governance, political economy, institutional development and economic regulation

Archive for June, 2016

Rexit technical brilliance, enter political economy expertise

rajan thinker

Rajan the thinking central banker: photo credit: bloomberg.com

Raghuram Rajan, India’s central banking czar, will be history by September 2016. He enjoys unprecedented popularity and near cult status as Governor of the Reserve Bank of India. Some of this has to do with his youthful looks and fresh demeanor — unusual in a profession peopled by dour old men. But much of his appeal is related to the confidence and skill he brings to the job, which he plunged into in weeks, rather than the months, which are the usual learning curve.

Even business — usually taciturn about rooting for bureaucrats, has also publicly supported his conservative strategy to keep the rupee stable; build foreign reserves; check inflation and ensure reasonable positive real interest rates, to protect the large mass of middle-class savers. International capital flows, which are as much about fundamentals as about the Iqbal — the credibility and charisma — of the central bank, responded well to his strategy for stability with fundamental reform.

Job specific technical brilliance and international standing matters

Rajan is the first RBI governor to came to the job with considerable experience in international finance (in the IMF) and even more significantly, a long spell in American academia, in the same area. To the billionaires who make the markets move, Rajan is a familiar face, with a track record of original thinking and practical foresight. He is best known for disagreeing with mainstream economists and foretelling the 2008 financial meltdown.

Rajan’s exquisite symphony- the “Dardnama” (book of pain)

In India, his legacy is the exquisite symphony, he wrote, of caution mixed with big-bang reforms. On interest rates, he was consistently cautious. His mantra was that flooding the economy with cheap money is not a quick-fix for growth. Instead, it can spark off high inflation, as in Brazil.

To the common man, this resonates well with the millennium’s continuing conundrum of jobless, inequitable, high growth. There are no quick fixes for these flaws in today’s post-industrial, service-oriented growth model. Rajan had no choice except to focus on keeping inflation low; preserving the real incomes of the disadvantaged who don’t have the luxury of inflation-indexed incomes and pushing banks and industry hard to become competitive.

His historic big reform was break with the past and publicly finger banks that had lent inefficiently, destroyed capital and most likely enhanced corruption — given the magnitude of bad loans accumulated by them since 2011.

He shone a bright light on the dodgy bank loans overburden- shockingly high at more than 12% of bank assets and 4% of GDP, rather than keeping them hidden under furtive, refinance Ponzi schemes. He was likened by “incremental reformers” to a bull in a china shop — pulling down both fraudsters and unlucky entrepreneurs with equal ferocity.

Admittedly, big-bang reforms shake up the cozy status quo and inflicts pain. But if followed through with decisive surgery, as Rajan recommended, it could have created sustainable wealth, in the medium term, rather than slowly bleed the financial system till it collapses, as happened in the developed world in 2008.

“Big bang” reforms too disruptive for India’s political economy

Will there ever be another Rajan as RBI governor? More importantly do we need another Rajan, given our political economy?

India is a conflicted society — at once eulogizing “savants” like Rajan, and yet shrinking away from the ripples they create in the village pond. It takes a lifetime of work in India to play the system harmoniously. Rajan came before India was ready for him. So while we may not be able to digest a Rajan today, there is unlikely to be a shortage of “suitable” talent. But the real pity is — why have we tried to “fix” a system that is not broken. Why not let the good work continue?

Tough global headwinds for the new Governor

head winds

Grapic credit: janeaustenslondon.com

The irony is that by letting Rajan go in September this year, the government will actually be cementing his “rock star” legacy. The second half of 2016 is blighted by uncertainty and will be hell for the new governor. First, is the near-term question mark over Brexit on June 23. If the “Leavers” win, Europe is surely in for turbulent times. But this may not actually happen, as the British are far too practical to be brash and emotional.

Second, even without a Brexit, the economic outlook is gloomy. Protectionism is growing and geopolitical instability is getting worse. These are fertile grounds for a flight of capital to safety and away from emerging markets like India. A tightening by the US Federal Reserve in the second half of this year may convert the capital flight into an outward-bound tsunami, severely denting our foreign exchange reserves and importing instability.

