Saturday, September 02, 2017

Modi-Shah duopoly in zombified BJP

The mail-fisted leadership has established its credentials through successive electoral wins

It would seem to be a paradox to say that the Bharatiya Janata Party (BJP) is the most successful, in terms of electoral victories –and yet a relatively inert party in the country. It is dominated by Prime Minister Narendra Modi and the party’s national president Amit Shah. When the party is in power and the two top, strong leaders seem to be steering the party to victory after election victory, it seems natural that the face of the BJP is Modi, and a little behind him, Shah. And it does not matter what the state of BJP is.
With Shah taking oath as member of Rajya Sabha from Gujarat on August 25, and taking his place in the BJP’s parliamentary party, it should be as good a time as any to look at the Modi-Shah phenomenon, as to what they have been able and what they have not been able to do for the party in the last three years.
This is the first time Shah will be entering parliament even as Modi entered the central legislature for the first time only after he became the prime minister in 2014. Shah had served as the party president for three years before he has entered parliament. The general response as to the significance of Shah becoming an MP, it is being described as a routine matter, that he has been a member of the Gujarat assembly and with the state going to polls in December this year, he would not be contesting the state election. The general sentiment seems to have been that the party president should now be a Member of Parliament, and when it turned out that Gujarat was choosing its members for Rajya Sabha, he has been included in the team. Of course, the presence of the party president in Rajya Sabha is sure to be a morale booster of sorts.
Prime Minister Modi addressing the parliamentary party meeting earlier this month warned the party MPs in Rajya Sabha that with Shah in the Upper House, it would not be possible for the members to play truant. He was angry that party members were not present while passing the Constitutional Amendment Bill setting up the National Commission for Backward Classes, and the opposition was able to press a crucial amendment before the bill was passed. This is an indirect hint that Shah will not be a passive member in the House and he would play the role of the monitor of the class, over and above the chief whip of the party in the House. It also reinforces the image of Shah as that of a disciplinarian. The BJP is a party that believes in party discipline more than in party democracy. It remains true to its roots of a right-wing party, an off-shoot of the Rashtriya Swayamsevak Sangh (RSS), Boy Scouts-cum-semi-militia-like organisation.
Surprisingly, the media have not scrutinised and commented on the state of the BJP and its leadership as it usually does with all other parties, especially the Congress. The Congress has been the butt of media ridicule and an object of unsparing criticism that it is dominated by party president Sonia Gandhi and vice-president and her son Rahul Gandhi, and that the grand old party of India is a Nehru-Gandhi family firm, with no place for other leaders in the system. The woes of the party are attributed to the monopolistic power exerted by the mother-son duo. But not many in the media have even dared to comment that the success of the BJP at elections is due to the Modi-Shah duopoly, and that the two comrades from Gujarat have strengthened the party’s electoral prospects from Gujarat to Assam, from Goa to Manipur and from across the Hindi heartland. There has been no analysis of the quality of leadership provided by Modi and Shah.
The two enjoy unchallenged power at the moment in the party and in the government. Though the two leaders ascribe the party’s successes to all members of the party, especially the foot-soldiers at the booth level, it is quite evident that decision-making is completely in the hands of the two leaders. But it does seem that Shah has been successfully spotting winning candidates in the states, and he would not have been able to do this if he did not have his ear to the ground. It is a well-understood proposition that leaders take decisions all alone. A good leader does not fall back on collective decision-making. The converse of this thesis is the fact that the traditional middle-level leaders and lobbies are thrust aside and the party structure takes on a monolithic shape, with the leader at the top and the worker/follower at the base. There is not much challenge to the power structure as long as long as the party is winning elections.
The record of Modi and Shah is worth reviewing. It is generally assumed that it was Modi who had won the mandate for the BJP in the 2014 Lok Sabha election. The role of Shas has been limited to Uttar Pradesh in that election. He was made the ‘prabhari’ or the BJP in-charge of the state. This was no doubt done at the behest of the then prime ministerial candidate Modi. Modi was contesting the election from Varanasi, and it seemed that he wanted a trusted lieutenant there. It should be remembered that Rajnath Singh was then the president of the party. He was from Uttar Pradesh. Singh was also contesting the election from the state. The credit for the BJP winning 73 of the 80 seats from the state is given to Shah. To prove the point as it were that he was indeed the architect of the victory in 2014, Shah as national president the party led the BJP to a landslide victory in the assembly election in March, 2017. The party had won 312 out of the 425 seats in the state assembly.
Shah is very clear that his campaign strategy is based on the image of Prime Minister Modi and the success of his government’s policies at the centre. He is the political sales manager but the product he sells is the image of Modi. This strategy poses problems of its own. The party fought the assembly elections without projecting a chief ministerial candidate in the state assembly elections after the Lok Sabha victory in the summer of 2014. In Maharashtra and Haryana, it was Modi who picked up the chief ministerial candidate, Devendra Fadnavis in Maharashtra and Manohar Khattar in Haryana. It was not a democratic process, and the BJP had criticised this tendency whenever Congress president chose the chief ministerial candidate in similar circumstances. There is also the other significant aspect that the BJP had declared Modi its prime ministerial candidate in September 2013 much against the resistance of senior leaders in the party that the decision of naming the prime minister should be left to the parliamentary party.
The BJP under the Modi-Shah dispensation felt that there was no need to declare the chief ministerial candidate. There is speculation that Yogi Adityanatah became chief minister though Modi and Shah were not apparently enthusiastic about his candidacy for the post, and that the RSS had its way. If it is true, then it seems to be the case that there are limits to the power exerted by Modi and Shah.
Interestingly, Shah had declared in Bhopal earlier this week that Shivraj Singh Chouhan, the incumbent chief minister in Madhya Pradesh, will be the chief ministerial candidate in the assembly election due in the state later this year. It will be argued that in Maharashtra and Haryana, the choice of the chief minister had to be made afresh because the party was never in power in these two states earlier, and that where there is a chief ministerial candidate as in Madhya Pradesh, Modi and Shah would not disturb the status quo.

