governance, political economy, institutional development and economic regulation

Posts tagged ‘Australia’

Stop being a bully State


Does the proposed national “beef ban” and the rabid intolerance for “beef-eaters” illustrate a new and disturbing trend in Indian politics? Are we squandering away our “secularism”?

India has been a “secular” state in practice all along. All the bells and whistles to ensure equal rights for all citizens, irrespective of religion, have existed in the Indian Constitution. But via the infamous Constitution (Forty-second amendment) Act, 1976, the term “secular” was inserted into the Preamble somewhat superfluously.

This attempt to put a “face” to the “fact”, should have been the first signal that our commitment to treating all Indians as one, was doomed to be only skin deep. Thereafter, it has been open season for most political parties to play strategically with the sentiments of both, the majority Hindus and minorities — Muslims being the largest — for periodic political benefit.

inter faith

photo credit:

Religion and community feeling matters

At an individual level, Indians from all faiths accept the basic proposition that culture and religion, which are closely interwoven, are personally important. They also, generally, accept that the individual has to bow down to community norms. This acceptance of religious and community dominance is not without legal precedent.

Our Constitution via Article 48A of the Directive Principles of State Policy requires that the state take steps to “prohibit the slaughter of cows”. Admittedly, the Directive Principles are not justiciable in a court of law. They are more in the nature of guidance for future action. But, consider that cow protection is clubbed with protecting worker rights; the educational rights of the scheduled castes and scheduled tribes; improving nutrition levels, protecting the environment and promotion of international peace and security!

The Constitution has been amended one hundred times till now. But the primacy for cow protection in our constitutional vision, as enshrined in the Directive Principles, still stands.


photo credit:

Democracy without development remains backward looking

What this illustrates, is that democracy is a blunt instrument for social inclusion. The incentive to pander to majority votes is too intense. Second, things become worse when the political architecture assumes, like ours does, that all religions have similar social and economic demographics and, hence, proportional representation is not needed for minorities to protect their voting power. Ironically, this is exactly what we are urging Nepal not to do under their new Constitution and to instead protect the voting power of the “minority”, coincidentally Indian-origin, Madhesis and Tharus, who live in the Terai adjoining Uttar Pradesh and Bihar.

The romantic hope of the “Macaulay generation” in 1947 was that as India became richer, it would resemble the West, where churches are empty but the bars are full. India is richer today. But religion and tradition remain deeply embedded. We are unlikely to lose our religious identities any time soon.

Decentralisation: the still born option for enhancing inclusion

Another route to manage a heterogeneous society, like ours, could be to decentralise deeply. This was tentatively envisaged under the Constitution (73rd Amendment) Act and Constitution (74th Amendment) Act, 1992. These amendments sought to transfer the management of local affairs to village panchayats and urban municipalities. But the attempt was stillborn. We remain a fairly centralised polity. State governments get seduced to toe the “Imperial line”, dished out from Delhi along with Central funds, rather than go their own way, which is so much more effort intensive.

Our recent experience with the reorganisation of state governments shows that decentralisation can take the steam out of corrosive identity politics. The creation of five new states out of Assam in the 1960s and ’70s is a good example. The proliferation of state governments in India, since Independence (from 16 to 29) lends further credence to this strategy for dampening identity politics.

To cater to our cultural and religious mosaic, India needs either many more homogenous states or more powers delegated to local governments, particularly large cities. Consider that if Mumbai was a city-state, it was unlikely to have opted for a “beef ban”. But as part of the state of Maharashtra, it has no choice.

Isn’t it time to come clean? Our secularism is limited to being a benign, quasi-Hindu state, where minority religious rights are constitutionally protected. This is very similar to enlightened Muslim-majority states like Jordan or Egypt both of which have significant Christian populations.

Secularism is not a State without religion

Our brand of secularism is too passive for anything but harmful politicking. It is time to make it proactive and more effective. Here are three suggestions.

First, minority rights must be explicitly recognised, but subordinated to the common law rights of workers, children and the differently-abled. These, and the principle of gender parity, should be “core values” cutting across all religious rights.

Second, if we are to ban beef, despite the significant adverse economic impact on those who trade in it, how about being even-handed and also banning pork — meat considered impure in Islam? This removes, at one stroke, the perceived discrimination against Muslims and Christians, both of whom eat beef. After all, India has more Muslims that any other Islamic country, except Indonesia; enough Christians to be notionally the 22nd most populous Christian country in the world — just ahead of Australia — and the second largest in Asia after the Philippines.

