Prem Shankar Jha

No ‘Achhe Din’ Here: The Modi Bubble Has Now Burst

By: Prem Jha
06-10-2017
Indian Economics, Politics India

Middle-class youth who supported Modi and gave him legitimacy are now seriously doubting his economic policies. That doubt will soon turn into rag

“The economy is in a tailspin. Yes, it can crash. We need to do a lot of good things to revive the economy”. These words are not mine, but Subramanian Swamy’s. Swamy is not a “pseudo-secular” critic of the BJP. He is a disappointed devotee of Prime Minister Narendra Modi who was, only last year, the BJP’s weapon of choice in its assault on Sonia and Rahul Gandhi in the National Herald case.

He is not the only one. Arun Shourie has been warning the country that Modi does not have a clue on how to revive the economy and has therefore turned to the most dangerous form of populism – communal polarisation – in a desperate bid to ensure victory in 2019. Still more scathing criticism has come from former finance minister Yashwant Sinha, whose critique of the government’s unbroken string of economic failures has brought forth no credible refutation, because none is possible.

Swamy is a reputed economist, and the other two are former ministers who have experience and inside knowledge to back their critiques. But what about the Aam Modi Bhakt – urban, educated, middle class and young? Does he still believe that Modi and Amit Shah are crafting a new economy in a New India, that can still bring ‘acche din‘?

The answer has been given recently by Ninad Vengurlekar, a Mumbai-based mechanical engineer and co-founder of a mobile-based education company, who spent a year doing a masters in education technology at Harvard University:

“Why did I support Demonetization?” I was taken over by our PM’s audacity, his resolve, his emotional appeal, and then tears. He said give me 50 days or else persecute me. I thought, if the head of the country is so confident about what he is doing, obviously he knows something that his critics don’t. My support to demonetization came from this trust in the PM. A billion people thought like me. I was not alone.

10 months later, a friend told me, “Bewaqoof banaya Modi ne.” I said,”Shayad”. And we both laughed at ourselves. But did Modi make a fool of the country? Maybe he did. But he never intended to. He was genuine when he believed that there is black money that would be unearthed out of demonetization. It will break the backs of terror organisations. Corruption will be dealt a severe blow by killing the cash economy and digital transactions will be up. Yes, UP elections would also be on his mind.

But I was sure no sane person would put the entire country through discomfort, cause deaths, wipe out incomes of the poor, just to win UP. This was my hunch. My personal reason for support to demonetization was because I genuinely believed that digital transactions would finish the cash economy.

But I was wrong and how. The economic cost of demonetization was never thought through, especially on the poor. Millions lost their jobs, industries closed down, NPAs went up and banks came under undue pressure to recover SME loans. The spiral effect was probably never imagined to be so devastating.

Digital transactions are down. Corruption looks unconquered. Worst, all the so called “black money” has come back to the system. GDP is down to a historic low. And now RBI has stopped short of saying that demonetization was a dare gone horribly wrong.”

Vegurlekar’s is not an uninformed outburst. All the recent signals from the economy are sharply negative: the onset of deflation in agriculture, which confirms the sharp drop in rural buying power caused by the premature return of migrant labour to villages after demonetisation; the CMIE’s recent estimate that 1.5 million jobs were lost between December and April; the shrinkage of commercial bank credit to industry this year for the first time in 63 years; FICCI’s finding that 73% of the 300-plus respondents to its latest survey of industry would do no hiring for at least the next three months; and McKinsey’s finding that more than 35% of the 466-million labour force of India in now severely underemployed, with no secure jobs and no social security.

Add to this the fact that the investments abandoned by their promoters has risen from Rs 8,60,000 crore in March 2013 to the mind-boggling sum of Rs 11,40,000 crore in 2016, that 40 of India’s most courageous (and possibly foolhardy) entrepreneurs are entering bankruptcy court, and that almost half of the $20 billion of foreign direct investment that has come in during the last year has gone into the purchase of distressed assets by international speculators, and the picture of an unravelling economy is complete.

The harsh truth is that India’s once-envied entrepreneurial class has been all but destroyed, and India is being sold piecemeal to foreigners. It is not the only country that has faced such a tragic denouement by ill-conceived economic policies. In December 1998, a year into the Asian financial crisis, the chief of research at the Siam Commercial Bank, Thailand’s oldest bank, greeted this writer with the remark, “Welcome to the basement sale of Thailand “. We are now witnessing the basement sale of India.

Vengurlekar belongs to the part of the new middle class that was the mainstay of the BJP’s victory in 2014 – not because of its numbers, but because of the acceptability it gave to the party. But he now feels betrayed. What he has voiced is what millions of young people are also feeling.

Modi’s highly-personalised propaganda blitz had kept them quiet so far: “The government cannot be lying to us,” they probably said to themselves. “Maybe it is only me, and a few others like me, who have been unable to find jobs”. That doubt has begun to dissolve, and when it does, Modi and his government will face its inevitable corollary: rage. That was the sentiment that drove the Congress out of power in 2014. It is now rising against the BJP.

Is it too late for Modi to reverse the trend? This question begs an even more important one: does the government even know how to do so? And if it does, then what prevented it from taking the right decisions when it first came to power? Modi may claim, as Jayant Sinha has done, that his reforms will benefit India in the long run by simplifying procedures and making the income-generating classes more accountable to the government. But even if this were to prove the magic bullet the economy has been waiting for, its effects will not be felt in time to save the BJP in 2019.

What can and may well save the BJP is continued bickering within the opposition, combined with a total absence of understanding within it of what caused two decades of growth to fail so suddenly in 2012. Till it works that out, it will not be able to offer a credible plan for restarting growth. It will therefore be unable to provide hope to the people who are hurting most – the youth of India. So far not a single opposition party has shown that it has the slightest inkling of how this is to be done. Till one or more of them shows that it does, and offers a policy that the now-sceptical public can believe in, Modi may well continue to reign and the economy to sink.

No ‘Achhe Din’ Here: The Modi Bubble Has Now Burst

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Why India’s Electric Car Vision May Be Leading Up a Blind Alley

By: Prem Jha
06-10-2017
Blog, Indian Economics

The Indian government seems to have fallen for the Big Business’ agenda of using electric cars even as climate change is accelerating.

Everyone’s suddenly going electric, so India is doing it too. In the past six months, Norway, Germany, Britain, France and China have announced their intention to end the use of fossil fuels in cars by 2040 at the latest. Germany aims to do it as early as 2025.

Although several of these governments have hedged their statements saying that they will switch to electric cars or alternate fuels, everyone knows that, with the possible exception of China, which already has a large coal-based methanol programme running, they are talking about electric cars. So to no one’s surprise, the Indian government has also hastened to fall in line.

In May this year, NITI Aayog, India’s revamped Planning Commission, electrified the Indian elite by announcing that India would aim at replacing its entire passenger vehicle fleet with electric cars by 2040. “India can save 64% of anticipated passenger road-based mobility-related energy demand and 37% of carbon emissions in 2030 by pursuing a shared, electric, and connected mobility future,” it announced. “This would result in a reduction of 156 Mtoe (million tonnes of oil equivalent) in diesel and petrol consumption for that year.” In the same month, Piyush Goyal, the-then minister of power, said that not a single petrol or diesel passenger vehicle should be sold in India from that year onwards.

On September 7, Amitabh Kant, chief executive of NITI Aayog, told the annual meeting of the Society of Indian Automobile Manufacturers (SIAM), an industry lobby, that India would have 30.81 million electric cars on the road by 2030. None of those present could tell how he had been able to arrive at the second place decimal, to within 10,000 cars of what would happen 13 years hence.

The very next day, the newly appointed minister for transport somewhat incautiously told the assembled automakers that they would be “bulldozed” into switching to electric and alternate fuel vehicles if they did not do so voluntarily.

Automobile manufacturers are predictably incensed – and the Modi government’s electric car dream is only the latest development in a long-series of general industry policy flip-flops.

Not well thought out

Was it well thought out? Did any analysis of costs and returns precede this sudden announcement? A look at the draft energy policy for 2040, which was released in June, shows that there was none. For the plan, which estimates that India’s total energy consumption will treble by 2040, predicts that in an “ambitious energy-saving scenario,” the share of fossil fuels will only come down from 81% in 2012 to 78% in 2040. Transport will account for 25% of this.

Only 16% of the oil and 5% of the gas that the “business as usual” scenario would have required will have been saved, mainly through increases in fuel efficiency. Quite obviously, at the time when the policy was being finalised, electric cars had not yet entered the government’s dreams.

What none of the governments that have made this commitment have thought about is its feasibility. The first question any transport minister should have raised was, “Is it feasible?”. One small question would have shown that it is not. The batteries that supply power to electric cars use nickel, cobalt, aluminium, graphite and lithium. All these are rare earths, whose availability in the earth’s crust is far smaller than that of coal and oil.

This poses two problems. First, will there be enough to power the more than two billion cars that will be on the road in 2040, not to mention the billions upon billions of electric bicycles and scooters? Second, will enough new reserves of these be found to offset the amount being mined every year? If the discovery of new reserves falls short of the annual increase in consumption, it will immediately trigger speculation on their future prices in commodity markets, which will push their prices into the stratosphere.

How sensitive these prices are can be judged from the fact that the fall in price of lithium reversed itself sharply at the end of 2015, when the major automakers committed themselves to making electric cars. By mid-2017, they had risen by 50% over the 2015 price.

