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Chidambaram Peddles False Narratives on Indian Economy

Chidambaram Peddles False Narratives on Indian Economy

Two news items in the recent past caught the attention of many. They deserve closer scrutiny since it provides good insights into a thriving business in India. It is indeed representative of a deep and well entrenched industry that has prospered by profligate peddling of false narratives in India.

The first was observations made by none other than the former Union Finance Minister P.Chidambaram. He led the economic fortunes of the country during his days in the Union Cabinet and arguably presided over an economy that tanked the fastest despite strong fundamentals. That he is in the news for investigations by concerned agencies and related court cases for alleged corruption is beyond the scope of this piece.

The erudite former Minister – a Harvard alumni – has opined that the country’s current economic conditions were akin to a vehicle with three punctured tires. He went on to paint a very dismal picture where almost everything about the economy was wrong. If one were to believe him, it would appear that most Indians are rotting in poverty and even unable to sell pakodas to make a living. As a politician in the opposition camp, this was not unexpected.

As expected, this statement was lapped up by the media and reported 24/7. Many pseudo experts and self-acclaimed economists joined the fray, pontificating on why all these imaginary ills can be attributed to none other than Prime Minister Modi himself. Mercifully, the false narratives did not carry on for more than a few days of print and airtime.

The second item was a glibly written piece that subtly casts doubt on the sustainability of the high growth rate that India is currently witnessing. It again questions PM Modi’s statements where he called for a double digit growth rates in GDP. Eminent economist Dr. Subramanian Swamy has also talked about India’s inherent capacity to grow at double digits. With a touch of finesse the article cites other pundits who are not sanguine about double digit growth for India. It is certainly reminiscent of the days when socialists lectured us on why India can only grow at a “Hindu rate” of growth of 3.5% or less. The article pompously advises that it would do India better to aim for growth rates of less than 8%.

India has seen too many of these arm chair pundits and ministers of bygone eras attempting to water down the unprecedented growth we are witnessing. The fact is that this is not well intentioned advice or political strategy, but churlish rant emanating from those quarters where the sun has begun to set. It is indeed incumbent on Mr. Chidambaram, in particular, to tell the nation the initiatives that he had undertaken to stimulate the economy that provided better results, if any. That would garner better Television Rating Points (TRP) than the story of a vehicle with three flat tires.

The point is to not question anybody’s freedom of expression or the right to have an opinion that is different or even counter intuitive. On the contrary, such cross winds fertilize the idea pool and the ultimate winner is the country. But this virus strain is different. At a minimum, balanced punditry is morally duty bound to signal and call out the existence of a thriving industry that peddles false narratives.

Many politicians, together with some sections of the media, have excelled in consummating this art of creating false narratives via obfuscations, distorted and skewed opinions that is ably supported by presenting selective data.

Now let’s look at another set of data that provides a counter or shall we say a neutral narrative. In a recent article published by World Economic Forum (published well before Mr. Chidambaram’s statement), a researcher using World Bank data has shown the performance of the Indian economy over the last fifty years. Please refer to chart.

WB1The author argues that India’s growth rate has been consistent and has accelerated over the long run.  The author further projects “…..  GDP growth to be 6.7 percent in 2017-18 and accelerate to 7.3 percent and 7.5 percent respectively in 2018-19 and 2019-20”. (Emphasis added). The observation of the author – derived from data presented in the chart – seems tenable. Since the readers themselves can visually verify the data, it irons out any potential for mischievous interpretation that may ensue when data over a shorter window is observed.

This chart belies both the news items referred to above. The Indian economic vehicle does not have three flat tires, as alleged by Chidambaram. On the contrary it seems to be kicking and doing very well, despite pessimistic projections. Secondly, if we look at the performance over the last fifty years, a high trajectory i.e. double digit GDP growth may well be within India’s reach.

That leads us to the well-known truism that most Indians are aware of. In the worst days of socialism that beggared India, many exasperated but wise Indians would remark that no government rules India, for India governs itself. For them, India was on auto pilot on “Ram Bharosa”, meaning India was governing itself on the will of Lord Ram. The chart referred to earlier just seems to reinforce this dictum on India’s potential, well known only to ordinary Indians, and apparently not to some Harvard educated elites. In short, India’s growth is unstoppable, albeit it can be slowed down by the likes of Chidambaram in the short to medium term.

But that should make reasonable Indians stop on their tracks and ponder. Fashionable opinionistas in India and their allies elsewhere, as is their wont, have repeatedly lamented that India has missed the bus. But has it really? Today, when data is democratized and can be accessed by anyone in a matter of few clicks, it is indeed easy to review and draw their own conclusions.