Oily silver linings and political compulsions

vote 2016

India’s largest state-Uttar Pradesh, votes in 2016: photo credit: teluguflavours.com

The only good news is that oil prices are likely to remain low. The low lead time for the mothballed 500-odd oil fracking rigs in the United States to return to work ensures that any uptick in price beyond $50 will deliver a supply response. Saudi Arabia, with nominal production costs, a deficit budget and a deficit current account and a proposed public listing for its oil company, is unlikely to rein in production or oil revenue. But low oil prices also depress incomes in oil-producing countries, which is bad for Indian exports and disastrous for inward remittances — that are largely dependent on the Gulf countries remaining lucrative employment sinks for Indian expatriates.

Low growth potential in the coming years, combined with the domestic compulsions of the largest state election in Uttar Pradesh in 2017 and three smaller states and a national election in 2019, are likely to strain the fiscal discipline, which the finance minister has assiduously built up since 2014. Rajan was lucky. But had yet to be “Indianised”. He would have got there. But time ran out.

Job description for applicants

queue

India financial leadership job vacant- only the best need apply: photo credit: blogs.wsj.com

Needed an RBI Governor with the political acumen to align with the government’s compulsions. Must be able to quickly improve the well-being of voters. Must also have the economic guile to minimize the resultant damage caused by politics to the economy. Must have his finger on the pulse of Bharat; the experience of having walked this tightrope earlier and the good fortune of being lucky. Must be able to strike practical deals — with big defaulters to ensure that capital starts getting rolled over; with banks so that interest rate cuts are passed on to borrowers; with the government so that Rajan’s “dosanomics” inspired efficiency enhancing incentives are carried forward: cut red tape and discretion in licensing of financial intermediaries; keep interest rates positive in real terms; exercise forensic oversight over banking discipline. Must be reconciled to the macro-economic ball being carried mostly by the government. Must have the access and ability to discreetly warn the government against scoring self-goals.

Adapted from the authors article in The Asian Age, June 19, 2016 : http://www.asianage.com/columnists/does-rbi-needs-political-governor-511

The death of “rutba”

police colonial

Rutba, an urdu word, means status or honour. In sarkari parlance it equates to the “shock and awe” evoked by a single determined officer. Some of this is larger than life, the stuff that legends are made of- like a single Sikh soldier equaling 1.25 lakh opponents in battle or a Gurkha mowing down dozens with a flashing Khukri.

The Americans are more practical about such things. For them shock and awe is unleashed via devastating fire power from the sky and thousands of armed boots on the ground. In India belief in the rutba of a single District Officer or Superintendent of Police to quell a local disturbance, still lingers.

Clearly, rutba, either of the Indian or the American kind, was lacking in Mathura, Uttar Pradesh, last week, when an armed mob of land grabbers, operating under the guise of social do-gooders and political anarchists, murdered two senior police officers and injured many more. Twenty-two squatters are reported to have died in the retaliatory police firing.

The occasion for the ruckus was a High Court order for their eviction from a public park they had illegally occupied since 2014, adjacent to the local police headquarters. It is not easy to preserve rutba if a police force has to be on good neighbourly terms with criminals camping unauthorisedly, on public land, right under their nose.

No dearth of Police martyrs

martyrs

photo credit: rediff.com

Search the net and there are dozens of police martyrs you will unearth- in the North East, Bihar, Kashmir, Punjab, Andhra Pradesh and Mumbai, battling ideological or religious terror mixed up with mafiosi making a quick buck from fractured politics and instability. All police officers are trained to lay down their lives in public interest. But this ultimate sacrifice should be a last resort not a prime mechanism to evoke public or a substitute for full institutional support.Getting killed is not a good way to serve the nation. The idea should be to kill the sob across the line of fire – to paraphrase US General Patton. This is not easy in situations of domestic violence. The enemy is elusive, as are the support systems for an honest police officer.

Institutional collapse in the police

Rutba overrode such political economy obstacles in the past. But no longer. Rutba derives its salience from inherited institutional prestige and power. The only Indian institutions, which continue to demonstrate rutba are the Supreme Court of India and the army. A soldier, in uniform, still creates a stir and evokes awe. Similarly, the Supreme Court has retained its reputation for independence and fair play.

Under colonial rule, the police and the army were co-joined. Even today, in Uttar Pradesh, the Superintendent of Police is called kaptan sahib. Captains of the British Indian army, who had to be cashiered out because of injury, were appointed to the police, which was considered a “softer” job.

