Sunday 30 November 2014

Modi’s ministers must deliver jobs (Sunday Guardian)

M.D Nalapat is the Editorial Director of The Sunday Guardian.

President Pranab Mukherjee, Prime Minister Narendra Modi and the Union Council of Ministers after the swearing-in ceremony at Rashtrapati Bhawan in New Delhi on 26 May 2014. PTI
Six months into his first term in office, Prime Minister Narendra Modi must be searching for ways of improving his performance. The economy is still stuck at a 5% rate of growth (or half of what it needs), while companies and individual investors still hold on to their cash rather than investing it in new (job-creating) plants. Apart from the nightmare that procedures have evolved into during the Manmohan decade, other factors holding back job-creating investment are the limitless powers of the tax authorities, as well as high bank interest rates. Former Finance Minister Palaniappan Chidambaram has placed the responsibility for the dampening of investor sentiment at the door of the retrospective tax proposals of Pranab Mukherjee, omitting to mention that he himself had imposed retrospective imposts more than two dozen times while he was the Finance Minister. The refusal of Chidambaram to accept that his officers may sometimes go wrong in their assessments resulted in a "fear factor" among investors, who became unsure of just how much tax they would have to pay, and when. The unpredictability of tax demands and the extreme powers given to officers to enforce them have made India an impossible place to do business in for those not close to the Finance Minister.
Finance Minister Arun Jaitley needs to retrieve the situation, not by soothing sound-bites, but by removing bribe-generating discretionary powers, abandoning the retrospective tax route and lowering tax rates so as to boost compliance and collections. Jaitley needs to lean on the RBI to stop that institution's obsession with slowing down the economy to a crawl. Another minister who needs to deliver jobs is Piyush Goyal, who should ensure that procedures and practices in the power sector get more transparent and even-handed, so that others besides a handful of corporates with political influence can safely invest in expanding electricity generation. Conditions need to be further relaxed for those investing in natural resources. For example, those companies without a steel plant are handicapped from bidding for coal mines. This means that almost all the major international coal mining companies will be barred from investing in India, because they do not have a steel mill as part of the product mix. While some distance has been traversed, much more needs to be done by Piyush Goyal before India becomes a top destination for investment in energy and natural resources. His colleague Nitin Gadkari needs to stop believing that only the state (which by the way has no money) should build roads and other infrastructure. Instead, he needs to attract capital from across the globe for such a purpose.
Defence Minister Manohar Parrikar needs to do away with the absurd suggestion to bar defence PSUs from competing with private companies for certain orders. Both public and private companies in India should compete with each other. Just as blocking the private sector was wrong, so is any move to block the public sector now. Also, in this globalised age, it makes no sense to limit external ownership to just 49%. Provided each company has a "golden share" belonging to the state, and which can be used in case of emergency, there is no harm in permitting near-100% foreign ownership in almost all sectors. What is needed is to ensure that surveillance systems be improved to ensure compliance with national interest, rather than continue with the existing policy of blocking investment.
Ravi Shankar Prasad looks after ICT (Information Communications Technology), which is potentially capable of generating $15 billion of investment into India, provided he can convince intending investors that he will ensure fairness, transparency and speed in the decision-making process. For too long, a perception has taken root within investors that only favourites get the inside track in getting projects cleared, often on terms which give undue benefit to themselves. Such a UPA-era policy has to change, and in this process, the Modi Council of Ministers has to demonstrate through their actions that they have no favourites, barring the 1.26 billion people of India and their interests.
"Make in India" is a brilliant slogan, but for its promise to get realised, Modi's ministers need to deliver on performance. Those with good records such as Suresh Prabhu or Manohar Parrikar need to do even better this time around. By March 2015, Narendra Modi needs to show that he can run the Government of India at the same level of performance as he supervised the Government of Gujarat. In such a task, his ministers need to not just talk, but deliver on policies which can ensure the 12 million jobs this country needs annually.

Monday 24 November 2014

India’s ministers should follow Mahatma Gandhi (Sunday Guardian)

M.D Nalapat is the Editorial Director of The Sunday Guardian.

