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.
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