The Modi government's economic story

In politics, depending on your point of view, one year can be a long, or a short time. The Narendra Modi government has hit that anniversary and while critics charge that he has failed to deliver, his supporters argue that a year is simply too short a time to judge the government of a country as huge as India, and one with legacy issues ranging from corruption to misgovernance.

Modi's arrival was spectacular, at the head of the first party to win a majority by itself since 1989. His burden has arisen not only from expectations he aroused as a prime ministerial candidate, but also from the fact that he has a majority in Parliament, the first PM to have one since 1989. In other words, people believe that he is in a position to change things in a way Manmohan Singh, Vajpayee and his other predecessors of the 1990s were not.

The economic story of Modi's first year in office is mixed, both in the economic and political fronts. GDP has picked up to 7.4 per cent in 2014-2015, after a change in the way it was calculated. The index of industrial production for eight core sectors — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity — grew 5 per cent in 2014-15 over 4.2 in the previous year. However, areas of concern remain such as declining exports and imports, which went down 2 and 0.5 per cent in 2014-15 over the previous year.

Modi himself is on record saying that it would take him 5-7 years to fulfil his agenda. The issue, however, is not how much time he deserves, but how much he will actually get, and no one can forecast that. Pic/PTI

Of greater concern has been the continued poor performance of the agriculture sector where 600 million Indians are employed. It grew a marginal 1.1. per cent in 2014-15 and experts say that the numbers point to a deepening crisis in this sector.

Corporates and investors were betting on big bang reforms to kick-start growth and FDI has grown over 37 per cent in the past year. As the experience of tax laws imbroglio suggests, reform is not easy. However, the stock market continues to repose faith in Modi, though in the recent past, tax issues have dampened the spirits of foreign institutional investors.

The global fall in crude oil prices came as an unanticipated boon for the new government, as they helped in trimming the import bill and saving foreign exchange. There was good news as well in the inflation front, particularly in consumer prices which are below the Reserve Bank of India's 6 per cent target. However, the fiscal deficit has been contained to a comfortable figure.

On the political front, Modi has not been troubled so much by the shell-shocked Congress party, but elements in the Sangh Parivar who believe that the 2014 victory was a vindication of their politics. Perhaps they are worried that if allowed to go his own way, Modi could run away with the development agenda, and leave them high and dry. So they continue to agitate to push their Hindutva agenda wherever they can, queering the pitch for the BJP and the Modi government.

So far the prime minister has played a canny game. As the Gujarat experience of 2002 revealed, Modi is a skilful and cynical politician, who will not hesitate to use the communal agenda for electoral gain, just as a generation of politicians, from Indira Gandhi, Lalu and Mulayam Singh Yadav have done. Modi has not directly spoken on the issues of alleged attacks on churches or the communal violence in UP, or the inflammatory statements of some so-called sadhus and sants. But he has worked behind the scenes to rein them in because he is fully aware of their potential of derailing his agenda.

He has sought to position himself as a social reformer, keen to push the agenda of “sabka saath, sabka vikas” and promote programmes like “Swachh Bharat” and “Namami Ganga” and for women's empowerment. However, from the public point of view, the most important agenda is neither social, nor cultural, but his promise to rejuvenate India's economy and make it an industrial power. And this is where there are growing doubts about the ability of his government to do things.

There are issues like the land acquisition bill which have generated a lot of opposition. But that is par for the course for anyone trying to change the way the country is being run. He will, no doubt, face even bigger hurdles when he tries to reform the labour laws of the country, considering that biggest trade union in the country, the Bharatiya Mazdoor Sangh is affiliated to the BJP.

The problem seems to be an acute lack of expertise in the system. Modi is wary of his own political colleagues and is hoping that the bureaucracy will do the needful, just as it had done in Gujarat. But, the problem is that debris of a decade of misgovernance and corruption has paralysed the government machinery.

In the old days, a new minister took office things ran on their own. Today, each ministry requires deep restructuring and reform for it to even function effectively. The only people who can lead change are politicians, not bureaucrats. Unfortunately for the party, with stalwarts like Arun Shourie, Yashwant Sinha, BC Khanduri and Murli Manohar Joshi sidelined, the party has a very narrow base of experienced leaders who can lead the process. Mr Modi relies on Arun Jaitley, who is known for his abilities, yet, he simply cannot overhaul a dozen ministries.

