Economic Highlights

New Delhi, 18 July 2022

Rupee For Global Leap

NEIGHBOURS KEY TO DREAM

                                                           By Shivaji Sarkar                 

The Rupee is on at least an 11-year-journey in its quest for quasi international status, even as it slides below a record 80 to a dollar. The Reserve Bank of India circular is testimony of an anxiety for raving up the economy by endorsing a bid that began in 2011.

Since then India has taken many baby steps to keep the dollar at bay. A dream of former Prime Minister Atal Behari Vajpayee may come true if the neighbours do not envy and the rupee and the economy remain stable. Would Bangladesh, Sri Lanka, Myanmar and ASEAN accept it despite RBI paving the way for currency swapping?

These are good dreams for enabling having an international currency status though the RBI circular does not make it convertible. The goals are not easy to achieve when the rupee continues to slip rapidly slowing down growth to 4.7 per cent as per Nomura. It stresses on policy changes, softer taxes to strengthen the purchasing capacity of individual citizens and protect their wealth to contend with the mighty dollar.

The erstwhile Soviet Union had a rupee-rouble trade arrangement but reincarnated Russia scrapped it in 1990s. Recently too, Russia was given the offer to go back to the old arrangement. It has not expressed interest in accepting the rupee though it wants payments in rouble, post-Ukrainian war. It does not help India as only through a dollar conversion it can pay in rouble. Iran till recently, having a close relationship, accepted rupee payment amid the US sanctions. This was undone by India due to the US pressure. Iran still may work it out provided the sanctions do not deter.

But neither Bangladesh nor Sri Lanka despite high trading ever accepted the swap. Would Indians accept Bangladesh Taka? The Rupee is accepted unofficially, in, legal or not, border trades but taka still is not a preference. The enabling provisions apart, Sri Lanka through its worst crisis takes $ 3 billion loan from India in foreign exchange.

The country feels that it would have ready acceptance to its offer from smaller neighbours. Sri Lanka got into the trap of China and today in turmoil. Bangladesh with over dozen large projects with Chinese assistance is witnessing discontent within. Despite a favourable Awami League rule under Sheikh Hasina, sentiments are less pro-India.

Myanmar has recently agreed to accept Thai Baht in border trade dealings and reportedly plans a similar arrangement for the rupee seeking to limit reliance on the US dollar.

The Russia-Ukraine war has led to shortage, protectionism and a wave of defaults. It has led to weakening of world growth, high inflation and uncertainty for India with myriad issues like consistent trade deficits of $20 billion a month for almost a year. The currency reserves now reduced to $588 billion as 50 per cent of imports have seen price surge. Trade deficits may touch $250 billion this year.

India’s trade with the Gulf countries crosses $175 billion in 2021-22, for much of its oil imports and has investments of $16 billion.  The Comprehensive Economic Partnership Agreement sealed by India and the United Arab Emirates on February 2022 is expected to facilitate Indian exporters gain access to the Arab and African markets besides increasing the two-way trade to USD 100 billion in the next five years from current USD 60 billion. But the region does not want rupee trading.

The latest RBI move is not a new deal. The UPA government in 2013 had finalised a list of 23 countries with which India could have swap trade in local currencies to save precious foreign exchange. The list included Angola, Algeria, Nigeria, Oman, Iran, Iraq, Venezuela, Qatar, Yemen and Saudi Arabia and a task force was set up under the then Special Secretary Rajiv Kher, which in 2014 endorsed the traditional swap model. 

In 2011, India and Japan agreed to $15 billion currency swap as Japan’s then Prime Minister Yoshihiko Noda agreed to support the troubled Indian rupee, Asia’s worst performing currency, then at Rs 55.39 to a dollar. It was proposed to be increased to $75 billion in 2018 by the NDA government. For this a conversion rate is decided and later both the countries repay the amount at the same exchange rate.

These are linked to London inter-bank rate, called Libor. Japan has done this with a number of countries such as China, Malaysia, Singapore, Indonesia and Thailand. Madan Sabnavis, Chief Economist CARE ratings observed that such arrangements were there but never used nor it impacted the market but gives some leverage to the RBI.

