Anger At Slashed Small Savings Rates:Government Revenues Teetering

Anger At Slashed Small Savings Rates: Government Revenues Teetering

The abrupt slashing of interest rates payable on small savings instruments, has the middle-class, ignored in the union budget, annoyed at this fresh gouging, and worried about their retirement savings.

Particularly, as the NPA ridden banks, offering nothing better, have also cut rates, and the stock markets are in a bear grip too.

Even, if the RBI now cuts repo rates sharply, the beleaguered banks probably can’t lower lending rates with so much bad-debt. This is, in truth, a double whammy, with no silver lining.

The opposition Congress is immediately up in arms. The government is trying to brazen it out, suggesting that a low interest regime for deposits/lending is beneficial in the long run.

But it sounds like a bitter pill prescription from abroad, a requirement against the government’s own long term loan demands, from the World Bank, ADB, IMF etc..

For the public, these savings rate cuts of up to 1%, on the whole gamut, coming back-to-back with a sharp hike in petrol and diesel prices, feels like a grim start to spring/summer.

And these new financial blows have been delivered, seemingly via the back door, just days after the finance minister pulled back, under pressure, from taxing part of the PPF in his budget proposals.

Crude prices, everyone knows, have dropped 75% from its peak, but the Indian public only ever saw an 18% cut in total, issued in dribbles and drabbles, at the pumps. The rest of the oil benefit has gone into an easy dip government revenue generation.

The finance ministry is clearly struggling to garner revenues. Direct taxes are below targets, the government divestment programme at the bourses  is running at less than half levels, indirect taxes, though better, are still  grossly inadequate to finance the government’s ambition.

FDI, looking good, is the great white hope, combined with those long-term development loans.  Frustratingly, structural reform like GST, which can add a full percentage point to GDP, is still pending.

Besides, every initiative costs: OROP, the 7^th Pay Commission, rural upliftment, infrastructure boosts, the revival of the Railways/ power/ mining/ inland and coastal waterways, defence procurement/manufacturing.

The government’s refusal to relax the fiscal deficit target of 3.5% of GDP has been praised by all quarters, but does make it tougher to mobilise resources on a very narrow tax base.

Apologists point out that the PPF, once paying 12% tax free, has been handing out single-digit returns since 2001, and 8.1% tax free is not so bad. International rating agencies like Fitch too, like these cuts, and consequently expect more money to flow into the stock markets.

But the deeper and perennial problem of revenue generation on a tiny base is still not being addressed, resulting in a high direct and indirect tax regime, and the same people having to pay for the entire edifice.

Consider that in India, for many centuries past, almost the only tax applied, was a land based revenue. It was levied on the peasants that worked it, feudal vassals etc. It was rich enough to create and support a network of hundreds of maharajahs plus thousands of rajahs and zamindars, with very low rates of inflation. It also financed at least two immensely rich dynastic reigns-that of the great Moghuls, than endured for 400 years, and the British Raj, spanning another 200 years.

But once we took on Fabian socialism at independence, these universal tax bases passed into history. All agricultural taxes, even on the rich, were abolished forthwith.

A recent report had great and inexplicable riches, multiples of annual GDP, masquerading as agricultural income to bamboozle the tax authorities. It was speculated that it might be the unaccounted monies stacked abroad, brought back in, to avoid being nabbed in various secret bank accounts.

And still, the government has no mechanism to tax this money in the hands of a few hundred immensely ‘rich farmers’. It doesn’t even dare venture into a universal expenditure tax, oft suggested, of say 0.25% , applicable on all bank transactions involving more than a threshold of Rs. 10,000/-  for example.

Yet, only 3% of 1.2 billion are even in the income tax rolls as PAN holders. Corporate taxes too are paid by a small proportion of companies and businesses in the organised sector, while 90% of commercial activity is carried out by the ‘unorganised sector’. Our black economy rivals the $2 trillion official one.

Isn’t the refusal to grasp the political nettle of expenditure tax and imposts on high agricultural income, unfair to all current revenue generators?

For: The Quint

(752 words)

March 20^th, 2016

Gautam Mukherjee

BOOK REVIEW: KAUSHIK BASU'S LATEST BOOK

BOOK REVIEW

Title:                  An Economist in the Real World

The art of policymaking in India

Author:             Kaushik Basu

Publisher:        Penguin Viking, 2016, Pages 228, 2016

Copyright:        Massachusetts Institute of Technology (MIT) 2016

Price:                 Rs. 599/-

Real World Economics

Kaushik Basu is a vice-president and chief economist at World Bank, as well as professor of economics/ C. Marks professor of international studies at Cornell University.

