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Saturday, 9 May 2020

Mideast Stability, Security Essential for India (Sunday Guardian)

It is important for India to assist friends in the region and help ensure their safety, stability.
Given that international travel has become a part of everyday life, the distinction between “internal” and “external” threats is surreal. Several of the threats facing the government of a country have their origins elsewhere. An example is the manner in which exiles from Venezuela, Iraq and Libya were harnessed into backing insurgent movements in the three countries, of which the first has yet to succeed, despite the battering that Nicholas Maduro has received from US sanctions. Were the President of Venezuela to have welcomed US oil majors into his country rather than follow the example of his predecessor and strive to build up a domestically run petroleum sector, it is doubtful that any sanctions would have been imposed, no matter what the human rights situation in Venezuela is. Sanctions by the US and by its European allies have caused immense suffering to citizens of several countries, without fulfilling the declared objective of changing the regime in power. Iraq is an example. The sanctions imposed by President Bill Clinton caused immense misery to the population without affecting the lifestyles of Saddam Hussein and those close to him. North Korea has only accelerated the development of nuclear and missile systems with each twist of the sanctions lever by the Trump administration. Given the fate of Saddam Hussein and Muammar Gaddafi, it was pointed out by this columnist in 2011 itself that it was unlikely that Kim Jong Un would surrender his fate to the US and the European Union in the manner both these Middle Eastern strongmen did. The present fate of these two countries (where Whitehall, the Elysee and Foggy Bottom overthrew dictators “in support of democracy and freedom”) show what happens when the morning after gets forgotten while engineering regime change through violence. The consequences of both these military interventions have been less than encouraging where traditional US allies in the Middle East are concerned. Indeed, many are looking towards the emerging alternative to the US-led alliance, which is the Sino-Russian alliance, and which has a record of standing loyally by its friends, in Russia after Putin took charge from Medvedev.

Since the OPEC engineered a sharp rise in oil prices in 1973, US allies within the GCC have gorged on generally rising petroleum prices, which reached a high point of close to $140 a barrel in 2008, just before financial markets in the US tumbled after the decision of US Treasury Secretary Hank Paulson to permit Lehman Brothers to collapse. After the WHO-mandated lockdowns that were put in place across the world, economies have—at least temporarily—crashed. They are experiencing nightmarish levels of unemployment during the past two months,while oil prices breached negative levels for the first time in the history of that commodity. Given the way in which alternative energy sources are developing, the probability is high that within 10-15 years, the demand for oil will fall to levels close to what they are in the ongoing Covid-19 slowdown. Oil prices are unlikely to go back even to $50 a barrel. This being the case, the oil-exporting countries of the Middle East are going to have to make a choice, the first between lavishing funds on extended royal families or allocating more to the rest of the people. Next between businesses and services that can survive a decline in income, and those that will not without constant subsidies. President Donald Trump initially gave promise of standing by those in the Middle East who oppose Wahhabism in favour of the gentle and moderate practices that are natural to the overwhelming majority of Muslims. However, with his abrupt abandoning of the Kurds and his embrace of President Erdogan of Turkey, such a stance seems to have been forgotten. Thus far, the GCC countries have been pillars of stability in a region potentially volatile. In the changed financial circumstances, efforts will be made by radical elements in local populations to create difficulties for the existing governments in several countries, seeking to replace them. As the example of Libya has shown, sometimes the replacement is worse  than the regime that was removed. India has long had a very cordial relationship with the Middle East, links that go back by more than a millennium. During much of the 20th century, India and the Middle East worked in concert, with even currencies being aligned in some cases. Prime Minister Modi and the Royal Families of Saudi Arabia, the UAE, Oman and other countries have developed warm personal ties, a recognition of the importance to India of stability in the region. Should this be challenged, rather than remain on the sidelines, it is important for India to assist this country’s friends in the region and help ensure their safety as well as stability in the countries there.

India’s security does not stop at the boundaries of South Asia, as many assume. It includes the Middle East, where many millions of our citizens live and work, and to which once more those temporarily back will return, once the effects on the global economy of Covid-19 begin to diminish.

PM Modi Faces Vulture Cartels Seeking Gains from India Inc Crash (Sunday Guardian)

