Joblessness dangerous for all, not just the unemployed ( Sunday Guardian)

 

Approaching risk of an ‘India Spring’ in autumn is why economic policies are needed that move away from the rigid nostrums and playbooks of North Block.

Those born into the certainty of wealth will usually not understand what takes place in the human mind as a consequence of a prolonged period of joblessness and the resulting absence of income. As the months and in short order years pass without a job becoming a part of everyday life, an individual begins to look inwards for reasons why he or she has failed to enter the ranks of those with an adequately remunerative position. Comparisons, silent or ( more cruelly) vocal that get made with childhood companions who have managed to “crack the code” and secure a job, push the unemployed youngster into a mood of self-doubt. Perhaps he or she just does not have what it takes to assume a responsibility that carries a salary. The next stage is to shun company, except perhaps those of others similar placed (or misplaced). When guests visit, the jobless person waits inside his room to avoid hearing the inevitable question: Has he found a job yet? That will be met with a silent shrug, thereby giving the answer. In a desperate search for an identity that may convey some shards of respect (and a rebirth of self-respect), many gravitate to organisations that thrive on street protests, and on the creation of situations such that publicity becomes inevitable. Whether such coverage be favourable or condemnatory is hardly important. What counts is that the individual within the group he has joined begins receiving public attention and no longer needs to avoid the pitying eyes of visitors or the growing irritation in the faces of family members unhappy that their usually meagre finances are being depleted rather than increased by an individual who after all has a call on shelter, on food and the occasional dole of money. An identity has once again come into being, to replace that lost on account of prolonged joblessness.

The 2011 Arab Spring was more an expression of increasing loss of hope at an end to the joblessness and poverty of certain countries than it was a movement formed to bring in democracy. Which is why the effect of the Arab Spring was almost non-existent in countries such as the UAE or Kuwait, where the state has provided its citizens with comfortable livelihoods. Or in Saudi Arabia, where most of the levers of activity are in the hands of expats, thereby severely limiting the ability of even disaffected sections of the local population to cause a political upheaval. Which is why a long-term downward trend in oil prices is likely to lead to considerable tensions in the Middle East, given that the population of the region is even younger in composition than that of India. Unless educational systems are recreated in order to meet the needs of a modern society, the region is in serious trouble, which is not good news for countries such as South Korea, India, China and Japan that depend on it for much of their oil needs. It will, of course, be good news for the US and Russia in the race to pump out and sell as much oil as possible before the fuel becomes obsolete. In Germany, it was unemployment and the privation of the middle class that led to the rise of Hitler. But for the Great Depression of the period, the Fuehrer may have retired to Austria in the 1950s as a failed politician and the world spared genocide and world war. In China, where an entire generation has grown up without any memory of the poverty that was pervasive in the country before the close of the 1980s, a fall in employment and income levels within the new middle class is likely to have significant effects on the political and governance structure of the world’s other superpower. The same goes for India. Unless the monetary and fiscal tap is opened and money reaches hundreds of millions of pockets, the next two months are likely to witness a steep fall in middle class income and employment. Measures such as sky-high taxes on petrol and diesel do not help. By reducing economic activity, they will in fact yield less than lower taxes would have over a 3-year horizon. Organisations that showcase one grievance or the other are likely to sprout up, especially in the urban centres. These will compete in the streets, both against themselves as well as against the government. The policies of the 1970s are not going to ensure a return to the growth witnessed till 2017, what is needed are policies that are designed for 2021-23. Should such a reset of economic policy not happen, those who constantly cry out that India has become “fascist” will soon find out what real fascism and its attendant turmoil and fanaticism is.

The approaching risk of an “India Spring”, this time in autumn, is why economic policies are needed that move away from the rigid nostrums and playbooks of North Block. Measures which focus only on FIIs and not on the population at large. Eventually, the reluctance to open the monetary and fiscal spigots sufficiently has led to both a reduction in ratings (by agencies that ought to be ignored rather than placed on the high pedestal of policy) as well as economic pain that has now spread to the middle classes. First incomes have declined and then jobs have disappeared. India could replace China as the manufactory of the world, but for that the economy needs to remain on its feet rather than stagger downwards. The weeks ahead will show whether Modinomics has finally prevailed over Babunomics, or whether the 1930s of Europe are in danger of making a fresh appearance, this time in India.

https://www.sundayguardianlive.com/opinion/joblessness-dangerous-not-just-unemployed

India may re-evaluate neutrality in the US-China war (Sunday Guardian)

The Galwan incident may prove to be a watershed moment in the existential battle between Beijing and Washington should India abandon its longstanding policy of neutrality, in large part out of consideration for Moscow, which is now firmly on the PRC side.

