Cities and their names

We, the people of India, have been in a flux over the recent proposals being made to change the name of our beloved cities based on their historical or religious past. There are various sides and nuances to the conversation. In the past decades, the names of the cities were changed either to reclaim the names they had before the colonial rule or based on the linguistic preference of the local community. The argument against the recent change of names is that it has religious connotations and is biased towards one majority community’s preference. Although an interesting conversation, as someone who has been studying urban governance for half a decade now, I wonder how does it help the cities.

I have a proposal. Let’s allow the person who grants the largest amount to the city municipal corporation to name the city. This would not only make the process immune to the religious and linguistic impositions but would help the cash-strapped urban local bodies raise money to provide better public service. For instance, if a rich businessperson can afford to pay for it, she should have the option to rename one of our metropolises to her parent’s name. This would be a classic win-win situation.  

The municipal corporations that have been highly reliant on union and state governments to make the ends meet would gain significantly from the grants for a small price of changing the city’s name. The grants would have a provision for the grantor to provide a pre-defined amount to cover for the administrative costs that may be incurred in the process of changing the name. While the city would make financial gains, the grantor would be able to give one of the most significant forms of homage to an individual or an institution of their choice. This won’t be very different from the schools and institutions being renamed based on the wishes of the grantors.

To keep the cost of the transactions to a minimal, cities can restrict bidding to once every 25 years. This way the cities can plan large scale expenditures based on when the next grant would be flowing in. Of course, the large-scale expenditure can range from building a statue or creating a robust public health system. The final decision will be with the city municipal corporation or the state government, that oversees most of the significant urban functions. I believe this proposal would be appealing to all sides as it caters to none and the final winners would be the real underdogs, the cities.

Of Referenda and Loaded Questions

Reading this excellent review essay by Mohammed Hanif, I realised that when you are a dictator and you want a veneer of legitimacy, you can always conduct a referendum. And to be sure of your victory, you can ask an extremely loaded question with a binary choice.

Sample this question that ‘sought endorsement’ for Zia-ul-Haq’s Islamisation programme in 1984.

Do you endorse the process initiated by the President of Pakistan, General Mohammad Ziaul Haq, for bringing the laws of Pakistan in conformity with the injunctions of Islam as laid down in the Holy Quran and Sunnah of the Holy Prophet (peace be upon him) and for the preservation of the ideology of Pakistan, and are you in favour of continuation and further consolidation of that process and for the smooth and orderly transfer of power to the elected representatives of the people?

There’s no way that anyone is going to answer a ‘no’ to that question with such a framing. I’m actually surprised that 1.5 percent answered ‘No” to this question. Maybe it was Zia’s men at work lest anyone accuse the referendum of being unfair.

Then Musharraf also held a referendum in 2002 to seek approval for a five-year extension to his rule. Check out how that question was framed:

For the survival of the local government system, establishment of democracy, continuity of reforms, end to sectarianism and extremism, and to fulfil the vision of Quaid-e-Azam [Great leader – ie Pakistan’s late founder, Mohammed Ali Jinnah], would you like to elect President General Pervez Musharraf as president of Pakistan for five years?

Another loaded masterpiece to say the least.

Further reading: An excellent question on why the Brexit referendum question was unsatisfactory.

Reevaluating Citizenship

Last week saw the European Union raise concerns about golden passports, schemes that amount to little more than a sale of citizenship by some EU member-nations to rich individuals in lieu of investments. The EU is understandably worried that many individuals with questionable credentials could use a golden passport to enter and operate in the region. This is an excellent opportunity to wonder aloud about what citizenship entails in today’s world, particularly because there have been plenty of other cases in the past year alone that drive home the need for more clarity on the subject.

First, there was the case of Roman Abramovich, a Russian billionaire, being granted Israeli citizenship and using that to enter the UK when the extension of his original visa was held up by red tape and tensions between the two countries. Israel grants citizenship to any person of the Jewish faith who wishes to relocate to the country and a person holding an Israeli passport can visit the UK without a visa for short periods. But is not a citizenship based on religious denomination an anachronism? Religion remains a powerful identifier but should it be a sufficient condition to gain citizenship of a country?