But India has always been a paradise for peddling false narratives – be it economic growth, religious freedom, Aryan invasion theory or even the latest fad – intolerance. Some wisecrack puts out a skewed misinterpretation or blatant falsehood and this gets lapped up by the media like hungry wolves and then repeated ad nauseam. Finally, this becomes the established narrative – completely obliterating the underlying facts.

That has been the established and well tested strategy of the narrative peddlers who sell their views for a price, for a motive, in full disregard for India. And many of them happen to be politicians and opinion makers who presume they preside over the economic future of India.

The necessary and sufficient condition for the false narrative industry to thrive is a grossly ill-informed society. They had a free run for so many decades, but not anymore. Digital India has bought internet to every home and now information is free and the biased are being called out. This is the new ground reality politicians in India have to contend with. False narratives, be it from the government, the opposition political parties or for that matter from any quarter, will now be easily spotted and called out.

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Posted by on June 30, 2018 in Economics, India, Indian Economy, Media, Modi

 

Political Impact of Modi’s Transformation

Political Impact of Modi’s Transformation

In two earlier  pieces,  Modi’s transformation of India using the twin pillars – choosing the right policies and then executing them well – was examined in detail. The impact on the ground is for all to see. It is in this context that news of the plot to assassinate Modi by extremists groups has come as a shocker. Undoubtedly it is a serious issue and reports have indicated that the police as well as the intelligence agencies are looking into this.

The plot itself was not unexpected given that two former Indian Prime Ministers have been assassinated. But it comes as a living reminder that country’s leadership continues to face threats from forces inimical to India – both within and outside the country. More importantly, this is symptomatic of the deeper churn in the political ecosystem ever since Modi became Prime Minister. It is worth pointing out here that many opposition parties, particularly the fringe elements, have been drumming up so much hatred and spewing venom that may it have directly or indirectly contributed to such plots. But that is for the police to determine.

Modi’s focus on “development”, besides unleashing the economy, has enabled him to wrest control of the political narrative and lay down a new set of agenda for India. Muslim appeasement has lost its sheen – particularly after the banning of “triple talak” thus endearing himself to millions of Muslim women. Also the absence of targeted attacks on minorities that many Cassandra prophesied has only aided the shifting of the narrative. In many ways, much of the angst of these entrenched anti-national elements can be sourced to their complete disappointment in the successes of the ruling establishment.

This shift in narrative has immense consequences. India is witnessing a slow migration from ghetto politics – a perverted brand of politics of pandering to minorities at the expense of the majority that has only fissured India for seven decades – to one dominated by performance, punctuated by key statistics and data on the economy. The ground reality is that it is sounding the death knell for many political careers and parties. A careful examination of changes occurring in the political campaigns seem to suggest the movement in that direction.

The Congress party, India’ largest opposition party in terms of organization and resources, has been forced out of office all states save one.  India’s very own grand old party with a long history is today reduced to a mere rump of their erstwhile past. The massive mandate in favor of Modi has created severe long term damages to the party. Their banding together with all and sundry – disparate and desperate parties has only degraded India’s opposition polity into a chaotic agglutination for whom political ideology has become nothing more than a disguise. This short sighted calculus to gain political power at any cost has been their undoing.

Their responses to the government’s “development first” agenda have been bizarre – from a mix of standard divide and rule gimmickry to engineering violent protests to create a false aura of deteriorating law and order situation. They talked about unending oppression of Dalits, repression of Muslims, denial of equal rights to women, refusal to share river water sources between states, linguistic chauvinism, and north versus south India and on and on. But all these time tested strategies seem to have fallen flat on their faces and only succeeded in leading them further into dark political wilderness. The people seem to have called the bluff.

Aiding the Prime Minister in building his massive support base, albeit unintended, is the almost complete lack of thought leadership in the opposition camp. Their only answer to his development programs is a dysfunctional opposition to anything and everything he does. They seem to have mistaken rabid Modi-baiting for strategy. Engineering street protests and attacks on Dalits and minorities is now misconstrued as political stagecraft. So rapid is the erosion of their support base that today Congress is not even confident of being elected in their “safest” constituencies despite all allurements to the voters.

This truth is that Modi’s mindshare of Indians is real. He has captivated different demographic segments by providing different programs that appeal to them. With his powerful engagement on social media he seems to have captured the imagination of the younger segments. They see the fruits of his initiatives – from sleek railway coaches to soil data cards for farmers – and have massively backed him.

The expectations of the people on delivery of developmental agenda is high and there is no going back. In every village people are talking excitedly about electrification or the introduction of new railway lines or the spanking new highway that snakes though their town. They have now seen and experienced for themselves how things can change fast. The most important learning for the people is that these massive public investments and welfare programs, if executed well under watchful eyes can swiftly impact their economic fortunes. That is the essence of Modi’s economic transformation.

