Saturday 19 March 2011

Outsourcing policymaking to the West (PO)

M D Nalapat

One of the country’s most prestigious newspapers, The Hindu,has been carrying a series based on the 5000 Wikileaks cables which relate to India. The first installment carried details about how Mani Shankar Aiyar lost the Petroleum Ministry in a Cabinet reshuffle,because he was regarded as too pro-Iran and therefore anti-US.He was replaced by Murli Deora, who is known to be close to the US from the time of Ronald Reagan.

Mani Shankar Aiyar is no stranger to Pakistan,having served in the country as a diplomat for many years. He is among the few politicians with the ability to understand complex issues,and to take a long-term view of policy. Certainly he feels uncomfortable with those who argue that Delhi should unquestioningly follow the “advice” given by the US,France and the UK, and makes no secret of such views. Interestingly, another former Indian Foreign Service officer-turned-politician was also sacrificed, most probabably because like Aiyar,he too opposed the uncritical acceptance of advice from Europe and the US that has been the hallmark of Sonia Gandhi’s policies. Like Aiyar, Kunwar (Prince) Natwar Singh too has a very high IQ and is far happier in the world of books and scholarship than he is with politics and polticians. In contrast to them,Murli Deora, who was in charge of the Union Petroleum Ministry till very recently has made no secret of his affinity for the US and for Europe, being among the many Indian politicians who spend a lot of time in both these continents. Murli Deora is a person of great charm,and it is this quality that enabled him to become one of the top fund-raisers for the Congress Party in the 1980s. Businesspersons know that he can be relied upon to help them,and hence have usually followed hos advice to donate generously to the Congress Party.

Murli Deora’s mentor in politics was a soft-spoken barrister,Rajni Patel,who was the Congress boss of affluent Mumbai years before Deora took charge. However,while Rajni Patel had an affinity towards the Left, Deora has always been a backer of more privileges for private industry. He is the exact opposite of Mani Shankar Aiyar,and it is a commentary on Indian politics that he is still a powerful member of the Union Cabinet,while both Aiyar as well as Natwar Singh are without any official position. From the time (1947-64) when Jawaharlal Nehru was Prime Minister,the mainstream Indian establishment has followed a policy of verbally differing with the West while in effect obeying the dictates of the civilisation that dominated the globe for three centuries,till the close of the 1990s.

It is not accidental that the higher one goes in the Indian official establishment - especially in the economic ministries - the greater the proportion of children studying in expensive foreign institutions,such as Wharton,MIT,Harvard and Princeton. The monthly expenses of such tuition come to more than the annual salary of even a high official in the Government of India ( those of the rank of Joint Secretary and above), yet there has been no problem meeting these expenses. Usually,trusts and foundations indirectly funded by large corporates give scholarships and other assistance to the children of high officials. It would be a simple matter for the Income-tax authorities to get details of the number of officials whose children are studying abroad,but for obvious reasons,this is never done.

When the British ruled India,they paid very high salaries to the top civil servants. However,when Nehru became PM, he decreed that salaries should be cut to very low levels, a practice that has been followed to the present.Even the highest officials in the Government of India get a net salary of about Rs 70,000 a month, when a trainee fresh from an Indian Institute of Management gets Rs 2.5 lakhs per month in many companies. As Lee Kuan Yew pointed out,when there is a huge gap between discretionary power and official income,the temptation to be corrupt increases signficantly. It is a tribute to the quality of those entering the civil service that despite all the temptations,so many officers remain honest.

Lee Kuan Yew learnt from India’s mistake and ensured that he paid very high salaries to senior civil servants in Singapore,which is an important reason why that city-state has a civil administration that is honest and effective,as does another territory where too salaries and pensions are high,Hong Kong.Unlike Nehru, the Chinese did not tamper with the salary structure of the administrative structure,with the result that while India is riddled with corruption,the Hong Kong civil service is clean.

Interestingly, not only do several children of senior officials have degrees from the most expensive foreign universities,but many are also working for foreign-owned multinationals, especially the financial companies whose greed has caused so much economic turmoil. Is it any wonder that several policies get framed in India that benefit foreign countries at the expense of the Indian people? Indeed,the Sonia Gandhi-led administration is also considering changes in the Patents Law that would destroy much of the domestic pharmaceutical industry.Since the new government came to power in 2004,the prices of several drugs have gone up by 800% and more, as has hospital care. The beneficiaries are foreign drug giants as well as insurance companies Now that events in Libya and Egypt demonstrate the fair-weather nature of the friendship of Western powers with local elites, there is an opportunity for India to join China in attracting huge amounts of capital.

Indeed, Muammar Gaddafy of Libya has already declared that he wants to divert investment from the US and the EU to India. He has asked India to provide technicians for the oil industry.Should India oblige,the way may be clear for India to become a significant player in Libya’s oil industry. However,so total is the outsourcing of policy to the West that this request is being ignored by the Petroleum Ministry,which has thus far done a dismal job of ensuring either domestic production or access to foreign fields. The exploitation of proven fields has been painfully slow,while in most countries,Indian entities lose out to Chinese or Western oil companies.

That India is making progress is despite much of official policy,which remains geared towards creating multiple barriers to productive activity that can only be surmounted by bribes. India has yet to follow the example of Germany and seek out tax evaders who use offshore havens. The silver lining is that civil society is finally beginning to notice the magnitude of the problem created by official corruption,and is pressing for action. Should at least a few dozen big fish go into the net, the country would benefit substantially. However,as yet,there seems to be no evidence that VVIPs are in any danger of being held to account for the tens of billions of dollars they have stolen from the Indian people.

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