Second, the conversation following France’s football World Cup win earlier this year shows the need to distinguish between citizenship and nationalism. Hamsini Hariharan has written about this nationalism debate before in the Pragati Express. However, what would be of interest is to know how many of the victorious French squad hold dual-citizenship, something that is recognised by France. If the answer is yes, how would it affect the existing conversation?

Third, and not really connected to citizenship, is the farcical case of Boris Becker, the former tennis player seeking immunity from bankruptcy proceedings by claiming he has a diplomatic passport from the Central African Republic, which the latter denied. While there are genuine reasons for the continued existence of diplomatic immunity, an illustrative list of other cases from the past shows that the system can be abused. And, in the context of this post, if an individual with sufficient funds and influence manages to gain not just citizenship but also diplomatic immunity, there is surely a need to revisit the Vienna Convention on Diplomatic Relations to see if a change to the status quo is necessary.

Closer home, two features of Indian citizenship bear mentioning. One, the absence of dual-citizenship. Two, the absence of a monetary component, be it through net worth or investments in the country, to become a naturalised citizen under the Citizenship Act, 1955. These are sound positions, lending citizenship an exclusivity while at the same time avoiding the pitfalls that come with ascribing a monetary value to it. It would be interesting to see if the world moves towards a similar system in the future.

Note: It would remiss to end this post by only mentioning the positives of Indian citizenship without mentioning the recent furore over the register of citizens in Assam, which surely demands a better way of being handled than stripping four million people of their citizenship.

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.

Ambedkar on Equality

These lines from BR Ambedkar from Annihilation of Caste on the concept of Equality, are an absolute must-read.

First, he classifies equality along three dimensions:

Equality may be a fiction but nonetheless one must accept it as the governing principle. A man’s power is dependent upon (1) physical heredity, (2) social inheritance or endowment in the form of parental care, education, accumulation of scientific knowledge, everything which enables him to be more efficient than the savage, and finally, (3) on his own efforts. In all these three respects men are undoubtedly unequal. But the question is, shall we treat them as unequal because they are unequal ? This is a question which the opponents of equality must answer. From the standpoint of the individualist it may be just to treat men unequally so far as their efforts are unequal. It may be desirable to give as much incentive as possible to the full development of every one’s powers. But what would happen if men were treated unequally as they are, in the first two respects ? It is obvious that those individuals also in whose favour there is birth, education, family name, business connections and inherited wealth would be selected in the race. But selection under such circumstances would not be a selection of the able. It would be the selection of the privileged. The reason therefore, which forces that in the third respect we should treat men unequally demands that in the first two respects we should treat men as equally as possible.

Assuming this three-fold classification of (in)equality, one can deduce what Ambedkar would have said about the contemporary demands for reservation. He would have opposed them as the groups seeking affirmative action are not disadvantaged in the first two respects. If anything, some of these groups have been the most dominant political communities in the states.

Ambedkar then gives a utilitarian reason for why we need to uphold the principle of equality.

On the other hand it can be urged that if it is good for the social body to get the most out of its members, it can get most out of them only by making them equal as far as possible at the very start of the race. That is one reason why we cannot escape equality. But there is another reason why we must accept equality. A Statesman is concerned with vast numbers of people. He has neither the time nor the knowledge to draw fine distinctions and to treat each equitably i.e. according to need or according to capacity. However desirable or reasonable an equitable treatment of men may be, humanity is not capable of assortment and classification. The statesman, therefore, must follow some rough and ready rule and that rough and ready rule is to treat all men alike not because they are alike but because classification and assortment is impossible. The doctrine of equality is glaringly fallacious but taking all in all it is the only way a statesman can proceed in politics which is a severely practical affair and which demands a severely practical test.

Of Football and Nationalism

One of the first classes in my public policy course is to help students distinguish between the concepts of nations, states and governments. These concepts are interesting simply because they play out in every other political discourse. Take Trevor Noah’s coverage of the French victory of the 2018 Fifa World Cup:

Noah congratulated the French team with a jubiliant cheer,

Africa won the world cup! Africa won the world cup!