It has also to be noted that Modi and Shah faced defeat in the Bihar and Delhi assembly elections in 2015, and that the party did not win in Punjab, Manipur and Goa assembly elections in 2017. But with the change in the coalition status, BJP is back in power in Bihar, but as a junior partner to Nitish Kumar’s Janata Dal (United), as it was before 2013.
The Modi-Shah dispensation is likely to continue till 2019, the next Lok Sabha election. Shah completes his first two-year term as president of the party in his own right in January, 2018 – he took over from Rajnath Singh in July 2014 midway -- and the presumption is that he will get re-elected for another two-year term in January next. That is, he will be leading the party into the 2019 general election, even as Modi will remain the prime ministerial candidate party for a second term.
It is more than a matter of curiosity that two leaders from Gujarat, Modi and Shah, have taken complete control of the BJP, which has been an essentially Hindi heartland or cow-belt, force. The party rules over large swathe of Hindi heartland – Jharkhand, Chhattisgarh, Mahdya Pradesh, Uttar Pradesh, Rajasthan, Haryana – and the whole of western India – Gujarat, Maharashtra and Goa. It has also made a mark in eastern India by winning in Assam, and by forming governments in Manipur and Arunachal Pradesh.
What is it then that marks out the Modi-Shah duo? It seems to be their hunger for victory more than anything else, and their ability to streamline the party, and stubbing out any trace of dissent within the party. The BJP-watcher cannot but notice that there is much inner democracy in the party. Modi and Shah make no secret of their distaste and intolerance for those who do not agree with them. They would argue that they are forced to be ruthless for the sake of the party, and that the BJP’s winning streak is due to the fact there are no murmurs and rumblings inside the party.
Modi arm-twisted the party in 2013 to declare his prime ministerial candidacy and in retrospect it has turned out to be the right tactic. Modi foisted Shah as party president in 2014, and he can point to the fact that his decision was right because BJP has won significant victories in the assembly elections that followed, especially in Uttar Pradesh.
It however leads to the general question: how do parties discover their leaders? Is there a democratic way of doing it? Or is it the fact that the man with the self-confidence to grab leadership is the real winner? Modi had certainly seized the opportunity. He did not wait for others to elect him the leader. The apologists of the BJP would certainly refer to the fact that the central parliamentary board (CPB) of the party unanimously chose Modi as the prime ministerial candidate, and there was nothing arbitrary about it. On the face of it, the argument holds good. But only a naïve political observer would take things at face value.
Shah’s power in the party is derived entirely and exclusively from Modi. He has not endeared himself to the party leaders. It is likely that Shah would retort that he is not in the contest for popularity ratings, and that he would prefer to fetch victories for the party instead.
What is evident is that the BJP is now marching like a Greek phalanx or a Roman legion under the elected and undeclared temporary dictatorship of Modi and Shah.

