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28 June, 2016

Power play dashes NSG hopes

BRP Bhaskar
Gulf Today

Prime Minister Narendra Modi has none to blame except himself for the embarrassment caused by the failure of India’s bid for membership of the Nuclear Suppliers Group last week. He had unwisely upped the ante ahead of the NSG plenary at Seoul by personally lobbying at a few world capitals, including Washington.

President Barack Obama pledged US support to India’s admission, and the government fed the media with reports that Modi had won over all the countries he had wooed. However, 10 countries blocked the path by raising objections based on India’s refusal to sign the Nuclear Non-Proliferation Treaty (NPT). They were in a minority but under the NSG rules another country can be admitted only if all 48 existing members agree.

Some analysts have suggested that the US did not work hard enough to ensure India’s admission. They point out that the US assigned comparatively low level diplomats to lobby for India. They contrast this with the direct intervention of President George W. Bush and his Secretary of State Condoleezza Rice to secure a one-time waiver for India from the NSG regulations when it signed the civilian nuclear deal with the US in 2008.

Officially India blamed China, without naming it, for the failure of its membership bid. But countries like Switzerland, Brazil and South Africa, which were among the objectors, cannot be accused of acting at China’s behest. Switzerland had reportedly offered support when Modi visited that country but opposed it at the plenary. Brazil and South Africa, along with China, are India’s BRICS partners.

As India’s NSG campaign was gaining ground, Pakistan, which, too, has conducted nuclear tests and refused to sign the NPT, also applied for membership. Claiming to be on par with India, it argued that country-specific exemption from NPT conditions would have negative impact in South Asia. China endorsed this argument.

India refuted Pakistan’s parity claim. It pointed out that while India had scrupulously adhered to the non-proliferation principle, Pakistan was known to have made available nuclear knowhow to other countries.

On his way to Seoul to pursue India’s application, Foreign Secretary S Jaishankar stopped at Beijing to soften China’s opposition. Modi who met President Xi Jinping on the sidelines of the Shanghai Cooperation Organisation summit at Tashkent, Uzbekistan, urged him to take a fair and objective view of India’s credentials. But these efforts were of no avail.

The Seoul setback does not spell the end of India’s bid. The NSG has named Argentinian diplomat Rafael Grossi to hold consultations with member countries on the issue.

What has dashed India’s hopes is power play. China’s stated position is that it is not against India’s entry but wants norms laid down for admission of non-NPT members. Evidently it wishes to hold India down at the same level as Pakistan, its all-weather friend.

Writing in the Chinese Communist Party’s English language tabloid Global Times, Fu Xiaoqiang, Director of the Institute of Security and Arms Control, said Beijing could support India’s NSG entry if it “plays by rules”. He went on to make clear what exactly he meant by playing by rules.

He said entry into NSG would make India a legitimate nuclear power. During Modi’s last visit, the US had recognised India as a major defence partner, and this meant the US was now treating it as a military ally.

He added, “Against the backdrop of Washington’s accelerated pace of promoting its pivot to the Asia Pacific region, it will be highly likely to keep supporting New Delhi’s nuclear ambitions in order to make it a stronger power to contain China.”

Beijing, he added, welcomed New Delhi playing a role as a major power in global governance and could support its path towards NSG if it stuck to its policy of independence and self-reliance.

Obviously what stands in the way is China’s perception that India has joined hands with the US against it. At home, too, there are critics who view with disfavour Modi’s willingness to align India closely with the US even as a multipolar world is emerging, which will end its status as the sole superpower.

One of the driving forces behind Modi’s NSG fixation is the desire to expand nuclear capability for civil and possibly military purposes. However, even those who share his nuclear ambitions doubt if NSG membership is important at this stage. According to former Atomic Energy Commission chairman MR Srinivasan not being a member of the NSG will not hamper the civil nuclear programme as India has signed agreements with several countries under the 2008 NSG waiver. -- Gulf Today, Sharjah, June 28, 2016.

