Through Tortuous Swings And Roundabouts...

  

Through Tortuous Swings And Roundabouts, The Government  Makes Progress

An’ losses on the roundabouts means profits on the swings!

Patrick R Chalmers, Poet and London Banker.

The Indian Public Sector is not only chronically inefficient, with just a few companies turning any kind of profit; but also substantially corrupt. The Private Sector, the Unorganised Sector, even the world of NGOs, is no better when it comes to venality.  

India, with all its promise, is ranked one of the worst places on earth to do business. All of it, in addition to the creaky and perpetually needy Government, is in urgent need of major reform, so that it becomes more lucrative to be honest.  

Fraud in PSU Banks in just the first three months of fiscal 2014, totals to 2,417crores; over half of the losses incurred by them in 2013-14 (4,183 crores).The sooner these PSU Banks dilute their equity to 52%, as sanctioned by the Cabinet recently, the better.

The PSU bank managements, often employed through political patronage, need to be ousted. Many bankers themselves are involved in the embezzlement.  Such massive losses of public money are unsustainable by the under-capitalised banks , and these numbers do not include the massive NPAs, in tens of thousands of crores; some of which are being rescheduled now.  Things are much better in the private and foreign banks, because they use a higher level of monitoring technology and data analytics to nip the problems in the bud.  Perhaps the RBI will show some zeal to push this privatisation through, and past all the vested interests.

In addition, a stupendous $ 94 billion in ‘illegal capital’ was apparently exported from India in 2012 alone, a lion’s share of it, due to deliberate misinvoicing. With periodic bans on capital inflows  into the bourses via the anonymous participatory notes, very little of this capital ever returns to this country.  So when are we going to finally go fully capital account convertible, to make such cheating redundant?

Meanwhile, the divestment targets of the Government, over Rs. 40,000 crores in this fiscal alone, is pending. The time left for this now is just 90 days, assuming the ongoing market correction bottoms out soon. As it stands, only a meagre Rs.1,500 crores has been realized from a 5% stake sale in SAIL so far. Finance Minister Arun Jaitley wants to push it through to gain credibility for the Government’s fiscal plans. This sale would meet earlier commitments, before the full budget in February 2015, which will act as a verdict on this Government’s ability to deliver in the short to medium term.  

Second- Generation Reform, except for diesel deregulation, has been non-existent so far. The FIIs are showing some frustration, retracing part of the exuberant run-up  in the indices over the last year. The rupee too is beginning to tank, thanks to lack of growth in the manufacturing sector, despite low inflation.

But still, all this could turn around dramatically.The results of efforts to initiate the GST, which, when operationalised, is expected to add up to 1.5% to GDP; and the Insurance Bill, with an estimated $ 10 billion, or more, to come in against the 49% foreign investment quota; if passed in this session of Parliament, would be a game changer. The Government’s Reform Agenda would receive a great boost. It would, in one stroke, set the scene for a resurgent stock market in 2015, and attract a significant amount of FDI as confidence in India grows.

The Railway Budget, to be presented this time by the acclaimed Suresh Prabhu, is expected to lay-out the first serious modernisation, reform and renewal measures, ever undertaken in independent India, for this venerable institution and lifeline for millions. The FDI expectations in this are massive; enough to drive up the GDP, and likely to feature Japan, China, and maybe France as well.

The outcome of the Assembly Elections in J&K and Jharkhand will also be known very soon. It may well  give the BJP an opportunity to form coalition Governments in both States, a big step up from its marginal presence in both.  And all these Assembly wins and near-wins, with more in prospect, will add to the Government’s numbers in the Raya Sabha, and solve its legislative problems  decisively.

It may appear to some, that the fringe elements within the Sangh Parivar have been queering the pitch for the Government. But the fragmented Opposition, rag, tag, and bobtail as it is, would have found another way to make it difficult anyway.

On the foreign front, though the economic scenario is far from settled, the thumping snap-poll win achieved by Shinzo Abe in Japan, a prominent friend of Prime Minister Modi, will give a fillip to Japanese investment in India as pledged.

All in all, as this year draws to a close, there are good things to look forward to in 2015.

(801 words)

December 17^th, 2014

Gautam Mukherjee

This Banyan Is Just Too Heavy

This Banyan Is Just Too Heavy

If I had eight hours to chop down a tree, I’d spend six sharpening my axe- Abraham Lincoln

Governor Raghuram Rajan of the RBI cannot seem to resist efforts to enlarge his essentially regulatory role. He aspires to be nothing less than a policy-setter for the Modi Government.

