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Sunday, 27 November 2016

Officials advised PM Modi to ban 85% of India’s currency (Sunday Guardian)

By MADHAV NALAPAT | NEW DELHI | 27 November, 2016

PM raised several queries, especially on the impact on the common man and only when it was conveyed to him that steps were being taken to minimise hardship did he agree to the measure.’

Prime Minister Narendra Modi is working “more than ten hours a day” just on ensuring that the 8 November money measures announced by him ensure a smooth landing for the economy rather than turbulence. This despite the fact that the plan actually owed its origin to the Reserve Bank of India and the Ministry of Finance, who persuaded the PM to go forward with an idea which will affect (and has affected) over a billion citizens of this country. Prime Minister Modi showed moral courage in coming forward and accepting ownership of the currency swap scheme announced on 8 November, and has since then publicly backed every twist and turn in that policy by the monetary and fiscal authorities. Senior officials say “Prime Minister Modi was presented with the issue in such a way that turning down the scheme was out of the question”. Through the plan, concerned officials wished to “shield those in high positions in banks across the country from the consequences of the crony-oriented lending that they had been doing, specially since 2006”, the year when Narasimha Rao’s liberalisation policy was fully substituted by the UPA into a faux Nehruvian economic policy that combined Fabian socialism with Wall Street ways. “Officials argued that a windfall of up to Rs 550,000 crore would flow to the banks through the enforced extinguishing of currency notes issued by the RBI, and that this would recapitalise several banks that were in effect bankrupt, thereby allowing them to lend again”. The Prime Minister was assured that “steps would be taken to ensure that the common man suffered minimal discomfort” and that “the informal economy would accelerate its absorption into the formal without jobs being affected”. It needs to be mentioned that it is the formal sector that is responsible for not repaying bank loans of a value crossing Rs 750,000 crore, which will be several times the value of tax evasion by the informal sector. NPAs are being written off by banks at an accelerating pace over the past six years, with still more businesses declaring themselves unviable by the month.

The velocity of circulation of currency affects demand for the same, and the effects on the economic system post 8 November, combined with worries of further drastic steps including more demonetisations, is leading to hoarding of currency notes, thereby necessitating a higher volume of currency needing to get pushed into circulation. A senior official estimated that it will take eleven months for currency stocks depleted by the 8 November shock to get replenished. Holding on to low limits on cash made available to depositors will affect consumer spending. An interesting and possibly positive sidelight is that numerous NPAs are quietly being settled with old notes, although banks officially deny that this is taking place. Vehicle loan collections are up, especially former bad loans, as holders of the extinguished currency seek to deploy cash any way they can. However, NBFCs, which are a vehicle for funding small businesses, are facing non-payments of up to 50%, despite efforts by the RBI to boost confidence. And while card sales are up, Cash On Delivery (COD) sales have sharply fallen, and this forms the bulk of such business. There is a 30%-40% drop in restaurant and FMCG sales, with few expecting a quick rebound. The relentless official drive against cash transactions will result in numerous small stores and “kirana” establishments shutting down, as not many would be able to make the transition to fully digital payments. Even “dhabas” will begin shutting down, as many would not be able to afford the 21% sales and Value Added transactions on electronic transactions. A fall in economic growth over an indeterminate period of time will result in lower tax collections, leading to pressure on the Income Tax Department to squeeze as much as possible from taxpayers through use of technicalities. Bribe takers are offering handsome discounts for payments in new currency or in the form of gold and diamonds. The effect of the 8 November currency swap on overall employment is unclear, although jobs are being shed across the country on a daily basis. 

The recession after the 2008 collapse of Lehman Brothers cut India’s growth rate to 6.7% in 2009 as compared with 9.5% the previous year. Each 1% decline of GDP means around Rs 150,000 crore gone. Housing was an important segment of good economic results during 2006-09, but in the absence of lower stamp duties the introduction of the Rs 2,000 note is expected to perpetuate black money in the sector. As for the unorganised sector, while it often does not pay direct taxes, through employment and income, the sector adds to indirect tax collections as well as demand for several of the items produced by the formal sector. A problem is that India’s tax structure is so convoluted and cumbersome that several units will go out of production once they get into the tax net. Although there is much talk about lower tax rates down the road, few are willing to risk investing money in the economy as a consequence of such an expectation. 

Interestingly, key proponents of “swadeshi” are in favour of switching from cash to plastic in a country where plastic is largely in the hands of foreign players, mostly from the United States, or in some cases, China. Ultimately, it is investors in these two countries who will be smiling all the way to the bank as millions in India move from cash to plastic to make payments. Which is why some argue that despite the contrary view of the RBI and the Ministry of Finance (both of whom are in thrall to the “Cashless Country” concept), cash needs to be accepted as a primary medium of exchange for at least a generation more, even while genuinely Indian owned companies get empowered to compete with the foreign owned giants that now dominate the India market for non-cash transactions. 

Confidence in the value and stability of a currency is core to the monetary health of a country, hence the refusal of US authorities to ever make any denomination of the US dollar inconvertible. This despite the dollar being the most counterfeited currency on the globe. Repeated devaluations and demonetisations of the Indian rupee have resulted in a high percentage of citizens of India switching to gold and other assets in place of the rupee as a store of value. While unaccounted money does get hoarded in India, especially by politicians, officials and businesspersons, much of this gets converted into assets such as land or gets converted into foreign currency and wired abroad through secretive but well established hawala channels operating through Nepal, Singapore, Dubai and Mauritius. However, officials moving in step with Prime Minister Narendra Modi’s plan for transformation of the Indian economy by the close of his term in office say that the Prime Minister “accepted the recommendation of his Principal Secretary, Revenue Secretary and RBI Governor to immediately disallow circulation of the now defunct Rs 500 and Rs 1,000 notes”. “The Prime Minister raised several queries, especially on the impact on the common man, and only when it was conveyed to him that steps were being taken to minimise hardship did he agree to the measure”, a long-term civil servant revealed, adding that “the subsequent silence of some top officials is inexplicable” in view of the fact that they were the prime movers of the 8 November demonetisation. The source added that “the effects on the poor have been uppermost in the PM’s mind and it is to this point that he kept returning time and time again”. 

The snafu relating to the size of the new currency notes was placed at the door of the RBI by a senior official, who pointed out that “everything from the design to the printing of the Rs 2,000 notes came from Mint Road (in Mumbai)”. The US dollar is the same size irrespective of denomination, while ATMs in that country avoid dispensing even $50 notes, focusing only on $20 notes so as to minimise hoarding of dollars. “If the RBI is sincere about working to implement PM Modi’s desire for an end to black money, it should print many more Rs 100 notes. Instead, the focus of the Central bank over the past six weeks has been the Rs 2,000 note”, which is very susceptible to being sucked into the “black” i.e. undeclared economy. “The economy needs lower denomination notes, of which there is a deadly shortage since months because RBI has for the past eight years catered mostly to the well heeled by concentrating on the production of Rs 500 and Rs 1,000 notes, rather than the more humble Rs 100 or Rs 20 and 10 that are essential in those sectors of the informal economy which create the most jobs”, an official now based in Mumbai pointed out. He added that “Prime Minister Modi has been careful not to interfere with the decisions of the RBI”. However, “perhaps the PM needs to be careful about some bureaucrats who painted a hyper-optimistic picture about the immediate fallout of the currency scheme” announced by the Prime Minister on 8 November 2016, advised a senior official who is in sync with the Prime Minister’s innovative views on transformation of governance. 