Banks, airlines, companies, resources are being examined for possible distress takeover in case of an economic crash-landing.
 New Delhi: Vultures dealing with business and finance that are based in foreign locations are looking at India with anticipation. They are hoping to pick up assets that the policies they advocate—if accepted by the government—will bring down to disastrously low levels. Banks, airlines, public entities, resources—all these and more are being examined for possible distress takeover should an economic crash landing take place, in a situation where dollars, euros, sterling and other such “hard” currencies are gaining steadily against the Indian rupee. For some time now, there has not been any expectation of the value of the rupee going up, the overwhelming forecast being that it will fall even further from its present historical low against key currencies. Meanwhile, the accomplices of these interests both within and outside the country are incessantly warning in public and in private against taking the fiscal and monetary measures needed to ensure a revival of the economy. A crash would result in the feasting on the knocked down values of Indian entities by external investment funds intent on squeezing out billions of dollars of profits from human misery. Their only fear is that Prime Minister Narendra Modi may overrule the toxic (aka conservative) advice that is coming from a section of the policymaking community quarters to be parsimonious on the overall stimulus package, “to prevent the rating agencies from downgrading India to junk status”. This when further delay in fiscal and monetary packages of the level and direction needed for not just recovery but the very survival of key segments of the economy is already resulting in vast swathes of activity being converted into wastelands that will soon become progressively more difficult to nurse back to health, even with a correct level of stimulus targeted at protecting jobs and ensuring working capital so as to ensure that businesses resume in accordance with the permissions given.
RATING AGENCIES’ INSIDER CONTACTS
Investigative agencies would do well to track the nature of the multitude of contacts of personnel employed by those reliable Wall Street boosters, the “international rating agencies”. Personnel within those entities have extensive contacts with the very officials in India who frame the fiscal and monetary policies which determine the level of their profits. They therefore come into possession of inside information that professional ethics demands of those giving them not be shared or used, but routinely are. Such agencies are in favour of assets in India becoming cheaper and cheaper in dollar terms with every passing month, thereby making takeovers more attractive in an economy that they know no force can keep down permanently. Those eager to ensure a fiscal and monetary stimulus sufficient to rescue the Indian economy from a Covid-19 economic meltdown say that some rating agencies are lobbying to ensure that any such effective (as distinct from token) stimulus gets blocked, so that their own interests get fulfilled. Their purpose has always been to serve the interests of their overseas clients (and those Indian clients who usually through their proxies hold vast reserves of cash abroad) at the expense of the 1.29 billion people of India. Rather than rescue the economy through fiscal and monetary stimuli of sufficient amount, such entities are goading their contacts within the governance mechanism to instead recommend the selloff of state-owned assets cheaply, in fact very cheaply. Recently, a particular cartel (that had been inseparable from UPA policymakers in the past) has fixed its gaze on Axis Bank and on the equity held by state entities in private sector blue chip companies such as ITC, which they are eager to snap up at steep discounts. According to an individual familiar with the goings-on in the “PC Network” (the most active and effective cartel of such operators), they are, among other planned low-cost acquisitions, seeking to get control of Yes Bank for less than Rs 25, 000 crore, when the actual value is nearly four times more. Instances of such feeding by vultures on state-owned assets are many. It is as though North Block, since the 2014 changeover, has seemed almost a continuation of UPA 1.0 and UPA 2.0. This is despite Finance being the Ministry particularly critical to growth. Only with the arrival of Modi 2.0 on the wings of the Balakot strike and the absence of a credible alternative is the situation changing.
An example of a matter that calls for probing in a manner free of the influence of the PC Network are the goings on at MCX. This is the largest exchange for commodities trading, the way the NSE is the largest for stock trading. According to a source familiar with the situation, while some brokers operate only in the commodity exchange, a group operates in both. The exchange allows brokers to trade on commodity futures, with settlement being made in cash at the close of the trading period. Such a practice may be contrasted with several other commodity exchanges, where settlement takes place on delivery. Any shortfall or margin therefore gets offset by the exchange’s settlement fund if the broker goes broke. Otherwise each broker is expected to make up the margin shortfall on a continuous basis. Why SEBI has not looked closely into such practices while dealing with the situation in India is among questions needing to be answered, but which thus far do not seem to have even been raised. Simultaneously, taking an entirely different position in Dubai, HK or Singapore than was done in Mumbai may make possible the keeping of profits on such overseas trade in offshore accounts. Where the money for such trades comes from, and who the possible fronts or sources of those making them, needs to be in the list of questions asked by the relevant authorities in this country. Estimates vary of the potential gains made abroad by such brokers, but some put the amount in just this set of trades at well over Rs 50, 000 crore. It is possible that the brokers sought to be enquired into for such trading in multiple locations are innocent of wrongdoing, but finding that out requires an enquiry, which thus far does not seem to have taken place. Besides of course zeroing in on a few obvious (and peripheral) matters involving far smaller sums of money. The good news is that Modi 2.0 has ensured better coordination between the Ministry of Finance and the PMO in accordance with the Prime Minister’s Zero Tolerance policy towards illegal harvesting of moneys abroad or in India. Finance Minister Nirmala Sitharaman will need to prod agencies such as SEBI and the ED to be much more active in the matter of multiple trading, so that accountability gets fixed. Given that financial data cannot be eliminated thanks to electronic records and their retrieval, it is only a matter of time before guilt or innocence gets proved in the matter relating to some high profile brokerage entities. Of course, whether it be co-location or other matters, thus far only cosmetic enquiries appear to have been made, for whatever reason.
A cursory forensic audit would suffice to reveal how public institutions have lent moneys repeatedly to entities that have neither the intention nor the ability to repay even the loan capital, much less the interest. Several such mega loan mela recipients have not been able to repay even part of the capital borrowed for months. They are unlikely to lose sleep over this. Loan after loan has either been wholly written off or disposed of at a massive haircut that is of course suffered by the public institutions who made the advances, usually on the verbal instructions of VVIPs. That an agency such as SEBI has the ability to generate moneys from targeted businesses was clear in the Sahara matter, where substantial sums amounting to Rs 25, 000 crore were swiftly recovered despite the promoter being in jail. However, such activity by SEBI has been the exception, even while suspicious dealing by select brokerage and corporate entities reached unprecedented levels, many during the UPA period.
Why SEBI and RBI during the tenure of successive SEBI Chairmen and RBI Governors have been so lenient and forgiving to so many who are under suspicion of having siphoned off substantial sums abroad through frauds committed in India has been a puzzle to students of the markets in India, something that electronic evidence could with ease resolve in Modi 2.0. Given existing regulations and the manner in which they are enforced, even those who have looted as much as (and sometimes more than) Rs 50, 000 crore (first by securing loans from public entities and thereafter shifting funds through various routes from the corporates they milk) at worst may face a few months in prison in Arthur Road or Tihar before getting out on bail, in many instances permanently. As for civil suits against such depredators by those they have cheated, such proceedings may finally get decided after their grandchildren become grandfathers.
15% OF GDP OVER THREE YEARS NEEDED
The Indian economy needs a carefully directed fiscal and monetary stimulus amounting to an additional expenditure 5% of GDP each year for the three years that the effects of the Covid-19 pandemic and the countermeasures taken by government wear off. The financial history of countries across the world is littered with accounts of the pain and collapse of multiple economies whose Finance Ministers adopted the playbook of the international rating agencies. Milton Friedman (whose favourite saying, “there is no free lunch”, indicated that he had yet to meet a journalist or a politician) founded the Chicago School of economic theory, which believes in the maxim that suffering by the poor is good for their souls. This is the same credo adopted over the decades by vulture finance and its accomplices. In India, many of those at the higher levels of framing monetary and fiscal policy (for a country with immense potential waiting to be utilised) consider the firmans of Wall Street-oriented foreign agencies as gospel. This despite the obvious bias these have almost invariably shown against India, an economy where the debt to GDP ratio stands at a healthy 62%, and which debt can be tripled without coming close to the level of Japan, whose debt to GDP ratio is 245%. Or doubled like the US, where at last count this had breached 110% and is expected to climb much more this year itself. Despite its much lower level of debt relative to GDP and its always having met its obligations so far as external loans are concerned, Moody’s has given India a Baaa2 rating, which is just below junk status. In other words, Moody’s has relegated almost to junk status the financial paper of a country that is already the third biggest economy in the world in Purchasing Power Parity terms. As for the US, whose financial problems Moody’s and other agencies constantly gloss over, the same agency gives a rating of Aaa, while heavily in debt Japan has an even higher rating, Aa3. Standard & Poors rates India a lowly BBB, as does Fitch, while for the much more in debt US and Japan, their ratings are AA+ and AA- respectively. The Chinese have tossed such ratings out of the window, and India should do likewise. And, like the Chinese began doing in the 1980s, focusing on formulating and implementing strategies for high growth, including from domestic and external investment. The first requirement of such growth is the bringing back to health of the economy through booster shots of monetary and fiscal measures designed with an eye on domestic interests rather than a the type of vulture financial entities that were among the primary reasons why the 2008 crash (not to mention that of 1929) took place.