India’s three free trade agreements (FTAs) with the ASEAN, Japan and South Korea have not turned out to be favourable for the country as these resulted in growing deficits in merchandise trade, according to a study published by think-tank Third World Network. It means the FTAs need a review as the perceived benefits elude.

It is erroneous to believe that the rupee is losing only because of the present Ukrainian war. There are many other reasons and details have to be listed. The inherent conditions in the country, the 7.1 per cent retail and 15.18 per cent (down from 15.88 per cent) wholesale price rises, 32 per cent hike, in a year, of commodity prices and flight of foreign manufacturers significantly contributed to the crisis. One may wonder why despite 9.1 per cent US inflation the dollar values increase. It is attributed to the US Fed Reserve decision to increase real interest rates. It assures higher returns to the investor. India has yet to develop that intrinsic strength.

Some peculiar policies also affect India’s economic performances. High taxes on fuels, and the quixotic idea of junking two crore Euro IV and VI cars by 2025 does not add to the value of the rupee. It hits below the belt on its march to atmanirbhar Bharat. It adds to severe plastic pollution.

Blasting of Himalayas and forests has become a fad for development. It hurts every citizen, the image of the country, great wealth loss and impoverishes the country. It overlooks that each new car have components that have to be imported and cause further erosion in foreign exchange. Each new car production also hits air quality. The silly UPA rule brought in through the National Green Tribunal has destablised the market. Prime Minister Narendra Modi should personally intervene to scrap it.

A mix of policy changes and push to the real growth would make the rupee more acceptable and not a mere official circular.---INFA

(Copyright, India News & Feature Alliance)

Round The World

New Delhi, 15 July 2022

Continuing Ukraine War

CAN INDIA INTERVENE?

By Dr D.K. Giri

(Prof. International Politics, JIMMC)

The war in Ukraine continues. No expert or leader can predict when it ends. Since it is a proxy war for all we know between Russia and the United States and its allies, one can pontificate on the attitudes of the countries at war. International political realists argue that, now-a-days, the wars between the big powers do not simply become wars – they turn out to be matters of prestige. The Ukraine war seems to have entered that prestige phase.

The Russian President Putin wants annexation of Ukraine, or parts of the country, at any cost. The western powers, led by America maintain that a protracted conflict gives them an opportunity to entangle and enervate Russia economically and militarily. Ukraine is fighting desperately for its independence and sovereignty. None of these countries seem to be bothered about the human costs.

In any war, there are victors and vanquished, winners and losers. Prima facie, the winners are the United States, China and India and the losers are Russia, European Union and Ukraine. According to Marc Saxer, German political-economic-strategic analyst from Friedrich Ebert Stiftung, a think tank of the Social Democratic Party, US may be fighting its geo-political rival Russia to the last Ukrainian standing. Washington has managed to deplete the Russian aggressive power and deflect the pressure against nato’s eastern flank. The NATO has revived after the vacillations during Trump years. Germany has accepted responsibility to guarantee the security from the Baltics to the Sahel. The opposition to 2 per cent GDP has given way to massive rearmament programme. Saxer conjures that in the medium run, the change of stands by Germany may lighten the US burden in Western Eurasia, so that Washington can give its attention to the hegemonic struggle with China in East Asia.

China is a gainer as Russia is depleted. Beijing gets Moscow as a junior partner. The Russian gas companies will supply to China at a cheaper rate than the market prices. China becomes the only rival to the US. India continues to stand with both Western bloc as well as Russia. New Delhi buys Russian oil at a hefty discount. It is not clear where India positions herself in the international geo-politics in the longer run. For now, protagonists of India’s foreign policy pat themselves on their back for taking a neutral stand on Ukraine war. I have argued in this column more than once if that has been a right stand.

The European Union has failed to read Moscow’s mind and has been disturbed by the Russian aggression in Eastern Europe. The European Union had to fall back on United States to prevent Russia from disturbing the East European order. Both Germany and France have to staggeringly enhance their expenses for hard power. They will have to find alternative sources of supply of gas. Europe got caught between USA for its security and Russia for energy supply. The deficit in European Union’s foreign and defence policy got exposed in the wake of Ukrainian war.