The fall out on the political ecosystem is that many political careers will be ruined and we may never again see the faces of many politicians. Fringe elements, arguably the loudest anti-Modi voices and the most virulent anti-national forces, have been corralled and their sources of funds have been shut down, thanks to demonetization. For others, the writing on the wall is clear. Perform your duties as expected or exit the political life.

The focus on governance and development may have found a long awaited cure for anti-incumbency that ailed India for decades.  This does not mean that 2019 election will be a cake walk for the BJP or Modi himself. There is lot of unfinished work. More importantly, he has to step up his publicity machinery to bring to the attention of every Indian in every village what has been achieved in these four years.

Good governance and data on economy may provide fuel to debates and score brownie points on the television talk shows and may even win thunderous applause. But winning elections is another matter altogether. The 2018 elections in Karnataka shows that BJP has much work to do. But at least one thing is clear. The days of perverted appeasement politics is definitely over and seems to have had a quiet burial.

 

Modi Lifts Millions Out of Poverty

Modi Lifts Millions Out of Poverty

In an earlier piece the ground work laid by Modi in his first four years in office was analyzed. His important achievement was the creation of a policy environment that facilitated an accelerated growth. As pointed out the implications for the country are many. This piece will explore the ripple effects of the rapid transformation on society

One big game changer that Modi has spotted very early has been the widespread use of the mobile phone in India. With over 118,34,08,000 mobile phones, India has a massive penetration of over 91% (Wikipedia), bulk of the users being rural and urban poor.

This large user base presented a great opportunity to deliver government services to the people via the mobile phone. In fact it Modi has used the mobile phone as a development accelerator. Called the Digital India initiative, the e-governance architecture provides swift and intermediary-fee delivery of services as never seen before.MSME1

Modi’s Digital India is probably the biggest platform for delivery of government services anywhere in the world. Fully leveraging India’s prowess in information technology, this has been created in record time. The bandwagon service platform enables citizens to track status of their application to government, request information, seek marketing information on agricultural produce, weather information, cashless transaction using digital wallets, file income taxes electronically, access free CBSE textbooks, review digital land records, view data from the Geo-Informatics Center and an almost endless list of services line up.

But how has the sweeping changes brought in by Modi impacting India? Have they created job growth? The political opponents of Modi have charged that despite these changes, there is no impact on employment. While concerns on employment are valid, the truth is that the changes have bought a large number of jobs particularly in the informal sector.

It must be noted here that Indian economy is a complex mix of formal and informal sectors. This informal sector, like the small business sector in the US, is a key pillar of the economy. It employs over 120 million people while the formal sector employs only 12.5 million (mudra.org.in). It is one of the largest disaggregated business ecosystems in the world – shopkeepers, vegetable vendors, repair shops, artisans, street vendors and many more – sustaining around 50 crore lives.

According to the National Sample Survey Organization (NSSO), as of 2013, micro, small and medium enterprises (MSME) totaled 6 crore business units mostly individual proprietorship. Most of these are owned by weaker section of society particularly from SC/ST or Other Backward Classes.

Since they are not organized, granular data is hard to come by. This is has posed a great challenge in assessing the true benefits particularly in generation of employment. But a fair assessment of the impact on employment can be deduced from the data available with the Mudra Bank. Since its inception three years ago, the bank has disbursed loans to more than 12 crore small entrepreneurs which is more than the total population of Italy and France (narendramodi.in). 50% of its borrowers were from SC/ST and over 75% were women.

Assuming that only 50% of the borrowers employed one additional help, Mudra bank would still have generated a minimum of 6 crore direct jobs. Further, even if only 25% of the borrowers were successful in developing their businesses, then at least 3 crore people would have enjoyed a higher disposable income. This is a very conservative estimate and data on the ground may indicate an even better scenario. More importantly, all this was in the weakest sections of society in rural as well as urban areas. The gains in employments from Mudra bank are substantial.

Modi’s transformation exercise has greatly impacted Indian society. Series of small but important changes in the way public consumes government services have generated optimism and has boosted the self-esteem of the people. It is now common place to hear senior citizens in temples, marriage get-togethers or other social occasions to wax eloquently about the beneficial changes Modi has bought about in the country.

The senior-citizen demographic segment in particular has lived through hell – having to pay bribes, suffering untold delays in everything, being ignored or harassed for seeking what is legitimately due to them. Many have not forgotten how millions of retired government and public sector employees have been forced to pay bribes just to get the legitimate pensions or retirement dues.  For them Modi has given a new life experience.

The impact on women is profound. For instance a housewife is now able to sell her cooked food to local area residents by soliciting orders via SMS and accept digital payments. She can borrow money at subsidized rates from banks or lending institutions that are refinanced by Mudra Bank. All this without paying a rupee in bribe to intermediaries. Such anecdotes abound in almost every town and village in India today. Not to forget, this was not even in the realms of imagination for many Indians even a few years back.

