Copping out on Privatisation

The recent bank merger between Bank of Baroda, Vijaya Bank, and Dena Bank is essentially a move of cowardice, and not the bold reformist step it is touted to be. The original plan (for reforming the banking sector) was to have just 6 public sector banks, and while Modi has reduced the number from 26 to 19, there’s still a far way to go. Further, the plan was not to achieve the reduction in numbers by merging all of the public sector banks into 6 mega banks that are still in government control, but to privatise them eventually. However, the traditional governmental dislike for privatisation and the lack of political will in an election year resulted in this sub-optimal solution of merged banks.

The merged entity is set to become the third largest Indian bank, however the size is hardly important. In fact, it would actually deter any real progress in reforming the banking sector. Another move of cowardice was in giving the assurance that no jobs would be lost due to merger. Thus, the banks cannot really cut cost and achieve economies of scale in this aspect.

The history of such mergers is not reassuring. The merger of New Bank of India (NBI) with Punjab National Bank (PNB) in September 1993, of Global Trust Bank with Oriental Bank of Commerce in 2004, and the spate of merging the associate State Banks with the main State Bank have all worked poorly. The strong bank in the merger eventually ends up suffering considerable losses. The editorial in The New Indian Express comments:

“When a strong and weak bank merge, the combined entity loses competitiveness and the merger is counterproductive. An RBI working group recommended avoiding such events without first restructuring weaklings—a step now being bypassed.”

Failures are the essence of capitalism, so before gaining size, we need measures that allow banks to fail safely without causing systemic shocks like Lehman Brothers. No math can correct errors made out of lack of self-discipline, and as we still fight the last NPA war, rather than planning for the next one, it’s time to act bold, taking haircuts and ceding control to private parties. For, in a growing economy, banks should lend without worrying about provisions or sacrificing profits at the altar.

 

Interventions at MSME level are not the answer for job creation

The jobs problem in India is acute and there isn’t enough we have done to solve it. We have around 12 million new people joining the working age population every year but we create only 4 million jobs per year. To solve this grave issue, the Union Skill Development and Entrepreneurship Minister Dharmendra Pradhan recently started a new centre to guide new entrepreneurs and provide helpline to MSMEs. A novel step but it based on a common assumption that interventions targeted at MSMEs would create new jobs. This assumption has been questioned by a systematic review by Michael Grimm and Anna Luisa Paffhausen that looks at whether the interventions targeted at MSMEs create new jobs.

Grimm and Paffhausen reviewed the existing evidence on the employment impact programmes to evaluate what impact do interventions have when made on the MSME level. The review concluded that the impact was modest. The interventions are able to “successfully affect intermediate outcomes such as management skills (however) only very few interventions enhance job creation.”

The reviewers have looked at employment created as the new jobs coming up in existing MSMEs (privately or publicly owned) and as jobs that arise through the creation of new MSMEs, including self-employment. The authors analysed 53 studies to understand what form of interventions were taken and if employment generation was the primary objective. The review considers that various interventions would have varied responses. For instance, a measure to increase productivity, such as training, would only result in an increase in employment if the interventions are able to increase outputs and reduce cost. A mere increase in efficiency that does not help reduce cost would not convert into more hiring.

The review brings out various insights but some of the most significant ones are:

  • Most interventions at the MSME level are not intended to create jobs. Primarily because, “enterprise performance is typically measured in terms of output, sales, revenues, business expenditures and profits.” The interventions, therefore, focus more on entrepreneurship training and business development.
  • Entrepreneurship training is beneficial for business skills but mostly does not result in business expansion or more jobs. Unless the firms can generate profit and reduce the cost to a point where they can expand, the training does not do much for job creation.
  • Addressing capital constraints is not enough. Most of the firms use the credit or cash provided as working capital used to increase the inventories. It is rare for firms to use it on fixed capital investment like labour. To add to it, the credit is mostly too small to lead to large changes in capital or production technology which could lead to an increase in employment. For potential business starters or subsistence-type enterprises, the credit is substituted for personal needs like healthcare, housing improvement etc.
  • Formalising the firms does not translate into job creation. To begin with, it is difficult to formalise a firm “because the average firm is simply too small and not profitable enough to make use of the potential that formality offers”. Instead one of the studies shows that the firms that do generate more jobs are the ones that create more permanent and large-scale jobs.