Modi demonetised, RBI remonetised

The story of RBI’s disaster management

Prime Minister Narendra Modi and Finance Minister Arun Jaitley can continue to indulge in the rhetoric of demonetisation, but the Reserve Bank of India’s Annual Report for 2016-17 tells an absorbing story of economic disaster management. Modi’s November 8, 2016 televised announcement of withdrawing Rs 1000 and Rs 500 notes from circulation was nothing but an act of bravado, meant to take the bulls of black money, counterfeit currency and terror funding by the horns as it were, but basically an empty attention-grabbing gesture. Neither Modi nor his government had any clear idea about the extent of counterfeit currency, black money and terror funding in the money circulating in the system. It is quite unlikely that the government would put the information in public domain for sanctimonious reasons of state even if it had specific information at the time.
But the information about currency in circulation and the money available in the banks is known through the Reserve Bank of India’s weekly statistical supplements. On March 31, 2016, the currency with the public was Rs 15,972.5 billion, and on November 11, 2016 it was Rs 15,262.3 billion. It was at a high of Rs 17,013.8 billion on October 28, 2016. It came down to Rs 9,119.1 billion on November 25. And the bank’s annual report for 2016-17 says that currency in circulation declined by Rs 8,997 billion on January 6, 2017, “which resulted in a large increase in surplus liquidity with the banking system, equivalent to a cut in the CRR by about 9 per cent.” (CRR or cash reserve ratio is the mandatory cash that the banks have to maintain apart from their daily turnover. )
The bank used “unconventional measures” like market stabilisation scheme (MSS) by issuing securities of short-term duration. Apparently, the bank had asked the government to increase the limit on issuance of securities from Rs 300 billion to Rs 6,000 billion. Cash management bills (CMBs) under MSS were used between December 2, 2016 and January 13, 2017. And the bank managed to deal with excess liquidity in the system. “With fast paced remonetisation surplus liquidity in the system declined by mid-January 2017,” the bank’s annual report notes.

It looks like that neither Modi nor Jaitley nor those in the Prime Minister’s Office (PMO) or those in the Ministry of Finance seem to have had any idea about the immediate after-effects of demonetisation. The RBI identifies five phases in the post-demonetisation period to deal with the flood of liquidity in the banking system unleashed by demonetisation. In the first phase, from November 10, 2016 to November 25, 2016, the RBI used various measures of reverse repo. That is, the central bank borrowed money from the banks which were now flush with cash at variable and fixed rates. According to the bank, it absorbed Rs 5,242 billion on November 25, the peak. In the second phase, from November 26 to December 9, the bank absorbed up to Rs 4,000 billion through Incremental Cash Reserve Ratio (ICRR) of 100 per cent, which meant that banks’ CRR rose from existing 4 per cent to 8 per cent and more. In the third phase, from December 10, 2016 to January 13, 2017, the bank it used Cash Management Bills (CMBs) under the Market Stabilisation Scheme (MSS), and it took in Rs 7,956 billion on January 4, 2017. In the fourth phase, from January 14, 2017 to end-March,2017, the bank fell back on the traditional reverse repo to drain the excess liquidity from the banks. This measure peaked on March 6, 2017 with the bank absorbing Rs 5,522 billion, and it declined to Rs 3,141 billion by the end of March. But the bank report says that surplus liquidity persisted through March as a result of which the government maintained cash balances and the banks kept excess CRR.
In the fifth phase, beginning with the new financial year in April 2017, the bank anticipated that surplus liquidity will persist through 2017-18, the bank provided for MSS and reverse repo measures of up to Rs 1 trillion and it had auctioned Treasury Bills for Rs 1 trillion in April and May, 2017.
There is an interesting twist to the story of demonetisation. While post-demonetisation witnessed unprecedented excess in liquidity, the period from April,2016 to November 8, 2016, the RBI injected Rs 2.1 trillion to move from liquidity deficit of Rs 813 billion in Quarter 1 from April, 2016 to June, 2016 to a liquidity surplus of Rs 292 billion in Q2 (July, 2016 to September,2016) and to a surplus of Rs 64 billion in Q3 (October,2016 to November 8,2016).
The tacit assumption behind the demonetisation argument was that there was excess liquidity in the system, which the subversive elements were manipulating, and therefore there is a need to drain that excess. It turns out that the assumption was wrong. There was no excess liquidity in the system. And the RBI’s statistics reveal the exact volumes of liquidity in the system. While Prime Minister Modi revelled in demonetisation, the RBI had to step in and carry out remonetisation operations and that too in double quick time. And the bank assures, “The continuing increase in currency in circulation on the back of remonetisation is likely to reduce the magnitude of the liquidity overhang during the course of the year.” The disruption, and let us be clear that there was nothing clear about it, that Modi has caused through demonetisation had to be repaired by the RBI through the remonetisation measures. The argument for a less-cash economy is so much of baloney. It is possible to split hairs about cash and liquidity, and how they are not the same, and how draining out cash from the system is not the same as creating a liquidity crunch. The RBI report makes it clear that there is not much of a theoretical difference between the two, and less cash translates into less liquidity. The banks cannot handle too much liquidity or cash, and people cannot do with less cash. And there is a moral in all this: Fools venture where angels fear to tread!