“The RBI is concentrating on Rs 2,000 notes that are the easiest to store and to transport in place of plastic because it wants to show that a higher value of currency has been printed”, a source claimed, adding that “the Central bank seems to care very little about small retailers and the common man, both of whom are facing a shortage of small denomination currency notes owing to the lack of an adequate contingency plan by the bank”. The official added that “only PM Modi has the authority to request (RBI Governor) Urjit Patel to ensure that the painful shortage of small denomination notes end through adequate supplies by the RBI”. “The shortage of currency combined with yet another demonetisation has led to a steep fall in the confidence of the people in the Indian rupee. They are going in for US dollars instead”, claimed a senior official, warning that “within a few more weeks, several hundred thousand small enterprises will close down unless the RBI gets its act together”. 

Officers in sync with Prime Minister Modi’s plans expect that during the next week itself, he will ensure that policies get tweaked in a manner than is people-friendly and not babu-friendly, and that “by 30 December, the economy will be running far more smoothly than it ever has”. The citizens of India are waiting eagerly for such an outcome to come about.

Trump wisely spares Hillary (Pakistan Observer)


November 27, 2016 | 
Geopolitical notes from India | M D Nalapat


PRESIDENT-elect of the United States Donald John Trump has indicated that he would not be appointing a Special Prosecutor to seek the incarceration of Hillary Rodham Clinton, his Democratic Party challenger in the Presidential sweepstakes. This decision will annoy several of his most loyal supporters, most of whom were energized by the prospect of the former First Lady being sent to jail. However, from a pragmatic point of view, Donald Trump has taken the correct call. A prosecutorial investigation and possible indictment of Hillary Clinton would take at least ten months, and is likely to have dominated the news cycle for much of that period.

The resulting hubbub would be a severe distraction from President Trump's own agenda, thereby diluting the possibility of shepherding the basket of policies through the legislature. In particular, because the investigation would develop into a partisan circus which would further poison relations between the White House and the Democratic Party. Although the charges against the former Secretary of State and the Clinton Foundation are serious, the fact remains that donations to the latter were made through cheque and not through envelopes stuffed with cash. Proving a judicially verifiable link between decisions taken by the State Department and foreign donations to the Foundation would be a difficult task. Certainly Foggy Bottom ( as the Department of State is evocatively referred to) pandered to the whims and geopolitical fantasies of states such as Qatar, China and Saudi Arabia.

However, it was usually not an outlier in such policies vis-a-vis the rest of the Obama Administration but part of a pack heading in the same direction. Importantly, almost always other NATO member-states endorsed the same policies, especially in matters relating to the Arab Spring and its aftermath. The Clinton Foundation may have opportunistically sought to cash in on policies already worked out within the bureaucracy, but only in a very few instances was it the initiator of policy, and this often at the level of the individual. Shrewd businessperson that he is, Donald Trump has apparently decided not to continue to invest time and effort on a Clinton prosecution but to direct his attention towards matter of greater concern to the United States as a whole, rather than to the small group of Clinton-phobic individuals who are unhappy at his decision to give Hillary Clinton a pass on the charges made against his defeated challenger.

By doing so, Trump has strengthened his image of pragmatism and created significantly greater distance between himself and a perception of vindictiveness of the kind that led President George W Bush to finish off Saddam Hussein at a crippling cost to the US. For Bush Junior, wrecking both an entire country as well as much of the US economy was an acceptable price to pay for getting rid of an individual who tried to get his beloved Pappy ( George H W Bush) assassinated. What President Trump needs is a cellphone configured to ensure that his tweets flow only to a limited number of intimates, ideally only Melania and Ivanka. Both the incoming First Lady as well as the First Daughter have conducted themselves with style. With her charming accent and expressed dislike of bad behaviour, Melania Trump boosted the voting tally for her husband on November 8.

Unlike Jackie Kennedy, who loved the spotlight while professing to hate the attention, the spouse of a very strong-willed personality clearly has qualities that have enabled her to weather what must on occasion be a stormy life with an individual who is both passionately admired and hated, sometimes by the same audience. Hopefully the new First Lady will use the moral power that will soon be hers to push for policies that assist the poor, especially children. Although the biggest economy in the world, the US is far less caring of its needy citizens than any of its major European partners, or indeed countries such as Kuwait and Taiwan. Despite Obamacare, the Big Pharma lobby in the US has combined with the Doctors Mafia to ensure the most expensive healthcare system in the world, and which despite the money lavished on it, is uncaring of the poor.

Correctly, President-elect Trump has gone public about his intention to preserve some of the features of the Affordable Health Act while tweaking or sometimes removing other sections. This sets him apart from Ted Cruz, who is a fundamentalist in his political beliefs and therefore regards compromise as a weakness. At the same time, Trump refuses to hide his views, even when they may lose him votes. An example is the way he distanced himself from the views of Mike Pence on Russia. The next Vice-President of the US embraces the Beltway at least in his foreign policy outlook, and joined in the baying against Moscow. For this, he was publicly contradicted by Trump, who insisted that he would seek a genuine reset in relations with Moscow rather than follow the Paris-London line of hostility to Vladimir Putin. This sets him apart from Senator Marco Rubio, who follows the Clinton playbook of adopting positions that are popular with the audiences which are being wooed.

Donald Trump has the confidence to remain himself, which is why the surprise within the Washington Beltway at his choices is inexplicable save for the fact that the denizens of this privileged state of mind have dismissed him as an intellectual lightweight without a complete analysis of the man. It is clear that incoming White House Chief of Staff Reince Priebus is focussing mainly on "unifying" the party. Such a stand neglects the reality that voters opted for change and not continuity. From such a viewpoint, it would be senseless to appoint Mitt Romney as Secretary of State, for the man hates Trump. Far better to send him to the prestigious post of Ambassador to the UK. Choosing an envoy of such eminence would ensure that the globe understand that the special relationship between the US and the UK will be continued by a President Trump.

Given that a war on terror is ongoing, the historical parallel of the 1939-45 war against Germany needs to be remembered. Prime Minister Winston Churchill sent Lord Halifax as envoy to Washington in a gesture towards a crucial relationship. In like fashion, sending Romney to London would be a geopolitical gesture of significance, as would asking Representative Tulsi Gabbard to serve as US envoy to India. The former US Marine Corps member has developed significant traction within the ruling establishment in India, and could play a key role in ensuring a full scope alliance between Washington and Delhi during the Trump presidency. Trump's choice of a brilliant neurosurgeon, Ben Carson, as Housing & Urban Development Secretary, is inspired. Dr Carson can be expected to visualize and to implement cutting edge strategies for ensuring that the deterioration in infrastructure in the US be reversed at a reasonable cost.

As for Trump's family, they will be aware of the fact that while the patriarch of the clan has forgiven Hillary Clinton, the Clinton machine may be expected to keep up the pressure on Trump. Indeed, with Paul Ryan ( who has the same distaste for President-elect Trump as Mitt Romney) remaining the Speaker of the House of Representatives in another Reince Priebus-inspired. gesture of reconciliation between the old Republican establishment and new that is getting formed around Trump, there will be more than a few within the House of Representatives looking for an opportunity to impeach Donald Trump and place Mike Pence inside the White House.

Presidential candidates usually avoid such possible power plays by ensuring that their running mates are far less popular and indeed toxic. However, a confident in himself Trump chose the affable Pence, who has friends across the board in the Washington Beltway swamp who would be delighted were he to take over from the individualistic Trump. Given determination and qualities of next President of the US, it is likely that he will overcome the snares and traps placed in his way and emerge as a transformational leader. In his family, Trump has a group of able and loyal individuals not seeking official positions, and they too seem capable of batting away darts already being aimed their way.




Saturday, 26 November 2016

India’s honest look to Modi to cleanse bureaucracy (Sunday Guardian)

By M D Nalapat

Target of PM’s next ‘surgical strike’ should be the crooked among the bureaucracy. 
 