One of the things that do work is an intervention that provides a mix of financial assistance and entrepreneurial training. Although the review has looked at a handful of studies for certain conclusions, the learning is in-depth and needs to be taken seriously to avoid falling into the same traps as other countries have.

Employment Elasticity of Growth in India

Recently, there have been a spate of articles on employment elasticity of income in Indian newspapers and how important that is to job creation in India. The Hindustan Times has a series on India’s job challenge, Mint’s editorial discussed quality of jobs created, and the Economic Times cautions against India mimicking China’s strategy in creating jobs.

But what exactly is employment elasticity? And why is it important?

According to an RBI working paper by Sangita Misra and Anoop K. Suresh, employment elasticity is a measure of the percentage change in employment associated with a 1 percentage point change in economic growth. It indicates the ability of an economy to generate employment opportunities for its population as a per cent of its growth or developmentprocess.

An employment elasticity of 1 denotes that employment grows at the same rate as economic growth. Elasticity of 0 denotes that employment does not grow at all, regardless of economic growth. Negative employment elasticity denotes that employment shrinks as the economy grows.

This is crucial as it is commonly believed that economic growth alone will increase employment. However, as we examine the data, we see that despite India’s impressive economic growth, employment has not grown alongside. Ideally we would like to see an employment elasticity >=1, but, from the Misra and Suresh paper, we see that employment elasticity in India declined from 0.44 in the first half of the decade 1999–2000 to 2004–05, to as low as 0.01 during second half of the decade 2004–05 to 2009–10.

YearsEmployment Elasticity
1999-2000 to 2004-050.50
2004-05 to 2009-100.01
2009-10 to 2011-120.18

Similar trends have been witnessed at the sectoral level. In agriculture and manufacturing, employment elasticity between 2004-05 and 2009-10 has been negative.

Sector1999-2000 to 2004-052004-05 to 2009-102009-10 to 2011-122004-05 to 2011-121999-2000 to 2011-12
Agriculture1.09-0.39-0.44-0.41-0.08
Manufacturing0.80-0.271.740.100.33
Mining & quarrying0.870.20-1.76-0.140.34
Utilities0.67-0.277.601.421.17
Construction0.881.63-0.251.121.01
Trade, transport, hotels0.45-0.020.540.130.25
Finance, real estate1.400.34-2.32-0.450.06
Other services0.46-0.112.960.480.47
All sectors0.500.010.170.060.20

The negative employment elasticity in agriculture indicates movement of people out of agriculture to other sectors where wage rates are higher. This migration of surplus workers to other sectors for productive and gainful employment is necessary for inclusive growth. However, the negative employment elasticity in manufacturing sector was a cause of concern particularly when the sector has achieved 6.8 per cent growth in output during Eleventh Plan. It did bounce back during 2009-10 to 2011-12, but the average employment elasticity in manufacturing between 2004-05 and 2011-12 was still only 0.10.

 

References:

Misra, S., & Suresh, A. K. (2014). Estimating Employment Elasticity of Growth for the Indian Economy. Reserve Bank of India.

Planning Commission, India. (2013). Twelfth Five Year Plan, 2012-2017. Sage Publications, India.

The Opportunity Cost of Counter-terrorism

Today marks seventeen years since 9/11 happened. If terrorism is theatre, all its shows have been running full house since that fateful day in September 2001.

India has of course been dealing with the threat posed by terrorism long before 9/11. But that attack made the rest of the world take notice of the dangers posed by terrorism. In the US for example, new strategies were made, new intelligence organisations were setup, and armed forces were retrained for counter-terrorism in the aftermath of 9/11.