Sunday, August 06, 2017

Critics misread Alankrita Shrivastava's "Lipstick Under My Burkha" . It is not about feminism's liberation theology

I was reminded of Paul Haggis' 2004 film, "Crash" when I watched Alankrita Shrivastava's "Lipstick Under My Burkha". In "Crash", Haggis traced the lives of black and white individuals -- four of them, two blacks and two whites -- from different middle class and poor backgrounds. The film is a tapestry of multiple narratives. Shrivastava does the same thing in her film when she traces the lives of four women -- two from Hindu and two from Muslim backgrounds -- in Bhopal. The women in "Lipstick Under My Burkha" is not really about sexual liberation. It is so partially in the case of Usha (Ratna Pathak Shah), the older and richer woman, and in many ways this is the weakest link of the movie. But Shrivastava manages to carry it on the shoulders of Ratna Pathak Shah. The story of Leela (Aahana Kumra) is more about love and emotional stability as opposed to mere stolidity of lower middle class married life. She is confused and she struggles to make a choice. Leela's story goes beyond notions of sexual freedom. Shirin (Konkona Sen Sharma), is a mother of three pursuing her career as a door-to-door saleswoman, and she is not fighting for sexual liberation. Rehana (Prabita Borathkur), a college student, from a lower middle class background, where the father is a shopkeeper and the mother a housewife, and who sends the daughter to college. Rehana flirts with the joys of college life and air of rebellion that goes with it. It is music that seems to attract her as a mode of rebellion though sex and love come as part of the cocktail. In her case, there is also the temptation of the girly indulgences that only money can bring -- scents, boots, lipsticks, which she cannot afford. Shrivastava tells the four stories as competently as she can, keeping them separate and pursuing them deftly. It is here that the parallels between Haggis' "Crash" and Shrivastava's "Lipstick Under My Burkha" stand out.
The title of the movie is catchy but misleading, because the only one bothered about lipstick under the burkha is Rehana hers is not the only story in the movie. It shows the bigger, social picture with its ironies, contradictions and its elusive pleasure points. And all this within the constricted context of a provincial town. The success of Shrivastava is in conveying the social complexity and its little sorrows and joys, its emotional crises. And she does all this without any comment and this is the virtue of the movie. The last scene where all the four protagonists come together is the only point where it is made out that the women thrown down by the dominant norms of the small city have something in common. But here too, there is admirable restraint. There is no dogmatic declamation. The movie would have however been more powerful without this last scene where the women gather.
What Shrivastava succeeds quite brilliantly is conveying the dark shadows that dominate social life in a small city and there are no escape routes. It is a dark conclusion and a bold decision on the part of the director to leave it at that.
It is disappointing that many of the reviewers and critics of the film missed out on the essential part of the movie --its deft narration of four separate lives that play out in the same small city.

Saturday, August 05, 2017

Sushma Swaraj pours cold water on BJP’s war-mongers in and outside the party

The Minister for External Affairs in her reply in the Rajya Sabha rules out military engagement

