The Energetic Modi Doctrine Has Rejuvenated India's Place In The World

The Energetic Modi Doctrine Has Rejuvenated India’s Place In the World

The first 100 days of a newly elected government are its honeymoon period. AB Vajpayee in his boldness and wisdom went nuclear-weaponised within days of taking over at the head of a bulky coalition.  And this, along with The Golden Quadrilateral system of highways, has probably become the Vajpayee government’s lasting legacy.

The nuclear weaponisation of India was certainly a tipping point, thrusting it into the leading ranks of nations with a “credible deterrence”. It also put paid to Chinese inclinations to seriously dominate India. This, while also keeping nuclear Pakistan (which followed suit with a slew of its own nuclear tests), at bay.

President Clinton and others may have slapped economic sanctions on India in the aftermath, but at home, Vajpayee walked on water. Vajpayee had done what no Indian Prime Minister before him had dared to do. But Vajpayee took the risk, changing India’s status into that of a select few nations who could make and deploy nuclear weapons. Today we have a triad capability- we can launch from land, sea and air, simultaneously if need be.

Based on Vajpayee’s bold move, predicated on Indira Gandhi’s “peaceful nuclear test” of years before, Prime Minister Manmohan Singh in UPA I was able to  get India waivers from the Nuclear Suppliers Group (NSG) with promises of the requisite technology/fuel/spares on an ongoing basis.

This, in order to buy and install multiple and “clean” nuclear power plants in a power hungry country. India was acknowledged as a responsible nuclear power that had no truck with proliferation, with the help of President George W Bush.

It is only now however that two Russian made nuclear power plants have been operationalised at last. The ones from France, and ironically, America, have not fructified yet. India, meanwhile is working on its own Thorium based reactors as there is a large supply of the fuel in country .

Meanwhile India is still trying to join the NSG as a full member, but is being stymied by China, because the induction must be unanimous.

But if nuclearisation was the big game- changer in Vajpayee’s term, the equivalent in the Modi government is a completely revamped and reenergized foreign policy. In four years, it has yielded substantial dividends, including the highest level of Foreign Direct Investment (FDI) in India’s history.

Modi won in 2014 with a thumping majority and promptly invited the heads of SAARC to his swearing-in ceremony. Nawaz Sharif of Pakistan attended, along with almost all the others. And, there in one fell swoop, the Modi Doctrine was born, even before the ink was dry on his signature in the Presidential ledger.  

Narendra Modi had, by inviting the regional assembly, already signaled that he was going to revive and hopefully transform India’s approach to its neighborhood.  True to this intent, and many other global bilateral and multilateral goals, Modi has worked on his foreign policy with zeal ever since.

He leads from the front, globe-trotting frequently, with his able Foreign Minister Sushma Swaraj bringing up the rear with a remarkable human face and a concern for the humblest Indian worker stranded or in trouble abroad. She, in turn, works with her twin Ministers of State – one a former Army Chief, and the other a renowned Journalist and Editor.

This phalanx, ably assisted by the professional foreign service( IFS), and the National Security establishment spearheaded by the National Security Adviser (NSA) Ajit Doval, underlines the importance this government attaches to its international links.

Narendra Modi has carefully built upon old relationships with major countries such as Russia and the United States, but moved away from the old UN General Assembly non-aligned block and the post-colonial Commonwealth, despite the continuance of CHOGM.

He has replaced this with a more flexible and dynamic bilateralism, inclusive of many countries in Africa and West Asia. Our relationship with Japan is at an unprecedented zenith. Modi was the first Indian Prime Minister to visit Israel on a State Visit, and this has been warmly reciprocated. This, even as relationships with the UAE, Saudi Arabia, Indonesia, Malaysia, Bangladesh, Myanmar,  Australia, are better than ever before.

At the same time, there are collectives and multilaterals that Modi has enthusiastically joined, most for the first time, including ASEAN, APEC, the EAS, the ARF, as part of the nation’s “Act East” policy.

Others are of course, the G-20, G-8+5 with the developed West,   the regional BIMSTEC that works better than SAARC, the G4 which tries to help each other become permanent members of the UNSC even as the UN loses more relevance everyday.

Closer to home, there is the very important BRICS, the Shanghai Cooperation Organisation (SCO) and so on.

There are security related international organizations India has recently joined- the Missile Technology Control Regime (MTCR), the Australia Group (AG),  and the Wassenaar Arrangement- these latter by invitation only. And guess what, China has not as yet been invited.

Soft power  initiatives like the World Yoga Day that was just celebrated on the Summer Solstice are unique Modi initiatives that have been well received. His constant harping on the scourge of global terrorism has resulted in much greater cooperation and sharing of vital intelligence between nations, including Islamic ones.