But bigger questions loom large for the BJP. The kick starting of the economy has started a new social dynamics in the county. It is narrowing, albeit at a slow pace, income disparities at the lowest levels in the economy. But how will all this impact the 2019 election?  Will it boost the prospects of BJP? Why did it not influence Karnataka elections or the recent by-polls? Is BJP’s ‘development first’ agenda waning? Political observers are not in agreement and opinions seems to vary widely, largely depending on whom you talk to.

The fact is that the number of reforms is unprecedented and the impact in the ground, as explained above is lifting millions out of poverty. But these poor millions, by themselves, may not be able to decisively sway the elections.  On the other hand it is also true that sections of supporters feel let down by the BJP. From the delay in building Ram Mandir to corrupt politicians of UPA not facing the law, the anger is real.

But this anger needs to be unpacked to have a better understanding. The dissatisfaction largely stems from impatience due to non fulfilment of expectations. Here again, these are the classic problems seen in a large pluralistic society where the expectations of different sections compete for attention at the same time and often are not complementary. Modi’s government has impacted them differently and hence the sense of unfulfilled expectations.

In a complex country like in India, poverty alleviation at the lowest level is rightfully the urgent priority and Modi has devoted a lot of time for it. As regards booking the corrupt, the delay is inexplicable. The only plausible explanation is that Modi does not want to create a martyr out of these corrupt leaders who left alone have no chance of winning.

For the millions at the lowest levels of society, Modi is a godsend. So too for millions of middle class Indians, particularly the under 35 segment. For them the actions have matched the promises. This is rarity in Indian politics.

 
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Posted by on June 4, 2018 in Economics, India, Indian Economy, Modi

 

INDIA’S TRANSFORMATION UNDER MODI – IMPLICATIONS

indianeconomy2The growth in the Indian economy has attracted a lot of attention. India has emerged as the fasted growing large economy, pipping China. It is expected to clock a GDP growth rate higher than 7.2% in 2018. Many international agencies that monitor key economies around the world have been sanguine in their projections on India.

A recent study published by UK based Center for Economic and Business Research (CEBR) states that India’s consistent GDP growth rate will push it to prominence in 2018. It has forecast that India will join the elite group of the top five largest economies of the world. This is a full year ahead of projections by International Monetary Fund (IMF) that India will make it to the top five in 2019.

India’s rise in global prominence has not come easy. In the last four years, Prime Minister Modi’s government has put in an unbelievable number of policy reforms and public investments in hundreds of projects that have borne fruit. This smorgasbord of reforms and investments have deeply impacted key sectors of agriculture, manufacturing, and services like never before. The gamut of initiatives – many of which have longer gestation periods – will continue to deliver results over an extended time horizon

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A dispassionate analysis throws up three key pillars that have provided the bulwark for the emergence of the economy.  Firstly, Prime Minister Modi, shedding ideological baggage, has incorporated best practices in economic management that are pragmatic and more importantly, well suited for the country. This is indeed refreshing, since for many decades India was hamstrung by ill-advised ideological paradigms that only resulted in poor growth rates and endemic poverty.

Secondly and more importantly, we are witness to an unparalleled excellence in executing these economic reforms and policies. Modi’s personal leadership qualities – acquired mostly as Chief Minister of Gujarat where he was virtually baptized by fire – have played an important role. The recent inauguration (May 2018) of the smart Eastern Peripheral Expressway (EPE) is but one example of this mastery over execution. Built at a cost of Rs.11,000 crore in Delhi, this 135 KM long solar power lit expressway was completed in 18 months.

Thirdly, and most notably, the government has ensured that, at least at the political level, there is no corruption, pilferage or fraud. These have been the core secrets of the swift economic transformation we see today. It is well known that India’s track record in delivering government services, particularly welfare benefits to the poor has been dismal. Former Prime Minister Rajiv Gandhi is on record saying that for every rupee the government spent on welfare only 15% actually reached the beneficiary.

But Modi had stopped all that by directly transferring benefits to beneficiary’s bank account. According to data published by the government, welfare benefits of Rs.3,65,996 crores were directly transferred to beneficiaries’ accounts in the last four years (www.narendamodi.in). This is an example of Modi choosing the appropriate service delivery vehicle and executing it well in a given time fame.

Modi’s developmental paradigm and governance strategy are built around these three pillars. Hence his schemes and initiatives, just to name a few –   GST, Indian Bankruptcy Code (IBC), recapitalization of public sector banks, unprecedented investments in national highways and railways, 100% electrification, transfer of welfare benefits directly to the beneficiaries’ bank accounts –  are runaway successes.

