All entries for October 2005
October 14, 2005
October 13, 2005
SAAG Paper 1575, 13.10.2005
The foreign policy and strategic dynamics of the Indian sub-continent never ceases to stump those observers who believe in unearthing “meta-narratives” or “trends” in their development. On October 5th, ministers of the Bay of Bengal initiative for multisectoral technical and economic cooperation announced in a meeting at New Delhi to “study the possibilities” of setting up a power grid and a gas pipeline for South and South East Asia. It naturally followed from this announcement that a new era of closer co-operation in the field of power and energy would be witnessed in the region. Two days later, however, came a complete volte face. India announced that the proposed pipeline to bring gas from Myanmar via Bangladesh- valued at anywhere between $1 to $4 billion- was “as good as shelved”.
It’s not as if talks at the BIMSTEC meeting were at a cul de sac. In fact, it had give out certain positive vibes. Ministers had talked about “power exchange and grid interconnections” between the countries to facilitate electricity supply. Power Secretary R V Shahi mulled a possible “trans-Bimstec gas pipeline network” for securing energy supply for the members. There was even some talk about investing in renewable and “clean” energy resources for long-term energy security.
So what happened?
Proshanto Banerji, chairman of the Gas Authority of India Limited (GAIL) – the company in charge of the pipeline- made the cost and benefits of the move clear. The pipeline would be routed through India ’s North East- possibly through Mizoram- en route to Myanmar , making it 40% longer than the 850 kilometres it was originally supposed to be. Even though that might push up costs by $290 million, the decision seems to be final.
Two main strands of explanations can be used to illustrate India ’s change of heart. First, as Mr Banerji made it clear- “Our past experience shows we get into all kinds of trouble when we try to work through a third country.” On face value this seems to refer to the long-term destabilising elements in its politics that surfaced in August with 459 bombings in one day, and also the turmoil that has recently gripped the country over en masse arrests and a rather draconian anti-terrorism law that is being mulled by the government.
India is so unsure about the ability of Dhaka to provide adequate security for the pipeline, that it feels it is not worth paying $125 million a year as transit fees and still risk having one of its most valued energy assets being held hostage by terrorists or worse yet, blown to bits. The extent of India ’s apprehension can be seen in the fact that it would rather re-route the pipeline through Mizoram, one of its most restive states, than through Bangladesh .
Second, the Bangladeshi government had been dragging its feet over the deal for a while now, realising the importance of the pipeline for Delhi . Despite “agreeing in principle” with the Burmese and Indian governments in January, Dhaka had continued to ask for major trade and transit concessions as a quid pro quo for letting the pipeline pass within its domain. A while back Indian Petroleum Minister Mani Shankar Aiyar had said “the ice [was] melting”, but a deal was not yet in sight. Unfortunately for Dhaka, India ’s patience has just run out.
However, it may have taken more than mere frustration with Bangladesh for India to declare that the deal was off. Recently, Myanmar ’s Energy Minister Lun Thi conveyed to his Indian counterpart that they had other parties interested in the gas fields of Arakan- Thailand and, most importantly, China . Delhi is still licking its wounds from the recent failure of Oil & Natural Gas Corporation (ONGC) to acquire PetroKazakhstan in view of aggressive- albeit shady and dubious- bidding by China National Petroleum Corporation (CNPC). It would be a geopolitical embarrassment, not to mention another loss of a valuable energy asset- to let China steal the bread from India ’s mouth.
In fact, it could be argued that the timing of this announcement came at precisely the right time for India . Various public interest groups had been demanding this re-routing for months, in the belief that its construction and maintenance would bring jobs to the struggling local economy. Now that the pipeline will pass through West Bengal, Assam and Mizoram- it does look like their demands will be met. Moreover, the pipeline will merely complement GAIL’s recent endeavours in the region, including a Rs. 55 billion “gas cracker” project in Assam . Furthermore, it is of no mean significance that GAIL, which had been given shares to the A1 offshore block in Myanmar , was awarded shares in the A2 block following this announcement. Someone must have been happy in Yangon to see India ’s promptness.
