M D Nalapat
PM Modi seems to have left economic policy to the ‘experts’, rather than his natural instincts. Blow upon blow has been landed by these worthies on the economy.
Prime Minister Narendra Modi seems, from the start of his term in office, to have left economic policy to the “experts”, rather than his natural instincts, and the effects are clear. Blow upon blow has been landed by these worthies on the economy, the latest being the incomprehensible interest rate hike announced by the Reserve Bank of India on 6 June. Several RBI Governors, including the past trio of Reddy, Subba Rao and Rajan, have looked westwards for appreciation and have imposed punitive rates designed to cut growth (i.e. employment and income) in an economy where around 400 million people are hovering around the margin of subsistence, many close to starvation. Of course, the very central bankers of London, Frankfurt and Washington plus fund managers based in North America and Europe themselves have slashed interest rates to near-negative levels, even while they applaud every upward movement in interest rates in India. Their purpose is to reduce the holders of rupees to penury and the holders of dollars, pounds and euros (including the many in the country with illicit accounts in offshore banking centres) to the status of masters, able to pluck equity and other assets from their domestic owners cheaply. The latest RBI rate rise has further lowered the value of the rupee, a fact that will bring smiles to the faces of those with money abroad. This columnist is presently in China, whose currency is ten times the value of the rupee, and may possibly be on track to be 15 times more valuable. Not too long ago, the rupee and the Taiwan dollar were equal in value. Today, the rupee is half the value of the Taiwan dollar, and counting. It was expected that the Prime Ministerial term of Narendra Modi would result in the rupee being at the least Rs 30 to the US dollar, rather than an all-time low that could soon fall to Rs 70 per USD. Of course, basking in the smiles of their peers in London and New York, RBI officials must be delighted at such an outcome. Rather than India’s Main Street, what they are looking to protect is Wall Street, including the rating agencies that were blind to the 2008 market crash. Rather than wallow in servitude to such dodgy institutions, what was expected was India joining hands with a Coalition of the Willing in both East and West Asia that would trade by using their own currencies rather than those of countries that have cost investors in Asia, Africa and South America trillions of USD because of defective governmental policies and greedy moneymen.
In contrast to economic policy, Prime Minister Modi has led from the front in foreign policy, fashioning an innovative approach to relationships that could change long-held perceptions of India. His Singapore speech was among the finest the Shangri-La Dialogue has witnessed. Modi correctly defined the Indo-Pacific in the most expansive terms, as stretching from the eastern and southern coasts of Africa to the western shores of the Americas. In a silent rebuke to those who conflated the concept into a geopolitical weapon against China, Modi warned that the Indo-Pacific should be inclusive, not exclusive, its waters should be free and open, and the concept was emphatically not aimed at any country (i.e. China). At the same time, he made it clear that there should be freedom of navigation in sky and air, and that resort to military power was unwelcome. Earlier, Modi had shown his intention to have a balanced foreign policy by going to Wuhan for intensive confabulations with President Xi Jinping and later to Sochi for informal talks with President Vladimir Putin. It was a signal to both that the steady warming of relations between Delhi and Washington, including in the military sphere, would not impact existing relationships with old friends, a group that includes Iran, with which India has been carrying out several projects in an atmosphere of friendship unaffected by the close relationship that Prime Minister Modi has with Prime Minister Benjamin Netanyahu of Israel and the close ties between India and Israel. Although Modi is being called a hawk by Mani Shankar Aiyar (who, let it be admitted, is among the most brilliant and witty of this columnist’s friends), the fact is that in August, for the first time since 1947 separate from UN missions, both the Indian as well as the Pakistan army will conduct exercises jointly in Russia under the SCO banner. Modi’s meetings not just with US President Donald Trump but Prime Minister Theresa May of the UK, Chancellor Angela Merkel of Germany and President Emmanuel Macron of France demonstrate the importance the Prime Minister attaches to relations with established democracies, another strand in the foreign policy of delicate balance that has been crafted by him. So far as China and the US are concerned, Modi will need to “balance” ties with them, but in entirely different ways. With China, economic and commercial ties need to be given a quantum boost, so that the two countries can together race towards a combined trade volume of USD 300 billion. Investment from China would also help to reduce the net outflow of funds from India as a consequence of Chinese exports to India being much more than those in the other direction, while Chinese banks operating in India would have substantial opportunities. With the US, what is desirable would be to carry forward the defence and security relationship between Washington and Delhi by signing the other two Foundation Agreements consequent on one (that dealing with logistics) being already signed. Transferring the F-16 assembly line to India, combined with the supply of F-18s and later F-36 aircraft, would assist in ensuring that India’s domestic aviation manufacturing facilities reach at least the level of Brazil, if not higher. Following a punishing schedule of visits, Modi has succeeded in once again positioning India as a central force in global geopolitics.