Naidu, remains the NDA’s sole presence in the south. Karnataka therefore, carries a value to the BJP well beyond its size. Modi knows that of the three large states that go to the polls in December 2018, Rajasthan could well be a lost case. Madhya Pradesh and Chhattisgarh are winnable but again will occupy a disproportionate amount of Modi’s time.  

And Governing
Meanwhile, four key areas will dominate Modi’s agenda for 2018 before campaigning for the 2019 Lok Sabha election overtakes him.  

The Economy 
Gross Domestic Product (GDP) growth has slumped to six per cent in the first half of 2017-18 and will end the year at between 6.50 per cent and 6.75 per cent. To ramp up growth to 7.50 per cent to eight per cent, the key driver is investment. Private sector spending is slated to revive once banks are recapitalised and restart lending to corporates for large infra projects. Consumption and job creation will follow as the economy rebounds. 

The next general election will be fought on the 2014 promise of development. Many of the government’s schemes like the Mudra Bank have quietly transformed lives. Nearly 75 per cent of these small loans given to several million entrepreneurs have been credited into new Jan Dhan Yojana bank accounts opened in the names of the women of the household. 

Technology has been a game changer in this effort. Digitisation is also helping farmers with weather forecasts and ensuring that subsidies aren’t siphoned off by middlemen. But all this progress will be negated if farmer distress on the ground is not addressed. Farmers are not receiving promised loan waivers on time. The bureaucracy in the states and at the centre remains heavy-handed and at times callous in the face of rural distress. In Gujarat, the rural vote went to the Congress. In states with a higher rural population ratio than relatively urbanised Gujarat, that could spell trouble for the BJP in 2019.  

Social Inclusiveness
Hindutva has been the leit motif of the BJP. But in an increasingly cosmopolitan India, there is a need to focus on an inclusive nationalism rather than an exclusively Hindu nationalism. Since virtually every Indian is genetically a Hindu, asserting Hindu nationalism is a non-sequitur.  

In a deeply religious country like India, Hindu nationalism is used to inveigle votes. Just as the Congress and the Left for decades used Muslims as vote banks, the BJP is invoking religion to appeal to Hindus for long silenced by what they perceived as an anti-Hindu Congress government. 

Rahul Gandhi’s temple-hopping spree in Gujarat underscored how the Congress too has woken up to the fact that appealing to 80 per cent of Indians makes more electoral sense than appeasing the other 20 per cent. 

The movement to build a Ram Temple in Ayodhya is likely to reach a climax in late 2018, irrespective of any Supreme Court order — if in fact the apex court delivers one before the next Lok Sabha election. Modi recognises the powerful impact of  the Ram Temple idea and there is little doubt that the BJP will exploit it to the hilt, especially with three big state elections in Rajasthan, Madhya Pradesh and Chhattisgarh preceding the general election. But the Prime Minister also knows that development trumps deity in everyday life. He will have to tread a fine line between the two as the poll-heavy year draws to a close. 

Good governance also demands the establishment of a Lokpal and a robust RTI. In 2018 that should be a priority for the Modi government. Accountability rests at the heart of good governance. Without a Lokpal and with an atrophied RTI, the government fails the first test of governance: openness. 

Right To Information activists like Sailesh Gandhi have now approached the Bombay High Court to compel the government to appoint information commissioners to reduce the backlog of RTI queries.

Two “great power” poles will dominate the world in this unfolding century. The first, led by the United States, will include Western Europe, India, the Middle East, Australasia, Japan, South Korea and large parts of east Asia.  

The second, led by China, will embrace parts of central Asia and Africa (where Chinese investments have given it salience) as well as the rogue states of Pakistan and North Korea. Russia will be a wild card. It has in recent years drawn closer to China which buys oil and gas for its expanding industries from sanction-strapped Moscow.

The United States in its latest National Security Strategy (NSS) statement (which by statute determines US global policy) has for the first time elevated India to the status of a “leading global power”. It has excoriated China and Russia and called Pakistan-abetted terrorism a threat to the world order. The US security statement establishes a new global doctrine: 

“A geopolitical competition between free and repressive visions of world order is taking place in the Indo-Pacific region. The region, which stretches from the west coast of India to the western shores of the United States, represents the most populous and economically dynamic part of the world. The US interest in a free and open Indo-Pacific extends back to the earliest days of our republic. Although the United States seeks to continue to cooperate with China, China is using economic inducements and penalties and implied military threats to persuade other states to heed its political and security agenda. We will expand our defense and security cooperation with India, a Major Defense Partner of the United States, and support India’s growing relationships throughout the region.

“The United States continues to face threats from transnational terrorists and militants operating from within Pakistan. We will deepen our strategic partnership with India and support its leadership role in Indian Ocean security and throughout the broader region. We will press Pakistan to intensify its counterterrorism efforts, since no partnership can survive a country’s support for militants and terrorists who target a partner’s own service members and officials.” 

As 2018 unfolds, India must be mindful that, while the India-US strategic partnership augers well, a nation’s strength rests on a growing economy, a robust foreign policy and good governance. The final year of Modi’s first tenure as Prime Minster will prove decisive. In this special issue, leading experts across domains analyse the agenda for India over the next twelve crucial months.   

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Nationalism, in national interest

The New Indian Express
Thursday, January 4, 2018

At a recent ideas conclave, I was asked to define “nationalism”. The word has been used (and misused) both by the Left and Right in today’s fraught political discourse to advance a specific ideology. But in its purest sense, as I told the audience, nationalism has nothing to do with ideology. It has everything to do with national interest.

One reason why the Congress, the Left and several other parties including the BJP have a poor understanding of nationalism is that they use European reference points. It is fashionable in the West and among India’s Westernised nouveau elite to say that patriots spread “love” and nationalists spread “hate”. But that is a Western postcolonial construct based on European nationalism that led to World War II. Indian nationalism is very different.

German nationalism in the 1930s, for example, sought to invade and conquer. Indian nationalism under Mahatma Gandhi in sharp contrast was non-violent and sought to free India from British colonial occupation which, like German ‘nationalism’, was invasive, violent and expansionary.

German and British nationalism of course were not nationalism at all but jingoism. Employing a deliberate sleight of hand, the Left attempts to discredit Indian nationalism today by conflating it with European “nationalism”.

In India, ideologues on the Right make a fatal error: they conflate nationalism with Hindu nationalism. It is not. In its truest form nationalism is inclusive. To protect the national interest means protecting every Indian’s national interest: Hindu, Muslim, Christian or Parsi; rich or poor; Brahmin or Dalit; Sunni or Shia; male, female or transgender. Nationalism seeks national advancement but not at the cost of other nations, races or creeds.

Real nationalism is fair, open and embraces diversity. It seeks to guard India from terror, promote the country’s economic interests by globalising the Indian economy and protect the rights of minorities by empowering them.

So why has nationalism attracted so much odium? Last week, at the Congress’ Foundation Day, party President Rahul Gandhi attacked the BJP for endangering the Indian Constitution. He was alluding to Union Minister Anantkumar Hegde’s comment (later retracted in Parliament) on changing the Constitution by removing the world “secular” which Indira Gandhi had inserted during the Emergency in 1976.

Rahul said India’s Constitution was “under threat” from the BJP. Irony is a strange affliction: it didn’t strike Rahul that the Constitution is a living document and that his own party, the Congress, has amended it over 60 times. The words “secularism” and “socialism” did not find their way into Dr Babasaheb Ambedkar’s 1950 Constitution. They appeared 26 years later for political reasons when the country was being subverted under a draconian Emergency imposed by Rahul’s grandmother, Indira. The Emergency threatened the Constitution far more severely than anything the BJP has done in its nine-and-a-half years in office under Prime Ministers Atal Bihari Vajpayee and Narendra Modi.

Rahul also said the Congress “stood for truth”. He should begin by acknowledging the truth about the “threat” the Congress posed to the Constitution not only during Emergency but also by its reckless use of Article 356 to impose President’s rule on inconvenient Opposition-ruled states at least 64 times since Independence, starting with Kerala in 1959.

Meanwhile a BJP MLA recently said, “Hindustan is for Hindus”. This is deplorable and symptomatic of extreme right-wing jingoism. They represent a fringe view that subverts real nationalism. The prime minister must condemn them swiftly and unequivocally. They damage the cause of Indian nationalism and do nothing to advance national interest. All Indians—Hindus, Muslims and Christians—are Hindustani civilisationally, geographically and genetically. The Right must understand this. Indian nationalism has only a national identity.

In its latest issue, The Economist devotes several pages to an essay on nationalism and what it means to different nations and peoples at different times in their history: “Thinkers like George Orwell and Elie Kedourie have argued that patriotism —tolerant, welcoming and reasonable—really has nothing to do with nationalism. It is a comforting thought; it separates decent people from the bigots who cling blindly to their own nation’s superiority.

But one person’s patriotism is another’s prejudice. In 1917 the Indian writer Rabindranath Tagore lamented how ‘the people which loves freedom (the British) perpetuates slavery in a large portion of the world with the comfortable feeling of pride in having done its duty.’ Genial English patriots were blind to the harm they caused.”

Colonial British “nationalism” was neither patriotic nor nationalistic. It was jingoistic. So was the fraudulent nationalism of Lenin, Stalin and Mao which India’s Left, even today, unthinkingly embraces.
 Like secularism, India’s definition of nationalism is shaped by history. During the freedom struggle, Gandhiji’s nationalism was noble. Today, Indian nationalism has fallen victim to chicanery. In order to rescue it from the morass of the subverted definitions it has attracted, focus on three non-negotiables. One, nationalism is open and welcomes diversity. Two, it is non-aggressive and non-expansionary unlike European nationalism. And three, it protects India’s national interest.

Rahul would do well, as he prepares for a rigorous election season that lies ahead, to expand his reading of Tagore. This great Indian nationalist saw nationalism as the embodiment of the idea of India: plural, democratic and tolerant. That is what every true Indian nationalist should stand for.

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Cross-currents of loyalties

Thursday, January 4, 2018

India’s Middle-East policy has long been hostage to three vulnerabilities. First, India imports most of its crude oil from West Asia. Second, over seven million Indians work in the Middle East. Third, India has a large Muslim population.

New Delhi’s foreign policy mandarins have, therefore, turned a blind eye whenever the Organisation of Islamic Cooperation (OIC) passes resolutions criticising India and supporting Pakistan over Jammu & Kashmir.

India has for decades swallowed its pride, voting with the Arab bloc against Israel at the UN even as the Arab bloc votes for Pakistan over Kashmir. India’s growing relationship with Israel though has introduced a new factor in this nuanced game of balancing domestic political interests with India’s expanding geopolitical role.

This was reflected in the strong demarche the external affairs ministry sent last Saturday to the Palestinian Authority (PA) over the Palestinian ambassador to Pakistan, Walid Abu Ali, sharing a stage with the globally designated terrorist Hafiz Saeed at a major Rawalpindi rally. Within 24 hours, the PA acted. The Palestinian ambassador to India, Adnan Abu Alhaijaa, confirmed to a leading Indian daily: “Our ambassador in Pakistan has committed a fault, knowingly or otherwise. He is being recalled to Ramallah. He will no longer be Palestine ambassador to Pakistan. Relations with India are very important for us.”   

And yet the incident bares the fault lines in India’s Arab-Israel policy. India recently voted in favour of a UN resolution condemning US President Donald Trump’s decision to recognise Jerusalem as Israel’s capital. This drew a sharp protest from Israel which over the years has emerged as India’s major defence partner. Prime Minister Narendra Modi last July became the first Indian prime minister to visit Israel. Israel’s Prime Minister Benjamin Netanyahu will pay a return four-day visit to India from January 16.

Despite all this, the principal actors in the frisson over Middle East politics are themselves under significant political pressure. Netanyahu faces corruption charges that could see him losing power. An Israeli court has deferred its verdict against him till the end of January 2018. Trump faces a tough 2018 with the possibility of impeachment over alleged Russian collusion during the US presidential election. Modi confronts a challenging raft of eight assembly elections in 2018 which could stall his political momentum in the run-up to the 2019 Lok Sabha poll.

In Saudi Arabia, 32-year-old crown prince Mohammad bin-Salman, heir to the throne, has upended Saudi society with gender reforms but also disgraced himself with his war on Yemen. The blockade of food and medical aid to Yemen’s starving millions has robbed MBS, as the prince likes to be called, of his reformist credentials. The other key player in the Middle East, Iran, is being wracked by violent citizens’ protests across major cities against Tehran’s hardline government.

In this cauldron, India has a nuanced but robust role to play. A month after Netanyahu’s visit, Modi flies to Palestine. The visit will be largely symbolic. Cynics will accuse India of once again balancing Palestinian and Israeli interests. But Trump’s declaration over Jerusalem has virtually killed the “two-state” solution. Backed by members of the European Union (EU) and most other countries, the solution envisaged Israel and a sovereign Palestinian state existing side by side, with east Jerusalem being the capital of the future Palestine state. With Trump’s move that solution lies in tatters.

Saudi Arabia has played a deceitful hand in this. In secret talks with Palestinian Authority (PA) chief Mahmoud Abbas, crown prince Mohammad bin-Salman told him bluntly to accept a truncated Palestinian state without east Jerusalem. This has been rejected by the PA which though has neither the military power nor diplomatic clout to do anything about the Saudi betrayal. Against this backdrop, the Palestinians can ill afford to alienate a longtime friend like India. Hence the marching orders to its ambassador in Pakistan for sharing a stage with Hafiz Saeed.

Will this change the way the Arabs vote on a future India-Pakistan resolution in the OIC over Jammu & Kashmir? No. In the Middle East, Islamic blood runs thicker than water. For the present, Modi will focus on welcoming Netanyahu to India (Ahmedabad is his first stop) followed by the symbolic visit to Palestine. A more tactical move would be for India to leverage the intensifying rivalry between Iran and Saudi Arabia. Iran has been annoyed with Pakistan over skirmishes between Islamabad-funded terrorists and Iranian border guards even as it seeks Pakistani involvement in its India-aided Chabahar port. The Saudis too are upset with Pakistan for refusing to send troops for its Islamic coalition military force waging an unsuccessful war against Yemen. Islamabad pacified Riyadh by allowing former army chief Raheel Sharif to head the Saudi-led coalition which has been humiliated by the Iran-backed Houthi rebels in Yemen.

For India, it is time to refashion its Middle East policy in a region where equations are fluid and alliances based on expediency. Modi’s engagement with Israel and Palestine over the next few weeks could be the trigger to shed New Delhi’s kid gloves approach in a geography that best understands the grammar of power.

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Modi government is in office, but not in power
The Congress has plenty of experience in exercising power. The BJP has relatively little.
Saturday, January 6, 2018

The BJP-led NDA governs 19 of India’s 29 states. You’d think 2018, with eight Assembly elections slated to be held this year, would build on that total. 

You’d be wrong.

The BJP could win one of the four northeastern states on offer (Meghalaya, Mizoram, Nagaland and Tripura) but could well lose at least one of the three big states (Rajasthan, Madhya Pradesh and Chhattisgarh) going to the polls later this year. Karnataka, in April 2018, is a toss-up.

But the real worry for the BJP is 2019. In 2014, along with its NDA allies, it won 191 out of 208 Lok Sabha seats in five key states – Uttar Pradesh, Rajasthan, Gujarat, Madhya Pradesh and Maharashtra. That tally will not be repeated.

The problem is the BJP’s wobbly economic, foreign and social policies as it enters the last year of its term. The government is in office, but not in power.

In contrast, the Congress-led UPA Opposition often seems to be out of office but in power. Its former lawyer-ministers strut around as if they were in government. In parliament, the Congress with just 45 MPs sets the agenda for debates. BJP MPs (with few exceptions like MJ Akbar, Smriti Irani and Arun Jaitley) seem defensive, even apologetic.

The Congress, the progenitor of serial scams, hasn’t been able to pin a single scam on the NDA government. It doesn’t need to. The government gives the impression of being under pressure all the time – from the Opposition, the media, NGOs, and activists. The media, whose role by definition must obviously be adversarial to the government in power, is packed with Left leaning ideologues who loathe the BJP.

The Modi government has done some excellent things in its tenure. It has, among other achievements, legislated an insolvency and bankruptcy bill, massively expanded financial inclusion, electrified large swathes of villages that had had never seen electricity before, empowered small entrepreneurs through Mudra Bank, begun recapitalising PSU banks, scrapped hundreds of colonial-era laws and launched dozens of schemes ranging from Make in India to Swachh India. Some have worked. Others haven’t. Many are works in progress. Outcomes are awaited.

So why does the Modi government seem more vulnerable than it is? To be effective, power has to be projected. The Congress has plenty of experience in doing this. The BJP has relatively little.

For the first time in 500 years, India is being governed by Bharat rather than India. Bharat isn’t used to exercising power. For centuries it has obeyed while others ruled. The Mughals were feudal. The British were feudal. The Congress is feudal. The BJP has its faults but feudal it isn’t.

The Mughals ruled India through an elaborate system of elite Indian durbaris. The British upgraded the system, making educated Indians their subaltern administrators and the poor their sepoys. The structure though remained much the same as in the time of the Mughals: the narrow top of the pyramid comprising the British elite and its Indian retainers lorded over a broad base of the deprived, the poor and the dispossessed.

The Congress after Independence borrowed Britain’s clothes. It didn’t change colonial-era laws designed to keep Indians under British subjugation. It didn’t reform the ICS except to change one alphabet letter in it. The IAS ruled; it did not serve. The Congress didn’t democratise the party; instead, it feudalised it further under one family. India was for decades a democracy run by a feudal-minded, undemocratic party.

Subjugated for 500 years by the Mughals and the British, the Congress found it easy to be feudal, elitist and undemocratic. Indians were used to being subjugated. It allowed Congressmen to believe, as the British and Mughals had believed before them, that they were born to rule. The advent of “janata” politics finally challenged this zamindari attitude. The first experiment under Morarji Desai, following Indira Gandhi’s subversive Emergency, failed. The six Vajpayee years two decades later were relatively anodyne. Vajpayee was cut in a Nehruvian mould and loath to upset the old order.

That would happen only in 2014 with the arrival of Narendra Modi. He didn’t have Vajpayee’s Lakhnawi tehzeeb or Morarji Desai’s moneyed Mumbai background. He was truly different. The poor, finally, had their man.

Their masters though weren’t happy. Chaiwala, neech and other epithets showed their contempt for this usurper, the interloper who had dared to challenge their power. He must not be allowed to succeed. India was used to being ruled by people who spoke nice English, had good table manners and arrogated to themselves the permanent right to govern.

The corrupt bureaucracy, the gnarled Lutyens media, and India-hating NGOs were quickly co-opted. Discrediting Modi and eroding his credibility were put into operation as soon as the shock of the 2014 defeat had faded.

Modi has meanwhile fallen into a trap of his own making. He has not promoted technocratic talent into his cabinet. He has relied on bureaucrats who behind his back have subverted much of his agenda.

In permanent campaigning mode, Modi has outsourced governance to these bureaucrats who can’t wait for the return of the Congress which happily abets their graft. The tax department, ED, DRI and CBI, instead of taking UPA-era corruption cases to their logical conclusion, engage in petty harassment of honest taxpayers.

Conflict of interest abounds everywhere. Mukul Rohatgi, for example, should never been appointed Attorney-General. He represented some of the 2G accused. Such cavalier disregard for propriety has given the Opposition legitmate grounds to attack the Modi government across several fronts.

New Delhi’s Pakistan policy, for example, has been incoherent. Even as NSA Ajit Doval met his Pakistan counterpart Lt General Nasser Khan Janjua under the radar in Bangkok in late December 2017, Pakistan terrorists were killing Indian soldiers. This hot-and-cold approach to Pakistan has failed as mounting Indian casualties along the LoC attest.

US President Donald Trump through his tweet on January 1, 2018, virtually declared Pakistan a state sponsor of terrorism. India, the victim of Pakistani terrorism, however, continues to grant it most favoured nation (MFN) status, allows the Indus Waters Treaty (IWT) to go ahead unchecked even where IWT rules permit restrictions on water flow to Pakistan, and refuses to allow the tabling of a parliamentary resolution to declare Pakistan a state sponsor of terrorism while asking other countries to do so.

India used nuanced toughness to deal successfully with China over Doklam. Dealing with Pakistan requires an entirely different strategy based on imposing an unaffordable cost on the Pakistan army for abetting terrorism.

The armed forces, neglected for a decade by the last UPA government, have been slow to receive modern equipment even under the NDA. The bureaucracy in the ministries of defence and finance has not been tamed.

When Modi took office in May 2014, almost the first thing he did was summon over 70 key bureaucrats for a pep talk. The bureaucrats were initially worried: their kingdom was under threat by a prime minister who seemed to mean business. They are breathing much easier today. They were wrong.

In 2014, the question was: will Modi change the system or will the system change Modi?

The prime minister has just over a year to provide an answer to that question.

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US won't be able to rein in Pakistan over terror, India will have to take action
New Delhi must withdraw the most favoured nation title from Islamabad and fast-track hydroelectric power projects in J&K.

Thursday, January 11, 2018

Will the United States finally bring Pakistan to heel over its malevolent long-time abetment of terrorism? Not if it makes the same mistakes the former administrations of presidents Barack Obama and George W Bush made.

Pakistan will not be seriously hurt by the US withholding $2 billion (Rs 12,700 crore) in coalition fund support (CFS). Pakistan's defence budget is just under $10 billion (Rs 63,600 crore), so the suspension of US funds will pinch but not enough to change its policy of using terrorism as state policy against India and Afghanistan.

Terror funding
What will hurt Rawalpindi is the US blocking supply of military equipment, spare parts and weapons technology announced last week by the State Department.

Though Pakistan has diversified its weapons purchases from Russia and China in recent years, US military weaponry still forms the sharp edge of Pakistan's army and air force. Denial of key spare parts for its US-made fighter jets, for example, could ground them.

None of these measures, however, will stop Pakistan from sheltering, arming and funding terror groups it deploys against Afghanistan and India. What more should the US do? Unlike the Obama and Bush administrations that let Pakistan run with the Taliban hares and hunt with the American hounds, President Donald Trump's administration is made up of hardened army generals who've commanded war theatres in the Middle East. Defence secretary general James ("Mad Dog") Mattis has warned Pakistan's silver-tongued generals that their time is up.

The first step was suspending the balance of coalition funding of $255 million (Rs 1,600 crore). The second followed days later: suspending $900 million (Rs 5,700 crore) in funding budgeted for 2017. It was announced the same day that the US was suspending all security assistance to Pakistan. That included military equipment, spare parts and technology transfer.

These steps so far amount to over $2 billion (Rs 12,700 crore) in suspended military aid to Pakistan - nearly 20 per cent of Pakistan's 2017-18 defence budget. The mood in Rawalpindi has rapidly darkened. But even tougher measures could be in the offing. First, withdrawal of non-NATO ally status to Pakistan. That would be a serious blow, depriving Islamabad of the latest military technology and weaponry. Second, blocking financial aid to Pakistan in the International Monetary Fund (IMF) and World Bank (WB). Islamabad plans to seek bridge funding this year from the IMF to bolster its economy. The US, as the largest contributor to the IMF, can block the funding.

Third, and most worrying for Rawalpindi, is the prospect of travel and financial sanctions against top Pakistani military and ISI officers including two- and three-star generals. Freezing their foreign bank accounts and other financial assets could follow. The Financial Action Task Force (FATF), an international terror financing watchdog, is scheduled to visit Pakistan in late January 2018 to inspect money laundering by terror groups sponsored by Pakistan. An adverse report from the FATF could lead to wide-ranging UN sanctions against Pakistan.

Safe havens
Fourth, the US has made it clear that if Pakistan doesn't close down terror safe havens on its soil from where attacks on Afghanistan and India are launched, it will do so itself. So far US drones have attacked terror positions only along the AfPak border. That could now extend to terror safe havens on Pakistani soil, bringing the US and NATO into direct confrontation with the Pakistani army.

Rawalpindi, though worried by all of this, feigns nonchalance. It cities have three bargaining chips. One, leverage over US/NATO supply routes to landlocked Afghanistan which go through Pakistan and can be shut down. Two, a Chinese (and Russian) veto in the UN on any wide-ranging global financial sanctions against Pakistan.

Three, Chinese largesse replacing US funds. All three bargaining chips are flawed. Supply routes into Afghanistan from the north through central Asia, while cumbersome, can replace Pakistan's supply routes.

Washington has already prepared a "risk mitigation" plan to access Afghanistan through alternative supply routes. As one source in the Pentagon said, "The US favours supply routes through Pakistan because of cost, but has built flexibility into its Afghan supply lines to avoid over-reliance on any single option."

Financial sanctions
A Chinese/Russian UN veto won't block unilateral travel and financial sanctions on Pakistan by the US. Pakistan's third bargaining chip, China's largesse, is over-rated: Beijing's investment in infrastructure comes at high commercial interest rates, not in hard cash like free US military aid.

Meanwhile senator Rand Paul, upping the ante against Pakistan, declared: "I'm introducing a bill to end aid to Pakistan in the coming days. My bill will take the money that would have gone to Pakistan and put it in an infrastructure fund to build roads and bridges here at home."

As America turns the screws on Pakistan, India must execute its own raft of measures. It must revoke Pakistan's most favoured nation (MFN) status, citing lack of reciprocity. Under WTO rules, this is legitimate. It must fast-track hydroelectric power projects in Jammu & Kashmir in order to use India's full water allocation under the Indus Waters Treaty (IWT) which, inexplicably, it has not done for decades. It must also end the ludicrous daily border retreat ceremony at Wagah that gives Pakistan an opportunity to gain opportunistic equivalence, however superficial and fleeting, with India.

Finally, the Indian government must allow the tabling of a private member's bill declaring Pakistan a state sponsor of terrorism. New Delhi wants Washington to do so in the US Senate. India must do it at home first.

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For A Second Term Please Do The Right Things, Mr Prime Minister!
This year will be crucial for the Narendra Modi government. His strategy must take into account the complex electoral math that will confront him in April-May 2019 and at the same time focus on a strong economic and governance agenda in the final year of his tenure.

Swarajya Magazine
Friday, January 12, 2018

The 2019 Lok Sabha election will set India’s political and economic agenda for the next decade. If the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government is returned to office, it can execute many of the reforms it has begun. If the Congress, buoyed by its resurgence in the Gujarat assembly election, manages to stitch together a coalition government, India could be in for a spell of political instability.

Prime Minister Narendra Modi’s strategy going forward must take into account the complex electoral math that will confront him in April-May 2019 and at the same time focus on a strong economic and governance agenda in the final year of his tenure.

A winning economic and political strategy for 2019 can be broken up into specific silos. Start with the electoral arithmetic. The BJP powered its way to 282 Lok Sabha seats in 2014 — the first clean parliamentary majority since Rajiv Gandhi’s 400-plus seats in 1984 — on the back of a strong Modi wave. Public anger against 10 years of the scam-tainted United Progressive Alliance government buoyed the wave.

But beyond Modi’s oratory lies cold, clinical calculation. To win a majority in the Lok Sabha in 2019, Modi knows he needs to again sweep the north and west and also make inroads into the south and east. It is a triumph of the Modi-Amit Shah strategy that, in less than four years, the BJP has replaced the Congress as the natural party of governance. The northeast citadel has been breached. So has Jammu and Kashmir. Only West Bengal and Kerala remain unconquered.

But 2019 won’t be a cakewalk. The BJP on its own won 171 of its 282 Lok Sabha seats in 2014 from just five states: Uttar Pradesh (71/80), Gujarat (26/26), Rajasthan (25/25), Madhya Pradesh (26/29) and Maharashtra (23/48). Obviously, the clean sweep in Gujarat and Rajasthan, the juggernaut in Uttar Pradesh and Madhya Pradesh and the big numbers in Maharashtra will not be repeated. Lightning doesn’t strike twice.

Allies are another problem. The Shiv Sena could pose problems in Maharashtra. The Telugu Desam Party (TDP) has lost ground in Andhra Pradesh. The Janata Dal United (JDU) though will help the NDA carry Bihar, while canny partnerships under the North East Democratic Alliance (NEDA) will reap a rich harvest.

The first part of Modi’s 2019 political strategy must therefore be to focus on the five critical states that gave the BJP 171 Lok Sabha seats in 2014. He will need to factor an erosion in these five states of around 30 seats from Rajasthan (where Sachin Pilot’s Other Backward Classses outreach has Chief Minister Vasundhara Raje deeply worried), Gujarat (with caste schisms likely to widen), Uttar Pradesh (where an Samajwadi Party-Congress-Bahujan Samaj Party grand coalition could cause cleavages), Maharashtra (poisoned by the Shiv Sena’s lumpen politics) and Madhya Pradesh (where Jyotiraditya Scindia’s campaign could hurt Chief Minister Shivraj Singh Chouhan who faces strong anti-incumbency).