ERROR-PRONE RATING AGENCIES
That rating agencies loyal to Wall Street and to global offshore banking hubs awash with illegal cash are less than reliable is acknowledged worldwide. Beijing refuses to take them seriously, which is why their ratings have had no effect on the performance of the Chinese economy. Even countries favoured by them such as the US and Japan have complained about these agencies, the latter for example in 2002, when a downgrade was given that had the effect of handicapping Japan against a particular country that the agencies seemed to favour at the time. It may be remembered that Lehman Brothers, whose downfall triggered the 2008 global financial crisis, was given a rating of AAA even on its sub-prime loans to the very end. Thus far, there does not seem to have been a serious enquiry into the obvious fact that the US sub-prime bubble had reached skyscraper proportions over many years under the approving gaze of the rating agencies. Earlier, S&P had given not junk but investment grade rating to both Worldcom and Enron when they went bust. It may be remembered that Italian police raided the house of a key rating agency executive for “spreading false information designed to manipulate the Italian financial system”. Such manipulations appear to be routine in India, with the perpetrators going undisturbed by those specifically tasked with protecting the economy from harm. What has taken place in some Indian banks, brokerages and exchanges as a consequence of the operations of the PC Network have been documented several times in the records of agencies and much is even in the public domain. Such activity is continuing in the present, including the often successful efforts of the network to protect favoured individuals and institutions from being held to account for financial crimes. And indeed, to ensure in the past that many got placed in high positions. Foxes are given the responsibility of guarding the poultry farm. No less a personage than Economic Advisor to President Barack Obama, Austan Goolsbee had choice words to say about a rating agency (S&P) that is treated reverentially by Mint Road and in North Block, who seem unable to understand the severe cost to the economy and to the public interest involved in following the copybook of those for whom mass misery is a bagatelle and profits to their hyper-rich clients is the only goal. At present, some agencies seem intent through dark forecasts of driving down the equity values of some banks and financial institutions, so that the same may get picked up cheaply by offshore vultures later. The recommendations and actions of Wall Street and offshore banking-oriented rating agencies favour the needs of a small segment of the financial markets rather than the interests of the population as a whole, the latter being the very interests that politicians have been voted to power to safeguard.
India has never defaulted on its public debt obligations, yet this fact has been ignored by rating agencies working ceaselessly to constrain the Government of India and the Reserve Bank of India from spending anything close to the moneys needed to protect the economy from the 2020 Covid-19 shock. Indeed, the very term “default” is subject to multiple interpretations. Moody’s calculates on the (subjective) basis of “expected loss” and “ability to pay”. The data path by which its analysts reach such conclusions is of course changeable and usually opaque. Fitch talks of “default probability” along with “willingness to pay”, yet fails to explain why India with its perfect record on both counts is given such a miserably low rating. Such ratings, thanks to the outsize influence of such agencies, handicap domestic companies to the benefit of foreign competitors, an outcome that seems far from coincidental. Fitch relies on an aggregation of these two factors. It is obvious that the terms used are elastic and subject to interpretation on an industrial scale, which is why these agencies have escaped censure despite their record of bloomers. Rating agencies profess to rely on quantitative data, when the reality is that a heavy overlay of qualitative (i.e. subjective) deductions gets amalgamated with data analysis. The process of mixing of the subjective with the objective is hidden from public view, with only the briefest of reasons being given in public for an upgrade or a downgrade. Investors have been trained to swallow the prescriptions of these agencies without question, although recently contrarians have become more frequent.
Moody’s calculates economic, institutional and fiscal strength, helpfully adding “susceptibility to event” risk. What these are or how they are calculated seems to vary with the seasons. S&P employs the grandly proclaimed RAMP (Rating Analysis Methodology Profile) method, which is as vague as it sounds. This comprises of a 5-point score that again seems at bottom intensely subjective and prone to reaching wrong conclusions. Examples of criteria are “Institution and governance effectiveness” or “Economic structure and growth prospects”. Given the serial errors in such forecasting, the method used is probably astrology. Scores are calculated by use of data that is simply not there or not accurate and timely in many cases, and this is the “objective” part. In the case of the Indian economy, the ridiculously named and impugned “informal” sector (which creates more than three-fourths of jobs outside farming) has consistently been given a negative rather than the positive score the sector deserves for its invaluable contribution to overall economic wellbeing. It may be borne in mind that the UK and the US have on several occasions sent Wall Street’s associated personnel to jail or levied billion dollar fines on them, but not India. The few fines or punishments levied by regulators in India are derisory in comparison with the misdeeds committed, an example being the co-location scandal at a prominent exchange that has been and remains a favourite port of call for Finance Ministers of the Union of India. Another is the ongoing effort to disguise the monumental snafu perpetrated in oil futures by passing it off as a matter involving less than Rs 400 crore, when in fact the actual cost of the full transactions is several times higher. How much have Indian public institutions lost as a consequence of such activity? If India were the US or the UK, the PC Network would have been disbanded years ago, with billion dollar fines and stiff prison sentences for a few of its key players, rather than having many of its known elements ensconced in key policy slots. While some point to the remarkable coincidence that several scions of influential political and official personages have found employment in Wall Street and its satellite agencies, it would be an expedition into hypothetical scenarios to claim that governance decisions are being taken in accordance with the wishes of such foreign agencies only because of such family ties. Awe and reflexive acceptance of the presumed wisdom of the international rating agencies is a syndrome common within the portals of Mint Road and North Block, despite the consistent failure of such agencies to warn against global crises or their visible bias against India. The only task they fulfil efficiently is to favour short sellers, including those who bet repeatedly against the rupee.
WEAPONISE THE QUAD
India must weaponise the Quad and move robustly into the US-led military alliance rather than see-saw between that grouping and the Sino-Russian military alliance. Such a move would have an immediate effect on perceptions of India in a manner that even rating agencies would need to recognise positively. Lower tax rates and less minatory regulatory systems need to be implemented at speed. Lower rates, including in GST, mean higher growth and therefore more collections. Prime Minister Narendra Modi has immense goodwill across the country and retains the trust of the people. This opens the path for the success of innovative schemes for monetising this country’s immense gold reserves in an entirely non-coercive way. This would include the tax authorities forgiving past sins, many of which caused by regulations that are designed to stifle growth and boost bribes. Such changes would generate a push for growth, as would slashing taxes and therefore prices on feedstock such as petroleum. If this be done, it would help ensure that inflation levels do not rise even if the estimated amount of necessary stimulus (5% of GDP as extra spending each year over three years) gets pumped into the hands of workers and farmers, as well as in meeting the working capital needs of those employers suffering from the effects of measures taken to protect the population against Covid-19. Unlike what the Chicago School preaches, the Indian economy needs an effective level of stimulus precisely because so many within the population are poor and vulnerable. This is especially the case with the small, medium and “unorganised” sector (although this term is a misnomer, as is “informal”). Tax rates need to incentivise employment, rather than focus only on the replacement of men with (usually imported) machines.
Infra programs such as highways need to get completed not by relying on high-cost machinery but on labour. Given honest implementation, quality will be as high or higher should many people rather than a few machines be put to work. It is clear from the improvements made since 2019 that the control lever in North Block has now firmly shifted into the hands of Narendra Damodardas Modi. The PM will be aware that by August 15, 2020 the country needs to experience the cool breeze of hope sparked by a reviving economy rather than chill winds of despair caused by economic storms. Fiscal and monetary policy should not be dictated by international rating agencies, but by ground realities focusing on the need for high growth and employment. India has immense reserves of strength. Those seeking to block the utilisation of those strengths so that billionaires make even more money at the expense of the middle class and the poor need to be regarded with the disdain they deserve. Nothing succeeds like success, and once an effective stimulus package places the economy on the track towards ensuring a generation of double digit growth in the manner Deng Xiaoping did for China in the 1980s or Zhu Rongji in the 1990s, the same rating agencies now lobbying for a measly and disastrous fiscal and monetary response to the existential crisis caused by Covid-19 in the economy will come flocking back. They would be full of praise for effective policies, forgetting their own past advice, as they hunt for renewed relevance. What India needs is a sufficient and well-directed stimulus package which gets implemented under the direction of PM Modi.