But the two institutions have been purposefully made to diverge, possibly to check mate each other and thus ensure the supremacy of civilian control over both. The army continues to be viewed favourably, as the one which does all the grunt work. The police are perceived to just hang about wielding a baton or a lathi, harassing people and pocketing bribes. In a 2002 Transparency International survey of citizen perceptions, the police were ranked as the most corrupt.

Bollywood, has for long, either reviled the policeman as a bumbling Inspector Clouseau- of the Pink Panther fame – or played up the image of the good, fearless cop- Amitabh Bachchan in Zanzeer; Om Puri in Ardh Satya and Ajay Devgun in Gangajal-  who take on criminals and vanquishe all. Neither over-the-top-image is helpful.

The hapless police officer

hapless policeman

Being a policeman is an unenviable task. The police work best, in a regulatory environment where the dos and don’ts are clear and align with the law. Today, there is nothing muddier than when and how, a police officer should wield the powers legitimately vested in her. Whom to challan or ignore for a traffic violation; how forcefully to quell unruly behavior on the streets –  each petty incident, requires the police officer to first think through the political consequences. Decisive, timely, preventive action consequently suffers. Events snowball, as the local police wait for directions from higher levels, who ignore such events, till they explode and become “above the radar” on centralized flash point monitors. By them it is too late to save lives.

The colonial mindset- all are unequal

But are we all blameless? Indians, view the rule of law, not as a framework within which to mould our behavior, but as a hurdle, crossing which, is a metric of our prowess and power. District Magistrates and Superintendents of Police are required to be adept at this game of privileging and stratifying people – just as their colonial predecessors did.

poor

photo credit: revleff.com

Your social status is reflected in the manner you are received by these worthies. The poorest, unorganized litigants are stopped outside the gate by police guards. Their only chance to get the big man’s attention is to hope his car will stop, as it moves through the gate, its window wound down, through which a written petition is allowed to be stuffed and heart rending pleas babbled.

For the middle class- petty businessmen, small farmers and the poor who come via intermediaries – lawyers, village and block level politicians or non-state actors – a darshan (face to face meeting) is usually arranged by the peon in tacit recognition of their collective power. The aggrieved persons stand before the big man and only the leader is offered a chair to sit, whilst the issue is briefly discussed and assurances given to get it “looked into”.

darbar

Photo credit: tribuneindia.com

MPs, MLAs, rich landlords, big business people and senior government officers are ushered into an “inner office” where the atmosphere is more relaxed and tea may be served or at least offered. When ministers visit and want to meet the DM/SP, who will “call on” (visit) whom, depends on the relative political weight -“closeness” – of the two to the Chief Minister.

Unreal laws

Under colonial rule, the rule of law primarily protected the interests of Europeans. Post-independence laws are aggressively egalitarian on paper but quite toothless on the ground. In Kenya, another previous British colony, till 2006 or so, a large land owner – usually European – could shoot to kill a trespasser, without application of the “quantum of force used” rule. In India this principle regulates the use of force for self-protection. The Kenyan rule, whilst unjust, was honest and aligned with political reality. It worked well to preserve property rights.

Our laws are hopelessly idealistic and un-enforceable. We have the right to private property but it can be taken away, quite casually, for ill defined “public purposes”. Purposefully poor oversight of public property and abetment drive encroachments. But the reason why we all view encroachment so benignly is that, the concept of property rights is very lightly embedded in our political and social consciousness.

The High Court was legally correct to order eviction. But the political circumstances which allowed the encroachment to happen, in the first place, made the order unenforceable. The cost of such hypocrisy is two dozen people dead, many more injured and a further nail in the coffin of the rule of law. We ignore the political economy, within which laws operate, only at our peril.

Adapted from the author’s article in Asian Age, June 11. 2016 http://www.asianage.com/columnists/mathura-failure-grassroots-governance-382

 

Violence in Lord Krishna’s town

June 3, 2016 things reach a head in Mathura, a pilgrim town two hours by road from Delhi towards Agra.

mathura

Lord Krishan’s Temple Mathura. photo credit: easydestinations.net

The hot spot is a 200 acre plus public park, occupied in 2014 by a set of criminals and land grabbers, masquerading as social revivalist and curiously, political anarchist associations camps in the public park on their way to Delhi, from Sagar in Madhya Pradesh, to demonstrate against the Union government policies.

