governance, political economy, institutional development and economic regulation

Indian angst

Abandoned Faujis

abandoned faujis

Delhi. Fauji veterans agitate, unsuccessfully thus far, for implementing the One Rank One Pension principle. This is a promise, unadvisedly made to them, by both the previous and the present government. They boycott the celebrations commemorating the 1965 war. Even those who fought to win that war stay away effectively devaluing the event. An unintended and unfortunate outcome is that scores of disciplined ex-soldiers and one prominent fauji brat get on-the-job training, on how to enter politics to safeguard your rights.

Mandal revisited

Patel

Ahmedabad. An angry, young man clad in faux fauji combat fatigues, conducts a caste maha-panchayat of half a million Patels. The occasion is the demand for inclusion in the list of backward castes, eligible for affirmative action (reservation) as a fast track route to a government job or admission into schools and colleges. The young leader’s social media profile has him posing with a gun in hand-very much like Bihar’s notorious upper-caste Ranvir Sena or the face-book friendly young militants in Kashmir today.

Life on the edge

Mumbai, the city of dreams, a sordid, family drama unfolds of a possible filicide; secret serial marriages and shady doings, so bizarre that it could only happen in star crossed Bollywood.

The Proletariat strikes back

strike

Across India, labour unions prepare for a general strike of all workers on September 2 to express their rage. The cause- dissent against dilution of the regulatory ambit of the labour laws; opposition to privatization of State Owned Enterprises and Foreign Direct Investment in Railways, Insurance and Defence; support for regularization of contract workers and the demand for better social protection measures.

Were all these happening in the 1970s it would be pretty commonplace in that decade of social unrest and hartals. But this is 2015, with a stable BJP government in place and more than half way through the first quarter, of what was once touted, as the India Millennium.

Have we than gone horribly wrong already even before we have begun? or is there a grand design behind this ripple of disquiet?

Has the OROP been deliberately allowed to fester so that it can be settled, with a flourish, just prior to the Bihar elections with the personal intervention of the PM, making the fauji vote thereby indebted to him?

Is the Patel agitation merely a manufactured storm? Is it calculated to subside with strong and reassuring intervention from Delhi to help the floundering Chief Minister Anandiben, thereby reinforcing the “strong leader” image of the PM?

Is the impending general strike and the prospect of extended labour unrest; lost jobs and forgone income, meant to scare voters in Bihar into opting for stability and the BJP, rather than taking a punt at the alternative politics of the rag-tag combination of Nitish Kumar, Lalluji and Arvind Kejriwal?

Truth is stranger than fiction, so none of these scenarios can be summarily discounted. But one thing is clear. The government needs to tighten its boot straps if it is to be an instrument of economic and social change.

Four priorities emerge:

Legally correct but bi-partisan

First, the rule of law must prevail in spirit. This is not yet visible. Using the letter of the law for one’s own ends is not the same as the rule of law prevailing. The golden rule is to err on the side of administrative effectiveness, simplicity and comprehensive reading of the law. Delhi presents an opportunity. The electoral mandate of the Delhi government is unquestionable. Respecting it and developing a positive functional relationship with it is in the long term interest of democratic governance. After all in every harmonious family-as the Speaker Mahajan of the Lok Sabha views Delhi to be- the youngest – even a rebellious, member’s foibles are accommodated.

Where are the tough economic reforms?

Second, clear signals for undertaking tough economic reform are a must. This is a government which garnered far reaching support on the basis of its reformist credentials. The government agenda is long on “win-win” options but not so impressive where there is no option to causing some pain. Initiatives crying out for attention are- (a) restructure electricity utility debt to make them financially viable; use the energy and commodity price decline to move to a “hands off” regulatory regime for energy prices; (b) make State Owned Entities/Public Sector Banks autonomous. Delink them from the control of their administrative ministries. (c) Enhance government effectiveness by boosting the availability of specialized, functional skills at decision making levels. The absence of even a game plan towards these objectives is worrying.

Make one, keep one-the mantra for government employees

Third, make jobs not skills. People learn better on-the-job. Medium, Small and Micro Enterprises (MSME) are ideal for maximizing the jobs per unit of capital. Facilitate them by- (a) Ensuring metered supply of 24X7 electricity on priority feeders (b) Supply electricity at the actual cost of grid supply (c) Provide incentives for such businesses to meet environmental standards. Forge a compact with state governments to make the rural development, panchayati raj, labour and industries department staff focused on employment and migration at the Development Block level. Encourage monitoring using rapid survey techniques. Remember what is monitored gets done. Reward Blocks which excel at growing employment in MSME. These measures fit well with the financial inclusion and social protection initiatives already underway.

Junk the colonial district management architecture

Fourth, change from the bottom-upwards is always the prudent way to start. End a relic of colonial rule, under which the District Magistrate is mandated to exercise oversight of the police via judicial powers under the Criminal Procedure Code. It is high time that the Police Commissioner system, already functioning in metros, is extended to all districts. The district level civilian administration would consequently be free to focus on development- for which they are best trained and equipped. This simultaneously empowers Police Officers and makes them squarely responsible for maintaining law and order- an unpardonably ambiguous mandate today. It also kick starts the process of modernizing the somewhat creaky, colonial legacy of district level general management- often the missing link in speedy implementation today.

The calendar from now to 2019 is chock a block with state assembly elections starting with Bihar later this year. The die has already been cast, the major populist decisions have been taken, including special aid for Bihar and Smart Cities. Now the outcome will depend on smart vote management- an area where the BJP excels. Time to strategize on improving the knotty fundamentals of growth and development with decisions kicking-in as soon as the votes are cast in November.

OROP

photo credit: ex-servicemenwelfare.blogspot.com

Ex-servicemen are angry that their attractively titled demand — one rank, one pension — is not being implemented by the government. OROP as a “brand” is a huge communication success, hitting all the right buttons — simplicity, easy comprehension and being evocative of equity.

It is not surprising therefore that Prime Minister Narendra Modi adopted it in his election campaign. The United Progressive Alliance, caught napping, made a notional budgetary provision in February 2014, but did not survive the general election to be held accountable for its implementation. This pledge was repeated by Prime Minister Modi from the ramparts of the Red Fort on August 15. But fauji pensioners were not impressed.

Top babus, secretaries to the government and generals retire at a fixed apex pay since the Fifth Pay Commission (1996). Their pension increases to reflect all future revisions in apex pay. Those retiring below the apex pay have to make do with pension revisions at 50 per cent of the minimum of the revised pay scale, even if they retired at the maximum of the pay scale. Hence the inequity. Babu and fauji apex level officers thereby invite the charge of being self-serving.

A bit of history here. The armed forces have traditionally enjoyed an “edge” in the compensation they get versus civilians. The logic for the premium is accepted and remains rock solid even today.

