Prem Shankar Jha

Gasification of rice straws can solve the problem of air pollution, and with it many others, if only the government was willing to employ it.

Delhi’s air pollution has reached a level of severity where alarm has turned into panic. Every morning its citizens wake up with dread in their hearts, to a dark grey sky. These are not clouds: take a flight to Mumbai, or anywhere for that matter, and at 3,000 feet you will burst forth into a crystal blue sky. Below, on the ground, visibility is down to between 100 and 200 metres; the air spells of smoke. Children waiting for school buses, or the hapless ones who are forced to live in slums cough and sneeze in the frigid, poisonous air. Every day for the past nearly two weeks, the air quality index has been between 400 and 478 – over eight times the permissible maximum. By contrast it is currently 16 at Ooty, Wellington and Coonoor in the Nilgiris and not much higher in Shimla and Kasauli. But only the rich and the retired have the privilege of escaping to these havens in the mountains or to others by the sea.

The threat pollution poses to people is increasing. But contrary to what some environmentalists would have us believe, it is an unequally distributed threat. If you are in your teens or even your 60s, healthy, active, do manual work or play sports, and don’t smoke, the impact is minimal. It is your infants, your children below five or six and your aged parents – who are frail, may be prone to asthma and cannot stop coughing – who are face imminent risk of death. Both the very young and the elderly cannot be treated with antibiotics, or for very long, without causing complications.

So the smog prevents their lungs from healing and turns these into factories for growth of bacteria. Pollution therefore kills mercilessly at both ends of the spectrum of life. As infant mortality dwindles and the aged live longer, the threat from pollution becomes more severe.

Till as recently as a year ago, environmentalists were blaming urbanisation, incessant construction, the rising number of cars and two wheelers on the road, lengthening traffic jams, Diwali firecrackers and the burning of  garbage in the open air for most of the pollutants that now regularly hang in the Delhi air. They were only partly right, for the annual pall of smog arrived in Delhi last year a week before Diwali. This year, Diwali came a month early, on October 19, and thanks to the Supreme Court ban, there were relatively fewer firecrackers let off in the capital. But still, the pall of smog came on October 30, almost exactly the same day as last year.

Residents of Delhi think this smog is their special problem, and the scores of environment watchers who have raised Delhi to the top of their lists encourage them to do so. But this smog is now a North India problem. The trail of cancelled flights and severely delayed trains, and the multiple car crashes on the Yamuna Expressway to Agra last week showed that visibility was equally poor hundreds of kilometres from Delhi. In fact, a blue pall of smoke hangs across the whole of northern India every year from late October till the winter rains finally come, if they come. Even Bharatpur, 200 km south of Delhi, is no longer spared.

Problem deeper than stubble burning

This new and deadly threat has been created by the burning of millions upon millions of tonnes of rice straw in the fields of Punjab, Haryana and western Uttar Pradesh after the crop has been harvested. It is a product of the Green Revolution – and is, therefore, the price we have been paying for the food security that it has given to the country. So it is hardly surprising that no one, either in Delhi or in Punjab, has the faintest idea of what to do about it.

Chief minister Arvind Kejriwal has met Haryana chief minister Manohar Lal Khattar and asked him to enforce, and if necessary raise, the fines on stubble burning as an immediate measure. He has also been trying to meet Punjab chief minister Amrinder Singh for days, but to no avail. But even if both Punjab and Haryana agree to penalise stubble burning more harshly, it will have little or no impact on stubble burning. For if farmers cannot remove the stubble from their fields very soon after harvesting their paddy, they will not be able to sow the wheat crop. The dilemma they face was highlighted by the Aam Aadmi Party’s own party chief in Punjab, Sukhpal Singh Khaira, when he defied the state government’s order and ceremonially burnt crop stubble on October 15.

There is an impression in Delhi that the problem is only the stubble that is left after the crop is harvested. Based on this, there are proposals to deploy rotary root stubble digging machines to plough it back into the soil and enrich it. But stubble is the lesser part of the problem. The greater part is the rice straw and husk that gets left behind after threshing and milling. Punjab harvested a colossal 18 million tonnes of paddy in 2016, but with it came 34 million tonnes of straw and husk. Since rice straw is no longer fed to cattle in Punjab and Haryana, it too is being burned. In fact, what Khaira is seen setting fire to in photos of the event published in Punjab newspapers is mostly rice straw.

Possible solution

The only way to avoid burning straw and stubble is to find another use for the crop residue. Fortunately, there is a way. This is to not burn the straw and stubble but gasify it in a two-stage process that yields a fuel gas that can meet cooking, heating and power generation needs in the village in the first stage, and any type of transport fuel – diesel, aviation turbine fuel, methanol or CNG – in the second.

Gasification is the incomplete burning of biomass or coal in a limited supply of air or oxygen. While full combustion yields only large amounts of carbon dioxide, gasification yields a substantial   amount of hydrogen, carbon monoxide and methane.

Two other chemical processes, called the Fischer-Tropsch synthesis and the water-gas shift reaction, which have been in use for more than a hundred years in the petro-chemicals industry, can  convert this mixture into any type of transport fuel one desires, from CNG to diesel, methanol and aviation jet fuel. They can also produce dimethyl ether, which is a heavy condensate gas that can effortlessly replace LPG as a cooking gas.

