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20 September, 2016

Time to move from rhetoric to reality

BRP Bhaskar

The daring cross-border attack on the Indian brigade headquarters at Uri in Kashmir, which left 17 dead and about 30 injured, several of them seriously, poses a severe challenge to the Narendra Modi regime even as it copes with the situation created by more than two months of civil unrest in the valley.

Home Minister Rajnath Singh, who has emerged as the government’s chief spokesman on Kashmir-related issues, blamed the attack on the “terrorist state” of Pakistan. Modi, in a tweet, assured the nation that those who were behind the despicable attack would not go unpunished.

The social media and television channels were abuzz with the informed and the uninformed offering Modi advice on what punishment to give. Suggestions from former army officers and diplomats ranged from calls for surgical strikes to passionate pleas for well-thought-through responses.

Terror groups have targeted military establishments on more than 10 occasions since the eruption of insurgency in Jammu and Kashmir in the early 1990s. In terms of casualties, the worst attack was the one staged by a gang of three at the Kaluchak cantonment in 2002 in which 31 persons were killed and 47 injured. Of the dead, three were army personnel, 18 were family members of army men and 10 were civilians.

The most audacious of all Kashmir-related terrorist actions was the 2001 attack on the Parliament House in New Delhi. Six police personnel, two Parliament security guards and a gardener were killed but no MP was even hurt. The government, headed by Bharatiya Janata Party leader AB Vajpayee, viewed the event as a proxy attack by Pakistan and drew up plans for a military response but did not go ahead with it.

The Uri attack was the second one this year. In January a group of terrorists had sneaked into the large air force base at Pathankot. The encounter that followed resulted in the death of six defence personnel. It was apparently a calculated attempt to derail the India-Pakistan peace process. Following the attack scheduled official level talks between India and Pakistan were cancelled.

Going by the government’s accounts, the terrorists directly involved in all these attacks were liquidated in the encounters that followed.

Since the Pathankot attack, with one thing leading to another, there has been continuous deterioration in India-Pakistan relations. In his Independence Day address on August 15, Modi, in a marked shift from the position taken by all previous governments, openly voiced support for rebels challenging the authority of Pakistan in Baluchistan.

The ground situation in Kashmir took a turn for the worse when protests erupted after security forces announced the killing of young Hizbul Mujahideen commander Buran Wani in July. Many parts of the valley have been under prolonged curfew, and at least 80 persons have been killed, more than 100 blinded and several thousand injured in firing of supposedly non-lethal pellets by central security personnel.

As Pakistan despatched a large number of special envoys to world capitals to mobilise opinion against human rights violations in Kashmir valley, India decided on a similar effort with the focus on Pakistani rights violations in Baluchistan and Kashmir areas under its control. The flip side of such tit-for-tat manoeuvres is that they put India and Pakistan politically on the same level.

Some observers see in Modi’s toughening stance the influence of National Security Adviser Ajit Doyal, who, since retirement from the police, has attracted a bunch of admirers by recounting his exploits as an intelligence officer and has openly advocated a hawkish line. But he is also believed to be the one who sold to Modi the idea of inviting all South Asian leaders to his swearing-in ceremony in 2014.

For Modi the time has come to move from rhetoric to reality. Recent events have revealed two grave weaknesses which India can ignore only at its peril.

One is the ease with which terrorists have been able to intrude into fortified military establishments. The Uri attack resulted in heavy casualties as it took place when one unit was taking over from another. If the attack was timed with prior knowledge of the changeover, it indicates the terror planners have good intelligence support. Clearly, strengthening of the security environment deserves a higher priority than reprisal.

The other is the alarming degree of alienation in the Kashmir valley. In the past civil unrest manifested itself mainly in the form of demonstrations in Srinagar streets. This time young stone-throwers were out in the streets in the countryside and police personnel abandoned many stations. Restoration of normalcy must come first. All else can wait.

The Centre must not forget the healthy atmosphere that prevailed in the valley during the three armed conflicts with Pakistan. -- Gulf Today, Sharjah, September 20, 2016 

13 September, 2016

Housing sector paradox

BRP Bhaskar
Gulf Today

India’s real estate sector is headed for a crash, the US way, a business journalist warned a few months ago. Crazy as it is, the real estate bubble is not going to burst any time soon, a market watcher countered. Real estate is overpriced and if the property market were to function as efficiently as the stock market, prices must crash, an experienced analyst opined. All three advanced seemingly convincing arguments in support of their conflicting viewpoints.

There has been no crash but there are signs of stagnation on the housing front which presents a paradox with widespread homelessness on one side and proliferation of unoccupied residential units on the other.

In the cities, where big real estate companies are engaged in feverish building activity to cater primarily to the upmarket, a large number of flats are lying unsold. According to a property research firm, in the Mumbai metropolitan region alone there were about 226,000 unsold apartments at the beginning of the year. This was 31 per cent more than a year ago.

In the real estate business, a fall in demand does not lead to a fall in prices because builders have the capacity to hold on until they get the desired prices. The conventional explanation for this is that the industry has access to black money. The government indulgently looks on at the flow of black money into construction as it brings hoarded wealth back into circulation.

Urban housing costs remain high as land is scarce and, therefore expensive. There is also mismatch in the market between supply and demand. The big builders are offering villas and luxury apartments costing upwards of Rs 10 million. Most buyers are looking for flats priced not more than Rs 5 million.