New Delhi: The People’s Republic of China has, since 1949, had three transformational leaders: Mao Zedong, Deng Xiaoping and now Xi Jinping. All three threw into the waste basket the agreements and protocols agreed upon till then and negotiated their own versions for adoption, whenever they regarded doing so as advantageous to China. Mao charted an entirely new course in domestic and foreign policy, as did Deng. The latter had the advantage of the Chinese Communist Party (CCP) leadership rungs all but destroyed by the Great Proletarian Cultural Revolution of the 1960s. He was, therefore, enabled to slice through the opposition of the ideologues to his plans at bringing China into the front rank of the world’s economies when at the time it was lagging behind India, a country that saw a much lower growth rate during the 1950s to the 1970s than even Pakistan.

When Xi Jinping took over from Hu Jintao in 2012, the rest of the party leadership was strong to a degree that it had not been during the period in office of the growth-focused Jiang Zemin and the first term of the softer hand of Hu Jintao. Xi moved carefully but steadily in consolidating his control over the entire machinery of the CCP. The war that he unleashed on corrupt officials proved effective in getting rid of several within the various rungs of the party machine who had been less than enthusiastic about the new boss in town. Although reports continue to surface, especially outside China, about fissures and cabals designed to weaken the now  limitless-termed General Secretary of the CCP, the reality remains that by 2017, Xi had achieved mastery over even the People’s Liberation Army, an important—indeed vital—component of the Party. It was perhaps not entirely coincidental that this was the year when President Donald J. Trump launched a trade war on the PRC, given that Xi had from the start of his tenure not been reticent about his intention to make China once again the fulcrum of global commerce, security and geopolitics. The Belt & Road Initiative (BRI) he launched in 2013 is nothing less than an attempt at re-ordering supply and transport chains in Eurasia such that Beijing becomes the hub. There may be some less than optimal (for Chinese interests) features of the BRI, such as the China-Pakistan Economic Corridor, which sacrifices the long-term interests of the PRC at the altar of the narrower objectives of the PLA, which have since 1959 remained almost entirely India-phobic where South Asia is concerned.

Apart from seeking to convert the PRC into the central logistics trade and transport hub of the globe, Xi Jinping also began a process of increasing gold stocks as well as silently moving towards a digitalised currency. This has largely happened among many sections of society and in multiple locations, with many hundreds of millions of citizens not having to see or exchange paper currency in their transactions. At the same time, potentially disruptive measures such as demonetisation, which could impact the reputation and stability of the currency, were avoided by the PRC, as it has been by the US. While conservative minds anchored in the past (the name of the former CCP General Secretary Hua Guo-feng comes to mind) initially prevailed within the CCP and sought to avoid crypto currency and digitalisation, by now such voices have been stilled by the technocratic Xi, and China has become the first large economy to go in for Blockchain as the back end of its money supply and banking. This would increase global trust in the RMB in a situation where President Xi appears to be of the view that it is only a matter of time before the US dollar gets massively reset, and falls by 40% or more as a consequence. China is already at work switching from US dollar to RMB in as many trade transactions as possible, for example in oil purchases from Russia and Iran, and reportedly soon with Saudi Arabia. Switching from USD to RMB could save nearly 1 trillion USD for China in a situation where there is already a shortage of that currency in its coffers. First the petrodollar link and then the global reserve currency status of the US dollar seem from his moves to be prime objectives of the most consequential Chinese leader since Mao and Deng.

US, ALLIES DECOUPLE FROM CHINA

The problem facing the CCP is that the United States under Donald J. Trump (despite the cooing noises that he often makes in the direction of Xi) has itself gone into a state of currency and other economic war with China since 2017. In the past, sanctions and other measures constricted the economy of the USSR to such a level that the country imploded in 1992. The expectation within China hawks in Washington is that similar pressure would create a like situation within the PRC. Economic stasis would end up in popular unrest replacing CCP rule with that of a more benign regime that would no longer be a threat to US global pre-eminence. Among the measures likely to be taken by the US to reduce the flow of dollars to China is the likely withdrawal of the privileges that Hong Kong is enjoying, once the HK security bill becomes law in the former British colony. More than 70% of the PRC’s US dollar supply comes from the Hong Kong window, and the shutting of that will worsen Beijing’s USD shortage considerably. Next to follow could be the sanctioning of PRC banks, including those in Hong Kong. This would further restrict dollar access. Steps already taken include the banning of pension funds investing in Chinese assets, a move likely to be followed by Canada and soon afterwards by other countries that are now very “soft” on China such as Germany, and even more so Italy. The assumption that a President Joe Biden would be soft on China seems unrealistic. Acceptance of the postulate that China must not be allowed to elbow out the US as the lead technological and economic power has been mainstreamed within the policy community, whether Red or Blue. On whether the Chinese economy will collapse first or the US dollar head for a painful reset hinges a primary effect of the China-US struggle, which has over the past three years especially become an existential matter for both countries. Financial, manufacturing and service chains from countries across the world are de-linking from the PRC if dependent on the US, a trend that will only intensify in coming years. Separating from Chinese supply chains that have long generated huge returns for US and other corporations is a hard ask, but is becoming necessary under expanding security protocols. Even Chinese students in US universities are coming under the radar, while across the board, the FBI and other elements of the robust Homeland Security system in the US are checking on transfer of intellectual property to China by visitors to either country from the other. Taiwan is on the way towards a complete reset of the “China Embrace” that was a mark of the earlier KMT period. Under President Tsai Ing-wen, Taiwan has from the start of her term been distancing itself from China. This policy has led to Taiwan escaping the fate of Italy, where linkages with the PRC have grown substantially during the past 15 years. Being tied to both the US and the PRC is becoming untenable, as a worried Australia is finding out. That country, unlike Italy or Germany, seems to have read the tea leaves and has begun the process of de-coupling from China. In contrast, India is still in the “non-aligned” box, maintaining a welter of conflicting relationships.