The most meaningful “Majority: Minority” dichotomy in India is between those citizens who are honest and those others who are dishonest, i.e. those who correctly pay the numerous taxes due and those who do not. Despite the reality that continuous additions to the colonial governance codes in India have arbitrarily criminalised swathes of activity that are legal in practically all other democracies, it would be safe to say that the “majority community” in India (i.e. those who are honest) comprise 90% of the population, leaving 10% in the “minority”. Even within that sometimes under-appreciated group, government servants, about 75% are honest and less than a quarter crooked, judging by the many this columnist has come across. Among officials, around 10% occupy posts which have the potential to make a significant difference to the situation facing the public.
It is on this 2.5% of the total of government employees that Prime Minister Narendra Modi needs to most concentrate on. Corrupt officials have an outsize influence on policy. They have the ability to move up the promotion ladder much faster than the honest, who need to spend most of their time trying to make both ends meet till the next payday, rather than wooing their superiors and political heavyweights in the manifold ways that the crooked have access to. Indeed, the uninterrupted flood of repressive laws and regulations that each government unleashes on the population demonstrates the chokehold of the upper echelons of the 2.5% of officials who are dishonest. 
Almost all such regulations are broad and vague enough to be subject to misuse, thereby becoming manna for the dishonest rather than (as pious declarations accompanying such measures invariably aver) balm for the honest. The historically outsize influence of the dishonest in the actual working of the governance system ensures that many honest citizens get penalised under such laws and regulations, usually for technical violations, even while relatively few of the big fish get caught. These latter have the means to reach out to the dishonest minority within the governance system, thereby ensuring their safety. For public consumption, there may be a prime time hullaballoo raised by the very officials who are shielding them. However, proof of official intent vests in practical outcomes. If depredators either escape or get away with a mere wrist slap (such as a small fine), it is reasonable to assume that much more than conversation was exchanged between officials and the wrongdoer. When the political executive is being served a menu of policy options, and the judiciary the chance to review them, these two pillars of the governance system need to factor in the reality of corruption within the system in weighing and discounting recommendations made by officials which may focus not on the public interest but on their own and that of other corrupt individuals.
The Reserve Bank of India has believed since the time of Governor Yaga Reddy that the 1.26 billion people of India should be made to adopt the cashless ways of Sweden, despite the difference in conditions between the life of the median Swede and the median citizen of this country. It is clear from 8 November that RBI Governor Urjit Patel looks askance at those citizens with zero untaxed income who have nevertheless withdrawn substantial amounts of cash from their accounts to use towards patronising the (much-derided by Central bankers ) “informal” economy. The most trumpeted e-gateway in India for making payments is controlled by Jack Ma, who when last sighted was not an Indian citizen. Indeed, foreign rather than domestic interests have a lock on most major internet and mobile telephony entities in India. And “Indian” banks have been silently taken over by foreign entities. US shareholders dominate the big credit card gateways used in India, with Chinese shareholders in the same companies coming a close second and those with Indian citizenship nowhere on the equity horizon. Unless PM Modi manages to endow digital keys to over 600 million citizens within his term, for a considerable time to come it is more socially advantageous to put (taxed) rupees in the hands of the poor and the lower middle classes such as small shopkeepers and crafts-persons, rather than entirely through plastic controlled by multinational interests that are gaining in advantage over their domestic competitors with every passing day because of the rupee falling while interest rates and crippling regulations rise, with some rules making the word “draconian” an extreme understatement. An individual may have kept apart substantial cash (drawn from his or her bank account and shown in tax returns ) not to pay the “black” component of a future real estate purchase, but to make repairs to a temple entering the stage of dilapidation. The grim 1970s-style warnings issued by officials to taxpayers who prefer holding on to and paying with cash are making honest taxpayers, rather than the big crooks, nervous about depositing their clean “old” cash in banks despite the fact that such holdings will become waste paper after 30 December. Prime Minister Modi must protect the honest majority of citizens from crooked officials expert at using technical or imagined violations into darts designed to squeeze payments from honest taxpayers. Modi needs to ensure that the regulations being unveiled day after day on television be designed so as to protect the honest and get used on “bulk carriers” and not only small “fishing boaters” of black cash. A sniper rifle should be used in enforcement that aims at big fish rather than allow bureaucrats to wield blunderbusses spraying multiple innocents even as they incentivise the guilty to increase the bribe offer. 
India’s honest overwhelmingly cast their 2014 votes for Narendra Modi. The target of his next high-octane “surgical strike” should be the crooked among the higher rungs of the bureaucracy. Those who have defiled the noble calling of government through graft and misfeasance should be made to encounter justice rather than peacefully catch a flight together with family to London or Miami for—in more than a few cases—a very long stay. Only an accelerated drive against high-level official corruption may motivate citizens into enduring for months more the pain caused by the incompetence of much of the bureaucracy tasked with implementing the epochal policy unveiled by PM Modi on 8 November 2016.

Sunday, 20 November 2016

PM Modi’s currency swap enters a critical week (Sunday Guardian)

By MADHAV NALAPAT | NEW DELHI | 20 November, 2016

If RBI is correct that currency stocks are ample, its success ratio in reaching these where needed, is low to absent.

Officials in sync with the objectives of Prime Minister Narendra Damodardas Modi claim that there is global appreciation for his “braving personal unpopularity and the risk of low future seat tallies for the BJP” so as to implement a scheme that he has “had in mind since 26 May 2014”, his first day in office. Given his “methodical mindset”, the substantial and uncontrolled role of the informal economy has occupied much of Modi’s time. Not only does the government not control this vast sector, “it does not even have any idea about its extent and activities”. To the Prime Minister, “such an unregulated sector is akin to the ‘Dark Net’, the shadowy world of the deep internet that is resistant to policing”, an official said. The officials say that from Day One, the Prime Minister has been determined to ensure that all transactions in the economy get recorded, “both for revenue purposes as well as to ensure that anti-national elements do not misuse their access in order to create trouble for citizens”. They point to the Jan Dhan Yojna, PAHAL and MUDRA schemes as being “part of a continuum of activities leading up (to the 8 November currency swap)”. The Prime Minister’s vision is to see “every adult citizen of India have a bank account and access the internet in the palm of his hand”, and he has “worked on a plan to ensure both before 2020”. Early on, PM Modi tasked officials with “working out ways to ensure 100% access to banking and conversion of the informal economy into the formal space”, but by May 2016 as he entered the third year of his term, the Prime Minister was “feeling impatient at the slow progress made and decided to quicken the pace by leading from the front”. Two officials, who were in “complete harmony with the Prime Minister’s desire for speed, were Principal Secretary to the Prime Minister, Nripendra Mishra and National Security Advisor Ajit Doval”. According to the officials spoken to, “both were enthusiastic advocates of the currency swap scheme in internal meetings”, albeit for different reasons. From the outside, finance guru S. Gurumurthy played an “important role in selling the idea (of a lightning currency swap) to the top”. The official reiterated that “none of the bankers consulted expressed any apprehensions about the scheme” and that the RBI leadership was “totally in support of the move, as was the Economic Advisor to the Finance Minister and other officials of the Ministry of Finance”.

A characteristic of the Second Generation NDA Government has been that those from the outside with dissenting or out-of-the-box views have been excluded from participation in the policy process. Official advisory bodies have been few and those created have been both truncated and filled with retirees from service who may be expected to faithfully echo the line taken by the government. According to an official, the Prime Minister is under severe pressure of time and hence unable to meet with as many people outside the bureaucracy as was the case when he was Gujarat Chief Minister. Access to PM Modi is much more difficult (and in most cases impossible) than was access to CM Modi. While a flood of suggestions comes in via the internet, “almost all of this gets dealt with at the junior officer level”, and often these “lack the judgement needed to decide which should get referred to higher ups and even the Prime Minister”. Modi has always shown a willingness to accept new ideas and listen to different voices, that is, provided these gain access to him. “While he lasted, P.N. Haksar as Principal Secretary to Indira Gandhi used to ensure that the PM met at least two or three individuals of strong and contrary views each week. The same needs to take place now”, a former high official said, adding that “the way the currency swap is being implemented in practice shows the weaknesses of our inbred bureaucratic system that listens only to echoes of its own voice from the outside and dismisses the rest as inconsequential or motivated.”

