Prem Shankar Jha

With 78 of the largest companies in the country are facing dissolution under the Indian Bankruptcy Code, India’s economy is heading for a meltdown.

 The 'Indian Flu', or Why the Crash of the Economy Is Imminent

Fitch Ratings has raised its estimate of India’s expected growth rate in 2018-9 to 7.8%. For anyone who has the least knowledge of business conditions in India today, this can only be a sick joke. For India’s economy is heading for a meltdown – 78 of the largest companies in the country are facing dissolution under the Indian Bankruptcy Code. Of them, 20 have already been declared insolvent and sent to the National Company Law Tribunal for dissolution.

Another 30 companies, all in the power sector, are also facing the guillotine because the Allahabad high court has denied them more time to sort out their woes. The debt of these companies alone amounts to Rs 140,000 crore. Among them are three giant power plants, the 4,000 MW Coastal Gujarat Power of Tatas, Adani power, Mundra and Essar Power. They are bankrupt because they had the temerity to base their plants and have been denied the right to set tariffs that will cover the higher cost of imported coal, by the Supreme Court of India.

Yet another 92 companies are on the chopping block because they are more than 180 days behind on their loan repayments. And as if that were not enough bad news, loan defaults by small companies have also doubled in the past year, signalling an imminent crisis in that sector as well.

The sickness has spread to the private financial sector. Infrastructure Leasing and Financial Services (IL&FS), a financial giant, has just defaulted on its interest payments and sent the stock market into a tailspin. Foreign investors have been leaving the Indian money market in droves: the rupee plunged to 71.7 to the dollar on September 20, against 65 on March 31, less than six months earlier. The RBI has halted the slide by raising the repo rate by a full half percent.

But how long will its finger keep the dyke from bursting?

Who, or what, is responsible? 

In a note he submitted to the Estimates Committee of parliament earlier this month, former RBI governor Raghuram Rajan has identified two causes: an “irrational exuberance from 1994 till 1996” generated in promoters (of new projects) by the prolonged spell of rapid economic growth that began in 2003, and the government’s failure to live up to its commitments to the investors.

“A large number of bad loans,” he points out, “were originated in the period 2006-2008 when economic growth was strong, and previous infrastructure projects such as power plants had been completed on time and within budget. It is at such times that banks (and, needless to say, promoters) make mistakes”.

A woman walks past the Reserve Bank of India (RBI) head office in Mumbai, India, December 6, 2017.
Photo taken December 6, 2017. Credit: Reuters//Shailesh Andrade/File Photo

Their chief mistake was to “extrapolate past growth and performance to the future” and accept projects with very little equity capital, that relied almost entirely upon loans. When the upswing ended with the onset of global recession in 2008 and demand slackened, many projects became unviable.

Fraud, in the shape of inflated capital costs, over-invoiced import bills and unacceptably low promoters’ capital has played a part, he wrote, but it is only a small one. Rajan placed the remainder of the blame upon “governance problems” – a euphemism for the Central and state governments’ failure to provide promised inputs, such as land free of encumbrances, coal, power, water, and transport connections. Unable to generate revenues, the investors ate into their equity capital to meet the mounting burden of interest payments, till there was none left. Then they walked away from them. This is the reason why India is saddled with up to 1,160,000 crores of stalled, “zombie “ projects and Rs 950,000 crore of largely irrecoverable debt.

Rajan’s analysis is cogent, but incomplete. India has never been free of “governance problems”. There was a spell of “irrational exuberance from 1994 till 1996, followed by a steep slump in 1997 that lasted till 2002. But there was no pile-up of abandoned projects and irrecoverable debt then.

His ascription of the current decline to the impact of global recession is also suspect. For the recession began at the end of 2008, but India’s slide into industrial stagnation and insolvency began three years later in 2011. In between, it recorded two years of the highest industrial and GDP growth that the country has known. Why this delay? The answer is the crippling interest rates that the Reserve Bank imposed on the economy in 2010-11 and is persisting with, in the face of catastrophe, today.

A simple calculation is all that is needed to show what high interest rates do to infrastructure investment: If the promoters of power and highway projects, for instance, borrow money at 5% a year their capital cost, if not repaid, will doubled in 14 years. At 10% it will double in seven years. At 12% — the rate that even blue-chip companies were paying until 2015 – doubling takes place in 5.5 years.

Since the same high rates will simultaneously kill the demand for housing and make car and refrigerator loans unaffordable, investors will be hit from both sides. In addition to this the government reneges on its promises to provide the infrastructure needed for production, such as coal, power, water and transport, the only option left open to them will be to cut their losses and walk away. Rajan does not have a single word to say about this, because he is one of the high priests of the high interest rate regime that has bankrupted the country.

The evidence that this is indeed the cause of both the crisis in industry and in banking, comes from the pattern of bankruptcies. All but a few of the companies that are on the chopping block had dared to invest in infrastructure projects. The reason they had done so was that the public sector, which used to invest in infrastructure in the past, was no longer doing it. Public sector investment had been even more prone to delays because of the government’s failure to meet its commitments, but there were no stalled projects because it had the dual advantage of being loaned money by the banks at paltry rates of interest, and never having to fear bankruptcy.