Lord Krishna’s land seems attractive to them. The land-rich public park even more so. They dig in and grow in numbers over time to around 3000. They establish a self-ruled colony – as most slums are- under the nose of the District police office. They play the political game to resist eviction, even thought the town residents want them out. The local police, ever hesitant to take strict action per law, least they upset the apple cart and displease someone important in Lucknow or Delhi, play possum. A convenient route for inaction is found. Register a Public Interest Litigation with the Allahabad High Court. The expectation is that the case will drag on for generations. Meanwhile the status quo can be preserved.

math mathura

The massed “human shields” behind which the land grabbers hid photo credit: despardes.com

The Hon’ble High Court refuses to play ball. It swiftly orders the eviction of the interlopers. Cut to a young, conscientious, police officer – Mukul Dwivedi, Superintendent of Police (City) who leads from the front. Santosh Kumar Yadav, the Station House Officer of Farrah is with him. The task is difficult. The interlopers are armed to the teeth- guns, bombs and full of bravado. The police is aware of their arsenal. But they make the fatal error of underestimating the determination of the interlopers.

The police force is met with bullets, bombs, bursting gas cylinders and mayhem and is brutally beaten up. The SP dies from his wounds. The SHO is shot dead. Scores of policemen are injured. More police forces arrive. They retaliate with bullets. 22 interlopers are shot dead, beaten up or burnt to death in the ensuing melee.

the blazing battle

The blazing battle of Jawahar Park: Photo credit: UPI.com

The blame for letting the situation get out of control is, as usual, put on the local police and district administration. Indeed they are to blame, because they had the powers to evict the interlopers long back, but did nothing.

But the price in blood is paid by the officers on the spot. The state government awards each of the families of the two police officers callously murdered, a grant of Rs 20 Lakhs each. Jobs for family members follow. The healing touch is applied to the living.

The real question is, what has the incident done for the image of the police and their morale. No one wants to die in vain. Mukul Dwivedi and Santosh Kumar Yadav would gladly have given their lives, if by “giving up their today they could build a better tomorrow for their colleagues in the police”. But have they?

Read the anguish expressed in a characteristically mild manner letter of condolence (below) by the officers recruited in 1980 to the IAS, IPS, IFS, IRS, IC&ES and the IAAS  via the common UPSC examination. Most (including this writer) have retired. Those that still serve do so in leadership positions in the Union government and state governments. Other than the cohort camaraderie, what this group of 67 shares is despair, that the civil services should have come to this- where institutional inaction imperils their very lives.

To,

Shri S Javeed Ahmad, IPS, Director General of Police

Uttar Pradesh Shasan, Lucknow.<dgpup@nic.in>

Shri Alok Ranjan, IAS, Chief Secretary, Govt of UP <csup@nic.in>

Shri Akhilesh Yadav, Hon’ble Chief Minister, Govt. of UP. <cmup@nic.in>

Shri Rajnath Singh, Hon’ble Home Minister, Govt. of India <38ashokroad@gmail.com, jscpg-mha@nic.in>

June 6, 2016

Condolence message from 1980 batch AIS and Central Service Group A officers on the martyrdom of brave hearts: Mukul Dwivedi SP (City) and Santosh Kumar SHO Farah, Mathura

Sir,

We, the serving and retired officers of the 1980 batch of the AIS and Central Services Group A, deeply condole the untimely and violent death of Shri Mukul Dwivedi, SP (City), Mathura and Shri Santosh Kumar Yadav, SHO, Farah, Mathura.

We strongly condemn the perpetrators of this murderous assault on police officers performing their duties. We hope that an enquiry will swiftly identify the culprits and ensure that they are punished under law.

These brave officers have paid the final price in the call of duty to implement the orders of the Hon’ble High Court of Allahabad, in difficult circumstances, which were out of their control.

In doing so, they have held high the tradition of “service before self”, with courage and dedication and amply displayed their deep commitment to maintaining the Rule of Law. They have made us all proud.

Please convey our heartfelt grief to the families of the deceased police officers. We all stand with them in their hour of deepest sorrow.

We are also contributing Rs 50,000/- directly to each of the families of Shri Mukul Dwivedi SP (City) Mathura and Shri Santosh Kumar Yadav, SHO Farah, Mathura as a small token of our respect for the supreme sacrifice made by these two brave hearts.