As India ’s economic growth notches up closer to 8% (Q1 growth was 8.1%), demand for energy rises at 10% a year. For an economy of India ’s size, that is a huge demand to be fulfilled. Bangladesh ’s backtracking and indecisiveness has therefore left India with no choice but to do without this irritant- especially now that the future of the $7 billion Iran pipeline is in question- and even there India faced problems of routing the pipeline through Pakistan . All Dhaka has managed to do is make itself a few billion dollars poorer (money that is desperately needed in the economy). At the time of writing, a news report quoted a spokesman from India ’s $17.6 billion Tata Group, who expressed his company’s intense frustration at the delaying of its $2.7 billion investment proposals by various bureaucracies in Bangladesh .
A u-turn still cannot be ruled out. After all, we’ve all seen this before- and in many areas of Indian diplomacy. But there are concrete lessons which Dhaka can- and should- learn from this debacle if it does not wish to be excluded from future regional projects. Whatever happened to signing the South Asian Free Trade Area? That could be next.
The author is based at the University of Warwick and takes a deep interest in the political economy of the Indian sub-continent
October 10, 2005
The Telegraph, 10.10.2005
“Wait a minute before you go down the escalator,” said Ashwin.
We’d just finished watching the late night, and only, show of Salaam Namaste at the Odeon Skydome in Coventry. The movie was a blast, and although it was my second time, I enjoyed it as if it were my first.
“Why, what’s the difference if I go down now or 20 seconds later?” was my surprised question.
“Well, that family in front of you is a Muslim one.”
I was rather annoyed at what I thought was my friend’s bigotry, and was gearing up to deliver a long pep talk on how we should respect fellow human beings, irrespective of what faith they belonged to. I was kind of surprised too; from what I knew of Ashwin, he was a typical economist — rational and practical. But you never know.
“You don’t want to be walking too closely behind them. Those guys below might think we belong to the same family.”
I looked down and knew exactly what he meant. The hall below the theatre was brimming with a crowd of intoxicated people trying to jostle their way through a packed nightclub entrance.
Sure enough, when the family ahead of us reached the end of the escalator, and was heading for the exit, one guy yelled, “What the f**k are you doing in my country? Get outta here you rascals.” Not to be outdone in displaying his machismo in front of his date, another snapped, “You wanna come have a drink mama?”, knowing full well that drinking was a strict no-no for Muslims.
The family quietly walked to the door looking down, and swiftly headed for the car park where a few policemen were walking around.
It was our turn now. Ashwin was a big fellow, and I was quite angry as well. But for a bunch of 6-foot something drunkards, we were no match. So we decided to avoid the stern looks, and went down the stairs. Nothing major happened, except that we got an earful of “Go back to your own country” and “What’re you doing here, mate? You don’t belong with us”.
Salaam Namaste is a hit, even in Britain. The hall was full. But after the people came out, you couldn’t see a person outside the cinema within 5 minutes. An Indian (or Asian), that is. They’d rather make a hasty exit than be subjected to abuse that would ruin the wonderful evening they’d just had. And in all the years I’ve been coming to late-night movies in Britain, every time it’s been the same.
Thankfully, we made it safely outside the hall. Now for a taxi. The taxi stand had turned into a haven of drunken people vomiting uncontrollably. So we started out on foot. But we couldn’t walk in a straight line as we had to take frequent detours, to bypass troublemakers headed our way; once we went around a hedge instead of past it lest we got drawn into a fight someone had started.
In crisis situations, one’s senses are heightened. My eyes zoomed in on an empty taxi from far away. Waving like lunatics, we asked the driver to stop and walked as fast as we could. Running could get us unwarranted attention, although I did feel like it.
As we came close, we saw that the taxi-driver was Indian. He could well have been Pakistani or Bangladeshi, but I couldn’t care less — he was an Asian. Finally here was a taxi with a desi driver who was ready to take us home.
Of course, any taxi driver would have done the same. But there was something so comforting and reassuring about seeing a fellow Asian that hard logic cannot possibly explain. He seemed like someone from home.