This may change after the Galwan massacre of Indian troops by PLA forces. Galwan has changed the public mood towards China in India in a manner that has been seen elsewhere as a consequence of the novel coronavirus pandemic. This change in public opinion has made it easier to overcome the objections and obstacles placed on a steady US or Japan-style de-coupling from China, including in telecom. Interestingly, while India overwhelmingly depends on Russia for defence, it does so in telecom for China, the same two countries which are close allies of each other. The Lutyens Zone and its not small number of holdovers inside the government are still loath to admit that Russia is now China’s closest security partner. The future of Russia under the brilliant strategist Vladimir Putin is firmly tied to that of a China led by the transformational Xi Jinping. Sino-Russian links are multiplying at speed, although the Lutyens Zone pretends otherwise.

CHINESE ECONOMY UNDER PRESSURE

The US-China trade war has sharply affected Chinese jobs and incomes in a situation where consumer prices are already high in the PRC and rising. The steady de-coupling of the US, Japan and other countries from China has led to price instability and job losses in the world’s second-largest economy. This has created a steep fall in factory prices. Given their narrow focus on personal profit with minimum effort, several businesspersons in India (assisted by accomplices within the bureaucracy, who take aim at competitors through misuse of regulations), India has become a reliable dumping ground for a miscellany of Chinese products, most crucially in technologies such as mobile telephony. In a way, consumers in India have been subsidising both the Pakistan army as well as the PLA through the steadily rising trade deficit with China. Apart from the worries created by trade frictions, the Chinese economy is also being battered by the shrinking of demand for its products caused by the global economic collapse that is a consequence of the Great Lockdown Strategy of the WHO in fighting the novel coronavirus that spread in an uncontrolled manner from Wuhan as a consequence of the WHO’s failure to recommend the snapping of contact between affected locations and the rest of the world in time. Lowering economic growth in China is central to the strategy of those looking at ensuring a USSR-style meltdown in the PRC.

GALWAN A WATERSHED

General Secretary Xi has understood the centrality of Artificial Intelligence (AI) in winning the war against the US, and has devoted considerable resources towards ensuring an edge in such technologies. At present, China is still ahead of the US in this crucial battleground, thanks to global champions such as Huawei, Tencent, Alibaba and others. India is as dependent on China in its telecom sector as the defence sector is dependent on Russia. In particular, Huawei and ZTE have a monopoly over the back end of mobile networks, while Chinese brands dominate the cellphone instrument market. Chinese internet offerings generate vast amounts of meta data from India that go to feed its relentless drive to secure a comfortable lead over the US in Artificial Intelligence. Should networks in India begin a de-coupling of the Indian telecom sector from the PRC and its entities, that would be a very heavy cost to the latter, and would be another result of the manner in which the PLA has been following the GHQ Rawalpindi playbook on Kashmir. As indeed its approach to the entire border situation with India. Despite multiple bilateral meetings between Prime Minister Narendra Modi and President Xi Jinping, there has not been any progress in Sino-Indian border talks even as the PLA moves further and further into the LAC since 2013. The May 2020 intrusions are only the latest in this saga, but the difference is that this time around, it is unlikely that the Lutyens Zone will any longer succeed in preventing the government from acting in a manner that recognises the fact that the Sino-Russian alliance is diverging from Indian security interests in a manner that makes it imperative for India to abandon the Lutyens Zone policy of playing the ostrich while the two superpowers—China and the US—battle to the finish the way that the US and the USSR did in the past. Once India follows the military logic of the situation on the border and chooses its side rather than swing here and there, the odds that China will prevail over the US in the ongoing contest between the two sides will lessen considerably. In past wars, operations that at the time seemed of small consequence changed the final result. The Galwan incident may prove to be a similar watershed moment in the existential battle between Beijing and Washington should India abandon its longstanding policy of neutrality, in large part out of consideration for Moscow, which is now firmly on the PRC side. The fierce courage of Indian soldiers at Galwan may ensure that the PRC’s many encroachments in other theatres may no longer go uncontested, the way its steady encroachment into the LAC has till recently been. In the South China Sea and in other locations, the possibility of kinetic conflict within a fairly short time span can no longer be ruled out. What took place on land at Galwan may happen again, this time on the China Seas or in the air over the Taiwan straits. India sitting out rather than participating in such a confrontation between the Sino-Russian alliance and countries such as Japan, Australia, France and the UK is no longer as certain as was the case before 15 June 2020.