Saturday, 2 May 2020

Covid-19 Gives China Advantage Over the US (Sunday Guardian)

WHO’s singular prescription, ‘Lock Down Now’, has ensured that Beijing’s principal rival is now in a much weakened state.
 It would be illogical to claim that the Chinese leadership intentionally released the Covid-19 virus into the global community. The damage caused to economies on which Chinese companies rely on for their profits and for many their existence is immense, and will have an effect on growth prospects in the People’s Republic of China (PRC) for years. Given the way bureaucracies function, it is certainly plausible that six weeks went by while the authorities in Hubei sought to put out by themselves the novel coronavirus outbreak that had erupted among its population late last year. The provincial and city governments appear to have gone through a phase of denial of the seriousness of the situation. Witness the punishment meted out by those self-assumed experts in virology, the police, to the Wuhan doctors who first warned of the danger that was spreading within the local population. This phase lasted for over a month. It took a further few weeks before they accepted that the Covid-19 fire had gone out of control, and that they needed to educate the highest authorities about the severity of the problem. In Beijing, it would have taken several days before such information travelled up the chain of command to the Chinese Communist Party (CCP) Standing Committee led by General Secretary Xi Jinping. By that time, there was no longer any doubt that a disease at least as deadly as SARS was spreading rapidly across the region. It was Xi’s January 23 lockdown of Wuhan that showed the world the extent of the danger that the international community was facing. Could information have moved faster up the chain of command in China? Certainly. Could the WHO have sounded the warning bell weeks before it finally did? Absolutely. Did intelligence agencies in the US and other countries pick up the social media posts of Chinese whistleblowers in Wuhan and warned their heads of governments by early January? But no effective global precautions happened until too late. The Wuhan lockdown and the quarantining of Hubei province got imposed weeks after the virus had spread across China and to the rest of the world in the shape of travellers going from that province to cities across the world.
The WHO first brushed aside the novel coronavirus as no big deal, denying even the possibility of human-to-human transmission even after proof arrived of the opposite, and persisted in declaring travel to and from Wuhan safe. Once the novel coronavirus began to spread, that venerable institution jumped in a flash to the opposite view, that Covid-19 was a bigger threat than even Genghiz Khan had been, and could cause a mass culling of entire populations the way the Black Death in the 1300s and the 1917 influenza epidemic did.
From that time onwards, the WHO pressed forward with its prescription of total lockdown of human activity, a recommendation in which WHO was joined by several world famous individuals such as Bill Gates and almost the entire media. Johns Hopkins and other renowned medical institutions gave doomsday predictions of tens of millions of deaths in billions of potential Covid-19 cases.
Was the initial reaction of the core leadership of the CCP to lock down entire towns and provinces the best course to adopt (and the few countries such as Sweden that are refusing to follow suit, and suspend all activities, seem to be having about the same level of incidence as others who accepted the WHO’s prescription)? That is a question answerable only after accurate figures get computed of the actual mortality rates of Covid-19.
Some estimates suggest that the large number of asymptomatic and undiscovered cases indicates that the overall mortality death is about the same as that of the seasonal flu. What is obvious is that the WHO issued repeated calls since the end of January for other countries to follow China’s example and lock down all activity and confine populations to their homes. This guidance by the world body has ensured that the US and most major European economies have as a consequence staggered into recession, while many are at the doors of the greatest depression they have ever faced.
In the meantime, the Chinese economy has begun recovering from the effects of Covid-19 and from the countermeasures initially taken by Beijing, and is systematically coming back into full throttle. While President Trump has no good word to say about the WHO (blaming not the entire leadership of that organisation but only the Ethiopian Director-General, a gentleman known to go by any consensus reached by his colleagues), US experts seem to have adopted without question the single-minded WHO playbook of recommending total shutdowns for an indeterminate period. This to limit the spread of a new disease whose per capita toxicity has yet to be determined accurately. Dr Anthony Fauci in particular is among the US “Shutdown Fundamentalists”, and almost daily warns in public about the disastrous consequences he foresees of any lockdown relaxation for most of this year at least. Not being an economist, Dr Fauci may be forgiven for not taking into account in his health prescription the manner in which US companies, jobs and the economy in general have been affected by the lockdown measures he favours. Of course, “to save lives in the millions”, despite the doomsday predictions made by numerous “expert” institutions (such as the Imperial College about Spain) having been shown to be completely wrong.
The launch of the 2017 Trade War between Washington and Beijing brought into full view what had since the close of the 1990s been the case. The USSR and the US entered into a “fight to the finish” superpower rivalry soon after Harry Truman became President of the US. During and after his time, Europhiles in the State Department and Russophobes in the Pentagon were given control over policy.
Now it is the turn of China and the US to enter into a similar competition, which again is likely to end in the collapse of one or the other of the two rival political and economic systems. By its doomsday predictions and incessant calls for an indeterminate stoppage of productive activity, including in the US, the WHO’s singular prescription (“Lock Down Now”)—made many weeks after the time when action by the WHO could have limited the disease to parts of China—has ensured that Beijing’s principal 21st century geopolitical rival (the US) is now in a much weakened state vis-à-vis this new challenger than was the case in the start of 2020.

Thursday, 30 April 2020

Suspense Over Kim Jong Un May Soon End (The Daily Guardian)

Kim


During the just-concluded parliamentary elections in one of the world’s most dynamic economies, South Korea, the opposition parties sought to characterise the idealistic President Moon Jae-Inn as a puppet of the Supreme Commander of North Korea, Kim Jong Un. Their calculation was that South Korean voters would turn away from President Moon because of his efforts at reviving the Sunshine Policy of some past leaders towards North Korea. Instead, the ruling party was returned to power with a comfortable majority. This shows that most of the South Korean electorate are in favour of better rather than tense relations with North Korea and that country’s Supreme Commander. In North Korea as well, large sections of the populace are reported by sources to admire Kim, and are hoping to “see him re-appear in public at an early date.
They feel enthused by visual images of Kim Jong Un, and are becoming apprehensive in view of his long absence” from public view. Such an absence has led to a flurry of theories about the problem. North Korean defectors (many of whom have not gone near that country for decades) claimed that the Supreme Commander suffered either a stroke or a heart attack, and that he has had a surgical procedure that has left him battling for life. Credible sources say that there was an assassination attempt on him by individuals who were regarded as being his supporters. This assassination attempt may, in the view of these sources, have entailed the use of biochemical weapons such as was used to kill Kim’s brother Kim Jong Nam in Kuala Lumpur in 2017. It is known that North Korea has developed a sophisticated kit of such weapons in its underground laboratories, and there is speculation that Otto Warmbier was sent back to the US in June 2017 as a “living” (but soon to be dead) demonstration of North Korea’s bio-chemical weapon capabilities.
Whether Warmbier, who was captured a year ago while about to leave North Korea, was indeed the subject of such a still live demonstration of WMD prowess is unclear. What is obvious is that North Korea has a significant WMD stockpile that its leadership will not hesitate from using as and when deemed necessary. Another theory is that Supreme Commander Kim Jong Un is in seclusion in order to avoid getting infected with Covid-19. However, such a theory seems farfetched in view of the fact that he travelled to unfamiliar shores to meet with President Donald Trump, disregarding the views of some within the core leadership group that the Singapore meeting was a trap designed to cause him harm.
Lack of boldness has not been a characteristic of Kim Jong Un. If credible sources are to be believed, Kim has gone through some trauma but is under the care of his loving and capable sister and is expected to make a recovery such as would enable him to “appear in public and assuage the desire of those millions in the Korean peninsula who regard him as the hero” of a people that shares a part of its ancient traditions and lineage with India. A Bright Sunshine policy designed to improve the living standards of the North Korean people can bring stability to the peninsula. Weakened by the constant efforts at belittling him, President Trump seems unable to go ahead with such a policy, and is persisting with the Clinton-Obama policy of harsh sanctions. It may be remembered that President Clinton oversaw the deadly sanctions on Iraq that killed hundreds of thousands of babies in that unfortunate country during the period when Saddam Hussein was left in charge.
This despot of Iraq was permitted to continue to rule by President George H.W. Bush (who even allowed him to massacre Shia and Kurds despite a socalled No Fly zone) and later despatched to the afterlife by President George W. Bush. In the case of North Korea, it is clear that the present policy of crippling sanctions has failed except in making the lives of millions in North Korea miserable. However, President Moon is not being permitted by the US side to go ahead with efforts at ensuring a peaceful future for the entire peninsula. If those sources who say that the situation with regard to Kim (whether he will or will not return to his tasks) are correct, the situation regarding the North Korean Head of Government will become clear in a short time. They add that a return to work by Kim would ensure that both he as well as President Moon of South Korea can resume the “task of ensuring a stable peace in the Korean peninsula such that both sides join hands for prosperity”.