Workers hold iron rods at the construction site of a bridge on the river Tawi in Jammu. Credit: Reuters

To justify their suicidal commitment to price stability, three RBI governors in succession – Y.V. Reddy, D. Subbarao and Raghuram Rajan – have argued that price stability will automatically lead to growth. They have been buttressed by a much touted finding of IMF and other neo-classical economists that, contrary to the previously unquestioned belief, high rates of inflation do not automatically raise the rate of economic growth, but actually lower it.

“Inflation targeting” was born out of his flaky belief. The RBI made this its Bible despite the fact that none of these studies had been able to establish a causal link from high inflation to low growth. And it did so in the face of compelling theoretical and empirical evidence that the causal chain runs in the opposite direction, i.e from economic growth to inflation.

Some inflation has to accompany industrialisation because it requires the diversion of a part of current investment from producing consumer goods to capital goods. Every government of a rapidly industrialising country has had to face this problem and has resorted to price and distribution controls, such as rationing, fair price shops and food coupons. South Korea had an average inflation rate of 21% during the three decades in which it became an industrial powerhouse, and China has become one only with the help of stringent price controls on essentials, and negative real rates of interest on bank loans. In India, by allowing the RBI to make price stability the sole goal of policy the elected government sacrificed growth at the altar of stability.

What has made the RBI impose this suicidal policy on the country, and why have two governments capitulated? The first reason, the suicidal adoption of “inflation targeting” by the RBI without realising that the rich nations have entirely different goals for adopting it than the poor, has been described at length in these columns on an earlier occasion. 

But the second, more pressing, reason is the imperative need to keep not prices, but the exchange rate stable. This has gained in importance with every year of high interest rates, because these have forced investors to borrow abroad, where loans have been available at rates as low as one to three percent, to keep their interest burden down.

Between 2008 and March 2015 around 300 of India’s largest companies borrowed Rs 4.5 lakh crores ($680 billion) abroad, mostly with maturity periods ranging from 3 to 20 years. Between March 2014 and March 2015, after Modi’s victory became certain, borrowings increased by $ 181.9 billion. This raised India’s outstanding external debt by 38% to $580 billion.

The euphoria was so intense that a very large part of the new debt was not hedged against the risk of a fall in the value of the rupee. As a result, in 2015, 59% of the $580 billion was vulnerable to devaluation.

For the borrowers, maintaining the exchange rate regardless of side effects therefore became a matter of life and death. The real, unspoken, goal of ‘Inflation targeting’ is to maintain not price but exchange rate stability at any cost. This quest has not only killed the real economy but created an imbalance between India’s foreign exchange debt and its reserves that has brought international hedge funds into the Indian money market, circling like wolves scenting a killing. What India is experiencing, therefore, is a mild version of the “Asian Financial ‘flu” that began in Thailand and spread to the whole of Southeast Asia in 1997 and 1998.

Unlike the Bank of Thailand in 1997, the RBI has had the sense to allow the rupee to depreciate in response the demand for dollars in recent weeks. But every few points drop in its value is increasing the risk of insolvency for the companies that have borrowed abroad. 

How to stem the collapse

The only way to stem a further collapse is to lower the interest rate on long and medium term loans drastically to 4% or less. This will allow the embattled infrastructure and heavy industries to refinance their loans and drastically reduce their debt burden. Since the lower rates will also revive the housing, real estate and consumer durables industries, these companies will have a far better chance of repaying their re-structured loans than they have had in the past seven years.

Why 4%? The short answer is that in no country in the 19th century did companies building infrastructure face real interest rates of more than one or two per cent. The US government provided much of the capital that American companies sank into 300,000 kms of railroads between 1870 and 1891 free of cost in the form of land and timber felling rights that they could sell in the market. In the 20th century, South Korea and China achieved their breakthroughs by raising capital at negative real rates of interest, in effect taxation of peoples’ savings. 

There is some risk that a sharp reduction of interest rates will cause an outflow of short term foreign investment . But this will get reversed when foreign portfolio investors see a sustained rise in share prices. More importantly, the availability of cheap capital that is free of exchange rate risk will end the long-term borrowing spree abroad by Indian investors that has precipitated the present crisis. The resulting reduction of demand for dollars will ease the pressure on the rupee.

But time is of the essence, for every day that the rupee continues to depreciate increases the repayment obligations of companies loaded with foreign debt and weakens their capacity to respond positively to measures designed to revive economic growth. One more attempt to avoid domestic collapse by propping up interest rates will bring on the foreign exchange crisis that the government is mistakenly trying to avert through monetary policy alone.

https://thewire.in/economy/the-indian-flu-or-why-the-crash-of-the-economy-is-imminent

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In transferring the Kathua trial out of Jammu and Kashmir, the apex court has conceded that communal polarisation has advanced so far in the state that a fair trial is no longer possible there.

The Supreme Court Robbed J&K of the Chance to Prove its Secularism

Supreme Court of India in New Delhi. Credit: PTI/Atul Yadav

If the Supreme Court’s dismissal of the writ petitions requesting an independent investigation into Judge Loya’s death was a mistake, its decision to move the trial of the eight persons accused of raping and murdering an eight-year-old in Kathua out of the state of Jammu and Kashmir to Pathankot – although well-intentioned – is also a mistake.