21 June, 2016

A miracle maker bows out

BRP Bhaskar
Gulf Today

With Raghuram Rajan, Governor of the Reserve Bank of India, who provided a calm environment for the economy through skilful management of monetary policy, quitting in September, the path is clear for the Narendra Modi administration to bring another autonomous institution under its heel.

The rupee was falling against the dollar and inflation was ruling high when the Manmohan Singh government picked Rajan to head the RBI in 2013. He steadied the rupee and brought down retail inflation.

The rupee’s movement against the dollar was held in the narrow range of 66.02 to 67.09. The inflation rate was brought down from 10.5% to about 5% in two years. In the past year it has moved up but still remains below 6%.

Rajan worked the miracle mainly by using the RBI’s right to fix interest rates. Initially he raised the repo rate (rate at which the central bank lends money to commercial banks) and reverse repo rate (rate at which the central bank borrows from commercial banks), against the wishes of the government. After stabilising the monetary system, he reduced the interest rates, but not to the extent the government desired.

In the favourable atmosphere he created the GDP grew from 5.6% in 2012-13 to 7.6% in 2015-16, foreign exchange reserves rose from $275 billion to 363 billion and the current account deficit fell from 4.8% in 2013 to 1.1% last year.

Rajan is credited with having forecast the ongoing global financial crisis three years in advance. Speaking at a function to honour outgoing US Federal Reserve Chairman Alan Greenspan he had said a disaster was ahead. Recalling his words, IMF chief Christine Lagarde said last year, “The world should have listened to him.”

Economists and financial analysts say the effect of Rajan’s departure will be felt in the years ahead. However, he disapproves of personalisation of the office and says the RBI will survive any governor.

A product of the Indian Institute of Technology, Delhi, the Indian Institute of Management, Ahmedabad, and the Massachusetts Institute of Technology, USA, Rajan served as Professor at MIT’s Sloan School of Management and Chief Economist at the International Monetary Fund before returning to India in 2007 to head a committee on financial sector reforms. He later became Chief Economic Advisor to the Government.

At the RBI, he was often at loggerheads with the government as it kept pressing him to lower interest rates to raise the growth rate. He resisted, pointing to the high fiscal deficit and possible price rise. After the change of government, the pressure on him increased as Modi was in a hurry to push up the growth rate and usher in the good days he had promised in his campaign speeches. Rajan started relenting but the quantum of rate cut always remained below the government’s expectations.

The government responded by attempting to tamper with the RBI’s autonomy. It proposed the creation of an independent debt management office. As Rajan objected, the move was dropped.

The government then planned to transfer part of the power to regulate the bond market from the RBI to the Securities and Exchange Board of India. The SEBI’s opposition forced the government to drop that too.

Thereafter the government sought to reduce the RBI to the level of certain other financial sector regulators. The RBI’s protests resulted in stalling of the proposed changes.

The Establishment’s unhappiness with Rajan came into the open when Bharatiya Janata Party leader Subramanian Swamy called for his removal a few months ago. He was believed to be acting at the instance of the Rashtriya Swayamsevak Sangh, the power behind the Modi government.

The RSS, which is quite innocent of monetary policy, was apparently incensed by his remarks on the growing intolerance after the lynching of a Muslim at Dadri in Uttar Pradesh for allegedly eating beef. “Tolerance and mutual respect are necessary to improve the environment for ideas, and physical harm or verbal contempt for any group should not be allowed,” he had said in a convocation address at IIT Delhi.

The government, which habitually hypes its record, was peeved with his comparison of the Indian economy to the fabled one-eyed king of the land of the blind.

When the government constituted a search committee to find a candidate to fill the vacancy that will arise when Rajan’s tenure ends it became a clear indication that he would not get an extension. In a note to RBI staff last week he announced his decision to return to academia when his current term ends.

“My ultimate home is in the realm of ideas,” Rajan said in that note. Such a man is, no doubt, a misfit in an administration which delights in surrounding itself with mediocrities.

As Rajan takes the bow some of the tasks he began remain unfinished. One of them is cleaning up of the balance sheets of public sector banks that are weighed down by bad debts, a process he had described as a deep surgery. Another is the formulation of a monetary policy framework. -- Gulf Today, Sharjah, June 21, 2016.