Wishful thinking

The propagandists for the electric car argue that since lithium accounts for no more than 2% by weight of the most advanced of today’s car batteries, production will be able to keep up with demand and iron out short term price fluctuations. But this is wishful thinking.

The lithium-ion battery that powers the latest Tesla weighs 540 kg and contains close to ten kg of lithium. If the world’s governments wish to wean the world off fossil fuels, they will have to wean two billion conventional passenger cars off fossil fuels. This will require close to 20 million tonnes of lithium. If the number of passenger cars grows by 2% a year and batteries last an average of eight years (the current warranty period on the Tesla), the annual demand for lithium will be in the neighbourhood of 580,000 tonnes.

Even that will reduce the consumption of fossil fuels by somewhere around half, for it does not take into account the consumption of the road haulage industry or the billions of two-wheelers that also consume gasoline today. Against this the entire global production of lithium was 160,000 tonnes in 2015. Since it is rising at 8.8%, it is expected to reach 239,000 tonnes by 2021, according to Macquarie Research. At that rate, it will cross a million tonnes a year before 2040. Can the increase be sustained? The short answer: No. The total amount of lithium in the earth’s crust is an estimated 13.1 million tonnes, according to the US Geological Survey.

Led by the nose

Why then are governments tumbling over each other to announce plans to stop the production of cars that run on petrol or diesel within the next two decades? The answer is that they are being led by the nose by the global automobile industry. As of now, Volvo, Toyota, BMW, Daimler-Benz, General Motors, Chrysler-Fiat, Renault, Honda, Kia, Mitsubishi, Nissan, Volkswagen and Tata have announced plans to make electric cars. They have done this because they know even if their governments do not, there simply isn’t enough rare earths and metals in the earth’s crust to permit a complete shift out of petrol and diesel. So their massive investments in the auto industry will remain safe while they exploit the consumers’ growing fear of climate change to make a fast buck.

Electric cars are therefore a blind alley up which the giant oligopolies that dominate the market economy are taking the world. It is not the first one, for wind and solar photovoltaic power are also in no position to replace even a small part of the electricity that the world consumes. Had there genuinely been no alternative to oil-based petrol and diesel, the mad dash to electric cars would have been excusable. But the technology for converting carbon monoxide and hydrogen, obtained from biomass, into any olefin or transport fuel via the Fischer-Tropsch synthesis has been known for a hundred years and was first used to convert urban solid waste into methanol commercially in the US in 1922.

Today, it can do this with any kind of biomass in the world. Thus the determination of big businesses to lead the world up the blind alley of electric cars at a time when climate change is very obviously accelerating is utterly inexcusable. For the Indian government to fall for it is just plain dumb.

Why India’s Electric Car Vision May Be Leading Up a Blind Alley

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Is the Narendra Modi Bubble About to Burst?

By: Prem Jha
06-10-2017
Indian Economics, Politics India

Three almost simultaneous developments, each of which would normally have dented the government’s image in only minor ways, show how Modi’s image is beginning to lose its shine.

Why has Prime Minister Narendra Modi gone in for such a sweeping cabinet reshuffle now? The short answer is a growing anxiety within the Sangh parivar, voiced recently in the context of agriculture by the RSS, that the BJP’s honeymoon with the electorate, the longest that any government has ever enjoyed, may be coming to an end.

For three years, Modi’s political star has been ascending. India’s new middle class has been singing his praises, NRIs have put up altars dedicated to him in their homes abroad, even leaders in the opposition have begun to wonder whether their interests will not be better served if they join the bandwagon, rather than risk being run over by it. Bihar chief minister Nitish Kumar, once the tallest among his opponents, has already chosen the safer course.

Modi has achieved his larger-than-life stature by making a succession of promises to the people and a media blitz that has no precedent in Indian politics. Whenever you look and wherever you go, televisions screens flash his image every few minutes, announcing a new programme or welfare scheme, or admonishing Indians to take part in schemes already announced. The central government’s advertisement budget for “welfare schemes” this year is a mammoth Rs 1,153 crores, Rs 200 crore more than last year. And there is hardly a single advertisement that does not centre around Modi.

This TV blitz is supplemented by a saturation of cyberspace with praise and propaganda for Modi and the BJP, and denigration of all those who find fault with his policies. The combined onslaught has stupefied the ordinary Indian and discouraged the opposition to the point where every effort by it to build a common platform against the BJP has foundered on the unspoken belief that the effort is pointless because Modi is bound to win the 2019 elections.

Modi’s Achilles’ heel

But larger-than-life images also have larger-than-life Achilles’ heels. Three almost-simultaneous developments, each of which would normally have dented the government’s image in only minor ways, show how Modi’s image is beginning to lose its shine. The first is the unconditional Indian withdrawal from the Doklam plateau; the second is the news that 99% of the bank notes demonetised on November 8 have been exchanged for new notes; the third is the decline in GDP growth to a three-year low of 5.7% in the April-June quarter of 2017-18.

Coming on top of two train accidents in four days that have killed more than 20 and injured close to 200 passengers, and the death of 67 children in a single hospital in Gorakhpur, home of Adityanath, reportedly for want of something as basic as oxygen, these setbacks have stripped the Sangh parivar’s “New India” of much of its gloss. The frenzy of denials and rebuttals that has followed each of the three events reveals the government’s awareness of the softening of the ground beneath its feet.

Stripped to its essence, India’s vacation of the Doklam plateau is an unconditional acceptance of China’s precondition for the avoidance of conflict and the resumption of normal diplomatic relations. Modi’s propagandists could easily have portrayed this as a display of good sense and moderation by both sides. But they have described it as a ‘big win’ for India and a diplomatic setback for China.

Since our TV channels have lapped it up without a word of skepticism, Beijing has been forced to disclose that, contrary to the impression it is creating, China has made no real reciprocal concession to India. Hua Chunying, the Chinese Foreign Office spokesperson made this crystal clear by stating, “Chinese border troops continue to be stationed (in) and patrol (the area)”. About the road she said that China “will take into consideration all factors, including weather, to make relevant construction plans according to situations on ground (emphasis added).”

Her reference to the weather is the only hint China will not restart the road building this year. And by ‘all factors’ she may have implied that the resumption of construction could depend upon the state of Sino-Indian relations eight months from now. The Indian public is not well versed in deciphering diplomatic language. But the perception that Doklam was at best a losing draw is bound to sink in over time.

In a similar vein, had the Modi government been less nervous, it could have claimed that the return of 99% of the demonetised currency notes is an indication of the success and not failure of demonetisation. For it shows that large numbers of tax evaders have preferred to deposit their money in banks and pay the penalty, rather than lose their money altogether. The true measure of success, it could have asserted, is not the currency that did not return but the sudden increase of money in peoples’ bank accounts that has taken place since then.

As finance minister Arun Jaitley pointed out last week, this has been substantial. But the problem with putting this forward now is that it would be not the first, but the eleventh justification for demonetisation that the government would be presenting. It would therefore strengthen the suspicion that when Modi announced demonetisation personally last November, he did not really know what he was doing and that his advisers have been cobbling justifications together ever since.

An economy in crisis

The news that the GDP only grew by 5.7% in the first quarter, against 7.9% in the same quarter of the previous year, could not therefore have come at a worse time. The government has ascribed this to the sharp drop in manufacturing growth from 10.7% last year to a measly 1.2% in the first quarter of this year. But the real explanation is that the growth last year, and in fact the whole of the economic revival that the government claims is now beginning, is a statistical illusion created by the measurement of manufacturing growth by value added and not physical output.

Value added is physical output minus the value of consumed inputs other than labour. So it can change without any change in actual production or employment. This is what boosted estimates of growth in manufacturing in 2016-17. As the RBI’s annual report this year has pointed out, in April-June 2016, there was a windfall gain in value added because of a sharp fall in input costs. This year, by contrast, there has been a slight rise in these costs. Since sale prices of manufactured products have remained fairly steady, the whole of this change has been reflected in the fall of value added in manufacturing, and therefore the GDP.

Proof of this can be had by comparing the estimate of changes in value added and physical output during this period. In April to June 2016, manufacturing output grew by only 6.7%, against the 10.7% rise in value added. In sharp contrast, this year physical production rose by 1.8% in the same quarter, but value added rose only by 1.2%. This was because there had been a marginal rise in input costs of 0.6%.

The BJP, however, cannot use this argument because, in stark contrast to the GDP data, the index of industrial production shows growth in manufacturing actually declining from 4.8% in 2012-13, the last full year of UPA rule, to 2.8% in 2015-16 and 3.8% in 2016-17. Doing so would therefore put a very large question mark over the government’s claim to have revived economic growth in the previous three years.

Precise comparisons over a longer period of time are not possible because the Central Statistical Office changed the base for calculating the index of industrial production in 2011-12 and did not link the new estimates with the old, but at the very least, manufacturing growth has fallen  from an average of 8.6% a year between 2003-4 and 2011-12 to 3.5% between 2013-14 and 2016-17.

Coming on top of this, the drop in manufacturing growth to 1.8% in the first quarter of the current year is alarming, for it not only confirms what the government’s critics have been saying, that the hardships caused by demonetisation were not just temporary, as Modi kept reassuring the people, but likely to persist for a long time.