Saturday, 25 April 2020

Protect Afghanistan, World From Taliban (Sunday Guardian)

Trump apparently does not care that his newfound friends are going to once again imprison women in their homes, cut throats, and establish a Wahhabi code of law.
President Donald Trump has overall been an effective leader of the US, despite unceasing pressure on him that concluded in the abortive bid to remove him from office through impeachment. However, some of his decisions have shown a disregard for long-term US interests, such as the withdrawals from Kurdistan and Afghanistan. In both instances, after the US military had been getting substantial help from local allies, the latter were abandoned to their worst foes. It is doubtful that the Kurds (or indeed the greater region) will any longer trust in US promises, or in Washington’s willingness to show gratitude for favours received in the past that continue into the present. The sell-out of the Kurds appears to have been at the behest of Senator Lindsey Graham, whose “friendly ties” to the Emirate of Qatar are well known both in his home state as well as in Washington, although unlike “Moscow Mitch” McConnell, he has yet to be called “Doha Lindsey”. Trump’s embrace of R.T. Erdogan must have warmed the hearts of the Turkish strongman’s backers in Doha, while Graham and another US Senator, Chris Van Hollen, appear to have balked at introducing the Graham-Van Hollen bill in the US Senate. They were obviously afraid that it may get passed with a veto-proof majority and annoy Erdogan and the only US Representative who voted against the near-unanimous backing for a similar sanctions bill against Turkey in the House of Representatives, Ilhan Omar, another admirer of Erdogan, despite her claims of following a Left-Liberal ideology. The about turn by Van Hollen and Graham has been good news for Moscow, which can now safely go ahead with finding new markets for its expensive but effective S-400 air defence system. While going in for the S-400, the Narendra Modi government calculated that the sanctions threatened in public and private by several dozen US officials (including the Secretaries of State and Defense) would fail to materialise, and the wager seems to have paid off. US officials have been voluble that the Kurds are in the throes of ecstasy at having been forced by Trump to surrender their forward defence line and have their second-worst enemy, Erdogan (the first having been Abubakr Al-Baghdadi, now in his afterlife) gain the upper hand in his battle to eliminate them. This is as believable as the remark that the Taliban (to whom President Trump has surrendered after a lengthy and costly war in a formal treaty) would “fight Al Qaeda on steroids” as a consequence of such a surrender. Mike Pompeo, who made this statement, has thereby shown that he has a deeply ironic sense of humour, given that Al Qaeda, ISIS as well as the terror groups nurtured by GHQ Rawalpindi have always—repeat, always—found a refuge in those parts of Afghanistan controlled by the Taliban. And what of the elected government in Kabul? Washington has made outrageous demands, such as that it release the 5,000 Taliban desperadoes in its prisons so that these newfound US partners can return to cut the throats of the members of the Afghan government. US special envoy Zalmay Khalilzad seems to have finalised the US draft of the agreement entirely out of notes handed over by the Taliban, for the latter make no promises at all for getting US forces out of the country and threaten the Afghan government with dire consequences unless they—in effect—hand Afghanistan back to the Taliban.
Judging by their published responses to the absurdly labelled “peace plan” between the US and themselves, the Taliban have not been coy in declaring that they are of the same mindset and with the same objectives as when President Bill Clinton helped to install them in power in Kabul in 1996. Now a US President who claims to find the Clintons toxic is following in the path of the 42nd President of the United States. Should the Ghani government release even a fraction of the 5,000 jailed terrorists as demanded by both the Taliban and the US administration, it would be a catastrophe for Afghanistan. The Afghan National Army (ANA) is already facing a determined campaign by the ISI, the Taliban and the financial backers of the latter in the GCC. This well-funded drive is intended to secretly win over commanders, so that what took place in Iraq (when commander after commander of the Iraqi army surrendered to ISIS without a fight in 2014, thereby gifting Al Baghdadi vast territories, terrified citizens and stores of weapons) gets repeated in Afghanistan once US forces almost entirely leave the ANA to its fate. Giving back even a few such prisoners to the Taliban would ensure that their drive to generate treachery within the ANA picks up speed, even as morale falls to sub-zero levels. It would also cause panic among the moderate majority within the Afghan population, as the danger of a Taliban takeover arrives at their doorstep courtesy President Donald J. Trump. While Barack Obama at least sought to discern elements of moderation within the Taliban (in a search similar to that of bleeding hearts everywhere for “good” terrorists), Trump apparently does not care that his newfound friends are going to once again imprison women inside their homes, cut the throats of the tens of thousands who refuse to become their slaves and establish a harsh Wahhabi code of law and behaviour in Afghanistan. Should they come to know what her husband and father’s newfound allies have in mind for the women of Afghanistan, hopefully Melania Trump and Ivanka Kushner will make their distaste clear of this sell-out of human rights and values by President Trump, if nothing else.

It is not only the women of Afghanistan or the overwhelming majority of the Afghan population that are non-extremist who will suffer the consequences of a retaking of Kabul by the Taliban. In 1978-1986, first Carter’s National Security Advisor Zbigniew Brzezinski and later Reagan’s Director CIA, William J. Casey put Wahhabism on steroids in order to mobilise vast numbers into joining in the GHQ Rawalpindi-directed (and US funded) war against the Soviet invaders of Afghanistan. During his initial 31 months in office as the 45th President, Trump backed those who were challenging Wahhabism, but after that, began to make peace with the backers of that sect. The past few years have seen a determined fight-back by the global Muslim community against the Wahhabis, as they have sought to reclaim their essentially moderate faith from the Wahhabi International, especially once the Crown Prince of Saudi Arabia became the first Al Saud to openly oppose a creed that had been intertwined with his family till then. The reclaiming of Afghanistan by the Taliban would weaken the global fight-back against Wahhabism, thereby accelerating radicalisation in the Muslim world. Thereafter, similar tendencies would deepen within other faiths, resulting in a world in danger of being torn apart by faith rather than brought together. This will be the legacy of Donald Trump, should he persist in his betrayal of the Afghan people to their extremist foes.