Till 1973, fauji pay was reviewed separately. The 1970s were bad times for all government servants. Faux socialism required that government salaries be stagnated in the name of removing poverty. But the axe fell most heavily on Army pensioners via the Third Pay Commission, 1973. The result was that the payout ratio (the proportion of last pay to pension) for fauji and civil pensioners was made the same — 50 per cent — by reducing the fauji payout and increasing the civilian payout.

Real basic pay under the Fourth Pay Commission (1986) doubled, but inflation adjustment was only partial. The Fifth Pay Commission (1996) doubled the basic pay and provided for 100 per cent inflation indexing including for pensions. This fixed the earlier problem of pension not keeping pace with inflation. The Sixth Pay Commission (2006) tripled real pay. Whilst this was necessary, it stoked the angst of pensioners, other than the creamy layer, because pension adjustments lag behind salary revisions. With every pay commission, pensioners fall further behind. Only faujis have led the agitation for OROP, possibly because of the high regard the public has for them versus a less than rosy public perception of other government employees.

Kohima

The principle that fauji salaries must have an edge over civilian salaries has been consistently accepted. Suitable salary scales exist to illustrate this “edge” of around 10 to 15 per cent of basic pay. But in a classic case of maintaining the form whilst subverting the spirit, the benefits of the designed “edge” are only notional and not real. Here is why.

First, the sharply pyramidal structure of the armed forces limits the potential for promotion. In comparison, the civilian cadres are much less sharply tapered. Since pay is still effectively linked to position or rank, this means that civilians’ pay outgrows the notional salary “edge” over the first 16 years of their service. Thereafter, they lead not lag the fauji pay.

Second, stringent health requirements also ensure that faujis retire much earlier than civilians. Estimates suggests that 60 per cent of fauji officers retire by the age of 54. A soldier retires at the age of 35, while other ranks retire by the age of 45. In comparison, all civilians carry on earning promotions and pay enhancements till the age of 60.

Shorter service spans and fewer promotion avenues ensure that at retirement faujis have a basic salary which is around 40 per cent lower than a civilian who started service at the same time at an equivalent grade. To provide an equated pension to a fauji, the pension payout ratio has to be at least 75 per cent, as it was till the Third Pay Commission slashed it to 50 per cent.

The other options to safeguard the “edge” are to increase the salary scales of faujis significantly above civilian pay or to proliferate the number of senior positions — as it happens for civilians — to safeguard promotion prospects and income. Neither is an optimal solution to deliver more bang for the buck. Both require complex negotiations between losers and gainers within the armed forces.

The fact remains that OROP, as a principle, is flawed. It is not consistent with the principle of efficiency and it violates the principle of contracts. Pension is a stream of future payment for past services. Pay is a dynamic concept which changes as markets and job requirements change. Pay must reflect current market conditions. Pension is like a fixed annuity, albeit indexed to inflation to protect pensioners. Increasing the base pension amount as pay increases, as envisaged in OROP, is indefensible.

What then is the way out of the Jantar Mantar logjam, where the agitating faujis vent their gussa?

Good practice suggests that huge changes in pay be avoided since they lead to intergenerational inequity — future employees get paid much more, even in inflation indexed terms, for doing the same job. But such pay changes are sometimes necessary to correct a long neglected problem. Interim solutions can be one way to smoothen the transition. This is the way to go.

The government can restore the pre-1973 pension payout of 75 per cent but only for those faujis who retired between 1973 and 1995 when pension was not 100 per cent inflation indexed. This will significantly soothe the gussa of faujis whilst creating no untoward precedents for civilians.

The cost is around Rs 10,000 crore per year (back of the envelope estimates) or 7 per cent of the annual defence revenue budget for a period of four years.

Righting a wrong is costly but best done whilst the cost is bearable. Giving fauji pensioners short-shrift, whilst feting them publicly is inconsistent. Let January 26, 2016 be when the President of India soothes the gussa of 1.6 million fauji veterans.

Adapted from the authors article in Asian Age August 23, 2015: http://www.asianage.com/columnists/soothe-gussa-fauji-pensioners-476

anger

Photo credit: http://www.avaxnews.net

The defining feature of India today is bottled up, seething anger. It erupts unexpectedly anywhere — in the plush drawing rooms of the rich, on our choked roads, in crowded, middle-class colonies over parking rights or in the ramshackle dwellings of the poor, over imagined insults and petty money disputes.

Saeed Akhtar Mirza’s 1981 celebrated film — Albert Pinto Ko Gussa Kyoon Aata Hai (What makes Albert Pinto angry?) starring the blessedly talented Naseerudin Shah, explores the roots of societal anger. It concludes that, contrary to modern liberal belief, it is difficult for individuals to go from zero to hero overnight. Society functions best when individual expectations align with the pace of social change.

Political pundits have forever advised politicians not to raise expectations too far beyond what can be realised or delivered, precisely to avoid such a backlash of sullen resentment or angry outrage. Yet, this has never stopped politicians from continuing to make rash promises.

Contrast this with the behaviour of bureaucrats, who are usually conservative with promises and targets. This could be because they have little to gain from aiming high. With no upside, why take a risk? Is risk aversion holding governor Raghuram Rajan of the Reserve Bank of India from lowering interest rates and thereby risking inflation? This could be one, albeit implausible, explanation.

Alternatively, maybe, the RBI governor and his team have watched Albert Pinto… carefully and remember that nothing can be worse than creating expectations and not meeting them. This government was voted in on the plank of restoring fiscal stability and providing jobs. Inflation can totally disrupt both objectives.

The political problem, of course, is the 10 million young people, who join the workforce every year. They voted the government into power and are now looking for the jobs they were promised. Telling them now that they lack a job because they lack skills, is a Kafkaesque googly that could result in a Pinto-type outburst on a massive scale. Hence the political pressure to kick start growth.

But what is the surety that lowering interest rates alone will result in more jobs. The world is finally flat — at least in terms of prospects for economic growth. In this dull market, with large inventories and surplus manufacturing capacity, new manufacturing jobs can only be created by ramping up protection for domestic industries. This option, as anyone who has driven an Ambassador car will know, has disastrous long-term consequences for productivity and competitiveness.

A better option to increase the competitiveness of Indian exports and provide protection to domestic manufacturing, would be to depreciate the INR as China and other competitors have done. But here again the ghost of potential inflation lurks via higher landed cost for petroleum and edible oil. The possible flight of foreign capital threatens the stock market and the external account. The higher cost of servicing the foreign debt of businesses is also a downer.

In any event whilst the macro-economic variables are tweaked, direct, rapidly deployed interventions for growth and employment are needed to meet expectations. Three “win-win” options stand out which are reasonably non-inflationary; targeted at jobs and quickly implementable.

First, get a grip on administrative reform and focus on tangible outputs and outcomes. The determination to get the Goods and Services Tax (GST) implemented by April 1, 2016 shows the way, as does the focus on ramping up highways construction and making Indian Railways more efficient.