Some of his prescriptions, however, are palatable enough. He calls for more tax sops for the middle class to boost the saving’s rate. He also points out that the tax concessions, given in the past, were not indexed for inflation, and have quickly proved to be inadequate. This is equally true of the tax rates, which are absolute, except for exemptions.

Rajan advises the Modi Government to remember that the ‘Make in India’ campaign cannot take off without infrastructure and taxation reliefs. Rajan is right; even if he chooses to state the obvious. He cautions the Government against adopting a China style export oriented campaign. But this is not the Prime Minister’s emphasis. Modi  hopes a proportion of what is made here, if it is state-of-the art, and not the sorry ‘import substitution’ effort alluded to by the RBI Governor, will surely be exported. This is by way of an additional benefit to the country, not a primary objective. Of course, with the West being in the doldrums currently, they may not prove be the actual export markets at all.

Modi’s purpose however  with the ‘Make in India’ call is to attract much needed foreign investment, boost the GDP share of the manufacturing sector, and to provide greater number of jobs to our youth.

For example, when the Russians start making their estimated $3 billion worth of joint venture factory to produce helicopters in India; the majority of the choppers will be absorbed by the Indian Armed, Para-military and Police Forces. Some will certainly go into the corporate ends of  ‘Civvy Street’. But a number, in addition, could well find buyers abroad; just as cars made in India by international marques have done.

Governor Rajan also suggested that to emphasise the manufacturing sector over other ones may result in imbalances. Again, he must understand that the Modi government expects to proceed on multiple fronts simultaneously. And to emphasise any one of them, is not intended to be at the expense of another.    

Given the faltering  statistics, despite a drastic fall in oil prices, a ramp-up in dwindling manufacturing activity is crucial. The latest IIP (Index of Industrial Production), number is at it worst in 3 years. Manufacturing has contracted by a whopping 4.2% in October.

Will Rajan cut rates now?  Curiously, it is not likely. He says that, by themselves,  rate cuts will not restart the investment cycle. But it will certainly help sentiment. Talk of it being too soon as inflation may spike again, strike many as a bogus argument. Particularly, since October 2014 data shows  the CPI (Consumer Price Index), has eased to 4.38%; well below Rajan’s earlier target of 6% for January 2016!

He may have a point on excessive taxation and poor infrastructure though.  And other commentators too, like Pratap Bhanu Mehta, are also complaining that the Government is not working to a plan. To others, the plan is to build massive infrastructure, Chinese-style, using foreign investment from a host of countries including Japan, Russia, the US, Australia, France, Israel and others. President Vladimir Putin’s other recent offer to build 12 new nuclear reactors, with their parts and componentry to be also manufactured in India, is illustrative of this.   

The larger, far more sinister problem is that India runs a very expensive administration. This could prove disastrous in the long run. It destroyed a financially top heavy and once mighty USSR. Our taxes, GST bill notwithstanding, are running away with us. The fundamental question remains: why does India need such a high direct and indirect tax structure?  

In reality, a major chunk, if not all of the Government’s raised taxes, goes to cover just a part of the salaries and expenses of the enormous sarkari set-up. Governments may come and Governments may go, but none seem to get any leaner or more frugal. 

This high tax regime may be  the single greatest disincentive to the ‘Make in India’ campaign.  

 And as for export driven growth, our moment may indeed have passed. But Asian giants like Japan and China used this very route, rising like the Phoenix from the ashes of war and colonial exploitation. They added enormous wealth to their economies; but not without an incredible amount of Government support. This came, by way of low or nil taxes, state-of-the-art infrastructure and processes. There were liberal bank credits, loans, technology. There were MFN (Most Favoured Nation) trade protocols.

The Modi Government’s ‘Make in India’ programme will have to adopt and adapt many of these proactive techniques with the greatest dynamism, in order to succeed.

(807 words)

December 13^th, 2014

Gautam Mukherjee

When Will They Begin?

When  Will They Begin?

The gap between the expectation and the pace of economic reform is widening. Things are not moving fast enough and there is no clear-cut road map. Small administrative and economic improvements have kept coming, but these have only acted as appetisers for the main meal to come.