He served a 30 month stint as chief economic adviser to the government of India in 2009-2012.It was a rare foray for Basu, outside academia, theoretical economics, and research, and spawned this engaging book for the layman who wants some insight into how economics in general, and economic policy in particular, works in India.

When Basu joined the government, inflation was raging at between 7-11%, and lasted for the five years 2009-2014,coming after being stable for the previous 12 years.

Inflation is a peculiarly Indian obsession, and trumps, somewhat self-defeatingly, the concern for growth. Basu revisits much worse inflation, in the hey-day of socialism, and on a much lower base of just about $0.25 billion. Those were also the days of the infamous ‘Hindu rate’ of growth - never more than 3.5% p.a..

In 1973-1974, just before the Emergency (1975), inflation never dropped below 20%, and stood at an astounding 33.3% in September 1974!

The new season of high inflation during Basu’s tenure however, sat upon a much stronger economy, reasonably large at $2 trillion, growing at over 4.5% at its worst. And it was back-stopped by a black economy, estimated to be of equivalent size.

Basu acknowledges as much, writing that India’s cash economy probably saved it from the ravages of the post 2008 sub-prime crisis and the borrow-and-spend decades preceding. That downturn engulfed the US and Eurozone, and sent it reeling.

The West chose to stave of recession, or worse, with negligible interest rates, and billions in stimulation money, paid out every month, and for years together.

India picked the opposite course, tightening interest rates, sucking up excess liquidity, even as it widened the fiscal deficit to finance welfare measures.

This choking manoeuvre went on, slowing an 8% GDP growth rate to under 5%, not seen since 1994. But, the inflation stayed high, until falling oil prices brought it down, but only during the successor NDA government.

Basu repeatedly makes the point, in almost every chapter of this volume, that economic policy is just one element in the mix, and only succeeds to the extent that its prescriptions are taken up by the people – provided, of course, other macro conditions both nationally and internationally, are amenable.

He dwells on the theory of the ‘focal point’ first postulated by Thomas Schelling in 1963, wherein the level of acceptance of a new law is based on peer behaviour. It shifts the strategic epicentre, or focal point, to a place where state effort will give best results, assessed along with John Nash’s concept of the ‘Nash equilibrium’. This speaks of consensus brought about by several people agreeing on a preferred course of action voluntarily, as part of his celebrated Game Theory. As an economic theoretician, Basu feels strongly about the people having the last word.

Another concept, beloved of Basu, is ‘the invisible hand’ postulated by that prince of early capitalist thinking Adam Smith. In this, the enlightened ‘self interest’ of the people pushes the economy towards desired outcomes, and economic policy does well to adapt itself to it.

And I suspect, though he does not say it in so many words, in a black and white economy like India’s, where a full half operates as it pleases, the writ of the government is, to that extent, happily compromised.

Basu makes relevant comparisons between what India does, and what other countries, China as yardstick, certainly, but also emerging economies- Brazil, Turkey, etc. have done differently, but does not make any definitive value judgements either way.

But also underlying everything Basu has written in this book, perhaps tantamount to his world view, is the implication that the sophistication and receptivity of the populace, as in First World Vs Emerging Economy contexts, has a major effect on outcomes.   

For: Mail Today

(651 words)

March 18^th, 2016

Gautam Mukherjee

BOOK REVIEW: KAUSHIK BASU'S An Economist in the Real World: The Art of Policymaking in India

BOOK REVIEW

Title:                  An Economist in the Real World

The art of policymaking in India

Author:             Kaushik Basu

Publisher:        Penguin Viking, 2016, Pages 228, 2016

Copyright:        Massachusetts Institute of Technology (MIT) 2016

Price:                 Rs. 599/-

At The Crossroads of Theory  & Practice

Kaushik Basu, a distinguished academic specialised in theoretical economics, international relations and research, works at the highest echelons of the World Bank and Cornell University.  

For a brief season 2009-2012, Basu stepped into the realm of applied economics, when he was the chief economic adviser to the government of India, coming in at the invitation of then prime minister Manmohan Singh.

Coming to India in the backdrop of the sub-prime crisis that was raging in the US and Europe, post 2008, he found India relatively insulated  from its ravages, in part because of the buffer of its black money economy, that saved the banks from undue strain.

This book is largely a meditation on the novelty of those India years, but it refers to many situations in other parts of the world for points of comparison and illustration as well.   

There is a clear divide, economically speaking, of the early decades since independence with its low growth rates and high inflation, up and into the 1980s.