Ukraine is of course the biggest loser. It has become a pawn like Afghanistan between two big powers – USA and Russia. It has suffered heavy loss of men and material in addition to territory. Ukraine may not have had any other choice than fighting back for its independence, as the Russian forces marched in. But, the question is could it have avoided the war by refusing the Western overtures. That was not to be. Ukraine must fight to the finish or find a way to ceasefire and then cessation of the war.

That said, let us explore the scope for New Delhi’s intervention as a peace-broker which may catapult India to the world stage. New Delhi has conducted its international affairs on a platform of neutrality which was called ideologically and strategically, non-alignment. I have argued consistently that this policy was neither desirable nor doable. A discussion on the efficacy of non-alignment is out of the purview of the current formulation. India has participated in the military operations externally, by sending troops to UN peace-keeping missions in countries like Sudan, Kosovo and Congo. New Delhi also has stayed away from the Gulf war in 1990s or American wars in Afghanistan and Iraq after 9/11. India has stayed neutral in Ukraine.

India’s neutrality has not paid off in anyway, rather it has harmed India’s interests. New Delhi did not learn of this lapse after China annexed Tibet in 1950s and later in Chinese aggression on the country and annexation of Indian territories. The Western powers had expected India to join their bloc as China was breathing down India’s neck. The situation after so many years remains the same. China is at India’s border.

India could perhaps take two diplomatic steps – one, inward, and another to help resolve the Ukrainian crisis. New Delhi has to rethink its neutrality and make strategic partners. The obvious partner is the Western bloc for two reasons. One is to enhance its GDP to 10 trillion USD from under 3 trillion USD at present. In order to do so, New Delhi has to engage with G-7 economies. It should complete the FTA negotiations with the EU and Britain. Second reason for going to the West is to secure itself against Chinese incursion into Indian territory. Some experts are suggesting that Quad could be turned into a military alliance of sorts. India could nudge Quad into going down that road. On the contrary, New Delhi seems most reluctant of all in militarising Quad.

India’s smart and strategic military alliances will secure her from Chinese threats and possible aggression, minimise the enormous military expenditure, and reduce her dependence on Russia. According to SIPRI estimate in International Arms Transfers (2021) factsheet, “India was the world’s largest importer of major arms in 2017-21 and accounted for 11 per cent of total global arms import in the period”. Is this military strategy sustainable or advisable for a developing country with 2.7 trillion economy? Is it realistic to engage in an arms race with China, whose economy is around 14 trillion USD? The disarmament experts show that the cost of one fighter aircraft can run the primary schools of the entire country for 20 years and likewise, cost of a submarine will run the old-age homes for a similar period. The estimate may not be exact but the principle holds.

Today, India draws greater respect and attention from the world community. It is a democracy, respects rule-based world order, freedom and human rights across the world. Can India use that goodwill to mediate in the war and bring it to an end? I have argued before that India should bring about a rapprochement between Russia and USA, since the major threat to the world system comes from China. India should thus decouple Russia from China, and make Western powers see the real danger to world politics and security. This is a tall order but not impossible. The great statesmen are known for breaking such new grounds. Our Prime Minister is well-placed to perform this challenging role and it is certainly worth his while. --- INFA

(Copyright, India News & Feature Alliance)

REWIND

New Delhi, 14 July 2022

A REMEDY FOR THE NEW MALADY

By Inder Jit

(Released on 28 August 1984)

Outrageous developments in Andhra Pradesh and earlier in Jammu and Kashmir and Sikkim have posed yet another threat to our young democracy. More and more people in New Delhi and elsewhere ask: Is there no remedy against the new blight which has afflicted our body politic? We have experienced political harlotry in this country for many years, beginning with massive defections in Haryana. Now the nimble Indian political mind at the Centre and in the States has evolved yet another invidious device to topple Governments with massive majorities in their respective legislatures, as in the case of Mr N.T. Rama Rao. It has even invented a method to overcome the hurdle, if any, posed by a ban on defections, boldly introduced by the late Sheikh Abdullah in the case of Jammu and Kashmir. Defections, which have come to acquire at least some odium, have been substituted by vertical organisational splits which are sought to be justified on the ground of an honest difference of opinion on policies and plans or their implementation -- and projected as a natural development within a political party.