What is even more striking is the fact that the government has used existing laws, existing civil and administrative machinery, existing staff and officers to execute its vast number of projects. The same machinery has in many cases achieved the project objectives ahead of schedule without cost overruns.

Like all previous governments, Modi too had the low risk option of choosing reforms on a smaller scale that do not tend to rock the boat. But these changes would have yielded only incremental results or benefits that would have continued to keep India hostage to a pernicious low growth cycle, depriving huge sections of society a decent livelihood. But Modi apparently has taken a calculated risk and has instead, boldly opted to choose the transformation route, a high risk option, to achieve big results in as diverse areas as possible. The gamble, as seen from the optimistic projections by international institutions, seems to have paid off.

Many compare Modi’s transformation exercise to the reforms of 1991 initiated by the then Prime Minister Narasimha Rao. Rao’s reforms were no doubt extremely critical for India then, but were more in the nature of a rescue mission. They were focused on deregulation and attracting foreign direct investments to shore up dangerously low levels of forex reserves. They were incremental and definitely on a smaller scale in comparison.

As already pointed out, Modi’s reforms are transformational. Further his efforts must be seen as part of a master plan that includes securing India from internal and external threats as well as forging bilateral ties with various countries around the world to deepen India’s trade and commerce. The truth is that both Rao and Modi have succeeded in untethering the native economic sinews of the country.

Despite the din, distorted and mostly negative reporting in the media, Modi’s developmental agenda has the backing of large sections of society. For them the economic resurgence passes the smell test, at least anecdotally. For instance, in high growth states like Gujarat and Tamil Nadu, there is a noticeable absence of beggars on the streets or on railway platforms. Long gone are the days when people could not afford footwear or wore torn clothes. The so called ‘trickle down’ effect which was a just a dribble for several decades, now seems to be drenching vast sections of poor people. Of course this is not to gainsay the fact that poverty continues to pervade vast sections of society in many states.

The economic survey for 2018 has highlighted the strengths of economy. But it has also warned of potential risks and threats to the economy, both internal and external that need to be carefully watched. However, the good news is that key statistics and relevant data point to continued robust growth in the economy. Modi’s biggest achievement seems to be the setting up of right the ecosystem via a conducive policy environment, infrastructure building and massive public investments that has since unleashed the economy.

The silent changes that are sweeping across the country– mostly at the lowest levels of the economy – are creating huge impact on the very fabric of India – economically, politically and socially. The enthusiasm and expectations of the people – particularly the under 35 demographic segment that forms over 60% of India – seem be scaling up.

The clamor for corruption-free and swift delivery of government services – be it provision of electricity, sanitation, public health services or any service for that matter – is ratcheting up. While citizen experience is positive, this may not be a welcome change for the political ecosystem in India.

Modi’s iron will and mastery of execution is unmatched across the whole political spectrum in India today. He has given India a new mantra to the political class- perform or perish. He has set the bar for performance high enough that many in the current political scene may not be able to achieve. This probably explains the collective hatred seen for Modi among his political opponents and their proxies. But the impact of Modi’s transformations will continue to reverberate for years to come.

 

 

MODI ATTENDS COMMONWEALTH MEET IN LONDON

MODI ATTENDS COMMONWEALTH MEET IN LONDON

The recently concluded 25th Commonwealth Heads of Government Meeting (CHOGM) summit in London saw the participation of fifty three countries. Of these, only two countries (Rwanda and Mozambique) do not have a colonial past or a constitutional link to Britain. All Commonwealth members avow the leadership of the British royals. This biennial gathering of leaders from round the world is indeed a grand show of pomp and splendor.

This year’s Commonwealth Summit has been billed as a grand opportunity for India not only to showcase its growing economy but also project its leadership in an emerging new world order. It has been further argued that it provides a unique platform of influence for India where China is conspicuously absent. No wonder, Prince Charles air dashed to New Delhi on a charm offensive to invite Prime Minister Modi in person to attend the Summit.

But there is more than meets the eye. Many see the Commonwealth as a vestige of the past, conceived by Britain to arrest its declining influence in the world. Despite its large membership, it continues to be high on optics and low on influence as it struggles to find relevance in an ever changing world order.

India’s relationship with this body can best be described as lukewarm. From India’s perspective, despite being home to over 50% of the population of the Commonwealth and with the second largest economy, next only to the UK, it has never enjoyed pride of place. That the Prime Minister Modi decided to even attend the CHOGM 2018 Summit came as a surprise to many, given that he had declined to attend the previous Summit.

Large sections of Indians, given its track record, are not exactly enamored by the Commonwealth and even view it with suspicious. For instance the Commonwealth provides that no bilateral or internal issues should be raised by members in its meetings. Despite this, Pakistan has been allowed to raise the Kashmir issue on multiple occasions, angering the Indian establishment.