The colonial bureaucracy’s focus on a single objective to the detriment of the overall benefit is illustrated in the continued refusal of the authorities to permit the (free from direct taxes) farm sector to use extinguished currency notes for sale and input purchase. The loss of farm output through wastage and for other reasons as a consequence of the severe liquidity shortage the farm sector has been experiencing since 8 November, is far more than any gain consequent to lesser tax evasion. Already sluggish rural consumption is heading for a major dip this financial year, with discretionary spends in both urban and rural areas down as citizens hoard their small denomination notes rather than risk spending them. Mandis are unable to purchase fruits and vegetables from the farmers, who themselves are unable to purchase essential inputs. Given the lower access to banking infrastructure in the rural areas, the severe post 8 November restrictions put in place for monetary transactions (including deposits and withdrawal) will lead to a much slower return to liquidity in rural areas, while the urban areas too are likely to remain stressed. Rural distress has been accentuated by cooperative banks being denied access to cash. Even mobile recharge numbers have sharply fallen. The abundance of cash mentioned by some bank chairpersons and the RBI seems to be in evidence only in their imaginations, leading to a loss of credibility in such institutions. The way the currency swap has been implemented is leading, according to an official, “to a pronounced slowdown in sales of consumer goods, including those usually fast moving”. This will have an impact on revenue collections and increase pressure on the tax authorities to conduct raids and raise assessments in a situation where profits may be negative and income growth low. If the RBI and the more voluble bank chairpersons are correct in asserting often and in public that currency stocks are ample, their success ratio in reaching these where most needed, has been low to absent. Because of fear of continuing cash shortage, the velocity of currency is slowing down as holders store rather than spend their depleted hoards. As for the money coming into the banking system, only the restrictions on access to currency are keeping much of it there. Across the country, millions are experiencing the effects of a slowly liberalising economy suddenly returning to a planned mode. 

That several at the apex of the banking pyramid in this country have very limited knowledge of ground reality seems clear from bank officials’ remarks such as “the line outside branches and ATMs is coming down”. This is not because of lack of demand for currency, but a lack of cash in ATMs and in bank branches. Those where there is some cash to dispense are seeing long queues. As for the rural areas, currency supply has been much lower than in the cities, despite the political importance of the rural vote. In UP, Uttarakhand, Punjab and Gujarat, the way in which the currency swap scheme is being implemented is likely to impact voting behaviour substantially. The transport industry is down with trucks idle, while retail business has fallen across the country. Latest by the close of 50 days beginning 8 November 2016, access to cash needs to get restored to pre-8 November levels for the economy to right itself. Any further delay would result in an unimaginable situation very different from that anticipated by Prime Minister Modi when he signed off on the suggestion from some officials that he approve the shock withdrawal of Rs 500 and Rs 1,000 notes. The “reason for the Rs 2,000 notes was to speed up the volume of money supply as these get printed at the same rate as the Rs 100 or Rs 500 notes”, an official claimed, adding that “the level of safety features is the same as in the older versions”. 

The total currency in circulation on 30 September was Rs 17 lakh crore, of which 500 and 1,000 rupee notes amounted to 15 lakh crore rupees in value. The Rs 100 notes were 12% in value, the Rs 500 notes 46% and the Rs 1,000 notes 40%. A total of 21 billion notes of 500 and 1,000 were in existence. In the four currency printing presses, only 3 billion notes of all denominations can get printed in a month. Of this, the 6 billion Rs 1,000 notes will get cut down to 3 billion Rs 2,000 notes. Printing Rs 100 notes takes the same time as printing a Rs 2,000 note, and there is a looming shortage of these, as demand has spiked since 8 November. Apart from printing, the average time taken for dispensing to consumers is 36 days, according to an official. The math will show the speed at which the currency shortage can get addressed in a meaningful way. About six months is the minimum, which is why those saying that currency supplies are adequate need to explain their remarks.

The coming week will be a crucial period for the bold scheme announced by Prime Minister Modi. Unless the ground situation improves substantially, economic distress will be unmanageable. 

Those whom the Prime Minister has trusted with handling the machinery of government will need to deliver on their promises to him, so that he himself can keep the promise he has made to the people of India, of witnessing a smoothly running and corruption free economy within 50 days of this unprecedented decision. Modi’s bold move will enter the Guinness Book of Records for a single decision affecting the maximum number of people (1. 26 billion) in the shortest possible time (less than four hours). Those who are well-wishers of Prime Minister Modi hope that the team personally chosen and assembled by him will deliver the results expected of a government led by a maestro of the calibre of Narendra Modi. 
http://www.sundayguardianlive.com/news/7402-pm-modi-s-currency-swap-enters-critical-week

Saturday, 19 November 2016

RBI must deliver on PM Modi’s promise (Sunday Guardian)

By M D Nalapat

RBI has been less than effective in ensuring that currency reach the public in time. 

The BJP as a party overexposed Prime Minister Narendra Modi during the Delhi and Bihar Assembly elections and the same error has been made by the Reserve Bank of India (RBI). A currency swap is entirely the responsibility of the RBI, which has enjoyed autonomy from the Ministry of Finance precisely to ensure that the Central bank directs monetary policy, while the Ministry of Finance frames fiscal policies. Even during the tenure of UPA favourite Raghuram Rajan, the Modi government showed utmost respect to the Governor of the RBI, despite the fact that the Chicago School economist was systematically slowing down or killing small, medium and even some large-scale industries by a policy of ultra-high interest rates, not to mention the damage done during his tenure to the service and infrastructure sectors. As the newly appointed RBI Governor Urijit Patel is in the driver’s seat on monetary policy, it follows that the scheme which was announced not by its Governor but through Prime Minster Modi on 8 November was the RBI’s brainchild. Of course, this must have been discussed by Patel with officials such as Secretaries Hasmukh Adhia and Shaktikanta Das as well as Principal Secretary to the Prime Minister, Nripendra Mishra, who has been a champion of the 8 November currency swap scheme from the very beginning of its being discussed. However, at all stages, it would have been the RBI which had the final say on a monetary policy that affects every citizen of India. Given this, the measure ought to have been revealed to the public by RBI Governor Urijit Patel. Passing on such a task to the Prime Minister has unintentionally conveyed a misleading impression about the autonomy that the RBI has under the Modi government.
 
Not only the 8 November announcement, but subsequent mentions of tweaks to the policy have also been handed over by the RBI to the Finance Ministry, with a particular Secretary making such announcements on almost a daily basis, when this task should have been carried out by a Deputy Governor or an Executive Director of the Central bank. Each such announcement of monetary measures that emanates from the Finance Ministry, rather than the RBI, reinforces the incorrect assumption that with Rajan leaving the bank, so has the autonomy of our country’s Central bank. This when PM Modi, in line with international best practices, has ensured autonomy to the RBI. Certainly Governor Patel may be media shy and very modest despite his high attainments. However, his is not a job where the incumbent has the option of retiring behind a curtain of silence for the whole of his or her tenure. After all, the RBI Governor has, by his signature, guaranteed that each currency note will be honoured in full by the institution he now leads. Since 8 November, the RBI (despite repeatedly revealing that it has ample currency stocks) has been less than effective in ensuring that the currency in its possession reach wherever it be needed in a timely manner. As a consequence, the misery of the public is rapidly becoming unbearable. A Prime Minister of the savvy of Narendra Modi would never have taken the political risk involved in endorsing a currency swap involving 85% of the total cash in circulation, without first being assured by the RBI that currency stocks in its possession were sufficient to prevent the severe disruptions now being seen in commerce and in the citizen’s everyday life. Such an assurance of ample supply of cash with the RBI must have been minutely examined at various levels by the Finance Ministry and the Prime Minister’s Office. From all this, it is clear that the Central bank has the means to ensure liquidity in the economy sufficient to prevent a cash shortage, which indeed is among its core functions. The fact that severe cash shortages are taking place even ten days after the swap was first announced, indicates that the Central bank of the country may not be living up to the written assurance of each RBI Governor that each currency note remains exchangeable in like value instantly on presentation. The severe and disruptive restrictions imposed on moneys which can be withdrawn from the accounts of citizens, added to the fact that ATMs across India are empty of cash for much of the day and often week, goes contrary to the RBI Governor’s solemn assurance, and unless Urjit Patel acts with despatch, loss of faith in the word of the RBI Governor may spread to the broader population. That the new notes are as devoid of cutting edge security features as the old, plus the fact that this swap has been more than six months in the pipeline, makes what is being witnessed across the country inexcusable for a Central bank with a tradition going back more than eight decades.