Back home, I couldn’t help wondering what kind of life these taxi drivers had. After all, most of their passengers must be those who’d just had a drinking spree and who could utter abuse quicker than their own names. And all for a few pounds!
You get to hear a lot of harping about how multi-culturalism has been a resounding success in Britain. It may well have been — I’m sure most of these seemingly racist buffoons would be perfectly respectable citizens in the morning. But what’s the saying? — a drunkard never lies. Is this the hideous truth that lies dormant in the souls of England?
Ashwin and I will go watch Maine Gandhi Ko Nahi Mara next week. You can’t let irritants like this to hold your life hostage.
India Cause, 10.10.2005
Manmohan Singh touched down in Delhi on September 17 after his recent trip to Paris and New York. Prior to his departure, he had a hefty list of issues to be taken up during his bilateral discussions with President Jacques Chiraq and at the General Assembly of the 60th annual convention of the United Nations. He was also scheduled to meet Presidents George W Bush, Vladimir Putin and Parvez Musharraf on the sideline of the UN summit to discuss bilateral and global issues of importance. Commentators and politicians back home were dissecting his every speech, every move and every gesture, trying to analyse whether he managed to showcase India’s rising stature and push for its national interests amidst the ever-changing dynamics of international relations. He has largely succeeded.
The sheer symbolic importance of Dr Singh’s speech to the UN General Assembly cannot be left aside. He began his speech with a reference to the ancient Indian concept of Vasudaiva Kutumbakam, i.e., “the whole world is one family”. He dwelt for a considerable time on the vision of shared destiny of all the member countries of the United Nations, and lauded the adoption of the UN Millennium Goals by most of them. However, he did chide certain groups of countries, primarily the richer and the corrupt ones, saying that while the world “is generous in setting goals”, it is also “parsimonious in pursuing them.”
When it came to the issue of reforming the UN Security Council, Dr Singh was unequivocal in his condemnation at the process hitting cul de sac- “Unfortunately, the UN suffers from…[its]…decision making process…[that]…reflects the world of 1945, not 2005.” He strongly argued for the case of the G-4 countries (India, Japan, Germany, Brazil) for reforming the UNSC, even though it faced stiff opposition from the US, China and the African Union. He pointed out the “democracy deficit” at the UN, which denied these countries their rightful place, suggesting that the UN’s “ability to deliver…on its own charter obligations remain limited” as a result.
It could be argued that Singh, along with India’s External Affairs ministry, has missed a trick by still sticking with the G-4, as many countries are prepared to support India’s bid on its own, but are not sure about all the four aspirants. For example, during his bilateral meeting with Dr Singh, Russian President Vladimir Putin suggested “constructive reform” of the UNSC, and giving India a permanent seat was an essential part of it. British Prime Minister Tony Blair and French President Jacques Chiraq have recently re-iterated their unreserved support for India in this regard. But the United States remains unconvinced about Brazil and Germany, while China will not have Japan at the table.
On international terrorism, Dr Singh, widely looked upon as a soft-spoken man, was surprisingly firm. He declared that the international community “must not yield any space to terrorism”, while maintaining that “India will never succumb to terrorism”, be it in Jammu & Kashmir, or elsewhere. He upheld the notions of democracy and called upon all problems to be discussed within the system, while ruling out that there was any justification for terror.
His bilateral meetings were arguably tricky in nature and mixed in terms of success. On one hand, he had an extremely fruitful meeting with President Chiraq in Paris en route to New York. Apart from signing the $1.8 billion Scorpene submarine deal with France, he was welcomed with the declaration from the French government that it will facilitate the supply of civilian nuclear materials to Delhi, and encourage other members of the Nuclear Suppliers’ Group to do the same. Similarly, his meeting with President Putin also bore rich dividends- Russia welcomed the relaxed rules of technology transfers to India announced by the US, and assured greater assistance from the Nuclear Suppliers’ Group for India’s Kundankulam Project. Moreover, in a bid to increase under-utilised economic relations, Moscow will prepare a “comprehensive study on economic ties” by the time Dr Singh’s annual visit to the country takes place in December.