The Government as a whole seems to pause and mark time when Modi goes abroad on bilateral and Summit meetings, or is out campaigning for the Assemblies. And the Prime Minister has been doing a lot of this rather than attending to governance himself over these first few months.

There are successes to count, handsome pledges of investment and cooperation from several important nations, President Obama himself accepting the invitation to be Chief Guest at  Republic Day 2015, President Xi Jinping’s visit, Prime Minister Tony Abbot’s visit, and now President Putin’s visit, amongst a number of other creditable foreign affairs ‘wins’. On the electoral front, wins in Haryana and Maharashtra and good possibilities in Jharkand, J&K, and in the Municipal and Local Body elections in Kolkata, are indeed substantial achievements.

But, what about the crucial reforms agenda, and the improved day to day running of the Government?  What about those slogans about precisely this?

There is a sureness about Narendra Modi during the electioneering and the foreign initiatives, that goes missing and becomes hesitant when it comes to recasting the nation’s economic possibilities. Here the Prime Minister seems to be influenced by various political and bureaucratic inputs and is unable to put his bold and visionary stamp on the proceedings. For a Government that is pyramided to the top for almost every important  decision, this is an impediment to progress.  

Everything Narendra Modi does personally is still perceived as potentially high-value, but his Government or indeed governance, has not made any big impact on the minds of the people so far. This is creating frustration and disillusionment amongst the BJP supporters and reenergizing the once flattened Opposition. The activity in parliament too is disappointing and as chaotic as in the UPA days of coalitions. Some inexperienced first-time ministers and fringe elements in the Sangh Parivar create unnecessary distractions, offering ready ammunition to the Opposition, and there seems to be no effective mechanism to monitor or control what they say and do.

The litmus test of how all this is to go forward will be the content of the Annual Budget in February 2015- it needs to establish a milestone for the new India that has been promised. If it fails to do so, the patience with this Government will certainly begin to run out.

In the stock markets, till recently, before the latest correction began to set in, most shares were trading at 17 or 18 times earnings. They were doing so in anticipation of the action of the Modi Government to follow. They looked over-valued against actual corporate earnings all the while,  but not if compared to the 25 times prevailing in late 2007.

But those 25 times earnings in 2007 were by way of ‘irrational exuberance’, and a lot of money flooding in via the FIIs in the context of a global bull run. These 18 times now also expect to go to 25 times; but based on solid company earnings in real terms. But with the currently ‘rich’ valuations,  many foreign brokerages are beginning to fight shy, preferring other, ‘cheaper’, markets elsewhere.

China, even a slowed down China, has size in its favour too, and has beaten down stock valuations today. And at a projected 7% growth figure in terms of GDP, it may be the more attractive investment destination. 

India’s dream run as the best performer amongst the EMs may turn out to be an altogether brief season. The amount of FII money coming into India could diminish in future, perhaps being cut to half, or less. This may have already begun, though a major ‘weighting’ review will take place based on both the legislative success of items such as the GST and Insurance legislation being processed in parliament, the international ratings for India in the new year, and the reforms content of Budget 2015.

Meanwhile there is a clamour for a significant ‘correction’, of at least 10 to 15%, in stock prices, in order to make it attractive. Of course, the FIIs, who control the Indian market, with their grip on some 22% of all the floating stock, can engineer this quite easily. They seem all set to do so, taking it down in order to push  it back up again to 35,000 on the Sensex, by the end of 2015.  A reason why this sort of rank manipulation is possible, is because the FIIs invest much bigger sums as influencers, and because the markets have run up, not on hard news but on favourable expectation.

At  present levels, real earnings have to grow to sustain the bull run. This can only happen if the economy picks up substantially. For this, the Government must make a number of bold reforms. Why this first majority Government in 30 years that needs a buoyant stock market for its own disinvestment programme, is being so cautious, to the point of exasperating business and industry,  is difficult to fathom.

Small incremental improvements of the kind that has become routine, can possibly take the GDP to 6.5% per annum. This may be creditable when compared to the dismal low of 4.5% that this Government inherited, but the job creation and alleviation of poverty needs upwards of 8% for several years ahead on the trot. Such growth cannot be generated from the small incremental moves.

The GST, the Insurance Bill, Land and Labour Law reform, are all emblematic of the yearning for change. 

But, along with such legislative change, there have to be changes in the way the young see their possibilities these several months down the line. It  was very exhilarating listening to the campaign promises, but the reality today, while not bad, mainly on the back of the spectacular fall in oil prices, rather than any Government action, cannot yet be declared as good.