14 June, 2016

Move to club all elections

BRP Bhaskar
Gulf Today

Prime Minister Narendra Modi is working on a plan to hold the national, state and local elections simultaneously although opinion is divided on the issue.

In the early days of Independence, Lok Sabha and assembly elections were held together. They got decoupled when some assemblies were dissolved before they completed their five-year tenure and early elections held.

Today, three out of every five years are election years in many states as they go to the polls at different times to choose their Lok Sabha, assembly and local body representatives. Consequently, the parties are constantly in election mode.

The holding of Lok Sabha and assembly elections together again was mooted by Bharatiya Janata Party leader LK Advani, who was No. 2 in the AB Vajpayee government, in 2012. He said impending elections even in a remote corner used to influence decision-making by that government. To avoid recurring periods of policy paralysis he proposed a fixed tenure for the Lok Sabha and the assemblies and simultaneous elections to them every five years.

Less than four months after Modi led the BJP to power in 2014, the Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice took up a study of feasibility of holding simultaneous elections. While the opposition Congress, the Nationalist Congress Party of Sharad Pawar and the Trinamool Congress of Mamata Banerjee opposed the idea, several regional parties supported it.

In its report the committee proposed holding of elections in two phases instead of one. It suggested that elections to state assemblies whose terms end within six months to one year can be held together in November 2016, when the present Lok Sabha will be at the middle of its term, and elections to the other assemblies can be held along with the Lok Sabha poll in 2019.

The committee realistically assessed that simultaneous elections “may not be feasible in 2016 or even in a decade”. Yet the government began pushing the idea immediately. Addressing a meeting of office-bearers of the BJP, Modi said clubbing together Lok Sabha, assembly and local elections would reduce the time and money spent on electioneering and allow party workers time to attend to people’s needs.

Deposing before the parliamentary committee the Election Commission had said the additional electronic voting machines and voter verifiable paper audit trail machines needed to hold LS and assembly elections simultaneously would cost about Rs 93 billion. When the Law Ministry sought its views on the committee’s report, it repeated these figures and said costs of storing the machines would also go up. The machines had to be replaced every 15 years, it added.

If elections to local bodies are also clubbed with LS and assembly elections, more equipment would be needed and the costs would go up further. The balance sheet of democracy must take into account costs that cannot be expressed in monetary terms as well.

Voters generally differentiate between elections to national, state and local bodies and pick nominees of different parties to represent them in these bodies. The results of the recent elections in Delhi and Bihar bear this out.

Voters in all seven of Delhi’s LS constituencies chose BJP candidates in 2014. The party led in 60 of the state’s 70 assembly segments. But in the assembly elections that followed the people voted overwhelmingly for the Aam Admi Party. It bagged 67 of the 70 assembly seats. The BJP got only three.

In 2014, the BJP won 22 of Bihar’s 40 LS seats, as against only 12 in 2009, and the party led in 122 of the 243 assembly segments. But in last year’s assembly elections it got only 53 seats, as against 91 five years earlier.

Modi is pursuing for simultaneous elections because it would help his party. Studies have shown that when elections are held together 77% of the assembly constituencies produced a winner from the same party. This means if simultaneous elections were held in 2014 the BJP might have won up to 46 assembly seats in Delhi and 93 in Bihar.

According to former Chief Election Commissioner SY Quraishi, though good in principle simultaneous elections seem to be an idea fraught with constitutional issues and administrative problems. He posits a scenario of the Lok Sabha getting dissolved in 13 days, as happened in 1998, and all assemblies being dissolved to hold simultaneous elections.

Fixed tenure may work well in a presidential system, but is unsuited for a multi-layered parliamentary democracy. Simultaneous elections may reduce costs but they will extract a heavy price by distorting the popular will. -Gulf Today, Sharjah, June14, 2016, -

07 June, 2016

A reality check on Chabahar

BRP Bhaskar
Gulf Today

The deals India struck with Iran and Afghanistan during Prime Minister Narendra Modi’s recent visits to these countries have led to brouhaha at home and disquiet in Pakistan. The two sides appear to be exaggerating their hopes and fears.