Modi himself is on record saying that it would take him 5-7 years to fulfil his agenda. That is a reasonable amount of time. The issue, however, is not how much time he deserves, but how much he will actually get, and no one can forecast that.

Mid Day May 12, 2015

Chinese keep a keen eye on Modi's visit

BEIJING: The overwhelming question a visitor here faces is: What will be the outcome of the visit of Prime Minister Narendra Modi? Will he bring a package to resolve the border question, or will he come with a basket of measures to attract Chinese investment in India? 

It is a tribute to the Indian prime minister’s hard-driving style, that the phlegmatic Chinese are actually intrigued by the prospect of an Indian prime ministerial visit to a capital, which witnesses many a kowtowing foreign leader passing through. 

 

The great neglect 

India is a fairly benign, if distant, distant image to the Chinese. Few are familiar with the border dispute which obsesses the Indian media. 

A leading Chinese expert, Wang Jisi, the erstwhile Dean of Peking University’s School of International Studies, wryly points out that China has neglected India till now, and few in China realise India’s growing strength, considering that its GDP today exceeds that of Russia. 

Yet, as Chinese interests expand into the Indian Ocean, China has begun to focus on India not just as a pesky wannabe that needs to be kept in its place in South Asia, but as an important linchpin in its strategy of transforming its economy from one based on investment and export, to one emphasising consumption and innovation. 

India, then, becomes a destination for Chinese investment, a market for its products, the low end segment of its supply chain and a way station on its maritime silk route. 

The problem that the Chinese face is India’s perception of China. While the Chinese may not think much of India, the Indians certainly view China with some envy, trepidation and even fear. 

In some measure this is an outcome of the traumatic defeat China inflicted on India in 1962. But it has other drivers: China’s relations with Pakistan, its recent forays in the Indian Ocean, and, above all, the fact that the Chinese economy, which was roughly equal in size to the Indian in the mid-1980s, has dramatically outpaced it. Today India’s GDP stands at $ 2 trillion, whereas China’s is pushing beyond $9 trillion. Consequently China’s military budget is three times that of India. 

Five focus areas 

When Modi goes to Beijing, there will be five major areas of focus: First, the continuing effort to resolve the border dispute; second, the mechanisms to maintain peace and tranquility on the border and the seas; third, bilateral relations and the issue of enhancing economic cooperation, as well as issues like river waters and Tibet; fourth, Sino-Indian cooperation in multilateral issues; and fifth, strategic business - issues relating to third countries such as US, Japan, Pakistan, Iran, West Asia, Afghanistan, and so on. 

After calling for keeping the border issue aside, China has begun to realise that the border issue has become an obstacle blocking closer Sino-Indian ties. They have signaled that they are open for a quick settlement, but it is not clear as to what this means. 

In the past they were agreeable in trading the Indian claim on Aksai Chin with theirs’ on Arunachal Pradesh, but since 1985, the Chinese have demanded an India “concession” in the east, such as the Tawang area, in return for a Chinese acceptance of India’s sovereignty over the rest of Arunachal. Aksai Chin has been conveniently forgotten, as it is securely under Chinese control. 

However, the Indian side has been equally vehement in telling the Chinese that conceding the Tawang tract is just not possible. Talking of packages, indeed, the balance of expectation is on Xi Jinping to right the “eastern” tilt to their border claim. 

Issues of mistrust 

But the border is not the sole cause of the strategic mistrust between the two countries. China’s relations with Pakistan remain problematic for India, especially when it comes to the transfer of strategic weapons and technology. 

With China deciding to invest heavily in Pakistan, there is further cause of concern as to the nature of this evolving relationship. 

China says it is worried about India’s ties with the US and Japan. But India has moved cautiously in this area. Modi’s recent remark that it was natural that China, like any other country, will seek “to increase their influence in the international space” should put things in a perspective. 

If things go according to plan, the most important outcomes of the visit will be economic, though we should not rule out a surprise on the border. The bilateral trade is heavily weighted against India and Chinese investment in India is trivial, not in the least because of Indian barriers. 