Similarly, India underwent a change to add teeth to its counter-terrorism strategy and the question that I want to focus on in this blog post is: at what cost have we achieved counter-terrorism effectiveness? Let me explain.

The cost of terrorism is a subject that’s been discussed in great detail. But lest we forget, a cost is incurred for countering terrorism as well. By cost here, I mean the economic cost and not merely the explicit accounting cost. Economic cost is the sum of accounting cos and opportunity cost. And the opportunity cost of a choice is the value of the opportunities lost (Cowen and Tabarrok). So, is the value of the opportunities lost by India in choosing to focus on counter-terrorism significant enough that we should lose our sleep on it?

To be sure, counter-terrorism requires spending money and deploying resources. At a macro-level, every resource spent by the government on counter-terrorism could’ve instead been used on something else. But because the threat of terrorism is so potent, it probably makes sense to incur the cost of letting other opportunities slip by. But is there any component of this opportunity cost that needs a relook?

I believe there is one component that needs some rethinking – the opportunity cost of getting R&AW involved in counter-terrorism. Because we probably will never have solid data to understand the resources diverted from R&AW to focus on counter-terrorism, my claim is only based on statements made by intelligence officers.

One such statement I came across was in a recently televised interview of two highly respected retired intelligence officers Tilak Devasher and Vikram Sood. At 10:25, Mr Devasher paraphrases from Mr Sood’s book The Unending Game, saying:

The focus is on terrorism and immediate actionable intelligence. What everybody is looking for is an instant coffee book report. So nobody is looking at the longer-term picture. What happens six months or six years down the road, where is that country headed, what are the vulnerabilities of that country which will affect us, those capabilities have been diminished.

Assuming this is how R&AW has actually transformed itself for countering terrorism, the opportunity cost is not at all trivial. This is because R&AW is a small organisation with limited resources at its disposal.  On the other hand its mandate is huge – it is perhaps the only Indian organisation that is tasked with collecting intelligence and conducting operations in other countries. If such an important organisation is disproportionately focused on counter-terrorism, it means that there is diminished focus on extremely critical questions such as: what will happen in China over the next six months? What should India’s stance be with respect to persecution in Xinjiang? How should India influence political events in Afghanistan? What will be the security implications of a water crisis in Pakistan?

This is a huge opportunity lost. Particularly so because terrorism is not just the only threat facing India. The conventional threats of an arrogant China and an irreconcilable Pakistani military-jihadi complex are just two others in a larger list of long-term threat vectors that India needs to be worried about. The US can afford to focus on counter-terrorism disproportionately because probably it really is the largest threat, given its geography and relative power. But India’s threat matrix looks very different and hence an assessment of opportunity costs of counter-terrorism is necessary.

PS: I suppose the same case of high opportunity cost applies to the Indian army. With its focus on countering terrorism in J&K, one needs to ask, what is the value of other opportunities being lost.

 

 

Traffic cops and a city’s ethos

Yesterday, I got flagged down by traffic cops for steering my car across the yellow line in the middle of the road. I was bemused, because I don’t think any Delhi driver regards it as a traffic violation.

I pulled over, and lowered my window. The constable asked me whether I knew what I had done; I said yes. “That’s a fine of Rs. 1100”, he said, and asked for my driving licence. I handed it over, and while entering my name into his machine, he paused and said – “I was transferred to traffic duty 6 months ago, and you’re the only person I’ve met who admitted to making a mistake, without argument”.

That’s a crazy comment on our city, I thought – 2 minutes at a  traffic crossing, and you can document 10 traffic violations, but people do not want to be told they’re in the wrong.

“I’m glad you’re trying to enforce the yellow line”, I told the constable, and handed over 3 five-hundred rupee notes. “Wait,” he gestured with his palm.

“Insaaniyat ka javaab insaaniyat se karna padegaa”.

(Civility must be reciprocated by civility).