The technology chain described above has been perfected to the point where it is now possible to convert any form of biomass – from urban solid waste to crop residues – into transport fuels. In 2011, British Airways signed an 11 year purchase agreement with a US-based company, Solena fuels, to set up a plant outside London that would convert 575,000 tonnes of London’s municipal solid waste into aviation turbine fuel every year.

Three other airlines signed memoranda of agreement with the company to do the same. But those, and several other projects that were in the pipeline in Europe, went into cold storage in 2014 when oil prices crashed for the third time since 1985, making future fuel prices uncertain. However, earlier this year, a Texas-based company S.G Preston signed an agreement to provide Quantas with 800 million gallons of Aviation turbine fuel a year, obtained from biomass.

Benefits beyond combatting pollution

In India, the large-scale induction of this technology can not only end the annual invasion of smog, but greatly increase farm incomes and save the country valuable foreign exchange. It can therefore solve a multiplicity of problems: give urban solid waste a value and get it off the streets; stop the burning of straw and stubble; and give the farmers a valuable ‘lean’ gas to use for cooking and generating electricity locally and provide them with biochar, a solid, carbon-rich residue that they can briquette and sell to large scale modern bio-fuel plants of the kind that are being planned for Europe and the US.

Biochar is 70-80% pure carbon, and contains no sulphur, so it is similar to superior varieties of imported coal, and will fetch a similar price. At present, India is importing coking coal for blast furnaces at Rs 22,300 per tonne, if farmers can get half that price for their biochar from bio-fuels plants, they will add Rs 20,000 to the Rs 70,000 that they gross from every hectare of land under paddy.

Finally, it will save foreign exchange. Punjab, Haryana and western UP produce close 45 million tonnes of rice straw and stubble. This is sufficient to produce between 15 and 20 million tonnes of transport fuels. The reduced dependence upon oil imports will convert India’s 1.5% balance of payments deficit into a comfortable surplus.

These are not over-the-horizon technologies of the kind that are continuously being proposed by high-tech global corporates abroad to their own and developing country governments, but tried and tested ones, with some of which Indian industry is already familiar, that need only a stable transport fuel pricing environment to take off. India could, for just this once, be a pioneer in providing an enabling price and marketing environment instead of the eternal laggard that it is today.

Prem Shankar Jha is a senior journalist and author of several books. His most recent book, on combating climate change, titled Dawn of the Solar Age: An End to Global Warming and to Fear, is being released by Sage Publications next month. He was a member of the Energy Panel of the World Commission on Environment and Development, 1985-88.

 https://thewire.in/197679/delhi-smog-air-pollution-paddy-burning/
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Demonetisation has resulted in, at best, marginal improvements in India’s tax compliance and digitisation. But at what cost?

Ever since Prime Minister Narendra Modi’s surprise announcement of a year ago, demonetisation has been the single most hotly-debated issue in India. Modi and members of his government have given a series of justifications for the sudden move, shifting ground from one to the next as each in turn has lost its emotional appeal. One year after the move it is possible to make a dispassionate appraisal of its impact.

Modi’s first justification was that it would destroy large hoards of black money. In a way that he never explained, this would enable him to put thousands of rupees into the bank accounts of the poor. In fact, very little black money was destroyed: only Rs 16,800 crore in old money did not get converted into new. Needless to say, no money has come into any bank accounts.

His second justification was that it would cut off the funds for terrorists. This too has not had any perceptible impact on ‘terrorism’ in Kashmir, but even if had, the success would have lasted just till Pakistan’s ISI was able to forge the new bank notes. His third justification, that it would root out black money by forcing shell companies indulging in benami transactions out into the open has some validity, for the government has deregistered more than 217,000 companies and disqualified 319,000 directors.

But while this drastic sweep is welcome, it is difficult to see how it relates to demonetisation. This cleansing operation has been done by the Ministry of Corporate Affairs, and it is difficult to see why the weeding out of companies that had filed no returns or annual accounts could not have done it without the aid of demonetisation.

Modi’s final assertion, that demonetisation has been be a giant step towards a cashless economy, is equally open to question, for while both the number of taxpayers and the tax revenues have risen, neither has departed significantly from the long-term trend in India. The single most unambiguous indicator of a shift towards a digital economy would have been a sharp increase in the number of outstanding credit cards. But after a small surge from 829 million debit and credit cards in October 2016 to 886 million in March 2017, this has sunk back to 853 million in September 2017, an increase of only 3.1% over 11 months.

All in all, therefore, demonetisation has resulted in, at best, marginal improvements in tax compliance and digitisation, but at what cost? It is when we draw up the debit side of the balance sheet that the tally turns heavily negative.

First, whether well intended or not, demonetisation was badly bungled and therefore imposed not just severe but also unnecessary hardships upon the poor of the country. If the intention was to destroy black money hoards, then demonetising the Rs 1000 notes could have been justified, but demonetising the Rs 500 was little short of criminal. For in value terms by 2016, the Rs 500 was the most heavily-used currency note in the country, accounting for 45% or Rs 7,89,000 crore worth of the total currency while Rs 1000 notes made up Rs 6,32,000 crore. A better step would have been to issue Rs 5,000 and Rs 10,000 notes to which black money held as cash would have come flocking, and then withdraw them from circulation altogether.