To lose 30 seats in these five big states can be partially compensated with gains in the Northeast, Bihar, Odisha and the south. But to hit 272-plus again will be a challenge. Beyond the numbers lies Modi’s second key political strategy: governance. Accountability is the key to good governance. Here the NDA government’s record has been disappointing. It hasn’t put a Lokpal in place. Police reforms mandated by the Supreme Court of India in 2006 have not yet been implemented either in letter or spirit. In the few states where the seven-point Supreme Court directive has been honoured, it has been diluted so much that professionalising and modernising the police force remains one of India’s more intractable problems.

Worryingly, the Right To Information (RTI) Act, a sharp tool to hold politicians, bureaucrats and other public servants accountable, has been step-mothered. Pending RTI cases are now in the lakhs. In Maharashtra alone, 40,000 RTI requests remain unanswered. Vacancies for information commissioners have not been filled, making the RTI almost dysfunctional.

Modi pledged minimum government and maximum governance when he took office. Without a Lokpal, police reforms and an active RTI ecosystem, that pledge will remain unfullfilled. While the Prime Minister and BJP president Amit Shah fine-tune the electoral math for 2019, good governance must top their priorities. It’s useful to remember that apart from serial scams, a key reason for the Congress to plummet from 206 Lok Sabha seats in 2009 to 44 in 2014 was public anger, fuelled by the now largely forgotten Anna Hazare movement, at the arrogance and lack of accountability in the UPA government. It is a lesson the BJP-led NDA must not lose sight of in the run-up to 2019.

The third political strategy Modi should focus on is social inclusiveness. The Prime Minister has to balance his core base that is unabashedly majoritarian, with the promise of vikas. Development is Modi’s calling card. But without societal cohesion, development will remain underwhelming. While the more vocal members of the BJP have engaged in majoritarian politics that appeals to Modi’s core base, he himself has steered clear of divisive politics. He has allowed the symbolism of appointing a monk as chief minister of Uttar Pradesh to send its own message to the faithful while remaining true to his pre-election pledge of development.

An important element of crafting a winning political strategy is foreign policy. Modi’s approach to Pakistan has evolved significantly from his outreach to then prime minister Nawaz Sharif at his May 2014 inauguration. Pakistan’s terror perfidy has been met with a surgical strike across the Line of Control, robust counter-terrorism in Jammu and Kashmir, and underscoring the principle he declared in a pre-election TV interview: terror and talks can’t go together.

Modi’s successful strategy over the Doklam standoff with China and the emerging quadrilateral with the United States, Japan and Australia have burnished India’s international credentials. Along with India’s win over Britain in nominating an Indian judge, Dalveer Bhandari, to the International Court of Justice (ICJ) at The Hague, Modi can now weave the emergence of India as a geostrategic power into his overall political campaign for 2019.

As I wrote in my book The New Clash Of Civilisations: How the Contest Between America, China, India and Islam Will Shape Our Century, India must punch at its true geopolitical weight: “To play a role in world affairs in line with its size, population and economy, India needs to think and act like a major power. It must fix governance at home, build a strategic foreign policy and leverage its demographic and economic assets. In the emerging world order, the India-US partnership will be as pivotal as the Anglo-US axis was for most of the twentieth century.”

Economic Policy
Two radical reforms — demonetisation and the goods and services tax (GST) — have disrupted India’s economy. A putative gross domestic product (GDP) growth rate of 8 per cent, well within reach in 2017, has declined to an estimated 6.75 per cent for fiscal 2017-18. Both disruptive reforms could have been executed more thoughtfully. GST is now back on track. By bringing the vast hinterland of the informal economy into the tax net, revenues in the long term will rise rapidly. While GST will boost the numbers of small corporate and trade taxpayers, demonetisation will suck in individuals to elevate India’s tax-to-GDP ratio well above the current 10 per cent. A collateral benefit of both demonetisation and GST is digitisation. While the spike in digital transactions shortly after demonetisation has slowed, digital payments are higher today than a year ago and rising. To build on the incipient recovery in the economy after the twin disruptions of 2016-17, Modi must now focus on three key economic issues.

First, reform the tax system from the bottom up in the next Budget, scheduled for 1 February. Corporate tax must come down to 25 per cent as promised in an earlier Budget. This will spur private sector investment which has slowed to a trickle. The Direct Tax Code, long promised, needs to be fast-tracked. Nearly 99 per cent of tax revenue comes from taxpayers in the taxable slab above Rs 5 lakh. The zero-tax exemption limit should therefore be raised to Rs 5 lakh, saving manhours of work and resources for the Income Tax Department. Following demonetisation, several lakh suspicious transactions and accounts have come to light. It is important to bring these into the tax net. But the Finance Minister must resist a return to the raid raj. Tax reform and tax terrorism, like oil and water, don’t mix.

Second, reduce the grip of the bureaucracy. This is particularly damaging in the Ministry of Defence (MoD) and the Ministry of Finance (MoF). Introduce technocrats in lateral positions. The MoD must have a senior armed forces officer on deputation to provide domain knowledge on modern weapons purchases that today are in the hands of IAS generalists newly seconded from, for example, the Ministry of Tourism.

Talented individuals from the private sector like Sanjeev Sanyal (the government’s principal economic adviser), Bibek Debroy (chairman of the PM’s Economic Advisory Board) and Rajiv Kumar (vice-chairman of NITI Aayog) have brought fresh ideas into governance. Their tribe must multiply in government. As in the United States, technocrats must occupy key positions in administration as well as the Union Cabinet. India’s defence preparedness has suffered significantly because of delayed and often rogue decision-making in the MoD on key weapon systems. This is an important area that the Prime Minister’s handpicked Defence Minister Nirmala Sitharaman must urgently address.

Third, focus on exports. Indian exports have sagged to 2014 levels. Few countries in the world have achieved high levels of GDP growth without double-digit export growth. China’s 10-11 per cent GDP growth in the 2001-14 period was buoyed by surging exports. India has a unique demographic advantage — the world’s youngest workforce. But that demographic window will shut within 20 years as it already has in ageing China. It is vital therefore to enhance the productivity of India’s young workers with a combination of vocational training and professional courses.

Modi was quick to recognise this, hence the focus on Skill India, a scheme that has made slow progress. Like several other schemes launched over the past three-and-a-half years, outcomes have not matched ambition. Yet, financial inclusion through Jan Dhan Yojana, the Mudra Bank’s small loan initiative and key reforms on the bankruptcy code and biometric delivery of subsidies to the poor through Aadhaar have all been standout achievements.

Economic reforms though have so far been incremental rather than radical, apart from demonetisation and GST. It is time to focus on taking the investment and savings rates, which have slipped to below 30 per cent, back to the level of 35-37 per cent. The economy escaped a deflationary environment, but to regain high growth, consumption through household savings is the key. That also underscores the principal concern of the Prime Minister: jobs. Unless jobs are created at a faster pace, consumption will remain patchy, endangering the economic revival in 2018 that is vital to Modi’s 2019 Lok Sabha campaign.

Manufacturing has recently shown an uptick, following a year-long depression. Services too are beginning to scale up after the IT software sector lost momentum in an increasingly protectionist world. Foreign direct investment (FDI) though is strong and the start-up ecosystem is maturing rapidly. In 2018, India will overtake Britain to possess the second largest start-up universe of entrepreneurs and investors after the United States.

The rise in India’s ranking in the World Bank’s Ease of Doing Business (EDB) by 30 places to 100 and Moody’s sovereign rating upgrade to BAA2 come with caveats. The World Bank’s methodology is confined to Mumbai and Delhi and thus understates the problems entrepreneurs still face in setting up a business — or indeed in closing it down. The old licence raj may have been consigned to history, but it has been replaced by canny bureaucrats with a slew of new clearances — environmental, land use, power connections and municipal laws. It is these irritants that have kept India at a lowly 100th position in the EDB ranking, behind countries like Kenya (80th) and Indonesia (72nd). Modi has managed macro reforms but is being let down at the micro level by gatekeepers intent on keeping their discretionary powers — and side income — intact. It is a systemic problem and Modi needs to attack it at its root and branch.

The year 2018 is going to be critical for Modi. On the one hand, the BJP faces strong anti-incumbency in three states that go to the polls in December 2018 — Rajasthan, Madhya Pradesh and Chhattisgarh. All three, and especially Rajasthan, are vulnerable. Modi’s campaigning skills will be needed to retain them. Four northeastern states — Mizoram, Meghalaya, Nagaland and Tripura – will also hold elections in 2018. Modi and Shah’s North East India strategy will be fully put to test.

This year will be crucial for the Narendra Modi government. His strategy must take into account the complex electoral math that will confront him in April-May 2019 and at the same time focus on a strong economic and governance agenda in the final year of his tenure.

The 2019 Lok Sabha election will set India’s political and economic agenda for the next decade. If the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government is returned to office, it can execute many of the reforms it has begun. If the Congress, buoyed by its resurgence in the Gujarat assembly election, manages to stitch together a coalition government, India could be in for a spell of political instability.

Prime Minister Narendra Modi’s strategy going forward must take into account the complex electoral math that will confront him in April-May 2019 and at the same time focus on a strong economic and governance agenda in the final year of his tenure.

A winning economic and political strategy for 2019 can be broken up into specific silos. Start with the electoral arithmetic. The BJP powered its way to 282 Lok Sabha seats in 2014 — the first clean parliamentary majority since Rajiv Gandhi’s 400-plus seats in 1984 — on the back of a strong Modi wave. Public anger against 10 years of the scam-tainted United Progressive Alliance government buoyed the wave.

But beyond Modi’s oratory lies cold, clinical calculation. To win a majority in the Lok Sabha in 2019, Modi knows he needs to again sweep the north and west and also make inroads into the south and east. It is a triumph of the Modi-Amit Shah strategy that, in less than four years, the BJP has replaced the Congress as the natural party of governance. The northeast citadel has been breached. So has Jammu and Kashmir. Only West Bengal and Kerala remain unconquered.

But 2019 won’t be a cakewalk. The BJP on its own won 171 of its 282 Lok Sabha seats in 2014 from just five states: Uttar Pradesh (71/80), Gujarat (26/26), Rajasthan (25/25), Madhya Pradesh (26/29) and Maharashtra (23/48). Obviously, the clean sweep in Gujarat and Rajasthan, the juggernaut in Uttar Pradesh and Madhya Pradesh and the big numbers in Maharashtra will not be repeated. Lightning doesn’t strike twice.

Allies are another problem. The Shiv Sena could pose problems in Maharashtra. The Telugu Desam Party (TDP) has lost ground in Andhra Pradesh. The Janata Dal United (JDU) though will help the NDA carry Bihar, while canny partnerships under the North East Democratic Alliance (NEDA) will reap a rich harvest.

The first part of Modi’s 2019 political strategy must therefore be to focus on the five critical states that gave the BJP 171 Lok Sabha seats in 2014. He will need to factor an erosion in these five states of around 30 seats from Rajasthan (where Sachin Pilot’s Other Backward Classses outreach has Chief Minister Vasundhara Raje deeply worried), Gujarat (with caste schisms likely to widen), Uttar Pradesh (where an Samajwadi Party-Congress-Bahujan Samaj Party grand coalition could cause cleavages), Maharashtra (poisoned by the Shiv Sena’s lumpen politics) and Madhya Pradesh (where Jyotiraditya Scindia’s campaign could hurt Chief Minister Shivraj Singh Chouhan who faces strong anti-incumbency).

To lose 30 seats in these five big states can be partially compensated with gains in the Northeast, Bihar, Odisha and the south. But to hit 272-plus again will be a challenge. Beyond the numbers lies Modi’s second key political strategy: governance. Accountability is the key to good governance. Here the NDA government’s record has been disappointing. It hasn’t put a Lokpal in place. Police reforms mandated by the Supreme Court of India in 2006 have not yet been implemented either in letter or spirit. In the few states where the seven-point Supreme Court directive has been honoured, it has been diluted so much that professionalising and modernising the police force remains one of India’s more intractable problems.

Worryingly, the Right To Information (RTI) Act, a sharp tool to hold politicians, bureaucrats and other public servants accountable, has been step-mothered. Pending RTI cases are now in the lakhs. In Maharashtra alone, 40,000 RTI requests remain unanswered. Vacancies for information commissioners have not been filled, making the RTI almost dysfunctional.

Modi pledged minimum government and maximum governance when he took office. Without a Lokpal, police reforms and an active RTI ecosystem, that pledge will remain unfullfilled. While the Prime Minister and BJP president Amit Shah fine-tune the electoral math for 2019, good governance must top their priorities. It’s useful to remember that apart from serial scams, a key reason for the Congress to plummet from 206 Lok Sabha seats in 2009 to 44 in 2014 was public anger, fuelled by the now largely forgotten Anna Hazare movement, at the arrogance and lack of accountability in the UPA government. It is a lesson the BJP-led NDA must not lose sight of in the run-up to 2019.

The third political strategy Modi should focus on is social inclusiveness. The Prime Minister has to balance his core base that is unabashedly majoritarian, with the promise of vikas. Development is Modi’s calling card. But without societal cohesion, development will remain underwhelming. While the more vocal members of the BJP have engaged in majoritarian politics that appeals to Modi’s core base, he himself has steered clear of divisive politics. He has allowed the symbolism of appointing a monk as chief minister of Uttar Pradesh to send its own message to the faithful while remaining true to his pre-election pledge of development.

An important element of crafting a winning political strategy is foreign policy. Modi’s approach to Pakistan has evolved significantly from his outreach to then prime minister Nawaz Sharif at his May 2014 inauguration. Pakistan’s terror perfidy has been met with a surgical strike across the Line of Control, robust counter-terrorism in Jammu and Kashmir, and underscoring the principle he declared in a pre-election TV interview: terror and talks can’t go together.

Modi’s successful strategy over the Doklam standoff with China and the emerging quadrilateral with the United States, Japan and Australia have burnished India’s international credentials. Along with India’s win over Britain in nominating an Indian judge, Dalveer Bhandari, to the International Court of Justice (ICJ) at The Hague, Modi can now weave the emergence of India as a geostrategic power into his overall political campaign for 2019.

As I wrote in my book The New Clash Of Civilisations: How the Contest Between America, China, India and Islam Will Shape Our Century, India must punch at its true geopolitical weight: “To play a role in world affairs in line with its size, population and economy, India needs to think and act like a major power. It must fix governance at home, build a strategic foreign policy and leverage its demographic and economic assets. In the emerging world order, the India-US partnership will be as pivotal as the Anglo-US axis was for most of the twentieth century.”

Economic Policy
Two radical reforms — demonetisation and the goods and services tax (GST) — have disrupted India’s economy. A putative gross domestic product (GDP) growth rate of 8 per cent, well within reach in 2017, has declined to an estimated 6.75 per cent for fiscal 2017-18. Both disruptive reforms could have been executed more thoughtfully. GST is now back on track. By bringing the vast hinterland of the informal economy into the tax net, revenues in the long term will rise rapidly. While GST will boost the numbers of small corporate and trade taxpayers, demonetisation will suck in individuals to elevate India’s tax-to-GDP ratio well above the current 10 per cent. A collateral benefit of both demonetisation and GST is digitisation. While the spike in digital transactions shortly after demonetisation has slowed, digital payments are higher today than a year ago and rising. To build on the incipient recovery in the economy after the twin disruptions of 2016-17, Modi must now focus on three key economic issues.

First, reform the tax system from the bottom up in the next Budget, scheduled for 1 February. Corporate tax must come down to 25 per cent as promised in an earlier Budget. This will spur private sector investment which has slowed to a trickle. The Direct Tax Code, long promised, needs to be fast-tracked. Nearly 99 per cent of tax revenue comes from taxpayers in the taxable slab above Rs 5 lakh. The zero-tax exemption limit should therefore be raised to Rs 5 lakh, saving manhours of work and resources for the Income Tax Department. Following demonetisation, several lakh suspicious transactions and accounts have come to light. It is important to bring these into the tax net. But the Finance Minister must resist a return to the raid raj. Tax reform and tax terrorism, like oil and water, don’t mix.

Second, reduce the grip of the bureaucracy. This is particularly damaging in the Ministry of Defence (MoD) and the Ministry of Finance (MoF). Introduce technocrats in lateral positions. The MoD must have a senior armed forces officer on deputation to provide domain knowledge on modern weapons purchases that today are in the hands of IAS generalists newly seconded from, for example, the Ministry of Tourism.

Talented individuals from the private sector like Sanjeev Sanyal (the government’s principal economic adviser), Bibek Debroy (chairman of the PM’s Economic Advisory Board) and Rajiv Kumar (vice-chairman of NITI Aayog) have brought fresh ideas into governance. Their tribe must multiply in government. As in the United States, technocrats must occupy key positions in administration as well as the Union Cabinet. India’s defence preparedness has suffered significantly because of delayed and often rogue decision-making in the MoD on key weapon systems. This is an important area that the Prime Minister’s handpicked Defence Minister Nirmala Sitharaman must urgently address.

Third, focus on exports. Indian exports have sagged to 2014 levels. Few countries in the world have achieved high levels of GDP growth without double-digit export growth. China’s 10-11 per cent GDP growth in the 2001-14 period was buoyed by surging exports. India has a unique demographic advantage — the world’s youngest workforce. But that demographic window will shut within 20 years as it already has in ageing China. It is vital therefore to enhance the productivity of India’s young workers with a combination of vocational training and professional courses.

Modi was quick to recognise this, hence the focus on Skill India, a scheme that has made slow progress. Like several other schemes launched over the past three-and-a-half years, outcomes have not matched ambition. Yet, financial inclusion through Jan Dhan Yojana, the Mudra Bank’s small loan initiative and key reforms on the bankruptcy code and biometric delivery of subsidies to the poor through Aadhaar have all been standout achievements.

Economic reforms though have so far been incremental rather than radical, apart from demonetisation and GST. It is time to focus on taking the investment and savings rates, which have slipped to below 30 per cent, back to the level of 35-37 per cent. The economy escaped a deflationary environment, but to regain high growth, consumption through household savings is the key. That also underscores the principal concern of the Prime Minister: jobs. Unless jobs are created at a faster pace, consumption will remain patchy, endangering the economic revival in 2018 that is vital to Modi’s 2019 Lok Sabha campaign.

Manufacturing has recently shown an uptick, following a year-long depression. Services too are beginning to scale up after the IT software sector lost momentum in an increasingly protectionist world. Foreign direct investment (FDI) though is strong and the start-up ecosystem is maturing rapidly. In 2018, India will overtake Britain to possess the second largest start-up universe of entrepreneurs and investors after the United States.

The rise in India’s ranking in the World Bank’s Ease of Doing Business (EDB) by 30 places to 100 and Moody’s sovereign rating upgrade to BAA2 come with caveats. The World Bank’s methodology is confined to Mumbai and Delhi and thus understates the problems entrepreneurs still face in setting up a business — or indeed in closing it down. The old licence raj may have been consigned to history, but it has been replaced by canny bureaucrats with a slew of new clearances — environmental, land use, power connections and municipal laws. It is these irritants that have kept India at a lowly 100th position in the EDB ranking, behind countries like Kenya (80th) and Indonesia (72nd). Modi has managed macro reforms but is being let down at the micro level by gatekeepers intent on keeping their discretionary powers — and side income — intact. It is a systemic problem and Modi needs to attack it at its root and branch.

The year 2018 is going to be critical for Modi. On the one hand, the BJP faces strong anti-incumbency in three states that go to the polls in December 2018 — Rajasthan, Madhya Pradesh and Chhattisgarh. All three, and especially Rajasthan, are vulnerable. Modi’s campaigning skills will be needed to retain them. Four northeastern states — Mizoram, Meghalaya, Nagaland and Tripura – will also hold elections in 2018. Modi and Shah’s North East India strategy will be fully put to test.

The most immediate challenge is Karnataka, which goes to the polls in April 2018. With Andhra Pradesh the only southern state in the NDA fold, and Tamil Nadu in flux, the BJP needs to win Karnataka, even as it seeks to establish a beachhead in Kerala.

With eight state elections slated for 2018, Modi will have to ration his time between political campaigning and policy making. It is therefore vital that he breaks with his practice of not holding regular press conferences. A robust and free media interaction will help him erase the disinformation spread by the Opposition that today goes unchallenged except by the BJP’s social media team and TV spokespersons — neither of whom have the sophistication and finesse needed in modern political messaging.

A daily briefing by the Prime Minister’s Office or the Ministry of External Affairs too is vital. A minister and a department official can by rotation brief the Indian and international media on key economic and political issues in a structured format as every major country, including China and the United States, does. India’s current permanent representative at the United Nations, Syed Akbaruddin, who played a vital role in helping India’s judge defeat his British rival for a seat on the ICJ, held excellent daily afternoon briefings when he was MEA spokesperson.

In a 24x7 media environment, the government’s policies need to be conveyed with clarity and brevity. As Modi hunkers down for the final lap of his first term, that is an information protocol he must establish.

Rahul Gandhi’s media messaging has improved significantly. So must Modi’s in an era where the only thing worse than disinformation is no information.

Follow@minhazmerchant on twitter

Hinduism today is in need of reform
Caste looms large as one of its biggest dangers.
Sunday, January 14, 2018

I’ve often dwelt on my admiration for Hinduism. It is the world’s oldest and wisest religious philosophy. Sanatana Dharma predates Judaism, Zoroastrianism, Christianity and Islam. Its vedic wisdom is unmatched. But like all things ancient, it needs constant care or the wisdom can turn into dogma.

The Abrahamic religions all suffer from this malady. Islam is shackled to the Quran written over 1,300 years ago. Rather than interpret its verses in modern, socially liberal terms, Islamic clerics have frozen them in time. That has led to appalling gender injustice. It has also sanctioned a violent interpretation of jihad which the Quran in its verses defines as self-defence, not conquest, but with enough semantic ambiguity to justify violence against infidels.

Christianity is similarly didactic. The Catholic Church, despite some recent efforts at reform, does not ordain women priests as a matter of “divine law”. It regards homosexuality as a “moral evil”. And it encourages belief in miracles. The break in the sixteenth century between the Catholic and Anglican churches led to the formation of Protestant majorities in countries like post-Reformation Britain and the future United States of America.

Both Islam and Christianity are proselytising religions. They have fought each other for over a thousand years, invaded territories in Africa and Asia, colonised them, plundered their wealth, and transported African slaves and Indian indentured labour to the newly settled Americas and the West Indies.

Hinduism, passive and inward-looking, has meanwhile absorbed invasion, subjugation, tyranny and plunder. It gave rise to Buddhism and Jainism, both older than Christianity and Islam, and both relatively more peaceful. Neither though could replace Hinduism in its birthplace.

But this shouldn’t blind us to the need for reform. Hinduism is amorphous, organic and shapes itself into whatever form its practitioner wants. You can pray at a temple or at home or not at all and yet be a good Hindu. You can be agnostic, atheist or religious and still be a good Hindu.

Islam and Christianity are stricter. Obey or else.

But Hinduism’s formlessness and sponge-like absorptive capacity can be a double-edged sword. Lack of discipline can breed disorder and division.

Caste looms large as one of its biggest dangers.

It is argued that the caste system in Hinduism helped India escape the fate of other countries whose native religions succumbed to mass conversions to Islam or Christianity.

The caste system has two concepts: varna and jati. Varna in vedic India was linked to the profession one followed based on aptitude, skill and interest. It was flexible and allowed social and occupational mobility. Jati, in contrast, was defined by birth. You couldn’t escape the jati you were born into.

Defending caste, Rajeev Srinivasan, an IIT and Stanford alumnus, wrote in Swarajya: “To consider resilience, think of the fact that of all the civilisations that the Muslims encountered when they swept out of Arabia, Hindu civilisation is the only one that did not get wiped out. Great, established cultures such as Egypt and Persia and all the Buddhist cultures of Central Asia were completely erased in a very short time. In the case of Hinduism, the jati served as the node. If your allegiance was to a particular jati, in essence, the destruction of other jatis had little effect on you. In one sense this is bad because of the lack of unity of purpose, but on the other hand, the system is resilient. I think this baffled Muslim invaders. Initially, they thought the centre of Hinduism was Somnath, so they sacked it, and nothing happened. Then they thought the centre was Benares, and they sacked it; again Hinduism did not vanish.

“Humans have an innate need to belong. Jati is an innovation that uses this drive for many positive (but alas, also negative) things. A flexible system of jatis where occupational value determines its market price was a good idea. An ossified system still seems to function pretty well, and I am not sure that jati will disappear with urbanisation.”

Beyond such historical justifications lies today’s reality. The riots that took place in Pune and Mumbai during the celebration of the 200th anniversary of the British-Dalit victory over the Peshwa-Brahmin-Marathas in Bhima-Koregaon show how caste remains a dagger aimed at the heart of Hindu society.

Whatever the justifications of “distributed systems” of jati and their historical role in protecting Hinduism from invading Islamic and Christian armies, the argument does little credit to Hinduism.

If a religion needs a caste-based distributed system – and the cruel injustices that go with it – to merely survive onslaughts from outside, it speaks poorly of its inherent strength. There must be a higher ambition than mere survival. 

Hinduism fell into such decay that it needed brutal Muslim and Christian invaders to, first, subdue it and then in the nineteenth century, as the British, for their own benefit brought modern education to the subcontinent, spark its renaissance.

It is a well-worn cliché to quote economist Angus Maddison’s thesis that India accounted for nearly 24 per cent of global GDP before the British colonised the country and systematically destroyed its industries, trade and crafts.  

But that was an India of 650 princely kingdoms, united by geography and culture but divided by religion, language, region – and caste.

Caste is today a potent electoral weapon. Dalit leader Jignesh Mevani used it effectively in the Gujarat assembly election. The Congress has begun to employ caste with an eye on the 2019 Lok Sabha poll. While Congress president Rahul Gandhi showcases his janeu-dhari Brahmin roots, his allies like Mevani play to Dalit sentiment. Divide and rule: it is an old ruse.

To again be a great religious philosophy, and not be held hostage to cynical electoral politics, Hinduism must shed old shibboleths and embrace reform. Caste divisions must go. Dalits must be allowed entry into every Hindu temple. So must women. There can be no exceptions and no excuses.

Follow@minhazmerchant on twitter

Jaitley’s Decisive Budgete
The 2018-19 Budget will, like Jaitley’s previous four budgets, ERR on the side of caution. Spending to spur jobs ...

Monday, January 15, 2018

This is Finance Minister Arun Jaitley’s last chance: the 2018-19 Union Budget, scheduled for February 1, will be Jaitley’s fifth Budget. With the Lok Sabha election due in April 2019, the next Budget could come under the model code of conduct if the complex parliamentary election schedule is announced in February 2019. No new schemes or tax cuts will be possible. 

And yet, next month’s Budget, instead of providing Jaitley an opportunity to make radical changes in the tax code or implement other economic reforms, will restrict him to balancing much needed government spending with a looming fiscal deficit challenge. 

The government’s decision in late December 2017 to borrow an extra Rs 50,000 crore over its budgeted borrowing of  Rs 5.80 lakh crore has set the alarm bells ringing. The fiscal deficit target of 3.2 per cent of  GDP could well be missed. It is estimated to climb to between 3.4 per cent and 3.54 per cent depending on how the government treats the new borrowing in its books. Jaitley though is sanguine. He has pledged to stick to his fiscal deficit target. 

India’s GDP in 2018-19, the final year of Prime Minister Narendra Modi’s first term, is estimated at Rs 187 lakh crore. This is based on the Budget’s estimate of nominal GDP growth (including inflation) at 11.75 per cent in 2017-18. Extrapolate this growth rate to 2018-19 and we get GDP in March 2019, as projected above, of  Rs 187  lakh crore. At the current exchange rate that translates into a GDP of $2.95 trillion. By purchasing power parity (PPP) Indian GDP in 2019 would be well over $8 trillion.

This focuses attention on the recent report by the Centre for Economics and Business Research (CeBR). The consultancy’s 2018 report says India’s GDP will overtake that of France and Britain in 2018 to become the world’s fifth largest economy behind the United States, China, Japan and Germany. The CeBR says India’s economy, growing at around 7-8 per cent a year, will overtake Germany and Japan by 2027 to become the third largest economy in the world. (By PPP norms, of course, India is already the world’s third largest economy.) 

How will all this affect the two issues that could determine the fate of the Narendra Modi government in 2019: jobs and rural distress? The government is clearly worried about the voting trend in rural Gujarat which tilted towards the Congress in the December 2017 assembly election. Farmer distress, especially in Saurashtra, and the lack of jobs were the primary factors for  the BJP’s poor performance. The Patidar agitation and Congress President Rahul Gandhi’s campaign rode this wave of discontent. 

Fixing the rural economy will occupy Modi’s time and attention in the six-month gap he will get between April and September 2018 when campaigning for Meghalaya, Nagaland, Tripura and Karnataka would have ended and campaigning for Mizoram, Madhya Pradesh, Rajasthan and Chhattisgarh would not have begun. 

