Protest against intolerance in India: A magnificent display of democracy or a “manufactured revolt”?,

On November 3rd, Mrs. Sonia Gandhi, President of the Indian National Congress, led a one-kilometer march from the Parliament House to the Presidential Residence. It was primarily to submit a memorandum to President Pranab Mukherjee, condemning the rising intolerance in India and expressing “deep regret” over Prime Minister Narendra Modi’s continued silence over these matters. What the march lacked in distance, it covered in its optics and the purpose of the march and the rhetoric that followed. The optics were quite spectacular with Mrs. Gandhi in the lead, Rahul Gandhi and former PM, Mr. Manmohan Singh by her side, followed by prominent political leaders like Ghulam Nabi Azad, Sushilkumar Shinde, A K Antony, and Mallikarjun Kharge. This was a 125-strong delegation that took the short walk protected by massive security coverage and inundated with reporters, journalists and photographers. It was a dramatic display of protest that was evident of a strong opposition and a strong democracy in India.

In addition to this recent memorandum, the intelligentsia in India has been overwhelming in expressing its outrage towards the oppression of religious minorities, the rise in censorship and restrictions on the “freedom of thought.” The most recent figure to return her award is author and activist, Ms. Arundhati Roy. Ms. Roy joined this political movement in order to share solidarity with the community of scholars, academics, writers, filmmakers who are standing up against the “ideological viciousness” that she says would “tear us apart and bury us very deep.” Individuals like writer Nayantara Sehgal, Malayalam poet, K. Satchidanandan, Theatre Artist, Maya Krishna Ray and recipient of Padma Bhushan, P.M. Bhargava have returned their respective awards and over a 100 scientists have publicly condemned the recent “sectarian and bigoted acts” in a letter to the President. The Karnataka Chief Minister, Siddaramaiah, recently condemned the intolerance over cow slaughter and that he will start to “eat beef now” and “nobody can stop” him from doing so as it is his right if he chooses to. Some intellectuals like Jayant Vishnu Narlikar have condemned these issues but deem returning their award unnecessary. Nevertheless, these are all methods the public community has taken to fight for secularism, pluralism and tolerance in the country.

However, some politicians are not convinced that this recent uprising is legitimate. Arun Jaitley, Union Finance Minister, criticized the uprising of writers and through Facebook asked whether it was “a manufactured revolt” and also claimed that the protest itself was a symbol of intolerance. He has gone on record to call the current state of the country peaceful and has denied the very existence of intolerance in the country. The absent rhetoric of Mr. Modi has translated into poor rhetoric of ministers within his party. And while Karnataka Chief Minister was quite vocal about his right to eat beef, local BJP leaders have threatened to even behead Mr. Siddaramaiah if he eats beef on the streets of Karnataka. This violent backlash is not empty in its rhetoric after the Dadri lynching and the beating up of a minister in the Kashmir assembly. Haryana’s Chief Minister, M. L. Khattar, was recently quoted saying “They (Muslims) can be Muslim even after they stop eating beef, can’t they?” While lecturing on secularism Mr. Khattar claimed that the cow is of highest faith in the country. While the opposition and the public criticized this hypocrisy, Modi’s response to the opposition by the Congress came across as more standoffish by resurrecting party politics from the past. Mr. Modi responded to the Congress as being unreliable in this debate on religious intolerance due to their passiveness during the Sikh massacre in the 1984 riots. This defense by Mr. Modi is weak. While he has been quite an enigmatic, outspoken and unequivocally abrasive leader in his rhetoric to the country, he has altogether remained silent on this debate.