On the other hand, though, he came under increasing pressure from the US over the proposed $4.7 billion gas pipeline with Iran. According to official sources, the issue of the pipeline was not on the agenda during his meeting with President Bush. But a rather hawkish comment by a US Congressman just days prior to the summit, and a not-so-subtle statement by Condolezza Rice expressing “concern” about India’s relations with Iran, drove home the point rather well. India, being a board member of the International Atomic Energy Agency (IAEA), is increasingly being drawn into the “tripartite diplomacy” over Iran’s nuclear hoopla.
However, on the surface it appears that Dr Singh made India’s stand very clear. While arguing that “diplomacy must be given a chance”, he also stated that “Iran must live up to its international obligations” to suspend conversion and enrichment of uranium without IAEA inspections. He stated that India had the second largest Shia Muslim population in the world, was dependent on oil imports from the region, and that 3 to 4 million Indians work in the Gulf, and therefore a stable Middle East was always desirable by Delhi. At the same time, he did not forget to mention that a nuclear Iran was “not desirable”. He did the balancing act rather well, it seems.
Since then, India has surprised many by voting for the US/EU-backed resolution at the International Atomic Energy Agency (IAEA) board meeting to refer Iran to the UN Security Council over its constant failure to comply with its guidelines. The leftists in India are predictably furious, and so apparently-according to a report in The Hindu- is Iran, and contrary to official statements, it still might torpedo the $7 billion Iran-India gas pipeline. However, Foreign Secretary Shyam Saran presented two arguments in defence of India’s decision- first, that it was India that included a clause in the resolution that left way for further discussions between Iran and the EU-3 in the future, and once it had helped formulate the resolution, it had to stand by it or lose credibility. Thus, India effectively watered down an erstwhile hard line stance of the West towards Iran. Secondly, by its own judgements as a board member of the IAEA, India found Iran short of fully co-operating in increasing transparency about its nuclear activities.
His meeting with President Musharraf suffered from the hangover from a rather ordinary summit experienced by Pakistan. In his speech to the General Assembly, Musharraf was reduced to apologising for the A Q Khan nuclear proliferation network, promising more action to curb terrorism and getting himself drawn into a controversy over his comments about the rape of women in Pakistan, and how it was supposedly a ploy to get foreign visas. His response was predictable- try and shift the limelight to Kashmir.
The response from the Indian delegation was firm. Foreign Secretary Shyam Saran dismissed Musharraf’s referral to resolving the Kashmir dispute as per UNSC resolutions as a result of domestic populist pressures. Dr Singh too reiterated India’s stance that no troop withdrawals could take place in the valley until there was a substantial and visible reduction of terrorism on the ground. Despite the seeming rifts, both sides agreed that they were dedicated to the peace process and the third round of dialogue in January “had much going for it”.
A minor, but domestically significant, debacle took place when Dr Singh made a “casual remark” during his meeting with President Bush about the opposition he faces back home to the recent nuclear deal signed with Washington, and how surprised he was at the vociferous attack at the same by his predecessor Atal Bihari Vajpayee, under whose premiership India finally began to improve relations with the US. Apparently it is objectionable to highlight domestic dissent in international meetings for Singh, but it is all right when Bush mentions the problems he faces with Congress over the same deal.
Thus it seems that logically there can be no defence of this criticism on Manmohan Singh. His trip will be marked as a sure, albeit modest, success as he looks to broaden India’s horizons into the wider world.
October 07, 2005
The position of leftist political parties in India over the country's recent vote at the IAEA [International Atomic Energy Agency] to report Iran to the UN Security Council displays flagrant lack of credibility (Tehran builds bridges with India's left, Oct 6). For one, the cadres were silent in the early '90s when V P Singh's government went back on its word so blatantly and denied Iran the supply of a nuclear reactor. They were supporting the government even then – so why this sudden volte-face? Moreover, as Foreign Secretary Shyam Saran pointed out, it was India that pushed for a particular clause in the resolution that left open the path of further dialogues between the European-3 and Tehran. Therefore, India was instrumental in providing leeway to Iran – how could it go back on a resolution it had helped draft? Finally, the leftists forget that by its own independent analysis, Iran does need to do more to comply with the standards of the IAEA. So do the Marxists prefer nuclear proliferation to following a moribund foreign policy? Moreover, the Iran they support – just like their other favorite, China – is not exactly an exemplification of a free society where human rights are respected. Therefore, all that the cadres have based this on is anti-Americanism, pure and simple.