At the same time, Modi has made sure that this eager diplomacy has not made India a Nehruvian pushover. It is not the statesmanship label the Prime Minister is after, but greater connectivity and cooperation with multiple nations.

Some of this follows its own script. India enjoys excellent relations with Iran, buys oil from it in the face of threat of US sanctions, and has helped develop Chabahar Port, much to the benefit of land-locked Afghanistan. But India does just as well with Saudi Arabia simultaneously.

The military stand-off with China at Doklam and the surgical strike into PoK, are illustrations of India’s resolve in the face of obvious provocation. And despite a willingness to cooperate with China, there is no joining  of the China Pakistan Economic Corridor (CPEC) that runs from Xinkiang through Indian PoK all the way to Gwadur in Balochistan. Other Chinese attempts to encircle India on the high seas via Sri Lanka and the Maldives are also being countered.

Modi has lately also held one-on-one informal summits with President Xi Jinping of China and President Putin of Russia. More may follow, as it is a very good way of setting mutually beneficial agendas without ambient noise getting in the way. India’s blistering growth rate of  7.4% p.a. in a sluggish world economy, is pushing it towards the top.

The Indian diaspora around the world, and there are few places on earth where Indians cannot be found, is ecstatic. At last an Indian Prime Minister has recognized their salience and contribution. Modi’s considerable oratorical skills, his obvious pride in his country and its 125 crore inhabitants, makes for an inspiring tableau wherever he goes. And the fact that he still enjoys a 70% plus personal popularity rating at home is both impressive and heart-warming.

All in all, the unalloyed success of the Modi Doctrine, could have it go down in history as his best work, despite all the domestic initiatives taken and to be taken as yet .

(1,195 words)

For: New Start Up via Surajit Dasgupta

June 22, 2018

Gautam Mukherjee

Who's Afraid Of Narendra Modi?

Who’s Afraid of Narendra Modi?

Going into election mode in 2013, and winning, with the first majority in 30 years in May 2014, Prime Minister Narendra Modi projected himself as an incorruptible Robespierre-like figure, strong, clear-headed. He promised to shake up the Indian political firmament.

The voting public expected a fresh start and a renaissance rolled into one. The much talked about 56 inch chest was a symbol of the muscularity in governance that was anticipated.

The reality, since, has been somewhat less overwhelming. Surprisingly, and to his detriment, Modi as Prime Minister has made bold to disappoint almost every section of his admirers.

Beyond the invariably fiery rhetoric and the pleasing spectacle of our Prime Minister being treated well and with respect wherever he goes, little has happened that touches ordinary lives for the better. The Modi “Bhakt” is still stubbornly loyal, and consistently hands him 70% plus approval ratings saying he cannot be expected to do in five what has not been done in fifty. But this too could evaporate by the 2019 general election, especially if the BJP loses another state or two in forthcoming assembly polls.

As the only pan-India vote-catcher in the BJP, with only a motley crew in the supporting cast, it is astounding that he prefers to wag his finger at the electorate rather than addressing its needs.  

There is a yawning credibility gap. We are told here and in the cities of the world that the Indian farmer now has ample neem-coated urea. Cooking gas and electricity has touched the lives of lakhs of the poor. Bank accounts, mass medical insurance have come to millions, as has micro-lending to the pakoda seller, etc. . The Aadhar card registration drive has exposed much fakery amongst the takers of government subsidies and saved crores. The implication is that the bottom off the pyramid has been squarely addressed.

Why then don’t the rural/urban poor really think so. Why have prices of almost everything gone up for the housewife with new taxes that have been slapped on?  

His Finance Minister is busy managing the macro economy and there’s the real rub. Fiscal and current account deficits, foreign exchange reserves, and so on, are much better, but what has it done in tangible terms for the man in the street?

Many BJP voters, unwilling to vote for the other side still, have taken to sitting at home, as bye-poll results in Gorakhpur, Phulpur and Khairana in Uttar Pradesh have recently demonstrated. Even if there was no Opposition unity, would the BJP have won? The same thing happened in Rajasthan in a straight fight with the Congress, and, most tellingly, in the hard fought Assembly Elections in Karnataka. Despite pulling out all stops the BJP fell just short of a simple majority and could not cobble together a post poll alliance.

We have only seen a mild prime minister. One, curiously unwilling to rock the boat, of taking a hard line with lazy governance, wary of prosecuting, let alone jailing, the corrupt. One that lets parliament turn into a non-functioning fish market. One who shamelessly plays from the very song book of the Congress he reviled on the stumps.