 Then came the path-breaking reforms of 1991, and every chapter in the book is written with a focus on the post 1991 reformist period, with an hopeful eye to the future.

However, Basu’s wry comment on 1991 and the reasons for the momentous changes wrought, was that: ‘for a system resistant to change’ implication that it was the same in 2010, ‘nothing is as good as a crisis’.

He points out, amidst years of the derisively labelled ‘Hindu rate’ of growth that never exceeded 3.5%, that during the Emergency in 1975-76, India saw 9% for the first time. It was almost a harbinger of the post 1994 period.

However, though he points out 1975, Basu refuses to attribute it to the totalitarianism of the Emergency, and hastens to point out that the following year it was down to 1.2% once more. In fact, 1979-1980, saw India’s GDP at a disgraceful minus 5.2%!

Besides, one of the reasons for the Emergency was severe civil unrest, caused, in part, by very high inflation, peaking at an astounding 30% per annum after the oil price shock of 1973.

Inflation, particularly food inflation, was once again a concern when Basu was here, but nothing like it was in the old days. The UPA contained it by using tight monetary policies and high interest rates. But yes, it was one of the causes that led to their loss of power subsequently.

Basu baulks at the notion that ‘text-book’ economic policy alone can necessarily contain inflation, citing contrarian successes in other places such as Turkey and Brazil, where interest rates were lowered despite high inflation, in order to stimulate, and not deflate demand.

In another place, he does say however, that Brazil was well used to double-digit inflation year after year.

What is clear is that Basu’s foundations in macro-economic theory are on full display throughout. But he lays great stock with underlying sociological factors to determine the success rate of policies adopted.

As in his first book, (Beyond the Invisible Hand:Groundwork for a New Economics), he mixes anecdotes and examples, revisiting the concept of the shifting but strategic ‘focal point’ first developed by Thomas  Schelling in 1963. This, leavened by another, the ‘Nash equilibrium’ developed by “Beautiful Mind” John Nash, as part of his Nobel prize winning Game Theory.

The ‘Focal point’, to Basu, is the co-relationship between the impact of new laws, even policies, on economic outcomes. A new law, writes Basu, influences human behaviour in a relative manner, only to the extent one person believes another will be influenced by it. So each person instinctively reacts in consonance with his peers.

Collectively therefore, the impact of new laws, no matter how they are written or what they in themselves intend,  happen in  a  relative manner, and shift the strategic ‘focal point’ to a place that must become the epicentre of the effort afresh.

But, since different laws are received variously, the shift in the ground zero, the ‘focal point’, inclusive of its direction too, is a variable that must be responded to. It is as if economic policy is suspended over a sprung dance floor.

The new law, as a thing written and enacted, has little salience in itself, and even the policing or enforcement of it cannot ensure its willing acceptance. Ideally, it should be voluntarily accepted by most people, leaving deviants in the minority.

The ‘Nash equilibrium’, comes into play when various ‘players’ choose the same option. Basu points out however that there can be several ‘Nash equilibriums’ operating at the same time, calling for coordination between them. But people, somehow, resolve any confusion on their own, via their innate sense of order, by choosing one option above all others,  one they can all generally agree upon.

These ideas, to Basu, are the foundations of proper economic development, because the tool-box of  just setting monetary targets, fiscal deficit limits, setting trade tariffs, banking regulations, etc. cannot work without the backing of social and psychological conditions they rest upon. This, though he’s too polite to say it in so many words, is the difference between a First and Third World mentality.

Basu seeks through his books and his other work to catalyse ‘new ideas for economic policy’. He believes in proposals to stimulate a more perfect competition to engender efficiency, and writes against the rigidities and distortions caused by oligopolies, for example, in the distribution of food grains. Basu favours many small and localised distributors, over just a few nationwide big depots,that can, and do, exert more price and supply controls.

In the end chapters, Basu does to stick his neck out and predict that India will ‘join the ranks of industrialised nations’ with a per capita income of at least $10,000 per annum by  2040, ‘and bring chronic poverty to an end well before that’. He thinks India has reached take-off point, and will maintain ‘a GDP growth rate of approximately 8.5% per annum’.

He revisits the concept of  Adam Smith’s ‘Invisible hand’ mentioned also in his first book, which postulates much of the momentum and order we see in society and economic activity is governed by ‘self-interest’ of ordinary people, and ‘the coordinating power of the market’.

This is, of course, is an elegant invocation of the free-market principle redolent with laissez faire. Basu quotes: ‘there is no economy on earth that is closed and has grown rapidly’, and then mocks it by saying planet earth itself is a closed market, and has done very well for itself, thank you.