And despite the number of Assembly Elections the Modi-Shah  duo may win now, that second term can only come if the people are satisfied that their aspirations too are being met. Controlling more  of the States and eventually, most of the seats in the Rajya Sabha may provide the mechanics of a sustained stint in power, but they cannot substitute for the widespread feeling that this Government is not living up to  its promise.

(1,086 words)

December 10, 2014

Gautam Mukherjee

Incrementalism Central

Incrementalism Central

Talk of the radically bold right-wing moves of Thatcherism, that put paid to the Trade Union Movement in Great Britain, and privatised great swathes of state-owned enterprise, being replicated here, in Modi Raj, is decidedly wishful. 

Not unless Modi himself sits down to give dictation on his presumably reformist economic beliefs in the context of India’s progress. Is there an economist that Modi particularly admires or is his vision a combination of UPA’s welfarism  and a soft capitalism of his own? Since everybody in the Opposition expects Modi to do something radical that they can pounce upon, he may have chosen the opposite, an altogether innocuous and less obtrusive method.

Besides, the Modi Government is long on election campaign thunder, but is essentially incrementalist in economic matters and the pursuit of ‘vikas’. It will still add a percentage, perhaps one and a half, to GDP by doing  this, taking it to 6.5 per cent per annum. 

Former Prime Minister PV Narasimha Rao got his transformative reforms done in 1991, by saying next to nothing at all about them. Modi can’t do that, as he is a great orator, and given to promising much. But paradoxically, if Modi appears to be doing less than he promised, the criticism can only be directed towards egging him on to do more!

Arun Shourie, former Disinvestment Minister in the Vajpayee Government,  recently opined that the plates may be clattering, but the meal is a long time coming. Many other observers claim they are ‘underwhelmed’ by the economic moves made so far. The table-setting however, if that’s what it is, seems to be impeccable.

In 1991, the reforms, which went such a long way to transform the lives of ordinary Indians as well as the Captains of Industry, was a World Bank prescription, and not some home-grown idea. It was said to be almost a dictat, if India wanted any loans and reliefs, as the country stood staring at bankruptcy and sovereign defaults.

It was then, that an erudite Prime Minister PV Narasimha Rao, implemented the first-stage dismantling of the infamous licence-permit Raj. He did it, through an obedient economist, Finance Minister, Manmohan Singh. Obedient, because Manmohan Singh was able to pt aside his personal biases. Singh was,  not long before, quite the Socialist, and teaching at the Delhi School of Economics!

The Modi Government is deeply hampered in its legislative agenda by its lack of numbers in the Rajya Sabha. But even if this were not so, its major reform  intentions themselves are being questioned as decidedly suspect. Some commentators are saying that the high expectations of second generation reforms, and indeed the Reforms Agenda itself, has been thrust on this administration by the expectations of the voting public. And left to itself, it has no over-arching market-friendly vision, or great interest in advancing it.   

Meanwhile, the Modi Government hankers, somewhat unrealistically, given its aggressive campaign style, for consensus- that too, across the political spectrum; presumably, to push through its legislative agenda.

But outside cooperation, is hard to come by, in a political landscape harking back towards status quo and a failed Leftist past. This, even if it didn’t resent Modi’s spectacular success with the voters, which it obviously does.   

The other aspect of the equation, is that the losers in the hustings are constantly looking to make trouble for the Government, often over frivolous or petty reasons. The ruling Government, in turn, is reluctant, to antagonize the much diminished Opposition, except during in its election campaigns to add more States to its tally.

But will all these niceties do it any good, or is the Opposition sensing a weakness to exploit? Does the Modi Governent wish, even long, to be liked, for example?

Chief interlocutor on Modi’s behalf in economic matters, Finance Minister Arun Jaitley, is essentially proving to be a gradualist, bred, as he is, on years in the genteel New Delhi based ‘Opposition’, while Congress played its two –steps-forward-one-step-back game.  But, given the nature of this highly apexed Government, it is very unlikely that Jaitley’s views are very different from those of Modi himself.

Nevertheless, if Jaitley turns out an indifferent budget come February 2015, it will do immeasurable harm to the Modi Government’s image and credibility.  Hoping against hope, the likelihood of a less than electric Budget 2015, is really quite high!