What we’ve had, in reality, is a more dynamic Congress, without the high level corruption. Modi has also put through a mass of administrative reforms in the minor key, spoiling the effect by simultaneously extracting masses of indirect taxes in the name of everything, including “greening”.

There is an overarching impression that Modi won’t, or can’t, do much about many things affecting the public, including financial skullduggery, blackmail, lynching, rape and murder. There is no putting people in the police lock-up till bail is given or denied by a court. And its various enforcement agencies like the ED, NIA, CBI, the IT Department etc. and even the intelligence agencies move so slowly that it appears the prosecution of the formerly mighty is the last thing they want on their record.

There is, now, some new and some refreshed legislation on nabbing the corrupt and financially delinquent. But even though the law may be there, the efficacy is still a work in progress.

Four years on, the Armed Forces, granted their OROP demands by the Modi government, continue to be ill-equipped.

The traders and SME segment, long time BJP adherents, are yet to receive a single benefit. Instead they face sealings, fines, higher taxes.

Likewise, the middle class BJP supporter, who has had little beyond a direct tax cut, traded for onerous GST on all things, VAT, etc.

There have been no mega bold steps except GST and demonetization. The latter has helped damage Opposition finances for the suddenness of its implementation, but, in retrospect, that is about it. Cash in circulation is once again double that of November 2016. Digitisation has also increased, but not by as much as it was hoped.  

There are no new jobs in numbers hoped for, no defence manufacturing to write home about, next to no privatization or private investment, meagre exports, a languishing stock market - also bedeviled by fresh taxes. The real estate market is languishing, even as talk of smart cities swirls and eddies.

There is not even a single substantial Hindutva move made, unless cancelling the Haj subsidy is to be counted. There is a mess of three steps forward and two steps back in the Kashmir Valley. There is no effort to abolish Article 370 and 35A of the Constitution. No Ram Mandir. The judiciary is unreformed, partisan and obstructive.

Modi has indeed delivered a 7.4 % GDP growth through it all, touted as the highest in the world. The international rating agencies, World Bank, IMF and so forth like it. But, it is based solely on infrastructure spending.

Other programmes, such as the much vaunted Swatchh Bharat, financed by yet another cess, inclusive of its rural toilet-building programme have not worked very well.

Free-float fuel minus subsidies has been handled scandalously. As global crude prices were halved and quartered, the fuel consuming public in India were taxed to the nines.

Is it too late therefore for Modi to reclaim his credibility? It would certainly appear so, given the huge overhang of unfulfilled promises. Modi may therefore rely on the TINA factor alone to see him through. And, given the contours of the proposed mahagatbandhan, he may be right. However, it still leaves a feeling of being cheated, and raises some doubts about his future performance too.

Modi might very well win with the able support of Party President Amit Shah and the legions at the command of RSS Chief Mohan Bhagwat. Still, because of the non-delivery and the mildness, his stature is much diminished. Nobody is afraid of Narendra Modi.

The same question was applied to Virginia Woolf, an English author of the 1920-1940 era, used as liet motif in Edward Albee’s hit play of 1962.

The play, and the movie that followed later, starring Richard Burton and Elizabeth Taylor, was on marital strife. And the modernist novelist, feminist, Adeline Virginia Woolf, is actually a stand-in for “the big bad wolf”.

But the tragedy of the first term of Narendra Modi as Prime Minister is that there has been too much rent-seeking Red Riding Hood, and not a lot of the avenging Big Bad Wolf.

(1,212 words)

For: Surajit Dasgupta’s new launch

June 21^st 2018

Gautam Mukherjee

BOOK REVIEW:THIN DIVIDING LINE By PARANJOY GUHA THAKURTA & SHINZANI JAIN

BOOK REVIEW

TITLE: THIN DIVIDING LINE-India, Mauritius And Global Illicit Financial Flows

AUTHORS: PARANJOY GUHA THAKURTA with SHINZANI JAIN

PUBLISHER: PENGUIN PORTFOLIO, RANDOM HOUSE INDIA, 2017

PRICE:Rs. 599/-

The World of Hawala, Tax-Havens, Round-Tripping, Anonymous P Notes & The Vexed Question of Tax Competitiveness

There are a   plethora of almost no- questions asked “Tax Havens” both onshore and offshore, across the world. Many have been there for a century or more. Much of the money flowing through them is not necessarily ill-gotten, but seek to take advantage of the tax avoidance opportunities proffered. This naturally to the detriment of the taxation authorities in the  country of actual residence.

 However, global as the issue is today, what tickles and tantalizes people in India, are estimates that $62.9 billion or Rs. 400,000 crores is secretly stashed by Indians abroad by way of illicit funds.