But, in almost every instance when he says anything overtly free-market, he hedges his own position with caution, pointing out there are no absolutes that appeal to his common sense.

For: The Pioneer

(1,116 words)

March 16^th 2016

Gautam Mukherjee

Brand In Flight

Brand In Flight

Vijay Mallya must rue the day he got into the airline business. He could also be congratulating himself for handing over the entire can of worms to the 17 lending banks.

It is the banks who lent vast sums against inadequate and chimerical collateral, including a brand valuation of Rs. 4,100 crores arrived at  fancifully by Grant Thornton.

It is the banks who allegedly listened to the prods and whispered persuasions of powerful politicians.

It is they who sanctioned more later, even as things became untenable in 2010. They restructured the loans, accepting Mallya’s sop of a personal guarantee, accompanied by a nod and wink both from the finance ministry and the RBI.

And it is they who did nothing to recover monies, even as Kingfisher Airlines went down for the count by 2012.

Mallya, in turn, lost control of his flagship liquor company, along with all his houses in the company books, his Formula One and IPL teams.

His personal honour is compromised in front of thousands of unpaid employees to the tune of about Rs. 1,000 crores, including undeposited TDS.  

He still owns shares, 4% in United Spirits Ltd. (USL) valued at about Rs. 2,400 crores, and 32% in United Breweries Limited (UBL), valued at around 6,700 crores.

Mallya may however be off the hook for all intents and purposes. Under present laws, the outstanding is business debt, incurred in good faith amidst hopes of revival, attributable to the risks and vagaries.  

So much so, that the investigating agencies are now searching for one or more criminal cases to pin on Mallya, money-laundering, cheque-bouncing, tax fraud, something!

Mallya inherited his father’s liquor business, being the only son, at just 28. Emerging from the obscurity of coming from his father’s second family, he quickly became addicted to an emperor-like flamboyance, fuelled by an insatiable appetite for highly-leveraged, debt-fuelled growth.

But Kingfisher Airlines, established 2005, never ever made any money. By early 2012, it was in deep trouble, its share price tumbling, so that its market value stood at just Rs. 960 crores. It gave up all its international flights, and cut back the domestic ones till it was operating just 22, and still bleeding money. 34 of its leased planes went back as the rental leases of over Rs. 1,000 crores were outstanding.

It owed Rs. 7,500 crores  in 2012, and the promoter holding in hand was at 35.86 per cent; but after minussing the shares Mallya had pledged, the remainder was just 3.55%.

The only one amongst the lending banks that flew the coop was ICICI, because it presciently sold Rs. 430 crores worth to Srei Venture Capital in mid 2012. Most of the others converted their debt into equity, but this rapidly became worthless. From a high of some Rs. 40 per share, the share stood at just Rs. 1.36  in June 2015. So are these banks, holding worthless equity they took on voluntarily, even in any legal position to ask?

Cut to March 2^nd, 2016, and the $75 million of the Diageo severance settlement, of which Mallya is said to have gone to England with $40 million. 

He does have other businesses abroad, and the possibility of starting new ones, plus several properties/assets: in the UK, France, the US, South Africa, Hong Kong etc..

So, what is the moral of this story? First, the PSU banks are easy targets for crony capital motivated by the political class, and the only solution is to privatise them.

Second, the borrower must be moneyed, and the lending must be against solid and sufficient collateral in every instance. Here, the borrower should have been USL or UBL, with its solid balance sheets and assets.

Third, handing out thousands of crores against esoterics like brand value for a new enterprise is ridiculous,  and possibly malafide.

Fourth, if the pending Bankruptcy Code becomes law soon, the creditors will be able to jump in and seize the enterprise and its assets in future, change the management, and try to revive matters before it is too late.

Fifth, until there are steady profits generated, there is no case for lending money to a new entity in the absence of matching promoter funds and solid collateral.  

Exceptions that prove the rule: Standard Chartered Bank recently had to write off $1.5 billion. This, for lending huge unsecured monies to Indian infrastructure companies.

Therefore, nothing is fool-proof, and even as the ultra-cautious RBI under Raghuram Rajan frowns on risky lending, it doesn’t want to dry up bank credit either.

For: The Quint

(752 words)

March 15^th, 2016

Gautam Mukherjee

New Movement On Structural Reforms In Parliament

New Movement On Structural Reforms In Parliament

Just when most analysts and India observers had given up, resigned to the Modi government’s boring economic incrementalism, far from good enough to deliver the goods - along comes a surprise.  

There has appeared, with the breakthrough of two important structural reform laws, a gap in the hedge. A clear passage, through the perpetual battle royale in parliament, it comes like a breath of fresh air, and not a moment too soon.