 All this pessimism begs the question, why is Modi going this slow? Is it because he is consolidating his hold on the Government?  Or does he essentially think reform can only be implemented in small bites?   

Jaitley may be considered a good back- room-strategist, but he is not the most electable of people, with little ability to ‘manage political fallout’. This renders him over-cautious, in thrall to the status-quoist bureaucrats, and dependent, like most of the BJP stalwarts, on the over-burdened shoulders of Narendra Modi.

(812 words)

December 8^th, 2014

Gautam Mukherjee

Hope As An Antidote To Despair

Hope As Antidote To Despair

RBI Governor Raghuram Rajan stuck to his high-interest regime in yet another learned sounding but pusillanimous review, his fifth since he took over. He seems to care nothing for symbolism and the gesture that enthuses, and like an unbending Robespierre, wants to drive in fiscal discipline, sharp as stakes, into the Indian body politic; even if it’s the last thing he does!

This time, his apologists, who seem to be legion, cited many things; reminiscent of the voluble blind men of the fable describing an elephant from their own unique perspectives. One talking head said the fiscal deficit was already at 90 per cent of the budgeted limit, implying cutting rates, by say, 25 bps would have tipped over the apple cart. He didn’t care to mention the great reductions in the Current account deficit (CAD), due to the precipitous fall of imported oil prices however. Another said the banks and their NPAs are in a parlous state. Another allowed that every head of inflation was indeed down, but what’s to say it won’t rear up again? One said it was not about inflation but the currency.  The RBI was not cutting in order to protect the rupee.

The Governor, an inflation hawk par excellence, himself said it wasn’t yet time to cut rates. He wasn’t comfortable with the state of the economy- the effects of the slightly deficient monsoon had not yet fully played out over farm produce and food prices. He wasn’t happy with the data on various aspects and would cut when the flow of data drives him to do it. For now, he wasn’t sure that things had turned the corner in any convincing manner.  

Governor Rajan ignores the fact that the US is growing again after  the coddling of 6 years of near zero interest rates, and massive, note-printing stimulus. Perhaps he is content to see India with a 5-6% growth rate, because it is bigger and better than everyone else, except a weakened China, which still outdoes India. But the jobs Modi has promised the young, need an 8% GDP or more, year after year.

Rajan must, given the tone and tenor of his pronouncements, be looking for the perfect moment. This is a scary thought, because it is unlikely to ever arrive, particularly in a chaotic country like India, with an inefficient but gargantuan bureaucracy, and Government to match. Or else, the Governor is not only pathologically cautious, but is tacitly blaming the six -month old Modi Government for not doing  enough to get growth back on track.

His apologists agree.They say that just cutting interest rates may improve sentiment, but won’t actually kick start the investment cycle by itself. ‘Sentiment’, of course, was not something the UPA Government cared to worry about. It drove the Indian economy instead, with its Stalinist focus on a showy welfarism, and what Rahul Gandhi thought was a chic anti-business stance - straight into the none to ‘swatchh’ toilet.

Now that the UPA is gone, it seems to have left behind  a very able Trojan Horse in the form of Governor ‘anti-inflation’ Rajan.

That Finance Minister  Arun Jaitley is going along with the misguided  Mr. Rajan, even after publicly calling for rate cuts in December 2014, not once but several times, is somewhat mystifying. One hopes that he cannot possibly be seduced by the soothing, ‘dovish’ talk of an interest regime of 1.5 to 2 per cent sometime in the misty future; when, and if, the situation allows it. Rajan also said, other things being  equal, that he might begin to cut rates early in 2015.

Now all hopes, to serve as an antidote to despair, have been transferred to the Annual Budget in February 2015. Business and industry, though it is putting a brave face on the goings on, is grimly hoping that it too does not turn out to be a damp squib. There are a lot of good people working on it to be sure, and Jaitley keeps saying it is going to be full of ‘second generation reforms’. But action must surely follow this torrent of talk. The Stock Market too is having trouble scaling new peaks with nothing happening.

Already, it appears, that neither GST, nor the Insurance Bill will see passage in this Winter Session of Parliament.  Frustratingly, nothing big seems to be going through. Small mercies: such as petrol, diesel, domestic cooking gas, and aviation fuel prices, have indeed been cut.

This Government, by letting a Governor of the RBI fly his kite unhindered, seems to be ignoring the monumental expectations of real progress the people harbour. This gradualism, incrementalism, timidity, downright slowness in economic affairs, somehow belies this Government’s massive electoral mandate, and its continued skill at winning the Assemblies.