When he visited Washington, among the high points of Prime Minister Narendra Modi's visit was to see the statue of Mahatma Gandhi which is located in front of the embassy of India on Massachusetts Avenue. Recently in Australia, he was beaming with joy when he unveiled a statue of the Mahatma in Brisbane. Clearly, Narendra Modi has intense admiration for the global statesperson hailed as the "Father of the Nation". Thus far, however, many parts of India have made as little progress in their path towards prosperity as did one of Gandhiji's sons, Harilal, who died an anonymous pauper in a hospital bed after a lifetime of failure, apparently ignited by his father's principled refusal to send him for higher studies to the UK. It must be said that the Mahatma never sought to promote any member of his family in any position, moving in a sharply different direction from the nepotism shown by some of his contemporaries, such as Motilal Nehru, whose promotion of son Jawaharlal bore fruit, especially when the Mahatma himself saw to it that the younger Nehru rose steadily within the Congress party, until he was nominated as the country's first Prime Minister by Gandhiji, who openly claimed that Nehru would, after he himself was gone, "speak his language".

"It is against the tenets of the Mahatma, for our ministers to live in ultra-luxurious circumstances when the people of this country are still eking out a living far from that needed to preserve their dignity. The Mahatma himself travelled third-class and lived in very humble surroundings." 
We do not know what exactly this "language" was, and so are a bit clueless about the extent to which Nehru's policies actually reflected those favoured by the Mahatma. However, it can be said with certainty that Gandhiji must have been distressed when he saw those who had replaced the British making a beeline for the bungalows and offices vacated by the former colonial masters of India. It is bizarre that in a country as poor as India, "servants of the people" (i.e. ministers) reside in palaces which cost Rs 300-400 crore on the market and sometimes more. It is ethically wrong; it is against the tenets of the Mahatma for our ministers to live in such ultra-luxurious circumstances when the people of this country are still eking out a living far from that needed to preserve their dignity. Indeed, when the Mahatma himself travelled third-class and usually lived in very humble surroundings, it is unconscionable that those "serving the people" enjoy a standard of life far, far in excess of that endured by the average citizen. Not merely in their places of stay, but in the matter of other colonial-era privileges as well, what needs to be done is for Prime Minister Modi to do what Jawaharlal Nehru and his successors failed to do, which is to ensure that ministers be treated the same way as other citizens in, for example, airport lines. This columnist had the privilege of travelling a few seats away from former Planning Commission Deputy Chairperson Montek Ahluwalia during an international flight, who for a decade and more would have had access to the "VIP channel" at Delhi airport. Shrugging off his present lowly status as a part of civil society rather than a big honcho in the Civil Service, the former Central planner cheerfully waited his turn in line. So should he have while in office, and so should those now in office do likewise.
This columnist is clueless about just what there was in the "language" of Jawaharal Nehru that was identical to that of Mahatma Gandhi. Indeed, looking at the simple conditions in then Chief Minister Modi's official residence at Gandhinagar as compared with the opulence of Teen Murti House, it would appear that Modi has been closer to the Mahatma's desire for simplicity than some others (who claim to be his most devoted followers) have been.
Presumably now that he is Prime Minister, Modi's living quarters must be of comparable simplicity, even if within the spacious confines of 5-7 Race Course Road. It would therefore be fitting if the Prime Minister were to request his ministerial colleagues to move out of the British-era mansions they now inhabit, into simple accommodation not too different from that of the citizens on whose behalf they are presumed to be functioning. Our ministers should follow Mahatma Gandhi, not just on designated days and before television cameras, but in their lifestyles.

Sunday 23 November 2014

‘Reports of Modi declining Xi invite wrong’ (Sunday Guardian)