But Modi was in a hurry; the crucial Uttar Pradesh elections were only three months away and he needed to do something dramatic to make sure the BJP would win. So he personally jumped the gun. There is an abundance of evidence that the central bank machinery, including governor Urijit Patel, did not approve of it. In the fortnight after demonetisation, he refused to say a single word in support, leaving the finance ministry’s economic affairs secretary to defend it day after day before the media.

As if this was not shortsighted enough, not only had the new notes that would replace the old not been printed, but the government did not remember that neither the new Rs 500 nor the Rs 2,000 note was of the same size as the old ones. So they could not be dispensed until all the million-plus ATMs had been re-calibrated. This prolonged the shortage of cash in the economy: as late as April 28, 2017, only 90% of the currency withdrawn had been replaced. By this time, a hundred people had died while trying to get their own money out of the banks.

What did demonetisation actually achieve? The simple answer is that by sharply reducing the money supply in the economy, it caused a huge immediate reduction in the generation of the Gross National Product (GNP). By how much can be understood by examining it through the lens of Fisher’s Quantity Theory of Money? The fundamental postulate of this theory is summed up in the equation MV = PT, where M is the supply of money; V is its velocity of circulation or the number of times money changes hands during a year; P is the average price level of all commodities in the market and T is the total number of sale transactions during a year.

After eliminating double counting (which occurs, for instance, when an intermediate product such as steel is first sold as steel and then re-sold as part of a car), PT is the GNP of a country. So when M nosedives, the GNP has to go down by the same proportion. By how much it will actually go down depends upon the proportion of total transactions that are carried out in cash, as against through bank transfers. In India, while 90% of the volume of transactions is estimated to be in cash, since most big ticket and bulk sales outside agriculture take place through the banks, the value of transaction in cash is in the neighbourhood of 68%. The demonetisation of 86% of India’s cash should have reduced PT, and therefore the GNP, by 58%.

How long this impact lasted would depend upon how rapidly the demonetised notes are replaced. Full replacement did not take place till some time in May, so assuming that the average shortage of cash tapered off evenly to zero by early May, the average reduction in GDP should therefore have been around 29% over these six months and half of that – 14% – for the full year. So how has the government been able to claim that the only impact has been a fall in growth of GDP from 7.3% in July till September 2016 to 5.7% in April to June this year?

A part of the reason is that employers and workers in the unorganised sector resorted to desperate stratagems to tide over the shortage of cash. Till December 31, the cut-off date for converting old notes into new, employers in the construction, other unorganised sectors of industry and trade, continued to pay their workers with the old currency notes leaving it them to queue at the banks to exchange it every week. Many vendors in the cities used this respite to install credit card machines or enrol in Rupay or other online payment portals. All this helped to prop up the money supply and therefore reduce the shock. By December 31, when the conversion facility was withdrawn, about half the old banknotes had been replaced.

But the second, more important reason is that the Central Statistical Office still relies on extrapolation of growth rates from the formal to the informal sector to estimate output and growth rates in a large part of the latter. Its projections in December 2016 of what GDP growth would be during the whole of the fiscal year, till March 2017, stated this explicitly. It does not, therefore, have a way of estimating the impact of a catastrophe that strikes only the informal sector.

How seriously this can distort its preliminary estimates was demonstrated by the Unit Trust of India’s crash in 2000. This was not reflected in India’s GDP figures till 16 months later because the CSO used to calculate growth in the non-banking financial Sector by extrapolating from the data for the banking sector. When the crash was factored in, the GDP growth estimates had to be reduced by 1.1%.

The full impact of the demonetisation only became apparent when the Economic Survey, Volume 2, noted that the rural India was in the grip of deflation, because while agricultural output had grown by 2.3%, its value had increased by only 0.3%. That meant that average prices had fallen by 2%.

The fall reflected the shortage of purchasing power in the rural economy and helped to complete the story of demonetisation. After the note conversion facility was withdrawn, construction and unorganized sector industry could no longer pay their workers, who were mostly migrant labour from other tates. So faced with having to choose between staying on in the cities and scrabbling for work, and going home to their villages to eke out a living on what they had saved till then, most of them chose the latter.

For weeks in January, therefore, newspapers reported that streams of migrant workers were returning to their homes. When they got back, many sought work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). This was reflected in a 30% increase in the number of applications for MGNREGA jobs. But MGNREGA gave only 100 days of work. So by the beginning of summer, that income stream too had dried up. That is when the sharp drop in their cash savings began to be reflected in a decline in their purchasing power.

While Supporters Clutch at Straws, Demonetisation Balance Sheet Is Awash With Red Ink

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The first step towards reviving political dialogue and ending the rule of the gun in Kashmir is for New Delhi to announce that it is committed to restoring full autonomy within the constitution to the entire state.

The Narendra Modi government’s dialogue with Kashmir has died even before it got a chance to be born. The fault does not lie with the leaders of the Hurriyat’s unified command, who last week rejected talks with the Centre’s interlocutor, but with the government in Delhi that speaks in many voices and does not know what it wants.

Hours after home minister Rajnath Singh announced his government’s decision to seek peace in Kashmir through a dialogue, Prime Minister Modi ruled out any discussion of restoration of full autonomy for the state within the constitution as a possible solution by accusing P. Chidambaram, who has been advocating this, of speaking the language of Pakistan.

Not to be outdone, Dineshwar Sharma, the newly-appointed interlocutor, has given a spate of interviews to the media within a week of his appointment that have virtually eliminated the space for a dialogue even before Kashmiris got a chance to decide whether they would participate in one.

There is something so hasty and ill-informed about Modi’s Pakistan remark that one is forced to ask whether he is really capable of taking on the delicate task of restoring durable peace in Kashmir. For autonomy within India is absolutely the last thing that Pakistan wants, or indeed has wanted since the day it was born. Pakistan wants all; repeat all, of Kashmir Valley. It has tried twice to get it by force, in 1965 and 1989, and is trying to do so again today.

Ceding Kashmir to Pakistan and keeping Jammu and Ladakh was the ‘Dixon Plan’ that Sheikh Abdullah and Jawaharlal Nehru had categorically rejected in 1947. This was also the plan with which the President Pervez Musharraf came to Delhi in July 2001. Musharraf learned a great deal from that visit and, for a brief period, Pakistan was prepared to trade a settlement that did not redraw boundaries in Kashmir, for the larger gains that would accrue from peace with India. But that moment has passed and may never come back.

Today, Modi’s unrelenting war on terrorism in Kashmir has revived Pakistan’s hope that the Valley will somehow shake itself free of India and turn to it for protection. It will, therefore, resist such a solution tooth and nail, and will kill, and kill again, as it did in the ‘90s, to prevent it. Its targets will once again be Kashmiris who are prepared to accept a solution short of breaking away from the Indian Union. So how, when he spoke of autonomy, was Chidambaram speaking the language of Pakistan?

Sharma has obviously not read the chapter in former French President Charles De Gaulle’s memoirs on the ‘virtue of silence’. But he could at least have asked himself why his two predecessors, K.C. Pant and N.N. Vohra, never spoke to the media throughout their tenures. He could also have waited till he had read theirs, and the Dilip Padgaonkar team’s, reports, not to mention those of the round table conferences of 2006, before he began to air his views. But he did no such thing. Instead, although he has tried to be non-committal in his interviews, every idea he has expressed has narrowed the space for dialogue till there is virtually none left.

For instance, his insistence on describing everyone who has picked up the gun in Kashmir as a terrorist amounts to an absolute refusal to make any distinction between terrorists and freedom fighters. But accepting this difference has been a precondition for negotiations to end insurgency all over the world, not to mention in Nagaland, Mizoram and Assam. In Kashmir, the V.P. Singh and Narasimha Rao governments fought the insurgency of the ‘90s with the intention of bringing the insurgents to the negotiating table. That is the goal that the Modi government has completely forsaken today.

Its treatment of all insurgents as terrorists has not only reversed this policy but goes against the grain of the most widely-accepted definitions of terrorism today. These are the US government’s Title 22, Chapter 38, U.S. Code no. 2656f, which defines it as “premeditated, politically motivated violence perpetrated against noncombatant targets by subnational groups or clandestine agents,” and the definition proposed by a high-level UN panel in 2004 and endorsed by UN secretary general Kofi Annan, that terrorism is “any action that is intended to cause death or serious bodily harm to civilians or non-combatants, when the purpose of such an act is to intimidate a population or government”.

Most of the attacks by armed Kashmiri youth in the past two years have been directed at the security forces and police. The few against civilians have targeted government officials and panchayat members. Unlike the last years of the 1990s insurgency, when some Kashmiri militants had taken to exploding bombs in crowded places, there has been no random killing of civilians in the past three years, let alone killings designed to intimidate the population. Nor are the insurgents in South Kashmir having to coerce villagers into giving them shelter as the insurgents, and fidayeen sent by Pakistan, had to do in the ‘90s. It is therefore difficult to categorise these attacks as acts of terrorism.

The way ahead lies in a dialogue within Kashmir

To grasp how far removed Delhi is from understanding the political reality in Kashmir, it is necessary to describe the risks that any Kashmiri leader willing to talk to Delhi has to run. First he or she has to live in constant fear of assassination. All the seven nationalist leaders who met George Fernandes in 1990 were assassinated in the following months. Mirwaiz Maulvi Farooq, the father of Mirwaiz Umar Farooq, was assassinated in May of the same year three weeks after he gave an interview to BBC in which he discussed how peace could be brought back to the Valley. Qazi Nisar, the mirwaiz of South Kashmir and a founding member of the Muslim United Front, which fought the state elections in 1987, was assassinated in 1994.

Among others who have met this fate are the brother of Hurriyat leader professor Abdul Ghani Butt, killed in 1996 to dissuade Hurriyat from even thinking about fighting the 1996 election; Hurriyat executive committee member and head of the Peoples’ Conference, Abdul Ghani Lone, shortly after he announced that his party would contest the 2002 elections; and Mirwaiz Umar’s completely non-political uncle, Mir Mushtaq Ahmad, killed in 2004 six weeks after the Mirwaiz had come to Delhi to meet the Deputy Prime Minister L.K. Advani.

In a deliberate act of intimidation, Pakistan’s Inter Services Intelligence advertised its hand in the last two killings by choosing May 21, the anniversary of Mirwaiz Mauvli’s assassination to kill Lone, and by setting fire to Mirwaiz Umar’s 106-year-old school in Srinagar to virtually coincide with the killing of Ahmad.

The most recent reminder of the threat under which nationalist leaders live was the nearly successful attempt to kill Fazal Qureshi, the most respected member of Hurriyat’s executive committee, in 2009, six weeks after he formally announced Hurriyat’s support for the four-point agreement forged by Prime Minister Manmohan Singh and President Musharraf in Delhi at a conference organised by the Centre for Dialogue and Reconciliation in Srinagar, at which I was present.

A spokesman for a shadowy organisation calling itself the al-Nasireen group claimed that it had carried out the attack because Qureshi had been playing an important role in a dialogue with New Delhi initiated by home minister Chidambaram.

The threat to their lives from Pakistan is not the only hurdle that Kashmiri leaders have to cross before they can enter into a dialogue with New Delhi. Another is the impossibility of entering into a dialogue with Delhi without losing influence, credibility and reputation in Kashmir. This happens when they come repeatedly to Delhi, meet leaders of the Indian government and achieve nothing.

The damage to them is multiplied when Trojan horses in the Indian or Kashmir government leak news of meetings that were supposed to have been secret to the media. It is completed when their interlocutors like former R&AW chief A.S. Dulat have disclose that they have been paying some Hurriyat leaders to keep them in line. This has happened so many times that there is no Kashmiri leader left who can guarantee that Kashmiris will abide by any settlement they reach with Delhi. All that the intelligence agencies’ discrediting of Kashmiri leaders has achieved is make the new generation of Kashmiris look for other leaders to follow and other ikons to emulate.

This is the background against which Hurriyat’s summary rejection of talks with Sharma needs to be understood. While this was only to have been expected, the wording of its criticism of Modi’s rejection of Chidambaram’s autonomy proposal sends a different message. Its crucial sentence: “if the GOI rejects the demand of its co-political party for restoration of autonomy guaranteed in the Indian Constitution, (then)… how will (it) address, or engage with, the Kashmiri people’s political will and aspiration of self-determination” is notable for the absence of the traditional red rags – the UN, a plebiscite, Pakistan and independence. Apart from reminding Delhi that there is an international dimension to the search for a solution it leaves the way to it through self-determination open.

Given the history of killings and betrayals, it will be futile for the present, or any future, government in Delhi to think that any of the separatist leaders will enter into a dialogue that has no clearly defined goal, no agenda and no overt commitment from Delhi. The only way to revive political dialogue and end the rule of the gun in Kashmir is for Delhi to announce that it is committed to restoring full autonomy within the Indian constitution to the entire state, ask the people of Jammu, Kashmir and Ladakh to define its contents, and offer to hold a fresh election to choose representatives of the three regions, if they so desire.

Seventy years after the Instrument of Accession was signed, it is perfectly possible that substantial changes will need to be made in the relationship of the three parts of the state. But they should be left free to decide what these should be, and bring their proposals to Delhi for ratification preferably with, but if necessary without, the involvement of Pakistan. This will replace the doomed dialogue between Delhi and Kashmir with a dialogue between the people of Jammu and Kashmir, and will be Kashmiris’ first step towards the empowerment they have been seeking.

Narendra Modi Government Has Wiped out Any Space for Dialogue With Kashmir

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However, the court also said that the constitutional scheme was prima facie tilted in favour of the lieutenant governor in the union territory of Delhi.

New Delhi: The Supreme Court on Thursday (November 2) observed that the constitutional scheme was prima facietilted in favour of the lieutenant governor in the union territory of Delhi. The five-judge bench however emphasised that the top official cannot “sit on files” for an unreasonable amount of time. He must refer matters where he disagrees with the state government to the president, said the court.

The bench of Chief Justice Dipak Misra and Justices A.K. Sikri, A.M. Khanwilkar, D.Y. Chandrachud and Ashok Bhushan also said that if there is a delay in clearing files, the LG must provide a reason for it.

“Article 239AA (of the Constitution) is unique to Delhi. Prima facie it appears that it gives more power to Lieutenant Governor unlike other Union Territories. LG in Delhi has the primacy under the Constitution,” NDTV quoted the bench as saying.

Justice Chandrachud, responding to the government’s complaint on held-up files, was quoted by Outlook as saying, “LG must give reasons for his decisions, which should be taken within reasonable time.”

Senior advocate Gopal Subramaniam, who appeared for the Delhi government, said that “an elected government cannot be without any power”. “More than 1.14 lakh vacancies are there, but I cannot fill it up and have to seek LG’s permission. I can’t take steps to stop deaths in sewers. This is hampering governance,” he had said.

The Delhi government has appealed in the Supreme Court against a Delhi high court order from August 4, 2016, which said that the LG is the administrative head of Delhi. “The Delhi high court actually said this LG has special powers greater than the president, greater than other governors of states,” Subramaniam said.

Writing on the high court’s judgment in The Wire, Prem Shankar Jha had said:

If the spirit of the Constitution and of democracy are respected, the Lt Governor of Delhi, or Puducherry should only have the power to refer disagreements between him and the chief minister to the President, as the 69th amendment permits him to do. Maybe that is what Governor Jung did initially. And maybe the central government is using him as a shield from behind which to destroy the AAP government. But if that is so, then Jung should never have lent himself to this ignoble purpose. For whichever way one looks at it, what is happening is a murder of democracy to which the Delhi high court has now unwittingly become a party.