This has since been confirmed by a host of supplementary data, such as the onset of deflation in agriculture, which signals a sharp drop in buying power in the rural areas; the CMIE’s estimate that 1.5 million jobs were lost between December and April; the fact that for the first time in over 60 years commercial bank credit has actually contracted this year, when it rose by more than 20% a year in the Atal Bihari Vajpayee and UPA-I years; that 73% of the 300 plus respondents in FICCI’s latest survey of industry indicated that they had no intention of creating any jobs for at least the next three months, and McKinsey’s finding that more than 35% of the entire 466-million labour force of India in now underemployed, with no secure jobs and no social security.

The conclusion is inescapable: Modi has utterly failed to live up to his commitment to bring back the “ache din ( good days)” and his bubble is about to burst. Only a dramatic change in policies can prevent this, and for that he may have run out of time.

Is the Narendra Modi Bubble About to Burst?

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Neither Win Nor Loss, the End of the Doklam Standoff is an Opportunity

By: Prem Jha
06-10-2017
Foreign Policy, International Issues

Today, the standoff has opened a route to the resolution of the long simmering boundary question. Can Modi turn the present draw into a victory for both India and China?

Even before news that the standoff between China and India on the Doklam plateau was ending with India withdrawing its 40 troops and one bulldozer was an hour old, the BJP’s spin doctors had begun to paint it as “certainly India’s win over a bullying neighbour”. In an unsourced opinion piece posted by the Economic Times the writer/s claimed that “China tried every threat to bully India – from starting a war to sponsoring insurgency within India. These threats make the Chinese climbdown very significant … The message that goes to smaller countries is that China might not back its threats with substantial action. While the Chinese retreat can encourage smaller countries to look it in the eye, it will also give India an aura of a regional power … Effectively, disengagement means China has been beaten back by India.”

Nothing could be further from the truth.

The Indian withdrawal is an admission by New Delhi that it had no legal justification for its military presence in Doklam. For while there was a dispute over ownership of the plateau, it was between Bhutan and China and there is no record in the public domain of Bhutan asking for India’s help in dealing with the Chinese incursion. Beijing had warned India that it regarded the presence of Indian troops in Doklam as an act of aggression, not once, but four times in the past six weeks – in a 15 page statement of its legal position issued in July, in a formal demand by foreign ministry spokesperson Hua Chunying on August 22 that said India must remove its troops from the Doklam side of the watershed as a prerequisite for peace, and in two categorical statements by its ambassador in Delhi following these declarations.

What is more, China has hastened to puncture the balloon of Indian hyper-nationalism by stating categorically that while Indian troops have already withdrawn from the disputed area, this fulfilling China’s precondition for a stand down, Chinese troops will “continue fulfilling [China’s] sovereign rights to safeguard territorial sovereignty in compliance with the stipulations of the border-related historical treaty.”

What, then, is the compromise that has enabled both countries to back off?  Could it be that the two sides have reached an understanding on the one subject that neither country has mentioned in its statements – the road that China was building towards the Doklam plateau. Or that there is no agreement on this issue at all but that both sides thought it best to end the standoff anyway. If this is so, then Monday’s redeployment is neither a victory nor a defeat for either country. It is, at best, a draw.

Also read: The Bhutan Stand-Off Is an Opportunity, Not a Threat

The Bhutan Stand-Off Is an Opportunity, Not a Threat

Only time will tell whether this surmise is correct, but what cannot be denied is that the Chinese have seen the full extent of India’s  paranoia about the vulnerability of the Chicken’s Neck stretch of territory between Bangladesh and Sikkim and will not hesitate to use it in future to put pressure upon New Delhi when the need arises. On the other hand, should Delhi ever overcome it, Nathu La can become a major asset in building a durable relationship of mutual benefit with China.

The first step in overcoming India’s paranoia is for Delhi to recognise that the vulnerability of the Chicken’s Neck is a cartographic illusion that has been taken advantage of by armchair strategists to create their stock-in-trade – fear. To start with, Nathu La is at an altitude of 4310 metres, almost 14,500 feet above sea level and is snow-bound for at least four months of the year. This means that any force that crosses it to the Indian side, runs the risk of getting stuck there for up to four months at the mercy of whatever India chooses to throw at it.

Second, the Chicken’s Neck itself is not all that narrow – its narrowest part is actually between Nepal and Bangladesh and that is more than 200 km as the crow flies, from Nathu La.

Third, the distance from Nathu La to Kalimpong on the West Bengal border is 136 kms and an estimated five hours in a passenger car. There are innumerable bridges, culverts and tunnels on this road that can easily be blown up. So how would an invading force from China be able to get to the Chicken’s Neck in the first place and how would it maintain its supply lines?

The alarmists’ memories are also extremely short. In the early 1980s, it was India that drove the Chinese out of the Chumbi valley, using its newly acquired Bofors guns to fire over the Himalayan ridges down into it from distances of 40 kms and more. India is far stronger now than it was in the ’80s and China has far more to lose in the Chumbi valley, which has become a hub of economic activity after it became a rail head, than it had 30 years ago. If anything, China has had more to fear from the worsening of relations between it and India, than India does.

Today, the Doklam standoff has opened a route to the resolution of the long simmering Himalayan border dispute that had been closed by the failure of Chinese premier Chou Enlai to establish common ground with Jawaharlal Nehru during his visit to India in 1960 and the 1962 war. For to establish the illegality of India’s incursion into Doklam, it has emphasised its acceptance (in the 1890 treaty) of the watershed principle of boundary demarcation that was the basis, however hastily and casually delineated, of the MacMahon line. By re-opening this possibility within a framework of increased intra-BRICS cooperation at Xiamen next week, Narendra Modi can turn the present draw into victory for both countries. Whether he has the sagacity to do so remains to be seen.

Neither Win Nor Loss, the End of the Doklam Standoff is an Opportunity

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Modi Is Taking India to a Dangerous Place

By: Prem Jha
22-08-2017
Indian Economics, Politics India

A statesman is one who admits when he has made a mistake and has the grace to correct it before it does any more harm. The prime minister, unfortunately, has shown no signs of having either of these virtues.

New Delhi: Prime Minister Narendra Modi addressing the nation from the ramparts of the historic Red Fort on the occasion of the 71st Independence Day, in New Delhi on Tuesday. PTI Photo / PIB (PTI8_15_2017_000059B) *** Local Caption ***

There was a discernible note of self congratulation in Prime Minister Narendra Modi’s Independence Day speech this year. As usual, it was replete with claims – “In our country everyone is equal”, “Those who have looted the nation and looted the poor are not able to sleep peacefully today” – and exhortations – “Bharat jodo“, “Let us create a new India” – that are entirely devoid of content. But these are not the sources of his satisfaction. That arises from his confidence that he has ensured a continuation of the BJP in power for the foreseeable future. He has done this by ensuring that the opposition is unable to unite to face the BJP in 2019; and by relentlessly undermining the constitutional safeguards upon which India’s secular democracy has rested, should it become necessary to retain power through constitutional sleight of hand.

The path India is being taken on

In the last three years, Modi and Amit Shah have removed virtually every institutional hurdle to the creation of the ‘new nation’ he talked about. The BJP now has a president and vice-president of its choice, thus ensuring that any conceivable future head of state will follow Modi’s instructions.

After its successes in Uttar Pradesh, Uttaranchal and Assam, the party will soon have the majority in the Rajya Sabha that it needs to enact transformative legislation.

By overturning the seniority-cum-merit system of promotion in the army, Modi has sent the message out loud and clear to the army that henceforth, it does not serve the constitution but the prime minister. The spate of statements from all and sundry in the armed forces that have begun to equate dissenting with the BJP with treason shows that the army has got the message.

The obstacle of the Supreme Court remains. But Chief Justice J.S. Khehar, who had overturned the judicial accountability Bill and saved the collegium system for the appointment of Supreme Court and high court judges, will retire in a few months and it is a safe bet that Modi will renew his struggle to destroy the higher courts’ capacity for judicial review after he is gone.

Modi’s ideal state

Only the electoral system, the beating heart of our democracy, will remain standing in the way. Despite all their bluster, Modi and Shah are acutely aware of the fragility of the BJP’s hold on power. In 1967, the Congress had required 40.7% of the vote to win 282 seats. In 2014, the BJP did it with under 31% of the vote. They will never, therefore, feel truly secure till they have captured that additional 10%.

Since that extra vote is not yet in sight, they have been following a two-pronged strategy to regain power in 2019. The first is to woo away the crucial 10% of the electorate by creating paranoia among caste Hindus in order to create a ‘Hindu’ identity as distinct from caste. The second is to ensure, by hook or by crook, that the opposition remains fragmented. To do this, the Modi-Shah duo launched a no-holds-barred campaign to destroy state-level parties like the Aam Aadmi Party in Delhi, the Janata Dal (United) in Bihar and the Trinamool Congress in Bengal, that enjoy a measure of constitutional autonomy and therefore the capacity to form an alliance capable of defeating the BJP in 2019.

But what is the goal that Modi believes is now in sight? Behind the camouflage of his grandiose and so far unfulfilled promises lies a single unswerving aim. That is to build a Hindu rashtra. There are hints of this in his speech, but three years into the BJP’s reign one does not need these pointers to understand the kind of India that Modi, and the RSS, intend to build.

This state will confront, not accommodate, its neighbours; this state will not tolerate cultural heterogeneity, but seek to replace it with a single homogenised culture that Modi mistakenly believes to be Hindutva. Muslims, and other minorities, will be tolerated in this entity so long as they know their place. Religious pluralism will be tolerated (but not accepted), as former vice president Hamid Ansari pointed out in Bengaluru, but cultural pluralism will not. For the minorities, the path to success will be through cultural assimilation. In sum, Modi is intent upon changing the very idea of nationhood upon which India’s political identity has been based not just for the past 70, but the past 2,000 years.