The thin, yet quintessential layer of secularism and pluralism in India is being peeled away by the back and forth between the two major political parties. Protesting a protest seems absurd. It wouldn’t be political suicide for Mr. Narendra Modi to take a stance on the injustice towards minorities in the nation. The silence that has remained so intact is actually harming the image of Modi, the legitimacy of the BJP and also on the stability of the Indian social structure. Time Magazine reported that top Indian business leaders like N.R. Narayana Murthy, Kiran Mazumdar Shaw and Lord Meghnad Desai are concerned that the “growing hostility towards minorities will decrease its (India) attractiveness as a business destination.” This growing intolerance might actually work against the economic growth that Modi wants to Champion for India. A few steps might be be necessary to address the issue of rising intolerance. Firstly, it is imperative that Mr. Modi recognize the reality of the growing intolerance and the increasingly aggressive opposition to it. It would be crucial for him to apprise leaders like Arun Jaitley to not deny the existence of a problem. Secondly, Hindu extremist organizations like the RSS and VHP who are leading the “Ghar Wapsi” or “(Re)conversion” campaign are most often associated with hostility towards Muslims, Christians and other minorities. These are often linked with chipping away at the secular fabric of Indian culture. These organizations have close links to Modi’s BJP. BJP was started as the political wing of RSS in 1951. VHP was created in 1964, again with members of the RSS to cultivate for Hindus  a “sense of religious identity and political purpose.” BJP, therefore, is closely linked with both organizations. It is imperative that Mr. Modi consolidates control over their violent acts and condemns them publicly. Thirdly, Mr. Modi must use his active social media platform (Twitter with 15.9m followers, Facebook page with over 30m likes, and a daily Radio Show called “Mann Ki Baat.”) to address the opposition without raking up the past and party politics. The situation is beyond the question of whether the protest against intolerance is a display of democracy or, as Mr. Jaitley would likely put it a “manufactured revolt.” The protest has reached a significant point in its course and the public, especially the minorities, within and outside of India is looking for a statesman and not a politician in Narendra Modi.

Modi Juggernaut Hits Bihar Roadblock

This was originally published in the Huffington Post.

The recent election results in the critical northern state of Bihar, India's third most populous state, are the first big roadblock that has hit the Modi juggernaut. Out of a total of 243 seats, the BJP-led National Democratic Alliance (NDA) only won 58 seats of which the BJP won 53. The Mahagathbandhan (or Grand Alliance) coalition won 178 seats, with former Chief Minister Lalu Prasad Yadav's party Rashtriya Janata Dal (RJD) winning 80 seats, former Chief Minister Nitish Kumar's party Janata Dal (United-U) winning 71 seats and the Congress winning 27 seats. How critical the Bihar elections were for the NDA can be gauged by the fact that the Prime Minister Mr Modi addressed 26 election rallies in Bihar and more than 90 top BJP officials addressed over 600 rallies during the election cycle phased out over six weeks.

The 2014 parliamentary elections in India that brought the Narendra Modi led Bharatiya Janata Party (BJP) back to power, after ten years in the wilderness, reflected the desire of a young Indian electorate that wanted robust foreign policy (and economic reform). Mr Modi was brought to power not because of any Hindu wave or the illusionary Hindu vote bank but he came to power on the strength of the moderate voter. That voter sought the Gujarat model of economic growth, not religious and social arguments amid violence.

The election of Mr Modi in May 2014 raised expectations around the world of the likelihood of far-reaching changes in India's economic policy. India was, for the first time in its history, being led by a conservative government with a clear parliamentary majority and a Prime Minister with prior governance experience. Before his election as Prime Minister, Modi successfully diminished concerns about the religio-cultural conservatism of his party. Modi was expected to be a catalyst for India's economic growth, removing the shackles of over-regulation quickly.

However, as Hudson Institute's 'Modi One year On' report states eighteen months later, "it seems that caution characterizes the Modi government's performance just as enthusiasm had defined Modi's election promises." India's economic growth has increased primarily because of global economic factors, such as lower oil prices, and not because of governmental reforms. Some government actions, such as 'tax terrorism'--imposition of retroactive taxes on multinational corporations--and the lack of implementation of tax and labor reforms, continue to hurt India's economic outlook.

For the last year analysts, and government advisers alike, argued that the primary reason the Modi administration was unable to implement economic reforms was because while it had a majority in the Lok Sabha, lower house of parliament it lacked a majority in the Rajya Sabha, upper house. The argument put forth was that the BJP-led National Democratic Alliance (NDA) needed to win critical state elections, like Bihar (November 2015) and Uttar Pradesh (2017) to boost its majority in the upper house.