AAP hopeful

Addressing party volunteers at AAP’s national council meeting, Delhi chief minister Arvind Kejriwal said if the Delhi government gets back the control of the anti-corruption branch (ACB), it will show the same charisma the 49-day AAP dispensation had displayed, referring to the time he governed Delhi between December 2013 to February 2014.

“The Supreme Court is hearing the case. God is with us,” he said, adding that something positive will come out of the case.

The apex court on Thursday commenced a crucial hearing to determine whether the elected government or the lieutenant governor enjoys supremacy in administering the union territory of Delhi, observing that the constitutional scheme was prima facie tilted in favour of LG.

The court said that Article 239AA of the constitution is unique with respect to Delhi and prima facie it appears that the LG is given more powers here, unlike in the other union territories.

In a tempered attack on the Centre, Kejriwal accused it of playing “dirty politics” and not allowing the Delhi government to perform as he sought to draw a parallel between the two governments.

Without naming Prime Minister Narendra Modi, Kejriwal claimed that the BJP government at the Centre had failed on every front and all sections of the society – the youth, farmers, businessmen, minorities, Dalits are unhappy with it. In comparison, everyone is happy with the AAP government, as it has catered to every section of society, he claimed.

“After being in power for two and half years, I can say this with confidence that a lot can be done, but their (the Centre’s) intentions are bad,” he said, adding that crucial legislations like the Janlokpal Bill and Swaraj Bill are stuck with the Centre.

Kejriwal has alleged several times in the past that the Centre’s is blocking the Delhi government’s work, using the LG. In October this year, while attacking the Modi government for alleged interference in the union territory’s affairs, he said, “I am the elected chief minister of Delhi and I am not a terrorist”.

(With PTI inputs)

https://thewire.in/193908/kejriwal-delhi-lg-supreme-court-case/

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For most of the past ten years, the economy has been suffering because of the unrelenting regime of very high real rates of interest that the RBI has imposed.

 

Finance minister Arun Jaitley portrayed the Rs 2,11,000 crore recapitalisation of public sector banks that he announced last week as the first essential step to reviving the economy. He is right: bank credit has stopped growing because all but a handful of public sector banks are so mired in ‘stressed assets’ – or irrecoverable debt – that they have lost the capacity to lend. But even this gargantuan bailout will not revive the banking system, let alone the economy, if it is not accompanied by measures that will address the root causes of the ‘stress’.

Jaitley believes that the fault lies entirely with the bank managers, who have lent ‘excessively’ in a ‘non-transparent manner’, and then ‘hidden’ their actions ‘under the carpet’. What is non-transparent is the meaning he attaches to these words. Is he saying that the fault lies entirely with public sector bank managers, who have been corrupt, inefficient or both, and have then hidden their misdeeds? The answer seems to be yes, because he has skilfully laced this with a justification of demonetisation. Both reforms, he claims, were necessary because ‘you cannot have an economy where the size of the shadow economy is much bigger than the apparent economy’. The cleaning out process that his government has bravely undertaken will revive growth in the long run all by itself.

The most charitable way of describing this reassurance is that Jaitley is whistling in the dark to keep the demons away. One look at the sheer volume of bad loans and its composition shows that the problem is far too pervasive to be attributable to the misdeeds of public sector bank managers, and has to be one that afflicts the entire economic system. In December 2016, this had reached the mind-boggling figure of Rs 9,60,000 crore. Of this, Rs 8,75,000 crore consisted of ‘restructured’ loans, whose repayment schedules had been changed to give the companies respite and allow them to become solvent. But till April 2017, this has allowed the banks to recover only Rs 46,245 crore of loans. Inefficiency and corruption, not to mention political pressure, may therefore have exacerbated the problem, but cannot be its cause.

Unrelenting high real rates of interest

The affliction from which the economy has been suffering for most of the past 10 years is the unrelenting regime of very high real rates of interest that the Reserve Bank of India (RBI) has imposed upon the country.

Its origins are to be found in the UPA government’s sudden shift of economic objectives, at the end of 2006, from promoting ‘inclusive growth’ to controlling inflation, and its ceding this task to the RBI. The only way that a central bank can do this is by squeezing credit and raising the real rate of interest. But this stratagem works only when the inflation has been caused by an excess of demand in the economy. When the price rise has been caused by a sudden shortage of supply, such as one caused by untimely rains or a poor monsoon, or by a sharp rise in global commodity prices, there is little that squeezing credit to domestic industry can do.

In such ‘supply side’ inflation, curbing credit and pushing up the interest rate depresses production, without bringing down prices. Persisting with a high interest rate policy therefore leads to ‘stagflation’. That is what India has been suffering from for the past seven years.

In January 2007, when then RBI governor Y.V Reddy first began raising interest rates, inflation (measured as it had always been by the wholesale price index or WPI) had only risen 2% over the previous ten-year average, to 6.6%. Reddy ascribed this to an ‘overheating of the economy’ caused by increased social spending on the Mahatma Gandhi National Rural Employment Guarantee Act and other welfare programmes, and took measures that raised the lending rates of commercial banks by a full 3% in the next nine months.

His diagnosis proved wrong. The proof of this came in the January-March quarter of 2008, when WPI inflation rose from 6.7% to 7.7%.

Where the rise in prices had come from was apparent, because in the same 12 months, the rise in prices of basic metals, alloys and metal products accelerated from 12.6% to 19%. Quite obviously, credit curbs were doing nothing to restrain an inflation that was coming from a sharp rise in global commodity prices that was being fuelled by a six-year-long investment boom in China.