This book is something of a companion primer to a documentary of the same name, concentrated quite largely on Mauritius. The authorities in Mauritius have framed their laws and practices in a way that there is no wrong doing as far as they go. Nevertheless, the “Mauritius Route”, with a double tax avoidance treaty, has been controversial since 1982, when Indira Gandhi was Prime Minister. The treaty lay dormant for almost a socialist decade, and was only operationalised with the advent of India’s liberalization in 1991. PV Narasimha Rao  was Prime Minister –assisted, of course, by his economist Finance Minister, Dr. Manmohan Singh.

Soon, 40% of all foreign investment into India, now in many billions of dollars and mostly into the equity market, came in via Mauritius. How much of it is really Indian money turning white from black? All of it has been 100% exempted from capital gains tax for decades.

A clarification was issued to the Central Board Of Direct Taxes (CBDT), by the Finance Ministry when it was inspired to interpret the terms of the treaty differently in 2000.

The CBDT in its wisdom, tried to tax the capital gains of Foreign Institutional Investors (FIIs), High Net Worth individuals (HNIs) etc. despite the Double Tax Avoidance Treaty with retrospective effect. That is, for all the years the FIIs and others using the route were active in India! This naturally raised a hue and cry and the then Finance Minister Yashwant Sinha was forced to intervene. The clarification issued  during the Vajpayee government, said that if an FII was able to establish its “tax residency” in  Mauritius, (which anyway did not have any capital gain s tax itself), then the CBDT could not tax it in India.

But all along the line, there had been criticism of the Mauritius treaty by large domestic institutional investors (DIIs), for creating an uneven playing field albeit to attract foreign investment. This view was echoed by Left-leaning economists, bureaucrats, lawyers, and politicians. It was seen by them to favour FIIs using the debatable argument of “tax competiveness” vis a vis other countries.

This too changed after the global economic crisis of 2008, when the prevailing sentiment underwent a sea- change. Now most developed countries began to call for an end to “tax havens”, because of their allegedly deleterious effect on their domestic economies.

India too decided to go in for a change under the Modi government which has mounted a fairly serious effort against black money, hawala, round-tripping using tax havens and so on.

It has gone ahead and renegotiated various avoidance of double taxation treaties, starting with Mauritius in May 2016. India imposed a withholding tax of 7.5% of capital gains for those using the Mauritius Route for the two years till 1^st April 2019, when the full tax rate of 15% will be applied on foreign investors on par with domestic ones. That is, from financial year (FY) 2020.

For the moment, India’s level of taxation is most competitive, and the move has been generally well-received, mainly because most developed countries have imposed a 10% tax on capital gains presently. After this, India went on to amend its tax treaty with Singapore which was also on similar lines.

However, many FIIs claim that the currency exchange rate risks of operating in a emerging market of about $ 2 trillion market capitalisatiion with the rupee constantly depreciating,  puts them at an additional disadvantage.  

It is difficult to say whether round-tripping of massive hawala funds is really all that bad. Despite the obvious money-laundering, the alternative is that all the money sent out of the country via hawala, fraudulent invoicing and other means, never comes back at all! 

This thought might be behind the government’s reluctance to ban anonymous participatory notes (P Notes), that are accommodated by the registered FIIs. Efforts to regulate and tighten the regulations concerning them have been tried in 2004, without much evident success.

The question of tax residency however has been made redundant. And companies using the Mauritius Route henceforth have to put in Rs. 27 lakhs into the equity of the Mauritius companies they set up. This puts paid to operating via the erstwhile “shell companies”.

The alleged abuses that have involved this infamous route are a morass of legal conjecture, litigation, arbitration, and elevation to the International Court of Justice (ICJ). That clumsy attempts at tax realization from Vodafone and Cairn Energy, some of it retrospectively, has damaged India’s reputation is undeniable.

Author Paranjoy Guha Thakurta is a prominent media person and educator. He has sharply-honed journalistic and investigative abilities. Guha Thakurta’s prose is lucid as he tackles a somewhat dry subject despite its cops and robbers undertone. He also has a proper grasp of the economics and evolving regulatory framework involved. This is, of course, not his first joust with the world of fast-and-loose Capitalism in book form.

His young collaborator on this book, Shinzani Jain, comes in for fulsome praise from Guha Thakurta himself . Again, Jain, who is studying for a Master’s Degree in Sociology, writes articles for a number of print and digital media offerings, and has co-authored another book on the related subject area of black money, cronyism and the damage it is doing to the Indian economy.

For: The Sunday Pioneer BOOKS

(976 words)

June 9, 2018

Gautam Mukherjee