 The goodwill and patience cannot last indefinitely. It would be a pity if the Modi Government degenerates into a bad  copy of the UPA, ineffectual, congratulating itself all the while, even as the people are unhappy.  

(827 words)

December 2^nd, 2014

Gautam Mukherjee

Will Christmas Come Early For The BJP?

 Will Christmas Come Early For The BJP?

It could well be an early Christmas celebration for the BJP, in the best of  ‘Sabka Vikas’ spirit. It could send out a message of peace and beauty amidst the snows of Kashmir. One that says that here is a vibrant democracy that has triumphed over the bloodshed of terrorists and the machinations of the divisive and cynical. The BJP is not talking of Article 370 anymore. If it forms the Government in J&K, as it well might, 370 may not matter either way.

This dramatic result may be just days away, despite weak attempts to raise the bogey of ‘polarisation’ by soured coalition allies: the National Conference and the Congress Party.  Both are smarting from being roundly rejected by the electorate just six months ago. To make things worse, the Lok Sabha losers, having fallen out, are hurling invective at each other.

Meanwhile, the people of Jammu, Ladakh and the Kashmir Valley, are getting ready to change gears and embrace Prime Minister Narendra Modi’s rousing vision of  ‘Sabka Sath, Sabka Vikas’. As the 71 per cent turnout in the first phase of voting on November 25^th seems to suggest, the people in the Kashmir Valley want change. This despite the usual calls for a boycott by Separatists, and stepped-up Pakistani sponsored terror attacks.

Prime Minister Modi and BJP Party President Amit Shah, palpably take this longing for change very seriously. This could be the tipping point; the moment when the problems of this beleaguered state begin to be solved. Modi remarked at a recent rally in Kashmir, that he has visited J&K every single month of the six months that he has been Prime Minister. And Amit Shah is leaving no alliance, no organisational effort, no electoral tactic, untapped. The BJP’s Mission 44+ for J&K is no empty slogan.

Expert observers  reckon that if the BJP only replicates its general election performance, it will be just a dozen seats short of a majority; at 45 seats in the 87 member Assembly. But, it could well do much better. Jammu and Ladakh together account for 41 seats. Extrapolating just the 33 seats from the mirror image of the earlier election, is in itself, quite exhilarating. BJP led in 30 out of 37 segments in Jammu, and three out of four in Ladakh the last time around. Could it win perhaps  38 or 39 of these seats now?

Much, after all, has happened since the general election results were announced on May 16^th . The magnitude of the victory, the initiatives already taken by the Modi Government, both nationally and internationally, and the possibilities it has opened up, are not lost of the people of J&K. They do not want to be isolated or left behind, and the old dispensation has indeed let them down badly. And the Pakistanis have done nothing but stir up trouble.

Political ascendancy in J&K has tended to be a cozy ‘family’ affair , right from 1947; and even more so after the Kashmiri Pandits were  hounded out of the Valley in the 1990s. Jammu and Ladakh, in the absence of alternatives, has always voted for Congress; and the Kashmir Valley went to either the Abdullah family’s NC, or the Mufti Mohammed Saeed Clan’s PDP.  

This time, prospects are excellent for the BJP in Jammu and Ladakh. But it is determined to make a mark in the Kashmir Valley, to dispel the myth of the so-called ‘alienation’ there. Amit Shah’s organisation has been wooing many of the smaller parties that have had reasonable vote shares  in the last election, even if they lost, or won just 1 and  up to 3 seats, in order to stitch together a post-poll alliance based on actual seat shares.

Having said that, PDP is widely expected to win several  of the 46 seats in the Kashmir Valley. But how many? A clear majority will probably elude it, even with some wins in Jammu and Ladakh. Some  Valley seats may go to the small parties, the rival NC, and even Congress, besides the BJP. Still, PDP could be a potential BJP post-poll ally, depending. There are echoes of the Maharashtra Assembly election in the prospect.

BJP is also conducting a drive to register as many of the approximately four lakh Kashmiri Pandits,  mostly scattered outside J&K, to bolster the 126,000 currently on the electoral rolls. Pandits, potentially constitute 10 per cent of the electorate, in as many as eight assembly segments in the Valley, and could make a dramatic difference to the final poll results.