Also, Frank's preposterous statements [letter, Oct 6] know no bounds in his most recent – as with his earlier – letters. Who said India doesn't like Iranian oil? There is a strong consensus within the South Bloc to prefer renewable energy sources over perishable ones, but the fact remains that India still imports 70% of its oil needs. Moreover, the very fact that Indians are never happy with their leadership is the beauty of democracy – you don't see people under tyranny complain because they will vanish and/or they don't have a choice but to live with it. Indians can go out to the polling booth and do something about it. Finally – but by no means lastly – if Indians don't know how to speak English, why do all the BPO [business process outsourcing] firms prefer India vis-a-vis other countries? Even in the most remote village, you will probably be able to find an English speaker. Before he returns to the "slave mentality" again, note that (1) Indians generally speak three languages, local, Hindi and English; and (2) China itself is trying to catch up in English proficiency.
On an unrelated subject, look what Time brought out on its front page (courtesy- Rediff)-
October 04, 2005
SAAG Paper 1563, 04.10.2005
The Global Competitiveness Report 2005-06 published last week by the World Economic Forum had some surprises. While China slipped up by 3 spots, India climbed 5 places in the ladder. The Economist’s Global Foreign Direct Investment Index also saw India rise to second place below China in terms of espousing confidence amongst potential investors. However, what really made news in the business pages across the world was India ’s growth rate in the first quarter of 2005–06, which was up to 8.1%.
Indeed, the economy is “growing faster than expected”, according to the BBC. Up from 7.6% in Q1 of 2004–05, this is mainly due to “a robust growth in industry and service sectors”. Growth was particularly high in the manufacturing sector, which grew by 11% vis-à-vis the previous year, boosted by a real estate and infrastructure boom. Construction, for example, was up by nearly 8% compared to 5% during the same time last year. Within construction, cement and finished steel registered a growth rate of 10.7% and 6.7% respectively. Also high on the growth trajectory were trade, transport, hotels and communications, which grew by a whopping 12.4% compared to 11.5% in the last fiscal.
The increase growth figure thus justifies the record heights attained by the Bombay Stock Exchange just days prior to this report being published by the Central Statistical Organisation. It seems that the market grasped the strength of the economy far better than the government did. Just recently, the Securities & Exchange Board of India- the market regulator- was busy gagging the “senseless sensex”, fearing speculative forces were at play. However, even the markets underestimated India ’s growth prospects, as business lobbies pegged the rate to be around 7.3%. Even more mistaken, it seems, were the leftists who keep Prime Minister Manmohan Singh’s government in power in Delhi . Days before the release of this report, they were giving the Prime Minister flak over his “anti-people” reform policies.
On September 29th, the leftists called an “all-India strike”, forcing a shut down of public services and business across many parts of the country, supposedly in protest of the government’s reluctance to pay much heed to their populist demands. On September 21 and 22, there was a transport strike in West Bengal (whose “Marxist Chief Minister” is going out of his way to reform the state’s economy) over demands of increasing private transport prices. India ’s booming economy also shows why the country is the world’s largest opportunity cost- a tragic story of “what could have been”. If we subtract the cost of these strikes, and the myopic policies forced on the government by the leftists, economic growth could be notched up to 10% or more.
Two major questions remain. First, as the Finance Minister Palanippan Chidambaram said, “The not-so-good news is that agriculture in the first quarter of the current year has only grown by 2% as against 3.8% last year.” On face value, it may not appear to be too damaging, as only 20% or so of the $700 billion GDP is contributed by agriculture. However, its performance determines domestic demand in the other sectors of the economy, especially manufacturing, because dwindling crop sales could lower the disposable income of farmers, who form over 60% of Indian consumers. As India ’s foreign trade to GDP ratio remains considerably lower than, say, China , fluctuating domestic demand can create a problem for industry.