https://www.sundayguardianlive.com/news/india-may-re-evaluate-neutrality-us-china-war

 

Will the Taliban overrun Afghanistan again once the US exit? Prof M D Nalapat answers (PGurus)

 An in-depth look at Afghanistan and how things have come to what they are today - the Taliban and their radicalism, the fierce rivalries and multiculturalism, all discussed in detail in this hangout with Prof. Nalapat.

  

https://www.pgurus.com/will-the-taliban-overrun-afghanistan-again-once-the-us-exit-prof-m-d-nalapat-answers/

Will Joe Biden Go by Jill or Hillary? ( Sunday Guardian)

Choosing Kamala Harris as VP candidate would show that Biden believes in a multi-racial society as much as Obama did.

Donald J. Trump got elected as US President because millions of voters believed that he was the candidate best able to ensure prosperity for a country that had seen both an absolute as well as a relative decline in the incomes of the poor and much of the middle class. Rather than emotion, it was hard-nosed calculation which motivated most Trump voters to mark their choices during the 8 November 2016 ballot. If Trump could make billions of dollars for himself and his family, surely he could at the least make several thousand extra dollars for the average US citizen. Even the 45th President’s appointing of other wealthy citizens to key Cabinet posts did not raise the eyebrows of the less fortunate. They had, after all, made all the money they would ever need. Now the focus could be on the rest of society. The reality—that much of this money had been made on Wall Street and in corporate offices at the expense of the rest of society—did not figure very much in the public consciousness. During the 2016 polls, had there been a stark choice between Trump and Bernie Sanders, enough voters may have tilted towards the latter to get him elected as the first self-declared socialist ever to hold the world’s most high-profile leader (and still  the most consequential, although that attribute may  migrate to the General Secretary of the Chinese Communist Party). However, the Democratic Party, whose upper layers have been tended and lubricated by the wealthy behind a smokescreen of anti-millionaire rhetoric, closed ranks at the top to ensure through foul means more than fair that the always reliable (for mega donors) Hillary Clinton prevailed over Sanders, who quickly folded up and genuflected before the formidable Clinton machine. This time around as well, those with a genuine patina of fighters against mega privilege such as Elizabeth Warren or Kamala Harris were eclipsed in the Democratic Party presidential primaries, including by well-camouflaged backers of privilege such as the engaging Beto O-Rourke. In each primary, the party machine, still significantly under the influence of Bill and Hillary as a consequence of the subservience of Barack Obama to the Clintons once he secured the party nomination in the 2008 Presidential primaries, ensured that the votes of Bernie Sanders were suppressed in the mysterious and invisible manner of certain views being systematically weakened in number of hits by social media giants largely peopled by individuals playing at revolution through computer keyboards. Joe Biden, who had early on been identified by this columnist as a Clinton surrogate, seems to have locked in the nomination, denying it to Bernie Sanders or to either Warren or Harris. Should Biden get religion at 78, he would choose Warren or Harris as his running mate, but given the grip that the Clintons have long exercised on him, what is more likely is that a “safe” (for Wall Street and for corporate donors) albeit feisty in verbal jousts candidate will be chosen by the prospective Democratic Party candidate against Donald Trump, thereby making easier a second term for an individual ready to do almost anything so that the 3 November election ensures that he remain in the White House rather than go to jail, which is where Hillary Clinton would like to send him to repay Trump’s effective pardon of her influence-peddling activities over the years. There is not the faintest whiff of Prithviraj Chauhan and his fatal (to himself and to his people) generosity about the steely Hillary Clinton, who would have put both Indira Gandhi as well as Margaret Thatcher in the shade for ruthlessness, had she been elected about four years ago rather than Trump. The lady is formidable, brilliant and deadly in a way that Trump can never in practice be, for all his bluster.