The “Lutyens Zone” is less a geographical construct than it is a state of mind, and its denizens are masters of media spin. Many are already seeking to create distance between the 8 November declaration and themselves by claiming that the new currency was to be rolled out only on 1 January 2017 and that the decision to pre-pone the launch drastically was made by the Prime Minister. In view of the administrative record of Narendra Modi, it is impossible to believe that he would pre-pone such a monumental scheme unless the relevant authorities assured him that they were prepared. Statements coming from the RBI show that cash in hand is not the problem. Rather, it is insufficient speed in ensuring that enough liquidity to maintain high growth and employment flows across the many sectors suddenly drained since 8 November of 85% of their cash. Through faster replenishment of cash in banks, ATMs and other distribution centres and much greater ease in the processes devised for withdrawal of cash, it is imperative that the RBI ensures that the liquidity situation prevailing across the country and its economy return to the pre-announcement level within the 50-day period promised by PM Modi. The RBI taking more time than that for the present cash shortages to disappear would be cruel and indeed criminal.

http://www.sundayguardianlive.com/opinion/7370-rbi-must-deliver-pm-modi-s-promise

Friday, 18 November 2016

NATO is ‘fighting’ Daesh by committee (Pakistan Observer)

November 18, 2016 | Geopolitical notes from India | M D Nalapat

IF the humbling of the European country of Serbia through bombing raids be excluded, NATO has not won a single war since its inception, and has indeed lost every conflict it has entered into, especially since 1999. Of course, perusing books by trans-Atlantic "scholars" or television channels from that and affiliated zones, this fact gets obscured by coverage that is misleading and mendacious. Channels taking their cue from government sources, such as CNN or BBC, lead in giving viewers only what the chancelleries of the countries they are based in want them to see. They have, in effect, become an external publicity cell of the State Department in the US or the Foreign Office in the UK, although the fiction that these countries have a free press is mentioned by them and by their admirers repeatedly when comparing such media to those in the target countries of NATO.

If media in Russia is overwhelmingly on the side of Basher Assad in the Syrian war, to take an example, the media in the US or the UK has been overwhelmingly mobilised in favour of the "moderate fighters" battling Assad, almost all of whom are Wahabi and share that sect's distaste for European civilisation, although for tactical reasons, such an opinion is being kept hidden from view while the flow of assistance from NATO and its regional partners in the Middle East continues. In early 2011, this columnist warned that the fighters challenging Muammar Qaddafi in Libya were Wahabi ultras. This view was based on an analysis of the literature and speeches of some of the leaders of the NATO-backed revolt. Almost entirely, such tracts were filled with bile against Qaddafi but the reasons given for the same were not the absence of democracy in Libya or Qaddafi 's verbal sallies against US and its European allies.

The reasons these "moderate freedom fighters" of Libya gave for their antipathy to Qaddafi was the latter's refusal to convert Libya into a Wahabized State by blocking the education of women and making what they defined as religious law the basis of the jurisprudence of the State, stoning and amputation included. Many of the tracts used violent language to describe not only the regime in Tripoli but the trans-Atlantic partners as well. Clearly, neither the many speeches nor the pamphlets the "moderate freedom fighters" penned were taken seriously by NATO, else it would have been obvious what the future of Libya under the control of Wahabi militia would be. These fighters have defeated NATO by ensuring that the country over which they have near-total control has become an incubator for Daesh and a funnel through which hundreds of thousands seek entry into Europe. After the Sykes-Picot agreement of 1919, the 2011 "Arab Spring" gave NATO the illusion that the alliance could once again establish control over the Arab "street" through its control of social media platforms.

A telephone call to Palo Alto or to Seattle ensures that web filters get redone so as to generate kind of news and (mis)information that NATO regards as helpful to its objectives. There was recently a mock fight between Apple and US authorities about access to a phone belonging to a terrorist. A flood of media reports appeared that claimed that the US corporation was defying even the FBI "in order to protect privacy of owner" of each of handheld phones marketed by that company. Intention behind this imaginary fight was to ensure that buyers of such phones believed that Apple would protect their privacy. The reality is that each transaction on such instruments is open to scrutiny by US authorities, as indeed are transactions on Facebook, Twitter, Google, Hotmail, Yahoo and other platforms based within NATO alliance. Of course, platforms based in China have an even greater transparency to local authorities, as do others based in Russia.

What is noteworthy is that the NATO powers claim that their practices are different, when in reality only their "message spin" is. The Chinese or the Russians do not bother to conceal their access to modern methods of social interface and communications the way NATO does, even while it ensures the exile of an Edward Snowden or a Julian Assange, neither of whom would have become a fugitive had the US and Australia enforced the principle of freedom of speech.

Given the anger within intelligence agencies in the US about the way in which Bill and Hillary Clinton have traded access to decisions for cash, it would not be surprising if it were discovered that Wikileaks indirectly got its evidence against Hillary Clinton from intelligence agencies much closer to home than Russia's Federal Security Bureau. Given the anti-Trump bias of the US media, it was not surprising that much of the media commentary about the episode concerned the origin of the documents rather than the truths they revealed about a campaign fixated on no other ideal than power. Those who were heartened by Donald Trump's following the example of Churchill and Roosevelt in focussing on the prime threat rather than dissipating energies in subsequent conflicts were taken aback when General Flynn, who is billed as his closest national security advisor, made remarks about Turkey that ignore the reality of the situation in that country.

Some of Flynn's paid consultancies influenced this lack of realism about a country where Daesh has been mutating, thereby diverting him from the steely realism of Candidate (now President-elect) Trump. It is a disgrace that Mosul and Raqqa have yet to be captured by NATO forces, a setback explainable only by the way in which that alliance is hitting at Daesh with one arm and nourishing its warriors with the other, of course under a different label. The problem with NATO is that the alliance lacks a single focus but is instead driven by a cluster of agendas, some mutually exclusive.

The consequence is a mishmash of policy, the exact nature of which depends on which faction within the alliance has the advantage over the others at that particular time. They are seeking to fight Daesh by committee, not the best way to wage a war. President Abraham Lincoln prolonged the US civil war by at least a year because of his refusal to replace incompetent commanders in time and to enforce clear priorities rather than seek to mediate between rivals. And it is on the issue on which he was resolute, the Emancipation Proclamation, that he has earned a place of honour in human history. Unfortunately for the war on potentially the most destructive terror force in the world, NATO is showing in its battle with the scourge the same vacillation and misreading of ground realities that it has demonstrated in past conflicts, all of which it has in effect lost.


Sunday, 13 November 2016

Lutyens zone works to derail PM Modi’s currency move (Sunday Guardian)


By MADHAV NALAPAT | New Delhi | 13 November, 2016

The public and economic dislocation caused in the aftermath of the currency-based surgical strike has shown to those officials close to the PM the importance of ensuring administrative reform at an early date.