The move is well-intentioned, for its goal is to ensure a fair trial. Both, the victim’s father and the relatives of the accused, had asked for the trial venue to be shifted out of the state. But the fact that they had done so for diametrically opposed reasons should have made the apex court dig in its heels and insist that the state’s judiciary be first given the opportunity to rise above these contending pressures and give a fair and impartial judgement.

There were several things the judges could have done to ensure a fair trial. They could have given all the directives that they gave to the district court in Pathankot – that the trial should be held in camera; that it should be fast-tracked to avoid delays in adjudication; that a special public prosecutor should be appointed to conduct the trial and that full security should be provided to the families, witnesses and lawyers involved – to the trial court in Jammu and Kashmir. They could have gone a step further and asked the J&K high court to take up the case directly and thus minimise the possibility of quirky verdicts and subsequent appeals that will delay the final sentencing till it loses its moral force.

They could also have insisted that the bench include high court judges from both the Jammu and Kashmir divisions of the high court. And they could have monitored the trial on a day-to-day basis to ensure its fairness. But they took the easier route of shifting the case out of Jammu and Kashmir altogether. In doing so, they implicitly conceded that communal polarisation has advanced so far in Jammu and Kashmir, that a fair trial is no longer possible within the state.

This assumption is based solely on an unfounded surmise. One glance at the eight-year-old’s face is sufficient to convince any normal viewer that this was an unspeakable and depraved crime, born of sadism and perverted passion, rationalised as a blow struck for Hinduism against Islam only when the police moved with unexpected speed to identify and arrest the suspected culprits.

Sanji Ram – the custodian of the temple where the minor girl had been held, drugged and raped, who is alleged to be the mastermind of the crime – trotted out this cowardly justification because he was confident that it would bring the cohorts of the Rashtriya Swayamsevak Sangh (RSS) and its shadowy offshoots storming out to defend the bastions of Hinduism and paralyse the law and order machinery of the state, while Mr Modi and Amit Shah made tut-tutting noises and looked the other way.

And just look how close Sanji Ram came to success. Two policemen allegedly conspired actively in their attempt to cover up the crime; two BJP ministers addressed crowds demanding the release of Ram and the other accused and a gang of local lawyers stormed the courthouse in an attempt to block their arraignment, just as their peers had stormed the Patiala House court in Delhi three years ago, to beat up Kanhaiya Kumar and the Jawaharlal Nehru University professors who had come to the court to give him moral support.

Ram failed because the crime had not been committed in Unnao or Una or Bishara or Jaipur, or any other state which is inflicted with a BJP government. It was committed in Jammu and Kashmir, which is a Muslim-majority state with a Muslim-majority party in power, a Muslim chief minister and a Muslim majority in the police.

New Delhi: People display placards as they take part in ‘Not In My Name’ protest against the
recent incidents of rapes, at Parliament Street in New Delhi. Credit: PTI Photo by Ravi Choudhary

 

“Oh, but isn’t that exactly why the lawyers of the accused asked for the trial to be shifted out of the state?” Yes, that was their ploy, and it succeeded because none of the learned judges had any first-hand experience of the unique, syncretic, religious tradition of Kashmir Valley that has survived three decades of unrelenting, despotic, military rule, the ethnic cleansing of Kashmiri Pandits in the 1990s and the rise of militant Islam among the youth in recent years in the Valley.

This tradition, which is hard-wired into the genes of the Kashmiri Muslims, asserted itself when militants of the Lashkar-e-Taiba shot dead Lieutenant Umer Fayaz in cold blood in Shopian last year. The killing was not only condemned by the Kashmiris, but the local people even helped the army to identify the killers.

It surfaced once again a few days ago in the unanimous condemnation of the killing by stone pelters of a tourist from Chennai. It has surfaced a third time in the demand for a ceasefire during Ramzan and the Amarnath yatra.

What is far more telling is the absence of attacks on yatra pilgrims, despite five to six lakhs of them flooding the Valley every year. Sceptics may say that this is only because the pilgrims bring money to Kashmir, but the way in which Kashmiris have gone out of their way, year after year, to help pilgrims in trouble – whether as a result of a freak storm in the mountains, a bus falling into a ravine, or a sudden lockdown of the Valley such as the one that followed the death of Burhan Wani – belies this cosy dismissal. In fact, the sanctity of the Amarnath yatra empahasises the umbilical connection that Kashmir has with the rest of India.

At Kathua, the suspected culprits were caught so swiftly not because the key members of the government and the police were Muslim, but because they were Kashmiris. The Gujjar-Bakarwals are mostly Sunnis, but not of the Sufi-Hanafi-Reshi variants found in the Valley. They do not even speak Kashmiri. So to claim that the People’s Democratic Party and the Kashmir police acted swiftly only because they were ‘Muslims’ is from the reality.

By the same token, it would be a grotesque caricature of the truth to believe that all the Hindus in Jammu have been communalised by the incessant propaganda of the RSS. One has only to experience the stiff opposition to any suggestion that Jammu and Kashmir should be separated, to grasp that an overwhelming majority of Jammu prefers to remain a part of J&K state.

The unassailable truth is that Jammu and Kashmir is probably the only truly pluralist state in the country where the administration has not been poisoned by the hate-filled propaganda of the RSS. It should, therefore, have been given the chance to prove the secular credentials through the fairness of its judicial process. The Supreme Court did not really have the right to deny that opportunity to the state.

recent incidents of rapes, at Parliament Street in New Delhi. Credit: PTI Photo by Ravi Choudhary

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Kejriwal’s decision marks a tactical withdrawal from a field of battle in which he could not win. But the dismay provoked by his announcement shows that the disempowered millions have seen it as a defeat.