MADHAV NALAPAT  New Delhi | 22nd Nov 2014
Senior officials are surprised at reports in both the Chinese as well as Indian media that Prime Minister Narendra Modi declined a personal invitation from President Xi Jinping to attend the just-concluded Asia Pacific Economic Cooperation (APEC) conference in Beijing. An official pointed out that "there was no invite from President Xi to PM Modi to attend the APEC meeting", despite India not being a part of the 21-member group, which includes Russia, China, Japan, the United States and even Indonesia. Instead, "the invite was to attend a pre-APEC meeting, to which countries such as Tajikistan, Pakistan, Mongolia and Laos were invited", besides India. This meeting, according to the officials queried, "had no connection with APEC whatsoever" and was held "principally to rally support for the Chinese proposal of a New Silk Road and a Maritime Silk Road". It was therefore "misleading to claim that Prime Minister Modi had declined an invite to APEC, when in fact such an invite never existed". In view of the global heft of India, "clearly the Prime Minister of India can go to an APEC meeting only after our country becomes a full member". At present, India does not even have observer status within the grouping.
Officials spoken to hoped that "President Xi would take the initiative to get India included in APEC". They were confident that such an initiative would get the support of Russia, Australia, the US and Japan "as these countries are close friends of India". Asked about the Chinese proposal for a New Silk Road, these officials pointed out that such a highway would pass through "some of the most unstable and disturbed areas of Pakistan", and that therefore "security on such a road would be difficult to assure". As for the Maritime Silk Road, the Indian side was awaiting "more details of the proposal" before taking a decision on participation. The pre-APEC meeting, to which Prime Minister Modi was invited, discussed various ways in which China and the participating countries could enhance their economic linkage. It was pointed out that India favoured "full freedom of navigation within the region, and has itself adopted such a policy all across the Indian Ocean". Hence, any efforts to restrict freedom of navigation in the South China Seas would be a "matter of concern".
Senior officials pointed out that there was "sound logic" in India becoming a full member of APEC, as geopolitically, the Indian Ocean and the Pacific Ocean formed a single strategic entity, with common interests and facing the same threats. "India, as in the case of Indonesia, naturally belongs to such a grouping, because of its huge coastline", an official pointed out, adding that "in case the Chinese seem hesitant to initiate the entry of India into APEC, discussions may take place with the US, Japan and Australia" so as to ensure that these littoral countries sponsor India's membership. "Prime Minister Modi is very conscious of the need to ensure that both the dignity of India as well as national interest be protected at all times, hence the view that the Head of Government in India can attend an APEC meeting only if this country is made a full member". He added that he was hopeful that such a decision would "soon get taken by the organisation, in view of India's importance as both a maritime power as well as a security and economic partner".
"Prime Minister Modi believes in quiet diplomacy, even though this may not generate the same level of approval of television anchors as high-decibel moves", a senior official said, pointing out that it was precisely such diplomacy which worked to resolve the standoff created by PLA incursions into Indian territory during the 17-19 September state visit of President Xi Jinping to India. Both during the evening of 17 September as well as on 18 September, Prime Minister Modi "pointed out (to President Xi) what was taking place on the border, and made it clear that such activity by the PLA would damage the prospects for close cooperation" between India and China. The official added that "President Xi was surprised (by the PLA moves) and promised to ensure that the matter got resolved by the restoration of the status quo". A senior colleague added that "President Xi kept his word by ensuring a PLA withdrawal within days of returning to Beijing". This step "showed that President Xi was sincere about better ties with India and that he would work to ensure that irritants in the relationship got eliminated". Thus far, the PLA's obsession with testing the patience of India has been a major obstacle to the development of a comprehensive economic and security partnership with China, in a context where both seek faster economic development and security from religious extremism. "Had Prime Minister Modi resorted to high-decibel rather than quiet diplomacy, the border standoff may not have been resolved so soon", an official added, stating that "silent but effective diplomacy is the Prime Minister's style".
The officials pointed out that The Sunday Guardian report of 14 September (Xi to Abe, $35 billion is peanuts) on the extent of potential Chinese investment in India was "broadly accurate", adding that on 26 November, "a hundred-member delegation of top Chinese businesspersons including Jack Ma is coming to India to discuss investment possibilities". In the view of an official, "the target of $100 billion of inward investment and $100 billion in loans to Indian companies was realistic", given the size of India's market and need for finance. He pointed out that "already agreements have been worked out with SBI and ICICI for co-financing" and that "more are to follow". A colleague pointed out that now, Chinese tourists were given visas "within 48 hours" and that tour groups in India needed to connect with their Chinese counterparts to ensure a potential annual flow of 2 million Chinese tourists into India.
Overall, the view was that President Xi Jinping was "a man of his word" and that he was succeeding in gaining control of the military and ensuring that in future PLA adventurism would not be an obstacle to a comprehensive economic relationship between India and China that would boost growth in both. "In this context, the trust and chemistry between Prime Minister Modi and President Xi will play an important role", a senior official claimed.