The French Ambassador sent a letter to Noah, accusing him of racism to which Noah responded,

When I’m saying “African” I’m not saying it to exclude them from their French-ness, I’m saying it to include them in my African-ness.

Noah has come under criticism for his views. And while he is beholden to them, the fundamental problem is that the two nationalisms that we speak of are very different. As this article in the Quartz points out,

That’s where the difference between multiculturalist states like the US and assimilationist states like France really comes in. The Jacobin universalist definition of the French national identity promises to allow people freedom from differences; if everyone is French first, then everyone is equal. The “melting-pot,” multiculturalist American model allows people the freedom to be different, but still be American.

If you’ve read classics like the Scarlet Pimpernal or the Count of Monte Cristo, you will see how easily the French Revolution was dismissed as a crazy political project that professed to place reason above all else. So while, ban on the burkini is heavily criticised outside France, the French see it as a reflection of their nationalism.

Noah, who appreciates American multiculturalism professes admiration for a nationalism that accomodates and promotes (to a certain extent) differences. But it is also the French Revolution that provided the clarion call for liberal nationalism (Liberte! Egalite! Fraternite!) to which American, and even modern Indian nationalism can trace its roots back to.

The problem is not nationalism but the way the nation is built. India has attempted to assimilate minorities into a single Indian nation from the time of British India. Assimilation projects based on language have failed in the past but continue to dominate politics and identity. Over the last few years, fingers increasingly point to ‘anti-nationals’ who flout the perceived idea of the nation. As the French mull over what it is to be French, perhaps, it is a good time for us, as Indians, to revisit what ‘Indian-ness’ means as Independence Day draws closer.

Meanwhile, Mesut Ozil has resigned from the German foot ball team citing discrimination over his meeting with Turkish President Recep Erdogan — proving that nationalisms will always be at play in the sporting arena, long after stadium lights are dimmed. 

Politics as Persuasive Performance

In this post, I juxtapose two notions about politics that I came across in the past couple of weeks.

One, in Slate’s Lend Me Your Ears podcast on Julius Caesar (which I referenced in my two earlier posts, available here and here), Mark Antony’s famous speech is seen as an appeal to emotion and is in stark contrast with Brutus’ appeal to reason. It is a performance, a façade that Antony puts up to get what he desires.

Two, in an episode of the Waking Up Podcast on the current fate of liberalism in the USA, Mark Lilla argues against the pull of identity politics. He says that politics should not succumb to self-expression. Instead, it should be a tool for persuasion.

So, there you have the reason for the annoying alliteration in this post’s title. Politics as a combination of performance and persuasion. A persuasive performance, if you will. Of course, this begs the larger question: would it be good politics, and I use good in a value-neutral sense here, if one of these features is absent? This is something to mull over in the future.

Who gains from the new Maternity Benefit Act Amendment?

The new Amendment will harm the women working in the formal sector more than those in the informal sector.

There was a recent uproar about the new amendments were made to the Maternity Benefit Act of 1961, which extended the paid maternity leave to 26 weeks from 12 weeks. Although the move sounds positive at first glance, it holds negative repercussions for the women in the workforce.

One of the most obvious criticisms for the Act is that it would make it costly for the employer to hire women whom they would now have to give a paid leave for 28 weeks. Team Lease did a study titled “The Impact of Maternity Benefits on Business and Employment” which stated that 11 lakh to 18 lakh women will face difficulty in finding jobs in the Small and Medium Scale Industries. 

The second and the less discussed repercussion is that the amendment would impact women employed in the formal sector more than ones employed in the informal sector. There are two broad reasons. First, the formal sector is scrutinised more than the informal sector. Second, women in the formal sector are paid higher than in the informal sector. This makes the maternity leave a more expensive affair for the formal institutions.