A way has also been found to side-step the basic democratic norms in accordance with which the majority of a Government should fairly be tested only on the floor of the House and not in a Raj Bhawan. The Governor’s pleasure, namely his subjective satisfaction, has absurdly and unwisely been elevated to pre-eminence in deciding which leader enjoys the support of a majority at any given time. Consequently, the Governor of Andhra Pradesh has been able to get away with the rape of democratic conventions at high noon by merely chanting the mantra: “I am satisfied, I am satisfied.” What is more, a mantra has been evolved not only to enable New Delhi to put through its “Operation Topple” but also to defend it without batting an eyelid. The Home Minister, Mr P.V. Narasimha Rao, merely repeats: “The Governor had no alternative; the Governor had no alternative...” Loud protests from the Opposition in Parliament have made no difference. Mr Rao knows he has a massive majority behind him which he has not hesitated to use as a “brute majority.”

What happened first in Sikkim, then in Kashmir and now in Andhra Pradesh differ in detail. In Sikkim, the State’s Chief Minister, Mr Nar Bahadur Bhandari, was dismissed by the Governor, Mr Homi Talyarkhan, even when he enjoyed the support of 28 MLAs in a House of 32. His crime? Mr Bhandari’s refusal to follow the diktat of New Delhi in regard to the grant of citizenship to Nepalis in Sikkim. In Kashmir, Dr Farooq Abdullah, was dismissed and Mr G.M. Shah appointed Chief Minister ignoring acknowledged norms and, above all, the State’s anti-defection law. Mr Jagmohan is entitled to still claim that Dr Abdullah had lost the majority -- a fact that the latter did not contest. Nevertheless, Mr Jagmohan went wrong on one basic point, apart from his failure to test the majority of the rival claimants on the floor of the State Assembly. Mr Jagmohan had no authority to ignore the anti-defection law and determine that the 12 MLAs who had withdrawn support from Dr Abdullah had only split from the National Conference and not defected, even if he had consulted top legal opinion.

In Andhra Pradesh, Mr Ram Lal acted indefensibly --- an action which was condoned only by those who thought they would be able please Mrs Gandhi somehow and prove themselves to be more loyal than the King. History will not forgive him for reducing politics to a farce wherein he even ordered the arrest of the Chief Minister of his State -- a Chief Minister who was then visiting him in the Raj Bhawan and had not yet been served the dismissal order. History will also not forgive him for dragging politics down to the level of the gutter and creating a situation in which the country was treated to more than one unedifying spectacle: NTR parading 162 MLAs at Rashtrapati Bhawan and Mr Bhaskara Rao parading 95 MLAs the same day in Hyderabad. The number of Telugu Desam MLAs added up to 35 more than their known total strength of 211. At the same time, however, developments in the three States have a common denominator and pose a common question: Can something be done to cry a halt to the latest bout of destabilisation and give the system its much-needed stability and healthy norms?

West Germany and its vigorous democratic system provide an answer we seek. During the Weimar Republic prior to the rise of Hitler, Germany too was plagued by a plethora of political parties and instability. Governments fell like nine pins under a Constitution acknowledged by experts as the most democratic conceived until then. In fact, Hitler took advantage of the people’s disgust for uncertainty to abuse this democratic Constitution and its emergency provisions to impose dictatorship. The end of World War II saw a nation-wide reaction against twelve years of Nazi tyranny and a desire for a Constitution which would not only be democratic on the face of it but also guarantee a stable political and economic future. On May 24, 1949, West Germany gave itself the Basic Law which unequivocally puts across the following vital element: All state authority emanates from the people... The State exists for the use of the people not vice versa, as in totalitarian States -- Fascist or Communist.

Like India, West Germany has a federal set-up and its leaders, namely States. Mercifully, however, the West Germans do not face the problem of Governors as we do. (The country’s Basic Law provides that the Legislature, the Executive and the Judiciary are independent institutions). There is no scope there for Governors to function as hatchetmen of some Central authority and, like mindless morons, dismiss Ministries in accordance with the pleasure and subjective satisfaction of their lords and masters in the national capital. The Basic Law also provides against repetition of a situation in which one Government was voted out after another without the slightest thought of the national interest. The malady has been effectively tackled and stability ensured through the novel provision in the Constitution of what is described as a constructive vote of no-confidence, used for the first time in the Bundestag on October 1, 1982 by the new coalition of Christian Democrats and Free Democrats to topple Mr Helmnt Schmidt, leader of Social Democrats, and install Mr Holmnt Kohl as the new Chancellor in a historic vote.