Is such a profound change even possible? If not, where will its pursuit lead us? Three years on from his swearing in, the answer can no longer be ignored. In every single sphere of governance, Modi is leading India into deadly peril. If he continues down this road, India’s failure as a state is guaranteed.

 

New Delhi: Prime Minister Narendra Modi inspect a guard of honour before
addressing the nation from the ramparts of Red Fort during the 71st
Independence Day function, in New Delhi on Tuesday.
PTI Photo by Shirish Shete (PTI8_15_2017_000139B)

Zero tolerance in Kashmir

Let us look at where he has taken India in the past three years. In Kashmir, he has let loose a regime of absolute terror based on the idea of zero tolerance for political dissent. Today there are no militants in Kashmir, only terrorists who are being hunted down and killed without even being given a chance to surrender. Modi says the Kashmiris are itching to be freed from them. That of course is why hundreds of thousands of youth poured out into the streets and were able to close down the whole of Kashmir for five months last year.

What mainstream and separatist leaders have made clear, repeatedly, is that while they want ‘azadi’ from India, they do not want to become a part of Pakistan. Nor do they want to sever their links with India. All they want is not to be ruled by Delhi, especially on matters concerning their politics, culture and religion. Today, mainstream and separatist leaders are frantic in their pleas for the resumption of a political dialogue with Delhi because the absence of dialogue and Modi’s sole reliance on the gun is driving the youth steadily towards Pakistan, and more recently al-Qaeda and ISIS. Modi has only to live up to the promises he made a year ago to opposition leaders from Kashmir, to discuss any solution within the Indian constitutional framework, for Kashmir to start calming down. But he is dead set against this because a willingness to negotiate with a local government or movement goes agains the very grain of the hard nation state that Modi wants to turn India into and makes him, personally, look weak.

A dangerous foreign policy

Not only is Modi’s hardline policy pushing Kashmir into the arms of Pakistan and jihadi Islam, but it has given the Pakistan army the excuse it had been looking for since 2007 to steadily weaken Pakistan’s democratic establishment and concentrate power in its own hands. This has reversed the trend that India’s helpful and accommodating attitude to civilian governments there, since its foreign exchange crisis in 2012, had created. Indian firing across the LoC has killed 39 persons and injured 133 in 2016, and killed 24 and injured 170 so far this year.

Close to 500 poor and utterly innocent families have therefore suffered grievous losses in Pakistan-occupied Kashmir and possibly a similar number in Jammu and Kashmir, over something that Modi and the Pakistani generals know perfectly will yield them not a stitch of territory or military advantage.

A more immediate peril into which Modi has gratuitously pushed India is the mounting confrontation with China on the Doklam plateau in Bhutan, adjoining Tibet’s Chumbi Valley. Only those willing to gamble recklessly on India’s future have not recognised that the Chinese official position paper released on August 2 is in effect an ultimatum to India to leave the Doklam plateau, or be forcibly ejected from it. It concludes by stating baldly that “No country should ever underestimate the resolve of the Chinese government and people to defend China’s territorial sovereignty. China will take all necessary measures to safeguard its legitimate and lawful rights and interests. The incident took place on the Chinese side of the delimited boundary. India should immediately and unconditionally withdraw its trespassing border troops back to the Indian side of the boundary. This is a prerequisite and basis for resolving the incident” (emphasis mine).

The Chinese ambassador in Delhi underlined this the next day by stating that the presence of even one Indian soldier in Doklam will be considered an act of aggression. But another fortnight has passed and Modi has refused to budge.

Instead, as the South China Morning Post has reported, India is reinforcing its military presence at the India-Bhutan-Tibet tri-junction, and analysts are warning China of the possibility of  a blockade of the Malacca straits by the Indian Navy if China wages war in the Himalayas. Thus, after deriding Jawaharlal Nehru day in and day out for irresponsibly pushing India into the 1962 war, Modi is doing exactly the same thing – pursuing a reckless policy with China and gambling everything upon its not daring to strike back.

I have written extensively in my columns, as have many others, on the Sangh parivar’s relentless assault on Indian Muslims, on secular and Left intellectuals, and on the BJP’s political opponents, using and abusing every instrument of law the government could lay its hands upon, so I will not dwell on it any further.

Nor, for the same reason, will I dwell on the catastrophic decline of the Indian economy in the last four years and the many stratagems the Modi government has used to hide it. Suffice it to say that after taking into account those who have lost their jobs, the net employment growth in these years has been close to zero.

But Modi is as unable to step back from his gigantic blunders with Pakistan, with China, with Nepal and in the handling of the economy, as he was in admitting his bungling of the demonetisation. An essential requirement in a statesman is the self-confidence to admit when he has made a mistake and the grace to correct it before it does any more harm. India’s greatest peril arises from the fact that Modi has not shown any signs of having either of these virtues.

Prem Shankar Jha is a senior journalist and the author of several books including Crouching Dragon, Hidden Tiger: Can China and India Dominate the West?

Modi Is Taking India to a Dangerous Place

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The Bhutan Stand-Off Is an Opportunity, Not a Threat

By: Prem Jha
13-07-2017
Uncategorized

The Chinese don’t want a war with us, so Modi has time to change the path India is taking. Credit: Reuters

 

History is in imminent danger of repeating itself, and of doing so with uncanny fidelity. All the conditions that had led to India’s crushing, humiliating defeat at the hands of the Chinese in 1962 have recreated themselves: we have once more an eyeball to eyeball confrontation between Indian and Chinese troops along a disputed border in the Himalayas. We have a prime minister making one provocative move after another towards the dragon in the north, gambling on it not spewing fire and burning us at some point.

We once more have an army unprepared for battle, whose capabilities are being exaggerated by a hand-picked army chief selected for political reasons after superseding two first-class officers who, the prime minister felt, might prove less amenable to obeying orders that went against the army’s code of conduct. We even have another tri-junctionbetween Sikkim, Bhutan and China, as a flash point for the next war as the Dhola post was for the last one.

Repeating a scripted war?

For Jawaharlal Nehru read Narendra Modi; for Dhola post read Doklang; for B.M. Kaul read Bipin Rawat; for General Thimayya read General Praveen Bakshi. For Khinzamane read Gipmochi. The characters are the same, only the cast has changed. Only one final piece of the mosaic was missing. In October 1962, Nehru asked the Indian army to push the Chinese off the Thagla ridge. On Saturday, Lobsang Sangay, the head of the Tibetan ‘government in exile’ as it calls itself, saluted the Tibetan national flag at Pang Gong lake in Ladakh. Sangay may or may not have been given a nod by Modi’s government in New Delhi, but it doesn’t matter. For the Chinese, this is a serious provocation that can have consequences not just in the Doklam plateau but also Indian Ladakh.

So is another conflict now inevitable? Must India lose another thousand jawans, still more territory and put its relationship with China into deep freeze for another 25 years? Not necessarily. A wise leader is one who knows when to back off gracefully from an untenable position. A statesman is one who can not only do this but turn the situation around and make it work in his or her country’s favour. Regrettably, in his three years in power, Modi has so far shown neither wisdom nor statesmanship. But the Chinese don’t want a war with India. So there is still a little time left to make a start.

The first question Modi needs to ask is why the Chinese have chosen the Doklam plateau to build a road now. Several commentators have pointed out that it has done so to provoke India into a misstep. But it is also possible that with China’s infrastructure industries having almost completely run out of orders, and the military having large budgets to spend, the road had been proposed to the military command in Tibet by one of China’s powerfully-connected construction companies to refill its thinning order books.

The road might not have been intended for military use. Much has been made of the threat it could pose to the vulnerable ‘chicken’s neck’ of India, but we shouldn’t forget that we are also trading with China across Nathu La. Most China watchers believe that every major decision there originates in the party’s central committee or politburo. This is very far from being the case. The Three Gorges Dam project, for example, was not a grand central project, but the brainchild of a single private company owned and managed by the family of Li Peng, the former prime minister of the country. The same company, the Three Gorges Dam company, is now asking Beijing to let it build a 40,000 MW hydropower project on the big bend north of Arunachal Pradesh, where the Brahmaputra drops 3,000 metres over a few kilometres.

A series of missteps

Delhi’s first reaction should therefore have been to find out more about who was behind the road project and what China hoped to get from it. Trade through Nathu La apart, the Chinese had to know that in the Himalayas it would take only one well-placed bomb or explosive charge under a bridge to bring all movement on any road to a halt for years. So Modi’s advisors did not have to jump to the conclusion that the only purpose of a road across the Doklam plateau would be to bring tanks down it into the chicken’s neck.

However, even if the project originated in a jumble of motives, after the rapid deterioration in China-India relations in the past two years, Beijing must have seen in the road project a way to provoke Modi into making a serious mistake while also putting pressure on the Bhutan-India relationship –  thereby increasing India’s isolation within South Asia.

Modi has jumped into this trap with the same alacrity that he showed when he announced demonetisation. For Bhutan is a sovereign country. Without an explicit request from it for military help, there would be no legal justification for India to send its troops to confront Chinese road builders on its territory. For, granted that India has close relations with Bhutan, granted that it also has a military agreement with it, the decision to involve Indian soldiers in the attempt to evict the Chinese had to be taken by Bhutan. It could not be taken for Bhutan by India. Of such a request by Thimpu there is, still, not the slightest sign.