Can External Affairs Minister Sushma Swaraj’s sober and considered view that war is not an option and that dialogue is to be preferred to deal with China on the Doklam standoff with China in her reply to the short duration discussion in the Rajya Sabha on Thursday evening silence the right-wing war-mongers among the BJP’s cheer-leaders among the belligerent television news anchors and other China-baiters in the strategic community in the country?
Ms Swaraj would have certainly been hawkish if she had spoken on the issue from the opposition benches. But as minister she would not, which is as it should be. It does show that the BJP despite its nationalist rhetoric when it is not in power accepts the responsibilities and limitation that come with being in office, and it unhesitatingly accepts the self-restraint that one has to necessarily display. As a matter of fact, the opposition parties did not pose much of a challenge to Swaraj and the Narendra Modi government. They did not goad the government to respond militarily. As a matter of fact, Communist Party of India’s D Raja and Swaraj almost spoke in the same language with regard to China, emphasising the growing trade relations between the two Asian giants.
Swaraj read out a written statement on the position of the government on Doklam, and made it clear that the Chinese government had quoted ‘selectively’ from Jawaharlal Nehru’s 1959 letter.
The important underlying theme of Swaraj was that she ruled out military engagement of any kind with China. She reminded that it would be necessary to get back to talks even after a war because war by itself does not offer a solution, and that it is better to engage in talks before hostilities instead of after hostilities. With regard to war preparedness, she said standing armies are a clear indication that every country is always prepared to fight a war, and that it is not necessary to reiterate the issue of preparedness.
The prime spokesman of foreign policy of Modi government has almost spoken like a pacifist, and this should be certainly troubling for the hawks the BJP gallery. But it is clear that Prime Minister Modi and Swaraj are not willing to play to the gallery in this matter, whatever else they may or may not do.
Swaraj has also effectively silenced the government’s critics from the political left on Modi visiting Israel to mark 25 years of India-Israel diplomatic relations early in July. She said that Palestinians welcomed close relations between India and Israel, and pointed out to the irony that it is the Indian supporters of Palestine who are apprehensive about it. To prove her point, she disclosed that when she met Palestinian Authority chairman Mahmoud Abbas, he had told her that India should use its good offices in getting the Israel-Palestine talks going. She also pointed out that even in the joint statement issued by Prime Minister Modi and his Israeli counterpart, Benjamin Netanyahu, there was a clear indication that the two-state solution and talks are the way forward.
She reiterated in unambiguous language: “We will never let down the Palestinian cause.” This is quite an embarrassment to the pro-Israeli camp in the BJP which in its zeal to counter Islamic terrorism believes that the Zionist state is the best bet, which is daft to say the least. But Swaraj refused to oblige the ignoramuses in the party.
She acknowledged that there were apprehensions when BJP came to power that India would lose out on support in the Arab, Muslim world. She did not take care to explain why this was so, but she proffered evidence to show that this was not the case. She said when more than 4000 Indians were struck in Yemen when hostilities broke out between Saudi Arabia and Yemen, she went to the Prime Minister and asked him to talk to the Saudi Arabian ruler. The Saudi ruler assured Modi that there would be no bombing for two hours every day, and it is for India to talk to the Yemeni authorities to use the window of two hours of lull. Swaraj said that the Yemeni authorities obliged in evacuating Indians in the two-hour daily ceasefire and that Minister of State for External Affairs, Gen. V.K.Singh, had personally overseen the evacuation process. Swaraj drove home the point that India had in the process evacuated others belonging to 48 countries. She said this was ample proof that India’s relations with the Arab countries were at their best.
At the start of her reply, she made a smart observation that Jwaharlal Nehru won respect in the world at a personal level, but when Modi is respected it is India that the world is acknowledging. It is a subtle statement which undercuts the personal charisma of Modi while giving full marks to Nehru.

Tuesday, August 01, 2017

The FDI factor : Facts and figures for foreign investment inflows reveal a thin spread