The 2018-19 Budget will, like Jaitley’s previous four Budgets, err on the side of caution. Spending to spur jobs, especially in rural India, will be the main focus and that is where the extra borrowing of Rs 50,000 crore will go: agriculture, irrigation, rural infrastructure and healthcare. Will the extra money be enough to have a significant impact on jobs? Not by a long shot. While Mudra Bank with its plethora of small loans has created self-employed entrepreneurs in rural India, job growth in the formal economy remains tepid. The situation is worse in the informal sector which was hit by demonetisation and the introduction of the Goods and Services Tax (GST). 

According to statistics released by the Labour Ministry on December 29, 2017, the organised sector created 4.16 lakh jobs in 2016-17. This is far short of the 10 million (100 lakh) new jobs India needs to create every year. A caveat though: the ministry’s survey covers only the organised sector which accounts for just 1.4 per cent of all enterprises. 

The underlying problem of course, is that half of the Indian population (farmers) doesn’t pay tax. Of the other half, 95 per cent taxpayers contribute only a fraction (nine per cent) of total tax collected. That means just five per cent of India’s taxpaying population accounts for 91 per cent of total tax revenue. Unless this skewed tax base becomes more evenly balanced, India’s revenue-expenditure mismatch will continue into the forseeable future.

The government has meanwhile pledged to recapitalise the banking sector. Until banks get their NPAs under control, they will not lend freely to the corporate sector. Private investment will remain subdued. The reliance on government spending will grow.  

Former Deputy Chairman of the Planning Commission Montek Singh Ahluwalia in a recent article, laid out several measures to overcome this endemic problem: “The Insolvency Bankruptcy Code (IBC) promises real progress in getting indebted large corporate entities to pay up their debts or surrender control. If a dozen of  the large debtor cases sent to the National Company Law Tribunal come to a successful conclusion in the course of 2018, we should count it as a success even if the resolution involves large haircuts for the banks. Recapitalising public sector banks (PSBs) is essential, but what has been promised will only help to fill the hole in the balance sheets of banks. There is also no evidence yet of credible structural reforms that will change the way  public sector banks function. Ideally, government equity in the banks should be lowered to under 50 per cent, at least for some PSBs to start with. The role of the finance ministry as an additional regulator, in addition to the RBI, must end.” 

Jaitley announced recently that the government is likely to soon launch what it had promised in October 2017: recapitalisation bonds amounting to Rs 1.35 lakh crore to help public sector banks regain lending vigour.  Simultaneously, the RBI will need to relax monetary policy and reduce interest rates so that corporate debt burdens ease, allowing the private investment cycle to regain momentum. 

Modi will be watching carefully as Jaitley delivers what could be, electorally, his most decisive Budget. 

Follow@minhazmerchant on twitter

Decoding judge Loya case
The Supreme Court will now have to swiftly deliver a verdict in the case based on evidence not innuendo.
Wednesday, January 17, 2018

CBI judge BH Loya died on December 1, 2014 in Nagpur. Hospital records show he passed away following a heart attack. At the time, no one from his family, his legal colleagues, or the media raised any doubts about the circumstances around Loya’s death. The 2014 Lok Sabha election was over. There was nothing to be gained by politicising the death of a CBI court judge even though Loya was hearing a case involving the alleged fake encounter of Sohrabuddin Sheikh in Gujarat in 2005 when BJP president Amit Shah was home minister of the state.

Three years later, in November 2017, with the crucial Gujarat Assembly elections around the corner, the Loya case was exhumed by The Caravan magazine. It alleged a deep conspiracy. In essence what the magazine said was this: Loya’s death was not natural; he could have been murdered because he was about to pass a verdict making Shah complicit in the alleged fake encounter that killed Sohrabuddin and others; the judge who replaced Loya dismissed the case against Shah within 15 days of first hearing it.

The Congress and the Left now took up the case in real earnest. Although Loya’s son had written a letter on November 29, 2017 to The Caravan refuting its story, the magazine implied the signature on the letter did not seem to match Anuj’s.

Once the Gujarat elections was over, the Loya issue moved up a gear. Fresh petitions were filed in the Bombay High Court and the Supreme Court seeking a probe into Loya’s death. Anuj Loya held a press conference on January 14 to reiterate that his family did not want a probe. He said they were being harassed by journalists, activists and NGOs who wanted them to question whether his father had died of natural causes.

Meanwhile, a curious incident occurred. Senior counsels Dushyant Dave and Indira Jaising asked the Supreme Court bench of justices Arun Mishra and MM Shantanagoudar on January 12 not to hear the Loya case as it was already placed before the Bombay High Court. The moment the Supreme Court heard the case, the Bombay High Court would cease to hear it.

Dave pleaded with justices Mishra and Shantanagoudar “with folded hands” (his words) not to hear the Loya case. Jaising also requested the bench not to take cognisance of the case. The justices declined. They posted it for hearing on January 16. Within minutes, perhaps entirely coincidentally, four collegium justices began their press conference. Was the real purpose of the unprecedented press conference to pressurise the CJI to assign the Loya case to a collegium bench? And if so, why?

On the morning of January 16, the Maharashtra government, represented by senior counsel Harish Salve (who is also fighting India’s case against Pakistan on Kulbhushan Jadhav in the International Court of Justice at The Hague), handed over in a sealed envelope Loya’s hospital reports and other material, to be shared only with the petitioners.

Facts first

What are the facts in the Loya case?

Following The Caravan story, The Indian Express conducted its own investigation. This is what it found: “Loya, 48, records show, died of a heart attack in Nagpur on December 1, 2014, a day after he attended the wedding and reception of the daughter of fellow judge Swapna Joshi, who is now a judge in the Bombay High Court. Significantly, two judges of the Bombay High Court, Justice Bhushan Gavai and Justice Sunil Shukre, who both went to the hospital that day and made arrangements for the transport of the body, have spoken to The Indian Express to detail the sequence of events. Both judges said there was nothing about the circumstances of the death to raise any suspicion.

“After the wedding on November 30, 2014, Loya was at the Ravi Bhavan guest house in the Civil Lines Area of Nagpur when he complained of chest pain around 4 am on December 1. Recalling the sequence of events, Justice Gavai told The Indian Express:  ‘Loya was staying with fellow judges Shridhar Kulkarni and Shriram Madhusudan Modak. He experienced a health problem around 4am. (Local judge) Vijaykumar Barde and then Deputy Registrar of the Nagpur bench of the High Court Rupesh Rathi first took him to Dande Hospital (3km from the guest house).’

“When contacted, the director of the hospital, Pinak Dande, told The Indian Express: ‘He was brought to our hospital around 4.45am or 5am. We are a 24-hour trauma centre. There was a resident medical officer at that time who checked him. It’s only after the ECG was taken that we realised he needed specialised cardiac treatment which is not available with us so we advised them to go to a bigger hospital. They went to Meditrina hospital.'"

What happened next is crucial to the case.

The Meditrina hospital file on Loya says: “Immediately, resuscitation was started after reaching the hospital. Emergency treatment of DC (direct current) shocks of 200J was given multiple times. CPR (cardiopulmonary resuscitation) continued as per protocol. But in spite of all efforts, patient couldn’t be revived.”

The Indian Express story adds: “It was Meditrina where the judges arrived. Justice Gavai said, ‘I got a call from the High Court Registrar. As the seniormost and administrative Judge of the High Court bench at Nagpur, I rushed to Meditrina hospital along with fellow judge Justice Sunil Shukre. I didn’t even wait for my driver and drove to the hospital. Loya’s life unfortunately couldn’t be saved. There was absolutely nothing suspicious about the death or the events around it. The post-mortem was done at the Government Medical College and Hospital in Nagpur between 10.55am and 11.55am. No evidence of any poison or foul play was recorded in the report.’ About finding blood stains on Loya’s body, as reported by The Caravan, a senior government forensic expert said: ‘Blood is bound to spill out during post-mortem as we open all major cavities in the body. Sometimes, if small gaps remain in the sutures, blood might seep out.’”

The testimony of justices Gavai and Shurkre is obviously key. They were with judge Loya in the last few hours before his death. Those who allege murder are conspicuously silent over the testimony of the two Bombay High Court justices.

On January 16, the Nagpur police revealed it had told the Supreme Court that there was no evidence of foul play in Loya’s death. Now that the Supreme Court has Loya’s autopsy report, post-mortem report, ECG and other material facts, the case will proceed to a logical conclusion. The next hearing is to take place after a week though no specific date has been fixed by the Supreme Court bench.

Two broad sets of questions now present themselves. One, justice Arun Mishra has ordered a new bench to hear the Loya case. Will CJI Dipak Misra assign it to a bench headed by one of the four collegium judges? If so, was the purpose of the dissenting justices’ press conference aimed at achieving precisely this outcome?

Two, CJI Misra on January 16, while hearing an appeal on Bofors filed by a BJP member Ajay Agrawal, observed that third parties without direct “locus” in a case cannot file a PIL or an appeal in the Supreme Court. If that observation becomes an order at the next Bofors hearing, it could invalidate all petitions filed by third parties in the Loya case.

Is the case politically motivated? Shah, as Gujarat’s home minister in 2005, presided over a major clean-up of criminals. Sohrabuddin was one such history-sheeter. Was he killed in a fake encounter? Was Shah complicit? The Congress and its allies would like to think so. With the Lok Sabha elections just over a year away and eight state Assembly elections due in 2018, implicating Shah is high on the Opposition’s agenda.

The Loya case raises memories of the Ishrat Jahan “fake” encounter controversy that became an electoral issue in 2014. Ishrat Jahan was an LeT terrorist killed just outside Ahmedabad in 2004. The case sank into oblivion after the 2014 general election.

The Supreme Court will now have to swiftly deliver a verdict in the Loya case based on evidence not innuendo that will end all speculation, real and manufactured, and give the judge’s family the closure it seeks.

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This dissent doesn’t help democracy

Thursday, January 18, 2018

The conflict within the Supreme Court may or may not have been resolved but the issues it threw up certainly haven’t. The principle of arm’s length between the four pillars of democracy—the executive, Parliament, judiciary and media—has been compromised. When journalists and MPs act as choreographers in a dispute between the Chief Justice of India (CJI) and four seniormost Collegium judges, they damage not only the credibility of the media and of Parliament. They subvert the judiciary and with it the essence of democracy: the checks and balances of power.

The US judiciary has been largely immune to a serious loss of reputation. And yet the nine-member US Supreme Court, where unlike in India judges serve for life, is ideologically divided between Democrats and Republicans. One of the first steps US President Donald Trump took on assuming office was to impose his choice of conservative Supreme Court Justice Neil Gorsuch to fill a vacancy caused by the death of the highly respected Judge Antonin Scalia.

Despite their sharp ideological differences over issues like immigration, abortion and healthcare, the US Supreme Court stays aloof from everyday politics. The Indian Supreme Court has a mixed record in this regard. During the Emergency imposed by Prime Minister Indira Gandhi in June 1975, the apex court did not distinguish itself. Thousands of journalists, activists and Opposition politicians had been jailed under the Maintenance of Internal Security Act (MISA). High courts across India invoked the right to habeas corpus under Article 21 of the Constitution to free those jailed by the Congress government.

The matter reached the Supreme Court. Five of the apex court’s seniormost justices heard the case. To their eternal shame, four of the five justices refused the right of habeas corpus to the detainees. Justices A N Ray, P N Bhagwati, Y V Chandrachud and M H Beg wrote cravenly in their majority verdict: “In view of the Presidential Order [declaring Emergency] no person has any locus to move any writ petition before a High Court for habeas corpus or any other writ or order or direction to challenge the legality of an order of detention.”

Only Justice Hans Raj Khanna dissented, writing in his order: “The Constitution and the laws of India do not permit life and liberty to be at the mercy of the absolute power of the Executive. What is at stake is the rule of law. Detention without trial is an anathema to all those who love personal liberty.”

Over the years, the Supreme Court has rebuilt its reputation from the rubble of Emergency. But several problems still beset it. The court has not been able to mitigate corruption in, especially, lower courts. A sealed envelope charging several Supreme Court judges with corruption, presented to the apex court by senior counsel and activist Prashant Bhushan several years ago, remains sealed and ignored.

The backlog of over three crore cases has resulted in great injustice: many undertrials spend more time in jail than they would have had they served their maximum sentence on conviction. Court infrastructure remains antiquated. Senior lawyers charge extortionate fees, receive liberal adjournments and treat clients whimsically.

Instead of addressing these issues, the four judges chose to focus on the CJI’s “selective” assignment of cases to specific benches. Assignment of cases is the CJI’s prerogative. If the insinuation is that the CJI was being unfairly selective, the four dissenting judges could justifiably be asked why they were keen to be part of benches hearing specific cases. Imputing motives can be a slippery two-way slope.

The role of political parties, MPs and journalists in this squalid affair needs to be highlighted. Judges have little knowledge of organising press conferences. They were clearly helped in conducting the one they held with professional aplomb on January 12. Arm’s length instead became a lending hand, subverting the first principle of the relationship between the executive, Parliament, judiciary and media. Ironically, the four dissenting Collegium judges warned grimly of the danger to Indian democracy, not realising that their breaching the principle of separation of powers was by far the bigger threat.
Several sensitive cases handled by CJI Dipak Misra are likely to be heard soon. He recently ordered the appointment of a new Special Investigative Team (SIT) to probe the 1984 anti-Sikh genocide. He is also heading a bench that is expected to deliver the judgment on Ayodhya. The two cases could have a significant impact on the 2019 Lok Sabha polls.

The CPI leader and parliamentarian D Raja met Justice Chelameswar at the latter’s residence immediately after the press conference. Congress President Rahul Gandhi had reportedly been advised by his lawyers to call for strong strictures against the CJI, including possibly even his impeachment. Raja, caught on camera meeting Justice Chelameswar, put paid to that idea.

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Bottlenecks in India’s defence

Thursday, January 18, 2018

India must be ready to face a two-and-a-half front war, warned chief of army staff (COAS) General Bipin Rawat not long ago. He meant Pakistan, China and internal insurgencies. More recently, General Rawat said India would not be deterred from “crossing the border” by Pakistan’s nuclear bluff. That drew an angry response from Pakistan’s Foreign Minister, Khawaja Asif, challenging General Rawat to test Pakistan’s resolve.

Given the grim reality of being surrounded on two sides by hostile neighbours, Pakistan and China, as well as a Maoist threat, India’s defence preparedness, weapons purchases and overall military strategy are crucial. Over the past three years, the paramilitary forces have done well to quell Naxal insurgents. CRPF casualties have declined. Maoists fatalities have increased.  Many Naxalite leaders have surrendered. After a slow start, Home Minister Rajnath Singh has quietly emerged as a solid performer. In Jammu & Kashmir, the CRPF, J&K police and the army killed over 220 terrorists in 2017. The stick will continue to be wielded while interlocutor Dineshwar Sharma takes his bag of carrots to the Valley. This though is unlikely to work in a state where radical Islam has taken firm root.

General Bipin Rawat was right to criticise madrasas in the Valley where two maps – one of India and the other of Jammu & Kashmir – are pinned to the walls of every madrasa classroom. This reinforces the separateness Islamists want to indoctrinate in the youth of Kashmir. The state’s education minister, Altaf Bukhari of the PDP, told General Rawat to stay out of matters that doesn’t concern him. But it is General Rawat’s soldiers who are sacrificing their lives at the hands of terrorists, aided logistically by the same indoctrinated youth in the Valley’s madrasas. Bukhari should spend time on the LoC to understand the damage his party’s soft separatism has done. You are judged by the company you keep, and the BJP will be judged in the next state assembly election in December 2020 (J&K has a six-year term), by the company it has kept with the PDP since February 2015.

The most worrying aspect for Indian security lies within the Ministry of Defence (MoD). A key problem is weapons purchases. Senior army officers have warned of ammunition shortages that can constrain operations along the LoC. The army had to make emergency off-the-shelf ammunition purchases in late 2016 after the surgical strike on Pakistan to ease the shortage. Last month, the Indian Air Force announced that due to delayed fighter jet deliveries, the number of IAF squadrons had fallen to 33. India needs 42 air squadrons to fight a two-front war. The 36-fighter jet Rafale deal signed recently papers over the problem. India’s submarine programme is also well behind schedule. During my recent visits to some of India’s most technologically sophisticated facilities that are involved in India’s nuclear submarine programme, I saw first-hand how potent the Indian Navy will be in the future. But we live and fight in the present.

Weapons purchase delays have long been a bane of the MoD. A key reason is the absence of armed forces officers permanently appointed to this key ministry. Bureaucrats run the show. Many have little or no expertise in new weapons’ technology. Worse, many are corrupt. When he took over from Arun Jaitley as defence minister, Manohar Parrikar diligently implemented the policy that banned arms dealers, following a slew of defence-related scandals in the UPA government.

The CEO of one of India’s largest weapons manufacturers told me that Parrikar was the country’s best defence minister he had encountered in recent years. He understood the technical aspects, being an IIT engineer. He made quick decisions. And he was scrupulously honest. After Jaitley again temporarily took over the defence portfolio, when Parrikar went to Goa as the chief minister, things drifted, according to the CEO of a this blue-riband defence manufacturer. Fortunately in a cabinet reshuffle last year, Nirmala Sitharaman was appointed as the defence minister. Though she has no domain experience, Sitharaman has been fairly proactive.  

Disappointingly though, the bureaucratic grip on the MoD remains strong. The cancellation of a $500 million contract for Israeli-made Spike anti-tank missiles on the eve of Israeli Prime Minister Benjamin Netanyahu’s visit to India demonstrates the cussedness of MoD officialdom. Fortunately, the deal could soon be revived and will help the Indian army tackle the Pakistani army’s long-range anti-tank missiles.

The MoD’s whimsical decision-making is not restricted to delays in arms purchases. The recent decision to cap educational grants to children of armed forces martyrs to Rs. 10,000 a month shows the small-minded, mean-spirited way the MoD sometimes functions. Only a few martyrs’ children exceed the Rs 10,000 a month cap. The extra outgo, had the cap not been imposed, would be less than Rs. 6 crore a year.

Sitharaman, despite her sincerity and intelligence, has not yet been able to reform the MoD’s ecosystem calcified through years of patronage and corruption. This must change. The first reform should be to give the armed forces permanent representation in the MoD. If India is to prepare for a two-front war, the MoD needs to learn some hard lessons from General Rawat.  

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Why Ram temple issue is lurking behind crisis in Supreme Court
The same powerful group that has shown exceptional interest in the judge Loya case fears that the CJI could rule in favour of building the Ram temple.
Wednesday, January 24, 2018

The simmering dispute between the chief justice of India (CJI) Dipak Misra and four Supreme Court collegium justices - J Chelameswar, Ranjan Gogoi, Madan B Lokur and Kurian Joseph - gets curiouser by the day. Despite several meetings to reconcile their differences, the gulf between India’s seniormost justices has not narrowed.

What precisely are those differences? At their press conference and in their seven-page letter, the four collegium justices were vague in their demands. For those who want linguistic clarity and brevity from our finest judicial minds, the letter gives little indication of either.

Sample this: “One of the well-settled principles is that the chief justice is the master of the roster with a privilege to determine the roster, necessity in multi-numbered courts for an orderly transaction of business and appropriate arrangements with respect to matters with which member/bench of this Court (as the case may be) is required to deal with which case or class of cases is to be made. The convention of recognising the privilege of the chief justice to form the roster and assign cases to different members/benches of the Court is a convention devised for a disciplined and efficient transaction of business of the court but not a recognition of any superior authority, legal or factual of the chief justice over his colleagues. It is too well settled in the jurisprudence of this country that the chief justice is only the first amongst equals, nothing more or nothing less.”

But if all Supreme Court justices are equals, why shouldn’t cases, sensitive or not, be assigned to benches led by “junior” Supreme Court judges? No clear answer has been forthcoming.

So what do the four rebel justices really want? First, they want the case relating to the death of judge BH Loya reassigned. That wish has been fulfilled. Justice Arun Mishra was hearing the Loya case. Rattled by the events of last week, he recused himself.

The CJI, in a show of authority, reassigned the case to a bench headed by himself. He was under relentless pressure to reassign the Loya case to a bench headed by one of the four collegium justices. He did not. Instead, he even transferred the two PILs related to the case pending in the Bombay High Court to his own bench. Last week, the petitioners’ senior counsel Dushyant Dave had pleaded “with folded hands” against the CJI doing that. The CJI brushed aside Dave’s plea.

A group of lawyers and politicians are using the Loya case, as they had earlier used the Ishrat Jahan case, to target BJP president Amit Shah. The confrontation between the Maharashtra government’s counsel Harish Salve and Dave in the CJI’s court on January 22, brought this out into the open. Dave claimed that Salve had defended Shah in the past and should not appear in the Loya case due to conflict of interest. The charge was summarily rejected by the CJI’s three-judge bench.  

Salve has, meanwhile, submitted medical documents and other material to the Supreme Court to show that judge Loya’s death occurred due to natural causes. The CJI has posted the next hearing in the case for February 2.

But amid the judge Loya clamour, the case that lurks in the background is about building the Ram temple in Ayodhya. Like Banquo’s ghost that haunted Shakespeare’s Macbeth, the Ram temple case haunts the Supreme Court. The long drawn-out case is now with a bench headed by the CJI. He retires on October 2, 2018. There is an expectation that the CJI wants to deliver a verdict in the case before he demits office.

The same powerful group of lawyers, activists, politicians and sections of the media that has shown exceptional interest in the judge Loya case fears that the CJI could be inclined to rule in favour of building the Ram temple in Ayodhya where the Babri mosque stood.

Such a ruling would benefit the BJP in three big states due to go to the polls in December 2018: Rajasthan, Madhya Pradesh and Chhattisgarh. All three states will feature binary BJP-Congress contests. All three face strong anti-incumbency. A pro-temple ruling would give the BJP a steroid boost ahead of the 2019 Lok Sabha election. 

Two outcomes can now be divined. First, a chastened CJI, buffeted by the collegium’s rebellion, will postpone a verdict on the Ram temple case till after the 2019 Lok Sabha poll, citing its sensitivity. Second, the CJI could rule against  building the Ram temple where the Babri mosque stood and instead suggest the construction of two new structures, a temple and a mosque, side by side. That would suit the Opposition ahead of 2019.

All of these well-laid plans though may amount to nothing. Even if the Supreme Court’s verdict goes against building the Ram temple, or the verdict is inordinately delayed, the anger that it will spark among devout Hindus will be electorally fissile.

In the end, therefore, the elaborate shenanigans we have been witness to in the Supreme Court over the past two weeks could end in a whimper. But the spotlight it has shone on the apex court and its hallowed innards will have served a purpose. 

Why, for example, haven’t the senior justices of the Supreme Court shown similar ire, as they have over assignment of cases, against the real issues that bedevil India’s judicial system: deep-seated corruption, shambolic infrastructure, a mounting backlog of cases, lawyers holding clients to ransom with adjournments, and the opaque collegium system of appointing judges to the Supreme Court by other Supreme Court judges?

Such opacity hardly inspires confidence in India’s top judicial minds as they wrestle with the fissure within their ranks and Banquo’s ghost that hovers silently over the unbuilt Ram temple in Ayodhya.

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India needs to take Chinese threat at Doklam seriously
Chief of army staff general Bipin Rawat has been emphasising that India must shift its tactical military focus from Pakistan to China.

Thursday, January 25, 2018

Is China preparing for another confrontation with India at the Doklam trijunction? Recent reports using satellite imagery suggest a build-up of military infrastructure on Chinese territory less than 100 metres from where Indian soldiers continue to maintain vigil at the trijunction on Bhutanese territory.

Alarmist reports
In official briefings the Indian government has downplayed the Chinese build-up. The fortifications are on Chinese territory. There has been no attempt to encroach upon sovereign Bhutanese land which Indian troops are guarding at Bhutan's behest. Reacting to alarmist reports of a massive military infrastructural build-up near the Doklam plateau, the ministry of external affairs (MEA) said:

"The government would once again reiterate that the status quo at the face-off site has not been altered. Any suggestion to the contrary is inaccurate and mischievous." There is a constituency in India that periodically raises alarmist bogeys over threats, internal and external. In the past, routine army movements near Delhi have been called potential "coups" with rarely used front-page eight-column headlines which are employed by newspapers only for extremely critical events. The coup was not. It was a figment.

The Chinese threat at Doklam though is not an idle one. It needs to be taken seriously. Chief of army staff (COAS) general Bipin Rawat has for some time now been emphasising the Chinese factor in India's overall military preparedness. He says India must shift its tactical military focus from Pakistan to China. At last week's global Raisina Dialogue, General Rawat, commenting on the presence of China's PLA troops in the north Doklam area, observed: "They have carried out some infrastructure development, most of its is temporary in nature. But while their troops may have returned and the infrastructure remains, it is anybody's guess whether they would come back there, or it is because of the winter they could not take their equipment away. But then we are also there. In case they come (back), we will face them."

The Indian army commander who oversaw the successful disengagement of Indian and Chinese soldiers at Doklam last August after a 73-day standoff has clear views on the current situation on the Line of Actual Control (LAC). Lt General Abhay Krishna heads the Eastern Command which monitors the LAC. In a recent interview, General Krishna said emphatically: "The readiness and reactions of the Indian Army to the Doklam standoff have given courage to India's friendly neighbours to live up to their shared concerns. The situation is now normal with our stand having been clearly articulated, backed up by the readiness of the Army for any security scenario in the forthcoming season."

Elite group Meanwhile, the successful pre-induction trial of Agni V, an inter-continental ballistic missile (ICBM) with a range of over 5,000 km, places India close to joining an elite group of countries - the United States, Russia, Britain, China and France - that have nuclear-armed ICBM strike capability.

Following one more pre-induction trial, Agni V will be inducted into India's triservices Strategic Forces Command (SFC). Agni V's strike range covers the entire territory of China. An Indian ICBM with a range of 10,000 km -similar to Chinese ICBMs which have a range of up to 14,000 km - is under development. The acquisition of an advanced air defence missile shield, the S-400 Triumf from Russia that can destroy enemy missiles at a range of 400 km and an altitude of 30 km, is in the final stages of negotiations.

Beyond military preparedness on both the Pakistani and Chinese borders, India must use nuanced but robust geopolitics to strengthen its neighbourhood strategy. Towards this end, the United States and India will hold their first "two-plus-two" dialogue in April 2018. It will feature the defence and foreign ministers of the two countries: Nirmala Sitharaman and Sushma Swaraj for India and general James Mattis and Rex Tillerson for the US.

Growing engagement China is wary of the growing diplomatic and military engagement between Washington and New Delhi. Its spokesmen have "warned" time and again that the US-India strategic partnership should not be aimed at countering China's "inevitable rise", as Beijing puts it, and global influence. China was incensed by being described as a "disruptive, transitional force in the Indo-Pacific" by Admiral Harry Harris who heads the US Pacific command. Beijing sees the emerging "quad" alliance between the US, India, Japan and Australia as an impediment to its ambitions in the South China Sea as well as a spoke in its Belt and Road Initiative (BRI) that will give it seamless access to the markets of Africa, the Middle East and Europe.

India's membership of the Australia Group, finalised last week, in addition to its earlier entry into the Wassenaar Arrangement and the Missile Technology Control Regime (MTCR) - non-proliferation groups that China is not a member of - will not worry Beijing much. The three groups are obligation-oriented regimes. China's objective is to block India from the Nuclear Suppliers Group (NSG) which is rights-based. But since the other three groups that control the spread of nuclear, chemical and biological weapons have common members with the NSG, China's obsessive opposition to India's membership will be increasingly untenable.

Not a single shot has been fired along the LAC between Chinese and Indian soldiers for over 40 years. That tranquillity, despite China's military build-up in Doklam, is likely to continue. But as General Rawat says coldly, if they come, "we will face them."  

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How digital media poses a threat to print and broadcast
In India, total digital advertising amounted to Rs 400 crore in 2007. By 2016, it had grown to Rs 7,700 crore.
Sunday, December 31, 2017

In the West, the carnage has begun. Newspapers are going bust  and digital. The New York Times has retrenched print journalists and beefed up its digital newsroom.

Broadcast television could be the next victim. Millennials dont watch much television. They get their news in real time from social media and news websites.

In India, the figures for news television are stark. The first to feel the pinch is English news. The six leading English news channels have an average combined weekly viewership of just 20 lakh.

Thats barely 1 per cent of the reach of Hindi news channels. English news channels cater largely to the urban elite who have access to the latest digital technology. They are first movers from broadcast television news to digital-sourced news.

We are fast approaching an era when television will serve as a secondary medium of record  newspapers have already been reduced to playing that role  while digital platforms become the primary source of news and entertainment.

In India, digital advertising is growing exponentially, albeit from a low base. In 2007, total digital advertising amounted to a paltry Rs 400 crore. By 2016, digital advertising had grown 19x to Rs7,700 crore.