Sunday 16 November 2014

Modi effect, not RBI, tames food inflation (Sunday Guardian)

MADHAV NALAPAT  New Delhi | 15th Nov 2014
Senior officials say that food inflation has been moderated not by the high interest rate policy of the Reserve Bank of India (which in practice has boosted inflation and slowed growth), but by changes in policy carried out by Prime Minister Narendra Modi.
These include changes in procurement policy, as well as in the harnessing of technology for empowerment of genuine producers rather than financial and other middlemen. Even as RBI Governor Raghuram Rajan continued to effectively downsize the manufacturing base of India by a policy of super-high interest rates, Prime Minister Modi quietly used the interregnum between his Washington meeting with President Barack Obama and the G-20 summit in Australia to implement reforms in food procurement designed to reduce waste and increase market supplies, thereby lowering consumer prices. It was because of these reforms, officials say, that it was possible for India to agree to the WTO Trade Facilitation Agreement without any threat to the interests of genuine farmers, as distinct from food commodity speculators who are estimated to have collectively made windfall profits of $8 billion during just the second term of the UPA. The ten years when Manmohan Singh was Prime Minister, have been days of darkness for the common man, but "bahut acche din" for speculators and the international financial institutions assisting them. It needs repeating that where the UK and the US have collectively imposed fines of nearly $20 billion on such institutions for doing precisely the sort of trades and transactions commonplace in India, thus far the only response of the RBI has been to give such entities privileged access to its highest levels.
Modi has restricted MSP increases for wheat and paddy to an economically bearable Rs 50/qtl, which is a third lower than the UPA's 10-year average of Rs 75/qtl. He has also restricted the powers of state governments to announce bonuses for MSP, a step which has affected BJP-ruled states as well. Chhattisgarh, for example, added Rs 300/qtl for paddy, as did Kerala, while Rajasthan and Madhya Pradesh added Rs 150/qtl as bonus for wheat, all during the 2013-14 season. All this when these states had no need of the excess procurement, and "succeeded" only in driving up market prices for food grains because of reduced availability, even while buffer grain stocks rose to 49 million tonnes in FY 2014-15, or 133% higher than the required stock of 21 million tonnes. The wastage this has led to is regarded by a senior official as "criminal and incalculable".
Prime Minister Modi went further, by ignoring pressure from powerful agriculture mafias comprising commodity speculators and "mock" farmers (i.e. those who stay in the city, but operate giant agricultural operations for profit and for tax purposes). He limited the levy ratio on rice mills to 25%, thereby freeing more grain for the market. These steps have damaged the ability of hoarders and speculators to boost prices, and have led to a cooling off of rice and wheat prices in the market, which has nothing to do with the RBI's textbook reliance on monetary policy as a dampener to inflation, despite overwhelming empirical evidence to the contrary.
Senior officials say that there is "great chemistry" between Prime Minister Modi and US President Barack Obama, and that work on reconciling the positions of the US and India on the WTO standoff began immediately after the PM's meeting with Obama, subsequent to India's refusing to ratify the Trade Facilitation Agreement without ensuring food security safeguards for its poor. Officials said that "backroom negotiations in Geneva took place between the two sides", and that "Obama finally asked his team to agree to Prime Minister Modi's request for a permanent waiver rather than just a 4-year peace clause". This request had been conveyed by Modi to Obama in their September meeting in the White House. These officials say that the PM is keen to ensure that "other anomalies" get corrected, such as "outdated reference prices used to calculate subsidies". These prices have been arbitrarily fixed at 1986-87 levels that bear no relation to the speculator-boosted prices prevalent since Bill Clinton re-opened the doors to financial fraud in the 1990s that had been shut by President Franklin Roosevelt in the 1930s.
Senior officials say that they have been "energised by the innovative approach of Prime Minister Modi", which they compare to the "Can't Do Much" approach of his predecessor, and look towards success in other negotiations, such as crafting a stable and mutually beneficial relationship with China and winning India a permanent seat in the UN Security Council. They say that "Prime Minister Modi is looking at ways to ensure that India makes a significant contribution towards reducing climate damage, even while avoiding any damage to the country's growth prospects". The WTO deal, made possible by both the reforms initiated by Prime Minister Modi as well as the chemistry he shares with Barack Obama, is clearly only a first step in what these officials say will be "the long road to Middle Income status" for the people of India.