After the first phase on November 25^th, the next round of voting is on December 2^nd,and three more after that, on December 9^th, 14^th and 20^th. The results will come out on the23^rd ; well in time to  segue into the celebration for BJP patriarch Atal Bihari Vajpayee’s birthday; on the 25^th.

(806 words)

December 1^st, 2014

Gautam Mukherjee

Better Late Than Never

Better Late Than Never

 SAARC today is no longer about India and Pakistan grandstanding and checkmating each other. And consequently blocking every collective  resolution. Bilaterism has entered its blood-stream ever since Narendra Modi became Prime Minister of India, and decided to take on India’s regional responsibilities. And this time, at Modi’s first SAARC Summit, he made it clear that if something could not happen unanimously, it would go through to implementation anyway.

 Seeing the changed atmosphere, Pakistan too has agreed to the proposed SAARC electricity cooperation. This came soon after the Modi-Sharif handshake however. And well it might. Pakistan, particularly Nawaz Sharif’s home state of West Punjab, is starved for electricity! But the speculation remains- is the Pakistan Army going to stand by Prime Minister Nawaz Sharif’s commitment?  

There has been a fast evolving build up to this Summit. Every head of Government from SAARC, except Bangladesh, who had an unavoidable prior engagement, came to the inauguration of the Modi Government. Then, the first country Modi visited as Prime Minister was Bhutan, followed soon after by Nepal. He signed bilateral agreements for a host of things in both places, and pledged to finance them of behalf of India as well. But money is, indeed, at the root of the new efficacy.

Who will pay for SAARC to turn into a looser version of the EU then? This may not feel like a happy question at this time, but things were not always this dire. And, some benefits of a united Western Europe, such as the freer movement of goods, services, people, and jobs, are still evident.

Still, broke as the EU is today, there is no getting away from the bills piling up on the German and French desks, as the strongest economies in the region. It is up to them to keep the ship of union afloat, because the weaker hands cannot.

 Likewise in SAARC, all the smaller constituents must appreciate the Modi Government’s outreach. But they also know the answer about the pay- master with the really deep pockets that wants in.

The revived cooperation right now promises to lead to more road, rail and electricity links. And bigger trade without high tariff walls if it can be pulled off. Pakistan, never happy about giving India a walk-over, second in size, with the bigger nuclear weapons arsenal; came to the table very obviously hyphenated with China.

India knows that there is no containment agenda practicable in these globalised and multilateral times. But while China, the undeniably alpha power of Asia, has been active for quite some time, developing and financing projects everywhere in SAARC, as well as Myanmar to boot; India has only now begun to come to the party.

The scenario is definitely evolving and changing. India was not even invited to APEC in Beijing as an Observer early in November, but only to a preparatory meeting, to rustle up support for China’s ‘Silk Road’ plans.  Modi did not choose to go, but it is a gradual process of induction in statecraft, with several quid pro quos along the way. Pakistan went, as Observer, (and protégé), to the main APEC Summit, and came away with Chinese pledges of $45 billion in investment for itself.

Under President Xi Jinping, there are the ‘Silk Road’ initiatives, backed by money and infrastructure building know-how, which seek to connect every country in the region to China, and then across Central Asia to Europe- by road and rail, in addition to air.

And then there is the ‘Chinese Dream’ policy, being employed to persuade Taiwan towards reunification with the mainland. The latter is a ‘hearts and minds’ effort, being used in the SAARC region as well, a velvet-gloved hegemony, though not quite to effect an absolute merger.

India, as the biggest country in SAARC, is, in fact, China’s most lucrative potential business opportunity in the region today. China has the men, the know-how and the means. India definitely has the need, the appetite, the inclination, and the market size.

There is already nearly $80 billion in trade between India and China, heavily tilted in favour of Chinese exports, and it is headed towards $150 billion soon. The Modi-Jinping Summit in India in October was, without a doubt, the beginning of hundreds of billions in FDI involvements. More than any other nation in the world today, China is flush with surplus and investible funds. Its formidable infrastructure building capacity is being tapped all over the world. It most recently won a bid to build a $12 billion railway in Nigeria, for example. China, even as an Observer, has also just pledged $ 30 billion for SAARC region roads.

And the next SAARC Summit, let us note, will indeed be hosted by Islamabad, but by then, India’s influence with China may have grown considerably.  

(796 words)

November 27^th, 2014

Gautam Mukherjee