Should Joe Biden, even before clinching the nomination some months later, choose Elizabeth Warren or Kamala Harris as his running mate, his chances of becoming the 46th President of the US would soar. He is known to be a person of integrity, as is his spouse and was son Beau. Son Hunter has a taste for the good life, and is somewhat careless about the ways in which he ensures such an outcome, being a “Goodwill Ambassador” for hire to companies in the Ukraine, China and elsewhere. Fortunately for him, much of the media in the US dislikes Trump so much that they are determined to publish whatever it takes to get Biden elected. Or not do, in the case of easily obtainable facts concerning the activities of Hunter Biden, who has been given almost a blank cheque by his father after the death of elder brother Beau as a consequence of illness. While the Trump team may unearth bucketfuls of dirt about Hunter, such topsoil is not missing in the case of some members of the extended family of Donald Trump, who have ignored the fact that only their businesses visibly doing badly during the term (or terms) of Trump will ensure both his political success as well as the avoidance of multiple enquiries into their own business dealings, especially if these be profitable. The success or failure of Joe Biden on 3 November will hinge to a considerable extent on the distance he is able to maintain between the “requests” of the Clinton machine and his actions, including on the selection of the Vice-Presidential candidate. This columnist believes that choosing Kamala Harris would show that Biden does not just talk about a multi-racial society but believes in it as much as Barack Obama did. Given his record in supporting several of the Clinton initiatives which sent hundreds of thousands of hapless African Americans to prison and brutalized them, or which ensured that greed prevailed over reason in the financial markets, Biden will need more than soothing speeches to make many believe that he means what he says. The problem the prospective nominee faces is that both Harris as well as Warren are toxic to Hillary Clinton and to the interests she has so ably (if not always openly) championed throughout much of her political career. Barack Obama was fortunate in 2008 in having Mitt Romney as his opponent in the 2012 elections. Neither the Christian right nor Middle America took to the somewhat aloof candidate, who was no match for Obama. But for Covid-19 and the aftershocks created by the panic measures taken to stop its spread, Trump would have been certain to get a second term. He is still a formidable candidate, despite a gaffe a day. Which is why Biden needs another feisty politician—of principle and not just rhetoric—to take on Trump and Mike Pence, who has shown a capacity for quiet leadership that would make him the inevitable Republican nominee in the 2024 elections. Joe Biden has the advantage of an idealistic wife who, in a very understated way, is as steely as Hillary. The question which may decide the fate of the 2020 polls will be whether he listens to Jill Biden or once again goes by the habits of decades and trots along obediently behind the Clinton bandwagon. Should that happen, Donald J. Trump will occupy 1600 Pennsylvania Avenue NW for four more years.

https://www.sundayguardianlive.com/opinion/will-joe-biden-go-jill-hillary

PM Modi's Opponents Plan an Ides of August Surprise ( Sunday Guardian)

New Delhi: Rather than the “Ides of March”, future historians in India may write about the “Ides of August”, should the plans now under preparation of influential groups (each working towards the same objective) be ready by their intended launch date, 15 August 2020. The plan of action is to begin around that day and move into higher and higher gear thereafter. The calculation of these groups (who are in regular informal coordination with each other) is that by 15 August, the economic situation facing hundreds of millions of citizens in the country will have become so dire—indeed hopeless—that the tinder thus created would be sufficient to ensure that manifestations of discontent get sparked and spread across urban areas. This is expected to have an immediate impact on the investment climate in India, which is becoming a country of interest especially for units seeking to relocate from China. It is a given that the Ministry of Finance has been conservative and still moored to the past from the time the Narendra Modi government was sworn in on 26 May 2014. Even after the immense tensions in the economy caused by DeMo 2016, the rollout of GST as initially structured, and now the Great Indian Lockdown, the ameliorative responses of both the Ministry of Finance and the Reserve Bank of India have exhibited much the same caution that the US Federal Reserve Board and the Treasury Department showed in abundance during the years preceding the Great Depression of the 1930s. Because of such a timid stand, unemployment in the US during the 1930s reached the previously unimaginable figure of 24%. But President Donald J. Trump cajoled both the Federal Reserve Board as well as the Department of the Treasury into giving out trillions of dollars in doles, a scale of relief several times more than ever witnessed during past crises, accompanied by shock among conventional monetarists and economists. Because of Trump’s measures, the US economy has started to rebound during the last month, with unemployment figures falling by 2.6 million. In India this far, while the Agriculture Ministry and to a more limited extent the Company Affairs Ministry have finally—in the sixth year of Modi’s period in office, expected by well-wishers to last a total of 15 years—gone in for “Modivian” reforms. Sadly, many other key ministries have remained sluggish in their approach to change. This has created hope in those unalterably opposed to Prime Minister Narendra Modi, the “Anyone but Modi” groups. They have informally come together and are relying on a “Brains Trust” comprising mostly of expat experts, assisted in private by officials within the system who are sympathetic to their objective of weakening the hold of Modi over the people, thereby preparing the ground for a meltdown of governance in the manner last seen during the final 28 months of the Sonia-Manmohan government.