A recent official report estimates that the number of homeless persons is about 78 million. They need affordable housing. Prime Minister Narendra Modi has set for the country the goal of “housing for all”. However, he has not formulated an action plan for the purpose. Instead, he is continuing with the decades-old scheme under which states take up housing projects for the poor with Central assistance. It cannot end homelessness in the foreseeable future.

Last November, in a bid to give a fillip to the industry, the government removed all restrictions on foreign direct investment in the real estate and construction sector except for a three-year lock-in period for select projects. An industry spokesman claimed the step would have a huge positive impact on the housing sector as a whole, especially the affordable housing segment. However, there is no indication so far that foreign investors are interested in that segment.

Chinese and Japanese developers have shown interest in industrial projects. A leading Chinese firm has signed a memorandum of understanding with the Haryana government to develop a new industrial city in that state at a cost of $10 billion over a period of 10 years. Japanese firms, which are ready to invest up to $2 billion in industrial projects in the next two or three years, are said to be seeking strategic partnerships with Indian builders.

Much of the recent urban construction activity has been carried out flouting regulations with the connivance of corrupt politicians and bureaucrats, posing a grave threat to the environment. The floods that played havoc in the newly developed suburbs of Chennai city recently were the result of reckless construction blocking natural drainage. Governmental agencies were as much to blame as private operators.

The Judiciary is seized of many instances of construction in violation of regulations. Last April the Bombay High Court ordered demolition of a 31-storey apartment complex in the city which has become a national symbol of political corruption. An appeal against the judgement is pending before the Supreme Court.

Last week the Madras High Court directed the Tamil Nadu government not to register plots and buildings if there was violation of regulations. According to officials, the judgement may adversely affect those who bought plots in more than 300,000 housing colonies in the state. 

Both the judgements indicate a hardening in the stand of the courts. Earlier when faced with fait accompli, they were generally inclined to take a lenient view, considering the cost incurred and the hardship that would be caused to the buyers. It remains to be seen whether the Supreme Court will also take an equally tough position. --Gulf Today, September 13, 2016.

06 September, 2016

A worrisome job scenario

BRP Bhaskar
Gulf Today

With the working population rising rapidly and job opportunities lagging behind, India, which has replaced China as the world’s fastest growing economy, is in the most challenging phase of its developmental effort.

According to the latest UN projections, India’s population will outstrip China’s by 2022, six years earlier than previously calculated. While China has to contend with an ageing population, India, theoretically, has an advantage over it by virtue of its larger working population. But to take advantage of the demographic situation, it has to improve its ability to create jobs.

Currently an estimated one million people enter the workforce each month. The rate of job creation, which has always been short of the requirement, is now declining. A recent official survey revealed that eight labour-intensive industries, including textiles, garments, BPO, metals and automobiles, created only 135,000 jobs last year. They had created 490,000 jobs the previous year.

A study of the performance of more than 1,000 companies by a private rating agency also showed that the job creation rate was falling. Together these companies created only 12,760 jobs last year as against 188,371 in the previous year. The manufacturing sector companies recorded a 5.2 per cent decline in job growth. In the previous year there was a 3.2 per cent growth.

Three industries account for the bulk of employment in the organised sector. They are manufacturing (40 per cent), banking (23 per cent) and information technology (18 per cent). Prime Minister Narendra Modi’s ambitious goal of creating 250 million jobs over a 10-year period cannot be reached unless they generate more jobs.

Some analysts have suggested that studies based on the performance of companies may not reflect the true position as industries are increasingly outsourcing certain types of jobs. But, according to the official survey, there was a decline in contractual jobs also last year.

The dismal situation revealed by the studies has prompted critics to taunt the Prime Minister with questions like “Where are the promised jobs, Mr. Modi?” The fact is that low job creation has been a feature of India’s economic development even before Modi’s time. Between 1991 and 2013, India recorded an average annual growth of 6.5 per cent but did not create enough jobs to attract even half of those entering the labour market.

Modi’s expectation that increased flow of foreign direct investment and his Make in India programme will boost job creation has not materialised. About 60 per cent of the FDI is in the form of private equity investment, which may fetch the investor a decent return but does not necessarily result in job creation. The Make in India programme requires skilled labour for manufacturing and high-end services. Skilled workers form only two per cent of India’s labour force.

Medium, small and micro enterprises are the backbone of the industrial sector. There are about 40 million such units and they employ about 100 million people, making them the largest provider of jobs. Falling exports and difficulties in obtaining timely credit hamper their ability to play a bigger role.

Official and unofficial studies limited to the organised sector do not give a full picture of the job situation. More than 90 per cent of the country’s working people are in the unorganised sector where wages are low and underemployment is widespread.

Although China has fallen behind India in the rate of growth of the economy, it is still ahead in job creation. According to Human Resources Minister Yin Weimin, China created more than 13 million new jobs for urban residents last year. However, the pace of job creation is slowing. The target for this year is only 10 million new urban jobs.

China’s major problem on the job front now is the rehabilitation of 1.8 million workers who are expected to be laid off by state-owned coal and steel plants as the economy switches from the investment-led model to one that relies on domestic consumption, services and innovation.

Interestingly, Arvind Panagariya, Vice-Chairman of the Niti Ayog, which has taken over the functions of the erstwhile Planning Commission, senses an opportunity for India in the Chinese downturn. He believes the high wage levels in that country will tempt manufacturers of certain items like textile and footwear to view India as an attractive alternative location.

Amartya Sen, the economist, has pointed out that India is trying to become a global economic power with an uneducated and unhealthy labour force, which has never been done before and never will be done in the future either. Clearly the government has to do more to realise its goal. -- Gulf Today, Sharjah, September 6, 2016.