In any case there are sound environmental and health grounds for banning both beef and pork. We can live, quite happily, on goat meat, fish and seafood. Breeding pigs is a flourishing micro-business today for Hindu dalits, but there is no gain without some pain.

Third, our Constitution is explicit about helping SCs and STs, all of whom are assumed to be the poor and underprivileged, within the broad umbrella of Hinduism. Isn’t it fair then to also extend specific, targeted facilities to poor Muslims, Christians, Sikhs, Buddhists and Jains who are as helpless as the poor Hindus? Selective benefits for “underprivileged” Hindus look awfully like pandering to the majority community.

A benign and forward-looking ruler must be even-handed. That is raj dharma. Religious appeasement must be uniform not selective. This is difficult since at the root of appeasement is arbitrariness.

But there is a fourth option, if the first three are not practical. Stop being a bully state. We have done very well thus far as a “soft” state, wary of displeasing anyone — except perhaps our neighbours.

Becoming a bully state is the worst option, especially because we have the institutions and the skills to become an inclusive, rational, developmental state. Perception is everything in today’s social media-powered world. Let’s not squander our common future for petty temporal gain.

“Insaaf ki ghanti” is ringing. It must be heard.


Adapted from the authors article in the Asian Age October 13, 2015

Climate “warriors” head for the December 2015 Paris joust

Paris in December is not quite what it is in springtime. But who cares if someone else is footing the bill! Paris is the venue of the next Conference of Parties (COP), from November 30 to December 11. An annual jamboree that has been trying, since 1992, to limit carbon emissions and save the planet from what scientists predict will be the drastic impact of global warming and associated climate change. They have not succeeded thus far in taming emissions.

The plain truth on climate change

How much carbon space is left before disaster strikes is somewhat iffy and mired in science, negotiating stances and the “precautionary principle” which advocates that if danger lurks it is best to run rather than hang around assessing the extent to which you personally are at risk. Except that there is no place to run to.

Who’s to blame?

The problem is that whilst Americans and others in the rich countries are reducing emissions slowly, China, India and the rest of the developing world are eager to do exactly what the rich did earlier — use energy to grow their economies. This is fair, just and inevitable.

Can climate change be stopped?

The only way this can stop is if money is spent to junk the existing technology for producing and using energy and less carbon intensive and more efficient options are developed.

europe energy

photo credit:

But no one has a commercial incentive to do so. Most technology is developed in the rich world, which uses the most energy per capita and is the most heavily invested in traditional inefficient, carbon intensive energy chains.

They — Australia, Russia and the US are good examples — have preferred to milk their past investments in fossil fuel-based technologies rather than switch over rapidly to clean energy technology even though they have been talking about the problem in annual COP meetings since 1992. Thus, 20 of the 100 years available since 1995, to act, have been wasted.

To be fair, the northern European economies, including France, have been more conscientious than the rest of the rich and have reduced carbon emissions significantly by bearing the additional cost of doing so. Singapore is a stellar Asian example. It reduced per capita emissions by 66 per cent of its 1990 level.

But the rest, particularly the poorer, developing countries, have no incentive to divert their meagre fiscal resources to clean energy other than efficiency and local environmental benefits. But with so many competing priorities: stopping mothers and infants from dying due to poor health care; educating the young; creating basic infrastructure for trade and industry, just keeping energy — the life blood of a modern economy — flowing is tough.

India energy

photo credit:

Existing agreements are insipid and ineffective

The Kyoto Protocol 1997, the framework guiding the interminable Conference of Parties meetings, lacks teeth. It fixed emission targets for rich countries till 2012 which were weak and inadequate because nothing more stringent was acceptable to the rich — a 6 per cent reduction over 1990 levels. But countries can opt out of the agreement. US, Russia and Canada did just that, making COP even more toothless and bureaucratic.

It’s now 2015 and the world has changed. Extremely wealthy people are to be found everywhere, not just in the earlier “rich” countries. Ruling political, industrial and commercial elites in developing countries have incomes and consumption levels which rival those in the “developed” countries. Poor countries often have very rich governments, though fiscal resources do not filter down to the poor. Traditional archetypes have transmuted. A billionaire from the Forbes List could be living on your street rather than in far off London or New York.


photo credit: www.