Prime Minister Narendra Modi had held a meeting to review FDI policy with Commerce and Industry Minister Nirmala Sitharaman and other officials. It has remained a closed door affair and no announcements were made. There was speculation that there would be further relaxation of FDI policy. This government is quite happy with the FDI inflows in the last three years, US$55.5 billion in 2015-16 and US$60.8 billion in 2016-17. There is a sense of exultation that record FDI inflows are taking place.
But there is a need to ask the obvious question: How is foreign direct investment (FDI) faring in the Indian economy? This is a crucial question that should be of keen interest to many India watchers. One of the key premises has been that the liberalisation of FDI rules will help boost growth and that it will make up for paucity of domestic capital. When Manmohan Singh visited US after taking over as prime minister in 2004, he told American investors that India was in need of US$150 billion in investments, especially in infrastructure. That figure had jumped, naturally so, by the time Narendra Modi went to the US in 2014 and talked of the potential for investment in India to be of $ 1 trillion, again mostly in infrastructure. There was convergence in perception of the two prime ministers from different ends of the political spectrum that India needed FDI to get into the fast lane of economic development. Perhaps there is need to debate and challenge the premise. If a country can garner enough investment from internal sources, can it hope to do well? Is it also the case that it is not so much the investment as much as a country’s share of global trade through exports that will better explain the growth of an economy? The experience of China, Japan and other east and south-east Asian economies shows that exports alone cannot drive an economy, and that you need healthy domestic consumption to
One of the two issues – the other is about “The International Banking Statistics of India 2016” – that the RBI’s July bulletin focuses on is the performance of FDI-funded companies in the country compared to others which had no FDI in 2015-16. Both the groups have not done too well in terms of growth and their contribution to Gross Value Added (GVA), though according to the central bank, the FDI companies’ performance is “relatively better” than the non-FDI ones at the aggregate level. 2015-16 has not been a happy year in terms of economic growth, though it seems to be better compared to 2016-17. Therefore no verdict can be passed on the performance of either of the two groups of companies.
What is of greater interest however is the FDI footprint in the Indian economy. Economists have already noted the fact that FDI contributed no more than seven to eight per cent of total investments in the last 20 years and more, which coincides with the era of economic liberalisation. But as the saying goes, the devil is in the details indeed, and it is the details of FDI that is quite revealing. The number of FDI companies is 6,433 on March 31, 2016. When this number is broken down further, FDI in manufacturing is in 1,820, while it is 4.070 in the services sector, of which computer companies and those related to computer activities accounted for 1202. The comparable figures for non-FDI companies are startling. The aggregate figure of non-FDI companies stands at 3,04,978, of which manufacturing has 78,337 companies, services account for 1,75,926, and computers and related activities firms are represented by 18,040. The few big ones and the many small will always be the case in a market economy. It can even be argued that you can do without the big ones, but you cannot without the army of the small companies.
It would be a gross distortion if one were to judge the usefulness of FDI by these figures. It is common sense that it is a small number of big companies which earn huge profits and contribute to the overall impressive growth rate, and that a large number of companies stay on the margins of performance and profits. But the larger number with smaller profits is of great importance because it forms the sheet-anchor of the economy as such. In terms of investment, the FDI companies had 40 per cent of the paid-up capital, which is not surprising. But the corollary needs to be asked: Is there adequate capital provision for the no-FDI companies. It can be seen that 60 per cent of the capital needs of the company are met through local resources. It is the figures for domestic savings and domestic capital formation that give a hint as to capital adequacy. In 2014-15, Gross Domestic Savings stood at 33 per cent and Gross Domestic Capital Formation at 34.20 per cent. The corresponding figure for Net Domestic Savings is 25 per cent and for Net Domestic Capital Formation 26.40 per cent. Domestic savings and domestic capital formation are clearly below the benchmark. The general assumption that a fast-growing economy needs a 40 per cent savings rate holds good.
It would be churlish to either dismiss the crucial role played by FDI in buoying up an economy or to pretend that there is no politics involved in it. When American political and business leaders push for relaxation of FDI rules in India, they are not only helping American businesses but they are also looking at political influence. There should be no illusions on this latter count. Remember American pressures on India with regard to sanctions against Iran. India did find it difficult to manage but it did succeed in keeping its economic deals with Tehran intact. International power politics follow capital flows from the affluent Western countries into relatively capital-starved economies of the East. But you do not shy away from allowing FDI in because you fear the political muscle of the foreign investors and their governments. You learn to take the pressure and play ball with the apparently big guys on terms of near equality.
The more important issue for the Indian growth story is that it needs to rustle up its own capital as one goes along. There is as yet not much thinking or debate on the issue. Post-liberalisation, the thinking has been that India should attract as much FDI as it can. As a matter of fact, the boast of BJP-led NDA government of Prime Minister Modi and Finance Minister Arun Jaitley has been that India is now attracting greater FDI, and that the liberalisation of FDI caps for a larger number of sectors and the dismantling of the Foreign Investment Promotion Board (FIPB) are touted as achievements on the path of economic reforms. But the RBI figures for FDI companies show that there is a problem, and that FDI cannot entirely meet India’s capital needs. And that it would be a mistake to measure the success of the Indian economy by FDI.

Tuesday, July 04, 2017

From making arms to selling them

Scorpion of US' Textron, the Intermediate Jet Trainer (IJT)

India has to move towards arms exports to sustain a viable domestic defense production sector