He busied himself with his machine, and then looked up – ” I’ve issued a ticket for driving without your seat-belt. That’ll be a hundred rupees.”

Here was a completely different comment on our city, one you don’t hear often – an uncivil populace, and a charming, sensitive man in uniform.

How do we address the Maoist challenge?

Extract from the proceedings of the National Conference on “Central India – Towards Conflict Resolution” organised by the Nelson Mandela Centre for Peace & Conflict Resolution, Jamia Millia Islamia, New Delhi, September 26-27, 2012.

Speaker: Nitin Pai

It has been recognized that successful counter-insurgency strategy has three distinct but overlapping stages: “Clear, Hold and Build”. The first involves military operations to clear territory of insurgents, the second calls for holding territory and protecting the population from insurgent attacks, and the third consolidates military successes by building functional institutions of state that in turn can deliver effective governance.

While the security forces are equipped, trained and prepared to handle the Clear and Build stages, they find themselves inadequate to take on the challenge of the third, Build stage (more correctly, the Rebuild stage, after the destruction caused by the insurgents and collateral damage caused during counter-insurgency operations). By then, on the one hand, the local civil agencies would have atrophied and left without substantive capacity to undertake development in a conflict-ravaged area. On the other, media, public and political attention will move on to other issues once the statistics of violence show a degree of improvement.

Mr Pai, speaking about structural and governance shortfalls, pointedly stated that there were more convergences than divergences in the previous day’s sessions, about what he believed in and what his fellow panelists spoke on. His view spanned over three areas: how he viewed the Maoist issue, the fundamental errors we have made in addressing it, and what needed to be done.

He began with emphasizing on the problems and stated that the reason for the conflict was not merely limited to poverty, deprivation or lack of security – but essentially one of a governance deficit. People in many parts of India, especially towns and cities have a multi-dimensional engagement with the state. The ability to access people running the government is easier – though often unsatisfactory. They thus have a more balanced perspective of the state. However, people in many other regions – like parts of Central India – have a limited interaction with the Indian state, usually through police, forest guards and local officials. Often there rampant corruption and these public servants have no sense of purpose in their job and duty. Maoists exploit this and convert the dissatisfaction and anger arising from unsatisfactory quotidian interactions with government officials into a rejection of and revolt against the Indian state.

He also saw it necessary to distinguish between people who are angry because of the governance deficit versus people who have an ideological agenda to violently overthrow the Indian state. There is also a difference between adherents and sympathisers of Communism and those who take up armed struggle. Policy and public discourse must recognise these differences and address each group differently.

Mr Pai then spoke about fundamental errors in dealing with the issue in Central India. One of them being the attempt to make security forces deliver governance to people, because very often, they are the only ones with the capacity to do so. He cited the example of the BRO, where it is called upon to build roads in conflict areas. Such measures create and perpetuate a conflict economy, where everyone from the combatants to ordinary people develop an interest in keeping the conflict going. Second, flawed economic reasoning by the government is another error. It has tried to buy back weapons from militants, pay lumpsums on surrender and provide ex-militants with stipends. Such measures do not work because they can be easily manipulated both by militants and unscrupulous individuals.

Mr Pai then steered his case towards what needed to be done. Ideally, civil administration should take over when security forces leave. But this transition from counter-insurgency to normalcy is not well thought through. Bringing normalcy includes a process of governance, one that is well planned and executed.

It is necessary to create structures of governance while understanding that no existing organization can do this task. Civil administrators are unlikely to want to work in post-insurgency areas. It is undesirable to let security forces deliver public services like law and order, water, roads, public transport, banking etc. So it is necessary to create a new organisation with the capacity to handle the specific task of nursing a post-insurgency region back to health. Its purpose is to carry out the rights, privileges and guarantees given to the people of India. It must be created to deliver step-down care. For example, bank accounts, financial inclusion, roads, electricity, etc. These must be delivered within a span of two years.