Associates of Narendra Modi say that from the start of his innings as Prime Minister of India, it was clear from his approach how far he actually was from the characterisation of Modi as vindictive. PM Manmohan Singh sent one of his own Cabinet colleagues to jail and was well on the way to a second meeting the same fate, even while others were made to resign after allegations of gross impropriety. On the contrary, Prime Minister Modi ensured that an official clean chit was given to the then Minister for Coal (Manmohan Singh) during the precise period when numerous allocations were made on the verbal and “unsigned chit” recommendations of key UPA members. No other UPA-era minister has been the subject of even an FIR, much less a CBI prosecution. Indeed, the UPA-chosen director of the CBI, Ranjit Sinha and many other officials were allowed to serve out their terms with dignity and retire with traditional honour. Many key positions within the Modi-led NDA government remain filled by officials who were active in the service of UPA ministers, including some who have been reported as having facilitated illegal transactions, including through the stock, commodity and currency markets. Indeed, several at the top of the present government’s civilian bureaucracy have long had close and open contact with the Lutyens Zone, including with Congress president Sonia Gandhi, who has long been the uncrowned empress of this pool of resourceful and influential policymakers.

However, the fact remains that Narendra Modi is an outsider to the Lutyens Zone, and is known for his patriotism, integrity and refusal to act as a facilitator of vested interests nourished over decades by the Lutyens Zone. Hence, from the start of his term, the Lutyens Zone and its component groups have been silently working to undermine the Prime Minister and sabotage or at the least slow down the transformational measures that he has regularly been introducing since the past two years. Along with this, an entire “samizdat” industry has been developed that is designed to discredit the Prime Minister, and this despite his expansive and accepting approach towards those who were all powerful in past administrations. Senior officials in sync with the desire of Modi for transformation of the economy and the governance system warn that the currency measures announced by the Prime Minister on 8 November are being sought to be sabotaged such that public anger will swell to the detriment of the NDA. They are doing this in the context of the reality that the withdrawal of Rs 500 and Rs 1,000 currency notes amounting to 85% of the total money supply (as against less than 1% of the money supply in the 1978 measure targeting Rs 1,000 notes) affect practically all the 1. 26 billion people of the country. Should the measure go sour, the BJP as a party will pay a heavy price at the hustings.

The public and economic dislocation caused in the aftermath of the currency-based surgical strike announced by Prime Minister N.D. Modi on 8 November has shown to those officials close to him the importance of ensuring administrative reform at an early date. “Without an efficiently functioning government machinery, the historic plans of Prime Minister Modi will not succeed”, a key official warned, adding that “this needs to be a priority for the coming year, so that from 2018 onwards, people will feel the positive difference” caused by Modi coming to power at the national level.

Modi took office on 26 May 2014 with four key governance objectives: (a) making quality education widely accessible at all levels, including technology and vocations; (b) creating a framework for affordable healthcare that would place stress on prevention through measures such as vaccination and providing disincentives to toxic consumables such as tobacco; (c) ensuring that infrastructure reaches a scale and standard as would ensure that citizens be given a smooth interface to live and to work; and (d) work towards an enabling environment for the Knowledge Era that would place emphasis on high internet speeds and universal availability, as well as such essentials as freedom of speech. Thus far, the record has been less filled with spectacular outcomes than expected when Modi took office, and for this, those in government who are committed to his goals are pointing to the administrative machinery, and in particular its still colonial-minded and ossified higher echelons, where procedures and customs from the British-era past have not only been preserved but expanded upon so as to harass the citizen and deny him the rights and freedoms present in other major democracies.

There has been a continuous campaign designed to portray Narendra Modi as an over-centraliser, whereas his close associates point out that he is known by those working with him as a decentraliser. As an example of the Modi approach to national governance, senior officials point to the Ministry of Human Resources Development. They say that a single agency and its satellite bodies have not and cannot ensure world-class educational standards. In such a context, a suggestion is to recruit global talent to fill some of the posts within major centres of learning, rather than confining the choice to those resident in India. In a similar way, a fresh approach has been suggested towards key posts in the Central government and its agencies. This is to ensure lateral entry of domain knowledge experts and those from the private sector with a proven record of practical achievement to at least 30% of middle and top jobs. “If the ratio is less, the change will be too small to be effective”, a senior official pointed out, adding that “the present system of reserving almost all the highest jobs to those from a single service (the IAS) needs to be replaced so as to ensure that those from all services are given the opportunity to serve in key posts”. Another pointed out that “it makes little sense to have someone with a History and not a Mathematics background as Head of Statistics, or to place a doctor who has joined the IAS in Sports rather than in Health or a Chartered Accountant in Animal Husbandry”. Senior officials committed to the transformational plans of Prime Minister Modi say that in the 21st century, domain expertise is crucial to good decision-making, and “this is conspicuous by its absence within the higher bureaucracy”.

It may be mentioned that the IAS as a service is not First Among Equals but a Superior Service, the way the Imperial Civil Service was in the past. Almost all IAS officers reach the highest pay scales in the bureaucracy or in PSUs during the course of their career, and enjoy a two-year advantage over other services when promotions are being decided. Since the start, they have had the benefit of the same One Rank One Pension scheme that has been so difficult for Defence Minister Manohar Parrikar to navigate through the civilian bureaucracy. Although in theory those IAS officers who are incompetent or dishonest are weeded out, in practice this almost never happens. Instead, obviously incompetent or corrupt officers are frequently protected until they retire with pensions intact. “Any closed group without competition or effective accountability cannot deliver results”, an official pointed out, adding that in general, “senior officers abhor change and regard procedures as crucial while outcomes do not matter”.

Those watching with dismay the efforts of the Lutyens Zone to slow down or sabotage key Modi initiatives say that apart from 30% lateral entry from outside officialdom, key posts should be open to all services and not simply to a single group. Among ministries where outside experts are needed, including at the top, such officers in sync with Modi’s goals pointed to Electronics, Telecom, Health, HRD, Defence and Civil Administration. Based on their experience, they say that “more than 40% of officers are deadwood incapable of achieving results” and of the balance 60%, “more than a quarter are corrupt”, some obviously so and yet escaping scrutiny and censure. Many of these officers said that the Administrative Reforms Commission headed by M. Veerappa Moily needed to be retrieved from the dustbin “as several of its conclusions and suggestions are relevant to present needs”. They say that the manner in which the currency initiative of Prime Minister Modi is being implemented, the glitches and procedural lapses in the details of Modi’s bold scheme, show the need to make administrative reform a key priority during the next six months “so that the crucial (to the 2019 polls) 15 months after that can ensure smooth and complete implementation” of Prime Minister Modi’s governance and policy initiatives.

Meanwhile, it is becoming obvious that the present government’s light hand on those at the top of previous administrations who were guilty of past misfeasance on a gargantuan scale needs to get replaced with greater accountability and punishment, if the Lutyens Zone is to be scared off from further acts of sabotage in the remaining period of Prime Minister Modi’s term in office.

Saturday, 12 November 2016

Sanders should be US Senate Minority leader (Pakistan Observer)

 | M D Nalapat
AS predicted in these columns in July 2015, Donald Trump has defeated Hillary Clinton in the US Presidential elections. But for the manipulations indulged in by the Clinton political machine, it would have been Vermont Senator Bernie Sanders who challenged the billionaire for the world's top job. Sanders would have had a much better chance than Clinton to defeat Trump, in that the millions of unemployed and under-employed who voted for the Republican candidate on November 8 would mostly have remained loyal to the Democratic Party ticket.