Second, the steps being taken to increase domestic coal production via the transparent allocation of mines and gas production via price incentives for exploration in difficult fields, are necessary foundational work, albeit with medium term benefits.

More immediately, the Union government needs to restructure the accumulated loss of Rs 2 lakh crores of the electricity distribution utilities, as was done previously-albeit at a much smaller scale- in 2001. This is the only way to reactivate the demand side and realise the downstream benefits of enjoying, for the first time, an idling surplus generation capacity. But the 24×7 “electricity for all” mission can only be sustainable if it is linked to reasonable cost recovery for the utility and the complete stoppage of theft. This is one subsidy hole which is completely avoidable.

Third, an interim option to whip up “employment”, in these troubled times, is to offer a two-year National Service Mission for all young citizens of ages 19 to 25. One million young adults, each paid a stipend of Rs 6,000 per month by the government, could be offered this opportunity with a relatively nominal annual outlay of Rs 14,000 crore. For the young, this interim employment could be a “holding plan” while they look for a job. For the government, it buys time to create the environment for incremental private employment.

To weed out the rich, the poorly motivated and the faint-hearted, these young men and women would need to work in the 6,000 rural development blocks which dot the country and acquire skills on-the-job, in forestry, agriculture, irrigation, civil engineering, policing, security, public health, sanitation and education. They would function as management trainees and be placed according to their aptitude, education and skills. Trainee doctors are already required to do such service.

If the scheme were to be presented as just an opportunity for the unemployed and the poor to earn some money, it would end up being a less useful replica of its cousin, the Mahatma Gandhi National Rural Employment Guarantee Act. To brand the mission appropriately, it must attract the educated young across the social and economic spectrum.

To profile it as an option for high achievers it should be made compulsory for all aspirants to public office — budding politicians, potential judges and future civil servants — to start by experiencing life at the bottom of the public service ladder even before they fight an election or take the entrance exams.

Considerable social benefits are possible by bringing together the young from disparate groups in a competitive environment over extended periods. The resulting cohort networks of “desh sevaks” would be unique. Unlike educational or social networks these would cut across class, regional and religious rigidities and narrow the gap between “people like us” and “others”.

The first step in anger management is to feel equally responsible for the situation one is caught in. Albert Pinto and his ilk might have been less disillusioned and less angry had they had the chance to be a “desh sevak”.

Adapted from the authors article in the Asian Age August 13, 2015: http://www.asianage.com/columnists/albert-pinto-s-anger-redux-856

migrants

photo credit: http://www.tumblr.com

Who can say it better than Amitav Ghosh, the celebrated author of the Ibis trilogy, the master of evocative words and beguiling stories, when it comes to documenting the life of migrating Indians.

Bihar, Uttar Pradesh and Bengal (including Bangladesh) continue to supply cheap labour to the rest of India today, just as they did in colonial times to British plantations in Guyana, Fiji and Mauritius. Does domestic migration serve public interest beyond the individual benefits it provides?

The merger of cultures

Let’s consider what happens when stereotypes migrate and coverge physically. A single Tamil child of young, upwardly mobile, working parents in Chennai; reared by a Bengali nanny; driven around by a Bihari driver; taught by a Maharashtrian; living in a house built by masons and carpenters from UP who eats wheat grown in Punjab, cannot but be truly Indian.

Into the consciousness of that child are woven, the stories and hopes of the rest of India. It is unlikely, therefore, that she would be content with just her Tamil identity. Of course the danger is that she could become the domestic equivalent of the ABCD (American Born Confused Desi). But any change has to start by perturbing the status quo.

Strict “isolationists” would of course bemoan the demise of “pure” Tamil culture. They will quail at “bhel-puri” coupons being tacked onto tickets for a Bharatnatyam recital or retreat in horror from Bhangra rap at a jana vasam- south Indian baraat. But cultural cross-overs are the stuff that nations are built upon.

A national identity

The national identity project is not new. But in recent times it has been undermined by politicians who benefit from nurturing regional, cultural and religious silos rather than working actively to dilute them. This trend is now pretty much irreversible.

But the hope is that with economic development, traditional identities-caste, religious or regional- will lose the urgency and prominence they have today. This happened before when the gains from more modern identities outweighed the limited and circumscribed benefits from traditional roles. Economic migration is a powerful lever for achieving this goal.

Migration- a great Indian tradition

Indian teachers, soldiers and merchants were willing to brave the “polluting” effect of crossing the seas even in the 19th century, so long as the professional prospects (think the legendary mathematician Ramanujam), the pay (Indian shippies), or the profit (Gujrati traders) provided sufficient incentive. The cost of “ritual purification” on their re-entry into India was trifling and the priests inventive and ever willing to oblige for a small fee. This practice of embracing multiple identities simultaneously, is the essence of any developed, open-access country. We need to go back to the future and against the stifling silos reinforced on us by colonialism.

30% of resident Indians do not live and work where they were born (2001 census). More Indians are born in the Northern and Eastern states than are the jobs available in such states. Given this asymmetry between population distribution and the availability of jobs, at least one half of the 10 million youngsters who come of age every year, will need to migrate for employment mostly to the western, southern, richer northern states and further abroad.

Prime Minister Modi’s persistent wooing of the Indian diaspora can be seen from this perspective. Assuming responsibility for their woes (visas, quasi-citizenship rights, immigration hassles) is a master stroke to play to the sentiments of their families and friends in India. Why not extend the same strategy to the labour surplus states?

Soacialising the migrant

There are no facilities today to socialize domestic migrants into the environment where they go. The assumption is that they would be socialized by friends or their employers. A more blithe assumption is that being Indians they don’t need socialization. Nothing could be further than the truth.

Ghettos-ethnic, religious or regional are a fact of urban life. These are insulated and largely self-regulated. They perpetuate traditional identities rather than facilitate the development of new ones. If domestic migration has positive externalities- like helping develop a national identity or making labour markets more liquid- it is time we financed this public good. In a poorly targeted way we do so already by keeping railway fares much below the cost. Why not target support better to these brave hearts?

The time is right to launch this public program aimed at documenting, understanding and alleviating the challenges of domestic migrations. Marketed correctly, this could be of huge interest in Bihar and Uttar Pradesh- two large states which go to the polls within the next two years.

There are two key, low hanging fruit to be harvested:

First, provide a digital friend (e-saathi) to the migrant. Migratory workers should be able to access a National Travel Support Service (NTS). This could be a toll-free number they can call nationally and seek advice from a digital friend on travel, accommodation, labour markets, wage rates and emergency response.

The NTA could be administered by the Ministry of Labour and Employment since a large part of its work, albeit not exclusively, would be across state government borders. Ideally, management would be outsourced to a non-state or private agent. Over time it would become networked with local NGOs who work with migrant labour and provide a basic social safety net.