In 2021, according to, digital media spend will rise a further 4x to Rs 29,500 crore  equal to the amount spent today on television advertising.

The problem news websites in the West face is the dominance of Google and Facebook.

The two behemoths swallow 66 per cent of all digital advertising, leaving online-only news portals and the digital arms of newspapers and broadcasters to fight over the crumbs.

To overcome this, newspapers with strong digital content have built full or partial pay firewalls. Rupert Murdochs The Times and The Sunday Times in Britain were among the first to erect pay firewalls on their digital properties. Several others have followed.

In the United States The Wall Street Journal and The New York Times have built successful digital subscriber models. NYT now has more paid digital-only subscribers (2.50 million) than paid print subscribers.

Its digital advertising revenue in the quarter ending September 30, 2017 rose 47 per cent to $86 million, dwarfing the $64 million it received in print advertising in the same quarter, a decline of 20 per cent over the previous quarter.

In India, pay walls and digital subscribers havent yet got off the ground. Internet users have so much free content that digital subscriptions are hard to come by. Some non-news publications, though, like Swarajya and Economic and Political Weekly (EPW), have built robust digital pay models. That is the future of digital publishing  a revenue mix of paid subscriptions and advertising. 

Beyond economics, the relative decline of broadcasting and print media has social and political implications. News often breaks first on digital platforms. Television picks it up hours later and newspapers run with it the next day. That is why print newspapers appear dated: news is a highly perishable commodity. 

For the public, the rapid move to digital is a Godsend. They can react to news in realtime since digital platforms provide a two-way conversation. Editors and writers are regularly called out by readers, making them more accountable. The editorial ivory tower has come tumbling down to earth.

Readers and viewers, for long simply consumers of news and entertainment, can now be producers themselves. YouTube, for example, where 24,000 minutes of new videos are uploaded every minute, has created an entire universe of online entrepreneurs  from comedians and cooks to tipsters on travel and fashion.

Two recent veteran journalists-turned-entrepreneurs have entirely bypassed television and print media to launch their products digitally. Shekhar Gupta, the former editor of The Indian Express, uses Twitter and Facebook among other platforms to disseminate his start-up, The Print.

Barkha Dutt, the former NDTV anchor, uses Periscope, Facebook and Twitter to reach a digital audience for her event-and-content products, MoJo and WeTheWomen.

Both journalists have had long experience in print and television, but are using digital media tactically: its cheaper and though it currently lacks the bandwith of print and broadcast, its the most practical way to get started and create a buzz. Television and print will follow as add-ons, not primary drivers. 

Lagging behind

Politicians generally remain laggards in the digital age. Congress president Rahul Gandhi has begun to use digital media more effectively since he rejigged his social media team.

Prime Minister Narendra Modi was an early digital convert. Today he makes up for not holding regular press conference by using digital media actively. He is now the most followed Indian on Twitter (38.80 million), though his tweets lack a personal touch.

The biggest problem in digital media is online abuse and fake news. Websites are often created to generate fabricated news which, algorithmically, appears on Facebook or Google, the two largest news aggregators.

Both have recently put special software in place to weed out fake news, but with limited success. Bereft of an editorial filter, the tsunami of text and video overwhelms news aggregators.

Despite its drawbacks, digital media is the future. That doesnt mean the end of print or broadcast media as we know it. Just as television didnt kill radio in America in the 1960s (radio is booming), digital wont kill television and print.

It will, however, replace them as the first and principal source of news and entertainment. Hotstar, Netflix and Amazon Prime are the tip of the digital iceberg.

The digital era will also reinforce the role of writers and content-makers. In a recent interview with Midday, Chris Brancato, creator of Narcos, said that in the US television and film industry, content is king: The only person who has any say on the development (of a series) is the writer. He assumes various positions; ones that only a director or producer would have in another country. 

When digital content in India too becomes king, writers will finally have the last word.

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What Rahul can learn from Feroze Gandhi. And the road ahead for Modi till 2019
The BJP has reacted to Congress president's assertive new political mien in exactly the wrong way.

Thursday, December 28, 2017

Has Congress president Rahul Gandhi realised after 13 years in politics that appealing to 80 per cent of the Indian population is a better electoral strategy than appeasing the other 20 per cent?

If so, it marks the first big shift in Congress strategy since 1986 when father Rajiv used his parliamentary majority to overturn the Supreme Court's enlightened verdict on Shah Bano, a Muslim woman divorced by her husband Mohammad Ahmed Khan who pronounced triple talaq and left her homeless and penniless. That single act captured a large demographic of the Muslim vote for the Congress. It subverted real secularism in the name of minoritism and ironically paved the way for the BJP's majoritarian electoral success in the next decade.

Rajiv was in some ways more Parsi than Hindu. His father Feroze Gandhi was a brilliant parliamentarian. Feroze played the role of an Opposition leader in the 1950s when there was very little opposition to the Congress in Parliament. His death following a heart attack in 1960 at the age of 48, when Rajiv was just 16, deprived India of one of its finest but least heralded MPs. If there is a role model Rahul should follow in politics, it should be his grandfather Feroze, a non-Nehru who embodied both inclusive nationalism and real secularism, not the fraudulent variety practised by the Congress today.

The BJP has reacted to Rahul's assertive new political mien in exactly the wrong way. It focused on Rahul throughout the Gujarat campaign, building him up as a threat (which he duly became) rather than on development. Rahul meanwhile has shown a ruthless streak. Not all of it is inherited from mother Sonia, who was dispatched to England at 16 by father Stefano Maino to find work and learn English. She developed her cold, clinical toughness in those difficult years before she met Rajiv at a restaurant in Cambridgeshire.

Rajiv too was tougher than he looked. The manner in which he sacked foreign secretary AP Venkateswaran in 1987 during a press conference is still remembered by IFS veterans as an act of "refined brutality". If a Prime Minister like Narendra Modi were to dismiss and publicly humiliate a foreign secretary (currently the affable S Jaishankar), he would be roasted, and rightly so, by the media.

Rahul has a tricky agenda ahead of him but he could get lucky on two counts. First, of the eight states due for Assembly elections in 2018 (Karnataka, Madhya Pradesh, Rajasthan, Chhattisgarh, Meghalaya, Nagaland, Tripura and Mizoram), the Congress has a good chance of holding on to Karnataka and winning back Rajasthan from the BJP. Thus at the end of 2018, the Congress could have three large states - Punjab, Karnataka and Rajasthan - in its fold along with a few in the Northeast. Rahul will claim credit for the Congress' turnaround. No one will begrudge him that.

Rahul's second stroke of good fortune is the mild disarray within the BJP. If rural voters, including farmers, in other states follow Gujarat's lead, the BJP may face a real problem in the 2019 Lok Sabha election.

The lack of talent in the BJP was cruelly underscored by the CBI court's verdict in the 2G telecom case. If the BJP's law minister (under whom the special public prosecutor functions), home minister (who is responsible for the CBI) and finance minister (under whom the Enforcement Directorate and the directorate of Revenue Intelligence operate) cannot build a coherent prosecution in an open-and-shut case, it's no surprise that it has made tactical errors in other areas.

Much good work though has been done by the Modi government over the last three-and-a-half years. For instance, the Mudra Bank has helped millions of small entrepreneurs and created an army of self-employed.

Other schemes too have quietly transformed the way Indians receive subsidies and transfer money. But the government has made elementary mistakes as well. It hasn't moved ahead on police reforms. Judicial reforms remain stuck in a face-off with the Supreme Court. Bureaucrats continue to mislead, distort and delay. Finance ministry officials, for example, sat on the One Rank, One Pension (OROP) file for five months after then defence minister Manohar Parrikar had cleared it, losing for the BJP goodwill among the armed forces.

This, however, is where Modi too has encountered a stroke of good fortune. He will face a national coalition in 2019 of corrupt, communal, communist and casteist parties. The Congress will lead this ragtag coalition made up of the Left, TMC, SP, BSP, RJD, NCP, AIMIM and NC, among others. The politics of Sitaram Yechury, Mulayam Singh Yadav, Mayawati, Lalu Prasad, Asaduddin Owaisi, Sharad Pawar and Omar Abdullah was rejected in 2014 and likely will be in 2019. They form a toxic mix. Their collective odium will not burnish Rahul's chances in 2019. Modi knows this.

That said, he also knows that the clock is ticking. To regain political momentum after Gujarat, the prime minister needs to focus on the pledge of maximum governance and minimum government. Arbitrary tax claims, interference in citizens' lives over matters like food and films that shouldn't concern a progressive government, and allowing fringe elements to impose their perverse idea of India, often violently, are not signs of maximum governance, minimum government.

The prime minister has less than a year to set things right before campaigning for 2019 consumes him.

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The real story behind the 2G scam
Justice OP Saini hints at the culpability of two principal secretaries in the Manmohan Singh PMO - Pulok Chatterjee and TKA Nair.
Friday, December 22, 2017

Congress and DMK leaders, celebrating the acquittal of all 18 individuals accused in the 2G telecom licence case, could soon be in for an unpleasant surprise.

What CBI special judge OP Saini said about the UPA government's PMO is more damaging than the acquittal of mid-level DMK leaders like A Raja and Kanimozhi. The verdict shifts the spotlight to the two principal secretaries in the Manmohan Singh PMO, Pulok Chatterjee and TKA Nair.

Here's the damning part of justice Saini's verdict: "It was not Raja, but Pulok Chatterjee, in consultation with TKA Nair, (who) had suppressed the most relevant and controversial part of the letter of A Raja from the then hon'ble PM. Pulok Chatterjee ought to have taken note of these facts in his earlier note dated January 6, 2008 itself, but did not do so for reasons best known to him and placed only a partial view before the then hon'ble PM.

"It is clear from the record of the case that issue of LOIs (letters of intent) and grant of UAS licence by changed criteria was creating controversy in the country leading to the registration of the instant case. A Raja had justified the changed criteria, as referred to above, but this important issue was not placed before the then hon'ble prime minister at the right time. This was done only when the controversy broke out after issue of LOIs on January 10, 2008."

From the time the 2G scam was exposed nearly a decade ago, the brilliant, painstaking reportage of Shalini Singh (first for The Times of India, then for The Hindu) and J Gopikrishnan (for The Pioneer) pointed out that the real culprits in subverting the 2G telecom licence policy from first-come-first-served to first-pay-first-served were the respective high commands of the Congress and the DMK.

Raja was merely the bagman. He was "instructed" to change the first-come-first-served policy and did so obediently. He wrote three letters in 2007-08 to prime minister Manmohan Singh to inform him of the change. Pulok Chatterjee's role now becomes crucial. Who exactly is Chatterjee? A senior bureaucrat, Chatterjee was a Gandhi family favourite. He was deputy secretary in Rajiv Gandhi's PMO in 1985. He later became officer on special duty (OSD) to Sonia Gandhi. In between he worked at the Rajiv Gandhi Foundation.

When the UPA government took office in 2004, Chatterjee was posted back in the PMO as joint secretary when Manmohan Singh was nominated prime minister by Sonia after her "inner voice" told her not to accept the position herself.

During the 2007-08 2G telecom licence allocations, it was Chatterjee who, as justice Saini observed in his order, held back crucial information from Raja's letter to Manmohan Singh about a drastic change in the licencing policy to first-pay-first served.

It is worth repeating justice Saini's scathing observation: "It was not Raja, but Pulok Chatterjee, in consultation with TKA Nair (who) had suppressed the most relevant and controversial part of the letter of A Raja from the then hon'ble PM."

Manmohan Singh got to know about the controversial, even perverse, change in the licence allocation policy only on January 10, 2008 - after the allocations had already been made. This is why justice Saini observed cryptically: "If (the hon'ble PM's) words, 'I want the PMO to be at arm's length', are read in the context of the case, it is clear that they are aimed at officials of the PMO and not at A Raja."

Clearly therefore, Raja was always the bagman, carrying out instructions from his bosses in the UPA coalition government and through his three letters addressed to the prime minister keeping himself safe from future prosecution. That is what saved him from being indicted in justice Saini's order.

As the Supreme Court observed in February 2012: "The exercise undertaken by the officers of the department of telecom between September 2007 and March 2008, under the leadership of the then minister of communications and information technology (Raja), was wholly arbitrary, capricious and contrary to public interest apart from being violative of the doctrine of equality."

So were bribes not paid to secure out-of-turn telecom licences? The circumstantial evidence indicates they were. The CBI prosecution, begun by the UPA government, deliberately focused on Raja and others who were secondary to the scam. Justice Saini's verdict clearly indicts the Mamohan Singh PMO and its senior officials Pulok Chatterjee and TKA Nair.

Under whose instructions were these officials operating? Who ordered them to show only a part of Raja's letters to Manmohan Singh, effectively misleading the prime minister, in itself a grave offence?

The top leadership of the Congress and DMK in the UPA coalition government were the only functionaries with the power to order Chatterjee and Nair to ensure that the subversion of the telecom licence process did not reach the prime minister eyes.

The question remains: Why did the BJP-led NDA government let the 2G case meander after it took office in 2014? Justice Saini's comment that the prosecution seemed to have lost interest in the case is an indictment of the Narendra Modi government's lax approach. Its law minister, finance minister and home minister stand exposed as both incompetent and ineffective in failing to direct the prosecution to probe Manmohan Singh's PMO and the high command of the Congress and DMK that remote-controlled it.

Unless the Modi government's appeal to a higher court against justice Saini's verdict focuses on the real culprits and not their bagmen, it will not only lose that appeal but also its credibility and future electability.

For the Congress and DMK top leadership though, the unpleasant surprise is this: The spotlight they avoided in the 2G telecom case for a decade is now firmly on them.

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Gujarat shadow over 2019

Thursday, December 21, 2017

Like a Gujarati thali, the 2017 Gujarat assembly election had a little bit for everyone. The BJP retained Gujarat for the sixth successive time, beating strong anti-incumbency and a caste coalition of Dalits, Patidars and OBCs led by Jignesh Mevani, Hardik Patel and Alpesh Thakor. 

The Congress increased its seat tally to its highest level in decades, allowing newly coronated president Rahul Gandhi to take legitimate credit for a hard-fought campaign. Prime Minister Narendra Modi showed again that, despite a mini-gathbandhan of Congress and caste leaders ranged against him, he could pull the chestnuts out of the fire when it mattered. 

More critically, how will the Gujarat election outcome affect the eight assembly polls due in 2018? Four northeastern states – Meghalaya, Tripura, Nagaland and Mizoram – will hold elections next year. Four big states – Karnataka, Madhya Pradesh, Rajasthan and Chhattisgarh – also go to the polls in 2018. Karnataka is first up in April 2018. The BJP will be wary about its chances of unseating the Congress. Chief Minister Siddaramaiah has in recent months consolidated his position. Six months ago, the BJP was confident of winning Karnataka and reducing the Congress to just one large state, Punjab. That no longer looks a certainty. Siddaramaiah has played the Lingayat card, claiming that the community is not a part of Hinduism. BS Yeddyurappa, the BJP’s main campaigner and a Lingayat, will have to pull out all the stops to win a state where the JD(S), though not a major force, could forge a decisive alliance with the Congress. 

A much bigger problem though awaits the BJP in December 2018 when Rajasthan, Madhya Pradesh and Chhattisgarh hold elections. Rajasthan is the most vulnerable of the three. Chief Minister Vasundhara Raje is an unpopular leader. After a recent visit to the state, one colleague said he had met almost no one in Rajasthan who was likely to vote for Raje. The chief minister’s strained relationship with BJP party president Amit Shah is another complication. Without close synergies between Raje and Shah, running an effective campaign in Rajasthan will be difficult. The Congress could meanwhile benefit from Sachin Pilot’s OBC thrust in Rajasthan. It has a realistic chance of winning back from the NDA another big state after Punjab. 

Madhya Pradesh suffers from strong anti-incumbency and a backlash from the Vyapam scam. Chief Minister Shivraj Singh Chouhan remains popular but recent by-election defeats in key constituencies have set alarm bells ringing. Jyotiraditya Scindia will lead the Congress campaign along with veteran leader Kamal Nath. In the 2014 Lok Sabha election, the two were the only Congress leaders who won their seats in Madhya Pradesh amidst the nationwide Modi tsunami. 

Like Madhya Pradesh, Chhattisgarh too could be hit by anti-incumbency. In a  binary contest with the Congress, as the Gujarat poll has shown, the Congress can exploit voter fatigue with an incumbent. Chief Minister Raman Singh has been stolid rather than an inspirational leader though, unlike Pilot in Rajasthan and Scindia in Madhya Pradesh, the Congress in Chhattisgarh lacks a charismatic leader. 

More worrying for the BJP is what the Gujarat election result portends for the 2019 Lok Sabha election. The Congress has shown that it retains the ability to be a robust opponent. Even a relatively small coalition with the Patidars and other caste combinations was enough to run the BJP close in Gujarat. If Modi hadn’t campaigned as vigorously as he did in the state, the BJP could have come perilously close to falling below the 92-seat  mark and ceding its majority for the first time since 1995. While Modi’s vote-catching popularity has not ebbed from the high of 2014, the BJP’s on-ground performance has clearly fallen short. Instead of winning the 150 seats Shah had proclaimed, the party scrambled to a slender majority. 

The biggest worry for the BJP though is the emergence of Rahul Gandhi as a major future electoral threat. Rahul campaigned tirelessly in Gujarat, rarely losing focus. He temple-hopped to assert his Hindu roots, realising that in sharply polarised Gujarat being seen as a Muslim appeaser would be an electoral disaster. Rahul’s social media messaging has also become sharper with a young new team. No longer can the BJP or its supporters dismiss Rahul as a lightweight. 

In the end, victory margins do matter. They can influence voting patterns in future elections. They can energise the loser and chasten the winner. By winning the Gujarat poll by a margin narrower than most exit polls had predicted, the BJP has shown vulnerability. In Bihar in 2015, it lost because of the Congress-JD(U)-RJD mahagathbandhan. In Gujarat, it has scraped through after being given a fright by the caste coalition the Congress cobbled together. 

Opposition leaders will learn from the BJP’s underwhelming performance in Gujarat. Coalitions, where possible, are now the likely route in most future state and general elections. For Modi, Gujarat has several lessons. One, he must build a stronger second line of leadership. Two, the BJP must rebuild its NDA coalition: it suffers from neglect and that could cause problems in 2019. Three, the prime minister should re-focus on development and governance. Establish a Lokpal, revive the sclerotic Right To Information (RTI) ecosystem, and overhaul the bureaucracy. Time is running out.

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Electric Car Revolution
Till prices fall and production rises, India will lag behind China, the US and Europe in switching to electric cars

Tuesday, December 19, 20

By 2030, many of us will be driving electric vehicles – cars powered by lithium-ion batteries rather than the century-old internal combustion engine that uses petrol and diesel. The Indian government plans to phase out fuel-engine vehicles over the next 15 years. In the West and China, the pace is even quicker. 

So far the hurdle for electric cars and trucks has been the short distance that can be travelled between charges. That’s changing fast. Tesla’s CEO Elon Musk says his latest electric car can go over 600 miles between charges. He plans to get an electric-powered truck on the road within months. All of this has huge implications on the future of the oil industry and the battle over global warming. 

Cars and trucks spew carbon dioxide into the atmosphere. Electric vehicles will reduce pollution as the world gradually shifts from petrol and diesel vehicles to battery-powered cars and trucks. While the aviation and shipping industries will continue to rely on petroleum products for longer than the automotive sector, scientists are already working on short-haul electric-powered passenger aircraft.

In India, the speed breaker for fast-tracking electric cars is the lack of charging station infrastructure. In the United States, charging stations are becoming almost as ubiquitous as petrol pumps. New technology is allowing charging facilities to be set up even outside individual homes. China has treated the move towards electric vehicles as a means to reduce both pollution and reliance on fossil fuels. 

The challenge to convert a century-old technology of petroleum-fuelled vehicles to an electric battery-powered transport universe is enormous. Only one per cent of vehicles worldwide today run on electric charge. China is leading the way. Over two per cent of its annual production of cars is now electric-powered. In 2016, China made more than 3,00,000 electric cars, the highest in the world. By 2025, China plans to increase the ratio of electric cars to 20 per cent of total production. 

An internal combustion engine that runs on petrol or diesel has over 2,000 moving parts. An electric battery-powered car engine has only around 20 moving parts. As a result electric cars need much less maintenance and have longer “shelf lives” than petrol/diesel cars. In India, hybrid cars that can switch between petrol/diesel and electric batteries sell for less than Rs10 lakh. However, cars powered only by electric batteries cost upward of Rs 35 lakh. Till prices fall and production rises, India will lag behind China, the US and Europe in switching to electric cars. China’s ambitious target is to completely end the production of petrol and diesel cars by 2030. The Chinese government has imposed penalties on automobile manufacturers who don’t meet phased electric car volume targets incrementally by 2020 and then by 2025. 

In India, Energy Efficiency Services Ltd. has catalysed the move towards electric cars. Its tender was won by Tatas with Mahindra, the second lowest bidder, getting a 30 per cent share of producing 10,000 electric cars in an initial order. 

The numbers remain small and the Indian government must encourage the establishment of an infrastructure of charging stations across the country as the US and China have done. The National Electric Mobility Mission Plan (NEMMP) was endorsed by the Indian government in 2015. The target is to, like China, end petrol and diesel vehicle manufacturing by 2030 and switch entirely to electric vehicles (EVs). 

The ISRO’s Vikram Sarabhai Space Centre is doing excellent work in battery cell technologies. Chetan Maini’s Reva was India’s first electric car. Maini was a pioneer, ahead even of Tesla’s Elon Musk. The Reva was launched in 2001 but due to the lack of an ecosystem for electric cars in India, volumes didn’t pick up. Mahindra acquired the company in 2010 and is leading the charge to mainstream electric cars. Hyundai makes electric cars in South Korea under the Ioniq brand. It has pledged to begin EV manufacturing in India once the infrastructure for charging stations is in place. ABB India recently bid for a government tender to set up 4,500 charging stations for EVs. 

As Union Transport Minister Nitin Gadkari said in a recent interview: “Already, electric taxis are fully operational in (Nagpur). We have 20 charging stations and we are installing 20 more. Additionally, there are 55 buses running on 100 per cent bioethanol. We are scaling it up to 1,000 electric taxis. So it’s a public transport revolution. Let’s say petrol is Rs 80 (per litre) and diesel is Rs 60 (per litre). In electric, the equivalent cost will be Rs 10. On top of that, it is pollution-free, cost-effective and an import substitute. The problem in making all this (electric vehicles) was that the lithium-ion battery was expensive, but now look how costs are coming down. Even as we speak, I know they have just come down by at least Rs 40-50 further.” 

Once EVs take off globally, crude oil prices are expected to fall below $20 a barrel. That would be a windfall for India which imports 82 per cent of its crude oil, spending nearly $100 billion annually. India will benefit in two ways with EVs: one, lower pollution in cities; two, a lower trade deficit due to reduced crude prices. 

According to a UBS Global Auto Survey citied by Bloomberg: “Almost every sixth car sold in the world will be electric by 2025. By the middle of the next decade, global sales of electric vehicles should hit 16.5 million, analysts led by Patrick Hummel said in the report, a 16 per cent increase from the previous estimate. They predict electric vehicles will make up 16 per cent of all car sales by then, up from a previous estimate of 14 per cent.” Hummel added: “The shift to electric cars will come faster in a more pronounced way fuelled by the diesel demise in Europe, battery technology advancements and regulation in China and Europe.” 

In the 1920s, Henry Ford set off the automobile revolution by establishing the world’s first assembly line production that transformed individual public transportation. A century later, the automotive industry is gearing up for another revolution.

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Trumps controversial Jerusalem decision could rip the veil off Saudi-Israel alliance
For India, the changing geopolitical landscape in the Middle East presents several challenges and opportunities.

Thursday, December 14, 2017

When Dhirubhai Ambani was 17 years old, he sailed to Aden in search of a job. It was 1949. Yemen was a British colony. Aden, Yemens bustling port, beckoned the adventurous. Dhirubhai worked as a petrol pump attendant in Aden for seven years before returning to India to begin his extraordinary corporate journey.

Six decades later, Yemen faces what the United Nations describes as the worlds worst humanitarian crisis in more than a quarter-century. Nearly 17 million of Yemens 28 million citizens are on the verge of starvation. A Saudi Arabia-led military coalition of Islamic states has bombed civilian targets for months. It has not spared hospitals, schools or even mosques.

To compound what could well be considered a war crime, the Saudi coalition (whose armed forces are led by former Pakistan army chief General Raheel Sharif) has imposed a blockade on food and medical aid reaching Yemen from the UN and human rights bodies. With no electricity or medicines, Yemen is witnessing an outbreak of cholera on an unprecedented scale. Mortified by the inhumane Saudi blockade, the US last week officially asked Saudi Arabia to let essential supplies through.

While Saudi Arabia is the principal culprit in the war on Yemen, the United States and Britain are culpable as well. They backed the Saudi coalition to attack Yemens Houthi rebels in March 2015. Washington and London, veterans of illegal wars in Iraq and Syria, have provided the Saudis (a wealthy client state) with state-of-the-art weapons.

The Houthis, a Shia sub-sect, are supported by Shia Iran, a mortal enemy of Sunni Saudi Arabia. But beyond the Shia-Sunni conflict that today roils the Middle East, the war in Yemen transcends sectarian conflict. The Houthis have long felt marginalised by the Yemen government. They resent the increasing influence of Saudi religious extremism in the country.

Washingtons backing of the Saudi-led assault on Yemen fits into the cynical politics the US has practised in the Middle East for decades. President Donald Trumps pathological opposition to Iran has consummated a US-Saudi-Israel minage-a-trois, bound together by a visceral hatred for Iran. This has led to unintended and curious consequences. Despite not having diplomatic relations, Saudi Arabia and Israel are now in effect close allies. Qatar and Turkey, earlier in the Saudi orbit, have been driven into Irans embrace.

Trumps controversial decision to recognise Jerusalem as Israels capital could, however, rip the veil off the covert Saudi-Israel alliance. The Arab and larger Muslim world has erupted in anger over Trumps decision. Saudi Arabia is widely seen as complicit in that decision. If Riyadh had objected strongly to Washington recognising Jerusalem as Israels capital, it might well have been deferred. The US-Saudi-Israel alliance of convenience could be the first casualty of Trumps Jerusalem move.

Saudi Arabia was the earliest supporter of the Islamic State (ISIS). It used the terrorist group to fight the Syrian government of Bashar al-Assad, an Alawaite (a Shia-affiliated sect). The intervention of Russia, backed by Iranian militias, turned the tide of the war. ISIS was defeated in both Syria and Iraq (a Shia majority country). To Riyadhs horror, this has led to the formation of a crescent of Iranian power from Tehran in the east to Beirut in the west. A rattled Saudi Arabia has reacted in rage-fuelled panic.

United States, the worlds most liberal democracy, and Saudi Arabia, the world most repressive dictatorship, have enjoyed a cosy relationship since the 1930s. America provides protection, Saudi Arabia provides oil. Saudi Arabias callous blockade of Yemen has, however, made it difficult for the US to support the coalition war with the same enthusiasm as before. Riyadh too is in a fix. Humiliated by its inability to defeat the Houthis after nearly three years of war, it cant openly back Trumps Jerusalem decision which has delighted Israel and caused anger across the Middle East.

The Saudis choreographed entente cordiale with Israel could now unravel. Significantly, Americas dependence on Middle East oil will soon end. It produces nearly as much oil (10 million barrels a day) as Saudi Arabia. At over $65 (Rs 4,190) a barrel, US shale oil is again a profitable business and could make America a net oil exporter over the next few years.

For India, the changing geopolitical landscape in the Middle East presents several challenges and opportunities. One, Indias excellent relations with Arab countries, Palestinians, Iran and Israel have deepened under Prime Minister Narendra Modi, cementing New Delhis role as a neutral player in the Middle East.

Two, India has stakes across the region: over seven million Indians work in the Middle East. Three, the Iranian port of Chabahar, recently operationalised, gives India for the first time direct access to landlocked Afghanistan, bypassing Pakistan. Four, Israel is a key defence partner. This explains Indias silence as violent protests over Jerusalem explode across the Arab world.

Quietly though, India is deploying two other geopolitical aces it has up its sleeve. The first is the International North-South Transportation Corridor (INSTC) which will connect India with central Asia right up to St Petersburg in Russia. The second ace is the Asia Africa Growth Corridor (AAGC) linking India to resource-rich Africa.

Even as China suspends three China-Pakistan Economic Corridor (CPEC) infrastructure projects on grounds of corruption and security, Indias new economic corridors will transform the geopolitics of a volatile region across three continents: Asia, Europe and Africa.

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Dynasty damages democracy
Rahul Gandhis ascension to the post of party president is a deeply regressive move for party democracy

Thursday, December 7, 2017

The Nehru-Gandhis have maintained a vice-like grip over the Congress since Indira Gandhi split the party in 1969, sidelining the Syndicate comprising leaders like Kamaraj and Nijalingappa. The Gandhi family has controlled the cash-rich party ever since by electing themselves a president or nominating a loyalist to the post. The grip has never slackened.