Such an organisation should comprise of civilian experts but organised along military lines, and placed under the Home Ministry. It should, within a span of two years, be able to deliver governance and build transition in the post-conflict society. It should include all stakeholders, including the local politician with the aim to facilitate a quick and smooth return to normalcy, without affecting developmental goals. He stressed on the example of medical personnel and their requirement to serve rural areas.

In his concluding thoughts, Mr Pai said we have not learnt from our successes or failures. In fact, some mistakes only get worse with time. There is still a need to learn more about step-down care. So while the PM says, ‘Money does not grow on trees’, similarly, Mr Pai argued that capacity too did not grow on trees. It is something that needed to be created. While such a set-up would not totally solve violent or non-violent conflict – but somewhere in between was a marginal person, who would be less inclined to do anything off-track, if such a set-up is supportive of his or her well-being.

Recap: Naxalism rises because of governance deficit

I wrote this back in March 2008 after reading a book that helped be better understand why Naxalism/Maoism continued to exist in India. In a phrase: it is because it is because many parts of India are effectively outside the Indian Republic, and in some of those parts even the promise and hope that the Indian constitution offers is absent or unknown.

Playing into the Naxalites’ hands

Even well-intentioned people can become pawns in the Naxalites’ insidious propaganda war

(Mail Today | March 2008)

Sudeep Chakravarti’s Red Sun: Travels in Naxalite country is a very important book, for it offers an excellent account of the nature of the Naxalite threat. The Naxalite movement thrives on disillusionment and disaffection. It collects unaddressed grievances and unredressed complaints and channelises them into anger against the “Indian State”. It tells rape victims, dispossessed tribals and bullied villagers that the appropriate target of their ire is not the local landlord, policeman or politician but that abstraction called the “State”. But beyond seductive dogma and the logic of the inevitable armed struggle to upturn the status quo, it offers no positive solutions. The fact both Communism and Socialism failed doesn’t matter to the Naxalite leadership, ideologues and sympathisers: people in remote, backward districts of India don’t know 20th century history.

If Naxalite leaders rally support for themselves through mobilising local grouses into a movement against the State and its symbols, their ideologues and sympathisers provide covering fire in the broader strategic psychological war. By dissing India’s economic achievements, by spreading canards about the ‘failure of neoliberal reforms’, by an incessant, exclusive focus on the negative side (in the fashionable name of ‘dissent’), by playing up the myth of ‘two Indias’ and even by openly championing violence, these opinion makers create an context that leads the the average Indian citizen into thinking that there might be something legitimate about the Naxalite movement. There isn’t.

But the left-leaning and left-wing commentariat has succeeded where the pseudo-secularists have failed. The average Indian believes that the Naxalites are not quite as serious a threat as the jihadis—although Naxalites actually hold a broad swathe of territory. Little wonder then that Indian politicians feel no serious pressure to do anything about the Naxalite threat.

Even where there was significant public outcry, the UPA government decided that its perceived vote-banks were more important than national security: it is not half as serious about the jihadi threat as it should be. But where public attention was lower, it literally abdicated its responsibility. The presence of the incompetent Shivraj Patil at the home ministry didn’t help. So while the Naxalites consolidated into a nation-wide movement a few years ago, the central government continues to claim that this is essentially a matter for the states, and it would only play a co-ordinating role.

In the absence of a coherent national anti-insurgency strategy states were left to their own devices. Y S R Reddy’s government in Andhra Pradesh, got into bed with the Naxalites in order to win the election. It was a mutually beneficial bargain: the Naxalites took a breather (after being pummelled by the previous government led by Chandrababu Naidu) and regrouped. It ended predictably, when the negotiations failed and the Naxalites went back to their armed struggle. Why predictably? Well, because “armed struggle” is an inseparable part of the Naxalite dogma: Comrade Prachanda, the leader of Nepal’s Maoists, is being criticised for relenting on this even after they joined the government.