So the continual “fingering” of rich countries as evil carbon emitters is unlikely to resonate. We are all responsible collectively for the mess we have created. To cut through two decades of verbiage and accumulated legal baggage two things must change.

Two options for delinking development from carbon

First, Paris must agree a common aspirational emissions target which all countries buy into. The level of the target, whilst important, is less so than all countries agreeing to shoulder the burden according to their capacity.

Second, till now we have depended on charity — aid from the rich world — to fund the technology transformation. This is degrading for the poor who have a right to access the available carbon space and inefficient, because allocation and priorities get warped when dealing with “free” money.

Next steps

Agree a common emission target

The world per capita carbon emissions were 4.2 metric tons (Mt) in 1990. This increased to 5 Mt per capita by 2011. The 1990 level is an excellent aspirational level to target. Most developed countries are above the 8 Mt per capita level whilst most poor countries are below 2 Mt per capita. Halving emissions in the developed world and allowing space for carbon emissions to grow two to three times in the poor countries seems a fair deal and a realistic target till 2030.

Improve the science of climate change

We also need to establish with greater the nature of the relationship between carbon emissions; global warming; extreme climate events and the distributional impact thereof. This is sorely needed to establish a sustainable aggregate emissions level which is neither unnecessarily restrictive nor ineffective in stabilizing climate. The next 15 years on top of the 20 years which have passed should be sufficient to hone the science.

Find the money: tax international capital transactions

A transactions tax to fund climate mitigation and adaptation is best. In depressed economic times, such as the present, a new generalized tax is abhorrent. But if the incidence of tax is tiny per transaction, individuals and entities may not feel its pinch. If it has a massive tax base on which it is levied the tax collection could be huge despite the low incidence. Mumbai lunch places, serving a simple, low priced, thali are as profitable as an expensive niche restaurant. The miniscule profit earned per thali is more than made up by the massive turnover. Of course the tax must be progressive and tax only the rich, who enjoy a disproportionate share in wealth creating growth-the root cause of climate change.

A tax on outbound international capital transfers from all countries meets all these criteria. A 0.01 per cent tax can net close to $300 billion annually. This is three times the volume of the 2015 replenishment of the Green Climate Fund proposed at US$ 100 billion.

The bulk of capital-outflow happens from rich or newly rich countries (like China). The purpose is to mitigate risk and increase returns. To insulate poor countries from the tax it could be levied only on those countries which are non-compliant with the emissions target. Since all developing countries, but very few rich countries, will be compliant, this leaves the poor countries out but snags the non- compliant rich. The tax collected would be transferred to a fund manager and overseen by an inclusive and representative board.

A tax puts a tangible cost to not meeting emission targets and creates a reasonable financial incentive for the rich countries. For example, it would reward Singapore for its stellar performance, whilst penalizing newly rich countries, like China, for exceeding the agreed level of emission.

Shared benefits follow shared responsibilities

China tellingly, has already announced that it would reduce emissions going forward. By 2030 they would be 60 per cent below their 2005 level. This should reassure all developing countries that it is possible to grow in double digits every year and still beat the carbon ceiling in future.

Developing countries should consider adopting the carbon ceiling volunteered by China. By volunteering a carbon ceiling they would be emboldened to press for a tax on outbound capital from non-compliant countries-mostly the rich. Of course ultimately every tax is paid by the final consumer- which will be the capital deficit poor countries. But a differential tax on capital flows does have advantages- it levels the field for domestic capital providers and dampens the fluctuating flow of destabilizing hot money into emerging markets.

Climate “warriors” headed for Paris should consider this proposition as they savour the Crottin De Chavignol served to them. Sometimes, the cobwebs have to be swept aside to see the light. There is much cleaning to be done at Paris.

Adapted from the author’s article in the Asian Age, September 17, 2015

1415 words

PM Modi’s Foreign Policy “Trilema”


(photo credit:

Reposted from Asian Age May 15, 2015

India’s bland foreign policy has traditionally been based on the principle of “please all and offend none”. Things changed under Indira Gandhi when we pivoted to the Soviets and teamed up against the “capitalists” in the West. But post-1990, once the Soviet dream evaporated, we reverted to the “offend none” tactic. The UPA years were a continuation of this approach, which suited the soft-spoken, nominal Prime Minister Manmohan Singh.

Things have changed since then. Prime Minister Narendra Modi is a muscular, energetic man and wants his foreign policy to reflect that energy and purpose. But he faces the classic problem of managing an “impossible trinity” comprising the US, a weakening Russia and an emerging China, which today attracts allegiance from countries cutting across traditional power blocs.