Two years after Sonia Gandhi unceremoniously dumped Sitaram Kesri as Congress president in 1998 and appointed herself in his place, Jitendra Prasada (Jitin Prasadas father) stood against her in 2000. He was roundly defeated by Congressmen enraged at his effrontery. Prasada died shortly thereafter, in January 2001, aged just 62.

No one has since challenged Sonia Gandhi who, at 19 years, was the longest-serving Congress president in history. Jawaharlal Nehru, for example, was Congress president in independent India for a total of only four years, from 1951-54. Not surprisingly for a party steeped in feudalism, loyalists in the Congress have rallied around Rahul Gandhi. Delegates who backed Rahul in the election for Congress president were handpicked.

Ironically, Jitin Prasada, son of the only Congressman, Jitendra Prasada, who had the gumption to stand for election against Sonia Gandhi 17 years ago, moved a resolution in an Uttar Pradesh meet urging Rahul to take over as Congress president. Such is the sycophancy that courses through the Congress partys feudal veins.

Dynasty is toxic. It damages democracy. In my book, I dealt with a particularly disingenuous myth spread by feudal leaders defending dynasty: An argument advanced in favour of political dynasties in India is superficially seductive: the sons and daughters of lawyers become lawyers. So do doctors, businessmen, and actors. But professionals in medicine and law earn their degrees. Businessmen owe their position to specific financial shareholding. Actors are made and unmade every Friday. The purpose of democracy is to widen voter choice  not narrow it. By choosing dynasts over merit, political parties limit the choice voters have and lower the overall level of competence in Parliament.

Unless the Congress undergoes an internal catharsis, it will remain a feudal family fief. The outcome is bad governance, nepotism and incompetence. Following in the Congress malign footsteps, several political families established the lucrative business of dynastic political parties in the 1980s and 1990s. All without exception have spawned corruption, misgovernance, nepotism and communalism.

The roll call of dynastic parties is evocative: Lalu Prasad Yadavs Rashtriya Janata Dal (RJD), Mulayam Singh Yadavs Samajwadi Party (SP), Sharad Pawars Nationalist Congress Party (NCP) and Farooq Abdullahs National Conference (NC) to cite just a few. Regional parties like the Trinamool Congress (TMC) in West Bengal and the Telangana Rashtra Samithi (TRS) in Telangana have installed family members in key positions. The National Democratic Alliance (NDA) too has its own dynastic parties: Chandrababu Naidus Telugu Desam Party (TDP) and Ram Vilas Paswans Lok Janshakti Party (LJP). The BJP has promoted dynasts like Vasundhara Raje as well, though on a much smaller scale than the dynast-infested Congress.

When dynasty takes precedence over merit, the quality of governance suffers. Globally, the evidence is as damning as it is in India. Robert Mugabe, who was president of Zimbabwe for 37 consecutive years during which he devastated the countrys economy, wanted his wife Grace, accused of corruption and despotism, to succeed him as president days before he was removed from office in a choreographed army coup. In Cuba, Fidel Castros brother Raul has tried, with limited success, to reverse the ruinous socialism that has impoverished his island country.

North Korea, Pakistan and the sheikhdoms of the Middle East are other examples of how political families have curtailed their citizens freedoms, supported terrorism and imposed medieval laws to safeguard their dynastic cabals. The most successful democracies worldwide have long rejected dynasty in favour of meritocracy. In 241 years since Independence in 1776, only three families in the United States have produced more than one president: the Adams, Harrisons and Bushes. In Britain, the last dynast to head the government as prime minister was William Pitt the Younger in 1783.

To cleanse public life, dynasty must go. As Rahul becomes the sixth Nehru-Gandhi after Motilal, Jawaharlal, Indira, Rajiv and Sonia to head the Congress, he must reflect on just how regressive his ascension to the party presidency is. Rahul will have to brace himself for what could be bad news from Gujarat. After its rout in the Uttar Pradesh civic polls, including in The Familys pocket borough of Amethi, a defeat in Gujarat will sting. It will also strengthen the hands of the tiny minority in the Congress that has had the courage to speak out against dynastic succession.

Rahuls temple-hopping spree during the Gujarat campaign has meanwhile drawn criticism. Opposition leaders have questioned his faith. Religion should not matter but in public life, as former Jammu & Kashmir Chief Minister Omar Abdullah said, it unfortunately does. Ambiguity over religion can play on the minds of voters in Gujarat and Himachal Pradesh who tend to take matters of faith seriously. On December 18, when votes are counted in Gujarat and Himachal, Rahul will begin his presidency on a grim note a week before inclusive India celebrates Christmas.

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Politics, Like Crime, Pays
Criminal elements and power brokers “invest” in a candidate, financing his campaign. In return they expect favours

Wednesday, December 6, 2017

Politics is the first refuge of scoundrels. That piece of conventional wisdom may be contested by the few politicians who regard themselves as serving the public interest. Statistics tell a different tale: 1,581 MPs and MLAs across political parties face criminal prosecution. Nearly 34 per cent of  MPs in the current Lok Sabha have criminal cases against them. 

An alarmed Supreme Court last month directed the Narendra Modi government to set up special courts to hold “exclusive” trials against tainted lawmakers and “decide the cases within a year”. 

The issue is more complicated than even the Supreme Court imagines. The Association for Democratic Reforms (ADR) has long published names of parliamentarians and state legislators who face criminal charges. Some of these charges are flimsy and relate to unlawful political morchas, crowd disturbances at campaign rallies and controversial speeches. But some charges are serious enough to warrant the Supreme Court’s intervention. The Election Commission of  India (ECI) prescribes a six-year ban on convicted lawmakers. It wants to convert that into a life ban. Those affected by such a ban would include Lalu Prasad Yadav, chief of the Rashtriya Janata Dal (RJD), convicted in the fodder scam.

Politicians frequently claim that cases against them are politically motivated and fabricated. One of the founders of the Association for Democratic Reforms, Jagdeep Chhokhar, a tireless advocate of cleaning up Indian politics, has an answer to such apprehensions: “A simpler, and arguably, more effective step could be to ban all persons from contesting elections who have criminal cases pending against them, but with three safeguards against misuse. Only those cases should be considered (for disqualification from contesting) in which: (a) punishment is two (or three, or five) years or more; (b) the case has been registered at least six months before the announcement of elections; and (c) charges have been framed by a court of law. These are the safeguards that the Supreme Court has specified in 2002 but which have been forgotten in the din.” 

While Chhokhar’s three safeguards deal with most politicians’ misgivings, the problem has far deeper roots. The first is the large amount of money needed to contest an election. Criminal elements and power brokers “invest” in a candidate, financing his campaign. In return they expect favours following their “sponsored” candidate’s election – government contracts, project clearances and high-level access. The cycle of corruption and crony capitalism begins here.
Every recent corruption case, from Coalgate and 2G to AgustaWestland and Aircel-Maxis, resulted from a subversion of due process. Wrongful access was given (Aircel-Maxis), projects were illegally cleared (2G), government contracts wrongfully obtained (AgustaWestland) and natural resources illegitimately auctioned (Coalgate). Till funding of elections becomes more transparent, criminals will continue to subvert the system through the MPs and MLAs whose elections they have financed.

The second root cause of rampant criminality in Indian politics is the judiciary itself. Convicts like Lalu Prasad Yadav know the legal system favours them. He remains free on bail while his appeal crawls through the higher judiciary. Today courts are the best defence for anyone wishing to escape the law. Over three crore cases are pending in courts across the country, some going back to the 1960s. For those in legal trouble, the credo is: go to court. As a strategy it serves politicians and businessmen well. Vijay Mallya and Lalit Modi, for example, have adroitly used the courts to delay justice. 

The Supreme Court was being disingenuous in expressing disbelief at the number of criminal cases pending against MPs and MLAs. Were it to, suo motu, set up special courts, promote more arbitration panels headed by retired judges and quicken the pace of justice, criminally charged politicians would begin to fear the courts rather than welcome them as a protective shield. Inconvenient media can meanwhile be silenced by suing for defamation. By the time the case comes up for trial after numerous adjournments, the purpose would have been achieved: gagging the media till the story fades from public memory. 

The third reason why people with criminal backgrounds are attracted to politics is the polarisation of society along caste, regional and religious lines. To commandeer vote blocs, local criminals are deployed. With most political parties functioning as feudal family-run corporations, winning elections is a vital ingredient of a successful business model. 

Voters don’t seem to mind political criminality as a recent research report by the founder-chairman of ADR, Prof. Trilochan Sastry, reveals: “In every type of criminal case, the percentage amongst winners is much more. Civil society and the Election Commission have therefore asked for candidates with serious criminal cases to be barred from contesting elections. The Courts have also been inclined to take this view although they are not empowered to enforce this. A large percentage of candidates with serious criminal charges actually win elections. While only 12 per cent  of candidates with a  ‘clean’ record win on average, 23 per cent of candidates with some kind of criminal record win, and more alarmingly, 23 per cent of all those with serious criminal charges win. Nearly every party shows that a greater percentage of those with a serious criminal record win compared to those without any record. This partly explains the strong tendency of political parties to continue fielding people with badly tainted records.”

The case of Lalu Prasad Yadav again underscores this. Lalu has for years mollycoddled the terrorist Shahabuddin, who is currently in jail, to win Muslim votes. Shahabuddin is accused of throwing political opponents alive in vats of  boiling hot oil. And yet Lalu’s RJD won the highest number of seats in the 2015 Bihar assembly election. The Samajwadi Party (SP) in Uttar Pradesh too is notorious for using criminals to subvert the law. In West Bengal and Kerala, thugs doubling up as party workers capture voting booths during elections and murder political rivals with impunity. The Trinamool Congress (TMC) has exceeded even the Left’s long record of egregious violence. Here too, voters returned the TMC  to power in 2016 despite its record of anarchy and corruption. 

A fish rots from the head down. The Supreme Court should keep that in mind as it wrestles with the daunting task of cleansing Indian politics.

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Build the Ram Temple, but also build hospitals and schools in Ayodhya
Uttar Pradesh CM Adityanath has wisely kept himself out of the controversy, leaving it to the Supreme Court.
Wednesday, December 6, 2017

I have long argued that the Ram Temple should be built in Ayodhya where the Babri Masjid once stood.

Archaeologists have confirmed that an ancient temple lay beneath the Babri Masjid. December 6 marks the 25th anniversary of its demolition. The Supreme Court began hearing the case on the Ram Temple on December 5 and adjourned it to February 8, 2018. An out-of-court settlement between Sunni-led Muslim groups and the Hindu petitioners could yield a quicker result.

The Shia Waqf Board has meanwhile done what every Muslim organisation should have done long ago: given its blessings to build the Ram Temple in Ayodhya and put an end to a legal, religious and political battle that has distracted India and, in particular, Uttar Pradesh from more urgent tasks: healthcare, education, sanitation and infrastructure.

Uttar Pradesh has a larger population than Pakistan. Its 220 million people have among the worst social and economic indicators in India. Crime is rampant. Casteism remains endemic. Under Chief Minister Yogi Adityanath, law and order has improved though not as rapidly as it should have. During the Samajwadi Party government, Uttar Pradesh fell into an abyss of criminality. The statistics are stark and tell their own tale.

Research conducted by the Hyderabad-based Indian School of Business (ISB) revealed that Uttar Pradesh was safest from 1999 to 2003 when the BJP was in power. According to the report, “Since 2003 when either the BSP or SP have been in power, violent crimes in UP increased significantly at the rate of over seven per cent per annum. In comparison, Bihar which is the closest to UP in its record in crimes, registered an increase in violent crimes at three per cent per annum.”

The report’s author, Krishnamurthy Subramanian, ISB’s associate professor of finance, said that within the category of violent crimes, two particular markers assume critical significance. First, murders, kidnappings and abductions; second, crimes against women. “It is very clear from the above analysis that consecutive governments led by the  BSP and SP have exacerbated the lack of law and order in UP," writes Professor Subramanian. 

Adityanath has been criticised for introducing “Hindutva-plus” in Uttar Pradesh. Contrary to the popular impression that he spends more time on the affairs of his Gorakhnath math than on governing the state, the chief minister has turned out to be a hard taskmaster. 

He begins meetings with bureaucrats at 6 am. The sessions last for several hours. The meetings reconvene at 6 pm and go on till midnight. Bureaucrats unlucky enough to be part of both the early morning and late night meetings are sleep-deprived.

Has this helped Uttar Pradesh repair, for example, its notorious healthcare system? For decades, government hospitals in Uttar Pradesh have been children’s mortuaries. Dozens of newborns fall victim to Japanese encephalitis.

As a five-time MP from Gorakhpur, Adityanath has raised in Parliament for over a decade the issue of vaccinating children against encephalitis. Now that he is chief minister, what is he doing about it? Not much.

Law and order, too, remains a seemingly intractable problem though Adityanath says policing is improving: “More than 1,200 criminals have been sent to jail since the BJP government assumed office in the state in March 2017. Police are working in their own style to establish the rule of law which is a priority of my government. The situation has improved to such an extent that investors are heading towards UP, while criminals are scurrying for cover and leaving the state or preferring to stay in jail."

Cycle of communal violence
The demolition of the Babri Masjid led to a cycle of communal violence that still simmers in pockets of Uttar Pradesh. Soon after the demolition, Muslim mobs attacked Hindu targets. In Mumbai and elsewhere there was quick and vicious retribution.

Hindu mobs roamed the streets of Mumbai (then still Bombay) in January 1993. Over three specific days, January 7-9, 1993, Muslims and their homes were targeted and destroyed. Red crosses appeared on the doors of terrified Muslims targeted by the Shiv Sena.

Two months later, the Muslim underworld took revenge. Serial bomb explosions rocked Mumbai killing over 250 people. Tiger Memon, Chhota Shakeel and Dawood Ibrahim, who plotted the attacks, have remained beyond the reach of Indian justice, protected by Pakistan.

The city has never recovered from the 1992-93 cycle of communal violence. Muslims have retreated further into ghettos in Mumbra, Bhiwandi and Dongri. Celebrities like Shabana Azmi and Javed Akhtar find it difficult to buy flats of their choice because of the deep distrust that has developed between the two communities.

On a visit to India last week, former United States President Barack Obama remarked that Indian Muslims were well integrated into Indian society unlike in other Muslim-minority countries like France, Belgium and Germany. He said India must “nurture” its Muslims.

Obama is right and wrong. If by “nurture” he means empower Muslims, he is right. If by “nurture” he means placate Muslims with sops, he is wrong. That is the quickest recipe to deepening the schism between Muslims and Hindus who have yet to come to terms with old perceived grievances going back to the brutalities of Aurangzeb and earlier Muslim invaders.

Indian Muslims are woven into India’s social and economic fabric. From the Muslim breadman and auto mechanic to the Bollywood star and iconic cricketer, Indian Muslims know in their heart of hearts that civilisationally they are Indians first. They have nothing in common with the Arabs of the Middle East who give them work but not kinship. That they find only in India.  

This must be the touchstone of a settlement over the Ram Temple. It must be built where the Babri Masjid stood. Muslims must help build it. The Shias have agreed. Sunnis must show similar grace.

Adityanath has wisely kept himself out of the controversy, leaving it to the Supreme Court to deliver its long delayed verdict. He should focus on governance. Uttar Pradesh has over 40 million Muslims. Madrasas in the state, as a recent report discovered, teach very little math and English. That must change.

Ayodhya, a town of 60,000 inhabitants, is decaying. Its Hindus and Muslims live in harmony. But along with the Ram Temple, Ayodhya needs modern schools, hospitals, infrastructure and sanitation. Lord Ram wouldn’t want it any other way.

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Gujarat elections Why it's make or break for Rahul Gandhi
Would it not have been wiser for new to-be Congress president to wait for the Karnataka poll to move up a rung?
Sunday, December 3, 2017

Can Congress president-in-waiting Rahul Gandhi beard the lion in his own den?

Unlikely. But the Congress, out of power in Gujarat since 1995, has set a low bar for measuring Rahuls success. If the BJP can be kept to below 115 seats (its 2012 tally) in the 182-seat Assembly, then it will count as a vindication of Rahuls leadership.

After the Congress dismal performance in the Uttar Pradesh civic polls and a wipe-out in Rahuls Amethi constituency, even the most optimistic ground-level Congress worker in Gujarat expects the party to lose the election. The only question is by how much the BJP will win. There are three scenarios.

First, the BJP runs away with it, winning over 130 seats, using its fearsome booth-level power. That would be an early setback for Rahuls party presidency.

Second, the BJP gets 115-120 seats, matching the 2012 result. Rahuls sassy social media head will spin this as Rahuls win, ignoring that it still gives the BJP nearly two-thirds of the Assemblys seats.

Third, the BJP struggles to get past 100 and ends up with a slim majority of around 105/182. Rahuls team will talk that up as a big win for their new leader, taunting the BJP that the trend proves that this is its last term in office in Gujarat.

Rahul has taken a gamble to time his dynastic ascension so close to the results of the Himachal Pradesh and Gujarat elections. He knows that the Congress faces a rout in Himachal. And Gujarat, for all the damage Hardik Patel may do, is a lost cause as well.

On December 18, counting day, Rahul will be blamed for both the defeats. Would it not have been wiser to wait for the Karnataka poll (where the Congress should do well) in April 2018 to move up a rung in what, since Indira Gandhis internal Congress coup in 1969, has been the Nehru familys ancestral property?

To answer that question, dig deeper into Rahuls personality.

Psychologically singed by grandmother Indiras and father Rajivs assassinations, Rahul is unpredictable. In 2013, he displayed that by publicly tearing prime minister Manmohan Singhs ordinance which would have allowed Lalu Prasad Yadav to contest elections. 

The incident showed Rahul was capable of distinguishing right from wrong but suffered from a dynasts sense of entitlement that allowed him to publicly humiliate his prime minister, and the hapless Ajay Maken, who was present at the press conference where Rahul angrily tore up the ordinance.

So Rahul did the right thing in the wrong way. Not a disqualification for politicians, most of whom do the wrong thing in the wrong way (i.e. surreptitiously).

Rahuls streak of arrogance hides his insecurity. His reluctance to take charge of the Congress since mother Sonia Gandhi signalled years ago that she was ready to step aside sprang at least partly from that feeling of inadequacy.

His differences with the old guard, now largely settled, hark back to the same sense of insecurity that is often disguised in a show of arrogance. That led to the long reluctant Rahul phase. It also caused him to sleepwalk through parliamentary debates and disappear to unknown destinations for weeks together, once famously in 2015 for two months.

Next, look at Rahuls background. Father Rajiv was a reluctant politician, too. He had to be persuaded for months by his mother Indira Gandhi to join politics after younger brother Sanjay Gandhis death in a private plane crash in June 1980.

Rajiv was happy working as a full-time pilot for domestic carrier Indian Airlines from 1968 to 1980, deliberately distancing himself from Indian politics.

He finally, reluctantly, agreed to contest from Amethi, the family pocket borough now held by Rahul, in 1981. Wife Sonia was strongly opposed to him joining politics.

When Indira Gandhi was assassinated in October 1984, Sonia pleaded with Rajiv not to accept the prime ministership. She feared the worst. 

Thus reluctance to be an active politician was ingrained in Rahul. He avoided it till he was 34, the age in which Sanjay Gandhi died after a near-decade in politics. Thirteen years after, he became an MP from Amethi. Rahul at 47 has shed his reluctance but not his sense of entitlement.

It is a dynastic disease. The first germ was transmitted in 1959 when Jawaharlal Nehru appointed daughter Indira as Congress president. She was 41. The infection has since spread to other parties, but the Congress was the pioneer of a feudal system of political inheritance that has damaged the quality of Indian democracy.

By taking head-on the responsibility of near-certain defeats in Himachal and Gujarat, Rahul has shown bravado rather than bravery. Rajiv was brave. He led the computer revolution and tried to modernise the administration. But he had poor advisors, including the late Arun Nehru and a coterie of Italian businessmen, led by Ottavio Quattrocchi.

Eye on 2019
Rahul is positioning himself for the 2019 Lok Sabha elections. The Congress believes it can cut BJPs parliamentary seat tally in five key states: Uttar Pradesh, Gujarat, Madhya Pradesh, Rajasthan and Chhattisgarh. That could slice 60-odd seats from the 282, the BJP won in 2014.

With around 220 seats, Modi would find it difficult to form an NDA government if the Shiv Sena walks out. The only major allies left would be the JD(U) and the TDP. The numbers for the NDA would then fall below 272.

If an Opposition national alliance can put together a government with a working majority, the Congress could support it from outside (as it did in 1996-98). That though is a wishful thinking. The Congress itself is unlikely to improve significantly on its 2014 tally of 44 seats (45 following a by-election). Its alliance partners are all regional. Only the TMC will cross 30 seats in the Lok Sabha. A collection of Opposition Lilliputs could scare off the electorate.

The Modi magic may meanwhile return as the economy recovers. If the Congress trips up with more chaiwala jibes, the NDA could again win over 300 seats.

Its early days yet. Gujarat and Himachal will prove little. Nor will Karnataka. To see which way the political wind is blowing, well have to wait for December 2018 when Rajasthan, Madhya Pradesh and Chhattisgarh go to the polls.

They could decide Rahuls fate in 2019.

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India doesn't stand to gain from Pakistan's shifting equations with US and China
For New Delhi, the Trump presidency has so far been a mixed bag.

Thursday, November 30, 2017

Hard-line religious groups forced the resignation this week of Pakistan's law minister Zahid Hamid. They had laid siege to cities across Pakistan, enraged by the amendment (later rescinded) to an electoral law they believe diluted the "crime" of blasphemy.

Pakistan has long cultivated religious extremism and terrorism. Both are now slipping out of its control. The backlash is fierce. The Pakistani army has made a fortune out of its decades-old terror factory. That factory is now spewing hard-line fanatics challenging the government's writ across Pakistan.

Since President Donald Trump took office, Pakistani army's top brass has been on tenterhooks. Would the unpredictable Trump actually carry out the threat he made two months ago to bomb terror safe havens on Pakistani soil? Apart from drone attacks in Pakistan's tribal areas, the US has been content to attack terrorist targets along the Af-Pak border. Trump seemed to have upended that policy: if you don't get rid of terror safe havens, we'll do it, Trump said last month. Having watched Trump carefully during the first 10 months of his presidency, Pakistan's blustery generals have come to the conclusion: it's going to be business as usual.

By removing the LeT last week from the list of proscribed terror groups that disqualify US military aid to Pakistan, Trump has proved the generals right: he's no different from former President Barack Obama whom the Pakistanis gamed successfully for eight years. The Trump administration, like the Obama government, has fallen for the line that Pakistan is essential to stability in Afghanistan. Islamabad provides the key supply route for US-Nato forces in landlocked Afghanistan. Besides, Pakistan controls the lever on terror: it can switch on and off terror attacks by the Taliban and uses that to blackmail the US into accepting Pakistan as a partner in the war on terror rather than its principal instigator.

For India, neither Obama's visit to Delhi this week nor Ivanka Trump's trip to Hyderabad for the Global Entrepreneurship Summit (GES) will count for much.

Obama is more concerned these days with the Obama Foundation than geopolitical strategy. Ivanka Trump is no longer quite the influential adviser to her father that some imagine. She has recently taken positions contrary to his on several issues. She condemned Roy Moore, the Republican candidate for a Senate seat from Alabama, following allegations of Moore's sexual harassment of minor girls. Trump earlier this week endorsed Moore. Ivanka was unimpressed, saying those who "prey on children have a special place in hell".

For India, the Trump presidency has so far been a mixed bag. Washington continues to appease China despite Beijing not able or willing to restrain North Korea's nuclear missile programme. It has relieved pressure on Pakistan-sponsored terror. The US has "asked" Pakistan to re-arrest Hafiz Saeed and charge him. But for years, Washington did nothing about Saeed despite putting a $10 million (Rs 64 crore) bounty on his head even as the LeT terror head roamed free.

For Prime Minister Narendra Modi, the Obama-Ivanka visits come at a time that is a tipping point in his foreign policy formulation.

The victory over Britain in the United Nations to elect an Indian judge at the International Court of Justice shows that a new world order is taking shape. The post-World War II domination of the West is ebbing. What could replace it? Clearly, one pole will be led by China and another by the US. India's growing geostrategic and economic importance has compelled the US to change its Asia-Pacific strategy to an overarching Indo-Pacific doctrine.

China factor
Islamabad is also waking up to the perils of relying on China to solve all its economic problems. Pakistan recently turned down Chinese assistance for the $12-billion (Rs 77,000 crore) Diamer-Bhasha hydel power project in PoK under the China-Pakistan Economic Corridor (CPEC) due to tough Chinese financial terms. The row has caused the first rupture between Beijing and Islamabad over the CPEC.

Interestingly, at around the same time last week, the Chinese ambassador to India, Luo Zhaohui, proposed renaming the CPEC to satisfy Indian concerns. He also controversially suggested that the CPEC need not, as originally planned, pass through PoK but could be routed through the parts of J&K not occupied by Pakistan. Beijing reacted swiftly. It refuted its own ambassador's statement and said cryptically that Pakistan remained China's "all-weather ally".

Nonetheless for India, there are signs of growing frustration between Pakistan and China over financial and security concerns involving the CPEC. The realisation too is dawning in Islamabad and Beijing, especially after India's diplomatic victory over Britain in the UN that New Delhi is finally beginning to punch at its true geopolitical weight. By making China back off over Doklam, India demonstrated steely resolve. At the UN, it demonstrated that it has the confidence and ability to defeat the diplomatic machinations of a major if declining world power, Britain.

There is talk now of India pressing forward for a permanent seat in the United Nations Security Council (UNSC). That is tactically unwise. The UNSC seat will come, if it does, only without a veto which makes it meaningless. India comes across too often as a supplicant, pleading for recognition from world powers, including its keenness for membership of the Nuclear Suppliers Group (NSG) when it already has a one-time NSG-waiver, obtained in 2008.

A rising economic and military power does not seek "great power" status. It commands it.


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How BJP's regressive missteps help its critics build myth of 'Hindu Pakistan'
Its reaction to the uproar over the movie Padmavati has been unconscionable.
Wednesday, November 22, 2017

Every now and then, like little genies popping out of a bottle, emerge dark prognostications of India becoming a mirror image of Pakistan. The clichéd phrase bandied about is “Hindu Pakistan”.

The BJP-led NDA government is doing its bit to give this manufactured lie a life of its own.

Its reaction to the uproar over the movie Padmavati has been unconscionable. The Rajput votes in Rajasthan and the conservative Hindu votes elsewhere have made the BJP a party that places winning elections above doing the right thing. The makers of Padmavati have been forced to defer its release.

Instead of arresting BJP leader Suraj Pal Amu who placed a Rs 10-crore bounty on Deepika Padukone’s head, the government has, by simply issuing him a show-cause notice, emboldened the rabble who pass off as guardians of Indian cultural tradition.

BJP leaders argue: let’s win elections first, then we’ll take care of doing the right thing which is to protect free speech, not protect vandals from fringe groups.

That assessment is wrong. Once you place elections above principle, the habit becomes hard to break.

The reactions of Uttar Pradesh chief minister Yogi Adityanath and Rajasthan chief minister Vasundhara Raje to Padmavati feed into a regressive narrative. Suitably garnished, it becomes fodder for those crying wolf over how the BJP is creating a Hindu version of Pakistan where dissent is crushed.

Yet websites, some with dodgy funding, abuse Prime Minister Narendra Modi daily. Politicians on the Left, in the Congress (which is much the same thing), in the Trinamool Congress, RJD and in AAP freely call the prime minister everything from a “demon” to a “fool”.

And that is as it should be. A liberal democracy thrives on combative politics.

So why the periodic clamour that India is spiralling down into the “Hindu Pakistan” abyss? The BJP government is partly to blame. Its messaging is amateurish, infrequent and unimpressive. In contrast, the Congress runs a slick operation. It has many distinguished rabbits it periodically pulls out of a well-endowed hat.

Counter Modi legally? There’s Kapil Sibal, available on call. Trash DeMo in print? P Chidambaram does it every week in his column. Rubbish GST in public? Bank on Manmohan Singh, who’s rediscovered his voice after 10 years of silence.

The BJP’s lack of tactical finesse shows up time and again. Its TV spokespersons are either too timid or too aggressive. The prime minister doesn’t hold press conferences which is counter-productive.

Modi is the government’s most effective public face. A monthly press conference, taking tough questions head-on, is necessary in a liberal democracy. By not communicating regularly with the broader media in a structured two-way conversation, Modi makes the Opposition’s case stronger, not weaker.

Hindu Pakistan?
The comparison between a terrorist state like Pakistan (which condones murders on the grounds of blasphemy, has Constitutionally delegitimised Ahmadis, targets Shias and has driven out most of its post-Partition Hindu population) and an India that protects its Muslim minority scarcely deserves serious attention.

But are Muslims in fact protected in India? In some ways, yes, in others, no.

Madrasas get government grants, Wakf boards enjoy huge land largesse, the devout receive Haj subsidies, personal laws remain untouched.

Muslims are used as vote fodder every five years and packed off to their ghettos once they’ve voted for the Congress, TMC, SP, RJD, AIMIM, IUML and other parties which claim to be secular.

And yet, despite this cosmetic protection, Muslims have over the past 70 years been rendered India’s poorest, most backward group - poorer and more backward than even Dalits. Their sense of alienation has deepened since the BJP government took office.

All this doesn’t add up to India becoming a “Hindu Pakistan”, but it does show up the BJP as a party that needs to up its game.

First, be socially liberal. India is a young country. It is also a deeply religious country. Don’t use religion to promote regressive ideologies. Films, art and literature are the essence of liberal democracies. Any attempt to throttle them - even if they “hurt” the sentiments of a particular community - may win the BJP majoritarian votes but will eventually lose it majoritarian respect.

Second, stay out of people’s lives. Aadhaar is a great idea but to link it to every aspect of a citizen’s life makes the BJP government look like Big Brother.

Third, be more relaxed about people’s eating habits. I’m vegetarian. That  doesn’t mean I impose my views on even my family who (proud Hindus, all) are non-vegetarian.

Fourth, worship cows, but don’t allow a single case of cow vigilantism. It brings out the worst in Hindu extremists. It also allows half-baked commentators to conflate Hindu extremists with Pakistani terrorists and advance their fictitious “Hindu Pakistan” narrative.

That narrative allows congenitally Indiaphobic media like The New York Times to peddle silly innuendos about “Hindu nationalism”. Its recent disgrace of an article on saris and Hindu nationalism is just one example of how Asians writing for foreign media (in this case Asgar Qadri) ingratiate themselves with their Western bosses by upbraiding India at every opportunity. “Hindu Pakistan” trips off the tongues of ex-desi commentators with practised ease. It earns them brownie points and enhances their career prospects.

India has the most pro-Muslim laws of any country where Muslims are not a majority. Britain, which like India also has a strong liberal anti-Islamaphobic movement, does not however hesitate to expel hate-spewing Muslim clerics. India hasn’t dared to do so even with those Maulvis who call for the prime minister’s beheading.

It is this dichotomy that India must overcome. In practice, India protects Muslims with minority-favouring laws. In popular perception, especially among motivated foreign writers, India discriminates against Muslims.

Both are misleading. In practice, the government must empower minorities with non-discriminatory treatment and equal opportunities. Simultaneously, it must stop mollycoddling them with cosmetic sops like quotas, Haj subsidies, unchallenged Waqf land rights and funds for madrasas. Treat Muslims like first-class citizens, not a group at whom you throw secular crumbs.

Muslims must for their part regard themselves as Indians first. If you want to belong to the 21st century, you must leave behind the interpretations of those who lived in the 7th century.

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The Bullet Train Ecosystem
In India, the only sensible way to look at bullet trains is to treat them in parallel with urgent reforms needed in the railways sector

Tuesday, November 21, 2017

Is spending rs 1,10,000 crore on a bullet train a waste of money? Worse, does it indicate the government’s flawed sense of priorities? The Mumbai-Ahmedabad bullet train has been criticised on both counts. Former Finance Minister P. Chidambaram has been especially scathing. How valid is the criticism? Not very. Consider three key ingredients of the Mumbai-Ahmedabad bullet train project:

One, it is virtually free. Around 80 per cent of its cost is financed by the Japan International Cooperation Agency (JICA) at a nominal annual interest rate of 0.1 per cent. On a staggered JICA loan of Rs 88,000 crore, the interest outgo will be a mere Rs 88 crore per year. More-over, there is a 15-year moratorium on the 50-year repayment period. Adjusted for inflation, the real cost of repaying the principal loan amount beginning in the 2030s would have depreciated to a fraction of the original cost. Repayment over 35 years after the 15-year moratorium would amount to a heavily depreciated Rs 2,500 crore a year. Assuming a modest average GDP growth rate of 6 per cent a year for the next 50 years, India’s economy will double every 12 years. Doubling four times over 48 years, GDP would therefore, at $40 trillion, be 16 times the current level of $2.5 trillion when repayments of a mere Rs 2,500 crore per year end in the 2070s.

Two, a crucial aspect of the bullet train project is the ecosystem that will grow around it. The 508-km Mumbai-Ahmedabad route will generate economic activity, create jobs, promote ancillary industries and boost trade between Mumbai and other key commercial cities along the route: Surat, Vadodara, Bharuch and Ahmedabad.

Three, the bullet train project will introduce next-generation rail technology in a country still largely wedded to creaking colonial-era railways infrastructure. Nearly half of India’s gargantuan railways network is not electrified. New technology is only now slowly seeping into the railways ecosystem with the Rajdhani now completing the Mumbai-Delhi run two hours quicker following technological tweaks.

The introduction of air-conditioned trains early next year in Mumbai’s ramshackle suburban railway system is another innovation. It will not only make a traumatic city commute bearable but sharply cut passenger fatalities caused by overcrowding in open-door suburban trains.

Despite its technological advantages by a process of osmosis, bullet trains are regarded as economically unsound. They rarely make money for their operators. While Japan, France, Germany and, more recently, China have embraced bullet trains, the US and Britain have not. Capital costs are high and ticket prices uneconomical. Bullet trains work best in countries like Japan and France though China has shown that they adapt well to large distances as well.

In India, the only sensible way to look at bullet trains is to treat them in parallel with urgent reforms needed in the railways sector. Indian Railways has, for far too long, been used as a political tool. Former Railway Ministers such as Lalu Prasad Yadav and Mamata Banerjee made the Railway Budget an instrument to curry favour with their constituencies in Bihar and West Bengal, respectively. Uneconomical train routes were inaugurated for political reasons. Corruption in the railways bureaucracy was rife. Catering standards were abysmal. Derailments and accidents became common.

Former Railway Minister Suresh Prabhu tried to reform the ministry but met with limited success. His successor, Piyush Goyal, who revitalised the power sector in his previous assignment, now has the formidable task of wringing change in what is India’s largest employer. Indian Railways carries 23 million passengers every day in 10,000 trains across the country besides freight. That is equivalent to transporting the entire population of Australia — daily. It will need all of Goyal’s ingenuity to fix Indian Railways’ schizophrenic problem: launching a world-class bullet train project while simultaneously lifting a sprawling railway system out of the 19th century and into the 21st century.

Goyal would do well to seek the counsel of Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council and minister of state (MoS)-level member of Niti Aayog, who knows more about Indian railways than most. Debroy authored a seminal report on reforming the railways, including privatising railway stations and cutting the bloated railways’ bureaucracy.

The Railway Board constituted a committee, chaired by Debroy, to mobilise resources for major railway projects and restructure both the Railway Ministry and the Railway Board. Here is what the Debroy Committee report recommended: “One of the key reasons for the failure of private participation in Railways is that policy making, the regulatory function, and operations are all vested within the same organisation, that is, the Ministry of Railways. The Committee recommends that the three roles must be separated from each other to have sustained and large scale private participation. Railways’ monopoly discourages private sector entry into the market. Second, schemes for private sector participation are not prepared with the involvement of stakeholders. Third, the schemes are designed such that the risk lies mostly with private parties.

“In order to create a level playing field for private players in the sector, the Committee recommends setting up an independent regulator, the Railways Regulatory Authority. The regulator will be a statutory body, with an independent budget and independent of the Ministry. While it will not determine tariff, it will monitor whether the tariff is market determined and competitive. An independent regulator for Railways is also necessary because of the technical and specialised nature of the sector.

“Financing of Railways is challenge because: (i) Investment is made in projects that do not have traffic and hence do not generate revenue (ii) The unbalanced mix of passenger and freight traffic does not help generate revenue (iii) The efficiency improvements do not result in increasing revenue and (iv) Delays in projects result in cost escalation, which makes it difficult to recover costs. Railways has also been mostly financed through internal resources and budgetary support, and not through external resources. Thus there has been no financial oversight of its projects.”

Goyal is known to be a reformist who works swiftly and transparently. If there is anyone who has a good shot at turning Indian Railways around at bullet train speed, he does.

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Opposition against Bharat Ratna for KM Cariappa is a distraction. The real target is General Bipin Rawat
There is anger among Left-leaning 'intellectuals' against the army chief following his commendation of Major Gogoi.
Friday, November 17, 2017

Farooq Abdullah, the former chief minister of Jammu & Kashmir, likes to make provocative statements. Few take him seriously anymore. His latest remark, "Pakistan-occupied Kashmir (PoK) belongs to Pakistan", can therefore be summarily dismissed - but only after setting the record straight.

Abdullah said India had "betrayed" the people of J&K by not granting the state autonomy and not implementing its promise of holding a plebiscite. (Note: Not a word meanwhile escaped from the loquacious Abdullah during his press interaction on the betrayal by successive J&K governments of 4,00,000 Pandits driven from their homes by Islamists and separatists towards whom the father-son party, the National Conference, leans.)Abdullah senior, as usual, is muddle-headed over the "promise" of a plebiscite in J&K. Of course, a plebiscite was promised by Jawaharlal Nehru. And of course that promise was formalised in a United Nations resolution in August 1948 even as the India-Pakistan war over Jammu & Kashmir still raged.

The resolution said: First, enforce a ceasefire. On December 31, 1948, a ceasefire was duly enforced. The resolution went on to say: Second, all Pakistani troops and other irregular Pakistani fighters must vacate the whole of Jammu & Kashmir.

Was that done? No. Sixty-nine years later, PoK remains under illegal occupation by Pakistan in defiance of the 1948 UN resolution.

The UN resolution said third and finally: Once all Pakistani troops and other Pakistani irregular tribal fighter vacate the whole of Jammu & Kashmir, a plebiscite in the state will be called. By not complying with the second condition of the UN resolution to vacate PoK, Pakistan forfeits the right to the third condition ? ie, a plebiscite.

Farooq Abdullah knows this perfectly well. And yet every few months, in order to placate the National Conference's communal vote bank, he raises the issue of autonomy, plebiscite and PoK.

He is best ignored but the issues he raises cannot be.

Abdullah's comment contradicts India's position on PoK articulated in an all-party resolution adopted by a Congress-led Parliament in 1994 that PoK is an integral part of India.

Abdullah's scatter-brained remark, however, serves the useful purpose of shining a light on the first war between India and Pakistan in 1947-48 over Jammu & Kashmir spearheaded by Field Marshal KM Cariappa whose "singular distinction", historian Ramachandra Guha recently wrote, "was that he was the first army chief. He was not necessarily the best, either in the field or as a tactician."

Is Guha right?

Consider the facts.

Cariappa was the first Indian army chief, taking over in January 1949 from the last British chief of the Indian army, Lt. General Sir Roy Bucher.

What was Cariappa's role in the long battle in 1947-48 to drive the invading Pakistani army and its tribal forces out of Poonch, Kargil and Uri?

In early-1948, as GOC-in-C of the Western Command, Lt General Cariappa led the force that recaptured Poonch, Kargil, Dras and other areas that the Pakistani army had overrun.

The Indians had been ill-prepared for the war over J&K that erupted weeks after the accession of the state to India. The Pakistani army, helped by irregular tribal fighters, made deep inroads into J&K. General Cariappa appointed Lt General KS Thimayya as GOC of the 19th Division as the war wore on.

By mid-1948, General Cariappa's troops were pushing the Pakistani army back. The tide had turned decisively in India's favour.

Politics now struck. Nehru was "persuaded" by the United States to halt the Indian army's advance. Despite orders from New Delhi to scale back the Indian army's thrust to drive the Pakistani army out of the whole of Jammu & Kashmir, General Cariappa defied the government and continued to push forward, securing Ladakh for India before operations ceased.

Following the UN mandated ceasefire on December 31, 1948, General Cariappa was appointed the first Indian to head the Indian Army. He took over as commander-in-chief of the army from Lt General Sir Roy Bucher on January 15, 1949. The day is celebrated as Army Day.

General Cariappa was conferred the rank of Field Marshal in 1986 by the Rajiv Gandhi government at the age of 87. The only other Indian army officer to be conferred the rank of Field Marshal (by, incidentally, the Indira Gandhi government) was Sam Manekshaw in 1973, when he was only 58.

As a young Major, Manekshaw like General Thimayya had served under General Cariappa in the 1947-48 India-Pakistan war. Manekshaw though never saw action on the J&K battlefront and was posted to MO Directorate. Manekshaw had, however, proved himself on the battlefield in Burma in 1942 during World War 2. He was lauded for bravery, but did not, unlike Cariappa, get to command a battalion.

Whether or not Field Marshal Cariappa deserves a posthumous Bharat Ratna, as army chief General Bipin Rawat has recommended, is not the key issue. The key question is the accuracy of Guha's claim that Field Marshal Cariappa's "singular distinction was that he was the first (Indian) army chief."


The evidence suggests Guha is wrong. There is a deep but unspoken anger among Left-leaning "intellectuals" (I use the word loosely) against General Bipin Rawat following the army chief's commendation of Major Gogoi in the jeep incident amidst stone pelting in the Valley. Anything that General Rawat says will see bile from these sections of Indian society rise to the surface and curdle, trapped in its sourness.

Field Marshal Cariappa's Bharat Ratna is a convenient distraction. The real target is General Bipin Rawat.

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Why India can't bank on Trump to curb Pakistan sponsored terrorism
US president can't back his talk of a new South Asia policy.
Thursday, November 16, 2017

After a flurry of meetings across Asia among world leaders, the question on everyone’s lips is: just what does the United States President Donald Trump stand for? In Beijing, Trump praised Chinese President Xi Jinping who was on his best behaviour. Xi gave Trump red carpet treatment and promised to work together for a terrorism-free South Asia. The loud chuckles from the Generals in Rawalpindi could be heard as far away as in Beijing.

The moment he left Beijing for Vietnam and then Manila for back-to-back summits with the leaders of ASEAN, Trump’s tone changed. He criticised China for unfair trade practices and praised Prime Minister Narendra Modi for doing an “astounding” job to make India a major global economy. Trump said: “Since India opened its economy it has achieved astounding growth and a new world of opportunities for its expanding middle class. PM (Narendra) Modi has been working to bring that vast country and all of its people as one. And he has been working at it very, very successfully indeed.”

The Trump-Modi meeting in Manila though was long on rhetoric, short on substance. Can Trump back his talk of a new South Asia policy that reins in Pakistan-sponsored terrorism? The short answer: no. There are multiple reasons for this. At home Trump is under enormous pressure. Democratic party victories last week in Virginia, New Jersey and Pennsylvania have been seized by the anti-Trump US media as a decisive turning point in the Trump presidency.

Special counsel Robert Mueller is meanwhile likely to charge Trump’s former national security advisor (NSA) General Michael Flynn over illegal Russian collusion as well as an alleged $15 million (about Rs 98 crore) payoff deal to forcibly seize Turkish cleric Fethullah Gulen and hand him over to Ankara which accuses him of masterminding last year’s failed coup in Turkey.

The US media, which hasn’t reconciled to Trump’s electoral victory last November, is circling over him like vultures sighting prey. Last week The Washington Post ran a story on Republican candidate Roy Moore, a former judge, virtually destroying his chances in a Senate race for the Alabama seat vacated by attorney-general Jeff Sessions.

If the Republicans lose their majority in the House of Representatives in the biennial 2018 elections, Trump faces the real prospect of impeachment. Mueller has widened his probe against Trump to include obstruction of justice, a lower bar to prove the Russian collusion in the 2016 Presidential election which requires proof of malicious intent.

Fighting multiple fires at home, Trump is hemmed in abroad as well. After Syria recently signed the Paris accord, the US is now the only country which has refused to ratify the climate change agreement.

All this at least partly explains Trump’s often contradictory positions on China, Pakistan-sponsored terrorism and the Saudi Arabia-Iran proxy conflict currently roiling the Middle East. Pakistan, left out of major world summits, is meanwhile chafing at the bit.

Desperate to win back a measure of respectability, it suggested a SAARC meeting to discuss pollution across north India and Pakistan Punjab. India has ruled out a SAARC summit as well as direct talks with Pakistan till terrorism from Islamabad backed jihadis ends.

Trump’s decision to change the narrative from Asia-Pacific to Indo-Pacific deeply worries Islamabad. The US-proposed quadrilateral between the US, India, Japan, and Australia, whose four leaders met in Manila this week, has also unsettled Pakistan.

It sees its options limited to China. In order to keep US trade sanctions at bay following its failure to rein in North Korea, Beijing will be compelled to show it is at least reining in Pakistan. This is part of Xi’s commitment to Trump last week in Beijing to make South Asia terrorism-free.

Complicating matters is the ongoing crisis in Saudi Arabia. Emboldened by Trump’s visit in May 2017 followed by his son-in-law Jared Kushner’s several under-the-radar trips to Riyadh, Saudi Arabia is upending decades of settled Middle East politics. Apparently with Trump’s blessings, Kushner has held long meetings in Riyadh, often past midnight, with Mohammed bin Salman, Saudi Arabia’s crown prince who is destabilising the Middle East with his demonic antipathy towards Shia Iran.

On one side are ranged Shia powers Iran, Iraq, Syria and Hezbollah-backed Lebanon. On the other side is a powerful Saudi-led Sunni alliance of Gulf states and Riyadh’s covert ally Israel. Trump has unwisely backed the covert Saudi-Israel alliance while Russia’s Valdimir Putin, who helped the Syrian government defeat, US-backed insurgents, fighting to overthrow Syrian president Bashar al-Assad, is firmly behind the Iran-led alliance. These global flashpoints threaten to overturn the balance of regional power in an arc from Lebanon in the west to North Korea in the east.

Right in the middle of this geopolitical theatre lies the longest running war America has fought outside its borders: Afghanistan. Trump knows Pakistan sponsored terrorism is the cancer at the heart of Afghanistan. But he cannot administer chemotherapy because Islamabad controls access to landlocked Afghanistan. Last month, the first Indian shipment of wheat left Chabahar port in Iran for Afghanistan, bypassing Pakistan.

When Modi exchanged his trademark hug with Trump in Manila, he would have offered him wiser counsel than the American President has received from the silver-tongued hustlers in the ISI. That advice can be summarised thus: if you want a terror-free Afghanistan, treat Pakistan as part of the problem, not as part of the solution.

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Setting the agenda for Asia:
Trump and Modi will need to join hands for a strategy to counter China’s economic heft

Thursday, November 9, 2017

The first time Chinese President Xi Jinping called on US President Donald Trump in April 2017, the two men got along like a house on fire. Never mind that Xi didn’t get a White House dinner but had to settle for a sit-down at Trump’s Florida golf resort. In the midst of that dinner, Trump gleefully announced to a bemused Xi that the US had just launched 59 cruise missiles on Syria.

Much has changed in the intervening seven months. Xi has established himself as the most powerful Chinese leader since Deng Xiaoping following last month’s 19th Congress of the Communist Party of China (CPC). Trump, meanwhile, faces impeachment if Special Counsel Robert Mueller can prove that he or his senior staff colluded with Russia during the 2016 US presidential elections. So far Mueller, who started work in May 2017, has come up with smoke but no fire. The first charges approved by the federal grand jury have indicted former Trump campaign manager Paul Manofort and his aide Rick Gates on misdemeanours committed well before the presidential election.

In sharp contrast, Democrat Hillary Clinton, who lost a close election to Trump, faces allegations of subverting the Democratic party to rig her nomination at the expense of rival Bernie Sanders. The Clinton campaign is also accused of paying several million dollars for a dossier, now largely discredited, by a former British spy Christopher Steele, aimed at digging up dirt on Trump during the election. The Clintons are in the dock as well over a controversial uranium deal, when Hillary was secretary of state, with a Russian company. At exactly the same time, husband Bill Clinton received a fee of $500,000 from a Russian bank for a speech in Moscow.

Nonetheless, Trump is himself a much-diminished figure. Xi, in contrast, has burnished his reputation after the 19th Congress of the CPC. When the two men meet in Beijing on November 8 and 9, three issues will dominate the conversation: North Korea, trade and sovereignty.

According to US intelligence reports, North Korea is between six and nine months away from making an ICBM capable of launching a small nuclear warhead on the US mainland. Trump has pressed Xi to stop North Korea’s aggressive nuclear missile programme. Xi is playing cat and mouse with Trump. He has tightened sanctions on Pyongyang just enough to stave off criticism from Washington that Beijing is not doing enough to rein in North Korea’s Kim Jong-un.

That won’t wash anymore. The only measure that will stop Kim from threatening the US, Japan and South Korea is if China blocks oil and energy supplies. That would cripple North Korea. Current economic sanctions are a pinprick in comparison. China, however, will not cooperate with Washington because it regards North Korea as a buffer state against the heavy deployment of 37,500 US troops in South Korea. If North Korea is crippled, those US troops could move to within sniffing distance of the Chinese border. Just as China can’t afford the disintegration of North Korea with which it shares a 1,420-km border, it does not want a real rapprochement between the two Koreas. If the Korean border melts, it will bring US and South Korean troops at China’s doorstep.

Therefore, what Trump wants from Xi during his two-day visit to China is not what Trump will get. Instead, he will receive a lecture on global peace and how responsible China is in seeking a nuclear-free world, especially in Japan and South Korea, which, to China’s fury, have threatened to develop their own nuclear weapons if China doesn’t de-nuclearise North Korea.

Indian policymakers will be watching the Trump-Xi conversation closely. Prime Minister Narendra Modi is scheduled to briefly meet Trump on the sidelines of the East Asia Summit (EAS) on November 12-14 in Manila. They will have an opportunity to assess the outcome of the Trump-Xi talks held in Beijing days earlier. India is interested in building the emerging Indo-Pacific quadrilateral axis proposed by Washington, comprising the US, India, Japan and Australia.

The quadrilateral is relevant to the other two agendas of the Trump-Xi meeting: Trade and sovereignty. America under Trump is becoming increasingly protectionist. It recently imposed heavy anti-dumping duties (going up to 162.24 per cent) on Chinese aluminium foil. India, too, has a range of issues to sort out with Washington, including immigration, work visas and outsourcing.

But it is on sovereignty that the interests of New Delhi and Washington converge. China is a serial offender in the South China Sea and along India’s long border. The US has meanwhile challenged China’s claims over sovereignty in the South China Sea by sending its warships close to the waters controversially claimed by Beijing. China’s strategy in Asia is to buy out the opposition as it did with the Philippines. It is mending fences with Vietnam. India remains one of the few countries in Asia that has successfully defied China’s hegemonistic ambition.

Following his talks with Xi, Trump will visit Vietnam for the APEC summit on November 10 before he meets Modi shortly thereafter in Manila on the sidelines of the EAS summit. The two leaders will have much food for thought as they sculpt a strategy to live with a China emboldened with economic success and Xi’s total control of the Communist Party and the People’s Liberation Army.

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Kamal Haasan has done a disservice by raising 'saffron' terror bogey
To describe isolated acts of criminal violence or death threats by extremist Hindu groups as organised terror devalues the real fight against terrorism.
Wednesday, November 8, 2017

The incendiary call by Ashok Sharma, a leader of the Akhil Bharatiya Hindu Mahasabha (ABHM), following actor-turned-politician Kamal Haasan’s remarks on Hindu terror shows how extremist Hindu outfits have reduced themselves to the level of assorted Maulvis routinely issuing death threats to BJP and RSS leaders.

This is what Sharma said: “There is no other way to handle people like Kamal Haasan but to either hang them or shoot them dead.”

It is disappointing that senior leaders in the BJP have not condemned the Hindu Mahasabha and sought Sharma’s prosecution.

The Hindu Mahasabha is a prime example of how ideologically bankrupt extremist Hindu groups have become. Kamal Haasan has every right to express an opinion – in this case on Hindu terror – however provocative and wrong it may be. Debate him but do not hound him.

By filing a complaint against him in a Varanasi court (which will hear the case on November 22), advocate Kamlesh Chandra Tripathi is playing right into the hands of those on the Left who try to conflate Hindu extremists with Islamist terrorism.

To describe isolated acts of criminal violence or death threats by extremist Hindu groups as organised terror devalues the real fight against terrorism.

In India, politicians have trodden a thin line over the issue of “Hindu terror”. The Congress-led UPA needs Muslim votes to stay in power. In the 2004 Lok Sabha election, it won just 145 seats and 26.53 per cent voteshare. The minority vote comprised a large chunk of this. Without Muslim votes, the Congress would have been reduced to less than 100 seats in 2004.

In the 2009 Lok Sabha poll, the Congress won 206 seats with 28.55 per cent voteshare. Again, the Muslim vote proved crucial.

This explains the Congress’ attempt during UPA-1 and UPA-2 to coin the term “saffron terror”. Rahul Gandhi, then a young MP, told a US envoy in 2005, according to a Wikileaks document which has not been disputed, that saffron terror was a larger threat to India’s national security than Islamic terror.

Those words came to haunt him in the 2014 Lok Sabha election. The Congress faced a strong backlash from precisely the Hindu voters Rahul had demeaned by invoking the myth of saffron terror. The party plunged from 206 to 44 seats.

Is saffron terror really a myth? Didn’t the blasts at Malegaon, Mecca Masjid, Ajmer Dargah and on the Samjhauta Express prove that extremist Hindu groups like Abhinav Bharat were terrorists?

The cases against Colonel Shrikant Purohit and Sadhvi Pragya have collapsed. The Samjhauta Express blast remains unsolved with LeT terrorist Arif Qasmani named by the US Department of Treasury as one of the culprits.

Assuming though that extremist Hindu groups were responsible for these four acts of terror during 2007-08 – and none thereafter – it hardly points to organised “saffron terrorism”.

Even one life taken by terror is unacceptable. Extremist Hindu groups, when found guilty of acts of terror, must be prosecuted, tried and if found guilty punished.

But politicians seeking Muslim votes do Muslims themselves a disservice by conflating isolated incidents of “Hindu terror” with organised widespread Islamist terror perpetrated by ISIS, al-Qaeda, LeT, JeM, Hizbul Mujahideen and the Taliban. Such false narratives inculcate a sense of victimhood in ordinary Muslims. This makes them ever-more clannish, estranged from the mainstream, and vulnerable to radicalisation.

Kamal Haasan speaks of Hindu terror as if it were the biggest threat facing India. It isn’t. The term Hindu terror is oxymoronic. Hindus are by nature a passive (though not necessarily pacifist) people.

If they were not, in a poor country beset with huge social and economic injustices, there would be violent civilian unrest of the kind we see in Catholic South America and the Islamic Middle East.

If anything, Hindus have been silent victims. The incarceration of Colonel Purohit and Sadhvi Pragya for over six years without a charge sheet led to only muted protests from extremist Hindu “terror” groups and silence from the general Hindu majority population.

For Kamal Haasan and his ilk to misuse the oxymoron “Hindu terror” reflects poorly on their judgment.

The Roots
Islamist terrorism is a deadly global scourge. Its most virulent manifestation laid deep institutional roots in 1979 when the Soviet Union invaded Afghanistan. The United States, mired in a Cold War against the Soviets, saw in the invasion a repeat of the 19th-century great game when the Russian and British Empires contested the region on either side of the Khyber pass. The Afghans, then as now, were the hapless victims.

Between 1979 and 1989, a US CIA-led operation trained and funded jihadis to fight the Soviets in Afghanistan. Pakistan was the hired gun. That planted the seed of modern Islamist terrorism.

Two white Christian countries, the United States and the Soviet Union, thus helped create modern Islamist terror. Pakistan, the ever-willing servant of the West, seized the opportunity.

In 1989 when the defeated Soviets withdrew, the US scaled down its jihadi operations in Afghanistan and left it to Pakistan to clean up the debris. Left to themselves, the Pakistani army and the ISI dispatched hardened, out-of-work jihadi fighters to the Kashmir Valley in 1989. The rest is history.

Pakistan had used terrorists in the Khalistani insurgency. But the real target was Kashmir, the unfinished business of Partition.

Benazir Bhutto, then Prime Minister, midwifed the Taliban in the early-1990s. Terror sank deep roots in Pakistan. Afghanistan was the ISI’s laboratory of jihadism. Radicalisation of Kashmiri youth began even as the Valley’s Pandits were brutally driven out of their homeland.

Pakistan realised after its Kargil defeat that winning a conventional war with India was impossible. Terrorism presented a cheaper alternative. Young, impoverished boys from Pakistani villages were given elementary training in terror and sent across the border to kill Indian soldiers and civilians.

It was low-cost, high impact. Families of Pakistani terrorists killed by Indian security forces were given money and land as compensation. The jihadi industry ticked along smoothly. 

Until the jihadis turned on their masters. Pakistan became both the biggest creator of terrorists and their biggest victim.

Those attempting to draw an equivalence between such malignant, institutionalised Islamist terrorism and “Hindu terror” do India great harm.

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The $400 Billion Question
Does India need such a high level of foreign exchange reserves which, parked in us treasury bonds, earn one per cent annual interest? Two, can the reserves be put to more productive use?

Monday, November 6, 2017

India’s foreign exchange reserves recently crossed $400 billion for the first time in history. The increase in forex reserves by nearly 50 per cent in four years demonstrates the underlying strength of India’s balance of payments with robust FDI, FII and NRI investments pouring in, particularly since 2014. 

The spurt in forex reserves has, however, thrown up two questions. One, does India need such a high level of foreign exchange reserves which, parked in US treasury bonds, earn one per cent annual interest? Two, how can the reserves be put to more productive use? 

The current level of reserves cover 10.5 months of imports. In comparison, during the 1991 balance of payments crisis, reserves barely covered a few weeks’ imports. Forex reserves should essentially cover the current account deficit (CAD). In India this is running annually at around $120 billion in FY18 or a little over five per cent of nominal GDP. Clearly, Indian forex reserves are many multiples of this basic requirement. Reserves are also useful to defend the rupee. However, a flexible exchange rate policy followed by India since 1992 allows the Reserve Bank of India (RBI) to protect the rupee from big swings by buying or selling dollars. 

It is often pointed out that China, which has a positive CAD, still holds over $3 trillion in forex reserves. Beijing’s reserves have however dipped from a high point of $3.8 trillion to $3.1 trillion. Of these, $800 billion are part of China’s sovereign wealth fund. Chinese foreign exchange reserves are therefore, in effect, $2.2 trillion if a like-for-like comparison is done with India’s reserves — roughly five times greater than India’s and in line with the relative size of the two economies. 
The second question though is more critical: how can India’s forex reserves be put to better use? The one per cent return on US treasury bonds amounts to $4 billion (Rs 26,000 crore) a year, barely enough to pay for MNREGA. Indian policymakers are meanwhile, in a dilemma over whether to kickstart investment with a stimulus or maintain fiscal prudence. The commitment to not breach the 3.20 per cent fiscal deficit figure hangs heavy over the ministry of finance. The government though, needs to spur productive expenditure and set off a virtuous cycle of spending and consumption, supply and demand. Overall investment can then once again climb into the 33-35 per cent range from 30 per cent that it has dipped to. 

Consider now some math: India’s total debt (external and internal) is $1.20 trillion (Rs 75 lakh crore). The annual interest outgo on this debt is Rs 5.23 lakh crore as per the 2017-18 Union Budget. This means India is paying an average interest rate of around 6.5 per cent on its overall debt, including around 7.5 per cent on Indian rupee debt. 

This imposes a large burden on the Budget. The annual interest outflow is larger, for example, than the defence budget (Rs 2.62 lakh crore). Healthcare and education spending is dwarfed by the cost of servicing India’s national debt. It is a travesty that 25 per cent of India’s Rs 21.47 lakh crore annual Budget (2017-18) is spent on servicing debt due to past borrowing profligacy while social sector spending sags. 

There are three specific ways in which the government can mitigate this problem by putting forex reserves to good productive use in building infrastructure, cutting the debt servicing outgo and still retaining the fiscal deficit at 3.20 per cent of GDP.

First: Convert a portion of the $400 billion reserves into a sovereign wealth fund — exactly as China has done. If the sovereign fund has an initial corpus of $100 billion (Rs 6.50 lakh crore), it can invest in infrastructure which will deliver returns of up to 10 per cent a year compared to one per cent from US T-bills. Moreover, the need to use budgetary allocations for infrastructure investment will be obviated. This would keep the fiscal deficit target of 3.20 per cent untouched. Investing Rs 6.50 lakh crore in infrastructure, healthcare and education will kickstart spending, create jobs and spur consumption.  

Second: Cut RBI’s key interest rate by 100 basis points. As the country’s largest rupee borrower, the government will immediately save one per cent on its domestic rupee borrowing of nearly Rs 50 lakh crore. That’s a straight saving of Rs 50,000 crore a year, thereby cutting the fiscal deficit by around 0.3 per cent.

Third: Fast-track PSU disinvestment. There are dozens of PSUs (hotels, airlines, etc.) that can be fully divested along with minority share sales in large, profitable PSUs like ONGC. A recurring target of Rs 1 lakh crore a year is feasible which will release extra funds for social sector spending without affecting the fiscal deficit. 

One reason why the rupee has appreciated by over six per cent against the dollar during the past few months is the desperate search by foreign investors for higher yields. The Japanese and Swiss central banks offer near-zero or negative interest on deposits. The US and European central banks offer between one per cent and 1.5 per cent despite the US Federal Reserve’s determination to increase interest rates as global economic growth stabilises.    

India offers a safe six per cent return on sovereign debt. With the rupee holding firm and inflation moderating, US, European and Japanese investors are queuing up to invest in India. Hence the recent uptick in the balance of payments and the strengthening of the rupee against a basket of currencies. The fact that exports rose 26 per cent in September 2017 (when the rupee was 64 to a dollar) over September 2016 (when the rupee was 68 to a dollar) demolishes the myth that a weak rupee helps exports. Productivity, quality and delivery are more critical to export growth than a weak rupee. 

For Indian policymakers, as the disruptions caused by demonetisation and GST fade, the focus must be on fiscal reform. At the top of the list should be finding a better way to deploy $400 billion in foreign exchange reserves. By 2019, at the current rate of accretion, they could rise to $500 billion. That represents both a challenge and an opportunity.

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Xi Jinping How India can handle China’s strongman
Historical errors of judgement have allowed Beijing to control the narrative for decades.
Friday, November 3, 2017

Chinese President Xi Jinping is now in the august company of Mao Zedong and Deng Xiaoping. The 19th Communist Party of China (CPC) Congress last week enshrined “Xi Jinping Thought” in the CPC’s Constitution at the end of the week-long conclave. “Mao Thought” and “Deng Theory” are the only two such previous enshrinements.

Some believe that by not appointing an heir at the end of the Congress, Xi is positioning himself for an unprecedented third term in 2022-2027. None of the seven Politburo Standing Committee (PBSC) members is likely to be eligible to be president in 2022. The unofficial age limit is 68. Xi will be 69 in 2022 but with no other contender in sight, he could well persuade the CPC to give him a third term.

There are dissenting voices though in the CPC and Xi will have to tread carefully. He has alienated many powerful people. In his first five-year term, Xi purged or jailed nearly one million officials on charges of corruption. Several senior army Generals have been sacked. China’s powerful armed forces are now firmly under Xi’s command.

According to Hong Kong-based South China Morning Post, “It appeared from the state-run TV report that two top generals, the former chief of general staff General Fang Fenghui and director of the political work department, General Zhang Yang were absent. Both Fang and Zhang were Central Military Commission (CMC) members in Xi’s first term, but they were left out of the list of PLA delegates to the party Congress. Earlier, the two Generals were taken away on the same day last month as part of a corruption investigation.”

Xi’s aggressive stance in the South China Sea, on the Dalai Lama, over Doklam, and in Arunachal Pradesh as well as his support for Pakistani terrorists like Masood Azhar make him a challenge for Indian foreign policymakers.

China is positioning itself as the world’s leading superpower by 2050, replacing the United States. Its economy is likely to surpass America’s over the next 20 years though its military will take far longer to catch up with America’s formidable armed forces.

Xi’s ascent has worried several countries. The last time a Communist state sought superpower status to challenge the United States was the Soviet Union. The West engaged in a 45-year-long Cold War to counter that threat. An authoritarian China poses similar problems under Xi.

As The Economist wrote of Xi: “His personal powers reflect his exalted sense of mission. He is president, head of the party and in July was referred to by state media as ‘supreme commander’, a title last conferred on Deng. He bestrides the bureaucracy like a colossus, having swept away and replaced almost all the party leaders and local governors in China’s 31 provinces, as well as much of the top brass of the People’s Liberation Army (PLA).”

India needs to build a coherent strategy to counter China’s aggression and Xi’s growing hegemonistic ambitions. The Doklam standoff revealed two truths.

One, that Communist China is a land-grabber by instinct. It will continue its creeping acquisition of other countries’ sovereign territory - whether on land or at sea - as long as it can get away with it.

Two, when confronted, China will back down as it did at Doklam. That doesn’t mean it wouldn’t try again. It will. That is why army chief General Bipin Rawat has repeatedly stressed India’s preparedness to fight a two-front war. 

China has threatened Taiwan for years with military invasion, but has done nothing. It has clamped down on Hong Kong’s moves towards greater democracy and autonomy, but has backed away in the face of public protests.

Beijing remains prickliest though over the Dalai Lama. In a remarkable display of arrogance, it used the Communist Party’s Congress last week to warn world leaders not to meet the Dalai Lama, saying it would constitute a “major offence”.

Zhang Yijiong, who heads the Communist Party’s Tibet working group, told reporters on the sidelines of the party Congress: “Any country, or any organisation, accepting to meet the Dalai Lama, in our view, is a major offence to the sentiment of the Chinese people.” Zhang is also an executive vice-minister of the United Front Working Department of the Communist Party. Zhang said of the Dalai Lama: “After fleeing China in 1959, he established a so-called government-in-exile (in India), whose goal and core agenda is the independence of Tibet and to separate (from) China…”

Ever since the disastrous 1962 war, India has had a negative reflex action on matters regarding Tibet and China. In this context it is important to note the views of Prasenjit K Basu, a Singapore-based economist whose new book, Asia Reborn: A Continent Rises from the Rages of Colonialism and War to a New Dynamism, has key insights on Asia’s past, present and future.

In a recent interview with senior journalist Aditi Phadnis in Business Standard, Basu said of India’s Tibet policy: “Nehru was a brilliant historian: his Glimpses of World History is a masterpiece. But his naivete on statecraft was astounding, as if his knowledge of history was somehow utterly separated from his approach to governance and foreign policy. Sardar Patel saw clearly that India’s traditional role as Tibet’s main ally (and the only country with four consulates in Tibet while China had no representation in 1950) was essential to India’s security, (but) Nehru allowed China to invade and occupy Tibet – while doing nothing militarily or diplomatically to thwart this thrust from a rogue Communist regime that most of the world didn’t recognise as legitimate at the time.” 

Such historical errors of judgement have allowed Beijing to control the India-China narrative for decades. That is beginning to change. Doklam was the first sign of a more robust policy to counter Chinese aggression.

India is dealing with an authoritarian country that in effect abets Pakistan-sponsored terrorism against India and brazenly builds infrastructure on occupied sovereign Indian territory.

Xi is a leader who will make China even more authoritarian in the future. India must hold the line - and its nerve.

Follow@minhazmerchant on twitter

What we know about who's winning Gujarat Assembly elections
While Congress focuses on disenchanted Dalits, Patidars, OBCs and Muslims, the women of Gujarat could tip the poll in BJP’s favour.

Thursday, November 2, 2017

Two recent opinion polls on the Gujarat election gave the BJP, on average, around 120 seats in the 182-seat Assembly. That’s five more than the party won in the 2012 Assembly election. The Congress was projected to win around 55 seats, six fewer than in 2012.

A closer look reveals interesting nuggets. One of the opinion polls concluded that if Patidar leader Hardik Patel enters into a seat arrangement with the Congress, the BJP would lose up to seven seats, bringing its tally down to around the level of the last Assembly election. But with the fiery Patidar leader threatening to cut into Congress votes if it does not extend reservations to all OBCs and not just EBCs (as the Congress has declared), the BJP could gain from vote cannibalisation.

The Congress knows it is unlikely to win Gujarat in 2017 but seeks to chip away at the BJP’s majority. With opinion polls showing a BJP sweep in Himachal Pradesh, the Congress is girding itself for bad news on December 18 when counting takes place. Keeping the BJP to below 110 seats in Gujarat would be a balm. It will also be a good omen for Rahul Gandhi’s incipient elevation as president of the party.

What are the Congress’ chances of restricting the BJP to below 110 seats? Slim. The Congress lays great store by its “rainbow coalition” of Dalits, Patidars, OBCs and Muslims (DPOM). Together these groups comprise over 60 per cent of the Gujarat electorate. But there are already fissures among the Patidars. Several mid-level Patel leaders have joined the BJP.

Aplesh Thakor’s OBCs (who make up 40 per cent of Gujarat’s population) could pose a bigger problem for the BJP though Prime Minister Narendra Modi’s own OBC status will be deployed during the campaigning to stem the flow of OBC votes to the Congress. Dalits, while only 7 per cent of Gujarat’s electorate, could also cause problems for the BJP. There have been frequent atrocities against Dalits in the state in recent months. Dalit leader Jignesh Mevani may turn of to be a wild card in the elections.

The BJP has to deal with yet another factor: rising anger among the trading community over GST. Traders are the BJP’s bread-and-butter voters and the Congress hopes to wean enough of them away over the flawed implementation of GST.

The sops offered by the BJP — including the self-serving decision to reduce tax on khakra, a Gujarati snack staple — will not assuage the anger. As one Gujarati computer peripherals trader told me: “We hate GST, especially the cumbersome online filing and complicated tax slabs on different components in a single product like a computer printer.”

So will he vote for the Congress in December? A look of resignation crosses his face. “No, despite all this I will still vote for Narendra bhai.”

That encapsulates the mood of voters across Gujarat. They dislike GST, were hit by demonetisation and suffered during the floods. Farmers are in distress, Dalits angry and Patidars resentful. But when it comes to the crunch, they will vote for Gujarati pride — which means Modi.

On a visit to Surat and Vadodara, this sentiment was starkly evident: “It’s the first Assembly election since Narendra bhai became prime minister and we will stand by him,” was the common refrain. Warning bells though are sounding across the state. Farmer distress is real; so is Dalit alienation.

In the 2014 Lok Sabha election, the BJP rode a Modi wave and swept all 26 parliamentary seats in the state with 59.10 per cent vote share. That was a sharp rise over the 47.90 per cent vote share it received in the 2012 Assembly poll.

The Congress won 38.90 per cent vote share. It has been unable to reduce the 8-10 per cent vote share gap that the BJP has enjoyed since 1995. It is unlikely to do so in 2017, though the BJP is taking no chances. Modi will campaign extensively across the state. So will party leader Amit Shah and for the first time a phalanx of senior non-Gujarati ministers like Sushma Swaraj.

Rahul Gandhi’s aggressive swing through the state has rattled the BJP enough to target him continuously. That could be a tactical mistake. The more the BJP targets Rahul individually, the more he gains in stature. With a sassy new IT and social media head, Rahul’s Gabbar Singh Tax (GST) barb and other bon mots are gaining traction. Alas for the Congress, the average Gujarati remains unmoved by social media one-liners.

Gujaratis are a pragmatic people. They want development. The shower of new projects, including the Narmada dam’s raised height, power plants and the ferry service linking Saurashtra to South Gujarat are what matter to them.

Women are the other invisible ace up the BJP’s sleeve. When he was CM, Modi assiduously wooed women voters with a slew of women-oriented schemes. One of the most popular is the law that exempts women from property registration charges if the property is in their name. Other schemes for girl students have over the years built up a formidable women’s constituency for the BJP, a factor largely overlooked by most observers of state politics.

This December, while the Congress focuses on disenchanted Dalits, Patidars, OBCs and Muslims, the women of Gujarat could be the Y factor that tips the election decisively in the BJP’s favour.

Follow@minhazmerchant on twitter

Why Shashi Tharoor is wrong about Britain's colonial debt to India
The debt to India at today's prices would easily cross #3 trillion and reparations are needed.
Saturday, October 28, 2017

How much does Britain owe India as reparations for its 190-year occupation and depredation of India?

Shashi Tharoor, the Congress MP from Thiruvananthapuram, in his book An Era of Darkness: The British Empire in India, quoted American historian and philosopher Will Durant: "The British conquest of India was the invasion and destruction of a high civilisation, utterly without scruple or principle, careless of art and greedy of gain, overrunning with fire and sword a country temporarily disordered and helpless, bribing and murdering, annexing and stealing, and beginning that career of illegal and 'legal' plunder which now (1930) has gone on ruthlessly for one hundred and seventy-three years."

Consider the damage Britain did to India. In Tharoor's words: "Taxation (and theft labelled as taxation) became a favourite British form of exaction. India was treated as a cash cow; the revenues that flowed into London's treasury were described by the Earl of Chatham as 'the redemption of a nation a kind of gift from heaven'. The British extracted from India approximately #18,000,000 each year between 1765 and 1815. Taxation - usually at a minimum of 50 per cent of income - was so onerous that two-thirds of the population ruled by the British in the late eighteenth century fled their lands. Durant writes that '(tax) defaulters were confined in cages, and exposed to the burning sun; fathers sold their children to meet the rising rates'. Unpaid taxes meant being tortured to pay up, and the wretched victim's land being confiscated by the British."

While Tharoor's well-researched book has deservedly received wide coverage in India and abroad, an excellent article on the subject by Venu Madhav Govindu in The Wire (August 6, 2015) has passed relatively unnoticed.

Govindu throws light on what Britain owed India from an accounting point of view. These are empirical, official figures. From here we can extrapolate Britain's colonial debt to India, an exercise I first did in an article in The Illustrated Weekly of India in 1988: The Debt and Dishonour of the British Empire.

But first, Govindu's arguments: "In 1931, the debt owed to Britain by India was said to be about Rs 1,000 crore. At that time, the Indian National Congress argued that much of this amount was incurred by Britain in furthering its own interests. Based largely on the work of the Gandhian economic philosopher, JC Kumarappa, the Congress argued that the principle of natural justice would wipe out all of this debt and more. Therefore, it held that the future debt to be borne by a free India had to be subjected to the scrutiny of an impartial tribunal. The British political leadership and press roundly denounced this rather moderate position and treated it as a treacherous 'repudiation' of India's obligations.

"By the end of the Second World War in 1945, Britain had to finally reckon with the problem of its debt to India and other countries. Britain agreed to pay a debt of Rs 1,600 crore but other calculations showed a rather different figure. In 1947, Kumarappa estimated that the Indian share of the costs of deployment of its soldiers was Rs 1,300 crore. A similar amount of Rs 1,200 crore was spent in expenses pertaining to the war. He argued that these and other costs ought to be borne by Britain, which led to a figure of Rs 5,700 crore which was many times larger than the British figure of Rs 1,600 crore. Britain, Kumarappa asserted, should not be allowed to be the debtor as well as the judge and the jury and he lobbied for India to demand an impartial international tribunal on the matter. In the event, India failed to push for such an international settlement and the British view prevailed much to the detriment of independent India."

Let's take the Rs 5,700 crore figure estimated by Kumarappa in 1947 as the starting point of what Britain owed India in purely commercial terms, not taking into account intangibles such as the economic cost of human life caused by British brutality or the egregious strangulation of Indian economic activity and trade.

In 1947, the exchange rate was Rs 13 to one British pound sterling. Thus Rs 5,700 crore in 1947 was equivalent to #4.40 billion. What would that be in today's rupees/sterling?

The value of gold and real estate is an accurate indicator of how money appreciates over long periods of time spanning more than 70 years. In 1947, the price of 10gms of gold was Rs 80. In 2017, the price of 10gms of gold was Rs 31,000 - an increase of nearly 400 times.

The rise in the price of a basket of real estate, commodities and household essentials over the past 70 years gives a similar cost-inflation index of between 400 and 500 times. (The inflation-adjustment in British prices between 1947 and 2017 is around 150 times. But since our calculations are in rupees and a depreciation of the rupee-sterling rate between 1947 and 2017 has been factored in, the multiplier of 400x holds.)

Now to the math: according to Govindu, Britain's official debt to India in 1947 was Rs 5,700 crore (#4.40 billion) at the prevailing exchange rate of Rs 13 to one pound sterling. Multiply that by 400. At today's inflation-adjusted and exchange rate-adjusted figure, the debt is therefore #1.76 trillion.

But this is just the tip of the reparations iceberg. We haven't yet computed the cost of India's near-zero rate of GDP growth during vast time swathes of the 190-year British occupation, nor the cost of lost economic value due to Britain's wilful destruction of Indian mercantile trade.

If these are scientifically calculated, Britain's debt to India at today's prices would easily cross #3 trillion (Rs 270 lakh crore) - more than Britain's current GDP.

Tharoor says reparations aren't needed; an apology and a token payment of one pound sterling a year for 200 years will suffice. He is wrong. Reparations are needed. An apology and tokenism won't suffice. Writes Tharoor in his book: "India should be content with a symbolic reparation of one pound a year, payable for 200 years to atone for 200 years of imperial rule. I felt that atonement was the point - a simple 'sorry' would do as well - rather than cash. Indeed, the attempt by one Indian commentator, Minhaz Merchant, to compute what a fair sum of reparations would amount to, came up with a figure so astronomical - $3 trillion in today's money - that no one could ever reasonably be expected to pay it. (The sum would be larger than Britain's entire GDP in 2015.)"

Obviously #3 trillion (not $3 trillion as Tharoor writes) is a figure that needs to be ratified by an international arbitration panel of economists and technocrats. This mechanism had been demanded by the Congress, based on Kumarappa's work, even before Independence. Let's assume the final figure such a tribunal arrives at today as colonial reparations against Britain's debt to India is #2.50 trillion.

A payment schedule can stretch over 50 years, interest-free at #50 billion (Rs 4,50,000 crore) a year. That's less than 2 per cent of Britain's current GDP (#2.6 trillion) and not much more than the amount Britain intends in future to spend every year on the National Health Service (NHS).

Can Britain afford to pay India reparations of 2 per cent of its GDP for the next 50 years?

That isn't India's problem. It's Britain's.

For nearly 200 years Britain plundered India, committed brutal crimes on Indian civilians and strangulated GDP growth. In the process, it financed its industrial revolution, its Napoleonic wars against France, and built the world's largest economy in the 1800s. That led to the creation of Britain's post-industrial leisure society and the soft power of music, sports and culture that accompanied it.

What about Britain's contribution to India: the railways, unification, English, the ICS/IAS, universities, the rule of law?

Tharoor rightly sets each one in perspective. Consider, for lack of space, just one: the railways: "In this very conception and construction, the Indian Railways was a big British colonial scam. Each mile of Indian Railway construction in the 1850s and 1860s cost an average of #18,000, as against the dollar equivalent of #2,000 at the same time in the US."

In short, what Britain built in India with underpaid Indian labour and overtaxed Indian revenue was ruthlessly repatriated to pave the roads of London, finance British infrastructure and subsidise Britain's imperial wars. India in effect ended up paying for its own colonisation. All the benefits accrued to Britain. All the costs were borne by India.

Last week Virendra Sharma, a long-time British MP of Indian origin, tabled an Early Day Motion (EDM) in the House of Commons seeking a formal apology from the British government for the 1919 Jallianwala Bagh massacre. That is one of the tips of the reparations iceberg to which no price can be attached.

But to others it can. And Britain must pay.

Follow@minhazmerchant on twitter

The new triangle of power
By 2035, China, the US, and India will be the world’s biggest economies, maintaining the largest militaries

Thursday, October 26, 2017

In geopolitics, there is a certain inevitability of outcomes. Just as the 20th century was dominated by a triangle of great powers — the United States, imperial Britain, and the Soviet Union — the 21st century is set to be dominated by China, the United States and India.

In his speech at the Center for Strategic and International Studies last week, US Secretary of State Rex Tillerson laid out the terms of engagement between these three pivots of power in this unfolding century. Tillerson’s visit to India is part of a swing through South Asia, the Middle East, and Europe.

In his speech last Wednesday in Washington, Tillerson outlined America’s long-term strategic vision: “The Trump administration is determined to dramatically deepen ways for the United States and India to further this partnership. China, while rising alongside India, has done so less responsibly, at times undermining the international, rules-based order, even as countries like India operate within a framework that protects other nations’ sovereignty. China’s provocative actions in the South China Sea directly challenge the international law and norms that the United States and India both stand for.”

Three points stood out in Tillerson’s address. One, the US has unveiled an “Indo-Pacific” strategic model to cut a broad swathe from the Indian Ocean to the Pacific Ocean. That implies a joint India-US-Japan security grid to curtail China’s hegemonic ambitions in the South China Sea and beyond.

Two, the US sees India playing the role Britain undertook in the 20th century to help contain communism. China is the new Soviet Union, and the tinderbox Korean peninsula the new eastern Europe of the Cold War.

Three, Tillerson accuses China of irresponsible behaviour, “predatory economics” and violating a rules-based world order. In sharp contrast, he lauds India for being a responsible power and a force for regional stability.

Much of Tillerson’s thinking is based on hard economic and military facts. By 2035, China, the United States, and India will be the world’s three largest economies and possess the world’s three largest militaries. China’s economy, currently half as big as America’s, is likely to surpass it well before 2035. With its traditional allies in Western Europe shrinking their militaries and (bar Britain) beset by a declining population, Washington needs India as a counterweight to China more than ever.

India has many advantages to offer: A professional if under-equipped military, a growing economy notwithstanding a temporary slowdown, the rule of law (however cumbersome) and a robust, open democracy not unlike America’s. India’s consumer market is an added asset for US companies. The country’s military, labouring under delayed defence equipment purchases, offers another opportunity for the US defence industry.

Tillerson’s blunt warning to Beijing over its “predatory” investment strategy came at the worst possible time for Chinese President Xi Jinping. He was on the same day delivering his marathon speech (it ran for 205 minutes) to over 2,300 delegates at the opening of the 19th Chinese Communist Party’s Congress in Beijing. Reacting to the unusually harsh criticism by Washington, China responded within hours: “Beijing hopes the US can put China’s development and China’s positive role in the world into perspective, abandon its biased views of China and make concerted efforts with China to focus on cooperation, properly handle differences and maintain the momentum of the steady growth of China-US relations.”

Notably, the Chinese riposte was conciliatory, not confrontational. China pointed out defensively that it has invested $560 billion in over 60 counties in Asia, Africa, South America and Europe, creating wealth and jobs. Yet China knows that a dictatorship cannot deploy money to win respect. Xi believes China will have unparalleled “global influence” by 2035. But Beijing will not have global credibility if it jails dissidents, blocks social media, bars free speech and denies citizens democracy.

All great powers posses exceptionalism. China does not. What Xi fears most, therefore, is a collapse of Chinese communism as it happened in the Soviet Union, leading to chaos and disintegration. His misguided prescription is tighter control, more authoritarianism, and greater hegemonic aggression. Beijing has other problems as well. Its population is ageing rapidly. Taiwan and Hong Kong remain thorns in Beijing’s side. North Korea is an intractable problem that could end in Tokyo and Seoul opting to develop their own nuclear weapons and reversing more than 70 years of a denuclearised Japan and South Korea protected by America’s nuclear umbrella.

For India, as Tillerson leaves New Delhi, the challenge is to make Washington live up to its commitments: First, to bring Pakistan to heel on state-sponsored terrorism; second, to treat Punjab-based terror groups LeT and JeM, who daily attack Indian civilians and security forces in Jammu & Kashmir, as ruthlessly as the Haqqanis and the Taliban; and three, to make good on Washington’s pledge to attack terrorist safe havens on Pakistani soil, not just in the lawless tribal areas, but in Pakistan Punjab and PoK where the LeT and JeM enjoy Pakistani army patronage.

The US has few options in the unfolding geopolitics of the 21st century but to ally with India to counter China’s rise. In return, India must ask and receive full US cooperation to end the scourge of Pakistan-bred terrorism in the region. The fraudulent Bush-Obama doctrine of good and bad terrorists must be given an emphatic burial.

Follow@minhazmerchant on twitter

Putting Economy On Track
No two economists though agree on the key question: Now what? clearly some nuanced thinking is required

Tuesday, October 24, 2017

As the debate rages on how to return the Indian economy to good health, it is clear that there is very little wiggle room for a government stimulus without breaching the 3.20 per cent fiscal deficit target set by Finance Minister Arun Jaitley for 2017-18. As on August 31, 2017, the fiscal deficit had already consumed 96 per cent of the full year’s target (Rs 5.25 lakh crore out of Rs 5.46 lakh crore).

So if the government wants to pump in more money into the system to boost investment activity, the full year’s fiscal deficit could well hit 3.50 per cent, alarming fiscal purists and foreign rating agencies.

Nonetheless, the government may have few alternatives to kickstart the economy. As economist Ajit Ranade wrote in Mint: “Fiscal consolidation has been one of the prized achievements of the present government. The gains from falling oil prices did not lead to a spendthrift budget. This year the budgeted fiscal deficit of the Central government is 3.20 per cent, which will fall further to 3 per cent in the following year. The 3 per cent fiscal deficit holy grail number has origins in the number agreed by the European Union in the Maastricht treaty. There is no theoretical basis for this. For a country with a young demography like India, the number of unborn taxpayers far outnumbers the currently alive taxpayers. So passing a lighter per-capita tax burden on future unborn generations, through a higher fiscal deficit, is much more feasible for India than Europe. India is a developing country which is bound to have higher debt and deficits.