If this was the situation in Andhra Pradesh, with its relatively higher state capacity, what of places like Jharkhand and Chattisgarh, where state capacity is extremely weak? Faced with fighting a war with what they had, they engaged in some extremely flawed strategies. Setting up Salwa Judum, an extra-constitutional counter-insurgency militia, was a big mistake. So is the draconian law which suspends the freedom of the press. The Chattisgarh authorities identified the problems correctly. But the tools they used to solve these problems were ill-considered, ham-fisted and ultimately counterproductive.

Chattisgarh’s government and political leaders cannot escape responsibility for these bad moves—but in the absence of cohesion, determination and resources from New Delhi, it is not surprising that they chose that course. Understandable, but still not acceptable. But it’s no use criticising the Chattisgarh authorities for their dubious strategies. The anti-insurgency war against Naxalites is a national one. The Union home ministry should be held to account for its sins of omission that directly caused Chattisgarh’s sins of commission. The next government in New Delhi has its job cut out—and parties would do well to put their anti-Naxalite war strategy in their manifestos.

If Left-leaning commentators and Naxalite sympathisers are batting for the Naxalites, what should one make of genuine liberal human rights activists? It is possible to construct a reasonable argument that violations of human rights by the government must be criticised every time they occur. The danger with this, though, is that well-meaning individuals and groups can inadvertently end up batting for the Naxalites. Compared with their usual backers, the Naxalites derive greater benefit when reputed individuals and organisations criticise the government. On the war’s psychological front, NGOs and human rights groups end up strengthening the Naxalite movement to the extent they add fuel to the fire of disillusionment and disaffection. Rights activists and do-gooders would do well to heed the old injunction primum non nocere—first, do no harm.

There are bound to be some who evaluate this trade-off and argue that holding the government’s feet to the fire is important in the even larger context of democratic accountability and good governance. Well, to be taken as bona fide, such individuals and organisations must unequivocally condemn Maoism and violent armed struggle. They must also unambiguously accept that only the state has the normative legitimacy to use violence. In other words, there is no room for moral equivalence: it is fair to criticise the government and government officials for their failings. But it is necessary to make the distinction between the State’s legitimate right to the use of violence and the Naxalites’ armed struggle.

Now there has been a controversy brewing for several months over the arrest of Dr Binayak Sen. The Supreme Court has turned down his bail application, yet sections of the media have been projecting him as an innocent being victimised by the state. Quizzed about the affair, Chakravarti contends that Dr Sen is a soft target for the state. “Having him in jail” he argues “allows the state government and police a victory in the face of organisational and security disasters on the ground. But this is a pyrrhic victory. It stifles a moderate voice, and has done nothing whatsoever to curtail or solve in any way either the raging Maoist rebellion in Chattisgarh or issues of development”

Innocent or guilty, only the courts can tell (and Dr Sen has unfettered access to them). But the media coverage of the affair is playing into the hands of the Naxalites. In the absence of a nation-wide anti-insurgency strategy, will critical media coverage compel Chattisgarh and other weak states to take a more enlightened, sophisticated route? Given the situation on the ground, that’s unlikely. The interests of freedom and rights will be better served if the central government is compelled to really fight and defeat the Naxalites.

And then there is the non-security aspect of the anti-Naxalite strategy, wrongly characterised as the need for “development”. It misses the point because people don’t resort to violence because they lack development. They do so when there is a lack of governance.

The Conundrum of Informed Consent

I read The Immortal Life of Henrietta Lacks recently, a masterful book about the real-life story of a woman named Henrietta Lacks who died of cervical cancer in the 1950s. Before her death, Henrietta’s cancer cells were collected by doctors at the Johns Hopkins Hospital and it was found that they had a remarkable capacity to grow and proliferate. The sheer scale of the scientific achievements that followed and which owed a measure of credit to HeLa, as the cells came to be known, is immense. The crux of the book, however, is that Henrietta Lacks never gave informed consent to the harvesting of cells from her body.

Towards the end of the book, the author juxtaposes Henrietta’s case with that of other individuals, like Ted Slavin, who recognise the potential that parts of their bodies have for research and medical advancement, and ensure that they have control over who uses the tissue in question and under what circumstances.