After three years of relentless effort, India’s democracy has finally succeeded in breaking Arvind Kejriwal’s back.

Last week, the Aam Aadmi Party leader apologised to former Punjab minister Bikram Singh Majithia for having called him the state’s drug lord. He followed this with apologies to the son of former Congress minister Kapil Sibal, and BJP minister Nitin Gadkari. With each apology, his stock among the ordinary people has sunk lower. And unfortunately, he has several more apologies to go.

Kejriwal’s detractors are openly jubilant. And they are not confined to the BJP, but are spread across all party lines. For despite the rapidly increasing polarisation between the BJP and the opposition, all seem to be in complete accord that Kejriwal and the AAP are upstarts in politics and must be destroyed.

Relentless targeting

Narendra Modi’s onslaught on AAP is well documented. It began in April 2015 with his pliant lieutenant governor, Najeeb Jung’s physical seizure of the offices of Delhi’s Anti-Corruption Bureau, and the ejection of police officers serving in it. The move was designed to pre-empt the investigation of 70 cases of corruption and extortion in the Delhi administration, nine-tenths of which involved policemen and officials of the three municipal corporations.

In the months that followed, armed with a notification issued by his own home ministry, and a judgment given by a one-judge bench of the Delhi high court that despite article 295(a) of the constitution, Delhi state was no different from the Andamans, the LG rejected bill after bill passed by the Vidhan Sabha. He took away the chief minister’s right to choose his own officers; transferred those who worked closely with him, or carried out their duties diligently without even warning, let alone consulting, him; got the CBI to ‘bring in for questioning’ no fewer than 150 junior officials and left them in no doubt that their future depended upon their diligence in reporting all the plans and decisions of their ministers to the Central home ministry.

When this cut the government off from feedback on the implementation of its policies and decisions – and forced Kejriwal to delegate the task of information gathering to his MLAs by appointing them as unpaid parliamentary secretaries to his ministers – the Election Commission, headed by a Modi appointee, suddenly found them guilty of holding offices of profit and disqualified them.

Kejriwal took all this without flinching. He refused to be provoked by this flagrant abuse of law and the constitution into intemperate responses that would give his opponents the opportunity to depict him as an iconoclast who did not know how to govern. He held his party and government together against Modi’s relentless attempts to break his government by splitting the party. And he showed the country that the people of Delhi were standing solidly behind him. When a lone defector from his party contested the bye -election that followed on a BJP ticket, he lost the seat he had won by 24,000 votes as a member of AAP, by 22,000 votes. Last week, the Delhi high court struck down the EC’s order disqualifying AAP’s MLAs.

Why BJP feels threatened by AAP

Modi’s sustained assault on Kejriwal and the AAP shows that the Sangh parivar has taken the party’s challenge seriously. For as a movement built upon ideology, it has been quick to recognise the threat from one that is built upon a radically different ideology – that of class conflict. The opposition could have profited from the presence of AAP but lacks the far-sighted leadership that can do so. AAP’s most unforgiving detractor has been the Congress. The Congress has never forgiven it for first defeating, and then annihilating it in two successive elections in Delhi. As a result, it has adamantly refused to have anything to do with the party, even when not doing so runs the risk of handing victory on a plate to the BJP.

Two recent interactions highlight how deep the animosity runs. When a pall of smoke from burning paddy straw descended upon Delhi from Punjab and Haryana in October, Kejriwal tried to contact Captain Amarinder Singh, the chief minister of Punjab, to set up a meeting. He received no reply. Not deterred, he telephoned several times, but met only stony silence.

That this was not simply a maharaja disdaining contact with a ‘menial’ became apparent four months later when Kejriwal tried to contact Rahul Gandhi repeatedly to cement an alliance in Gujarat. Kejriwal proposed neither an electoral alliance nor a sharing of seats. What he offered was to set up candidates in a number of constituencies to divide the BJP’s vote and allow the Congress to win. He knew that AAP did not have enough of a following in Gujarat to win any seats on its own, but it could cut into the votes of the BJP and enable the Congress to win. But the Congress did not respond. Rahul Gandhi, too, did not take Kejriwal’s calls. How costly this proved became apparent when the BJP won 18 out of its 99 seats by a margin of 5,000 or fewer votes, and 9 of them with a margin of less than 2,000.

The AAP had weathered the attacks of the Central government; it could also have weathered its political isolation. But what finally seems to have broken its back was not the political system, but the spate of defamation cases that had been lodged against Kejriwal and his lieutenants for the allegations of corruption they had hurled against political notables belonging to both the BJP and the Congress during AAP’s rise to power.

Weaponising defamation

Libel and defamation are serious issues, but there is a huge difference between allegations that are essentially political, and therefore of a non-specific nature, and those that are personal – which may destroy a human being’s family life, reputation and capacity to work and earn a livelihood.

Kejriwal and his party members had made innumerable allegations of corruption and criminality against political parties, and specific persons. But their purpose had been to highlight the corruption and criminalisation of politics, and not specifically the individuals alleged to have benefited from it. In doing this, they had voiced what has become a virtual truism.