When the world economy went into recession in 2008, Reddy’s successor, D. Subbarao, brought interest rates down sharply at Prime Minister Manmohan Singh’s urging. For the next two years, industry enjoyed the highest growth rate it has ever achieved. And it did so without triggering inflation, for wholesale prices rose only by 0.8% in 2009-10 because global oil and commodity prices had fallen by 50-60%.

This again underlined the newly-formed connection between global and domestic inflation, but Subbarao did not see it. So when global commodity prices rose sharply once again on the back of China’s $586-billion fiscal stimulus programme, and WPI inflation shot up to 10.3% in March 2010, he promptly repeated Reddy’s mistake and raised interest rates once more.

In January 2007, when then RBI governor Y.V Reddy first began raising interest rates, inflation (measured as it had always been by the wholesale price index or WPI) had only risen 2% over the previous ten-year average, to 6.6%. Reddy ascribed this to an ‘overheating of the economy’ caused by increased social spending on the Mahatma Gandhi National Rural Employment Guarantee Act and other welfare programmes, and took measures that raised the lending rates of commercial banks by a full 3% in the next nine months.

His diagnosis proved wrong. The proof of this came in the January-March quarter of 2008, when WPI inflation rose from 6.7% to 7.7%.

Where the rise in prices had come from was apparent, because in the same 12 months, the rise in prices of basic metals, alloys and metal products accelerated from 12.6% to 19%. Quite obviously, credit curbs were doing nothing to restrain an inflation that was coming from a sharp rise in global commodity prices that was being fuelled by a six-year-long investment boom in China.

When the world economy went into recession in 2008, Reddy’s successor, D. Subbarao, brought interest rates down sharply at Prime Minister Manmohan Singh’s urging. For the next two years, industry enjoyed the highest growth rate it has ever achieved. And it did so without triggering inflation, for wholesale prices rose only by 0.8% in 2009-10 because global oil and commodity prices had fallen by 50-60%.

This again underlined the newly-formed connection between global and domestic inflation, but Subbarao did not see it. So when global commodity prices rose sharply once again on the back of China’s $586-billion fiscal stimulus programme, and WPI inflation shot up to 10.3% in March 2010, he promptly repeated Reddy’s mistake and raised interest rates once more.

As the rise in wholesale prices slowed in 2012, the UPA began to seriously consider lowering the cost of borrowing to revive the economy. To assuage the RBI’s worry that this might touch off an inflationary spiral, it also made changes in diesel and gasoline prices that would cut subsidies on petroleum products by more than Rs 50,000 crore in a full year and unveiled an ambitious programme to eliminate the Rs 1,90,000 crore of deficits accumulated by the state electricity boards, and bring the fiscal deficit down to 3% from 5.3%, over five years. But Subbarao remained unmoved and, citing vague inflationary threats in the future, marginally raised policy interest rates.

The only way to end this conflict was for the government to assert its constitutionally-mandated authority and force the RBI to lower rates. But the party was split between ministers who wanted growth and a party organisation that was morbidly afraid of the political fallout of inflation. It therefore did nothing and sealed its own fate.

Enter inflation targeting

The Narendra Modi government came to power with the full intention of restoring rapid growth. In his first ten months in office, Jaitley referred to the need to lower interest rates several times, but somehow lost sight of this goal at the precise moment when inflation disappeared from the economy. How did this happen? The only explanation is that he succumbed to Raghuram Rajan’s advocacy of “inflation targeting”.

Inflation targeting is the use of monetary policy to maintain credit and deposit rates in the economy that are higher than the actual or anticipated rate of inflation. Its purpose, as the name implies, is to keep inflation at a level that society can live with comfortably. The reliance on positive real rates of interest – or rates higher than the prevailing rate of inflation – developed in the 1950s and ’60s out of the failure of import-substituting models of growth in the first post-war generation of industrialising countries, notably including Taiwan, South Korea, Brazil, Argentina, Chile, Mexico and Turkey.

In all of these, and others, the import-substituting model of growth led to huge trade deficits that could only be contained by devaluation. But devaluation made imports more expensive and therefore fed back into inflation. This rapidly became a never-ending vicious circle. Positive interest rates therefore became the first essential step towards their transition into open, export-led economies.

Positive interest rates played a similar role in the transition of the socialist countries of the Warsaw Pact into market economies in the ’80s. However, the purpose in both sets of countries was only to check runaway inflation and stabilise the exchange rate in order to open the road to foreign investment and sustained growth. In all these countries, high real rates of interest were seen as a temporary weapon, to be dispensed with as soon as the inflation-devaluation-inflation cycle was broken.

All the governments knew that growth required an increase in capital formation, and that this would create inflationary pressures till the resulting stream of products and services entered the market. Managing these pressures required a constant, delicate balancing of interest rates, exchange rates and fiscal restraint.

Inflation targeting attained the status of a doctrine – a one-stop cure for all developmental ailments – only when it was adopted by the industrialised countries in the 1990s. For them it did prove a boon, but not for the reason that is now being peddled by monetary economists to the developing countries. For the rich nations with fully convertible currencies – the dollar, the euro, the pound and the yen – it was a way to continue living way beyond their means long after their industrial bases had withered away under the Asian onslaught.