The following text from the book, centred around these examples, is one of the best enunciations of the dilemma of informed consent that I have read:

“This is a capitalist society,” says Wayne Grody. “People like Ted Slavin took advantage of that. You know, the way I see it is, if you think of doing that on the front end, more power to you.”

The thing is, people can’t “think of doing that on the front end” unless they know their tissues might be valuable to researchers in the first place. The difference between Ted Slavin, John Moore, and Henrietta Lacks was that someone told Slavin his tissues were special and that scientists would want to use them in research, so he was able to control his tissues by establishing his terms before anything left his body. In other words, he was informed, and he gave consent. In the end, the question is how much science should be obligated (ethically and legally) to put people in the position to do the same as Slavin. Which brings us back to the complicated issue of consent. [emphasis from the text]

A Test with Imran Khan

If India wants to have a stable and constructive engagement with the Imran Khan government, it must temper its enthusiasm for a quick breaking of ice and totally avoid any attempt to secure a “big” breakthrough.

That’s because dealing with Pakistan is playing cricket simultaneously against two distinct teams on the other side, each of which has a different interest and expection from the game. The Imran Khan government might well have been helped to power by the Pakistan Army, but the military-jihadi complex is a distinct entity and has interests of its own. Based on historical experience, whenever there is an expectation of an upswing in bilateral relations, we should expect the complex to throw a spanner in the works. This usually takes the shape of a military adventure, cross-border terrorism or some other ugly rabbit out of the khaki beret. This creates an impasse and an inevitable downswing in relations.

The way to avoid this is for New Delhi not to demonstrate any eagerness for new beginnings. Don’t try for quick wins. Don’t create expectations. Don’t even fall for photo opportunities. Prime Minister Khan has made sensible statements on dialogue and trade. Let these be worked out at the staff level in the ministries concerned…not by high profile political leaders and government functionaries.

(As an aside, I do think the Pakistan Army will realise they got more than they bargained for by promoting Imran Khan. They don’t learn from their previous experience. From Junejo to Jamali, the army has found that once in office prime ministers develop backbones and don’t always yield to the generals’ diktats. If Junejo could stand up to Zia, imagine what a personality like Imran can do.)

What New Delhi does need to think about seriously is having an official outreach to the military establishment. Diplomatic protocal and normative policies are one thing, but if the Army calls the real shots and will do so for the foreseeable future, realism demands that we find a way to engage the generals directly. We should stop pretending that dealing with foreign ministers and foreign secretaries of Pakistan is an effective way to deal with that country on political and security issues.

As for how to deal with Imran Khan and his government, New Delhi should adopt the temperament of playing a test match. If you play with a Twenty20 or one-day international mindset, you’ll come to grief.

Disaster Relief and competitive advertising

Last weekend, following the Kerala floods, a long audio clip went viral on Whatapp groups across the nation. On two of my groups, each discussing the best way to contribute to disaster relief, this was thrown up as a counterpoint.

The speaker, who identified himself only as ‘Suresh’, says he “landed up in Kerala by accident” during the floods. The thrust of his advice:

  1. People in Kerala are rich. They don’t need your money.
  2. The only help they will need is by way of tradespeople – electricians and carpenters – to restore severely damaged homes.
  3. Oh, by the way, if you do decide to donate money, send it to Seva Bharti.
  4. And by the by the way, don’t donate it to the Chief Minister’s Relief Fund, since we have some evidence that all is not above aboard there.

What Suresh did not say was:

  1. His full name is Suresh Kochattil.
  2. His Twitter handle says “I hate Sickulars and Commies”.
  3. “Following requests from…Bharatiya Janata Party karyakarthas, I have decided to come back to India and go full steam into the campaign for the 2019 Lok Sabha elections”

Seva Bharati is an NGO affiliated with the RSS, and was founded by Balasaheb Deoras. I respect the work of RSS organisations in relief work, having observed them close at hand when I traveled in Garhwal after the Uttarkashi earthquake.