Saturday 15 November 2014

Ms Irani, India needs German, Chinese and Spanish (Sunday Guardian)

M.D Nalapat is the Editorial Director of The Sunday Guardian.
Union HRD Minister Smriti Irani, with FICCI Senior VP Jyotsna Suri (2R), US’ South Carolina Governor Nikki Haley (R), UK Universities Minister Greg Clark (L), releases a knowledge paper during the FICCI Higher Education Summit in New Delhi on Thursday. PT
When it was announced that Smriti Irani was being elevated to the Union Cabinet and given the Human Resource Development portfolio, to say that such a move was not universally hailed would be an understatement. The weeks ahead saw repeated references to her educational background, the presumption being that only a string of degrees would qualify an individual to be an effective HRD Minister. This despite the fact, that the country is littered with those carrying trainloads of qualifications, who are proving to be less than stellar in their work. Raghuram Rajan is an example. Despite — or perhaps because of — his academic pedigree, the Reserve Bank of India Governor has continued the high interest rate policy of both his predecessors, thereby ensuring that company after company be rendered unable to compete domestically or internationally, with several ending up in the non-performing asset books of public sector banks. There is much buzz about a "Harvard degree", with few pointing out that what is usually needed to acquire such a distinction is not IQ, but parents who have the financial means to spend more than $400,000 on their ward's education in that well-funded institution.
In contrast to the doomsday prophets, this columnist was glad that Smriti Irani was made the Union HRD Minister. Education in India needs to get modernised, and Minister Irani is certainly modern. Hence the expectation that she would bring at least a whiff of the 21st century into what is still a cram-filled 18th century educational process in India, a system that has stamped out excellence so effectively that no university in India comes anywhere near desirable standards of global excellence. A dull uniformity has been imposed across the spectrum of higher education, with almost no discretion given to universities in matters both academic as well as administrative. What is needed is to free higher education from micro-management, and convert the University Grants Commission into an institution, not focusing on control, as on coming up with innovative ideas by ensuring that those wedded to innovation and excellence occupy its highest offices rather than bureaucrats obsessed with detail to the exclusion of the bigger picture. Hopefully, Minister Irani will work on this, so as to fulfil Prime Minister Narendra Modi's agenda of "Minimum Government, Maximum Governance". In such a context, it was a surprise when the HRD Ministry abandoned — in midstream — the teaching of German in around 500 Kendriya Vidyalaya schools across the country, replacing that language with Sanskrit.
Sanskrit certainly needs encouragement, and a good way of doing so would be to set up an academy on the lines of the Goethe Institute, Confucius Centre or the Alliance Francaise, which would be tasked with teaching Sanskrit across the globe. Meanwhile, in India as in other countries, the decision as to what foreign language to learn should be left to the student rather than to the state. Most likely, the Goethe Institute will now look towards private schools (for example, the many run by the Catholic Church or by the Anglo-Indian associations) as alternative vehicles for the teaching of a language, mastery of which would enable tens of thousands of our youth to get jobs in German companies across the globe, thereby depriving the Kendriya Vidyalayas of an advantage. Instead of blocking access to the German language, what the HRD Minister needs to do is to ensure that facilities get created for school students to learn those foreign languages, which would help them get jobs, such as Chinese or Spanish.Additionally, facilities need to get created to teach Portuguese to those looking at migrating to Brazil, a country in need of teachers, nurses, engineers and other skilled manpower. Perhaps Russia could be tapped to ensure the teaching of Russian so as to ensure that more people from this country settle in that vast country of immeasurable potential.
Forcing choices on students by fiat is a style of governance alien to the philosophy of governance of Prime Minister Modi, and as the minister in charge of a portfolio crucial to the future of hundreds of millions of young people, Smriti Irani needs to not only avoid blocking German in schools, but adding to the mix Chinese, Spanish and other foreign languages of value in the job markets of the future, thereby giving students more, rather than less, choices in schools across the country.