The long impasse, practically throughout the 21 plus months of this government’s existence, was holding up, not only the government’s reform and legislative agenda, but also wilfully retarding the nation’s rate of GDP growth. Some observers have said that the potential to achieve double-digit growth was being stymied by a tragic lack of consensus.

Not all the regional parties have been comfortable with the Congress brand of confrontational and ‘beggar thy neighbour’ politics. Particularly, as the non-passage of GST, Labour, Bankruptcy, Land and other important reform oriented laws, was, and is, adversely affecting several of the states. 

With an unprecedented and perilous figure of PSU bank NPA’s, the implementation of the Bankruptcy Code for example, has progressed from being a desirable to a dire necessity.

However, with many of the operational controls being state subjects, some have cut loose, to make progress on their own. This is making for uneven development and wasted opportunity in those states who insist on partisan politics trumping all else. That this methodology is self-defeating over the medium term, is starting to dawn, even on the stick-in-the-mud Congress. 

Besides, it shows it the limitations of its obstructionism that cannot sustain.

The BJP too is now like a thing transformed. Gone is its inexplicable diffidence in the face of opposition attack. From being a good facsimilie of “Congress plus cow”, as senior BJP member and author/journalist Arun Shourie had it, it is showing signs of the Modi stamp of conviction politics at last.

It has thrown over its failed strategy of trying to curry favour with the  belligerent Congress, and begun to kick back. The RSS too is taking on an unapologetically positivist and modernist role within its socially transformational space.

Congress, trapped in its mandir-masjid mindset and its corrupt image, finds itself slipping off the bully pulpit. Lost and unmoored, it is desperately making common cause with separatists, maoists, communists, convicted terrorists- being depicted as  martyrs, other anti-national elements, even amongst students and professors; and all this in the quest for political traction. It has even gone so far as to compare ISIS to RSS, if in a diabolical and roundabout way.

Besides, this kind of divisive propaganda politics may be short-lived yet, particularly within parliament, if a certain private member’s bill, recently introduced, becomes law. This quiet proposal has the potential to change the complexion of parliamentary functioning once and for all.

This bill, let us call it the Anti-Disruption Bill, was introduced recently, in the Lok Sabha by MP Jayadev Galla of the TDP, one amongst the 32 private members’ bills admitted. It may well be the next big idea after Rajiv Gandhi’s Anti-Defection Bill became law.  

This would-be law seeks to effect the disentitlement of daily allowance to members for disrupting the House, and further the “termination of membership of a member or group of members who disrupt proceedings of the House”.  It would throw an elected MP out of office, privileges and perquisites, for the remaining duration of his term for disruption of parliament.

In one fell swoop this bill, if it becomes law, will return parliament to discussion, debate, decorum and democratic voting as envisaged by the founding fathers of the Indian constitution.

In the context of constant mayhem, the washout of two consecutive parliamentary sessions, the colossal waste of public funds, Galla’s bill has come at a most opportune time and could create history.

While we will have to wait and see how this highly significant bill progresses, for now, the long-awaited Real Estate Regulation & Development Bill 2015, that empowers and protects the interests of home-buyers was passed into law on December  10^th.  It will go a long way to revive the confidence of buyers’ in the residential housing sector.  The builders will not be able to delay projects with impunity in future, nor can they divert investor funds into multiple projects, or indeed siphon off monies into private aggrandisement.

Another most welcome development was the introduction of the Aadhar Bill as a Money Bill in the Lok Sabha. As  a money bill, it cannot be blocked, even as Congress, true to form, is protesting its very introduction as a money bill.

Once passed, the implementation of the Aadhar Bill will go a long way to accurately target subsidies for the poor, and prevent their misappropriation by unscrupulous and corrupt middle-men. 

At first, it is intended to be used for the LPG and food subsidies. Later on, it may well be the preferred conduit for all forms of government assistance direct into the bank account of the recipient.  Already the fertilizer subsidy for farmers is intended to be streamed through Aadhar.

In conjunction with millions of bank accounts recently opened under the Modi government’s early initiative in this regard, and others expected to follow suit, not only will millions of the ‘unbanked’ join the organised sector, but with help reaching the deserving without ‘leakages’, the Aadhar Law plus the individual bank accounts has true transformative potential. The Aadhar Card’s parent, Nandan Nilekani, suggests that it can be used not just for subsidies, but to “democratise credit”.

On the back of these two laws, the government seems far more confident of passing other sorely needed bills in the second half of this budget session itself.