If Seva Bharti wants to campaign for donations, this is perfectly legitimate; if they want to say they will do a better job than the CM’s relief machinery, they need to present good reasons why.

But what I just can’t figure is why an organisation seeking funds would start off by saying funds are not required. Mr. Kochattil’s motivations remain a mystery to me.

 

New Perspectives for Independence Day

Last week, India celebrated more than seventy years of being independent. This is a fact that Indians should be proud of and we are, judging by the articles and news segments that are common during this time of the year. At the same time, it is useful to not look at the country’s independence and its progress in isolation. Taking a step back and looking at the experiences of other countries can provide an interesting perspective on our own journey and offer some lessons for the future. I thought of this as I came across some literature about Kenya over the past few weeks.

First was the novel A Grain of Wheat by Ngũgĩ wa Thiong’o, set during the time Kenya became independent in the sixties as well as the long period of emergency that preceded it. While the book illuminates much about how Kenya gained independence and how ordinary Kenyans approached it, what took me by surprise were the multiple references to India. India, by then, had already been an independent nation for the better part of two decades and was a model of resistance for people still struggling against colonialism elsewhere. One of the characters in the book makes repeated references to Gandhi and the spirit of non-violence that contributed to India’s liberation. There are also less charitable references to Indians vying with the Europeans to seize local markets at the cost of the indigenous population.

The second was about the prosecution service in Kenya which is, on paper, an excellent and well thought out mechanism. It provides for the Director of Public Prosecutions to be a Constitutional position answerable to the Parliament with adequate safeguards against executive interference. It is also a relatively recent system, with the current version of the Kenyan Constitution having been in force for less than ten years. It shows the advantage of learning from the mistakes of other countries. For instance, as was pointed out to me, it would be difficult for India, without a Presidential form of government and with the anti-defection rule in place, to adopt a similar model even if it guarantees to be an upgrade on our existing system.

So, to recap the lessons learnt: one, we should be mindful of our influence and our power in being role models for other countries. And two, wherever possible, we should take advantage of being late to the party by adopting systems and institutions that do not carry the heavy burden of legacy while being best-suited for our unique needs.

Excerpted economics doesn’t work

“Even if the rupee falls to 80, it will not be a concern, providing all other currencies depreciate”, our Economic Affairs Secretary was quoted as saying, earlier this week, on the front page of the Mint.

The logic is pure Alice in Wonderland – if all other currencies depreciate, then what exactly does the rupee depreciate against? One commentator explained – “he’s transposing the dollar against the rest of the world”. She was probably right. And maybe the honorable secretary had mentioned that elsewhere. If so, then the Mint editors took the quote out of context.

This morning, the Vice Chairman of Niti Ayog, Rajiv Kumar, was quoted, in the same paper, as saying,

“The rupee rose by about 17% during the last three years. Since the beginning of this year, rupee has declined 9.8%. So it has recovered. It is coming back to natural value”.

This is a staggering statement, for many reasons:

  1. The math – if something rises 17%, then drops 10%, it ends up 5% higher. But the rupee is at it’s lowest against the dollar. If the dollar is the benchmark here – which it typically is, this defies logic.
  2. If the rupee has declined, how exactly has it ‘recovered’? Recovery usually suggests rising, not falling.
  3. What is the ‘natural value’ of a currency?

Again, in response to my tweets, a  commentator tried to add context – namely that Mr. Kumar was talking in the context of REER (Real Effective Exchange Rate). That may well be the case, but even read like that, it makes the math illogical. And it definitely puts the Mint editors in the dock, again, for printing an excerpt out of context.

Careless comments typically appear when people are in a hurry. Why are our senior-most economic bureaucrats in a hurry? It doesn’t behove the custodians of a large rapidly growing economy. And it certainly doesn’t behove the custodians of a responsible newspaper, to rush half-baked statements to press.

 

Mohit Satyanand