“India needs to expand fiscal spending in at least three specific sectors: (a) affordable housing, through interest subventions and assistance to states to acquire contiguous land to provide to developers. This can be potentially a big booster; (b) subsidy to employers, by way of full funding of pension funds or part of wage payment of workers and apprentices; and (c) enhanced fiscal support to manufacturing and services export schemes.”

Ranade rightly suggests that the Indian government can expand fiscal spending on schemes in housing, manufacturing and exports. This is critical since the other three engines of the economy are dormant. Private investment has been stalled by cautious bank lending due to persistently high NPAs. Exports remain weak, well below their 2014 peak. The fourth engine, consumption, has been hobbled by the after-effects of demonetisation and teething problems with GST.

Indian GDP over the last six quarters has declined markedly. In the January-March 2016 quarter, GDP growth was 9.2 per cent. In subsequent quarters it fell to 7.9 per cent, 7.5 per cent, 7.0 per cent, 6.1 per cent and 5.7 per cent.

Let’s analyse these figures more closely. In the quarter just before de-monetisation (July-September 2016) GDP growth, while showing a downward trend, was still a robust 7.5 per cent. It is easy to conclude therefore that demonetisation along with GST destocking in June 2017 clobbered growth as both supply and demand fell sharply. The low inflation rate (including briefly negative inflation) points to a deflationary economy which would normally call for a stimulus.

The government still has an opportunity to spur spending if tax revenue in the second half of the year rises steeply on the back of greater GST compliance. Tax receipts are currently up by around 17 per cent over the same period last year. But as GST settles down and compliance increases, the year’s tax revenue target could well be exceeded. Public sector divestment is another arrow in Jaitley’s quiver with several PSU share sales lined up to boost the national exchequer.

Surjit Singh Bhalla, the newly appointed member of the Prime Minister’s Economic Advisory Council, has a contrarian view on sliding GDP growth. He argues that stalled growth may well be temporary due to the structural disruptions caused by demonetisation and GST. His data shows that the income of the poorest of the poor is rising more than twice as fast after demonetisation than before it. Between December 2015 and September 2016, the wages of “ploughmen and carpenters” (whom Bhalla defines as among the lowest paid daily workers) rose by two per cent. However, in the post-demonetisation period, between November 2016 and July 2017, the growth rate in wages of these workers more than doubled to five per cent.

Obviously these constitute a narrow set of parameters which don’t prove conclusively that demonetisation hasn’t hurt daily wage earners across sectors as much as feared. Bhalla’s coup de grace: “Maybe that is why Modi has been winning elections; maybe that is why the growth slowdown (with a little help from the RBI) will soon reverse.”

No two economists though agree on the key question: now what? Clearly some nuanced thinking is required. A fiscal push may be necessary to revive the animal spirits former Prime Minister Manmohan Singh spoke so longingly about. A combination of surpassing both tax revenue and PSU divestment targets could give the Finance Minister elbow room to pump in around Rs 40,000 crore into the economy without seriously breaching the 3.20 per cent fiscal deficit target. (Remember, every 0.1 per cent increase in the fiscal deficit represents around Rs 18,000 crore.)

The other three engines of growth must simultaneously fire. Overall investment has dipped to around 28 per cent of GDP. The savings ratio has fallen to 30 per cent of GDP. Both were about a third higher in 2013-14. Till corporates begin investing and consumers start saving, GDP growth will remain subdued.

The Finance Minister must meanwhile keep his promise to cut the corporation tax rate to 30 per cent and remove exemptions to improve compliance in a post-GST environment. To boost consumer spending, Jaitley must rationalise direct tax rates. Far too much time and resources are spent by the income-tax department on chasing low-value taxpayers. As GST, which covers large and small businesses, has shown, 95 per cent of tax revenue comes from five per cent of taxpayers, an admission Jaitley himself made publicly on September 28. It is a sobering statistic. India’s economic policymakers are missing the wood for the trees.

Follow@minhazmerchant on twitter

Only in India Suleiman and Anwar celebrate a noisy but legally noise-free Diwali
'We are like that only.'
Friday, October 20, 2017

The flight from Riyadh to Delhi was uneventful. Suleiman Khan glanced impatiently at his Rolex watch as he waited outside the airport. Anwarbhai said he’d be here by 5.00pm, he muttered to himself as he searched for his friend in Delhi’s early-evening haze. He was looking forward to celebrating Diwali.

Just then Anwar Sheikh’s spanking new Mercedes drove up beside him.

“Get in, Suleiman,” said Anwar cheerfully. “I have a surprise for you.”

“What’s that, Anwarbhai,” Suleiman asked, brow knitted as he slid into the front leather bucket seat of his friend’s E-250. He had lately become wary of Anwar’s surprises.

“I’m taking you tonight to your first noise-free Diwali party.”

“Ah, you mean after the Supreme Court ban on the sale of firecrackers in NCR,” said Suleiman knowingly.

“Yes, Suleiman,” said Anwar. “The ban is a great idea. It’s only those right-wing Hindutva types who are upset about it. As if the Supreme Court is trampling on their divine right to pollute the city with smoke and noise.”

Suleiman nodded thoughtfully: “Yes, Anwarbhai, Delhi as winter sets in is polluted enough without all those firecrackers.”

Later that evening, the two friends drove up to quiet colony in south Delhi where Anwar’s friend was hosting a Diwali party.

As they entered the gate of the sprawling two-storied bungalow, Suleiman recognised a high-profile lawyer famous for writing poetry in between charging enormous legal fees to get his wealthy clients out of prison.

“Anwar!” the lawyer exclaimed, bouncing up to the pair and hugging Anwar. “What are you up to these days?”

“Oh, just the usual,” said Anwar, extricating himself from the bear hug. “Met madam the other day. She says the time is ripe for Rahul to take over.”

The stocky, white-mopped lawyer, on a retainer to the Family, nodded in agreement. “Yes, Anwar, it’s about time. Rahul has fire in his belly! He’ll do a great job.”

“While he’s in India,” murmured Suleiman, under his breath.

“Eh, what was that,” the lawyer asked, cocking his ear towards Suleiman, the wide grin on his face vanishing.

“Oh, this is my friend Suleiman from Saudi Arabia,” Anwar said quickly. “He’s here to get a taste of Delhi’s noise-free Diwali after that wonderful Supreme Court order.”

Just then a loud explosion behind them made the three men jump. “What was that,” asked Suleiman. “I thought firecrackers were banned!”

Anwar smiled sheepishly as the sprightly lawyer bounced off to greet a group of men, loudly discussing Modi’s waning popularity. “The Supreme Court, Suleiman, has banned the sale of firecrackers in NCR but not the bursting of firecrackers already sold. And there’s a stock of over one lakh kg of firecrackers in shops around NCR.”

“Ah,” said Suleiman. “So it’s a noise-less Diwali only on paper.” He smiled as Anwar rolled his eyes on hearing multiple crackers going off on the lawn in front of them. “In India, Suleiman, the law can sometimes be an ass.”

“That’s why Indian lawyers are doing so well,” grinned Suleiman. “Like your poet-lawyer friend we met.”

Just then, a kurta-clad man with a shock of thick white hair came up to greet Anwar. “Happy Diwali, Anwar,” he said. “We on the Left look forward to supporting the Congress in 2019. Modi must go! He has killed free speech, his cow vigilantes beat up poor Muslims every other day, Hindutwadis are killing journalists and activists who stand up to him. Modi must go.”

Anwar said soothingly, “Of course, he must go, but as our new young leader said, we don’t want a BJP-mukt Bharat, just a Modi-mukt Bharat.”

Suleiman was puzzled. As the white-haired leader of the Left, still breathing fire, walked away, he asked his friend: “But Anwarbhai, didn’t the Karnataka SIT chief say last Saturday that there was no evidence of right-wing extremists being involved in the left-wing journalist’s murder, contradicting the Karnataka minister?”

Anwar looked crossly at his friend. “Suleiman, don’t fall for all that BJP-RSS propaganda. Of course, she was murdered by right-wing extremists. Even the firearms that killed previous rationalists match the one that killed her.”

Suleiman shook his head. “No Anwarbhai, they don’t. The SIT chief said so specifically at his press conference on Saturday. He said he’s still not ruling anything out, including a Naxal angle.”

Anwar looked at his friend in good-natured exasperation. “Sitting in Riyadh, Suleiman, how on earth do you know all this?”

Suleiman smiled and nudged his friend. “See Anwarbhai, isn’t that bearded gentleman the TV channel tycoon who has run into problems with the I-T department and the enforcement directorate?”

“It’s all vendetta politics Suleiman,” Anwar said gruffly. “His channel is so professional, so fair to the Pakistani point of view. It’s Congress’ favourite channel. It’s such a refreshing change from those nationalist channels where anchors scream for two hours every evening.”

As Anwar and Suleiman walked towards the buffet table groaning under the weight of multiple cuisine stations, another bang went off. “Just kids playing with crackers bought before the ban,” said Anwar nervously. “Don’t give it a second thought.”

Suleiman smiled, thinking to himself, this can only happen in India. A noisy but legally noise-free Diwali.

Dinner over, as they prepared to leave, the two friends were startled to see a small stage with two men performing a skit. One was dressed in a smart sherwani, looking pleased with himself playing the bridegroom. The other was dressed in a simple white kurta, looking coy and demure, playing the bride. They exchanged occasional sideways glances, one smiling confidently the other coquettishly.

Anwar laughed as the two friends walked towards the exit. “It’s a marriage of convenience between the BJP and JD(U),” he chuckled. “Wait for our national mahagathbandan in 2019. That will end this marriage for sure.”

The deafening sound of firecrackers followed them out of the gate. Suleiman shook his head in mock despair. “We are like that only,” he said to himself as they slid into Anwar’s Mercedes and drove down a crowded Delhi street alive with a group of revellers bursting firecrackers led enthusiastically by a man he recognised.

“Isn’t that Chetan, Anwarbhai?” he asked.

“Yes, Suleiman, it is,” Anwar replied, his voice muffled by the sound of firecrackers bursting all around the car.

Follow@minhazmerchant on twitter

Can Rahul Gandhi revive the Congress ahead of 2019 Lok Sabha polls
Can the party provide the BJP with the contest Indian democracy needs? Not until it changes its dynastic DNA.

Friday, October 19, 2017

The coronation is imminent. In a fixed internal Congress “election”, Rahul Gandhi will soon be chosen unopposed as the next Congress president. That will make him the fifth member of the Nehru-Gandhi dynasty since 1947 to head the Congress.

If this is not cringe worthy enough in making a mockery of democracy, Congress leaders show no sign of embarrassment. As pioneers of dynastic politics they are actually proud that other families have followed in their footsteps: the Pawars, Thackerays, Abdullahs, Karunanidhis, Yadavs, Patnaiks, and even several NDA allies like the Naidus, Paswans and Muftis.

Congress leaders smugly point to the scattered political dynasts in the BJP itself, ranging from Rajasthan chief minister Vasundhara Raje to ministers in the Narendra Modi cabinet whose fathers were ministers or MPs. While the scale and numbers of BJP dynasts are much smaller, the principle applies equally to them: dynastic politics is bad in principle and damaging in practice.

The world’s most advanced countries have long rejected political dynasty. There are no Churchill, de Gaulle, Thatcher or Kennedy dynasties. Two of the most reviled politicians in the United States today, President Donald Trump and Hillary Clinton, are deeply unpopular at least partly because they are either products of a dynasty (Clinton) or brazenly promote assorted members of their family (Trump).

Apologists for dynastic politics argue that India’s dynasts are democratically elected and therefore legitimate, unlike dynasts in dictatorships or feudal sheikhdoms. This argument is disingenuous. India has a longstanding culture of feudalism. Deep-rooted poverty gives family-backed politicians an electoral advantage.

Indian dynasts use this advantage to ruthless effect, severely limiting the democratic choice available to voters. Culture and poverty collide to create a fertile breeding ground for feudalism. Other South Asian countries with similar cultural histories like Pakistan, Bangladesh, Sri Lanka and Nepal also suffer large economic inequalities — a common feature in dynasty-led countries.

In India even supposedly rational political leaders bow deferentially before dynasty. In former President Pranab Mukherjee’s new book, The Coalition Years: 1996 to 2012, launched last week, he writes, bereft of a trace of embarrassment: “I returned with a vague impression that she (Sonia Gandhi) might wish to consider Manmohan Singh as the UPA presidential nominee. I thought that if she selected Singh for the presidential office, she may choose me as the prime minister. I had heard a rumour that she had given this formulation serious thought while on a holiday in the Kaushambi Hills.”

Note Mukherjee’s plaintive, hopeful words: “She may choose me as the prime minister.” Sonia Gandhi, who had never held a constitutional office before appointing herself Congress party president in 1998 by railroading Sitaram Kesri, “chose” prime ministers while Pranab Mukherjee and Manmohan Singh looked meekly and obediently on.

It is this sycophantic party Rahul Gandhi will inherit in the coming days. The idea is to give Rahul a year to establish his authority over the old guard (many of whom will deservedly be sidelined) and put together a cohesive campaign for the raft of state elections scheduled for 2018 before the Lok Sabha poll in April-May 2019.

Apart from an unscheduled visit to a ladies bathroom, Rahul’s campaign swing across Gujarat last week was largely gaffe-free. Despite the Patidar factor and distress among farmers, the BJP is likely to win the Gujarat assembly election, though it will need hard, no-holds-barred campaigning by Modi himself.

Rahul’s minders know this and are trying to cut the BJP’s victory margin to just over 100 seats in the 182-seat assembly in order to change the mood in the four big states that really matter: Karnataka (which goes to the polls in April 2018) and Rajasthan, Madhya Pradesh and Chhattisgarh (December 2018).

If Rahul can keep the BJP’s victory margin in Gujarat below the 2012 figure of 115, the Congress has a good chance of springing a surprise in, especially, Rajasthan where anti-incumbency against Vasundhara Raje is building.

Rahul must also get credit for a statement he made in Gujarat which has been little noticed. Countering BJP president Amit Shah’s “Congress-mukt Bharat” war cry, Rahul said he doesn’t want a “BJP mukt Bharat” because India needs strong representation for people who support the BJP. He is of course right.

The last thing India needs is a one-party rule. We have had enough of the Congress’ unbroken 30-year rule from 1947 to 1977 (and overall for 55 of India’s 70 independent years) to not want any other party, the BJP included, to create a similar political monopoly in future. In a democracy, the only thing worse than dynasty is a monopoly.

Can the Congress provide the BJP with the two-party contest Indian democracy needs? Not until it changes its dynastic DNA. Rahul may have perfectly good intentions. But if he really cares about his party and his country, he must democratise the Congress and de-link his family from it.

That may alarm party loyalists who regard the Gandhis as the glue that holds the party together and ensures their own political longevity. But parties are resilient. The Congress will recover from a Gandhi-mukt future. With real internal reform, it could pose a challenge to the BJP in 2024.

Despite losing ground in urban India, Modi has enough momentum to carry the NDA to victory in 2019. But 2024 will be an entirely different matter. It will be the most open election in a generation.

Follow@minhazmerchant on twitter

Are Supreme Court judges right in saying social media must be regulated
Adding one more regulatory layer to those that already exist will not achieve balance.
Friday, October 13, 2017

Change is afoot in the Supreme Court. Decisions on how justices are nominated to the apex court by the collegium will soon be made public.

Transparency is obviously good. The highest court in the land should set an example in openness. In the United States, some (though not all) court proceedings are televised. US judges are held to account like any other public servants. In India, if proceedings in Parliament can be televised live, there is no reason why hearings in the Supreme Court shouldn't be televised either.

Indian judges need to drop the cloak of secrecy that surrounds their work. It is good that court verdicts are uploaded on the internet shortly after they are announced in court.

In the US, lower court judges actually have to get elected and take part in the hurly burly of campaigning. That may be taking things too far, but in India judges at all levels are treated with more reverence than needed. Respect, yes, reverence no.

In this context, consider the Supreme Court's "concern" at "accusations" made on social media against their judicial pronouncements. Senior advocates Fali Nariman (whose son Rohinton is a Supreme Court judge) and Harish Salve (whose father NKP Salve was president of the BCCI) said there was a need to "regulate" social media.

But first some context. According to The Times of India: "The Supreme Court expressed concern on Thursday (October 5, 2017) over abusive and derogatory comments on social media and agreed with the contention of senior advocates Fali Nariman and Harish Salve that people doing so should face consequences. The Supreme Court also hit back at those alleging that judges were increasingly becoming 'pro-government', saying such accusations were unfortunate and people should come and sit in courtrooms to see how courts have 'hauled up' the government to protect the rights of citizens."

"The Supreme Court was hearing a plea seeking its direction to restrain ministers and those holding public office from expressing their views in criminal cases which might affect the probe. The issue came up after Samajwadi Party member Azam Khan termed the Bulandshahr gangrape last year as 'an outcome of political conspiracy' and a petition was filed against him in the Supreme Court by the survivor's family. The court referred the matter to a Constitution bench and said the larger bench would be at liberty to frame questions for adjudication, including the issue of social media."

This is when Nariman and Salve stepped in. They asked for "regulation" of social media. Said Salve: "People have to be made accountable. Tweets are posted on a public platform. It is so abusive that I had to close my Twitter account. Consequences must follow for people misusing it."

Added Nariman: "It (social media) is horrible and nobody bothers about it. Some principle has to be evolved."

Justice DY Chandrachud (son of YV Chandrachud, another former chief justice of the Supreme Court), who was hearing the case brought by Azam Khan before the conversation veered around to regulating social media, expressed sympathy for Nariman and Salve's concerns. He recalled how Nariman had been attacked on social media for defending the Rohingya refugees: "I was shocked to see the kind of comments made against Nariman. People feel free to say anything. It is shocking."

So should social media be regulated? Wrong question. It already is. Twitter, Facebook and Instagram have robust self-regulation. Abusive posts are flagged and taken down fairly quickly after they're reported.

If the abuse is of a criminal nature (threat to rape or cause bodily harm), Twitter has an accelerated mechanism to suspend such accounts.

Such self-regulation is good but clearly not good enough. But there's a second layer of recourse available through various sections of the Criminal Procedure Code (CrPC) to punish threatening or abusive trolls.

Additionally, anyone who's active on an open public platform like Twitter knows there are three antidotes to trolling without even taking recourse to the two layers above. First, ignore. Second, mute. Third, block.

As someone who writes/edits/publishes across print/TV/online media platforms, I believe "regulating" social media as suggested by Nariman and Salve is both impractical and unnecessary.

Even much older media like print and television have failed to police themselves - or be policed. The News Broadcasting Standards Authority, Press Council and Editors Guild of India can't stop the stream of libellous stories that find their way into newspapers, websites and television.

Even the courts have proved ineffective in stopping slander as recent high-profile cases involving finance minister Arun Jaitley and Delhi chief minister and AAP leader Arvind Kejriwal have shown.

Media, by its very nature, is an untamed beast. Regulating such a beast is condemned to fail.

Social media has actually democratised media. One-way conversations between anchor/author and viewer/reader are now two-way - in realtime. The benefits this brings to transparent, robust journalism far outweighs any collateral damage such a free and at times fiery exchange can cause.

The Supreme Court and its senior counsel have missed the wood for the trees. The solution lies within them: fair, firm and fast justice. That itself will instill fear in those who use media to slander, abuse and threaten. There is no greater deterrence to wilful abuse or criminal behavior, in real or virtual life, than quick justice.

Justice DY Chandrachud has a history of delivering liberal, progressive judgments. He should re-examine his position on finding the right balance between a free media and a fettered media.

Adding one more regulatory layer to those that already exist will not achieve that balance.

Follow@minhazmerchant on twitter

Pak mainstreams its terrorists
It aspires to counter US pressure on terror havens and blur the line between terrorists, army and politicians

Thursday, October 12, 2017

Islamabad will receive two important American visitors over the next few weeks. Neither will be a bearer of good tidings. US Secretary of State Rex Tillerson and US Defence Secretary James Mattis have made no secret of their anger over Pakistan’s long-standing perfidy of harbouring terrorists who have killed over 4,000 US and NATO soldiers since 2001.

Presidents George W Bush and Barack Obama gave Pakistan $30 billion over the past 16 years in return for this perfidy. Pakistan’s army not only provides terrorists safe havens on Pakistani soil, but also trains them, funds them, arms them and protects them. Rawalpindi has two objectives. One, to bleed India at little cost to itself through the terrorists it nurtures because it knows it can’t win a conventional war. Two, to intimidate Afghanistan into accepting the Taliban as part of a future Afghan government.

Washington has finally blown the whistle. At a recent US Congressional hearing to the House Armed Services Committee, Mattis was blunt: “We need to try one more time to make this strategy work with the Pakistanis, and if our best efforts fail, the President (Donald Trump) is prepared to take whatever steps are necessary.”

Pakistan, though, has two trump cards: First, the land supply route for US/NATO forces in landlocked Afghanistan; second, China. The Pakistan army, famed for its cunning but not its intellect, overestimates the importance of these two key assets. The US has begun developing an alternative land supply route from the north through central Asia. While logistically more complex, it is an antidote to Islamabad’s blackmail over essential NATO supply routes (which Pakistan temporarily blocked after NATO helicopters and fighter jets killed 28 Pakistani troops in northwest Pakistan in November 2011).

China is an even weaker card. Beijing fears Islamist terrorism and has clamped down on its restive Muslim Uyghur population in Xinjiang province. China’s investment in Pakistan carries a heavy interest burden which ordinary Pakistanis are only now coming to terms with. Millions of Pakistanis study and live in the US. Very few do so in China. The cultural dissonance with China, along with the economic costs of China’s high interest-bearing loans for new infrastructure will (as Sri Lanka has recently discovered) rapidly erode the idea that China is the all-weather solution to Pakistan’s problems.

As Mattis said at the Congressional hearing: “In a globalised world, there are many belts and many roads, and no one nation should put itself into a position of dictating ‘one belt, one road’. One Belt, One Road also goes through disputed territory, and I think that in itself shows the vulnerability of trying to establish that sort of a diktat.” Mattis (a former Marine commander), who follows Tillerson to Islamabad later this month, says “everything is on the table” in his talks with the Pakistani establishment. That includes cutting all aid, stopping military spares, and ending Pakistan’s status as a non-NATO military ally.

Drone attacks on terror safe havens in Pakistan would be one form of escalated punishment. Sensing the danger, Pakistan’s resourceful generals have begun mainstreaming terrorist organisations into politics as an insurance policy against such attacks. The Milli Muslim League (MML), a “political” party controlled by the terrorist-cum-Islamist evangelist Hafiz Saeed, has the backing of the Pakistani army. The army’s spokesman Asif Ghafoor says: “The government has started some discussion over it, how do we mainstream them, so that they could (make a) constructive contribution.”

Pakistan thus joins the league of chaotic Arab countries like Egypt where quasi-terrorist organisations like the Muslim Brotherhood briefly held power and are still a force to reckon with in the Opposition. The Pakistani government has made a show of opposing the MML. The Interior Ministry told the Election Commission of Pakistan that Hafiz Saeed’s Milli Muslim League should not have been allowed to participate in a by-election where it won over 5,800 votes. The ministry wrote: “There is evidence to substantiate that the Lashkar-e-Taiba (LeT), the Jamaat-ud-Dawa and Falah-e-Insaniat Foundation (FIF) are affiliates and ideologically of the same hue, and (therefore) the registration of the MML is not supported.”

By mainstreaming terrorist groups into political parties under the army’s patronage, Rawalpindi hopes to kill two birds with one stone. First, counter US pressure on terror safe havens by, in effect, giving them political cover. (Drone attacks on terror groups masquerading as political parties are problematic.) Second, further blur the line between terrorists, the army and politicians. Attack one, you attack all three, thereby checkmating the US. The Generals in Rawalpindi, who spend their evenings sipping Scotch and obsessing over India, will try to spin Mattis and Tillerson exactly as their predecessors did.

The size of Pakistan’s economy is just 11 per cent of India’s. Its population is less than that of Uttar Pradesh. It has ongoing insurgencies in Balochistan (which comprises 44 per cent of Pakistan’s territory), Sindh, and among the Pashtuns, who are evenly spread on either side of the Durand Line that separates Pakistan and Afghanistan.

Like Houdini, Pakistan’s Generals have escaped the shackles Washington has in the past put on them. Mattis, who earned the sobriquet “Mad Dog” when he served in the US army, though, is a different kind of US defence secretary. He could be the most difficult visitor Rawalpindi’s Generals have received.

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Good And Simple Tax
The GST should simplify paperwork. This can happen only with a single gst rate for almost all goods and services

Monday, October 9, 2017

Three months after its introduction on July 1, 2017, it is time to take stock of the Goods and Services Tax (GST). Tax collections are running ahead of estimates. By pulling in large chunks of the informal sector into the formal economy, the long-term benefits of GST will be a game changer.

In the earlier regime of a plethora of state-level taxes – octroi, VAT, sales and excise – many SMEs operated beneath the radar. Small traders almost never paid any taxes. Now most do. The GST will, in the months and years ahead, dramatically broaden India’s tax base. 

Where GST has failed the test, however, is in its architecture and implementation. The architecture is needlessly complex. There are too many tax slabs, too many exemptions, and too many anomalies. Implementation has inevitably suffered with tortuous paperwork to decipher which tax slab applies to which product. 

As Einstein said apocryphally: “The clever simplify the complicated; the rest complicate the simple.” The GST would have intrigued Einstein. Here’s a great idea, replacing a complex web of state taxes with one national tax. Simplifying the complicated? 

In principle, yes. In practice, no. 

The first infirmity of GST is the multiplicity of tax slabs. The second is the onerous paperwork. The third is differences in tax slabs between components of the same product. A colour printer’s components, for example, have different tax slabs for each sub-product, making the paperwork a nightmare. Book publishers, to cite another example, have to deal with different tax rates for printing presses, designers and authors’ royalties. 

Some of the GST tax slabs descend from the sublime to the ridiculous. Food takeaways from an air-conditioned restaurant are taxed at 18 per cent even if it’s a walk-in customer who takes delivery in a non-airconditioned part of the restaurant. Oddly, a sitar is exempt from GST; a guitar is not. A dhol is exempt, drums are not. This is taking economic nationalism to ludicrous lengths under the guise of encouraging Indian musical instruments at the cost of western ones.

Exporters are especially unhappy with the new system in which taxes have to be paid upfront in place of the earlier waiver. These taxes will be refunded but till then the government increases its cash flow by an estimated Rs 1.50 lakh crore while exporters have an equivalent sum locked up and pay high interest on it. The new Commerce Minister, Suresh Prabhu, will need to sort out this problem in an environment where exports are already under pressure. 

The GST has five rate slabs: 0 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent. But that climbs to seven rates when you add cess on luxury goods (cars, for instance) of different sizes and types. Finance Minister Arun Jaitley and his team of bureaucrats in the ministry of finance (MoF) say there will eventually be one GST rate: 18 per cent. But even here there are conflicting views in the MoF which believes there should be at least two rates – 12 per cent and 18 per cent. That actually makes it three rates since the 0 per cent rate on household essentials like food will remain. And if cess on luxury and “sin” goods also remains, that will take a “simplified” GST back to at least four tax slabs. 

The MoF’s intention to move to a single GST rate is therefore clearly utopian. The only sensible way forward is to focus on three rates: 0 per cent for household essentials, 18 per cent for almost everything else, and 28 per cent for a small range of  “sin” goods. 

Exemptions are a bureaucrat’s delight. They give babus discretionary power and a sense of self-importance. Tinkering with tax rates is a time-honoured practice in Union Budgets. The habit has seeped into GST – unsurprisingly because the same set of people write the Budget. The GST should simplify paperwork. This can happen only with a single GST rate for almost all goods and services bar household essentials like food and luxury/sin goods. 

The larger problem that stares the government in the face is that tax revenue is not keeping up with the country’s expenditure. India requires more funds for defence, education, healthcare, railways and infrastructure. 

With private investment moribund and banks shunning new corporate lending due to high NPAs, the burden falls on public spending. Transport Minister Nitin Gadkari plans to issue a series of innovative bonds totalling Rs10 lakh crore to raise resources for infrastructure development. Similar creative ideas are needed to attract FDI and domestic investors in healthcare and education. 

India spends Rs 5.23 lakh crore – equal to the entire fiscal deficit – on just servicing interest on old loans. Compare this to the allocation in the 2017-18 Union Budget on agriculture (Rs 0.57 lakh crore), health and family welfare (Rs 0.49 lakh crore), education (Rs 0.80 lakh crore) and energy (Rs 0.37 lakh crore). That adds up to Rs 2.23 lakh crore in four key sectors – less than half the money spent on paying interest on old loans. 

Subsidies (Rs 2.40 lakh crore) and pensions (Rs 1.31 lakh crore) underscore the parlous state of India’s public finances. There is little left over in the Budget for productive investment to boost economic development aft