Friday, 24 April 2020

May Could Bring India Liberation From Covid-19 Tyranny ( The Daily Guardian)

Corona auto
In 2003, a few medical experts were of the view that SARS would not be a severe problem in India, unlike the crisis that was raging in neighbouring China. This was based on (a) their belief that those who had in the past been exposed to “Falciparum Malaria” (and hundreds of millions in India had) developed antibodies which were effective in overcoming the SARS virus, should that enter the human body of such an individual (b) that hotter weather crossing into the 30s range would assist in the virus getting rapidly degraded rather than remaining active and in a position to invade more victims.
Whether such a viewpoint was accurate or not is for medical experts to decide, but what is clear is that the effect of the SARS epidemic on India was very limited. In fact, then Defence Minister George Fernandes showed a high degree of personal courage by visiting China in the midst of the raging epidemic and returning unscathed. The then Raksha Mantri, who never made the mistake of many politicians by relying only on officials for information and policy suggestions, accepted the view of some outside the official machinery that the prospects for the virus, should it attack him, were dim. Whether it was on his pioneering visits to Siachen or in other ways, George Fernandes led from the front and was as oblivious to danger as our gallant women and men in uniform.
Now that Covid-19 has attacked India, Prime Minister Narendra Modi has shown his devotion to the principle of respect for human life embodied in the teachings of Mahatma Gandhi. Not relying on Falciparum Malaria or on the weather to do the job of controlling a virus deadly and potentially fatal to millions, PM Modi acted fast in ordering a 40-day lockdown in two consecutive stages in India. This is designed to break the chain of human to human transmission of the novel coronavirus, and is more comprehensive than any other lockdown ordered by a government anywhere in the world in history.
India’s lockdown will certainly enter the authoritative Guinness book of records for establishing a new level in lockdowns, not to mention the fact that this has resulted to 1.29 billion people almost entirely—and willingly—subjecting themselves to severe “tyag” and “tapasya” for such a long time continuously. The extraordinary lockdown measures put in place on the personal direction and supervision of the Prime Minister are expected to show its efficacy by next month. Should the calculations made by the relevant authorities in India work out, the first two or three weeks of May 2020 will witness the visible rollback of the Covid-19 pandemic within India. This would hasten the process of re-establishing normalcy in everyday operations of the hundreds of millions in India who have seen their livelihoods affected because of the pandemic reaching the shores of India from outside during the initial days of this year. Such a transformation would be an immense achievement of Prime Minister Modi, and will receive international attention and applause. More and more people in India expect that the existing lacunae in the regulatory system and in matters of taxation and monetary policy will get the attention needed to ensure that the Indian economy will bound back from the pandemic with additional and not less energy.
The days ahead are expected to witness several more measures taken by the Finance Ministry, the Reserve Bank of India that are designed to protect the economy (and jobs in particular) from the bad effects of the present medical emergency. Once such steps get announced, the economy will witness a rebound in jobs and a decline in the losses caused by the need to take extraordinary measures to protect each and every life. Measures that have succeeded, judging by the low death count in India as compared to much smaller countries. It is also expected that production of pharmaceuticals and healthcare items such as masks will be placed on a scale that ensures that this country supplies the world.
The country is looking towards May 2020 to break out from the Covid-19 tunnel, light from which has already begun to appear in the way in which the numbers of those infected and those killed by the novel coronavirus are holding at levels that are still in a zone where the next month could bring relief from the pain being endured by the people of India in their effort to control the spread of Covid-19.

Saturday, 18 April 2020

Modi Can Build a Viable Indo-Pacific Alliance (Sunday Guardian)

The Indo-Pacific has the highest chance of witnessing kinetic conflict between the US and China.
Prime Minister Narendra Modi understood from the start of his term in office that it was  the Indo-Pacific and no longer the Atlantic that was the centre of gravity of global geopolitics. He also factored in the importance of working with Washington, as is clear from the speed and warmth with which he extended the hand of friendship to the US leadership. This was despite two successive US administrations seeking to curry favour with Congress president Sonia Gandhi by revoking the  visa earlier given to him. This was an act of spite which represented a slap in the face of the world’s most populous democracy rather than be directed just at a single individual. However, within days of being sworn in, it was clear that the new Head of Government of the Republic of India had no subjective feelings about the move, and indeed made the US among his earliest foreign ports of call. First Barack Obama and subsequently Donald Trump in the White House have established warm personal bonds with Narendra Modi, ties that have resulted in substantial modifications of policy in both Washington as well as in New Delhi. Social distancing may be necessary in a world ravaged by Covid-19, but the distance between several policy decisions on major matters has been getting reduced each year since Modi took office to a degree much greater than what took place during the Sonia-Manmohan era, although irritants remain. Among these has been the relentless effort of the US Trade Representative (USTR) to neuter generic drug manufacturers in India to serve the interests of the billionaires he so transparently represents. Of course, the USTR professes to speak not just for the 300 richest men and women in the US, but for the 300 million people of what is still the world’s largest economic and military power, and who would find their health problems vastly more manageable were much cheaper generic products from India not blocked from sale in the US or the EU, where too Big Pharma exercises a similar degree of control over policy. Such leverage gets used in efforts at applying pressure on the Government of India to resort to measures that benefit large foreign drug companies at the expense of domestic pharma.

More than any other theatre, it is the Indo-Pacific which has the highest chance of witnessing kinetic conflict between the US and China, especially over Beijing’s efforts at securing control over Taiwan and the waters of the South China Sea. Should such a conflict take place and the PLA Army, Air Force and Navy succeed in overcoming US efforts at preventing the takeover of Taiwan, the effects on US credibility worldwide would be disastrous and irrecoverable. As for China, war planners in key countries believe that a PLA defeat in a naval and air battle in either the South China Sea or the Taiwan strait would reproduce what took place in Imperial Russia after the Japanese navy demolished the Russian fleet at Tsushima in 1905. The prestige of the Chinese Communist Party (CCP) after such a setback would, in the estimate of such planners, get reduced to such a level that there would be mass eruptions against the CCP on a scale and with a level of accompanying violence impossible to control. If the words of Prime Minister Modi at the 2018 Shangri La dialogue are to remain true, that differences between countries should not develop into conflicts, what is needed is an Indo-Pacific security mechanism in place that ensures an effective deterrent against the impulse for kinetic action designed to alter the status quo. During the period after President Xi took over the leadership of the CCP in 2012, the PLA, PLA Air Force and PLA Navy have become a force too large to launch a pre-emptive war against, even by the US and Japan acting together.

China is, therefore, safe from unprovoked attack. In similar fashion, a comprehensive defensive alliance including the US and India is called for. This would not be to launch a war with China, but to prevent military conflict from taking place. A meshing and sharing of manpower and materiel between the two biggest democracies would be a sufficient deterrent to maintain existing boundaries and deters effort at change, for example by an attempt to forcibly unite the two Koreas or to alter the status quo across the Taiwan Straits. For such an equilibrium state to happen, the US would need to ensure that India be given the same favoured attention that China got during the 1980s. Indian policymakers (most of whom are still romantic about Russia) would need to come to terms with the fact that a new Cold War with kinetic potential has begun in earnest, this time between Beijing and Washington. In such an era, at least in matters of security, non-alignment is not a viable option. India will have to join either the ever-strengthening alliance which is clustered around China (and which includes Russia and Pakistan) or the grouping that has begun to form around the US, now that the Indo-Pacific and not the Atlantic is at the heart of that country’s defence posture. Comprehensive exchange of resources and intelligence will need to take place between the new allies in order to ensure constant battle readiness, which is the only state of preparedness that would deter any country or combination of countries from initiating kinetic action as would provoke a conflict because of an effort to forcibly change the status quo.

Before 2027, the world may be nearing another 1962 Cuban Missile Crisis creating the risk of a war between superpowers. Hopefully this time too, war and its accompanying destruction will be avoided. Such a result would be exponentially more likely were India to become an active part of a security alliance designed to ensure continuation of the status quo in the Middle East and East Asia.

Citizens Call For a Modi-fied Economic Response to Covid-19 (Sunday Guardian)

Sectors such as pharma and IT can be expanded, using the global opportunities opened up by the pandemic.