The weakening of the Congress strength of numbers in the Rajya Sabha, with members routinely retiring and so on, has had a part to play in the new developments. 

Some reports suggest that it too does not want to fly in the face of opposition unity. Getting ensnared in an increasing number of probes, investigations, and prosecutions, is also putting on the requisite pressure to persuade cooperation.

This, even as the Modi government is apparently doing much better at coordinating its initiatives with the less obdurate sections of the opposition.

The large number of state assembly elections coming up makes it difficult for Congress to continue with its role of spoiler, particularly when others in the nominal opposition outside the NDA, want to take a more proactive and positive stance to their voters.

At this rate, the second half of this government’s term promises to do much better than the first.

For: The Pioneer

(1,099 words)

March 15^th, 2016

Gautam Mukherjee

Super Tuesday and the Trumping of America

Super Tuesday and the Trumping of America

It is difficult not to notice what is happening in the American primaries, mainly because of the presence of a blond, blustery, red-faced man, an increasingly serious contender, with startling views and strong deliveries.

Both Hillary Clinton, the first would-be female president, and Donald Trump racked up 7 wins each out of the 11 possible, in states that voted in the primaries on ‘Super Tuesday’.

But Trump is ahead on the number of delegates he still needs to clinch the Republican nomination, over Clinton on the Democrat side. She has to pull further ahead of her challenger Bernie Sanders, to be certain. 

But now that Trump is demonstrating undeniably broad support,  his detractors within the GOP (Grand-old-party- aka the Republican Party, symbol-elephant), are distinctly miffed. They did not expect him to last this long, let alone keep going from strength to strength with increasing traction, and this without their help.

Some outside liberal comment, on both sides of the Atlantic, trying to psychoanalyse the state of affairs, is suggesting that America itself has become rather like Trump, and not in a nice way. That Trump is the candidate of the ignorant and less-educated amongst the White majority.

But as the primaries roll on, the facile reactionary argument, that Trump’s nomination may be another way of handing certain victory to Hillary Clinton, has as many paranoid flaws as the original ‘nobody is going to support that loud-mouth-bigot Trump’, that has now fallen by the wayside.

Notwithstanding the calumny heaped upon Trump from various quarters, if the rank-and-file Republican voter keeps seeing to it that ‘the Donald’ continues to win big, for example in the next cluster of states in Mid-March; it will be very difficult to stop him seizing the  Republican Party nomination.

More so, because continued obduracy on the part of the party bosses might force Trump to leave in disgust, and run as an Independent.

If that happens, conventional wisdom has it that the Republicans, with their voters divided, are certain to lose. The election will go to the Democrats, or, if not, given enough groundswell support, to Trump, on his own!

Of course, much before Trump gets to the White House, if he does, after the inauguration in January 2017, the GOP may read the writing on the wall and decide to unite behind him. The Republicans may well hand him the nomination, without further contention, at the forthcoming party convention.

Then, as ‘the chosen one’ representing the  legacy of Abraham Lincoln and Ronald Reagan, Trump will have to conciliate and unify  all party factions, in order to go out to do electoral battle with Hillary Clinton single-mindedly.  

If however, in the unlikely event he has to leave the party, and battle on as an  Independent, all obligations, and bets, on the future course of action, should Trump win, are off. It will make history of course, as no independent has ever won before.

But if Trump does, either as the Republican candidate, or on his own, it will be a massive mandate for change. If he does, it will mean, like Modi in India,that his personal resonance with the electorate has proved to be greater than the appeal of his party.

If he wins as an Independent, it will further underline the difference, and he will stand taller than those from either of the two long-standing political parties.

Either way, it will clearly signal that the American voters are determined to overhaul the political establishment. That is why they would vote in a rebel outsider, a flamboyant businessman, one with no prior political experience, to the most powerful job on earth. A person moreover who  speaks a different kind of language, provocative and deliberately shorn of political correctness.

A president in the making, backed by a popular revulsion against the political establishment. A person famous and popular, long before this campaign, but not as a politician. A rich man, billionaire successful, unconventional, with none of the political baggage of his rivals. A man aspiring to the most powerful political office in the world, without ever once having held any public office.

How will it affect India if Trump wins the presidency? He threatens regularly to bring ‘jobs back from India’ on the campaign trail, but it is  debatable just how many US jobs have actually been exported to India. Unlike, that is, the mass-manufacturing units in China. His other remarks with regard to India are by and large favourable, particularly in comparison to what he says about China or Pakistan; and certainly, about Mexico.