The political attractiveness is obvious, not least because it is a pro-labour step. It would be most helpful for migrants in the informal sector, like in construction. It could extend a welcome helping hand, directly to one fourth of Indians who migrate, including for work.

Second, a safe, transit home for poor migrants. Domestic migration is often also a consequence of social persecution of marginal communities at home. Trail blazers, who marry inter-religion or inter-caste are forced to leave. For the poorest migrants, the biggest problem is finding a safe shelter till they can get a job and move on. For NGOs who want to help this segment, the problem is finding the land to provide a shelter at a location where work can be found nearby.

In the past, the Rail Yatri Niwas was a boon to the travelling middle class. These provided reasonably priced accommodation close to the railway station. Since then private hospitality facilities have exploded for this segment of travelers. It is time now to shift to serve the poor by leasing small land segments out to NGOs who wish to manage the socialization of poor, urban migrants. This intervention in the “real sector” will give a face and teeth to the virtual friend.

Cynics will dismiss this proposal as yet another mirage created by the smoke and mirrors of digital India. Other critics will rile that it is just another election gimmick. But pause and consider that the most practical public interventions are those which align with political economy and use the available entry points to enhance the public interest. This is one such win-win example. The families of poor migrants are unlikely to forget who helped to keep their migratory kith and kin safe, whilst simultaneously serving the public interest of social protection for the poorest.

1185 words

hypocricy 2

Graphic credit: chloesimonevaldary.com

Yasmina Reza’s God of Carnage — playing in Mumbai and Delhi — makes us laugh at ourselves by stripping bare the self-serving hypocrisy underlying socially acceptable roles. Bleeding-heart Indian social liberals would do well to see themselves in the mirror via this play.

Admittedly, we humans must get beyond our basically brutish nature. But the first step to doing this is not to be in denial about the brute within us. Narendra Modi baiters are particularly delusional about themselves.

For them Mr Modi is forever damned because of the Gujarat riots in 2002 and because he refuses to atone at the altar of “secularism” that Indira Gandhi embedded in the Constitution in 1976 along with the subsidiary altar of “socialism”.

We have, since 1990, correctly turned a Nelson’s eye to the latter as has the rest of the world. But liberals fear that both the right (Rashtriya Swayamsevak Sangh, Bharatiya Janata Party) and the left (communists), are so committed to their own political “ideology” that they aim to substitute liberal democracy with state authoritarianism.

The left has made itself redundant in India, so the real threat to liberalism is from the Modi government. The examples used to illustrate the increasingly “heavy hand” of the state are the clamp down on NGOs — Teesta Setalvad and Greenpeace; the attempt by the executive to reclaim the power to appoint higher judiciary; and current administrative practices like the “gag order” by home minister Rajnath Singh on officials hobnobbing with the press.

Are, then, Prime Minister Modi’s intentions subversive?

First, let’s consider the alleged attempt to misuse official authority to muzzle NGO critics.

Misuse of authority can only be assessed in two ways — either via the judicial process or via loss of public support, as happened resoundingly in 1977. Indira Gandhi was damned by the judicial process before being damned by the electorate post-Emergency.

In Mr Modi’s case, no adverse judicial outcome taints him. His significant popular mandate is likely to be re-endorsed in the Bihar state elections later this year. The Opposition has a majority in the Rajya Sabha and the judiciary remains generously tolerant towards public interest litigants. Both checks are working well. With respect to the “gag order”, post the RTI legislation, access to public information is institutionalised. Yes, news hounds can no longer get “breaking news” easily, but that is no great loss.

Second, when was India ever a social, liberal democracy? Mahatma Gandhi was a social liberal, like Jawaharlal Nehru and Muhammad Ali Jinnah, but the tactics he used show that the country was not. That is why he mobilised the majority via religious means — bhajans and kirtans.

By preferring Nehru as the de facto Congress leader to Jinnah (who was never much of a hard-core Muslim), the Mahatma bowed to his political assessment that the Hindu majority would not accept anyone except a co-religionist as their leader. This was good realpolitik and has been the broad political trend since Independence.

After Independence, none of the national parties — the Congress, the Janata Dal, leave alone the BJP — have ever had anyone other than a Hindu as their supreme political leader. The only recent exception is Sonia Gandhi of the Congress. But even her links into politics are exceptionally pucca, upper caste Hindu. The Communist Party of India (Marxist), which is meant to be areligious, has had only one non-Hindu — a Sikh, Harkishan Singh Surjeet — as its general secretary from 1992 to 2005.

Indians feel comfortable being led by those who are from their own social group. For national issues religion and caste are the bonding factors. For state level elections, caste is the major factor; at the village level it is sub-caste or clan. This is hardly a characteristic of a liberal democracy.

The liberal political elite do a great disservice by spinning the myth of a liberal India. A more honest assessment would be of India as a seething cauldron of competing social groups held in balance by quasi-colonial state power. Recognising oneself, as I said earlier, is the first step to reconciliation and reform.

In a democracy, numbers count. To protect itself, minorities either have to increase their numbers, as the Hispanics and blacks are doing in the US, or they have to stay below the radar while aligning broadly with the majority goals. The US, a land of immigrants, has no qualms about requiring everyone to be American — in language and in culture, such as it is. France is even less tolerant of cultural or linguistic deviance. In comparison, India adjusts to linguistic, religious and cultural diversity. But till the Hindu population is in a majority they shall dictate the music to be played, as they have done since 1947.

India has remained an “administered” democracy of the colonial style — the spirit is scarce but bells and whistles abound — albeit better administered than it was pre-Independence. Prime Minister Modi’s moves are merely a muscular rendition of what all directly elected Prime Ministers did prior to 1989. Thereafter, coalition governments diminished the stature of the Prime Minister, who, in terms of formal powers, is more powerful than the American President. Those who have been socialised only during the last two decades of “coalition dharma”, when listless governance was the norm, need not be alarmed at the vigorous use of the available constitutional powers.

Any real democracy merely reflects the norms and aspirations of the people. This is the central conundrum of the Arab Spring that ended up fanning radical Islam instead of modernising North Africa and West Asia.

Urban folks worry too much about the seeming frailty of Indian democracy. They also exaggerate the role played by the media, civil society and intelligentsia as the bulwarks against its demise. The real custodians of democracy are the enormous variety of vertically and horizontally arrayed social groups, each negotiating to safeguard its own special interests and societal norms. By their very presence they illustrate that there is a competitive market for political power in India. Unsurprisingly, as in any market, bargaining power in a democracy is with the majority. But every market has to be regulated to be efficient and equitable. That is what Parliament and the judiciary are expected to do in our system. If democracy ever dies, it is these two institutions which will be responsible, not the executive or the people of India.

Adapted from the authors article in Asian Age July 29, 2015 http://www.asianage.com/columnists/hypocrisy-socialist-liberals-635

death

Photo credit: dangerFantastic.BlogSpot.com

To everyone’s relief, the Governing Council (GC) of TERI appointed a new Director General to replace Dr. R. K. Pachauri (RKP). Seemingly, it was moved to act in response to a lower court ruling staying the operation of the findings of the Internal Complaints Committee (ICC).