Secondly, the UK’s anti-India stance as seen from its support of Pakistan in its wars against India has not endeared itself to Indians. Its support of Pakistan during the 1965 and 1971 conflicts are well documented. In peace time too, for example during the cold war era, it worked against India’s interest. In the eighties, it had actively supported Kashmiri separatists and refused to crackdown and deport them despite official requests from India.

So the average Indian cannot be faulted for a lack of interest in the Commonwealth or its affairs. Despite the slick campaign to project the CHOGM 2018 Summit as an economic and leadership opportunity for India, the disinterest is obvious.

The Commonwealth’s claim of providing economic opportunity for India is doubtful. This is because it is difficult to ascertain how much of India’s trade with fellow members came from bilateral dealings or directly as a result of the membership. Also there is no exclusivity clause that binds members to trade with fellow members. India’s policy makers are acutely aware that with or without the Commonwealth, its growth trajectory will stay its course for many years to come.

But what could be the reason for this desperation in rejuvenating a moribund organization? The truth probably lies in the sinking economic fortunes of Britain itself. That the UK economy is in the pits is by no means a secret.

Firstly, Britain is having major economic upheavals on the domestic front amidst an unfriendly European Union following Brexit. According to UK’s Office for National Statistics (ONS), its economy grew slower than expected. Its annual GDP growth for 2017 was put at 1.7%.  Secondly, UK’s Office for Budget responsibility (OBR) forecasts that its economy is expected to see an average growth of 1.4% over the next five years. This is indeed bad news for the Brits.

According to an analysis (The Guardian ,Feb 22nd 2018), the British economy continues to show fresh signs of deterioration. It has been pointed out that economic activity in multiple sectors have lost “momentum”. The alarming rise in unemployment, low wage growth and weak consumer spending are now part of Britain’s new normal.

The only saving grace, according to the UK’s National Institute of Economic and Social Research (NIESR), was a robust global economy which helped its exports, thanks to a weaker Pound. Post BREXIT, Britain is seeking new economic pastures to revive its economy. It is common knowledge that many developed countries are courting India to kick start their own economies. Thus it is no surprise that the Brits went all out to woo India.

As far as Modi’s trip to London was concerned, the CHOGM 2018 Summit itself did not make much of an impact or news in India. The strong anti-British sentiments in India – largely due to the colonial rule as well as UK’s long anti-India stance after 1947 – provides a powerful overhang that will not be easy to dissipate.

What really captured the minds of Indians was Modi’s meeting with the diaspora at an event of invited guests at the Central Hall, Westminster. Although attended by smaller audience, the event was telecast live around the world and as expected had a huge viewership. Modi smartly used the opportunity to convey what many believe is the clarion call for the 2019 general elections in India. This dominated his London trip, rather than the meetings with heads of fifty three governments from around the world.

The Commonwealth’s impact in providing tangible benefits to the member nations is debatable. The benefits, if any, are skewed unduly in favor of the UK. This is an unsustainable model in today’s world where China and India are fast emerging as economic power houses. Britain has pumped tons of good money in keeping alive an organization that is long past its shelf life. With a failing economy, Britain too may quietly bid goodbye to an institution that stood as a grand testimony to a bygone era. That being said, the Commonwealth, despite bold statements to the contrary, is probably in its last innings.

 

 
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Posted by on May 3, 2018 in #Brexit, India, Modi, Uncategorized

 

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India Changes Tack in Dealing with China

India Changes Tack in Dealing with China

Relations between India and China can best be described as tenuous, beset with mutual suspicion and distrust. A quick review of the relations between the two countries over the last six decades or so shows that India had been contending with an ever-increasing trajectory of belligerence and threats to its economic interests and territorial integrity. China has always perceived India as a potential competitor and a threat. Hence it has used every trick in the book to erect roadblocks in India’s path either directly or indirectly through its proxies.

India has long been aware of China’s support to Pakistan – from building nuclear weapons to tacit encouragement of terrorism against it. Its intelligence agencies have also long been aware of Chinese involvement inside India – from funding communists to maintaining a bevy of friendly journalists on its payroll to promote its point of view. But that is par for the course in today’s pernicious international ecosystem and India has no reason to complain but rather realign its own strategic policy responses that safeguard its interests.

Of course, there have definitely been several individual instances of India standing up to China – in military responses to border incidents prior to Dokhlam (2017) or while negotiating border disputes. But overall, it conspicuously lacked the sting to deter China. That would explain the condescending attitude and a second class treatment towards India.

This has largely been attributed to the fact that India for over three decades had coalition governments that were by definition weak. Hence in international affairs, more so with regards to its neighbors, India continued to punch below its weight. But that explanation is not convincing, given that many countries with far more unstable governments have stood up to their aggressive neighbors.