At a personal level, for what it is worth in statecraft, both Trump and Modi are outsiders, and this should help them bond. But it is not certain by any means. One is a billionaire with a putative racist streak, born rich; and the other speaks English with peculiar syntax and a very thick accent, and still takes an inordinate pride in his chaiwala days.  

Still, there might well be continuity, and there have been odder pairings in history. After all Modi gets on well with the Harvard educated ‘my friend Barack’, and thinks most heads of government are worth hugging.

At a deeper strategic level, Trump’s victory, and his unconventional political style, may provide momentum to the tilt towards India as a Kissingeresque countervailing force; to check the disruptive power of the China/Pakistan/North Korea combine.

India’s footprint of influence might be extended, with US backing to include not only the SAARC region in South Asia, but markedly farther  afield.

This is evident in a muted capacity presently in West Asia, the Asia-Pacific, amongst the G-20, BRICS, the most influential Nuclear Suppliers Group (NSG), the UN, IMF, World Bank, ADB etc. as well as the littoral Indian Ocean region.

But, under Trump, determined to overtly revive US power, India might receive a substantial boost as a favoured and chosen ally in the region.

This new Indo-US alignment, post the break-up of the USSR, actually began in the ‘unipolar-globocop’ world under Bill Clinton, during the Vajpayee administration. It was carried forward by George W Bush and Manmohan Singh, particularly in UPA I, when the nuclear power deal was signed. And lately, by Modi and Barack Obama, with many more bilateral visits and meetings, visibly greater military, technological and intelligence sharing cooperation, emerging directly, and via other US allies.

But going forward to 2017, it is clear that many of the old constraints, at the beginning and middle years of the tilt, have melted away. America is less dependent on Pakistan and China than it was in recent times. Its direct involvement in Afghanistan and Iraq are mostly done with. Diplomatic relations have been restored with Iran. Myanmar is coming out of its long isolation with a new break-out of democracy. The OPEC leverage and oil price politics is on the wane.

India has drawn closer to Israel, South Korea and Iran on its own. Its tireless and constant efforts to unite the world against terrorism are also finding much greater support and understanding, with many countries around the world. These not only include varied nations like the UK, France, Germany, Thailand, Canada, Russia, Indonesia, but lately, also the UAE and Saudi Arabia. The latter countries have seen fit to recalibrate their relationship with India vis a vis Pakistan to suit. How much of this has come about via US nudging?

America, and its strongest allies in the Asia-Pacific region, Japan and Australia, are already backing India to a much greater extent now in the context of the changed geo-political scenario.

Trump as president, if he remains true to his maverick streak, will be expected to think out-of-the-box and shake up the Washington establishment first and foremost. Many staffers and key players of his administration are likely to be drawn from outside the GOP net.  While as president Trump is likely to greatly moderate his confrontationist style, there is little doubt that he will try hard to give shape to his vision of returning America to a strategic pre-eminence, combined with economic and military greatness.

It will not be easy for Trump to redraw power equations and rejuvenate alliances in the increasingly multi-polar scheme of things presently; but if and when he tries, India, with its stability, responsibility, and democratic polity, may well find itself strategically placed to benefit from the effort.

For: Swarajya

(1,387 words)

March 3^rd, 2016

Gautam Mukherjee

Cement Mixer Politics

Cement Mixer Politics

The earlier narrative of a phoenix-like Congress rising from the ashes under the leadership of a mysteriously rejuvenated vice president Rahul  Gandhi, is beginning to fall apart - both inside parliament and outside.

For a while, it looked very good for the disruptive and boorish avatar of Congress, culminating in its resounding victory, in consort with its camp followers, and the JD(U)-RLD combine in Bihar.

Though Delhi was also thoroughly lost to the BJP, it was worse for the Congress to be completely wiped out where it had ruled for three consecutive terms. Still, Rahul Gandhi’s Congress adopted much of its disruptive style from the NGO/activist politics of the AAP.

Almost single-handedly, despite being just 44/45 seats strong in the Lok Sabha, and some 68 in the Rajya Sabha, Congress managed to trash both the monsoon and winter sessions of parliament, and paralyse the government’s legislative agenda.

Large and important bills like the GST, the Land Bill, the Bankruptcy Law, the Labour Law, the Real Estate Bill and so on, are all pending. And they will stay marooned, unless the government finds a way to coerce, rather than persuade, the Congress into cooperation. This can happen if it is punished for its negative politics in forthcoming assembly elections.  

But in parliament, it is made difficult by the reckoning that if the Modi government succeeds in being reformist, Congress will find it very difficult to return to power.