The Bhutan Stand-Off Is an Opportunity, Not a Threat

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Modi’s Approach to Foreign Policy Has Disrupted India’s Ties With China

By: Prem Jha
01-04-2017
International Issues

Modi has turned India into a military and diplomatic ally of the US. In China’s eyes, this has transformed India from a like-minded country, that shared its opposition to the US’s attempt to create a unipolar world, into an adversary.

Chinese President Xi Jinping (R) guides Indian Prime Minister Narendra Modi to a meeting room in Xian, Shaanxi province, China, May 14, 2015. REUTERS/Kim Kyung-Hoon

Three years ago, on the eve of the BJP’s victory in the general elections, India had achieved a status, and a degree of security, in its international relations, that it had never known before. Its relationship with the US and the European union was strengthening daily on the back of deepening economic ties; strategic cooperation with China and Russia on a wide variety of issues under the aegis of BRICS had given it a voice in the shaping of the post-Cold War global order that it had not enjoyed before, and tension with Pakistan was at an all-time low. All this was the result of patient, brick by brick, fence mending over two decades by four governments representing the entire gamut of Indian political opinion, those of Narasimha Rao, Inder Kumar Gujral , Atal Behari Vajpayee and Manmohan Singh. Today all of their work has been undone and the edifice of security they built lies in ruins. India is a country under serious threat and it has no one to turn to.

The threat has come from China, whose foreign ministry has warned India not to allow the Dalai Lama to proceed with a 10-day visit to the Tawang monastery that begins on April 4. On March 3 its foreign ministry spokesman, Geng Shuang, issued a formal warning to New Delhi: “China is gravely concerned over information that India has granted permission to the Dalai Lama to visit Arunachal Pradesh. …An invitation to him to visit the mentioned territory, would cause “serious damage to peace and stability of the border region and China–India relations. We have ….urged India to stick to its political commitments and abide by the important consensus the two sides have reached on the boundary question…. (and) not provide a platform to the Dalai clique and protect that sound and stable development of Sino-India relations”.

In diplomacy the words a country uses in its formal demarches are of the utmost importance, so what he said needs to be read with care. “Grave concern” is not an ultimatum, but it is half-way there. It is reinforced by the warning that his visit now would cause “serious damage to the peace and stability of the border region”. For “serious” we should read “irreparable”. The spokesman’s use of the phrase “Peace and stability of the border region” is also a veiled warning because it is the exact title of the 1993 agreement signed during Prime minister Narasimha Rao’s visit to China that has been the bedrock of Sino-Indian relations since then. In brief, China has warned New Delhi that if India insists on letting the Dalai Lama visit Tawang it will consider the 1993 agreement to have been violated by India.

But a close reading of the statement also shows that China is reluctant to go down this road. Its use of the phrase ‘information that India has granted’ was designed to leave a loophole open for Delhi to change its mind. This may have been no more than a token gesture, for Beijing knows fully well that prime minister Narendra Modi approved of the Dalai lama’s visit Tawang as far back as on October 27 last year. But the Chinese spokesman Geng Shuang’s reference to the disputed area as Arunachal Pradesh, and as “the mentioned territory”, carefully avoiding China’s pre 2009 nomenclature of “South Tibet”, and his reference to the “important consensus on the boundary question” is an indication that China would much prefer to limit its differences with India in the Himalayas confined to a border dispute and wishes to avoid allowing it to expand into an irreconcilable dispute over the whole of Arunachal’s 140,000 sq.km of territory.

One does not know how the Foreign Office would have responded been it been given the chance, but it was pre-empted by Kiren Rijiju, Minister of State in the Home ministry, who pre-empted any measured response that might have left a door to compromise open, when he declared, suo motu, that the Dalai Lama would not only visit Tawang, but that as an ardent yellow hat Buddhist, he would be there personally to receive him. This has left China with only two choices, to assert its claims or back down.

What will China do? Indian policy makers are inclined to believe that the current demarche is another pro-forma objection of the kind that China has made every time an Indian President or Prime minister visits Arunachal, or the Dalai Lama has met the prime minister or president, in order to keep the border issue open till a formal agreement is reached. And had this been 2009, they may well have been proved right.

On that occasion too, a request by the Dalai Lama in March, for permission to visit Tawang to open a hospital in November, had set off a flurry of objections by Beijing and assertions of sovereignty by New Delhi that rapidly escalated into a war of words and turned the Dalai Lama’s impending visit into an international test of sovereignty. Another war in the Himalayas had begun to look like a distinct possibility when Chinese Premier Wen Jiabao took the unprecedented step of asking Dr. Manmohan Singh for a meeting at Hua Hin, on the sidelines of an APEC conference to sort the matter out.

The discussions between them revealed that the Chinese wanted India, above all, to let sleeping dogs lie. In their view the border dispute was a legacy of history, and would die a natural death when relations between the two countries deepened. At Hua Hin, therefore, the two sides settled resolved the conflict by keeping the international, and most of the Indian, media out of Tawang. This turned the Dalai Lama’s visit into a strictly private one, carried out in his religious capacity, and robbed it of political significance.

But the situation this time is so different that to argue from historical precedent could prove suicidal. For in the past 26 months Narendra Modi has abandoned the policy of equidistance and turned India into a military and diplomatic ally of the USA. In China’s eyes this has transformed India from a like-minded country that shared its opposition to the US’s attempt to create a unipolar world, into an adversary.

The turnaround, which took place only a week after President Xi Jinping’s state visit to India, was so sudden that it could not but have taken China by surprise. In retrospect it is apparent that it took place during his first visit to Washington, and was signaled by the abrupt replacement of Foreign Secretary Sujata Singh with S. Jayashankar. Whatever passed between him and Obama brought the latter post-haste to India in January 2015, ostensibly to be the chief guest at our Republic day parade, but in reality to sign a ‘U.S.-India Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region’ on January 25, whose only operative clause was designed to prevent the assertion of Chinese hegemony in the South China Sea.

This did not prevent the Chinese government from laying out a red carpet for Modi during his state visit to China in May 2015, but since then the relationship has soured as India has moved rapidly into America’s strategic embrace. In the past eight months the Modi government has signed all the three military cooperation agreements needed to make it an ally of the US; and issued a second joint statement with President Obama in June last year affirming India’s intention to draw up “a roadmap for implementing the joint strategic vision that “will serve as a guide for collaboration in the years to come”.

The Chinese have responded by ignoring India’s objections to China’s building of a transit corridor to Gwadar through Gilgit and warning Delhi against trying to prevent it; refusing to allow India to become a member of the Nuclear Suppliers’ Group; refusing to allow the UN Security Council to brand Masood Azhar and Hafez Sayeed as international terrorists; increasing the frequency of their submarine incursions into the Bay of Bengal, and sending their most advanced 7,000-tonne nuclear submarine undetected through the straits of Malacca to surface deliberately in Karachi. By the time BRICS met in Goa last October, its Delhi declaration of 2012, which had laid the base for strategic cooperation between China, Russia, and India, had become a piece of waste paper.

Had matters rested there India and China might still have been able to maintain something akin to the frozen peace of the post 1962 years. But, beginning in April 2016, the central government had embarked upon a succession of actions in Arunachal Pradesh that China has found increasingly hard to ignore.

In 2016 the US Consul General in Calcutta did not only visit Itanagar but made a public statement from there that “the US considers Arunachal to be indisputably a part of India”. In the very next month the Modi government sent four Indian warships cruising through the South China Sea with a joint US-Japan task force for two-and-a-half months as its first concrete implementation of its joint strategic vision agreement with the US.

Delhi followed this up by inviting the US Ambassador to India, Richard Verma, to the Tawang festival in October. Verma celebrated this by tweeting a picture of himself, attended upon by the Assam Chief minister Sarbanand Sonowal, the Arunachal chief minister Pema Khandu, and Kiren Rijiju standing in front of the Tawang monastery, to the whole world. Six days later, the government gave permission to the Dalai Lama to visit Tawang early this year.

So far China has carefully avoided being provoked. It responded to the US CG’s visit by stating : “China and India are wise, and capable, enough to deal with their own issues and safeguard the fundamental and long-term interests of the two peoples. The intervention of any third party will only complicate the issue and is highly irresponsible.” When Indian ships joined the US-Japanese task force it again refrained from criticizing India directly and accused the US, instead, of following a ‘divide and rule’ colonial policy towards the two Asian giants.

Only after Verma’s visit to Tawang, did China warn India directly that the diplomat’s actions would damage the “hard-earned peace and tranquility of the China-India border region.” It also repeated its accusation that the US was deliberately enticing India into a confrontation with China, by reiterating that “Any responsible third party should respect efforts by China and India to seek peaceful and stable reconciliation, and not the opposite”. Last week it repeated this warning, but in words that come close to an ultimatum.

This is the first of a two part series on Indo-China relations by Prem Shankar Jha.

 

Modi’s Approach to Foreign Policy Has Disrupted India’s Ties With China

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Modi’s Note Ban May Spell Catastrophe for the BJP

By: Prem Jha
11-01-2017
Indian Economics, Politics India

Demonetisation has hit every sector of the economy from construction to automobile at the same time and its ripple effects are likely to be felt for months to come.

Remember the old adage, ‘You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time?’ Narendra Modi’s government is reluctantly learning its truth now. Exactly a month after the sudden announcement of the demonetisation of Rs 500 and Rs 1000 notes, even the tame audio-visual media has, almost unanimously, turned against his government on this issue. Their consensus echoes an epitaph favoured by Bismarck, “ it was not a crime; it was a mistake”.