While in Tehran last month, Modi committed $500 million for the development of Chabahar port in Iran’s Sistan-Balochistan province, which adjoins Pakistan’s Balochistan province. India, Iran and Afghanistan signed a trilateral agreement to create a transport and transit corridor.

The port and the corridor will free landlocked Afghanistan from dependence upon Pakistan for trade with India and other countries. They will provide India with access to Afghanistan and Central Asia, bypassing Pakistan. They will also help boost Iran’s trade.

Last week, on his way to Qatar and the United States, Modi made his second visit to Afghanistan in less than six months. On the occasion, he inaugurated the India-Afghanistan Friendship Dam in Herat province, built at a cost of nearly $300 million, to replace the Salma dam which was damaged during the civil conflict. It will irrigate 75,000 hectares of land and help generate 42 mw of power.

India is one of the largest benefactors of war-torn Afghanistan. It has so far spent more than $1 billion in reconstruction projects and humanitarian aid in the country. While leaving, Modi tweeted, “The dam is a generator of optimism and belief in the future of Afghanistan.”

Chabahar is barely 70 km from Gwadar in Pakistan’s Balochistan province where China is building a port under an agreement of 2012. It is part of the China-Pakistan Economic Corridor (CPEC). Many in India view Chabahar and the trilateral trade and transit corridor as a riposte to Gwadar and CPEC.

There is unrest in both Iranian and Pakistani parts of Balochistan. Iran has accused Pakistan’s Inter Service Intelligence (ISI) of fomenting trouble on its side of the border and Pakistan has alleged that India’s Research and Analysis Wing (RAW) is aiding dissidents in its territory.

According to Pakistani authorities, Kulbhushan Jadhav, an Indian national whom they are holding on espionage charges, was working for RAW. Indian authorities say he is a former navy officer and he was in Chabahar as a businessman.

Against this background, it is not surprising that the trilateral project has set alarm bells ringing in Pakistan. Speaking at a seminar in Islamabad, Asif Yasin Malik and Nadeem Lodhi, both retired lieutenant generals who had also served as Defence Secretary, said it posed a security threat to Pakistan. Malik asked the government to take diplomatic measures to avoid Pakistan’s isolation. Lodhi suggested using China’s influence to fix the problem.

There is a bit of irony in the generals’ response. Pakistan has been without a full-time Foreign Minister for some time and in any case the army has been formulating foreign policy in respect of neighbouring countries.

Iran’s Ambassador in Pakistan, Mehdi Honerdoost, has revealed that the Chabahar project was first offered to China and Pakistan but they showed no interest in it.

The euphoric as well as alarmist response to Chabahar stems from conventional political and military wisdom, and overlooks the new concepts of strategic relationships being put into practice the world over.

Iran, which has just emerged from years of Western sanctions, is estimated to have 9.3 per cent of the world’s oil reserves and 18.2 per cent of the gas reserves. It is eager to make up for lost time and claim its due place in the global economy.

Significantly, President Hassan Rouhani of Iran hailed the Chabahar agreement as not only an economic document but also a political and regional one. Ambassador Mehdi Honerdoost, while recalling that China and Pakistan had rejected Chabahar, said they could still come in. Iran needed more partners for the project, and “Pakistan, our brotherly neighbour, and China, a great partner of Iranians and a good friend of Pakistan, are both welcome,” he added.

A joint statement issued when Chinese President Xi Jinping visited Iran in January had identified development of ports as a possible area of cooperation. In a commentary on the India-Iran agreement on Chabahar, the Chinese Communist Party’s English-language newspaper Global Times observed that China might be a major beneficiary of the port.

Khursheed Kasuri, considered the most successful of Pakistan’s recent foreign ministers, has said the present situation has arisen because the country’s civilian government and military leadership are not on the same page. That is a problem which Pakistan should resolve in its own interest. -- Gulf Today, Sharjah, June 7, 2016.