The rationale for this developed out of Britain’s exchange rate crisis in 1992. Britain had been living way beyond its means, with very high inflation and large deficits in its balance of payments, since the early ’70s. Initially, the pound depreciated steadily against the dollar till it hit a low of $1.10 in 1976. Then North Sea oil hit the market and the pound recovered till it was once more worth well over $2 by the end of 1978. As was pointed out in a seminal book titled De-industrialisation and Foreign Trade by Robert Rowthorn and J.R. Wells, this rapid appreciation rang the death knell of British industry.

As the rise in wholesale prices slowed in 2012, the UPA began to seriously consider lowering the cost of borrowing to revive the economy. To assuage the RBI’s worry that this might touch off an inflationary spiral, it also made changes in diesel and gasoline prices that would cut subsidies on petroleum products by more than Rs 50,000 crore in a full year and unveiled an ambitious programme to eliminate the Rs 1,90,000 crore of deficits accumulated by the state electricity boards, and bring the fiscal deficit down to 3% from 5.3%, over five years. But Subbarao remained unmoved and, citing vague inflationary threats in the future, marginally raised policy interest rates.

The only way to end this conflict was for the government to assert its constitutionally-mandated authority and force the RBI to lower rates. But the party was split between ministers who wanted growth and a party organisation that was morbidly afraid of the political fallout of inflation. It therefore did nothing and sealed its own fate.

Enter inflation targeting

The Narendra Modi government came to power with the full intention of restoring rapid growth. In his first ten months in office, Jaitley referred to the need to lower interest rates several times, but somehow lost sight of this goal at the precise moment when inflation disappeared from the economy. How did this happen? The only explanation is that he succumbed to Raghuram Rajan’s advocacy of “inflation targeting”.

Inflation targeting is the use of monetary policy to maintain credit and deposit rates in the economy that are higher than the actual or anticipated rate of inflation. Its purpose, as the name implies, is to keep inflation at a level that society can live with comfortably. The reliance on positive real rates of interest – or rates higher than the prevailing rate of inflation – developed in the 1950s and ’60s out of the failure of import-substituting models of growth in the first post-war generation of industrialising countries, notably including Taiwan, South Korea, Brazil, Argentina, Chile, Mexico and Turkey.

In all of these, and others, the import-substituting model of growth led to huge trade deficits that could only be contained by devaluation. But devaluation made imports more expensive and therefore fed back into inflation. This rapidly became a never-ending vicious circle. Positive interest rates therefore became the first essential step towards their transition into open, export-led economies.

Positive interest rates played a similar role in the transition of the socialist countries of the Warsaw Pact into market economies in the ’80s. However, the purpose in both sets of countries was only to check runaway inflation and stabilise the exchange rate in order to open the road to foreign investment and sustained growth. In all these countries, high real rates of interest were seen as a temporary weapon, to be dispensed with as soon as the inflation-devaluation-inflation cycle was broken.

All the governments knew that growth required an increase in capital formation, and that this would create inflationary pressures till the resulting stream of products and services entered the market. Managing these pressures required a constant, delicate balancing of interest rates, exchange rates and fiscal restraint.

Inflation targeting attained the status of a doctrine – a one-stop cure for all developmental ailments – only when it was adopted by the industrialised countries in the 1990s. For them it did prove a boon, but not for the reason that is now being peddled by monetary economists to the developing countries. For the rich nations with fully convertible currencies – the dollar, the euro, the pound and the yen – it was a way to continue living way beyond their means long after their industrial bases had withered away under the Asian onslaught.

The rationale for this developed out of Britain’s exchange rate crisis in 1992. Britain had been living way beyond its means, with very high inflation and large deficits in its balance of payments, since the early ’70s. Initially, the pound depreciated steadily against the dollar till it hit a low of $1.10 in 1976. Then North Sea oil hit the market and the pound recovered till it was once more worth well over $2 by the end of 1978. As was pointed out in a seminal book titled De-industrialisation and Foreign Trade by Robert Rowthorn and J.R. Wells, this rapid appreciation rang the death knell of British industry.

By this standard, India has never been a high inflation country. WPI inflation averaged 7% during the ’60s, ’70s and ’80s, and has averaged barely 5% since 1993. By contrast, when Taiwan adopted ‘positive’ interest rates in 1957, its inflation had been running at 60% a year. Latin American inflation had been even higher. India did not therefore need to adopt inflation targeting. What is more, it did not need to adopt the cost of living, an index of supply shortages more than of excess demand, as the base from which to determine the ‘positive’ real rate of interest.

Between 2014 and the present date, demand inflation, which is imperfectly reflected by the WPI, has been very close to zero. But lending rates to industry have remained above 11%. The real rate of interest is therefore probably the highest anywhere in the world today.

At such high rates, investing in infrastructure projects is suicide, for interest payments can double capital costs in as little as seven years – long before they start yielding returns. That is why India is now saddled with Rs 11,40,000 crore worth of abandoned projects, and why 40 of its largest companies – the cream of its new entrepreneurial class – are facing ruin.

How the RBI Destroyed the Indian Economy

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

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

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

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

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

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

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

Not well thought out

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

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

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

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

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

Wishful thinking

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

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

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

Led by the nose

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

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

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

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

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

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

Nothing could be further from the truth.

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

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

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


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

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


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

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

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

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

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

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

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

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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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