The mistake is so elementary that it leaves no room for doubt that Modi announced the demonetisation without consulting either the Reserve Bank of India or the economists in the finance ministry and NITI Aayog. One of the most basic equations in economic theory – MV=PT – seems to have been forgotten. It is the base of the quantity theory of money upon which the whole neoliberal macroeconomics of today rests.

In layman terms, the equation states that the money supply in an economy (M) multiplied by the number of times it changes hands in a year (V) equals the average price level (P) multiplied by the number of transactions (T) that take place during the year. PT is the gross revenue generated in the economy during the year. Take away double counting – the resale of intermediate goods from one producer to the next – and you arrive at the GDP of the country.

Neo-classical economists use it to show that if you double the money supply, prices will simply have to double in the long term. But implicit in this is the belief that the velocity of circulation of money is very stable as it reflects the culturally determined habits of saving and consumption, and will therefore remain unchanged. The volume of transactions in any given period is, therefore, constant.

This assumption does not, in fact, hold true all the time. In his book General Theory of Employment, Interest and Money, J.M. Keynes showed that in actual fact, V rises or falls depending on the optimism or pessimism about the future course of the economy. Thus prices can, in fact, increase ­– and output can respond – without an increase in money supply, and fall without a reduction in it. This is the basis of Keynes’ theory of the trade cycle, one of the two that together fully explain this endemic seesaw in a market economy.

But Keynes never envisaged the possibility that a government would, of its own volition, bring the circulation of money to a near halt and force V down close to zero. For, since anything multiplied by zero is zero, it would, therefore kill the market economy and drive it back to barter. That is precisely what the demonetisation is doing. For an already tottering economy, this is a disaster. For the political future of the BJP, it is a self-inflicted goal that may well cost it the match.

I got some idea of how much V had fallen after demonetisation when a sweet shop owner told me that on the day after demonetization, his sale had fallen from Rs 30,000-40,000 per day to a mere Rs 700. A bookshop owner in Connaught Place told a friend that his sales had fallen from Rs 20,000-30,000 a day to Rs 12,000 in the past month. A high-end optician in Khan Market, New Delhi told me that his sales had fallen by 25% in the past month. Automobile sales, which had been rising at 11% a year in the first half of the year, fell by 38% for Mahindra & Mahindra, 28% for Tata Motors, 20% for Hyundai and 22% for Renault in November. There is not a single retailer who does not have a similar story to tell.

If this is the condition of demand in the urban areas, where more people have bank accounts and use credit cards, it is not hard to imagine what the situation is in rural areas where where moneylenders still meet four-fifths of the demand for credit, and nearly all the transactions are done in cash. Two-wheeler sales have fallen by 35-40% because 65% of all the sales are done in cash and tractor purchases have fallen by a whopping 63% because only farmers and a few construction companies buy them.

The worst affected sector is construction. After being starved for funds for nine years, the construction industry has been pushed further down by demonetisation. The immediate impact has been on employment, for not only is it India’s second largest employer – providing jobs to 45 million people – but since employment in agriculture stopped growing a decade and a half ago, it has also been the principal creator of new jobs.

But the bulk of its workers are migrants from other states who are paid by the day, or at best by the week, and they ask for their wages in cash. Therefore, in order to pay them, their employers need to maintain large daily stocks of cash. Those were the cash reserves that Modi made worthless overnight. What is worse, even their current overdraft facilities, and their bank deposits, are not available to them because the government has put a Rs 24,000 a day limit on all withdrawals.

Unsurprisingly, anecdotal evidence suggests that the industry has virtually ground to a halt. The employers’ shortage of cash has translated into a shortage of jobs and stalled construction. Earnings by have fallen by 80-90%. Until November 8, for instance, the mazdoor naka near the Madhuban garden in Bhandup in Mumbai was among the largest in the city, with nearly 500 construction workers thronging it every morning. On November 30, there was just a trickle of 30 workers waiting hopefully for jobs there.

In desperation, more and more workers are accepting payment in the old currency notes, and sending a member of their family to queue in front of banks all day to exchange it for legal tender. But as the employment opportunities have continued to dwindle, an increased number have joined a return flow of migrants to their villages in order wait until the times get better. Bus companies that brought migrant workers from Orissa to Gujarat are now plying in the opposite direction. There is a similar return of migrant workers to Andhra and Telangana from Mumbai and other cities in Maharashtra, and now, increasingly, from Delhi, Uttar Pradesh, Bihar and Rajasthan.

Construction is not the only sector in which jobs have disappeared. A fortnight after demonetisation, the Engineering and Export Promotion Council estimated that more than 400,000 workers had been laid off in the textiles and garments industries and as many as 60,000 in the leather industry. These are only a few lightning flashes illuminating the storm that is enveloping India’s poor.

Demonetisation is also laying waste to small and medium-sized producers and artisans in the country. It has not even spared the service industries, for except in software and domestic service, income and employment in every other service industry is directly related to production in the primary and secondary sectors of the economy.

The story of a utensils manufacturer in Noida that has lost more than half of its employees is the story of hundreds of thousands, perhaps millions of SMEs all over the country. In the month after demonetisation his sales have dropped by 90% for only one dealer has placed orders with his company during this period. More than half of his 40 workers, nearly all of whom are migrants, have been forced to go home, a journey that the government is considerately facilitating by asking the railways to accept old currency notes.

He has so far been able to retain the remaining employees only because a grocery store has been willing to provide basic food on credit. But the latter’s finances are not endless either. What is more, the remaining workers still need some money to send home. So the company’s finance manager has been standing in bank queues until 1:30 p.m. every day to withdraw money. However, after ten days of doing so, he was unable to withdraw any cash.

Demonetisation has not even spared the service industries, for except in software and domestic service, income and employment in every other service industry is directly related to production in the primary and secondary sectors of the economy. An idea of the hardship and loss of employment that it is causing, even if it is temporary, may be had from the fact that 90% of the country’s 300 million workers are in the unorganised sector and, with few exceptions, are paid entirely in cash.

What Modi has inflicted on India, therefore, is far worse than a natural calamity or a recession. For the first hits only parts of a country, while the second often spares agriculture and exports. But demonetisation has hit every part of a country and every sector of an economy at the same time.

Today, as the data for November pours in, a few of the government’s spokespersons and apologists are still trying to minimise the damage demonetisation has done by quoting the data for the whole of November, not just slurring over the fact that the first eight days saw the small surge of demand that had begun in April, but also on last-minute festival season rush.

But the retail sales data for December confirm that the post-November 8 data cited above, that the decline in sales is continuing. Even the automobile sector, where cash is least used is still experiencing a shortfall of over 20%, and two wheeler sales remain down by half.

The government spokesperson is reassuring customers that that demand will bounce back as soon as the cash crisis is over, but while this happens in sales, production will have to wait for three months’ accumulation of inventories to be liquidated in order to revive.

So the impact of demonetisation will not end when the currency replacement is complete because of the ripple effects that the sudden, two-month long contraction of demand has set off in the economy.

These effects that J.R. Hicks – another great 20th-century economist – dubbed the “accelerator,” are well known to any student who has studied his theory of trade Cycles. But if anyone in his government pointed them out to him, he chose not to listen.

As many experts have pointed out, not only was demonetisation unnecessary but also badly bungled. It was unnecessary because the government knew from its income tax raids that people hold merely 5-6% of their undeclared income in cash, and the balance is in gold, precious gems, real estate and benami shareholdings.

It was inept because not only had the government not printed the more than 20 billion new currency notes needed to replace the old, but it also changed their size to ensure that they could not be dispensed from the 150,000 ATMs in the country without extensive modifications. In the end, therefore, demonetisation has created no gainers, only losers. They now have two and a half more years to remember that they owe their hardships to a government and a prime minister who had promised them acche din, but has so far failed to deliver.

Prem Shankar Jha is a senior journalist and author of Twilight of the Nation State: Globalisation, Chaos and War, and Crouching Dragon, Hidden Tiger: Can China and India Dominate the West?

 https://thewire.in/86086/modis-note-ban-may-spell-catastrophe-bjp/
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What Drives the Modi Government’s Systematic Onslaught on AAP?

By: Prem Jha
04-10-2016
Politics India

arvind-kejri-pti-l

 

Delhi’s political fishbowl has greeted Chief Minister Arvind Kejriwal’s televised warning that prime minister Modi could get him killed with incredulity. “Has he lost his senses, or is this a clever political gambit in the intensifying the struggle between AAP and the BJP in Delhi”?

Its confusion is partly a product of the way Kejriwal’s statement has been reported—with barely a minute worth of excerpts on the TV channels overlaid with the anchor’s own incomprehension, and in short news items on the front pages of the major dailies. But Kejriwal’s full, nearly ten minute, televised statement is anything but delusional, and conveys an entirely different, chilling, message.

In brief it is this – the Modi government has been trying to incapacitate the AAP government in Delhi ever since its humiliating defeat in Delhi in December 2014, and has been failing miserably. But instead of desisting, it has only become more frantic, harming itself more and more with the electorate. Mr. Modi knows perfectly well that this is happening. So why is he persisting?