Recently, the Left and Congress, buoyant from its many political guerrilla style attacks on the government, thought they might just have it on the ropes. This, after the suicide of an OBC post-graduate student at Hyderabad, followed quickly by separatist, anti-government, anti-Hindu offensives at JNU and Jadavpur universities.

But neither opposition parties were actually prepared for the sudden counter-attack. The home ministry and the police arrested the students, applying the archaic British era sedition law. But, over the top or not, it was also used liberally by the UPA in its time.

Coincidentally, various senior Congress leaders have become enmeshed in other legal proceedings. The mother-son leadership of the Congress is out on bail in the National Herald case. Rahul Gandhi by himself, is also facing a charge of sedition.  Voluble Congress general secretary Digvijay Singh is out on bail for a recruitment scam case dating back from his time as chief minister in Madhya Pradesh.

Former union minister P Chidambaram, it is now revealed, allegedly rewrote an affidavit to conceal that terrorist Ishrat Jahan, killed in a legitimate police encounter in Gujarat, was a known LeT operative. He apparently did this, bypassing then home secretary GK Pillai. The government is now going into the details of the case to determine Chidambaram’s culpability in the matter, and to provide possible relief and retribution to the others affected.

In addition, the ED (Enforcement Directorate) has also discovered that Chidambaram’s son, Karti, amassed huge wealth and property in various parts of the world, in the period 2006-2014, when P Chidambaram was a union minister. This has become an electoral issue in Tamil Nadu.

So in the current budget session, used as the Congress/Left have become, to raising slogans, rushing to the well, and refusing to allow any business from being conducted, they were overtaken and outshouted by the AIADMK. The southern party is loudly demanding immediate action against Karti Chidambaram in the Aircel-Maxis scam. And this, vigorously enough to shut down both houses of parliament on the 1^st of March.

The AIADMK demand has drowned out the gratuitous Congress clamour for a privilege motion against HRD minister Smriti Irani. Besides, the government plans to move its own counter-privilege motion against Jyotiraditya  Scindia, to trade charges on who ‘misled’ the house.

Both sides will now have to wait and see how AIADMK is served, but the NDA must be pleased, particularly since Congress has teamed up again with DMK in Tamil Nadu.

With the government now determined to give as good as it gets, the odds are beginning to even. Another instance of returning the favour of Rahul Gandhi’s oft-repeated ‘suit-boot’ jibe came almost providentially. State BJP men were able to point out Congress run Karnataka chief minister Siddaramiah’s Rs. 70 lakh diamond encrusted Hublot watch. So much so, he was forced to donate it to the state treasury.

The fall of the Congress government in Arunachal Pradesh due to defection in its ranks, and the possibility of a BJP plus win there in fresh elections, is also evidence of a more aggressive stance, reminiscent of  former prime minister Indira Gandhi.

As of the 29^th of February however, the NDA may have gone in for a real and strategic shift to the left, with emphasis on measures for rural India, the farmers, the poor, poor women, job skilling etc.. Many are hailing it as the ‘Jai Kisan’ budget, echoing former prime minister Lal Bahadur Shastri’s famous slogan.

If this stance is amplified going forward, it won’t be easy for the opposition, even as new rounds of assembly elections come into view, to accuse this government of being anti-poor.

And by cleaving to the prudence of upholding the fiscal deficit targets unchanged at 3.5% for FY17, the government has also pleased most conservative economic observers, here, abroad, and in the RBI.

An interest rate cut therefore may shortly be in the works, provided there is no spike in inflation. This might just stimulate the beginning of a fresh investment cycle in private business and industry, long awaited over the 21 months of this government’s tenure.

If, through both substantive measures and perception shifts, the government begins, more and more, to resemble the UPA however, it should still remain free of scams and high-level corruption.

However, for those who had hoped for Thatcherite privatisation, at least of badly done by PSU banking, for example, or Reaganesque tax cuts and government downsizing, the Modi government is clearly not going to oblige.

It is apparently committed to an incremental and cautious growth of the Nehruvian mixed economy. It will not risk its political capital with bold structural reform and open-market capitalism.

 So, as Modi reveals his essentially nationalist philosophy, the BJP is deliberately moving towards a presumed larger, centre-left constituency, carved out perhaps from defectors from various dynastic regional parties and the Congress. Thankfully, it has retained its strong commitment towards building up the Indian Railways, roads, highways, electricity, and ports, rivers, canals, nuclear/solar energy, defence and other manufacturing, at the same time.

Whether this development promoting party with a pro-poor beating heart will produce more votes, remains to be seen. For now,  it may be  the guerrillas who’ve been ambushed by the state.

For: The Pioneer

(1,104 words)

March 1^st, 2016

Gautam Mukherjee