The Association for Democratic Rights regularly publishes lists of the assets declared by candidates for political office, and of the criminal indictments standing against their names. Both in the Lok Sabha and the Vidhan Sabhas, around one third of the members and a larger proportion of the candidates, have criminal records or cases pending against them. A disturbing proportion – amounting to a majority in many state legislatures – are indicted for one of the six most serious crimes in the Indian Penal Code, i.e. murder, rape, kidnapping, arson, armed robbery and the illegal possession of arms. By the same token, the declared assets of the majority of candidates bear no relationship to their earning capability, or education. And no one has any idea how much individuals and political parties spend on elections or day-to day expenditure and how they raise this money.

Ordinary Indians do not need these statistics to understand just how completely their democratic system has disempowered them. They come face to face with this every time they go to a government office to obtain a license, a permit, an authorisation, a ration card, to collect their pension, obtain a refund on taxes, or simply collect their food ration from a fair price shop. Today none outside a thin political crust consisting of criminals and second generation politicians – princelings – stands much chance of entering politics, let alone winning a seat. Add to this a bureaucracy completely shielded from accountability to the public, and the disempowerment of ordinary Indians is complete.

This is the disempowerment that the movement against corruption that Kejriwal first joined was committed to fighting. This is what he formed the Aam Aadmi Party to fight against when he realised that petitions, demonstrations and public interest litigation would not suffice to break the nexus that had developed between corruption, crime and political power. It was inevitable, therefore, that AAP would highlight the corrupt and predatory nature of our political system. And since the mere names of many prominent politicians and their backers were already bywords for the abuse of power, that his party would use their names in its campaigns.

Our common sense tells us that if we separate the individuals who have been allegedly defamed from the systems that they have propped up and prospered under, then taking their names can be considered defamatory. But if they are part of a corrupt and criminalised political system – and a political party refers to them in order to draw the public’s attention to the extortion and corruption that has hollowed out the democratic system – then defamation of the individual cannot be considered the main purpose of taking his or her name. In doing so, therefore, AAP’s leaders may have been technically at fault, but not morally so, for their purpose was not to impugn and punish the individual but reform the political system.

American law does recognise the difference. The first amendment to its constitution and numerous Supreme Court judgments have made it exceedingly difficult to file suits alleging the latter kind of defamation. Findings of defamation are not unknown, but have been extremely rare. Unfortunately, Indian jurisprudence has gone the other way. India is one of the few democracies in the world to still retain criminal defamation as a separate offence from civil defamation. Moreover, judges routinely admit defamation cases on the flimsiest of pretexts. The federal structure of our judiciary has allowed individuals and political parties with deep pockets to harrass defendants by filing the same case in every state where a report of the allegation has been carried in the press.

Arvind Kejriwal is not facing 33 defamation cases because he defamed 33 persons, but because there are cases filed against him in 33 courts. While the defendant has to prove his or her innocence in every court, it requires conviction in only one of them to send him to jail. Fighting such multiple indictments requires endless stamina, enormous amounts of time and very deep pockets. Few defendants have all three. The plaintiffs, of course, know this. That is how they have been able to turn even the judicial system, that many consider the last pillar of democracy, into an instrument of oppression.

Kejriwal’s decision to apologise marks a tactical withdrawal from a field of battle in which he could not win. But the dismay provoked by his announcement shows that the disempowered millions have seen it as a defeat. His opponents are jubilant, but in the long run there is nothing to rejoice about, for Kejriwal’s defeat is democracy’s defeat.

The lesson that the poor have learned from this is that they cannot end their disempowerment by democratic means. From this, it is a short step to concluding that Indian democracy is itself a sham. And from there it is only a slightly longer step to violence. The Aam Aadmi party rocketed to success in Delhi because it offered an alternative to bandhs, gheraos, processions, hunger strikes and attacks on public buildings as ways of forcing the state to accede to their wishes. If it is crushed by a tacit coalition of all the political parties that form part of the criminalised elite of the country, then at least one section of the public may come believe violence remains the only alternative left open to them.

There is a lesson that the opposition needs to learn: AAP may not have the numbers, but Kejriwal has the ideological platform that the vast masses of India crave. Its appeal is to the youth and the growing professional class of the country. In this respect, Kejriwal’s personal appeal is similar to that of Bernie Saunders during the US primaries in 2016. To defeat Modi and the BJP’s brand of ‘Hindutva’, the opposition needs to gain the support of these two groups in society. Therefore, they need to work with AAP, not try relentlessly to isolate it. If they fail to do so, while large numbers of these classes may not vote for AAP in its present avatar, they may, like millions of young people in the US, choose not to vote at all.

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The attack on Anshu Prakash has given the Modi government a sword of Damocles to hang over Kejriwal’s head. Given its relentless efforts to paralyse the AAP government, there’s no telling how this opportunity will be used.

 

The alleged assault on Anshu Prakash, the chief secretary of Delhi, by some angry MLAs of the Aam Admi Party (AAP) at the home of chief minister Arvind Kejriwal on February 19, has become the latest battleground in the long drawn out war between the Narendra Modi-led BJP government that rules India and the Kejriwal-led AAP government that rules Delhi.