In essence, the provision seeks to make a vote of no-confidence, which is essentially a negative concept, something positive which, in the bargain, also strikes a blow for stability and against frivolous or personally motivated actions. Under the provision, a Chancellor cannot be brought down during his term simply because he no longer enjoys the support of the majority. The Chancellor can be brought down only if his successor is able to muster a majority at the same time. In other words, parliamentarians are barred from playing ducks and drakes with national stability and interest on the basis of their personal interests, whims or fancies. The founding fathers of the Basic Law were clear that defeating a Government on the floor of the House was not enough in a system with more than two parties. Those seeking a change of Government, it was felt, must simultaneously provide an alternative in the best national interest. Otherwise, there would be no end to politicking.

Adoption of such a constructive vote of confidence in India could have saved us all the trouble and turmoil created by the sordid happenings in Sikkim, Jammu and Kashmir and now Andhra Pradesh. There would have been no occasion for Mr Nar Bahadur Bhandari to be bundled out at the whim and fancy of the Centre and equally Mr Homi Talyarkhan, who deserved to be sent home instead of being rewarded with a prize diplomatic assignment as Ambassador to Rome. There would have been no occasion for the cloak-and-dagger ouster of Dr Farooq Abdullah in Srinagar through a convenient make-believe split in the National Conference. (No one has spelt out to this day the basis of the split which raises the basic question: What is a split? Is it to be based on a clash over policies and programmes or merely over personalities?) We could also have been saved the disgusting happenings in Andhra Pradesh and their distressing fall-out in Delhi. There would have been no occasion for scores of people in Andhra Pradesh to fall martyrs to the cause of democracy.

The adoption of the constructive vote of no-confidence by us in India would ensure not only greater stability in the States, but also provide for a situation in which no one party is able to win a clear majority at the Centre -- a possibility which cannot be ruled out in the wake of the developments in Andhra Pradesh, (Circles close to Mrs Gandhi now discount the possibility of a poll in November. They are almost certain that Mrs Gandhi will postpone the poll to early January, thanks to the adverse impact of the Andhra Pradesh developments on Mrs Gandhi’s own image as a democrat and the new stimulus these have provided for Opposition unity.) It might also be mentioned that India could have escaped much damage from the instability of 1979 had such a device been a part of our Constitution. We would also not have had to suffer the constitutional monstrosity under which Mr Charan Singh was Prime Minister for six months without facing Parliament even once and securing its mandate. All in all, India needs what West Germany already has: a constructive vote of no-confidence. There is no other way if we are serious about having a healthy and stable democracy.---INFA

(Copyright, India News & Feature Alliance)

Open Forum

New Delhi, 13 July 2022  

Present Day Nationalism

DEVELOPMENT ASPECT MISSING

By Dhurjati Mukherjee

The ruling BJP has been harping on nationalism on and off. This nationalism is something unique as it is aimed at arousing the majority Hindu community of the feeling that this land belongs to them. There is thus a tendency of dividing the Hindus and Muslims and making the former feel more important. However, recently noted economist Amartya Sen,  pointed out that India’s culture has been of tolerance and the need of the hour is that Hindus and Muslims should work together, adding that the majority was not the end of all.

With the BJP coming to power, it slowly displaced the Congress from these two politically operative forces of mainstream Indian nationalism. The Modi government’s nationalistic package included welfare schemes such as National Rural Employment Guarantee Scheme, Swachh Bharat and Digital India, and economic policies like ‘Make in India’ and GST. The vocabulary of rights and entitlements has been replaced with the grandeur of national projects, with people portrayed as active participants in constructing the new nation. However, the BJP regime’s poor record on the social and economic front makes its ownership of this nationalism domain relatively weak and vulnerable to challenges.

The Congress used secular nationalism as an effective instrument of elite politics for building coalitions. But in the arena of mass politics, it failed to develop a vocabulary of secular nationalism to counter the growing and aggressive Hindu nationalism that is manifest very much today. The BJP’s brand of nationalism is one of aggressiveness, not seen since independence.

Delving into the past, it may be stated that nationalism originated in Western Europe in the 17^th and 18^th centuries but it did not become a general European movement until the 20^th century. Thus, it can be said that nationalism is a relatively recent phenomenon. As Prof. Oganski pointed out: “Nationalism in the modern sense did not exist at the time of Romans and Greeks. It was not present in medieval times. Some trace of nationalistic feeling can possibly be found at the very beginning of modern times when the nation State was first becoming an important form of political organisation”. With the passage of time, nationalism spread by means of propaganda and education.

The true meaning of nationalism cannot be identified in the name of religion, caste or community. The nation-State model talks about cultural boundaries of the State that must be similar to the cultural boundary of the nation. On the other hand, the State-nation concept focuses on the fact that there is no need for similarities between States and nations. Thus, the concept of State-nation protects the rich culture and individuality of the States.

The welfare of the nation is the true reflection of nationalism. It means the spreading of love and peace, brotherhood and unity among the countrymen, women empowerment, eradicating poverty and economic development, improvement of law and order, etc. In short, nationalism means the complete development of the nation. Nationalism neither encourages discrimination with minorities nor any type of violence against them that is manifest in India today. After all, minorities are also part of the nation.

If this definition is to be followed, the country has failed. In India, the social aspect of nationalism, i.e. the portrayal of the importance of the majority in public life has become manifest quite naively. Secular outlook and feelings have been suppressed, while the minorities have been humiliated in various ways. The culture and tradition of the Hindus may be there, but in a diversified country like ours, that of minorities too needs to be recognised. This is quite evident from a rendition of the country’s history.

The developmental aspect of nationalism must assume priority in all matters of governance, but this is sadly missing. The ruling party even a decade or two back was largely a party of the upper caste and small businessmen. As such, there was virtually no attention towards the conditions of the lower castes and backward communities. In fact, the impoverished and marginalised sections were not the focal areas of attention. Thus, till the late 90s, inclusive nationalism was virtually absent.

Though Prime Minister Modi recently asked party leaders to reach out to the “deprived sections other than Hindus”, without mentioning the largest minority, the Muslims, who have borne the brunt of the saffron party’s hate mongering, it is clear that the party now thinks of a change in strategy. “There are deprived sections in other communities too. We should work and connect with all these downtrodden communities”, Modi is reported to have told party leaders at a close-door meeting at Hyderabad.

It is thus quite discernible that over the years all the talk of inculcating nationalism was thus limited to a particular section of society and not intended to involve the masses. Even in formulating the development strategy, the focus has been on thrusting from above and not a grass-root level approach. This same strategy was followed by the Congress in the later years of its rule though their social nationalism was better as they followed secularism, not to the extent desired, but reasonably appreciable.

The sense of nationalism cannot be identified in the name of religion, caste or community of people, it’s beyond all these. Similarly, the European model of the nation-State is an old concept. India is a diverse country, where each State has its own culture, religion, tradition, history, language, etc. The nation-State model talks about the cultural boundaries of the State that must be similar to the cultural boundary of the nation, but this  is a very narrow concept, at least for a country like India with wide disparities in every sphere.

On the other hand, the idea of State-nation is much wider than this. It says that there is no need for similarities between States and nations. Thus, the concept protects the rich culture and individuality of the States. The welfare of the nation is the true sense of nationalism. It means the spreading of love and peace, brotherhood and unity among the countrymen, women empowerment, eradicating poverty and economic development, improvement of law and order, etc. In short, nationalism means the complete development of the nation from all aspects but principally in the social and economic realm.

If there is genuine rethinking within the party of moving forward with all sections of society in a truly nationalistic spirit, avoiding all forms of discrimination in matters of religion, caste and creed, the objective of a strong bond of citizens would be established. Dissenting voices would be heard, while intellectuals would be given due respect. In a pluralistic society, development would occur at a fast pace only if the social, cultural and economic climate is conducive to the interests of society. Then only can true nationalism in the country be witnessed. ---INFA

(Copyright, India News & Feature Alliance)