The law at work…and play

The Committee findings must have damned RKP, which is why he agitated the matter in court. The stay was based on the evidenced argument that principles of natural justice were not followed by the ICC, thereby disadvantaging the respondent (RKP). Hearings on the issue will continue. But the practical outcome was that RKP resumed work. He had voluntarily proceeded on leave, when the criminal complaint was lodged. There was no legal bar on his rejoining albeit, rather awkwardly, having to operate away from the Head Office and the Gwal Pahari campus, where the complainant works.

Corporate honchos call the shots

The GC which includes luminaries from the business word, academia and government had little choice but to end this Kafkaesque comedy by choosing a DG to take operational control of the institution. In doing so they wisely acted in compliance with the highest standards of corporate governance. No employee should even potentially be able to directly or indirectly use her position to compromise the due process of law.

A professional and a gentleman

Their choice of the new DG-Dr. Ajay Mathur, an ex-senior employee of TERI, is impeccable. A multi-talented engineer (like RKP) turned environmental and energy efficiency policy wonk, with a stellar track record- he has the advantage of straddling both the real world of green technology and the more rarified world of economics and global climate finance.

The ongoing case of sexual harassment against RKP will carry on. Given the convoluted judicial process we follow, the “truth” will likely emerge only in the mists of time, long after the media has lost interest. But four home truths bear attention in the meantime.

Shoddy, knee-jerk laws

First, even our most recent laws lack a comprehensive world view. The 2013 amendments to the Indian Penal Code and the new act extending protection from sexual harassment in the workplace, only protect women. As a first step this is unremarkable in a world dominated by men in powerful executive positions.

But powerful men sexually harassing male subordinates is not breaking news. Why a similar avenue for redress in the workplace should not be available for harassed men is unclear. It shows a tendency for legislators to react to populist vigilantism and not from deep conviction that sexual harassment is an infringement of the workplace rights of any employee.

Bad laws result in perverse incentives

Second, draconian laws do not a more caring or equal society make. On the contrary, draconian laws to protect human rights coupled with a judicial process which lacks the advantage of speed and suffers from an excess of procedural compliance, is a sure recipe for gaming.

In such institutional environments- like the US- the advantage is invariably with the unscrupulous; the rich and the wily. The outcome is a high incidence of miscarriage of justice. This is also the argument against irreparable damage imposed by the State, as in the case of the death penalty. India would do well to abolish such arrogant assumptions of judicial infallibility.

That we need to do much more to protect basic human rights, including the specific case of women, goes without saying. But nuance, granularity, comprehensiveness and proportionate disincentives are the corner stones of good law.

Pious intentions but perverse outcomes

Third, bad laws lead to perverse outcomes. Take for instance the outcome of the 2013 laws. Male Chief Executives now implicitly discriminate against hiring women to work in their personal office to guard against inadvertent transgressions of the law. This discrimination can be neutralized if there was similar protection for male subordinates from a harassing boss. The gender preference for male executive assistants would narrow once the risk of inadvertent sexual illegality is equalized. But a narrow legislative view on the sexual harassment of only women, never created the space for such balancing mechanisms.

Advancing gender parity in the real world

Fourth, is it time that India prescribes quotas for women in power? Moving to a more gender equal world should be a priority.

(A) All government quotas for jobs, promotion or education should have a gender component. This will address the incentive for discriminatory resource allocation to males per the traditional gender roles within the family.

(B) Political parties should be legally bound to field an equal number of women candidates for elections as men.

(C) Government budgets should be gender responsive.

(D) All state owned enterprises and banks; Public Private Partnerships and companies in which the government is a significant (26%) shareholder should be required to publish a gender breakdown of employees by levels/grades with the intention of reaching gender parity, unless special circumstances apply.

(E) The July 6, 2015 judgement of Supreme Court Justices Vikramjit Sen and Abhay Mohan Sapre amends Christian personal law to allow an unwed mother to be the guardian of her child and thereby “legalize” the child’s parentage. The SC Justices based their decision on the generalized principle that in a secular country, religious practices can be divorced from law if they transgress human rights.

Similar progressive changes must be made in the personal law of communities to erode the legal dis-advantages women face in exercising their right to family property, inheritance and maintenance.

The legislative approach to gender parity is no more than a flag, signifying that India is responsive to international trends. We need to detox formal and informal Institutions which perpetuate gender discrimination. Death by a thousand cuts is the way to go.

924 words

Barefoot college

Photo: A skilling leader from Bunker Roy’s Barefoot College, Tilonia, Rajasthan- an international training center in solar engineering for the illiterate. Photo credit: The Guardian,

The appointment of the president of the Film and Television Institute of India (FTII), Pune, is taking on the epic dimensions of Satyajit Ray’s Ganashatru.

Gajendra Chauhan, the new president, is no enemy of the people. But the students seem to be right in resisting the government’s attempt to foist a minor film personality on them. Compared to past presidents, the present appointee is a wafer-weight.

India produces around 1,600 films annually, which gross $2 billion on 2.6 billion tickets sold. Other revenues are additional. The nexus between undeclared wealth, films, drugs and over-the-top living is tighter than a two-person lift crammed with six. Despite the sleaze, visual media and entertainment is where the world is headed. We should join the race to the top.

Instead we are stuck in Byzantine power struggles — between students and the government in the FTII; between management and the government in Nalanda University and recently in IIT-Delhi. Why these autonomous trusts and institutions are micro-managed by the government is a mystery — one of many in the inscrutable world of the Indian public sector.

The Nalanda University is an innovative public-private partnership. It created breaking news recently, not for its academic standards, but because the celebrated academic and Nobel Laureate Amartya Sen went public, that he was nudged to resign from the post of chancellor and chair of the governing council, thereby drawing attention to the pervasive power of the government to manage public institutions by proxy.

How should Chauhan and Dr Sen have behaved in the public interest?

Chauhan should have recused himself in the face of the student protests. If he feels the agitation lacks depth or is politically motivated, he could offer to conduct a referendum amongst the students, a la Alexis Tsipras in Greece, to prove his support.

Dr Sen’s public criticism, albeit carefully evidenced, of the “Gujarat model of development” — closely linked to Prime Minister Narendra Modi’s prowess — was sufficient to put the new governments back up. But he didn’t stop at data. He followed up with a weaker and more political attempt to tarnish the government’s credentials.

He publicly and pointedly rejected the parallel drawn by Narayana Murthy of Infosys between, the 1984 anti-Sikh riots and the 2002 “Godhra” anti-Muslim riots, as the consequence of misguided abdication of responsibility by political parties in power. By seeking to instead distinguish between the two horrors, Dr Sen wore his Congress affiliations on his sleeve.