East Asia, other than Vietnam and Australia, feeds off China’s economic growth. China will likely add $6 trillion of new wealth (GDP increase over 2015) in the period 2015-24 and this is a powerful magnet that dulls the pain of negotiating with China over “disputed territory” in the South and East China Sea.

Similarly, Sub-Saharan Africa increasingly depends on Chinese investment “aid” and mineral export to China. Even Russia prefers to diversify its energy exports away from Europe to China, but not to India or Japan.

China is an immediate neighbour of India. A dispute over border demarcation in the west and east lingers. Neither party is really willing to resolve it because it is convenient for both.

For China, the ongoing border dispute presents it with the opportunity to build roads through Pakistan-occupied Kashmir (PoK), linking into Karachi on the Arabian Sea and the still-to-be-built Chinese port of Gwadar in Balochistan province, next to the Iranian border.

For India, the border dispute and China’s dodgy moves to build infrastructure through PoK, with the concurrence of Pakistan, is a package problem. It serves to legitimise a tit-for-tat aggressive development of Arunachal Pradesh, a border territory claimed by China. The area has significant hydro potential estimated at around 30 GW and is of strategic importance to safeguard the north-eastern states of India to its south.

It is fashionable to couch India’s need for China in commercial terms — trade and investment. But China is a much more efficient manufacturer than India and hence a trade deficit ($40 billion doubling to $80 billion in three years) is inevitable, with India as the junior exporting partner. Seeking investment from China is one way of plugging the hole created by the trade deficit. But such investment benefits China as much as India.

India’s growth story, whilst not as impressive as China’s, is sufficiently dramatic in these economically hollow times to garner eyeballs. New value creation (cumulative value addition to GDP over 2014 levels) of $1.4 trillion over a decade from now is not a trifle. A share of just 20 per cent (similar to its share today) in India’s new value creation could feed an annual growth of 0.3 per cent for China.

Growing economic ties with India — soon to be the fourth largest economy in the world (after the US, China and Japan) — enhance China’s “strategic prestige”. This is the “pull” factor. There is also a “push factor” which Indian strategists tend to emphasise — China’s paranoia that India may become part of a US effort to encircle China along with Japan. This “fear factor” is over hyped.

China knows well that the Indian psyche favours reconciliation rather than confrontation. India routinely prefers turning a Nelson’s eye to occasional intransigence but abhors subjugating its sovereignty to any foreign influence — a hangover of our colonial mindset. India could never be a link in an American chain to “contain” China.

China is unconcerned about future competition from the US. Over the next 30 years, the US will morph demographically into being dominated by fast-growing Hispanic and African-American communities; an ageing, minority white population; the inherited disadvantage of high wages and even higher citizen expectations; degrading infrastructure and increasing inequality. What this will mean for the “can do” spirit and mojo which defines the US, is unclear.

Despite such uncertainties, the US remains a long-term natural ally of India. Its plural culture, democratic values, federal institutional arrangements, history of innovation and grounded belief in religion and “family first” gels well with India.

A weakening US and a strengthening India make a perfect combination. The combined GDP of the US, India and Japan will be double of China’s GDP in 2024 and their future value addition — a key “convening” factor for attracting allies — will be higher than that of China.

Finally, the significant Indian community and private sector investment in the US and Europe provide a ready base for developing P2P (people to people) and B2B (business to business) contacts.

All this is reflected in the determined efforts of Mr Modi to establish a trade, investment and communication bridgehead with the US, Japan, Germany and Australia.

The traditional third leg of the impossible trinity has been Russia. But the gains from trade or strategic alignment are scarce. A close strategic friendship with Russia elicits no apprehension in Beijing because Russia is today a “toothless bear” plagued by a natural resource-export dependent economy. Russia, ruled by “grasping” oligarchs, has to reform and shed its macho image. Its best bet is to integrate into Europe, where it belongs. Consequently the “real” third leg of the trinity in future is Europe, with Germany and Russia as possible focal points.

Mr Modi’s strategy to navigate the impossible trinity of US, China and Europe-Russia is clear. Engage with the US, Japan and Germany aggressively and integrate into their value chains. Keep expectations low but exchange lofty targets with the Chinese and the Russians. But, most importantly, keep your powder dry and gear up India’s economy, because our best friend is our own strength and resilience.

Tag Cloud

%d bloggers like this: