governance, political economy, institutional development and economic regulation

Posts tagged ‘UK’

A Foreigner in Delhi


Foreigners aiming to live in Delhi must first get acquainted with its culture. It is they who need to adapt. No one, not the Mughals, the Brits, the entrepreneurial Punjabi refugees from Pakistan, the rich but rude, Haryanvi landowners, the clever South Indian Brahmins, desperate Bangladeshi refugees, the skilled Bihari, Eastern UP and Oriya migrants, the Christian tribals from East India nor the educated migrants from the North East, have managed to bend the robust spirit of Delhi, characterized by the five Cs: (i) Contempt for the law and rules: “sab chalta hai”. “Dilliwallahs” make the rules. (ii) Car; the bigger and higher the better, preferably black or white, with multi-coloured beacons, flags and a sign board on the front bumper (iii) Cut: variously, a cash payout from a deal involving public funds; short-circuiting a queue by using status; changing lanes frequently on a road, to get ahead of others. (iv) Cutlet: a westernized and tasteless kebab or a foolish friend and (v)  Carat: which is self-explanatory as jewelry, opulent clothes or a more generalized measure of quality.

The colonial Brits were adept at mastering this game. Many, not surprisingly given their choices, went “native” and integrated. Living examples are the journalist, Mark Tully; actor, Barry John and wildlifer, Belinda Wright.

Of course, the most recent examples are David Cameron and his wife, participating enthusiastically in Hindu rituals during Deepawali (clearly with an eye to the huge and rich Indian community in the UK) and the less strategic, but more genuine and endearing, “Indian”, Prince Charles, worshipping the Ganga in Varanasi. It is a measure of their maturity, that no one in the UK objects, to their leaders participating in the “foreign” rituals, of a minority community. The Americans are no different. President Nixon famously complained that every Ambassador he sent to Delhi became more Indian than American.

Modi must learn from the Brits. If he is to live in Delhi, he has to publicly accept the glorious Mughal and Muslim part of Delhi’s composite culture. It is a pity that Modi is vegetarian otherwise good sense would have got to him via his stomach.

The kebabs, korma and biryani, handed down from the Mughals, are mouth-watering. But he could feast on the succulent Shahi Tukda and reflect, on whether it is such a bad idea, to don a skull cap after all.

No one can argue that Modi is wrong. Of course, Indian Muslims have willingly been used as political pawns and “secularism” converted into a political tactic. Just as clearly, Hindu fundamentalism is misplaced in India. The BJP won the battle in 1992, but erred deeply in demolishing the Babri Masjid with the Congress looking on from Delhi. The Congress erred in supporting and feeding the fundamentalist Bhindranwale into becoming a cult figure for the Sikhs. It subsequently tarnished its image further, by having to destroy the Golden Temple, to get rid of him. Give politicians of any hue a cleavage and they shall play with it. No pun intended.

Hindus were massacred by Sikh terrorists in Punjab (1980s), Muslim terrorists in Maharashtra (2008) and got killed in the post Babri Masjid riots in Mumbai (1993). They have put the past behind them. Sikhs were massacred by Hindus, the Police and the Army (1984) but they have put that behind them. Christians have been sporadically killed in Odisha but they have not given up on the idea of India. Muslims have been massacred in Uttar Pradesh (1980s and 2013), Mumbai (1993) and Gujarat (2002). They, similarly, need to put this behind them.

Clearly the Hindu-Muslim religious tension is enhanced by the memories, albeit fading now, of the horrors of partition (1947). The continuing, intentional, overt support by Pakistan to Muslim fundamentalism in India does not help. Nor does the international, institutionalization of Islam in politics, evidenced by the rise of Islamist parties in the newly democratic countries of North Africa, Turkey, Iran, Iraq, the Middle East, Pakistan and Bangladesh.

Democratization inevitably throws up what people actually believe in. If citizens are deeply religious, democracy is unlikely to lead to religious neutrality. In India we know that religion is entwined into culture and life and cannot be separated from State action, in the manner it is done in the West.

But we also know that 15% (or more) of our population is of Muslims who are poorly led since the traditional elite migrated long ago to Pakistan and other countries. Indian Muslims are defensive, as only a minority can be and are gradually being pushed into a tight corner by all parties, to become the obscurantist, backward looking political pawns they are made out to be today. A case of life imitating fiction.

Modi is against appeasement of anyone just for votes and who can argue against that stand in distinguishing him from the others. However, he needs a Bill Clinton moment when he comes out openly and pulls the average Muslim into the warm embrace of the national mainstream.

He can do this by rising above Advani’s brand of fundamentalist Hinduism. He can also do this by consciously playing to the development needs of the minorities and the marginalized: Muslims, Christians, Sikhs, Buddhist, Jains, the Scheduled Castes and the Scheduled Tribes.  

Here are three suggestions:

First, be the caring elder you claimed to be in Patna. For the marginalized, the biggest concern is security of life and property. Set up an all India 24×7 call-in number and website which would counsel them if the local police are not taking sufficient or appropriate interest in their case and monitor the most outrageous cases of neglect. Law and order is a State subject, but it is within the Central governments powers to monitor and ensure that basic human rights are implemented by state governments.

Second, be even handed. Extend the scheme of reservations (positive discrimination) to the marginalized, who are currently excluded (Muslims, Sikhs, Buddhists and Jains) but with an additional poverty criterion. With a downsizing government and growing private sector this is a sop but it does establish equity as the corner stone of state action.

Third, make democracy truly representative and kill identity politics by killing the potential for fracturing the vote. This is the most important reform. Change the existing electoral system under which MPs and MLAs get elected just by polling the largest number of votes, which is sometimes not more than 20 to 25% of the polled vote. Introduce a system of runoffs so that the elected candidate represents at least more than 50% of the polled vote, including the NOTA votes. This will ensure that the voice of minorities is not ignored.

Skull caps and Astrakhans are just a symbol. Donning one will not put off Modi’s supporters. The Gujarati voters cherish him, not for the Gods he worships, but for the development he delivers. 

Indian Blood is Expensive



Indian diplomacy was at its worst last week. It conducted the PMs visit to the US as if he was attending a seminar on economics, in Neemrana. If India is a superpower (perennially waiting to happen), it came across, on the one hand, as a country sapped of all energy and squabbling about petty matters whilst on the other, punching way above its weight (as usual), by seeking to “inform” international debate on marco-economics, political strategy and social development. When will our politicians learn to control their babus egos? International agendas should be set by politicos to project a short, simple and credible message, not waffle on about everything under the Sun.  

Iran, in sharp contrast, showed real leadership and stole the thunder. The freshness of Iran’s approach to international rapprochement and the staleness of India’s squabbling with Pakistan couldn’t have been starker. The Pakistani perception of India and its leaders, aired on Pakistani television as bumbling compromisers, unable to live up to meaningful actions was true, but humiliating.

India used to be a Banyan tree spreading its roots. Today it has become a Baobab tree. Massive from the outside. Hollow from within. This is despite having the best technical talent and intellect in the world. Indians leave India to grow, get respect abroad (like Raghuran Rajan) and only then have the choice to return home to be recognized. The Indian private sector has similar constraints. Indians invest 1 % of GDP abroad (the real figure is higher but the IMF and the GOI do not share with us their assessment of investments abroad using havala) because of the ease in doing business, even in nearby Bangladesh, Myanmar and Srilanka.

Modi spoke on Sunday, from the ramparts of Rohini in Delhi, of “small” nations leaving India behind. It seems he was referring to East Asia, which overtook India in the late 1970s. He could as well have referred to our neighbours in South Asia and Myanmar, who have more recent successes. After Bangladesh, India is the poorest country in this region (World Bank definition of people with income below $2 per day). Srilanka, Nepal and Pakistan all do better than us. Both Srilanka and Bangladesh kept economic growth above 6% in the period 2009-2012 (World Bank Development Data). Even Nepal, managed to keep it above 5%, astoundingly despite (or perhaps because of) an undefined political architecture or credible government. In Pakistan, growth trended upwards from 1.6% in 2008 to 4.2% in 2012. Indian growth meanwhile declined to 3.2% in 2012. The manner in which Srilanka, Bangladesh and Myanmar have shaken off their erstwhile, crabbish lethargy of looking inwards is thrilling for business. We can learn from them.

External and internal conflict is a major growth retardant. The lengthy literature on the negative impact of conflict and violence on social capital and community well-being highlights the importance we need to give to the Rule of Law and Security. Sheikh Hasina in Bangladesh has met the extremist challenge upfront. Rajapaksa similarly tamed the Tigers in Srilanka. India’s inability to take strategic and bold steps to root out terrorism is attributed to our being a democracy and hence a soft State.  Nothing could be further from the truth.

If you are poor and marginalized, the Indian state would appear extremely hard and uncaring for your rights. Over 700 million people fall in this category. We are a country still enthralled with inherited social and ritual, class status. In this respect we are very similar to the UK and differ from our true team mate, the US. However, the US acts only in national interest. This is their ethos. You make it or break on your own. If we want to be taken seriously by the US (and the world) we have to first deal with what ails us within.

It is wrong to rush to the US to shake a few limp hands, limply. It is tragic to have leaders who represent no one, or to have those who drive from the back seat. It is unwise to degrade babudom into a quivering jelly of indecision even though we all know that both growth and social inclusion are based on selective but firm and effective state intervention. It is a crime to waste our intellectual and entrepreneurial talent overseas and be poorly served at home. It is unconscionable to spill Indian blood so casually but continue shaking hands with a Pakistani, puppet, Prime Minister. Yes, the nations of the world will applaud this conciliatory, rational approach. But what they respect, is America’s single minded determination to “hunt and gun down” the perpetrators of violence which spilt American blood in America.  Even tiny UK attacked Argentina (admittedly better known for its beef than its military prowess) in a display of the essence of sovereignty; the monopoly of the State over violence within its territory. The world fears China’s single minded, uncompromising pursuit of national interest. If we want to play with the big boys we have to emulate their tactics.

Any poor Indian looking to buy blood for an operation faces prohibitive prices and often scarcity. Why is the blood of our babus in uniform, so cheap then? Let’s value it better.  



Importing energy insecurity

Shortages make people do crazy things. In the 1970’s a Bajaj scooter was a prized posession because it was most easily available against payment in US$, as were denim jeans, which were smuggled in or sold by the firangi “flower children” flooding India for hash and nirvana. In the 1990’s, the humble Maruti 800 beame a “must have” since the only other options were the gas guzzlers; Ambassador and Premier Padmani. In the 2010s, gold is the the “go to” asset, as the INR crumpled.

Countries are no different. The neglect of long term, efficient, development of India’s domestic energy sources (coal, hydro, solar, wind and biomass) have made economic growth artifically dependent on petro products (gas and oil), as the fast and easy option to add electric power capacity. 30% of petro consumption today is for this purpose. Stagnating coal production, increasing coal imports, further bolster petroleum as the “go to option” for power generation. Highly efficient generation technology (developed for gas surplus countries like UK, US and now Africa) adds to the “green” character of gas based generation versus coal. Constrained by domestic supply side issues and seduced by external incentives (climate change and the engineer’s incentive to use the “best” technology) to switch to petro and gas, India fell headlong into the “shortage syndrome”- best recognised by a panic stocking up of goods….in this case gas based power plants (their installed capacity exploded since 2000), diesel fueled generators, diesel powered trains and diesel powered ground water pumps as short term answers since 2000 to the low availability of electricity.

The Mahatma’s concept of “Self Sufficiency” ceded defeat since the 1980s to the dominant, liberal, concept of an “open” economy via international movements in trade and capital (though not people). However, within this mantra “pricing power” has to be contended with by “small” buyers like India. We should learn from the US ( a big buyer) where the rapid expansion of domestic shale gas production was doggedly pursued and has decreased reliance on gas imports, leading to a reduction in international gas price. Even a “big buyer” like the US does not like being beholden to imported energy.

We are too small to move world petro/gas prices by reducing our energy import demand. However, energy security concerns should induce us to tax petro and gas consumption heavily to limit demand. We don’t do this today. The eternal scare has been the fall out of retail energy price induced inflation, but this is really a timing issue. The time to adjust energy prices upwards is when inflation is low or when energy prices dip. Today baby steps are being taken in this direction. What we need is to stride forward.

Our energy strategy is short sighted. (1) It does not limit the use of gas purely for industrial, road public transport in metros and cooking fuel use, as it should (2) It does not cap the use of petro products for power generation to existing generation capacity (3) It does not aggressively pursue hydro power generation where we have exploited only 40% of our potential. (4) It postpones rapid coal mining reform, principally due to political economy constraints. The only bright spot is the growth in renewable generation and market friendly domestic energy trade practices.

A very high Current Account Deficit (shortage of US$ to pay for imports) re-emerged as a major fiscal destabaliser in 2013, after more than a decade of stability in the external account. This is a sharp reminder, that external account stability (and our energy security) is hostage to energy imports. We import a very high proprtion (75%) of the petro and gas we consume. These constitute 40% of our import bill. India’s export performance (and hence its capacity to pay for imports) has been good. Our share of world merchandise exports increased from 0.4% in 1990 to 1.7% in 2010 (WTO 2013). Export of commercial services did even better with our world share increasing from 0.8% in 1980 to 3.3% in 2011. However, none of these export achievements have been enough to overcome the insecurity of having to import energy security in US$. Annual Petro imports (US$110 billion) are a high 50% of our FEx reserves (US$ 220 billion). China imports only 50% of the petro products it consumes and the prospect of this increasing to 70%  by 2020 (IEA) has them worried. This is despite the fact that their annual energy imports amount to only 20% of their FEx reserves. We cannot continue to be hostage to energy imports.

TERI Energy Map 2030, recommends the following steps to reduce dependence on petroleum imports: (1) Electrify rail and save diesel.   Today less than 30% of the rail track is electrified. (2) Switch passenger and freight transport to rail and save diesel by avoiding dependence on road transport. Today only 30% of the goods traffic uses rail and the share of road transport is expected to grow from 70% today to 85%. This trend needs to be reversed. (3) Increase domestic coal production which is one of the three dominant eneregy sources (hydro and solar being the other two) in India (4) Increase hydro based generation, whose share has reduced from 40% in 1980 to 12% in 2012, due to ineffective planning strategies and a defeatist approach to the genuine concerns of citizens with potential environmental fall outs. (5) Price energy competitivey to remove distortions in consumer demand across products (please we don’t need diesel powered motorcycles) and incentivise energy conservation.

Like our defence policy and our diplomacy, our energy policy is too status quoist and backward looking, to serve us well. We are not planning for a secure energy future.

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