The conflict between the haves and have-nots

Two weeks after that sorry episode, an uneasy calm prevails. Prakash attended a cabinet meeting on the state budget on February 26, with a polite, but unnecessary reminder that there should be no repeat of what happened a week earlier. And state government officials who had earlier considered going on strike but compromised by holding a candlelight protest for five minutes every day till the government gave a written apology to the chief secretary, are carrying on their work on the basis of written instruction alone.

This situation cannot continue indefinitely. Prakash’s FIR has accused the government of a premeditated conspiracy involving the entire party, to assault and humiliate him. This has given the Modi government a sword of Damocles to hang over Kejriwal’s head. Given its relentless efforts during the past three years to paralyse, discredit and humiliate the AAP government, there is no telling when he will use it.

Were he to do so, it could become the spark that sets fire to India’s fragile democracy. For Delhi is not a run-of-the-mill state and AAP is not a run-of-the-mill party. AAP is the first political party to be born that has made the transition from appeals based on caste, creed and ethnicity, to appeals based upon class solidarity.

By the same token, while Delhi NCT is a relatively small state, it is today what most of India will become tomorrow — an urbanised, industrialised state with a large, unorganised, and therefore extremely insecure, small industry and services sector. These are the conditions in which class politics was born in 19th century Europe. AAP therefore represents not only the poor of Delhi but the have-nots of the future, industrialised, Indian state.

As Europe’s experience has shown, for democracy to survive the conflict between the haves and have-nots must be resolved through mutual respect and compromise. But in India the political and economic developments of the past three decades have made this more and more difficult. AAP’s attempt to harness class power to democratic change therefore needs to succeed. If it is crushed, change will eventually come , but it will be violent.

The crisis caused by the events of February 19 must therefore be diffused. But for that it is essential to first understand exactly what happened.

Anshu’s FIR

Prakash has claimed in his FIR that he was virtually forced to come to the chief minister’s house at midnight on February 19, to “discuss with Chief Minister & Deputy Chief Minister the issue of difficulty in release of certain TV Advertisement relating to completion of three years of current government in Delhi”, and then in effect gheraoed by 11 MLAs or unidentified persons, berated for delaying the release of the AAP government;s publicity celebrating its third year of government, shouted at, abused, threatened with wrongful confinement for the entire night and finally manhandled and beaten up without provocation by two MLAs .

He was able to get out of the room and get to his car with difficulty. Prakash concluded his charge sheet by stating: “ I request you to take action as per law as the assault was premeditated and in conspiracy of all present with intention to criminally intimidate, cause hurt with motive to deter me from discharge of my lawful duty and compel me to follow unlawful directions. None of the persons present in the room made any effort to save me”.

AAP’s version of events

If half of what Prakash has alleged is true then it would create a cast iron case for the use of article 356 of the constitution to dismiss the government. But AAP’s version of what happened that night is so completely different that it needs to be reported in full:

Kejriwal had fixed the meeting not to discuss advertisements but to discuss how to mitigate the hardship being inflicted upon 2.5 lakh families by glitches in the linking of their ration cards to their Aadhar cards. This had been made mandatory in January but, like demonetisation and the introduction of the Goods and Services Tax (GST), was badly bungled in practice.

This was not a new, much less a suddenly concocted , problem. That the linking of ration cards under the National Food Security Act to Aadhaar cards has been creating problems for workers on the margins of society had been known for some time. Sex workers in Mumbai and other cities had complained as far back as in 2016 that they were unable to buy food on their ration cards any more because the shopkeepers wanted to see their Aadhaar cards.

On March 8, last year, a month after the Modi government made the linking mandatory, the Delhi Rozi Roti Adhikar Abhiyan (DRRAA) had filed a public interest litigation in the Delhi high court against linking food rations to Aadhaar. The network, which consists of around 30 non-profit organisations working on food-related issues, had petitioned the court to strike down the notification. The court had appointed a commissioner to examine the issue on the ground.

Prakash was aware of the problem because Kejriwal had taken him around earlier to several locations where rations had been withheld. According to Kejriwal, the two had planned to meet later to discuss how to remove the roadblocks but a spate of marriages and other engagements had made finding a common free evening difficult. So Kejriwal had suggested meeting late at night after all such functions were over. The meeting called for midnight emerged out of these constraints. Contrary to reports in some papers, therefore, Prakash had not come two hours late to a meeting scheduled for 10 pm.

The meeting, however, went wrong from the very start. In all, 11 MLAs were waiting to meet the chief secretary when he arrived, and within minutes they found in Prakash a convenient lightning rod to vent their anger. Prakash, understandably, resented this and asked Kejriwal for permission to leave. Kejriwal admonished the MLAs to restrain themselves and apparently asked the chief secretary to give them five minutes, since they had come a long way to meet him. Prakash agreed but the MLAs began venting their anger on him once more. At that point Prakash told them that he was not answerable to them, but only to the Lieutenant Governor. According to someone who was present in the room, that was when the scuffle began.

The fact that Prakash was manhandled was confirmed by the medical report, which noted that he had a swelling and scratches around his head. But it could not have lasted long because Prakash was able maintain decorum and again ask Kejriwal for permission to leave the room before heading for his car. CCTV footage showed that from the moment he entered till the moment he left, he had been in the compound of the CM’s house for just over seven minutes. The longest that he could have been in the meeting room was therefore not much more than five minutes.