In the event, the right thing for him would have been to resign from Nalanda on the grounds that it was against his conscience to work with a government he despises. By not doing so, he weakened his moral stand.

The last thing Mr Modi needs is disquiet in the higher echelons of the skilling establishments. The demand for skilling for employment is estimated at 425 million people over seven years till 2022. The available capacity is only seven million. India has a network of around 14,000 technical training institutes. What it does not have is a network of 100,000 leadership level professionals trained to manage this massive effort.

Existing initiatives in that direction seem disoriented. Why should one need a university for skilling — reported as one of the intermediate steps the government intends to take? Training trainers is the easy part. The really hard part is to link each training establishment to its natural market for skills with an eye on outcomes (employment) not outputs (the number trained).

The private sector can best fill the skilling gap. The information technology industry did this to grow and continues to do. Old economy companies in steel, cement, chemicals, engineering and construction are less willing to fund this public good. They complain that trained employees leave for better opportunities and skilling becomes a never-ending drain on company resources.

Old economy manufacturing is struggling under the twin challenges of squeezed margins due to domestic and imported competition and the large-scale migration of skilled workers overseas.

Mr Modi has astutely adopted this challenge as an opportunity. His proposal is for India to become the workforce supplier of the world. Presumably the idea is that the swelling inward remittances — $80 billion and counting — from overseas Indian workers is adequate compensation versus the cost of publicly funding the skilling effort.

Skilling is a public good but with strong private good characteristics. Displacement of worker skills from one company to another is not a net loss to the industry but an inter-company transfer. One company’s loss is another’s gain. Skilling costs should be borne by the respective industry associations — Confederation of Indian Industry, Federation of Indian Chambers of Commerce and Industry and Associated Chambers of Commerce and Industry of India — from funds created for the purpose based on member subscriptions and donations.

But there is also a case for partial public funding. Worker skills transferred by migration to a foreign economy are a net loss for Indian industry but helps the country’s external finances via remittances.

This justifies some public funding also for skilling.

The elephant in the room is not the amount of money to be spent nor the number of skilling opportunities. These are manageable with good leadership. What is more difficult is getting the maximum bang for the buck. Spend on skilling should result in people getting employment.

The option to encourage workers to migrate flies against the wind. Borders are increasingly closing to migration as the world economy winds down. Labour shortage in the developed world can be envisaged in future. But for every job available there will be 10 applicants from developing countries in queue. Add to that the fact that workers from compatible cultures and those who speak the language fit better and Africa will have a head start on India.

No, the real elephant in the room is that there are not enough jobs available for skilled workers in India. The desire to become highly skilled wanes if one is to subsequently while-away the hours at nukkads (street corners) scanning the “wanted” advertisements.

Adapted from an article by the author in Asian Age July 20, 2015: http://www.asianage.com/columnists/skilling-gap-252

The writer is adviser, Observer Research Foundation

dionysus

For rational people, if this breed actually exists other than in the imagination of economists, the most logical way out of the Grexit logjam was for Greece to vote “yes, we can”. Just by agreeing to take the pain of austerity measures, they would have got the amount required for this year, estimated at around 80 billion euros.

Banks would have re-opened, ATMs would have started functioning and Greeks could have happily gone back to sipping their Ouzos in their favourite cafés. Meanwhile, negotiations could have carried on with Brussels and the International Monetary Fund on the minutiae of the minimum austerity measures required to access the 240 billion euros bailout package.

Negotiations and a hot head do not mix

If only the Syriza government had the foresight to seek technical assistance from the bureaucracy of any Latin American, African or Asian country on how to deal with agitated lenders, they would never have got into the mess they are in now. Developing countries, which went through the notorious IMF “structural adjustments” during the 1980s, have mastered the art of walking the thin line between throwing the bath water, but keeping the baby.

This is not an art the Greeks are skilled in. Greek theatre dating back to 500 BC has a tradition of keeping the two main genres — tragedy and comedy — strictly separate. Compare this with Indian theatre and Bollywood where the surefire mantra for success is to mix and match, masala. This is the underlying core of Indian flexibility and the omnipresent gene of jugaad.

But all is not lost. Greece and the rest of Europe are bonded by more than economics.

Greece is not alone

First, it’s not just Greece. Greece is beautiful, sunny and laid back. But it is not the only one. Italy, Portugal, Malta and even rainy Ireland, have all benefited from northern Europe’s largesse and subsidy. These partners in destitution are honour bound to press for softening the terms of the austerity measures. Whilst they don’t have much weight in decision-making, they can be the medium for an honourable back down, both for Greece and the lenders.

A group of southern Europeans (Spain, Italy, Portugal, Malta, Cyprus) pleading for mercy on behalf of Greece would allow Germany and the hard-working northern Europeans to back down without abandoning their harsh standards with respect to performance, keeping promises and fiscal discipline — the things prosperous countries care about.

Italy and Spain, the two big economies (together they account for 27 per cent of Eurozone GDP), are sunny, hot-blooded Mediterranean countries with an iffy record of fiscal rectitude. It would serve them well to make common cause with smaller economies in southern Europe just in case they need similar fiscal accommodations in future.

Sellers need buyers

Second, remember, the world faces a demand recession and growth is slowing. What could be better for Germany’s Northern Alliance than to show some noblesse oblige and allow Greece to continue to buy manufactured goods sourced from them, with borrowed money, in return for “progress on reforms” — making it easier to hire and fire workers and adjusting the liberal social security downwards?

After all, this dance of fiscal profligacy by borrowers and fiscal fundamentalism by lenders is not new. Developing countries have routinely needed and received such accommodation, paid for by taxpayers in the developed world. Generations of developing country citizens have suffered and endured precisely such privations brought about by the actions of their profligate, corrupt and inefficient governments. Why then should the developing country assistance code not apply to Greece?

Street fighters are rarely credible as administrators

Third, mind the credibility gap. History establishes that “Dutch courage” is difficult to sustain. The negotiating strategy of the Syriza government has been built around the assumption that Brussels would blink before they do.

This did not happen and Greece defaulted on its loan repayment to the IMF on June 30. Desperate to seek time, the Syriza government sought refuge in a referendum to support their hard talk. Many must have hoped that the people would betray them and vote “yes”, thereby enabling them to negotiate a surrender with the lenders, ostensibly out of deference to the will of the people.

They were thwarted in this plan by the campaigning of their charismatic, media-savvy finance minister, Yanis Varoufakis, who tapped into wounded Greek pride and induced the massive “no” vote. He subsequently resigned and left the people he incited to their own devices. This is a familiar ploy of street fighters who live on in public memory by seemingly heroic actions which burnish their esteem, never mind that people bear the consequences thereof.