It is quite a relief to hear the sober assessment of Defence Minister Arun Jaitley saying that “defence preparedness” is the best way to ensure stability, and that no country can continue to win wars and battles by importing arms, which is in contrast to the maverick pronouncements of his predecessor, IIT-educated Manohar Parrikar, who has now gone back to his home state of Goa as chief minister, the place and position he came from. Jaitley made the remarks while giving away the Defense Minister’s awards for excellence to Defense Public Sector Undertakings (DPSUs) at New Delhi on Tuesday (May 30, 2017).
The crux of the new thinking on turning India into a hub of arms manufacture is however quite ambiguous. It is stated that it will be a joint venture between Indian and foreign manufacturers of fighter planes, helicopters, armoured vehicles including tanks, war-ships and submarines.
There is the realistic assessment that India is not yet in a position to become an indigenous arms manufacturing hub, and that there is the embarrassing need for foreign collaboration. Of course, the logic is that in course of time, Indian arms manufacturers should be able to shake off the foreign collaboration and become wholly indigenous. But this premise may not prove to be too promising because foreign armament manufacturers would be thinking ahead too, and they would not want to become redundant in the future. What it would mean is that the foreign arms companies would not share their state-of-art technologies with India.
The alternative would be for India to think in terms of becoming a manufacturing hub for armaments on a multi-national corporation (MNC) basis, where the business strategy would be to become arms exporter. As a matter of fact, this is indeed the unstated vision of many among the security as well as business strategists in the game. It would be simplistic to believe that it is enough if India learns to make armaments for its defence needs. So India needs to think in terms of being an arms exporter if it wants to have a sustainable arms manufacturing base.
There are many examples around the world where the ability to be a competitor in the global arms bazaar is seen as a sign of national prowess. The carping critics of United States’ global cop role argue that the Americans thrive on conflict zones across the world which would help boost the sales of arms they manufacture. There is also the searing critique that the day Americans cannot sell their guns then their economy would collapse. Indirectly, Americans, and the capitalist economy in general, is portrayed as merchants of death.
So, there is a moral dilemma to the whole question which should not be shirked. There might arise a need to construct a rhetoric that the arms exports will only be meant for self-defense of the countries that are buying them from us, and there might have to be clauses restricting re-export as is done by the United States when it sells armaments to Israel and other countries. Most gung-ho strategy experts in the country might scoff at the idea that there is any need to offer a moral defence for the export of arms.
But India has not yet reached the commanding position of arms exports. According to Ministry of Defence (MoD) figures, India’s expenditure on capital procurement from foreign vendors stands at rs 22, 422 crore in 2015-16, which has declined from Rs 35.082 crore in 2013-14 to Rs 24,992 crore in 2014-15. The comparative figures for defence exports are Rs 1,050 crore in 2013-14, Rs 1,682 crore in 2014-15 and Rs 2,014 crore in 2015-16. There is a huge gap between defence imports and exports. It can be said that moral dilemmas of arms exports can be deferred for the moment.
There is however a red herring in the way. There has been talk, even intense lobbying, and justifiably so, that the Indian private sector should become a major player in defense production. And there is the implied criticism that it is the government monopoly that had arrested the growth of the private sector participation in defense production. The reason as to why defense production in India remained with the DPSUs is a historical one. At the time of Independence, the Indian private sector was too weak to even take up the burden of meeting the economic challenges of the country. As a matter of fact, it is the captains of industry who had vigorously argued for the active role of the state in the economy. It is only in the 1990s, it seemed possible to wean the Indian private sector away from protectionism and expose it to global competition.
Secondly, the Indian private sector cannot hope to be at the forefront of research and development in weaponry. The Indian private sector generally has been in the habit of buying off new stuff off the shelf as it were in the global marts. The same logic cannot be easily extended to defense production. There is of course the example of the Boeing-Tata joint venture in Hyderabad which is tasked with producing Apache helicopter fuselages. But Boeing has an enviable R&D in place, which is not the case with the Tatas or with any other Indian private sector conglomeration.
It has also to be noted that even in the United States, the ostensible free market paradise, weapons and other frontier scientific research is done at government-funded laboratories as well as at the universities. India’s R&D spend will have to increase if the country wants to meet its own defense needs as well as hope to increase its footprint in the international arms market.
Therefore, it would be simplistic and even foolhardy to dismiss government-funding of R&D, especially in weapons systems as well as in basic science. India’s strategy experts who want to strut about as pragmatists do not recognise the umbilical cord that connects basic science research with technological spin-offs in the defense industry. There is then need for sensible debate on the issue of arms manufacturing and arms exports in this country. And it has to avoid the extremes of moral squeamishness on the one hand, and cynical swagger on the other.

Monday, July 03, 2017

The asymmetry of India-Israel relations

Prime Ministeer Narendra Modi wwith his Israeli counterpart Benjamin Netanyahu at their meeting in New York on September 28, 2014 on the sidelines of the United Nations General Assemnly session.