Kejriwal’s answer is deeply unsettling: it is because Narendra Modi’s actions are governed by an anger that mounts as his frustration grows. This is pushing him into acts that he knows can only harm his party. India’s national interest has already become a casualty: By imposing an oil blockade on Nepal when it was still struggling to recover from last year’s earthquake, Modi has destroyed India’s relationship with the only Hindu country in the world. He has also reversed a full decade of work by two Indian prime ministers to bring Pakistan and India closer together and end the Kashmir dispute.

Within the nation, Modi’s behavior towards the Delhi government has shown that, when angered, he may stop at nothing to have his way. Kejriwal dramatized this by saying that ‘he might even kill me’. But his deeper message was that when angered Modi showed scant respect for the law and the Constitution.

Is this political theatre a curtain raiser for the battle in Punjab and UP next year? Kejriwal would not be in politics if he did not have them at the back of his mind. But he knows that the credibility of everything he says depends upon his ability to prove his allegations against the BJP in Delhi. He has thrown caution to the winds because he knows that he is on firm ground.

Reports of the BJP’s onslaught on the Delhi state government have appeared in scattered, usually brief, news items spread over almost two years. The underlying issues have been further obscured by being presented to the public as a personal war between Kejriwal and Lieutenant Governor Najib Jung, i.e an opportunistic politician and an arrogant bureaucrat. It is only when we create a timeline for the onslaught that its full, systematic nature gets revealed.

The first conflict occurred as early as March 2015, within four weeks of the new government coming to power. When the chief secretary of Delhi went on leave for eleven days, instead of allowing Kejriwal to appoint his temporary substitute Jung forced Kejriwal to accept Shakuntala Gamlin, the Power secretary, even though this was to be an appointment for only eleven days. The pettiness of Jung’s action led to widespread speculation about its possible causes. But before long it became clear that this was the opening salvo in what was to be a long war.

The conflict was triggered by Kejriwal’s bid to end the rampant, predatory, extortion in all arms of government. During his first 49-day term in office in 2014 his invitation to the public to record any request for a bribe had brought extortion by the police, and municipal officials, down to a trickle.

So in February 2015 one of Kejriwal’s first acts was to set up a helpline where people could report such cases. Within the first 100 hours this received 32,489 calls. Of these 70 were backed with sufficient prima facie evidence to merit being passed on to the Anti-Corruption Branch. Of those 90 percent were against the police or officials of the three municipal corporations in Delhi. By April 18, the ACB had arrested 17 officials of the state government.

The Delhi police had watched these developments with mounting concern. Between April 5 and May 6 the helpline received another 125,000 calls. In an attempt to shelter the police from the deluge the police commissioner, B.S. Bassi, sent three impugned senior officers on forced leave.

But the conflict came to a head on May 1, when the ACB arrested a head constable for demanding a bribe of Rs 20,000 from a used car salesman. In a move that was without precedent the Delhi police immediately filed a case of kidnapping against the Anti Corruption Branch of the State government. Three days later the Police commissioner, B.S Bassi, phoned the head of the ACB and asked him not to forward the case to the vigilance department, but to transfer it to him for a departmental inquiry.

When the ACB chief, S.S Yadav, demurred, Jung demanded that the ACB should report to the LG and not to the state government’s vigilance department. When Kejriwal resisted this, Jung, in another move without precedent, called in a paramilitary force to surround and seize the ACB’s offices, and appointed Joint commissioner of Police Mukesh Meena in Yadav’s place. By choosing Meena, Jung waved a red rag in front of the bull, because Meena had earlier been entrusted with preparing a case against Kejriwal and the AAP for allegedly encouraging farmer Gajendra Singh to hang himself during an AAP rally at Jantar Mantar in August 2014.

Forced out of the ACB office and deprived of control over the police assigned to it, the Delhi government tried to operate the ACB from another location and get policemen from Bihar to staff it. Such transfers of cadres by one state government to another had been requested before and readily conceded, so Bihar CM Nitish Kumar quickly agreed and seconded five police persons to staff it. But Jung stepped in again, asserted that the ACB was now under him, and sent them back to Bihar. The Union Home ministry, unsurprisingly backed Jung, and accused Kejriwal of unnecessarily picking fights with the LG.

On May 21, 2015 the Union Home ministry followed this up with a notification that completely stripped the state government of its power to appoint, promote or transfer of officers in the state administration and vested all of these in the Lieutenant Governor.

A single judge bench of the Delhi High court ruled four days later that in doing so Jung had exceeded the authority given to him by the Constitution in the 69th amendment, which created Delhi State, but since he gave this opinion while hearing the bail application of the Head Constable in the May 1 bribery case, the Central government was able to get an injunction from the Supreme court to disregard it as it had been given on an unrelated matter. Knowing that public anger would serve his cause better, Kejriwal did not file an appeal against the Centre’s notification in the High court, and let the matter rest.

The May 21 notification took away the last shred of the Delhi government’s control over its officers. So when, seven months later on December 30, two senior officers belonging to the Delhi and Andaman Nicobar Service (DANICS) and employed in the State’s Home ministry refused to sign an order passed by the cabinet, stating that they had been given instructions to follow orders only from the LG, Kejriwal decided to suspend them.

Eight days earlier, the Home ministry had issued a notification that had been a year in the making, to protect IAS officers from summary transfers and suspensions by state governments by making these subject to review by the Union Home ministry. This was a much needed reform but did not apply to officers of the DANICS.

Despite that, within hours, the LG sent a letter to the Delhi chief secretary stating that the suspension was ‘illegal’ because it has been done “without the authority of Law”. The Union Home ministry also declared the suspension “ non est” i.e deemed not to exist, at the same time.

This completed the destruction of the executive powers of the Delhi administration. Emboldened by this notification, 200 officers of the DANICS cadre, supported by the IAS officers association, decided to go on a day’s leave en masse,in protest against the suspensions. Kejriwal condemned this as yet another conspiracy against Delhi’s people, but the Modi government did not stop there.

To rub still more salt into the wound the Home ministry began to transfer state government officials in critical positions without warning and without informing the chief minister and his cabinet, let alone seeking their permission. These included an officer who was supervising the establishment of CCTV cameras at critical places across the city to ensure the safety of women; another who was overseeing the regularization and development of unauthorized colonies and, most galling of all, officers from the personal staff of the chief minister.

And as if all this was not enough, over the past 18 months the CBI has called in no fewer than 150 state government officials for ‘questioning’ on issues it claims it is working on. All have been humiliated by being forced to wait from morning to night in the anterooms, and then being called in during the last hours of the day to be roundly abused and threatened.

Legislature paralysed

The centre’s lack of cooperation with Delhi is total. Fourteen bills passed by the cabinet have been sent to the Central government for assent, but the Centre hasn’t passed even one of them. These include three bills on education and three bills designed to enforce the law on minimum wages set for Delhi.

Administrative measures needed to implement government policy have also been routinely blocked by the LG. These include regularizing the employment of 15,000 temporary teachers; raising the land acquisition compensation in Delhi from the present Rs 54 lakhs per acre to the prevailing market price of Rs 3 crores, and engaging Akshaya Patra, the well-known NGO headed by Sudha Murthy, wife of Infosys founder Narayana Murthy that runs midday meal schemes for 1.5 million children, to run Delhi’s mid-day meal programme.

Till the end of 2015, the Modi government had resorted only to non-cooperation to hamstring Kejriwal’s administration. On December 15, 2015 it went on the offensive. At 9.00 a.m. that morning the CBI entered the Delhi secretariat, sealed all the three floors of the building, allowed no one to enter any office, including that of the chief minister, and began to go through the office of his principal secretary, Rajendra Kumar, an officer whom Kejriwal had picked because he had one of the cleanest records in the IAS..

The CBI claimed that it had not entered the chief minister’s office, and had only raided Kumar’s adjoining office and residence to investigate a charge of graft in five contracts placed by the Delhi government for a value of Rs. 9 crores with a company to which Kumar was allegedly linked. But the action was hasty, and stank of malice, for what it chose to ignore was that the charge had been leveled by a disgruntled AAP member, Ashish Joshi, who had been unceremoniously expelled from the Delhi Dialogue Commission.

Despite the existence of a long record of insubordination, insult and acrimony between Joshi and his seniors in the Delhi Dialogue Commission, and therefore a possibility that Joshi’s charge was mala fide, the CBI carried out no preliminary investigation of the accusation before shutting down the secretariat, raiding Kumar’s office, and invading the highly sensitive files kept there.

This omission was all the more inexcusable because the full record of the reasons why Joshi had been sent back to his parent cadre, the Indian Post and Telecommunication Finance Service, was available in the Union ministry of telecommunications. Nor did the Home ministry explain why a minor case of graft had not been handled by the Delhi police, but sent directly to the CBI.

The conclusion is inescapable: the Centre simply did not want to forego another opportunity to harass and humiliate Kejriwal. All niceties of law and procedure were cast aside and, on July 5, Rajendra was arrested and taken to jail where he was sweated by the police for five days in the hope of wringing a confession out of him, followed by another 17 days in judicial custody. Since then the principal secretary’s post in the CM’s office has remained vacant because no IAS, or any other cadre, officer is willing to put his neck on the guillotine.

Attack on AAP MLAs

The Modi government has not confined its attack to the administration. In the past year the Delhi police have arrested no fewer than 11 out of the 67 AAP MLAs in the Delhi assembly on a wide variety of charges ranging from rioting, slapping a Jal board worker, sexual molestation and domestic violence, to cheating and land grabbing, rioting, assaulting a public servant, making casteist remarks against an NDMC worker, and instigating the burning of copy of the Quran.