But the civilizational glue still sticks

Fourth, the Syriza overestimated the value of the glue they provide to the Eurozone. Greece is less than two per cent of the Eurozone GDP. Turkey, now with an increasingly hard-line Islamic government, has been waiting to accede to the EU since 1987. Its GDP is double than that of Greece. But the problem is not economic; it is civilisational. An EU without Greece — the cradle of European civilisation — would be like Ramlila minus Ram or Bhairavi sung at midnight.

A new deal is needed to thwart the Russo-China combine

Whilst a departure by Greece does open a door for China or Russia to consolidate their influence in the Mediterranean, the burden of history is against this happening just yet. If the proud Greeks will not bend before the Germans, can one possibly imagine them in bondage to China?

Cosying up to Russia would be far more acceptable. But low oil prices constrain the oil-dependent Russian economy from becoming even more profligate than it already is in foreign adventures.

No room for those who don’t tie their own bootstraps

Truth be told, the Syriza’s strategy was audacious and imprudent. Here is why. The world no longer suffers those who do not help themselves. For the multilateral and bilateral lenders and banks to depart significantly, just for Greece, from the fiscal rectitude economic mantra they espouse worldwide, would mean different strokes for different folks. This would be unconscionable and overtly iniquitous in these politically correct times.
Adapted from an article by the author in Asian Age July 7, 2015 http://www.asianage.com/columnists/barbarians-temple-dionysus-026

saarah-ahmed-indian-pilot-8-march-15-513x239

Photo: Sarah Ahmed: Indian. Pilot.

July 4, 1995 — America’s Independence Day — Islamist militants take six tourists hostage in Kashmir. They decapitate a Norwegian and kill the rest, including two Americans. There has been no letup in the orgy of violence since. But now Islamists — Sunni and Shia militants — are eliminating each other in West Asia. Glee that the “enemy” is disintegrating is inevitable in both Christian and Hindu right-wing camps. But as Prime Minister Narendra Modi has repeatedly stated, albeit with scarce substantive effect, terror has no loyalties beyond the willingness to kill and maim.

The political economy of terror

Islamic terror, like terror anywhere, comes heavily loaded with political and economic objectives. The Taliban was created by the US to oust the Russians from Afghanistan in the 1980s. They and the Army are the only credible political actors in Pakistan today. Even China engages directly with them to protect its infrastructure investments and workers in Pakistan.

Saudi Arabia funds Sunni Iraqi militants to dominate the Shias of Southern Iraq and to undermine Syria’s Shia regime — all because Shias are perceived to be universally aligned with Saudi arch-rival Iran. Conversely, Russia and Iran support Shia militants in Iraq and the Shia regime in Syria. It is not inconceivable that in future Shia militants may be used to neutralise the Taliban in Afghanistan.

Ashraf Ghani — the technocratic President of Afghanistan — would probably welcome a dilution of Taliban power so that he can get on with implementing the development agenda.

Endemic warlordism and militant factionalism in North Africa and West Asia was constrained during the Cold War (1960-1990) by authoritarian regimes supported either by the US or the Soviets. Ironically both the democratic US and the Communist Soviet Union had no qualms about imposing authoritarian regimes as the norm in the region. It helped that till 1990, even the metric of development ignored politics as a factor and focused primarily on enhancing per capita income levels.

Democracy as a metric of development

The change came with the surprisingly sudden collapse of the seemingly well-off Soviet Union, a middle income country in 1990. Soviet unsustainability was ascribed to the absence of Western-style institutions — elective democracy, rule of law, small governments, markets, competition and choice.

Post 2001 (9/11), this development mantra acquired evangelical fervour, as an instrument to “civilise” the “arc of Islamic terror” stretching from Afghanistan in the east, through Egypt and Sudan to Mauritania in western Africa. The Arab Spring (2011) was hailed as the blossoming of democracy in time-warped North Africa. Once invincible, Hosni Mubarak in Egypt, Muammar Gaddafi in Libya and Zine El Abidine Ben Ali in Tunisia bit the dust and the people won. This was the expected upside.

The unintended consequences of Democracy: strengthening traditional fault lines

But two unanticipated downsides were less palatable. First, democracy became uncontainable — like a nuclear explosion. Democratic contagion travelled south and shook the gilded birdcage lives of the Sunni sheikhs of the Gulf states and deposed President Ali Abdullah Saleh of Yemen via tribal bloodletting which rode on the aftershocks of the Tunisian “Jasmine Revolution”.

Second, democracy in Egypt empowered the Muslim Brotherhood — a transnational Islamic party pushed underground by Mr Mubarak. For the G7, “Islamists” ruling Egypt was a horrific replay of the deposition of the “modernist” Shah of Iran in 1979 and the subsequent rise of a “renegade” nuclear, Islamic Iran. The Egyptian “Brothers” — beneficiaries of Islamic democracy — were presented as role models for disenfranchised commoners across the region. This questioning of the elite order was not what the sheikhs or the G7 had bargained for, or desired.

The G7 were comfortable with a “managed democracy” — the bare-bones institutions of a democracy, never mind if the

democratic spirit was non-existent. What they got was an unruly explosion of the democratic spirit — a magnified version of rumbustious, Indian style democracy, where rights trump responsibilities.

Libya disintegrated into armed militias and cost the US the life of its young, well-liked ambassador Chris Stevens. Yemen remains a cauldron of tribal militias. This democratic disorder is much like the persistent clan and tribe-based militancy in Manipur and Nagaland in India’s Northeast, funded by the drugs and arms trade with “wink-nod” support from China.

The recent bomb blast in Tunisia, which killed several British tourists, is similar in intent to the blasts in Mumbai in 1993 and the terror attacks in 2008. The former, managed by smuggler and mafia don Dawood Ibrahim, rode on the back of Muslim anguish at the unlawful destruction of the Babri Masjid by Hindu right-wing groups. The 2008 strike is credited to the Inter-Services Intelligence — Pakistan’s dirty-tricks entity. Both aimed at hitting where it hurts the most — the economy.

Tackle Islamic terror with targeted incentives for peace and development

Can we really expect Indian Muslims to remain unmoved by the global trends in Islamist terror? A few misguided young men have already joined Islamist groups in Iraq and paid the final price. But most Indian Muslims look inwards to a domestic solution to break out of the downward spiral that events drag them into. This is where government intervention can help.

First, reducing poverty helps all marginalized groups. There is a broad congruence between Muslims and poverty in India even today. Focusing on  poverty reduction more vigorously also reverses the marginalization of poor Muslims in Independent India.

Second, a more visible signal is also needed. Positive discrimination like reservations is unhealthy. It pits Muslims against the existing beneficiaries — dalits and backward castes by generating a scrabble for a fixed pie. Far better to instead to empower young Muslims to work productively in the modern economy. Modernizing the curricula of the madrasas is a long-term, sensitive but powerful option. Indian Muslims shine in private enterprises where success is meritocratic and not dependent on connections, networks or preferential access to education or progress at work. They are the core of Bollywood, handicrafts, the arts and our cricket team.  Ashwini Kumar’s Inshallah, Football is a touching film about how a dedicated Brazilian coach uses football leagues to meet the needs of aspirational youth in strife-torn Kashmir. They must be directly supported to do be better prepared for private enterprise which, is in any case, is the growing sector. Indian Muslims must also be assured that being part of the modern economy does not and should not, mean having to abandon traditional beliefs or culture. India is not France. We are a plural society.