On leaving 6, Flagstaff Road, Prakash immediately phoned the Lieutenant Governor Anil Baijal. Despite it being well past midnight, Baijal immediately picked up the phone and asked Prakash to come to Raj Niwas straightaway. He also called the chief of police who arrived promptly. There followed an hour of discussion, after which Prakash went home without filing an FIR.

Prakash again did not register an FIR immediately the next morning, but went straight to the secretariat, where he called the heads of the various associations of Delhi civil servants to his office and related   what had happened the previous night. AAP interlocutors suspect that he did so to instigate a strike, but he may have done this only to nip the growing turmoil in the secretariat, as the news of the previous night’s events began to spread. Only then did he file his report on what had happened.

‘Political suicide’ 

Comparing the two versions of this unsavoury episode one finds only three points of complete disagreement between them. The first is on the subject that Prakash had been summoned to discuss. Here the complete absence of any reference to the ration card issue in his FIR smacks of prevarication. Had the delay in releasing advertisements commemorating the completion of AAP’s three years in power been the sole cause of the meeting Kejriwal would not have had 11 MLAs waiting to meet the chief secretary when he arrived.

The MLAs too would have had no reason to come on their own because while the delay might have affected the image of the party as a whole by denying knowledge of its achievements to the people, it could in no way harm the image of individual MPs. A discussion of advertisements alone could not therefore have generated the anger among the MLAs that led to the scuffle.

The second difference – the evasiveness of AAP spokespersons on whether the chief secretary was actually beaten or not – is easier to understand: with Prakash Jarwal and Amanatullah Khan already in jail on the charge of assaulting a government official during the discharge of his official duties, even the most oblique admission could have helped to convict them and sentence them to years in prison.

But it is the third difference – on the motive that underlay the alleged attack on the chief secretary – that is the most pregnant with meaning. Neither version denies that Prakash was, in effect , manhandled. But while the AAP version gives a clear, and easily confirmed, motive for the anger of the MLAs, for Prakash’s accusation to be credible one has to assume that the Aam Aadmi Party leaders, knowing that the Modi government has been on a never-ending hunt for an excuse to destroy it, had taken a collective decision to commit political suicide and spend a good part of their lives in jail.

This is absurd: as Kejriwal is believed to have remarked, “If I had wanted to get Anshu beaten up, would I have invited him home and got it done in my meeting room?”

This accusation of a premeditated conspiracy casts a different light on what happened after Prakash left the chief minister’s house, and raises several questions. First, why did he not register an FIR straightaway, but telephone the LG instead? Second, was it by chance that the LG was awake well past midnight, and his phone was not on the silent mode? Or was he waiting for a call from Prakash? Third, what was the need for Baijal to summon Delhi’s chief of police to this meeting at such an unearthly hour and, to do so even before Prakash had arrived and given his report? Fourth, why did Prakash not register the FIR first thing the next morning, but spend the entire morning meeting office bearers of the various Delhi state government employees associations, before submitting his FIR in the early afternoon?

There can be perfectly legitimate explanations for these actions, but none for the allegations he makes in the last para of his FIR. For unless the entire ration card story is a concoction, and Kejriwal brought 11 MLAs to his home with the intention of letting them beat Prakash up, there is no way in which his description of the assault as “premeditated and in conspiracy of all present to criminally intimidate, cause hurt with motive to deter me from discharge of my lawful duty and compel me to follow unlawful directions” can be true.

Fall like dominoes

I have not come to this conclusion lightly. I have known Anshu Prakash for 32 years from the time when he was an IAS probationer in Mussoorie, and have known him well. In these years, I have seen him hold many jobs and interact with the public on several occasions, and my respect for him has grown steadily. I therefore find it hard to believe that he drafted the final paragraph of his FIR. Its clumsy, lawyerese, English does not reflect his command of the language. And he, more than anyone else, must know that the distress caused by glitches in the Aadhar-ration card link is real, so all that the AAP government has to do to blow up the accusation of a criminal conspiracy is prove that there are indeed 2.5 lakh, or a similar number, of ration card holders who have not been able to access their subsidised rations because of the Aadhar link.

Since I have not been able to speak to Prakash since this crisis erupted, I have not been able to get his side of the story. But I do not doubt for a moment that he was roughed up and humiliated on the night of February 19. But I also suspect that he was required by his seniors to insert charges that could be used to justify the dismissal of a government elected with the largest vote share in the history of Indian democracy.

If this surmise is correct, then Prakash is in the same unenviable position in which every state and all-India services officer who has served the Kejriwal government has found himself or herself since it came to power. For, in a manner strongly reminiscent of the way he ruled Gujarat in the aftermath of the riots of 2002, Modi has abruptly transferred or thrown trumped up accusations of corruption against every senior officer who has served the state government sincerely. Scores of lower level officers have also been summoned by the CBI, made to wait all day long before being called in, and then warned never to forget that their first loyalty must be to the central government.

To understand what can happen, it is not necessary to understand how it will happen. When Gavrilo Princip assassinated Archduke Franz Ferdinand and his wife Sophie in June 1914, he triggered a war that consumed 19 million lives in four years, destroyed both the German and Russian monarchies, and cleared the way for the rise of Adolf Hitler.