INSPIRED BY U.S. UNREST

Groups opposed to the Modi government have been enthused by the civil unrest being witnessed in the United States. The proximate cause of the unrest there was the cold-blooded execution of an unarmed and unresisting African-American man by a Minneapolis policeman of Euro descent, but the massing of angry crowds could also be explained by the spreading unemployment in the US, at one time reaching an estimated 40 million before now beginning to decline. The young adults who have lost jobs during the past few months form a goodly proportion of the crowds defying curfew in several US cities, and the calculation of the “Ides of August” planners in India and outside is that a similar phenomenon—a sharp rise in unemployment in India—will lead to the same unhappy outcome. India is a country of the young, and unless they are given good education and productively employed, the new generation is not going to have the patience, tolerance for hardship and self-control of those who were of their age in previous generations. The lack of attention to the actual ground situation of some of the bureaucrats tasked with filling in the details of Prime Minister Narendra Damodardas Modi’s ambitious schemes has been most evident in developments relating to the estimated 140 million migrant workers scattered across the country. No move was made to ensure that funds were provided to take care of such essentials as the rents of such individuals, even in states such as Tamil Nadu, which gave each migrant worker 30 kilograms of rice and 1 kilogram of cooking oil. Rent to the landlords needed to be paid but was not. Neither a subsistence allowance to each migrant worker at his or her work location nor ensuring mass distribution of grain from otherwise rotting FCI food grain stocks was properly attempted. An audit needs to be made of the losses incurred by FCI through disposal of food grains wasted through negligence over the years, although neither this nor any accountability for the past is at all likely in a system that has protected its own even since 1947. The “Ides of August” groups say that several of their sympathisers within the portals of government have been placed in key positions in the present government, and that in matters of policy or the crucial task of giving early warning of impending events, these Trojans are expected to give misleading suggestions and reports, so as to ensure that policymakers at the top remain unaware of ground reality.

‘MOOD OF ANGER WELLING UP’

In several cities including Mumbai, migrant workers rent not a room but a bunk bed in a cramped room, that too for 8-12 hours every day. They rest on the bunks for that period each day, and spend the rest of each day at work or remaining on the streets till the time comes for the bunk they have rented for a few hours to fall vacant when the other occupant leaves for his or her daily shift. Those working out the details of the Great Indian Lockdown, which became effective at midnight 24 March, ought to have given a window of 5-6 days for migrant workers and others to leave for wherever it was that such workers wished to spend the lockdown period. It was clear from the speech of PM Modi first announcing the lockdown that the government viewed the threat from Covid-19 as seriously as Prime Minister Winston Churchill talked of the threat of invasion from Nazi Germany in his 4 June 1940 address to the nation. Modi made it clear in his sombre 24 March address to the nation that this was a war against a deadly foe that will entail great sacrifice, but which must be won. Before the coming into force of the nationwide lockdown, the bureaucrats tasked with its implementation ought to have ensured at least five days for citizens to plan and carry out their moves rather than calculate that just four hours at night was sufficient as notice period, which it plainly was not. During such a preparatory phase of the Great Indian Lockdown, transport arteries needed to be kept open rather than shut down in the manner they were (at incredibly short notice).