The Clintons have become too smug and too obviously wealthy to gain the loyalty of those who have seen their lifestyles plummet since the 2008 financial crash caused by Wall Street. And as this column has often pointed out, the Clinton Foundation has become a vehicle for patronage, its primary utility being as a vehicle for the political ambitions of Hillary Clinton and the extravagant lifestyle of Bill Clinton, whose penchant for travel in corporate jets and stays in luxury hotels began while he was Governor of Arkansas a quarter century ago. The tab for a significant share of such travels gets picked up by the Foundation, which markets itself as a saviour of the underprivileged. The Clintons were certainly close to impoverishment for years, but that was before he took office as Governor of Arkansas and later as President of the United States. Since then, both he and his wife are millionaires several times over, while daughter Chelsea is married to one of the richer families of New York.

Those in contact with the Clintons say that it has been Bill's ambition to launch his telegenic and gifted daughter into politics, but that this had to be put on hold because of the hunger for the US Presidency of Hillary Although reliable figures are difficult to come by in view of the secrecy maintained by the Clintons, it is estimated that $ 608 million was spent on the Presidential campaign of Hillary Clinton, which began in 2013, including money spent on securing the nomination. Cash has flowed in from multiple sources, and this must now be seen as a dead investment, in view of the fact that the Democratic Party has lost the White House while remaining a minority in both the US Senate as well as in the House of Representatives.

To Hillary's credit, even though such a step may have been politically advantageous in a close election, she refused to oblige Both Hillary and Bill Clinton are certain to remain the most powerful couple within the Democratic Party, even more so than Michelle and Barack Obama. The current President and First Lady of the United States lost a considerable amount of respect and goodwill in the final weeks of the campaign, when it seemed as though they were at Hillary's beck and call. Seemingly to the neglect of his awesome official responsibilities, Barack Obama criss-crossed the nation begging people to vote for Hillary Clinton. Whether by accident or design, the Clinton campaign showcased the couple with an African-American context, believing that the Obama would be able to generate a firewall of black votes in crucial states that were expected to win the contest for Hillary Clinton.

The reality is that President Obama has run the government in a neutral way and not as a representative of the African-American community, although that is the ethnicity to which he belongs. As it happened, although citizens of every colour – brown, yellow, white and black – flocked to listen to one of the most charismatic individuals on the planet, a much fewer number were enthused about Hillary Clinton, whose husband as US President introduced changes in the justice system which resulted in several hundred thousand African-Americans going to jail, often for long periods of time. At the same time, others were put off by the spectacle of their popular President and the First Lady (who has the elegance of a fashion model and the looks of a filmstar) serving almost as hired hands of Clintons, going from place to place at their bidding.

During the campaign, Obama lowered the dignity of his office by indulging in partisan politics on a scale never before seen in US elections, and that too, making the most personal and derogatory remarks about an individual who was on the road to being his successor Apart from Barack Obama, another individual tarnished by the campaign is Bernie Sanders. Although he had repeatedly pledged to take the battle for the nomination up to the Nominating Convention floor, he retreated and emerged instead as an admirer of Hillary Clinton. Together with the Obama, the Clinton political machine sent Sanders across the country to seek votes for Hillary, but the extravagant way in which he praised a candidate whom he knew to be close to Wall Street turned off several followers.

The same fate befell Senator Elizabeth Warren, who acted as a Clinton surrogate despite her idealism and the knowledge that Hillary Clinton was in league with interests that Senator Warren had courageously and consistently opposed. Now that Hillary has been defeated, both Sanders and Warren are left with very little leverage to fulfil their wishes in the matter of public welfare, unless Bernie Sanders bids for the post of Minority Leader of the US Senate. Should he take over this position, the New Yorker who has spent a lifetime in the service of the underprivileged may be able to have a potent influence on policy, or at least be able to challenge decisions of the Trump White House much more strongly than as a lone voice.

Hillary Clinton may not approve, but the reality is that Bernie Sanders is the fittest candidate to serve as Senate Minority Leader. Should a Sanders associate become the House of Representatives Minority Leader as well, the pair would be a formidable force in Washington. Senator Sanders has walked away from a fight before, that with Hillary Clinton over the Democratic Party nomination, and that retreat had disastrous consequences for his party. Will he have the will to wrest the leadership of the Senate and House for himself and an associate? Should he do so, the Sanders revolution will endure in the ashes of the Clinton Presidential flameout.




Sunday, 6 November 2016

Gen Raheel Sharif plans judicial coup against Nawaz (Sunday Guardian)

By MADHAV NALAPAT | NEW DELHI | 6 November, 2016

In a fresh election in Pakistan, the plan is for Raheel Sharif to take over as the leader of a coalition of parties that would act as a third front.

Analysts in key countries who are engaged in tracking developments in Pakistan warn that GHQ Rawalpindi has initiated a plan to remove Prime Minister Nawaz Sharif before the middle of 2017. Instead of a Musharraf-style military coup, this time around the planning is for the Pakistan Supreme Court to perform the (not very difficult) task of finding Nawaz Sharif guilty of corruption and initiating his prosecution. The grounds given will be the Panama Papers revelations, along with fresh evidence against the Pakistan Prime Minister that has been gathered by GHQ Rawalpindi, including undeclared assets in the United States and Canada. Contrary to those in India who claim that Sharif is insincere about wanting peaceful relations with India, and indeed in contrast to his own fiery rhetoric on Kashmir, these experts say that Sharif has sought to work out a peace agreement with Prime Minister Narendra Modi, on the principle that “only hawks can ensure a peace settlement”. They say that PM Modi’s gesture of dropping in on the Sharif family for a birthday celebration towards the close of last year “made a big impact on the entire (Sharif) family”, who “saw in Modi a man who could be expected to keep his side of the bargain” in contrast to Manmohan Singh. The 2004-14 Prime Minister is blamed by high-level circles in Islamabad for “making promises which subsequently get forgotten” and in not “walking the talk” on the several secret and overt peace overtures made to Pakistan during the UPA period, including the “Musharraf Formula” of soft borders between the parts of Kashmir held by the two sides, a solution that would allow the migration of several hundred thousand Pashto and Punjabi-speaking settlers across Jammu & Kashmir, thereby strengthening the influence of GHQ Rawalpindi in all corners of the state.
According to these sources, the reason why GHQ seeks to oust Prime Minister Nawaz Sharif is that “he is not in favour of an aggressive and adventurous line to match the Modi government’s newfound assertiveness on the Line of Control (LoC)”. Aware of the harmful consequences of any such escalation on the business environment in Pakistan, Sharif is known to have argued against General Raheel Sharif’s call for a “matching response” to recent Indian moves, including the surgical strike on terror camps which took place last month. The Pakistan Prime Minister is known to be against giving an extension to the present Chief of Army Staff, and is seeking to replace him with a Corps Commander “who is junior to at least two other serving generals in the (Pakistan) army”, besides of course General Sharif himself. A key source revealed that “initially the view within the higher command of the Pakistan army was to make the extension of service of the present chief a matter of prestige”, but in September, a Plan B was adopted. This would involve a fresh election in Pakistan, where General Raheel Sharif would take over as the leader of a coalition of parties that would act as a “Third Front” separate from both the PML(Nawaz) and the Zardari-run PPP. The expectation is that the popularity of the present army chief would be sufficient to ensure that this coalition gets a majority in Parliament, especially as there would be a division of votes between the PPP and the PML(N). According to the analysts talked to, GHQ Rawalpindi “has dossiers on every top leader of both the main parties”, and “these would be selectively leaked during the campaign” to contrast them with Raheel Sharif, who has a reputation for integrity. 
These sources claim that Imran Khan’s latest agitation was scripted by GHQ to ensure that the Pakistan Supreme Court took up the matter of Nawaz Sharif’s corruption, thus setting into motion the chain of events expected to end in his downfall. They claim that Imran Khan has reached an understanding with the military to accept the leadership of Raheel Sharif in a future coalition government, in which he would be the Foreign Minister. It may be mentioned that Raheel Sharif has very close contact with both the US and China, and has recently built bridges with Moscow on the recommendation of China’s People’s Liberation Army (PLA). Over the past four years, China has ensured that the Pakistan military retains its strike capability against India, “as the PLA wants to launch a second front, should India join the US and Japan in entering into a conflict with China over the East or South China Sea or over North Korea or Taiwan”. According to the sources spoken to, “Raheel Sharif has promised to open a second front in the event of hostilities between India and China”, despite the fact that such a reciprocal gesture has not been made by Beijing during any of Pakistan’s wars with India. 
A high-level source claimed that “while Raheel Sharif is trusted in Beijing, Nawaz Sharif is not”, thereby implying that Pakistan’s closest ally would have no problem were the present Prime Minister of Pakistan replaced by the Chief of Army Staff, “especially if such a change were to occur through the ballot box”. China is in the process of supplying fifth-generation fighter aircraft to the Pakistan air force “as soon as two squadrons of fourth-generation Rafale aircraft get inducted into the Indian Air Force. Beijing is already co-producing J17 aircraft with Pakistan, and has gifted that country’s navy eight diesel submarines to counter the Indian fleet. Interestingly, General Raheel Sharif has managed to persuade Russia to supply Mi-35 helicopters, using the excuse that these were intended for counter-terror operations in FATA and in parts of Balochistan. Interestingly, together with the move of the military in Pakistan to remove the PM, terrorists from the Lashkar-e-Tayyaba, Jamat-ud-Dawa and Jaish-e-Mohammad are openly congregating in cities across Pakistan, even though these are wanted by both the US as well as India. 
Once a new government linked to the Pakistan military gets formed in Islamabad, the intention is to ramp up the “internal insurgency” in Kashmir. In this context, GHQ claims that four districts in south Kashmir have become no-go-zones for police, with those in uniform still present “being rendered frightened and ineffective” by pro-Pakistan groups. GHQ Rawalpindi has asked its men in Kashmir to get hold of police weapons, “so that innocent people can be shot and the police blamed”. More than a hundred such weapons have already been seized by pro-Pakistan elements from the police, “with around two dozen having been handed over voluntarily by police personnel” close to such elements. 
The intent of GHQ Rawalpindi is to “ensure that future acts of violence get perpetrated entirely by home grown terrorists” and not by imports from across the border. In this context, “the effort to make Burhan Wani a heroic martyr is intended to tempt many more such impressionable youth into joining the groups planning to launch a wave of insurgent attacks in Kashmir around the time Nawaz Sharif is removed in Islamabad”. “Along with responding through conventional actions such as sniper fire and rocket shelling from across the LoC, the plan is to intensify terror operations across India and create a climate of insurgency in Kashmir”, claimed an analyst based in the US. These sources say that GHQ Rawalpindi “does not share the feelings of Nawaz Sharif for (PM) Modi, and hence wants to replace him with a substitute who would be supportive of a policy of robust move across the LoC and through proxies the rest of Kashmir”. 
According to them, the present Prime Minister of Pakistan is “counting the days before he is removed from office by the judiciary”.