Xi has promised more investments, but it is really up to New Delhi to work on a strategy of getting the Chinese to put down serious money to further India’s economic goals. 

Mail Today May 10, 2015

The paranoia over Ford Foundation

There is an irony in the government’s crackdown on Ford Foundation that seems to have escaped most observers. In the 1960s, the principal critics of the Foundation were the Indian Left, which maintained a steady drumbeat of attacks on the Foundation and its projects in the country, along with a generalised attack on all such institutions which have played such a significant role in transforming the country. The critique really takes aim at NGOs and civil society institutions that provide depth to the Indian democracy. But their role in promoting education and agriculture has been forgotten.

The deeper motivation, however, seems to be the same. The Left believed that these groups were fronts for the US intelligence agencies and their aim was to undermine India’s non-aligned or independent status. The Sangh Parivar seems to now be mirroring this belief. It believes that its political trajectory is on the ascendant and the only forces that can undermine it are foreign powers — principally from the West. In this, there is a remarkable congruence between the government of India and the government of the People’s Republic of China, which, too, has cracked down on NGOs based on a similar belief.

During the Cold War, some western foundations did play a role in assisting their respective country’s political objectives. A closer look at the Church Committee revelations in the 1970s come up with little or nothing with regard to India. Indeed, Mrs Indira Gandhi was convinced she was being targeted by the CIA in the run-up to the Emergency, through the funding of Socialists and the Sangh Parivar by the US.

Ford Foundation, which has been around since 1951, seems to be targeted because it supported Teesta Setalvad, who has run an NGO seeking to prosecute those responsible for the 2002 Muslim massacres in Gujarat. You may argue there is no evidence linking Modi and his government to the massacres, but you cannot ignore the fact that the massacres did take place and that scores of people responsible for it haven’t been punished. Pushing for the application of the rule of law can hardly be considered a crime.

NGOs like Greenpeace can be pesky institutions, challenging the might of the state. But they play an invaluable role in holding up a mirror to the governance and societal institutions and aid in the process of their transformation. This is true whether it relates to reduction of hunger, community development, adult literacy, women’s empowerment, protecting the environment, caste discrimination, or exercise of arbitrary power.

As for Ford, one of its key roles was in encouraging the profession of economics by funding research and training institutions like the Institute of Economic Growth, Gokhale Institute of Politics and Economics, the NCAER, IIMs in Ahmedabad and Kolkata. Among its earliest grants in the early 1950s was to set up training institutes for village extension workers, rural public health training centres, and for five agricultural colleges. So intense was the commitment that Foundation officers were sitting in on planning meetings of the Delhi University, which got massive funding of over Rs 5 crore to re-organise its library and its other schools. This was thrice what the UGC was offering for the five-year plan period. This is just a synoptic rendering of the role such institutions have played in Indian life.

The Foundation has not only helped nurture significant academic scholarship in India, but has also played a role in the intellectual life of the US itself. It helped create the Public Broadcasting Service and supported arts and humanities in the country; it promoted desegregation and voter registration of the Black people. Abroad, it has helped set up the Grameen Bank in Bangladesh, and backed Palestinian NGOs. It has followed an essentially liberal agenda, which has been criticised by conservatives in the US. And now, we are seeing a similar phenomenon in India.

Neither the Left, nor the Right seems to have much confidence in the Indian people, who have displayed a feisty sense of independence, and nor do they realise that manipulating the politics of a vast and diverse country like India is not a simple task. It is one thing to back the Colour Revolutions in eastern European countries, which are the size of an Indian state, and quite another thing to deal with a country which is a continent in itself and is a flourishing democracy. And more often than not, such manipulation usually backfires — as was evident in the case of Iran in the 1980s and Ukraine today.

There is one thing the government and critics of foundations and NGOs fail to realise. India of 2015 is not the India of the 1950s or 1970s. We are a self-confident, resilient society with institutions that have gained considerable depth; communications technology has bound the country far more securely than it ever did in the past. More than that, we are also a transparent and open society where backroom deals and manipulation are not easy to implement.

Mid Day April 28, 2015