To grasp the magnitude of the problem, we need to start with some basic facts:

  • Number of women working in the informal sector in India (2018): 90%
  • Gender pay gap in India (2017): 20%
  • The difference between the male and the female employment ratio (2017): 79% – 27% = 52%

As women in the informal sector are already cheap labour and the regulatory oversight is limited, the chances are higher than the employment rate for women in the informal sector would remain the same. Meanwhile in the formal sector, where even after the wage gap, providing a 26 week paid leave would be an expensive affair for the firm. With the formal contracts in place, the higher regulatory oversight also ensures that the employer would rather hire a male employee than overlook the new amendment. The final outcome of this would be that we will see a decline in the female labour employed in the white collar jobs, even if the status stays the same for their informal counterparts. Leaving us with the question of who is the actual beneficiary of the Act.

Instead of increasing the cost of hiring women, one of the key solutions is to make more jobs formalised. This initiative need not be just for the women. With just  6.5 per cent of the jobs formalised, the regulatory reach of the State is several limited. Increasing the formal net would allow more people to access the safety benefits provided by the state and ensure better working conditions for more people. One of the other key impacts would, of course, be that it would help empower more women to seek their rights.

Xi Jinping’s foreign policy pivot

Chinese President Xi Jinping addressed the Central Conference on Work Relating to Foreign Affairs recently, with his speech offering important insights into Chinese foreign policy philosophy, objectives and approaches. Xi defined his philosophical program as “diplomacy of socialism with Chinese characteristics for a new era,” outlining 10 key aspects of this thought.

Examining these, it isn’t surprising that Xi’s first and foremost priority in foreign affairs is to uphold the “authority of the CPC Central Committee” and strengthen “its centralised, unified leadership on external work.” This has a domestic and international component. Domestically, it refers to the emergence and role of a diverse set of actors in Chinese foreign affairs – from the top leadership, diplomatic corps, representatives at international institutions, party members in the judiciary, the trade and commerce bureaucracy, local governments, the military to financial institutions and state-owned enterprises. Externally, it implies an expansion in the role of party organs and ensuring that events outside do not jeopardise the Communist Party’s rule.

Analysing the state media readout of the speech, one can identify that the fundamental objective of Xi’s foreign policy is to “facilitate a favourable external environment for realising the Chinese Dream of national rejuvenation.” This is an expression of Xi’s shift from Deng Xiaoping’s tao guang yang hui (roughly translated to hide your strengths and bide your time) in favour of the strategy of fen fa you wei (roughly translated to striving for achievement.)

What this implies is that one can expect China to continue with an assertive foreign policy to actively shape events, attitudes and institutions in order to achieve its objectives. However, this round of assertion will be different from the nationalistic kind that has been witnessed since 2008, say in the South China Sea or with regard to Senkaku/Diaoyu islands dispute since 2012.

For starters, Xi acknowledges that China’s rise is “intertwined” and interacts with “the most profound and unprecedented changes (that the world is currently undergoing) in a century.” In such an environment, he is placing priority on developing “global partnerships while advancing diplomatic agenda.” This ranks two spaces above “national core interests as the bottom line” in the list of ten aspects of the new diplomatic thought. Also, ranking higher than core interests are the goals of “building of a community with a shared future for humanity” and “reform of the global governance system with the concept of fairness and justice.”

This indicates that Beijing is keen to actively “advance major country diplomacy” to reduce friction and work with partners, particularly developing countries, to expand its global influence and play a greater role in norm setting. For potential partners, this signifies an important window of opportunity, as China is likely be more amenable to addressing sources of tensions and flexible towards accommodating their concerns. One can view events like December’s South-South Human Rights Forum, Beijing’s outreach to New Delhi and Tokyo over the past few months, its deepening ties with Moscow, its attempts at negotiating a new South China Sea Code of Conduct with ASEAN and its efforts to gather support against Donald Trump’s protectionist policies in this context. This subtle change does not imply an infusion of universalistic or idealistic notions in Chinese foreign policy but is rather driven by pragmatism.

A final noteworthy aspect of Xi’s speech was the constant reference to history. The repeated emphasis on having “an accurate understanding of history,” the need to “review the past, summarise historical laws,” understand “the trend of history” and the identification of present times as a particularly significant “historical juncture” operate at multiple levels. First, it signifies a sense of manifest destiny that has characterised Xi’s leadership. Second, it is an example of personal narrative building, whereby Xi has appropriated for himself the goal of making China strong, after it has stood up and grown rich. This once again places Xi in the league of Mao Zedong and Deng Xiaoping, above his predecessors Jiang Zemin and Hu Jintao. And third, it is a nudge to the party rank and file to maintain “strategic confidence” and not be disoriented by “ever-changing international chaos.”