New Delhi: In 2013, a few voices had warned of the need for UPA-era thinking to be swiftly eliminated from the next government, which was predicted by a few from 2010 onwards and by most from 2013 onwards to be led by Narendra Modi. The 2013 argument about avoiding the “UPA policy and personnel trap” was that only a comprehensive “Modi-fication” of processes, personnel and policies could lift India from the consistent undershooting of potential since the 1950s. This was a period heralded by the era of Soviet-style institutions, mindsets and policies. Groups of officials, businesspersons and politicians including the “PC Network” (whose influence has continued well beyond 2014) used inside information, fake news and skewed policy to grab riches at the expense of the broader society. The “PC Network” comprises individuals in each of the Four Estates, and works to ensure that its members get inserted into key positions even while those few who are opposed to this band of profiteers remain excluded. Officials who are part of the PC network are serenaded by a fawning chorus of praise from PC-oriented elements of the Fourth Estate, with their misdeeds either covered up or camouflaged as furthering the public good rather than vested interests. Over the decades, through gaming of the investigative agency, import-export, stock exchange and other key components of governance and the economy, members of this network have accumulated wealth to a degree as would raise envy in New York. With the advent of Modi 2.0, some of the key figures of the PC Network have begun coming into the spotlight of investigative agencies that were earlier either complicit in or complacent about the manner in which this network used insider power and information to convert vast tranches of the economy into a rigged casino guaranteeing wealth for them at the expense of the common citizen. Economic and financial policy in particular has been a favourite hunting ground of the PC Network, the shadow of which has now started to be removed under the alert and vigorous eyes of Modi 2.0.

Together with the 40-day lockdown, across the country, individuals and institutions, both public and private, are calling for a dynamic “Modi-fied” economic policy. Sectors such as pharma and IT can be expanded, using the global opportunities opened up by the pandemic. Such measures would enable India to emerge the winner from a pandemic that strong steps by PM Modi in the health sphere have thus far blocked from becoming an Italy-style typhoon. A similar active role by the Prime Minister in the framing and implementation—at the soonest—of the economic aspects of dealing with the Covid-19 pandemic in India is needed. A few steps which would help ensure a double digit growth trajectory for India soon after the Covid-19 shadow passes are detailed:

(1) Automatic 100% FDI approvals across sectors, except for a few—repeat, few—specified exceptions where FDI proposals should be submitted in advance to the relevant authority. Unless a negative nod is given in 45 days, the proposals should be deemed as approved. In a few specific cases, the period for decision on approval may be explicitly extended within 15 days of submission of the proposal to 90 days, but not more. India is not a weak country any more to be unable to meet threats to its interests. Under Prime Minister Modi, the integrity of India is protected in such a manner that it is not possible for external actors to function inside the country in the manner they were used to in previous regimes. It may be remembered that Deng Xiaoping launched a similar reform, which enabled China to overtake India at speed since the 1980s. When Chief Minister Modi visited Beijing and Shanghai in 2011, this writer spoke of him becoming for India what Deng was for China, a transformational leader. Deng opened the doors of China to FDI, including from moneys accumulated abroad by overseas and other Chinese, and it was this bold policy that created the spark which ignited the massive growth engines of the Chinese economy. In the same way, 100% Foreign Direct Investment should be permitted to come to India by the automatic route. Any suspicious case involving significant threats to the security of India can be dealt with under an unobtrusive surveillance mechanism. Such a move on FDI would assist in sending the market value of assets in India higher at once, thereby preventing the distress selling of Indian assets that has been taking place since the period when Congress president Sonia Gandhi took full control of the government from a Prime Minister convalescing after massive heart surgery in 2009. The reputation of Manmohan Singh, among the finest human beings on the planet, would not be what it is today were he to have decided to decline a second term.

(2) A FEMA for income tax, i.e. reduction and simplification of income-tax. Lower rates generate more revenue. In 1997, this writer had asked in the Times of India for tax rates to be slashed to 30%, 20% and 10%. These were the rates in the 1997 budget, and the effect on revenue was profound. P. Chidambaram as Finance Minister, when his effective boss was Sonia Gandhi, was a disaster, moving away from the gentle touch of the Narasimha Rao and Vajpayee past to UPA-era Police Constable ( PC) methods that have been allowed to linger within the portals of North Block for too long. Tax rates should be reduced, slabs brought in line with inflation. Importantly, just as FEMA replaced FERA, tax codes should be reformed in such a way that the emphasis is on getting additional revenue rather than clogging the courts and jails at the expense of revenue settlements even more than is already the case. Income-tax laws need a FEMA in the manner this was introduced under Prime Minister A.B. Vajpayee, and Prime Minister Modi is strong enough to ensure a change from “police constable” methods to a system and processes that accept the Indian citizen as being responsible and honest unless (in rare instances) being proved otherwise. In such cases, the penalties should be financial rather than penal. The country needs money, not more expenditure on the prison system, the few exceptions being income from occupations such as extortion or narcotics.

Another way of promoting employment would be to introduce a GST and income-tax write-off for units employing more than a given unit of labour per Rs 1 lakh of capital invested. Those with a higher labour slab (as compared to capital slab) would enjoy tax benefits. The present tax system permitting depreciation benefits companies seeking to replace labour with machinery.
(3) The Goods and Services Tax needs to truly be a “Good and Simple Tax”. This is possible by:
(a) slashing slabs to 5% and 15%;
(b) eliminating those businesses with an annual turnover below Rs 10 crore or individuals with annual income below Rs 15 lakh;
(c) exempting items of common consumption such as food items from GST;
(d) making the filing of returns quarterly in the case of payees with a turnover above Rs 1,500 crore, twice yearly for those with a turnover in the Rs 100 crore-Rs 1,500 crore range and annually for those with an annual turnover of less than Rs 100 crore and above Rs 10 crore.

(4) Using corrupt officials to harass rivals is a practice which needs to be eliminated, and for this, the ED, CBI and DRI should concentrate on a much smaller caseload, leaving smaller cases to more routine investigation. Officials should be protected from harassment for taking decisions, including for some that may go wrong, unless collateral motive gets clearly established in advance. Much more transparency and broader accountability is needed in the functioning of agencies with vast power, which itself needs to be whittled down to levels more suited to a democracy.

Punitive powers need a relook, and ombudsperson systems need to be created on a decentralised level. Having a single Lok Pal to fight corruption in India is a measure that seems more than usually optimistic. The investigative agencies and safeguards to their misuse need to be accessible in multiple places rather than citizens having to go to the national capital or to state capitals for needs that ought to be settled at most at the district level. Online resolution of problems should be multiplied and finally made the norm. Constant monitoring is needed to ensure that undue influence is not brought to bear on the investigating officer. Overall, once a situation gets created in which they can function in a transparent and professional manner, several of the IPS, IAS and IFS officers in India (together with the other services) are—on a person to person basis—among the finest in the world. Administrative reform is a needed supplement to economic reform, and now that adequate knowledge of the processes of governance at the Central level has been picked up, Modi 2.0 can proceed to design and put in place a 21st century administrative structure for India that replaces the 19th century model (with a few elements of the 20th century thrown in) which comprises the governance mechanism of a country that has the potential to be the next superpower, after China and the US. In particular, an overall climate free from the fear of arbitrary action is essential for rapid growth.