Prime Minister Modi, who since 26 May 2014 is the de facto Chief Executive of the Nation, took the decision to enforce a countrywide lockdown on the country to prevent the millions of deaths that modelling by international agencies such as the Gates Foundation, Johns Hopkins and the Imperial College of London forecast for India. These estimates, which have since proved to be shamefully inaccurate everywhere in the world, left no other course for a conscientious follower of Mahatma Gandhi such as PM Modi to adopt except that of the lockdown. However, those within the government who were tasked by Modi with working out details of the measure ought to have provided sufficient time and logistics for an estimated 140 million migrants situated in different parts of the country to either be given facilities to stay put comfortably rather than move to their preferred lockdown locations and raise the risk of infection in rural areas poorly served by the public health machinery. Officials tasked with working out the operational details of the lockdown needed to ensure that those who stayed behind in their work locations were assured accommodation through assisted payment of rent to landlords and the provision of essentials and a subsistence allowance provided from the start of the lockdown by a government headed by Prime Minister Modi. It needs to be remembered that 85% of the wages of workers has been met in UK by the Conservative government of Boris Johnson. There are similar doles in the US under Trump, as in Singapore, Germany and several other countries. No such funds appear to have been released in India, only an unenforceable command that companies “retain jobs and freeze salaries”. Units making zero income, thanks to the lockdown, cannot be expected to retain staff or pay salaries. Vulture funds looking at arbitrage profits through the misery of citizens claim that a poor country cannot afford such measures, when the fact is that such assistance is particularly needed in countries where substantial chunks of the population are within sight of starvation, while more millions have crossed into the boundaries of Sub-Saharan subsistence. Looking at the migrant situation in the entire country, some states (such as Kerala, Karnataka and Tamil Nadu) seem to have handled the issue better than others such as Gujarat or Maharashtra, which have hardly seen a stellar performance in this regard. Because of inadequate attention paid to the operational details of the Great Indian Lockdown (GIL), millions of migrants have returned home to their villages in UP, Jharkhand and Bihar with horror stories of getting fleeced by truck drivers or being beaten up by policemen and starving en route. Apart from carrying the risk of Covid-19 infections to their village homes, stories of extreme hardship are daily being disseminated by returned migrants in families where other members work in the police or in the military across India. Overall, the planners of the “Ides of August” movement believe that a mood of anger is welling up against both the government as well as the upper classes. They say that for the first time since the close of the 1970s, a class divide is opening up in the minds of hundreds of millions who feel ignored by the system and who have been left to fend for themselves. It is not known whether such a change in rural narratives is being noted by intelligence and other police agencies or if so, whether officers close to the groups opposed to Modi are blocking transmission of full and accurate information to the levels needed for immediate corrective action. Given the plans being prepared, it is important to ensure through effective ameliorative policies based on “Sabka Saath Sabka Vikas” that a point not get reached as would trigger civil disorder on a scale which would severely impact the future prospects of the aspiring superpower led by PM Modi, to the delight of his domestic detractors and the list of this country’s international foes and rivals. The window for adequate relief measures designed to rectify the situation is closing and after some time, will shut completely. Fiscal action in the sphere of tax rebates and lowering of rates along with a massive expansion of money into the productive system so as to stimulate demand are needed since the day before yesterday.

SEEKING POLICY GRIDLOCK

Those opposed to Narendra Modi are now preparing to catalyse and ride a series of events after the “Ides of August” that they expect will culminate in a process which will result in the government going into a policy gridlock, much as was the case in the final 28 months of the Sonia-Manmohan decade. They are in regular contact with experts (mostly stationed overseas at present) on social psychology, military science and economics. The latter have predicted to their contacts in India (based on the information fed to them by friends in the system in India) that the economy is headed by early next year towards what they have characterized as “hyper-deflation”. Such an event would involve steep falls in output after an earlier collapse in demand, accompanied by lower prices as producers desperately seek to unload stocks on a market shrinking in effective demand by the hour because of the fall in purchasing power. Many of these expert advisors have occupied key policymaking slots in the Government of India and know that institution well along with many of its personnel (many of whom informally update their external contacts about developments in India). The latter have told their external and internal contacts in the “Anyone but Modi” groups that the recent downgrade by Moody’s to the margin of junk status was not because of the Rs 20 lakh crore additional expenditure announced by PM Modi on 12 May, but because “not enough was being done to rescue and revive the economy”. Interestingly, the advice of those in the “Brains Trust” who still give advice to the present government was precisely that: to do little, and to cling to fiscal and monetary conservatism, the very course of action that they now privately claim led Moody’s to its ill-advised downgrade of an economy that even adversity cannot keep from becoming the third largest in the world. These experts have sought to establish that the actual quantum of outlays announced by PM Modi “add up to less than 3% of GDP rather than 20%, and that this is woefully inadequate” to help the economy to regain its old momentum. Aware that an important component of Narendra Modi’s support base comes from the salaried middle class and the professional classes, they predict mass layoffs in companies during July and August, with the dire situation continuing for several more months. By the close of 2020, they calculate that it would be almost impossible to get the economy moving out of the critical care facility for at least the next three years, thereby casting a shadow over the 2024 polls and before that, polls in states such as Bihar and Uttar Pradesh. From their insider knowledge of the functioning of North Block and Mint Road, the experts consulted by known and unknown opponents of Modi do not believe that innovative ideas will get acted upon, such as the RBI going ahead with a massive increase in money supply which could be distributed directly to workers, or the Finance Ministry giving tax rebates and write-offs for units giving more jobs.