Only one of these, against former Law minister Somnath Bharti, merited being taken seriously because it had been filed by his wife. At the other extreme are two cases, against Mehrauli MLA Naresh Yadav and Okhla MLA Amanatullah Khan, filed while I was interviewing Kejriwal on July 24–both bear the fingerprints of a frame-up by the Delhi police.

Yadav was arrested for having instigated the burning of a copy of the Quran, on the word of the three RSS activists who were actually caught committing this desecration. Why three RSS men should have heeded the exhortations of a Muslim belonging to a party that is the BJP’s sworn enemy, is a question the police did not bother to ask.

Khan was similarly arrested on the word of a woman who claimed that he had threatened her with rape and murder when she went to him to complain against power cuts in Okhla. Even more shocking than the arrest was the summary sentence passed upon him by a city court on the basis of the woman’s word alone, of one day in police custody. AAP posted a video that showed her telling someone on a mobile phone that the Officer in charge of the Okhla police station at Okhla had urged her to accuse Khan, but by then Khan had become a registered sexual offender in the records of the police.

There is no way of telling who convinced the prime minister, or the Home minister, that this would be a good way to discredit the Kejriwal government. But what no one believes is that the BJP government is doing this out of a sudden respect for the law. Modi had promised to cleanse Indian politics of crime and corruption, but their election affidavits show that 98 out of the BJP’s 281 MPs have criminal cases pending against them. Sixty three of these face indictments for one or more of the six most serious crimes in the Indian Penal code — murder or attempted murder, dacoity, arson, rape, kidnapping, and the illegal possession of arms.

One of Modi’s ministers, Nihalchand Meghwal, has been facing a charge of rape along with 16 others, since 2011, but this has not been sufficient to prevent Modi from inducting him into his council of ministers and refusing to release him to face prosecution in a Jaipur court.

And while the guilt or innocence of the 11 indicted AAP MLAs will be decided by the courts, few of the voters of Delhi could have failed to notice this strange concentration of crime in one small party in one small state. Against 70 in Delhi, there are 4,050 MLAs in the remaining Vidhan Sabhas of the country. The total number of cases registered against them during the past 18 months does not add up to 11.

Had Modi’s persecution of Kejriwal’s government been the only example of his disregard for the niceties of the law and the constitution, it could have been ascribed to personal enmity and overlooked. But from his government’s strenuous efforts to exonerate and rehabilitate the Gujarat policemen indicted for the killings of Ishrat Jahan, Sohrabuddin Shaikh and Tulsiram Prajapati, to the framing of a case against Kanhaiya Kumar and the physical assault on him, as well as on journalists and JNU professors, by RSS affiliated lawyers who roam free today, to the constant drumbeat of persecution of Indian Muslims, there is a pattern emerging that bodes ill for India’s future.

Prem Shankar Jha is a senior journalist and author of Twilight of the Nation State: Globalisation, Chaos and War, and Crouching Dragon, Hidden Tiger, Can China and India Dominate the West?

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India is Losing an Opportunity With China

By: Prem Jha
01-08-2016
Foreign Policy, International Issues
Prime Minister Narendra Modi during his visit to China in May 2015. Credit : PTI

Prime Minister Narendra Modi during his visit to China in May 2015. Credit : PTI

When Delhi ignored Beijing’s quiet demarches to let sleeping dogs lie in Arunachal Pradesh, not only did the Vice foreign minister Liu Zhenmin summon Ambassador Ashok Kantha to express his “strong dissatisfaction and staunch opposition” to Narendra Modi’s visit in February 2015, but the entire text of his protest was released by the Foreign office, and carried in full by Xinhua , the next day.

China, he said  “has never recognized the so-called ‘Arunachal Pradesh’ unilaterally set up by the Indian side. It’s an universally recognized, unevadable fact that significant disputes do exist on the eastern section of the China-India border…. the so-called “Arunachal Pradesh” was established largely on the three areas of China’s Tibet — Monyul, Loyul and Lower Tsayul currently under Indian illegal occupation. These three areas, located between the illegal “McMahon Line” and the traditional customary boundary between China and India, have always been Chinese territory”.

However Liu kept the door open for resuming the convergence towards strategic cooperation that had taken place between Hua Hin and Durban. He again said that China placed importance on developing relations with India. He said the two countries, ‘as neighbors and the top two developing countries in the world, share broad prospect on cooperation at various levels’.

He expressed ‘the hope that the Indian side should treasure the sound momentum in the growth of bilateral relations, march toward the same goal with China and abide by the important consensus on the border issue’ and “called for the Indian side not to take any action that may complicate the border issue and stick to the general orientation of resolving the issue through bilateral negotiations so as to maintain the overall growth of bilateral relations”.

But the significance of this very public demarche was lost upon the Indian media, which did not even mention it. So two months later, surreptitiously, and therefore unnoticed yet again by the media, Modi sent four Indian warships to join a US carrier fleet in the South China Sea to enforce the freedom of navigation within it less than a week before his return State visit to China. With that all ambiguity about where India stood on the central strategic issue of our age, was dispelled.

Inspite of this China pulled out all the stops to welcome Modi later that year. Xi took an entire day out of his calendar to spend it with him in Xian. Li Keqiang spent in all 13 hours with him. The joint statement issued after the visit began by acknowledging “ the simultaneous re-emergence of India and China as two major powers in the region.” This was something Beijing had never before conceded and was obviously intended to keep the door open for serious further engagement on international issues. But Indian commentators either did not notice the shift or took it as an acknowledgement of India’s growing power and influence that required no quid pro quo.

Spread over several paragraphs was also a commitment by both countries to put the border dispute in cold storage and not allow it to hinder the further development of cooperation between the two countries. It reiterated that the two governments were determined to ‘actively seek a political settlement of the boundary question’ and ‘resolve outstanding differences, including the boundary question, in a proactive manner’. They agreed to exchange   regular visits and make full use of the opportunities provided by the presence of their leaders at various multilateral fora to hold consultations on bilateral relations and issues of regional and global importance. It again affirmed that an early settlement of the boundary question served the basic interests of the two countries and should be pursued as a strategic objective by the two governments.

But what was absent from it was any reference to strategic cooperation. This was glaringly obvious in the last, and from China’s point of view most important, section of the statement, sub-titled Shaping the Regional and Global Agenda. Given India’s explicit support for Vietnam’s rights in the South China sea, it came as no surprise that the statement steered clear of making even an oblique reference to the disputes that bedevil the region. But the joint statement did not even make a reference to the need to ensure the freedom of navigation in it.

China has stated, times without number, that it has no intention whatever of blocking free movement of commerce within it. Asserting a common commitment to protecting this freedom, possibly qualified by and explicit reference to commerce, would have balanced the reference to it in the Indo-US Joint Strategic vision statement of January 25. Its absence suggests that India either felt no need to establish such a balance or baulked at including any statement that would dilute the tacit commitment it had made to the US.

Equally significant was the absence of any reference to the civil war and humanitarian crisis in Syria, any explicit condemnation of ISIS and, most significantly, any welcome of the US and EU’s agreement with Iran. There was not even the implied criticism of the US’ quest for global dominance and a unipolar world that BRICS’ Delhi declaration had contained. Nor was there an endorsement of a multi-polar world order. It was as if the Delhi meeting of BRICS had never taken place.

Although Narendra Modi had taken a huge business delegation with him, and came back with $22 billion worth of state and corporate investment commitments, the joint statement concentrated only on terrorism, border demarcation, and the bilateral trade imbalance. The possibility of redressing this by facilitating large amounts of Chinese investment in India was only touched upon in passing. There was no reference in the joint statement to China’s proposal to form a Regional Cooperation Economic Partnership or to the One Belt, One Road (OBOR) plan into which it was absorbed, and no indication on whether India would join it or not.

The joint statement also showed that China had begun to hedge its bets. It ‘understood and supported’ India’s aspiration to play a greater role in the United Nations (no mention of the Security Council) and, in language that foreshadowed the US’ welcome of India’s interest in joining APEC, it ‘took note’ of India’s desire to become a member of the Nuclear Suppliers’ Group.

Since then, as the Modi government has ploughed ahead, China’s withdrawal of its offer of strategic cooperation, and return to its older policy of isolating, and neutralising India, has gathered momentum. It opposed — and prevented — Masood Azhar from being declared an International terrorist by the UN Security Council. It is opposing India’s membership of the Nuclear Suppliers’ Group. It has committed $14 billion to building a tunnel under the Great Himalayan range, roads, bridges and a rail link to end Nepal’s dependence on India for access to the rest of the world. It has committed $13 billion to building ports, roads and power plants in Sri Lanka and a whopping $45 billion to developing Pakistan’s road, rail, port and nuclear power infrastructure.

When these projects are completed Pakistan’s infrastructure will not only far outstrip that of India but also, by creating an alternate route for its exports to Africa and Europe through Pakistan, shower so much foreign exchange upon it by way of transit fees that it will never again have to turn to India for help as it did in 2012.

Prem Shankar Jha is a senior journalist and author of Twilight of the Nation State: Globalisation, Chaos and War, and Crouching Dragon, Hidden Tiger, Can China and India Dominate the West?

This is the third part of the series of Indian foreign policy under the Narendra Modi government. The first two can be read here and here.

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Hi, my name is Prem Shankar Jha. I am a journalist and author based in New Delhi, India. In the last decade I have become more and more concerned about where the world is heading and I am curious to explore interactive formats with you in order to share views and concerns. Please do not hesitate to be in touch.

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