Among the pitfalls to promoting investment in India is the manner in which agencies such as the National Green Tribunal have blocked the setting up of enterprises on multiple occasions. Each decision of theirs needs to be concluded only through a public hearing and need to be accompanied by a fact sheet showing the cost to the economy if a decision gets taken to stop a unit from coming up. Certainly plants have rights, but so do human beings in India to a decent life, something that environmentalists seldom seem to consider in their prescriptions. Of course, it needs to be repeated that the day needs to soon arrive when a Chief Justice of the Supreme Court will change the way the judiciary functions in the comprehensive manner in how CJI J.S. Verma created the Collegium system and walled off the higher judiciary from external interference in processes of selection. Courts need not only more judges and staff but far less cases that each takes up, many of which may not be entirely worthy of the court’s time. Timelines need to be fixed such that the maximum period for a case to be finally decided does not exceed five years, while the median time should be a year or less. The Supreme Court and the Law Ministry need to work together on such an overhaul of a system that has some of the finest juristic talent in the world.

(5) If India is to seriously compete with China in becoming a global manufacturing hub, what is needed is to establish pre-fabricated housing complexes for temporary workers around manufacturing complexes. Such housing is an essential part of infrastructure and need to be developed at speed, so that the next pandemic (and there will be more) does not cause the problems seen in Mumbai and Delhi during the Covid-19 outbreak. Such housing will also incentivise migrant labour to return to locations where they are needed.

(6) Expansion of the education sector needs special attention, especially the use of online methods. Educational and entertainment programs designed for migrant labourers could also be developed under the Skill India rubric. The use of online systems for teaching needs to be encouraged. A way to garner jobs and resources would be to assist in setting up individuals with language skills to launch online courses in the English language for those in other parts of the world seeking to learn the international link language. India could be the world champion in the teaching of English as a second language across the world. Other centres could train teachers in Portuguese to enable them to go to Brazil and others in Russian to enable migration to another country needing an influx from outside that is compatible with the culture and disposition of the Russian people, who are among the most admirable in the world. India lost the chance under Jawaharlal Nehru and Indira Gandhi to send millions to countries such as the UK that at the time welcomed immigration. Given the immense goodwill President Jair Bolsanaro and President Vladimir Putin have for Prime Minister Modi, certainly hundreds of thousands of law-abiding citizens from this country could be welcomed in giant states that have immense gaps in their existing manpower, including in schools, farms and health facilities.

The strong action in the health field taken by Prime Minister Modi appears to be ensuring that India escapes the worst of the Covid-19 disaster, and will soon be on the road to the pre-Covid-19 situation in terms of health. What is needed is a similar set of actions, this time designed to ensure that the economy emerges from the Covid-19 pandemic in even better shape than when it entered it. This may seem a big ask, but “Modi hai to mumkin hai”.

Monday, 13 April 2020

Prof M D Nalapat on US Economy, US Elections and India Opening for Business (PGurus)


Prof M D Nalapat and Sree Iyer discuss the US stimulus package, the Vice Presidential candidate that Biden ought to choose, and Modi's plans for India.


https://www.youtube.com/watch?v=E7J4MhVzPpg 

Sunday, 12 April 2020

Xi Jinping Has a Plan. Does Donald Trump? (Sunday Guardian)

Xi will work to ensure that China emerges as the centrepoint of the global  economy, the way the US has been since 1943.

After US President Donald J. Trump, Chinese Communist Party (CCP) General Secretary Xi Jinping is the most discussed world leader these days. The two others who qualify in the top four spots are not Angela Merkel or Boris Johnson, but Vladimir Putin and Narendra D. Modi. Love them or hate them, these are four individuals who are impossible for the world to ignore. In this group, China and the US are in a class of their own where the size of their economies are concerned, with India a considerable distance behind, but ahead of Russia. While the first two are already superpowers, India hopefully will qualify within a decade (given smart policy) and Russia after that. Neither rapid growth nor the retardation of growth through bypassing possible synergies happens by accident. Both outcomes are the result of policy. Smart policy promotes growth, while dysfunctional ones slow it down. Now that the world economy is wrestling with the shock of the Covid-19 pandemic, it is unlikely that China will soon regain the fighter jet speed that its economy achieved for a generation. However, it is clearly the intention of Xi to once again place China at the top of the growth tables despite for some years, his country being overtaken by India. The Sonia-Chidambaram effect on the Indian economy has been profound, and while many ministries (and the PMO) have shaken off that legacy, a few have not. It is to be seen whether this year it will be China or India that has the higher rate of growth. The Covid shock has opened the door for opportunities for India if the country avoids the community transmission stage to a substantial degree because of Prime Minister Modi’s decisive step of first barring the world from India and later making the entire country stay at home for a 21-day period. After that period, there will, hopefully, not be a total lockdown but a hybrid scheme that ensures a restart to the economy and its transformation and renewal besides relief from the virus.

General Secretary Xi, meanwhile, will be working to ensure that China emerges as the Middle Kingdom once again, the centrepoint of the global economy, the way the US has been since 1943. In such a plan, ensuring that the Chinese currency gains acceptance as the reserve and trading currency of choice will play a lead role. Xi knows that the US dollar being the reserve currency of the globe is both the cause as well as the effect of US predominance in the global order. Xi is part of a trio of “Red Emperors”—Communist Party supremos who were as powerful as predecessors in the Han or Tang dynasties. The other two in the trio are Mao Zedong, followed by Deng Xiaoping. The first, Mao Zedong, systematically consolidated China into a unified country bigger in area than that ruled by past dynasties such as the Qing or the Tang. Once such a unification took place and got stabilised, Deng Xiaoping used smart policy to make China a global economic force, with the aim of eventually making it the biggest. Deng was able to succeed in this because Mao had demolished the entire top crust of the Chinese Communist Party (CCP) during the Cultural Revolution. The pre-Cultural Revolution CCP leadership, had they remained, would never have allowed Deng Xiaoping to introduce capitalism with CCP Characteristics, a form of economic system that prevails in the country to this day. While Jiang Zemin and Hu Jintao oversaw substantial changes, these were nowhere near the scale contemplated by Xi, which is designed to displace the US at the apex of the global economic and security pyramid before he demits office.

In this task, Xi needs to end the role of the dollar as the global reserve currency. Together with steps being taken by him, the General Secretary is banking on the headwinds faced by the US that get created through bad policy, just as President Ronald Reagan made bold and brilliant use of the atrophy of the USSR that began during the 18 years of stagnation and decline under Leonid Brezhnev (1964-1982). Without this advantage and the additional impetus for collapse created by the Tughlaq policies of Mikhail Gorbachev, the USSR may still have survived, provided that the economic system got a makeover. Gorbachev believed that the key to salvation of the USSR lay in making concessions to get bounty from the very countries that were impatiently waiting for the USSR to collapse. He was surprised and petulant when such assistance failed to materialize.

Now that the US is no longer the biggest consumer of but the biggest competitor to Middle Eastern crude, with China replacing it in the first role, the task of breaking the link between international oil trade and the dollar has been made easier. And given the way the US has proved to be a fickle partner, most recently to the Afghans and the Kurds by Trump suddenly joining hands with their bitterest foes, several of its allies are reconsidering the reliability of their reliance on the US for security. Such US behaviour is in contrast to the Sino-Russian alliance, which has stood by its traditional friends even when doing so is against their own national interests, as is the case of China with Pakistan.

Jiang Zemin focused on growth, and did not much care that China’s technology and plant was almost entirely imported. Hu Jintao aimed for self-sufficiency, and ramped up domestic design and production of higher-end items such as automobiles and even aircraft. Xi Jinping is looking to China establishing frontrunner status and advantage in the Knowledge Economy. He is ensuring that the country go digital, and is spending vast sums on innovation and hi-tech startups. Xi has a plan. Does Trump have another to ensure that the US-dominated status quo continues well into this century? The jury is out on this question, the answer to which will define 21st century geopolitics.