Second, there is an argument that much of the growth is being fuelled by excessive speculation. S. Gupta, a former member of the Planning Commission, said- “It’s hardly sustainable growth. It is based on a credit-linked consumer durables sales push and a speculative real estate and stock market boom. The economy is living off cheap bank credit and plastic money.” Indeed, financing and real estate outpaced infrastructure by miles, growing by 12.4%.
The latter is hardly fundamental in its damaging prospects. As mentioned above, SEBI has already taken stern action against some stocks with a high P/E ratio that were booming in the last few days. Real estate booms across India reflect real demand rather than speculation, as both businesses and people flock to urban centres. On agriculture, the government should start to think out of the box. It has witnessed successful co-operative ventures like Amul succeed in the countryside. Common sense entails that small marginal farmers cannot compete in a global market laden with subsidies and large agro-firms (both courtesy of the European Union and the United States ). To gain in size and take advantage of economies of scale is thus the answer. Moreover, joint ventures among farmers will qualify them for larger amounts of credit from rural banks that insist on sufficient collateral.
Perhaps the best news to have come out of this report is the modest rate of inflation. Sizzling growth is generally followed by high inflation- in this case there were record international crude prices to deal with as well. However, the wholesale prices index rose marginally to 3.75% at the end of last week from 3.5% the week before. Possible reasons could include the absorption of most of the price hikes by the nationalised oil companies and falling domestic prices in many sectors due to increased private competition. Moreover, even with the burgeoning sectors, the growth rate is from a low base. Therefore, there remains a strong possibility of sustained growth without major inflationary pressure.
A cause for concern is that growth rates in Q2 and Q3 of 2004–05 were lower than Q1, bringing down the annualised figure to 6.9%. Whether India can finally repeat or better the 2003–04 growth rate of 8.1% depends on the momentum of key sectors including agriculture and industry. The service sector- especially the information technology sector- seems to take care of itself for a few years now. For now, however, the “ India story” looks pretty- although, no one dare bring back the haunted term “India Shining”.
The author is based at the University of Warwick and takes a deep interest in the political economy of the Indian sub-continent.
The Telegraph, 04.10.2005
The India vote in favour of the US-backed resolution at the IAEA meet, marks a new beginning in the foreign policy of the fourth largest economy of the world. It is of considerable importance that major non-Nato allies like Pakistan, as well as major developing countries such as China, Brazil and Russia abstained from the vote. In publicly released statements, officials from these countries have made clear their apprehensions on some of the points of the resolution. As a traditional non-aligned, pro-Iran country, India had all the reasons to follow their lead. However, in a brave departure from an erstwhile moribund policy, India has declared that by its own independent inquiry, it feels that Iran needs to do more in order to comply with the IAEA’s regulations.
In any case, siding with the US gives a boost to the recently signed nuclear deal, and might facilitate Indo-US cooperation in the energy field. The leftists in India are naturally unhappy about this. But the fact is that Manmohan Singh’s India has finally accepted that it has more to gain by siding with the US than by being against it.
October 01, 2005
The Telegraph, 01.10.2005
In his eagerness to be politically correct, Achin Vanaik has enlisted India as a proponent of “state-terrorism” along with countries such as Pakistan and China. What does he think is the government’s modus operandi in terrorizing its citizens? From jihadis in Kashmir to Naxalites in Andhra to the Ulfa in Assam, the government is facing armed insurgency by groups which terrorize the poor into submission, claiming to be their guardians at the same time. If the state tries to take development to them, they resist, for fear that their support base will dwindle. There is enough sympathy for the underdog and space for deliberation in the Indian democracy to defeat the forces of terrorism. India is not like China, where a brutal authoritarian state can displace its own citizens without having to pay compensation.
Vanaik’s argument that Irish terrorism should be branded “Catholic terrorism”, does not hold water because the allegiance of Irish Catholics lies with Dublin rather than with the Vatican.
Finally, it is true that the state often adopts coercive tactics against some of its citizens, but a far greater evil is to plunge the entire civic society into strife and turmoil, to build an utopian kingdom in which freedoms and rights are at a premium.