When Solomon Bandaranaike offered to ban the use of Tamil as a second language to win an election in 1956, he lit a match that sputtered for 27 years before bursting into flame and nearly consuming Sri Lanka. And when Mohamed Bouazizi, a roadside vendor in Tunis set himself on fire in January 2011, he had no intention of starting a conflagration in the Arab world that shows no sign ending.

India may not be the next country where something like this will happen, but it is already on the list.

 

https://thewire.in/politics/anshu-prakash-aap-assault-spark-fire-indian-democracy

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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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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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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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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?

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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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The media is rife with speculation about why the government refused to extend Raghuram Rajan’s tenure as Reserve Bank of India (RBI) governor. The ideas are endless: the Rashtriya Swayamsevak Sangh was unhappy with his remarks on intolerance; his policies were, to quote Subramanian Swamy, “anti-national in intent”; he orchestrated a huge campaign in the media to make the government keep him on; P. Chidambaram, and therefore, one presumes, the Congress, was still backing him. Therefore, Rajan deserved the same fate, of summary ejection, that 360 consultants to the United Progressive Alliance government suffered when the Modi government came to power.

Alongside these ideas are predictions of the harm that the Indian economy is likely to suffer from Rajan’s expulsion: foreign investment will stream out of the country because his removal will signal a return to autarchy, and therefore unpredictability, in policy-making; the rupee will depreciate dramatically and inflation will re-surface. The timing of the government’s move, only days before Britain’s Brexit referendum, has also faced criticism, because it will magnify all these effects, should Britain decide to leave the EU.

Buried in all the speculation is the possibility that the government sacked Rajan because of his stubborn refusal to lower the interest rates. But even that is being seen as a political move designed to assuage the wrath of powerful industrial and construction lobbies in the country, and not as a hugely belated response to a decade-long dear-money policy that has each year destroyed industrial growth, bankrupted the entrepreneurial class and blighted the future of six to seven million youth who would otherwise have found jobs.

The pressing priority

The truth is that Rajan should have gone earlier. He had to go because he had continued to oppose rate cuts for two years even after his own, invented justification for keeping them up – namely, the persistence of inflation – was no longer relevant. Today, the only thing that responsible media should be discussing is how to minimise the immediate fallout his departure will cause. But that, unfortunately, is the last thing on everyone’s lists.

There is no doubt that the timing of Rajan’s departure is unfortunate, but whatever turbulence follows Brexit (if it happens) will be short-lived. The main threat to the economy will stem from the uncertainty that the change of so key an official will create, especially among foreign portfolio investors. The longer the government keeps the position vacant, the worse the situation will become. Should some of the investors pull their money out, the resulting fall in share prices will trigger the herd mentality and cause further, much larger, withdrawals.

So, no matter who did what, the government’s absolute first duty is to announce a successor without any further delay. That successor has to meet several requirements:

Firstly, their professional qualifications must be stellar and beyond question. Only then will the international financial community be convinced that the government is only changing the governor and not undermining the autonomy of the RBI.

Then, they must be a first-class economist who can explain and justify his or her decision to lower interest rates with sound economic logic. This must not be seen as another victory of crony capitalism.

Finally, the transition from the regime of Rajan to that of his successor – the time they take to become familiar with subordinates at the RBI and the members of its advisory committees, as well as learn the technicalities of the bank’s working – should be as short as possible.

The best candidate

There are any number of excellent Indian economists who meet the first two qualifications. And any one of the RBI’s present deputy governors meets the third. But finding a successor who meets both the first two and the third requirements will not be easy.

There is, however, one person already associated with the Modi government who meets all three needs to the fullest extent. That person is Bimal Jalan.

Jalan is an economist by profession and has numerous books to his credit. He is perhaps the only ‘outsider’ (to the Indian Administrative Service) who has risen to become the finance secretary, an achievement that speaks volumes for his ability and tact. He was the governor of the RBI for six years, from 1997 to 2003, and is therefore well-known among, and held in high regard by, the international financial community. Most of all, it was he who, while working closely with the then finance minister Yashwant Sinha, steered the Indian state through the aid cut-off that followed the May 1998 nuclear weapons tests, and then out of the recession of 1997-2002, onto the 8 to 9% growth path, by halving bank lending rates between 2000 and 2003.

To do the former, Jalan had to attract Foreign Direct Investment from Indians living abroad, and he did so by raising interest rates at the beginning of 1999. This killed an incipient industrial recovery that had begun under the spur of huge harvests in 1997 and the sudden jump in disposable income caused by the Fifth Pay Commission awards a year later. But Jalan began to lower interest rates less than two years later as NRI money poured into the Millennium and India Resurgent Bonds that the government floated in international markets to offset the sudden cut-off of foreign aid.

By the beginning of 2003, lending rates had halved, but the share markets were reviving as promoters turned to them to raise risk-free capital for investment. It took only one spark to ignite the sharpest stock market boom India has experienced to date, and this was provided in May, 2003, by Maruti Udyog’s decision to sell 20% of its shares to the public. This sale was oversubscribed 13 times, and the gold rush began. It did not peter out till eight years later, in 2011, and then, as in 1995, it was the morbid fear of inflation in a Congress government that brought it to its end.

Rajan was a stranger to those events, as he was in the US as they unfolded. Jalan, however, was completely a part of the whole experience.

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