All that seem to have slowly but surely changed under Prime Minister Modi. After an initial but short-lived honeymoon with both Pakistan and China, India has displayed a nuanced ratcheting up of assertiveness. There are ample pieces of evidence that point in this direction. This piece will highlight three recent reports that have attracted immense interest that attest to India’s emerging assertiveness.

Firstly, the political crisis in Maldives brought the navies of India and China to a near confrontation in the Indian Ocean. In what is seen as blatant gunboat diplomacy, China had dispatched a flotilla of several vessels (some reports have said eleven) including missile destroyers to the Indian Ocean Region (IOR). But the Indian Navy threatened action and fired warning shots that stopped the flotilla and forced the Chinese Navy (PLAN) to retreat. (Nikkei Asian Review 3/23/2018)

Secondly, India has beefed up its military along the Chinese border in the north from Ladakh to Arunachal Pradesh in the north east (Times of India 3/31/2018). Not only has the density of troops been increased in these sectors, but also a comprehensive upgrade in defense infrastructure is evident – roads, bridges, advanced landing ground (ALG), military hospitals, etc.

Thirdly, in an apparent reversal of its earlier stand and much to the annoyance of the Chinese, a government minister and a senior BJP functionary attended the 60th anniversary of Dalai Lama’s arrival in India (Economic Times 3/31/2018).

These diplomatic incidents or updates to its statecraft, if you will, should be seen as outcomes of an inner overhaul of the operating guidelines for handling China under the Modi dispensation. Clearly a confident India has come up with its own answers to the management of a pernicious neighborhood. India is now seen as able and willing to match the belligerence from Beijing in equal measure.

It must be noted in this context that China’s rise as a global power has been punctuated by bulldozing   civil societies, grabbing others territories, defying judgements of the International court of Justice (ICJ) among others. In the same breadth it has diabolically quoted historical treaties and international law to justify its land grab frustrating many of its neighbors. Unlike India, its rise has hardly been peaceful.

With several countries bristling against China – Brunei, Malaysia, Vietnam, Indonesia, Philippines, India, and Japan and of course the US, the writing on the wall is self-evident. China’s belligerence and open defiance of international law – as demonstrated in the case of the South China Sea dispute – is the raison d’etre for the formation of a loose coalition-of-the-aggrieved against it. If China continues to pursue its current course, this loose coalition could solidify into a formidable alliance that would only bode ill and spell disaster for China even in the span of a decade.

For a dictatorial and authoritarian state, where hundreds of millions of people continue to be denied basic civil liberties, the domestic situation in China is indeed fragile at best. For any nation this is a veritable internal time bomb. Any misstep or social crises like the “Arab Spring Uprising” could be irretrievable and have disastrous consequences for that country.

China’s troubles are not limited to its immediate neighborhood. As China and the US are continue to  engage` in a war of words and slapping sanctions and counter sanctions at each other, it is difficult to read the tea leaves to determine if an early rapprochement is in the horizon. But whatever be the outcome of this incipient trade war, it does provide India a window of opportunity to expand and deepen its relations with likeminded countries that perforce have to counter and stand up to China.

The regular military exercises by India’s armed forces with their counterparts in other friendly countries designed to expand its influence appear to be paying dividend. Inviting the ten heads of states from ASEAN to Delhi for Republic Day celebrations in January 2018 is another initiative designed to contain China. Although it is anybody’s guess as to how ASEAN nations will reciprocate, India has made the right moves.

In hindsight, India’s refusal to back down in heights of Dohklam in 2017 is indeed an inflection point. The rout of 1962 or the sense of inferiority perceived by the Indian political establishment vis-a-vis China are now buried in history. For now, India seems to be energized and arming itself to its teeth and flexing its muscles.

However, there will be more Dokhlam type “salami slicing” situations for India to encounter – be it in the heights of the Himalayas or the depths of the Indian Ocean – but the response will be unprecedented and definitely not to China’s liking.

 

Post Dokhlam Roadmap for India

Post Dokhlam Roadmap for India

In an earlier piece the reasons for India’s firm stand on the Dokhlam standoff were explored. It must be acknowledged that this misadventure by the People’s Liberation Army (PLA) has created an atmosphere of suspicion and enormous distrust between China and India. The million dollar question that lingers on is the impact of the standoff on the complete spectrum of ties between two as well as other countries in Southeast Asia. The potential diplomatic as well as economic fallout will be watched closely.

Firstly, the diplomatic fallout. There is no doubt that the élan and sophistication displayed by the Government of India in the handling of the standoff has yielded a big diplomatic dividend for India, not seen in decades. It must be stressed that this windfall is short-lived and India must strain every bit of its political and professional foreign policy expertise to consolidate this into concrete long term benefits. A business as usual or a fatalistic approach would certainly fritter away the gains.