Third, politics must lead by example.  Religion is deeply embedded in India. Politics must learn to live with religion as a political force rather than pretend to work within an a-religious framework. In this context, the new government in Jammu and Kashmir which federates the right-wing Bharatiya Janata Party of Jammu with the Kashmiri Muslim’s People’s Democratic Party in the governance of the state, is a progressive model which explicitly recognises that religion, like caste, is a legitimate basis for political action. True secularism is recognizing the right of citizens to organize themselves politically on any basis which provides a legitimate common cause.  Better to reflect traditional fault lines honestly rather than paper them over with the Band-Aid of pseudo-secular, socialist gibberish.

Fourth, women are the prime movers of social change, particularly in South Asia. Sheikh Hasina, Prime Minister of Bangladesh, Mayawati, the Dalit leader of Uttar Pradesh, and the young Pakistani Nobel Laureate Malala Yousafzai are examples. Leveraging potential Malalas in India via expanded and targeted education and health is what the government should be doing, if one-third of our population — Muslims and Dalits — are to make common cause with the rest of India.

Adapted from the authors column in Asian Age July 2, 2015 http://www.asianage.com/columnists/terror-s-echoes-home-748

Socializing the Dragon

dragon

(photo credit; http://www.mrwallpaper.com)

China has “bested” its way onto the big boys table through three critical initiatives which bore fruit since President Xi took over as China’s numero uno in 2013.

The first was the founding of the BRICS New Development Bank (NDB), headquartered at Shanghai. Symbols speak louder than words. The logo of the NDB is eerily reminiscent of Chinese communist logos of yester-years encased in two encircling stalks of wheat or maybe olive branches, as in the UN logo. At its center is a round blob with geometric shapes embedded- a suitably vague and nondescript statement of intent, possibly illustrating that the Bank can go any which way and has endless opportunities.

Whilst the first President of the Bank is an Indian corporate guru -K. V. Kamath, no one is under any doubt that it is China which will call the shots, exactly as the US does in the World Bank or Japan in the Asian Development Bank. This is fair since she who pays the bills gets to call the tune.

The second success was to get thirty eight regional and twenty non-regional countries, including members of the G8 except the US, Japan and Canada who kept away, to sign up as Prospective Founding Members of the Asian Infrastructure and Investment Bank which is to be based in Beijing. The candidature of North Korea and Taiwan was refused by China. The former because it is a renegade and the latter because China does not recognize Taiwan as a sovereign country.

The third success completes the trilogy of China’s financial hegemony. China has offered to fund the European Infrastructure Fund at a time when Europe’s powerhouse- Germany and the European Union are engrossed in managing the financial bog of a potential “Greek exit” from the Euro and the likely ensuing turmoil. Massive investments in infrastructure are viewed as one way to kick starting growth in Europe, which has lagged recovery post the 2008 crisis. With Europe agonizing over how much more pain it can take, China’s generous offer of financial support is well timed.

China gets it fiscal muscle from its foreign exchange reserves of over US$ 3.7 trillion. These are down from their peak last year of nearly US$4 billion but remain the largest reserve ever. The annual trade surplus is a healthy US$300 billion plus. Its budget deficit, albeit increasing is still low, though off-balance sheet borrowing by state owned enterprises and the iffy quality of bank assets could cloak an incipient problem.

Its diplomatic and economic muscle is evident from its success in cowing down the meek protests by the Philippines and Japan against its assertive claims over small islands in the South and East China Sea. Far-off South Africa, the continents most developed economy, has repeatedly refused to give a visa to the Dalai Lama since 2009, reportedly out of deference to Chinese sentiments. The Dalai Lama, who is resident in the gorgeous Indian mountain paradise of DharamshaIa, is not recognized by China as the titular head of the Tibetans. China promotes an alternative in the Panchen Lama who is resident in Tibet.

Only the feisty Mrs. Merkel, Chancellor of Germany has had the gumption to ignore China’s ire and met formally with the Dalai Lama. Now with China bailing out Germany-till now the primary “money bag” for the reconstruction of Europe – the jury is out whether Mrs. Merkel would be inclined to repeat this diplomatic equivalent of thumbing her nose at China.

There are two jewels China still seeks. First is to implement President Xi’s vision of reviving the ancient silk route from Western China to Europe. The second is to develop a maritime silk route in the Indo-Pacific region from Myanmar via Bangladesh to India and Sri Lanka. Possibilities exist of extending this further West to Pakistan (where China is already developing the Gwadar port) and Iran where India is tentatively engaged in a similar venture at Charbahar.

These Chinese financed beltways will straddle Asia physically. If China pulls it off they are sure benefit the economies of the continent by reducing transit cost and linking local markets better. But the key issue spoiling the party is sovereign doubts about China’s true intentions in proposing these extravagant infrastructure plans.

Action speaks louder than words. Chinese overseas investment, particularly in Africa, is perceived to be driven too narrowly by self-interest. Its muscular approach to safeguarding what it considers its justified claims in the South and East China Sea give rise to fears of territorial expansionism.  Despite the fact that the India-China border has been peaceful for the last forty years the fear of conflict is ever present.

China needs to demonstrate that it has crossed the hump of middle-income prickly aggression into the beneficent altruism of a self-confident, high income country. It needs to take on an international commitment which demonstrates its resolve to make the world a better place.

It has already taken the first step by voluntarily capping carbon emission by 2030 including by increasing the share of clean energy to 20%. The voluntarism is praise worthy. But a bird in hand is always more credible than two in the bush by 2030.

Stabilizing Afghanistan presents an existential challenge which China can use to establish its credentials as an international force of substance. This single initiative can start a virtuous cycle of development in the “roundabout of Asia”- as president Ghani of Afghanistan, terms his country- with spill over benefits across the region.

China is well placed to substitute the US in leading this effort. It has a close relationship with the Pakistani army and civil leadership which are crucial to contain the Taliban. It has the resources. The US is reported to have spent around US$ 800 billion in Afghanistan, over the thirteen year from 2001 to 2014. This is not a scary number for China, especially since there are spin off benefits- bringing to the international market the huge copper and iron ore deposits in Afghanistan; honing the experience for the Chinese army and equipment in the field and creating a stable buffer in Afghanistan which can sever the existing arc of terror and violence that extends today through Syria, Iraq, Iran, Afghanistan to Pakistan.

The real question is will President Xi bite this bait to flex muscle productively or shall transactional engagements remain the order of the day for China.

1061 words

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