Effectively what Xi appears to be telling Party cadres and the world at large is that while the tide of realpolitik may ebb and flow, China is here to play the long game, “keeping in mind both internal and international imperatives.”

Market Microstructure and Monetary Policy

Conventional wisdom holds that the monetary transmission mechanism (MTM)– a collection of pathways that connect the central bank actions such as increasing repo rate to real economic decisions such as taking a home loan–is quite weak in India. In theory, MTM is supposed to act in two separate legs. After the monetary policy committee decides to change policy rate, the RBI conducts liquidity management operations to bring overnight interest rate which happens to be operating target–the weighted average call rate (WACR)–within the policy rate corridor.

Since WACR, at the margin, determines the funding cost to the banking sector, it should ultimately change banks’ benchmark lending rates and affect economic variables like investment and savings etc.

But there is theory and there is practice. Recent repo rate hike by the RBI has been a very different story altogether. After the hike, there seems to be plenty of liquidity in the system. RBI is still conducting reverse repo operations to mop up excessive liquidity.

On the other hand, even before the hike was announced, a number of banks led by the State Bank of India and ICICI, had already increased their lending rates, increasing the borrowing cost both for prospective and existing borrowers.

Rather than the textbook monetary mechanism, interest rates seem determined by the market leader and imitated by other banks. There are striking similarities with  the Stackelberg market leadership model. The bottom line is that market microstructure is an important part of the price formation in Indian banking sector.

In this respect, Urjit Patel committee’s observations about the India-specific peculiarities of the MTM may be recalled:

Significant asymmetry is observed in the transmission of policy rates changes between surplus and deficit modes suggesting that maintaining suitable liquidity environment is critical to yielding improved pass-through.

Could it be that the ‘significant asymmetry’ is less due to liquidity environment and more due to market structure? The hypothesis can not be ruled out.

 

Advantage China after Trump-Kim summit

For all the talk about China being insecure with regard to potential Donald Trump-Kim Jong Un bonhomie, Beijing is likely to be rather pleased with the events that transpired in Singapore today.

First, soon after the early reports of the agreement came from Singapore, China called for easing sanctions and “establishing a peace mechanism.” The US-DPRK statement also envisions something similar, i.e., the “building of a lasting and robust peace regime.”

Such a framework places Beijing directly at the negotiating table. Foreign Minister Wang Yi underscored this today, saying China had and continues to play a “unique and important role” in the Korean Peninsula issue. The fact that Kim flew on an Air China jet shows Beijing’s continuing influence over Pyongyang.

Second, the formulation of the DPRK committing to work towards complete denuclearisation, while Trump describes US-South Korea drills as “provocative” and talks about ending US force presence in South Korea also works for Beijing in more ways than one. This is essentially what Beijing had been seeking for months, via its double freeze proposal. Moreover, Trump’s characterisation of US force presence in the region isn’t likely to have gone unnoticed in other regional capitals.

For one, the South Korean administration appeared to have been caught off guard with Trump offering the drills as a bargaining chip. The presidency and military both issued statements saying that clarity was needed on “the meaning and intention” of Trump’s remarks.

But more broadly, if US-South Korea military ties and exercises are “provocative,” would Washington under Trump be a reliable partner for states involved in the South China Sea dispute or even Taiwan, irrespective of the Indo-Pacific strategy and Defence Secretary James Mattis’ tough words at the Shangri-La Dialogue.

Also, Trump’s remarks about the cost of military exercises are very damaging. It’s one thing to want allies to carry their weight. But the repeated counting of costs is incredibly short-sighted and likely to raise questions about the costs that the US will be willing to incur to challenge an assertive China in the region.

After today, it appears that for all the rhetoric, Trump is uninterested in incurring those costs. Trump might have sought history in Singapore. But today’s developments mean it’s advantage Beijing.