Friday, 4 November 2016

Hillary’s ‘Russia card’ fails to convince (Pakistan Observer)

SPEAKER of the US House of Representatives Paul Ryan seems from his recent actions to be among the overwhelming majority of politicians who have a single objective : their own progress in politics and in other fields. At a time when his own Republican Party nominee Donald John Trump was closing in on Hillary Clinton in the polls, Ryan sought to fatally weaken the Trump campaign by declaring that he was opposed to the party’s Presidential nominee. Had he whispered this change of mind to his wife in private, and used the anonymity of voting to cast his vote for Hillary Clinton, many within the Republican Party may have even sympathised with Ryan.
The front line of Hillary Clinton’s party is united in working for her, so much so that the Democratic Party candidate is able to order President Barack Obama, Vice-President Joe Biden and First Lady Michelle Obama to visit those states where her campaign staff believe that reinforcement is needed. Their visits are given huge dollops of publicity by the media simply because of the posts they hold for the next two months. In addition, hundreds of millions of dollars are being spent by the Clinton campaign to portray Donald Trump as unsuitable for the most important job in the world, even more so than the second most consequential post, General Secretary of the Chinese Communist Party. The Clinton campaign has been given significant traction by a friendly media, with CNN, ABS, NBC as well as key newspapers acting as cheerleaders for the Democratic Party candidate and competing with each other to pour abuse on Donald Trump.
It must be admitted that the Clinton spin is rendered more effective by the clumsy response of the Trump campaign to them. Not once has Donald Trump pointed out, for instance, that it would be a simple matter for Huma Abedin to release her own emails rather than demand that the FBI do so, while being fully aware that this will not happen before the elections take place. The most ludicrous allegation is that Donald Trump is in some way beholden to Vladimir Putin, the President of the Russian Republic. Apart from those already opposed to the Republican nominee, few will believe such a nonsensical charge. Had Donald Trump been a foreign agent, the CIA, the FBI and the Department of Homeland Security would have stepped in to brief the voting public in the US about this. They would certainly not have kept silent about a “foreign agent” being in competition to lead government of their country.
Certainly some within the Trump camp – or who were there in the past – have been involved in business dealings with Russian entities, but so has John Podesta (the Clinton campaign chairman) and Bill Clinton himself, who has accepted speaking fees from entities linked to Moscow, as indeed he has from others linked to numerous countries, including some in the subcontinent. The effort to link Trump to Putin has thus far had little impact, in large part because today’s Russia is far from the USSR before Mikhail Gorbachev took over and began the Gorbachev-Yeltsin era of Moscow acting as a poodle of Washington, a status that got briefly (albeit in a diluted manner) revived when Dmitry Medvedev was elected President because of the backing of Vladimir Putin. However, the former KGB operative is a nationalist through and through, and has been following a Russia First policy during much of the time that he has been Head of State, especially during his second innings in the job.
Of course, it is becoming more apparent that Hillary Clinton (or her advisors) are setting course for a limited conflict with Russia. This, they calculate, will achieve two goals (a) weaken Russia’s global standing, especially in the Mideast and (b) serve as a lesson to the more powerful rival of NATO, China, as to the consequences of going against its diktat the Way Xi Jinping has in the nearly four years that he has thus far led the Peoples Republic of China. The likely theatres for such a conflict include the East and South China seas and Middle East, with Taiwan straits figuring behind these two in extent of probability of a conflict involving air and sea power but not land forces, in view of NATO’s repeated missteps in ground warfare. Such a “Clinton’s War” would be a hugely disruptive exercise on global economy, and is likely to have consequences beyond those that have been calculated by its protagonists.
In the 1939-45 war, Adolf Hitler was assured by the foreign policy experts that he consulted that it was safe to go to war against Poland in 1939, as neither the UK or France were likely to take the step of declaring war on Germany as a consequence. However, within days of the brutal invasion of that country by Hitler, both London and Paris declared war on Berlin, although subsequently doing little to contain the German war machine until the next year, when it invaded and occupied France and much of West Europe. The next year, Hitler made one of the three mistakes which cost him the war, which was to invade USSR.
The other two mistakes were to go slow on the development of the atomic bomb and its delivery systems until 1943, and to commit genocide against the Jewish community, which had the highest per capita brainpower in Germany and which had played a significant part in ensuring with complete (if somewhat misplaced) patriotism that Germany lasted nearly five years against its powerful foes during 1914-19 before surrendering. For the Clintons as for Trump, winning is everything. For the Democratic Party candidate, even implicitly accusing the security services of the US of conniving with Moscow against her is worthwhile in the cause of the couple winning the White House for a third time. Soon, the ballot box will reveal whether the smear has worked or has failed to stop Donald Trump in his march towards the Oval Office.