Signatories

  1. Gurjit Singh, IFS, Ambassador of India to Germany
  2. Javed Ahmed, IPS (MH), Ambassador of India to Saudi Arabia
  3. Vinod Aggarwal, IAS (JH) Secretary, National Commission for Scheduled Castes.
  4. Ram Tirath, IRS, Member, CBEC, GOI
  5. Ananya Ray, IRS, Member, CBEC, GOI
  6. K.C. Jain IRS, Principal Director, Income Tax, Delhi
  7. Naini Dhillon, IAS (UT) Secretary, Interstate Council, GOI
  8. Satya Mohanty IAS (AP), Secretary, National Human Rights Commission
  9. Vijay Anand, IRS, AS, ISRO
  10. Anthony Desa, IAS. Chief Secretary, Madhya Pradesh
  11. Rakesh Garg, IAS (UP) Secretary, Minorities Commission, GOI
  12. Thubdan Gomphel Negi, IAS (HP) State Election Commissioner
  13. T.P. Seetharam, IFS, Ambassador of India to the UAE

14.Upendra Tripathi, IAS (KN) Secretary, Ministry of Renewable Energy, GOI

15.Smita Chugh, IAS (JH), Member Secretary, Tariff Commission, DIPP, GOI

16. Sujata Mehta, IFS, Secretary (West), Ministry of External Affairs, GOI

17. Shanker Aggarwal, IAS (UP) Secretary, Ministry of Labour and Employment, GOI

18. Ashok Lavasa, IAS (HY) Finance Secretary, Govt. of India

19. Rajiva Misra, IFS, Ambassador of India to Austria

20. Aradhana Johri, IAS (UP) Chairperson, NACWC

21.Ashok Shekhar, IAS (RJ) Addl. Chief Secretary, Rajasthan

22. Amitabh Kant, IAS Retd, (KL), CEO Niti Ayog

23. Shanti Jain IPS Retd. (UT), Member, Police Complaints Authority, Delh

24. K.P. Raghuvanshi, IPS Retd. (MH) Advisor Security, RBI

25. Ajit Kumar, IAS Retd. (BH) Vice Chancellor, NIFTEM

26. Sanjay Panda, IAS Retd. (TR) Chairman, Executive Committee for Skill Development, Tripura

  • DP Singh IAS Retd. (UP)
  • Sunil Arora IAS Retd. (RJ)
  • Navneet Wasan IPS Retd, (AP)
  • Vivek Harinarain, IAS Retd. (TN)
  • T.S. Appa Rao, IAS Retd. (AP)
  • Malini Thadani, IRS Retd.
  • Rajesh Kishore, IAS Retd. (GJ)
  • Maheshwar Sahu, IAS Retd. (GJ)
  • C.V.S.K Sarma, IAS Retd. (AP)
  • K.K. Maheshwari, IPS Retd.
  • PK Patnaik IAS Retd. (BH)
  • P.C. Sharma IAS Retd. (UTT)
  • S. Srinivasan, IAS Retd. (KN)
  • V. Ramani, IAS Retd. (MH)
  • Ambassador Radha Ranjan Dash, IFS Retd.
  • Sharad Bhansali, IRS Retd.
  • Shishir Priyadarshi, IAS Retd. (UP)
  • Atul Gupta, IAS Retd. (RJ)
  • Samir Mathur, IAS Retd. (HY)
  • Rajendra Kumar, IPS Retd, (AM)
  • N.P. Singh, IPS Retd. (TN)
  1. P.S. Kathiresan, IAS Retd (TN)
  2. Raghu Nadadur, IAS Retd. (KN)
  • Sunit Kumar, IPS Retd. (BH)
  • Ashwini Kumar, IPS Retd.
  • Udayan Mukherji, IPS Retd.
  • S.M. Jaamdar, IAS Retd.

54.Vijay Laxmi Joshi IAS Retd (GJ)

55.Kameshwari Subramanian IRS, Retd

56.T. Balakrishnan, IAS Retd. (KL)

57.Shri Krishen, IAS Retd. (UP)

58.Jagannath Chamber, IAS Retd. (UP)

  1. P.K. Mohanty IAS Retd. (KL)

60.Ambassador R. Swaminathan, IFS Retd.

61.Surjit Kumar, IAS Retd. (TN)

62.Amita Misra, IAAS Retd.

63.Nandita Bakshi, IRS Retd.

64.Neeraj Jain, IAS (MT)

65.Neera Saggi, IAS (WB)

66.Harsh Mander Singh, IAS (MP)

67.Sanjeev S Ahluwalia IAS Retd. (UP)

_____________________________________________

 

 

 

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