The US and Japan definitely see India as the wronged party in the dispute and have commended it on its refusal to buckle under PLA pressure. India must cash in on this new respect it has gained from these two key nations and recast its foreign policy doctrines and take a fresh look at military and strategic alliances.

Soon after the standoff, the second trilateral meeting between US, India and Japan issued a statement on September 19th 2017, reiterating their resolve to keep “the free flow of lawful commerce in the region and around the globe, including the South China Sea”. India must use this anti-China posturing of this group to its favor and garner wider support of friendly powers against an expansionist China.

Further, the trilateral meet in an apparent reference to China’s One Belt One Road (OBOR) and China Pakistan Economic Corridor (CPEC), called for respecting “international norms and sovereignty and territorial integrity on connectivity initiatives”. This again is in India’s favor given that the bulk of the CPEC runs through Pakistan occupied Kashmir (POK), which is a disputed territory. India must prepare an action plan to counter CPEC and brief world capitals to gain their support for India’s position.

India’s foreign policy establishment must also labor to translate this windfall into powerful levers for negotiation at the decades-old border / Line of Actual Control (LAC) talks with China. India must negotiate from a position of renewed strength and extract the most in its favor, at least in the Dokhlam sector.

The annual naval exercise MALABAR could be expanded to include new members or a conduct a new set of similar naval exercises with participation from more countries. India should specifically invite ASEAN members to join the exercises. This will enhance the reach of India’s blue water navy by providing greater global operability, reach and enhanced maritime expeditionary capabilities. Most importantly it will get India the concurrence of Southeast Asian countries in building a powerful deterrence against China.

The US, long aware of the prowess of the Indian military, has been actively persuading the political leadership to espouse a more pro-active policy that involves sending Indian troops on combat missions outside India. It will not be a surprise if India reviews its current stand on sending its troops to join other countries in combat roles.

Post Dokhlam, Indian troops may be fighting alongside other friendly powers, particularly the USA in Afghanistan. If India agrees, then it could not only help restore order in that war torn country, but also help keep watch on Chinese and Pakistani forces in POK along the CPEC. This will also open up a new dimension in India’s counter terror operations by monitoring the western and northern borders of Pakistan.

The Dokhlam standoff has left its ugly scars on bilateral trade between the two countries. India and China, over the years, have built a huge trade relationship.  Currently India has   running deficit of over $60 billion. Foreign Secretary S Jaishankar recently attributed this ‘alarming’ trade deficit to restrictions on trade and market access in China for Indian companies.

Similar complaints have been heard from the US and other large economies.  China has a mammoth trade relationship with the US – with the latter holding a huge deficit of nearly $350 billion (2016). Recently, U.S. Trade Representative Robert Lighthizer called China an “unprecedented threat to the world trading system”. So the US will definitely be empathetic to India’s travails against dumping of Chinese goods.

The standoff in Bhutan has only incentivized India to openly join hands with the US and Japan to seek punitive corrections and protectionists relief against China. It will be no surprise to see India use this as a powerful instrument of its trade & economic diplomacy against China.

It must be mentioned that these diplomatic and trade offensives by themselves may not help India stop Chinese intrusion into its territory or stop dumping of cheap Chinese goods. But they will certainly ensure that it is not business as usual for the Chinese or the PLA.  India must strive to build a “loose coalition” that will help in the UN or impose economic sanctions against a self-acclaimed world power.

However, India must understand that it has to fight its battle by itself. It cannot count on other countries to fight by its side, notwithstanding the rhetoric we hear today. From that perspective, India must continue to pack power into its military since the world – and China in particular – only respects military power. History shows that authoritarian states behave themselves when the adversary is equally strong.  The recent conciliatory stand by China, no doubt shows that it is respectful of Indian military might.

But this is not to say that every intrusion or challenge should be resolved by the military. There is a time and place for military operations, so too for diplomacy and negotiations in international affairs.

In balance however, it would be prudent to choose diplomacy and negotiated settlements over military solutions. This is well understood by the PM Modi and President Xi Jinping. Hence reaching out to China and charting a course of mutual growth and prosperity would be the common sense yet pragmatic approach. This is precisely what India had pursued, albeit with the backing of the iron fist of its military.

If China chooses to accept India’s friendly gestures, it will be the dawn of a new era. But whatever measures the two countries take to rebuild bilateral relations, the scar of Doklam will remain for a long time to come. It is now incumbent on China, not India, to rebuild its trust and reputation that lay in tatters in the heights of Dokhlam in Bhutan.

Indians will remember the Dokhlam stand off for a long time to come.

 
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Posted by on September 25, 2017 in China, Economics, India, Indian Army, Modi

 
 
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