India’s right-wingers have to shed their illusions about a militarily strong Jewish state

There is much excitement and expectation in Prime Minister Narendra Modi’s July 4-6 visit to Israel, greater than his visit to Washington last week. India’s right-wingers, the Hindutva ideologues as well as the strategy hawks, consider the Jewish state to be a prized friend, and even now rue the fact that India kept away from Tel Aviv for more than 40 years. The other side, comprising mainly of leftists, liberals and secularists, have been opposed to India-Israeli links because in their view, it meant letting down the Palestinians, the Muslims in India and the Arab and Muslim world. Of course, both sides are hugely mistaken in their presumptions. The reasons are really complex and no one wants to disentangle many of the strands behind the mushy perceptions.
The right-wingers wrongly believe that closer India-Israeli defence and security relations are to the advantage of India. In their enthusiasm for the Jewish state, which they think is heroically defying the Arab and Muslim world with its single-minded sophisticated defence dragnet, they forget that the differences in size between India and Israel are of such magnitude – the asymmetry is stark – that Israel can benefit from the India connection because India is a huge defence market for Israel but India has little to gain from the deal. Secondly, Israel can never alone meet the defence requirements of New Delhi.
India’s defence needs and strategic compulsions are vastly different from that of Israel. Tel Aviv’s strategic neighbourhood is confined to Palestinian Territories, Egypt, Jordan, Syria and Lebanon. It does not extend even to the larger Arab world. India’s strategic neighbourhood stretches from the Straits of Malacca to the Horn of Africa in the Indian Ocean, and from South-East Asia to West Asia and into Central Asia. In terms of sheer size, India is a giant and Israel is a midget in very objective terms. This mistaken importance given to Israel in the India-Israel equation is akin to the enthusiasts comparing Singapore and India in terms of economic efficiency and standards of living, and popping up the absurd question, “Why cannot India be like Singapore? If Singapore can do it, why cannot India?”
Israel has admirable achievements in the fields o agriculture and science, but there is very little that India can borrow from it. The much acclaimed drip-irrigation has had its day even in Israel, and India’s farm challenges are far more vast and complex.
It would be wrong-headed to think that Israel’s military technology, in spite of its heightened excellence, is of any great importance for India. The Indian military needs and strategies cannot depend on Israel’s experience deriving from a mini-theatre of conflict where it is pitted against a non-military entity like the Palestinian territories and the simple military setup of many of its Arab neighbours. India faces a China that spends far more than India on its defence and a Pakistan which imports all of its military ware from the United States. It should not come as a surprise if Israel would want to sell defence technology to Pakistan. Israel is only too keen to establish diplomatic and political links with Pakistan, and in the last decade, when Pervez Musharraf was calling the shots, the two countries came very close to establishing links through Turkish mediation. Even as the United States sells its military ware to one and all, Israel too is keen to sell to everyone and anyone. So, the strategic hawks are wholly mistaken about Israel’s importance for India in security matters.
The HIndutva ideologues are as far off the mark as the strategy hawks with regard to Israel. They simply misread the Israel issue. The Jewish state is not fighting an ideological battle with the Islamic world. It is not a clash of civilisations of the regular Huntington kind. Islam and Judaism have had smoother relations with each other than Western Christianity of Europe and the Jewish Diaspora. Israel is as a matter of fact an outgrowth of the disturbed history of Western European Christian and Jewish Diaspora relationships, which culminated in the Holocaust in Nazi Germany. The Jews in Europe were the archetypal religious minority. The Jewish Diaspora felt that a Jewish state is its ultimate refuge in a world, especially Europe, divided into nation-states.
Israel just wants to hold on to its present territory, and it is fighting every inch of ground against Palestine because of the gnawing sense of fear and insecurity that any compromise with Palestine would ultimately make it vulnerable. All its military build-up is to save the territorially small state of Israel. It has no plans to spread its territory beyond the larger area of Palestine. Israeli security experts see the emergence of a Palestinian state as a threat to the very existence of the Jewish state. Even if it wants to settle for a two-state solution, Israel wants Palestine to be as militarily weak as possible. This innate fear derives from Israel’s experience of the 1948, 1967 and 1973 wars. Here it is not a question of fairness, rationality and legality. And it is necessary to recognise this: Israel desperately wants to be accepted by its Arab neighbours as a legitimate state. It seeks legitimacy and its military belligerence is due to the fact that it has not got it so far. Israel is not a secure state in existential terms.
What Israeli leaders, especially the moderates, expect India to play the role of the trusted mediator between the Jewish state and the Arab states. India’s hesitancy is understandable because this is treacherous territory. The insecurities on both sides are so deep that no one of them would be easily assured by the other. That is why, India has been fighting shy off playing the honest broker, and perhaps rightly so. But it is necessary that India should maintain its trustworthiness with Israel and with Palestine. It would be a folly to play a partisan role in terms of sheer strategy. If Israel has US-derived military technology to offer, the Arab states too are ready to invest with their billions of petro-dollars in the Indian market.
There is need for India’s right-wingers to think right and straight about the shaky position of Israel.

Modi-Shah duopoly in zombified BJP

The mail-fisted leadership has established its credentials through successive electoral wins It would seem to be a paradox to say that...