SPENDING NEEDED FOR THREE YEARS

It is a given that three years will be needed to recover from the consequences of the policy response to Covid-19. At least 5% of GDP for this and the next two years will need to be spent as additional expenditure to mitigate the effects of the pandemic and the policies it has spawned on the broader economy. Interest rates need to be cut at least for MSMEs and SMEs to 5% through the RBI subsidising banks making such loans. In a situation of falling demand, what is needed is not additional funds at the same high interest rates (which is in the range of 11-18% when compared to near zero or negative interest rates in other major economies), but much lower rates for existing loans through the life of such loans. Rather than go by “babu logic” and extend moratoriums in 3-month instalments, such relief should be given for at least 18 if not 24 or even 36 months, especially in industries that are badly hit. Otherwise, high interest rates and RBI-caused chokeholds on fresh financing will result in a spike in NPAs over and above the horrendous amounts already caused by reckless lending to crony capitalists. Interest rate policy in India has been designed to favour overseas vulture funds holding the overseas assets of bureaucrats, businesspersons and politicians, who also benefit from the longstanding policy of allowing the rupee to fall against major currencies, while verbally comforting those invested in rupees with the placebo that the fall of the currency has not been as steep as in ramshackle economies such as Pakistan. A lowering of bank interest rates to 5% on existing loans to MSMEs and SMEs can be effected through RBI action designed to compensate banks. This would unleash animal spirits in a determined way, but those advising opponents of PM Modi (and who are awaiting an economic collapse) are certain that this will never happen. The reason they give is the influence in the policymaking community of arbitrageurs who borrow at almost zero interest abroad and invest in India, for example by selling shares purchased a year or less back at a profit and retiring their debt with a handsome gain at the expense of an economy that is groaning under high interest rates and a falling rupee. Why obvious measures such as allowing companies to raise additional share capital on the basis of the stock value during the previous 15 days rather than the present 26 weeks (if the latter be higher, which given the circumstances, it is likely to be) not get done. Plainly, such flexibility is beyond the capability of the bureaucracy in a country filled with innovation and entrepreneurial talent choked by system-created blockages to their utilisation. A hopeful sign is that PM Modi seems to have finally prevailed over such elements and has been announcing several essential reforms during the past few weeks. Many more are needed, and soon, if the hopes of the “Ides of August” planners are to be dashed.

The faith in these groups in the tendency of North Block to get policy wrong has been fortified by the just announced decision to raise the price of aviation turbine fuel by 56% in a situation where airlines are struggling to simply breathe. Automobiles and housing are other sectors, and in both the cause of their faltering is the collapse of retail credit and the rise in delinquencies caused in large part by the economy slowing markedly years before the Covid-19 shock. Thus far the RBI seems unwilling to address this problem sufficiently so as to bring retail credit back to health through an economy made strong by demand created by sufficient liquidity. The manner in which the Finance Ministry and the RBI managed the 2016 demonetisation of 86% of India’s currency has lowered the reputation of the latter institution especially to a level not seen before in its history, and the only way to redeem lost trust would be for the Central bank to take adult rather than baby steps to begin the rescue and revival of the economy by the close of 2020, a task that policy fashioned with the innovative mindset promised by Modi to the people of India in his many speeches could still achieve.

MODI MAY SURPRISE WITH MORE REFORMS

Because of PM Modi’s swift actions, the IAF will get the first four Rafale fighters (of 36 ordered) within a few weeks. This is 18 years after the A.B. Vajpayee government first began negotiations on its purchase. India can become the platform for several topline US aircraft, such as the F-35, except that the induction of S-400 systems from Russia has made this problematic. The F-35 manufacture plan was abandoned in Turkey after Erdogan went in for S-400s. India’s C-130 J Hercules aircraft, Globemasters, Chinook helos and the F-777 light howitzers can take care of any intrusion in Ladakh, and sufficient volumes of each can be stationed and partly made in India if policies get designed for the purpose. Russia needs to be kept happy through additional purchases, but not by installing the S-400 and foreclosing the setting up of production lines of state-of-the-art weapons systems from the US. Despite optimism by those gleeful about what they see as the impending disaster of the government failing to prevent hyper-deflation, those planning the “Ides of August” movement may be in for a surprise. Over the past few weeks, major reform after major reform has been rolled out by the Modi government. Even as early as before 15 August, additional reforms and economy boosters may take place as to speed up the process of ensuring a soft landing in a situation where, as Rahul Bajaj points out, the Covid-19 curve has not flattened but the economy’s growth curve has. Recent studies show the novel coronavirus has a much lower death rate than earlier predicted by alarmist agencies and journals. The decisive manner in which PM Modi has gone in for Unlockdown 1.0 despite warnings from prophets of doom favouring a longer lockdown give rise to hope that Modi may be able to ensure that North Block and Mint Road finally be made to deliver on the policies needed to ensure a soft landing for the economy and a subsequent move upwards of the growth curve. This will lead to disappointment within the experts from abroad and their associates in India who are looking forward to a meltdown of governance in India as a consequence of what they believe is by now an almost inexorable move towards hyper-deflation in the economy by the close of 2020. The consequent misery among the people, they expect, will lead to a situation that would render the governance mechanism ineffective and which would lead to mass civil tumult. They do not anticipate remedial action by PM Modi as could result in their forecasts and plans getting derailed even before 15 August 2020, but Narendra Modi has surprised his detractors and opponents many times in the past, and may do so again before long.

https://www.sundayguardianlive.com/news/pm-modis-opponents-plan-ides-august-surprise