With the devastating loss that the NDA coalition has faced in the Bihar elections it is time Delhi reevaluated its policy. Instead of framing the policy, and discourse, on the need to win every state assembly election, the government needs to focus on implementing economic policies that are tied to bureaucratic reforms and boosting economic growth.

Economy is not an independent silo; it is impacted by what is happening in foreign policy as well as the broader society. If there is a rise in religious intolerance and communal violence that too will affect how both domestic and foreign investors view the country.

Mr. Sharif Comes to Washington

Pakistani Prime Minister, Mian Muhammad Nawaz Sharif, recently traveled to the United States for his second official visit since being elected as Prime Minister for the third term in 2013. Rounding up to the days of his visit, there was an expectation that the Prime Minister would be seeking to establish a civil nuclear deal similar to that between India and the United States. The topic was not only covered by US media but also by journalists and analysts in Pakistan and India as well. The talk of paving a way for a nuclear deal with Pakistan was being deemed a possible “diplomatic blockbuster.” Through the Joint Statement by President Obama and Prime Minister Nawaz Sharif issued by the White House, the visit comprised of no such surprises or big revelations. The two leaders discussed a wide array of topics pertaining to improving the economic, educational, and defence cooperation between the two countries. However, there were a few new notes that PM Sharif shared with Secretary John Kerry and President Obama on Pakistan’s successful efforts to curb terrorism, and exchange of dossiers on the involvement of Indian intelligence in destabilising Pakistan.

Despite the speculation that a 123 agreement was in the works, the closest the leaders came to speak of nuclear security was Pakistan’s commitment to engage in the Nuclear Security Summit in 2016. Major highlights of the talks were around the topic of counterterrorism and regional security. Pakistan, in June 2014, launched an independent counter-terrorism operation, Operation Zarb-e-Azb, in the Northern Waziristan region as part of its National Action Plan (NAP). During his speech at the United States Institute of Peace (USIP) and to the House Foreign Affairs Committee, PM Sharif reported quite confidently on the success of the operation. He mentioned that “terrorist sanctuaries” were targeted within the country and while “thousands (terrorists) have been killed or captured,” the “decisive stage” of the operation is targeting “sleeper cells.” President Obama was apprised of the success of the operation during the meeting and for the first time Pakistan also recognized the need to take action against Lashkar-e-Tayyiba and its affiliates which is “protected by Pakistani intelligence forces”.

PM Sharif met with Secretary Kerry to discuss issues of counterterrorism as well, although, the spotlight was on three separate dossiers shared with Secretary Kerry by Sartaj Aziz, Adviser of Foreign Affairs to PM Sharif. These dossiers contain information regarding India’s role in destabilizing Pakistan. Similar dossiers containing “details of Indian interference and support for terrorism in Balochistan and Karachi as well as its security and intelligence agencies link with the Tehrik-e Taliban Pakistan especially in FATA,” were reported to have been presented to UN Secretary General Ban Ki Moon earlier in October 2015. This is the extent of the information that was presented at the UN through the Right of Reply at the UN General Assembly. However, it is unclear how this information is going to affect the relationship between India and Pakistan, as well as between India and the US. At USIP, Sharif also apprised the audience of India’s recent increase in ceasefire violations at the Line of Control. While there seems to be a deepening distrust between the two nations, Sharif, at USIP, also reiterated Pakistan’s commitment in undertaking the “peace initiative” that he had proposed to the UNGA in September 2015. Indian Prime Minister Narendra Modi, is expected to visit Islamabad in 2016; the leaders will meet for the first time since the introduction of the peace initiative.

While PM Sharif’s visit was packed with speeches and meetings, there were some events that called the media’s attention to the visit. During the meeting between President Obama and PM Sharif, there were was an peaceful, and organized protest in front of the White House calling to end Pakistani occupation of Balochistan, that brought attention to the oppression faced by the Baloch people. Another interjection to his visit was when Baloch activist, Ahmar Masti Khan, heckled the PM during his speech at the USIP (while the clip of him being heckled made national news in India and Pakistan, USIP has since muted/edited their official coverage to remove the heckling and called Mr. Khan an “uninvited protestor.”). He used the slogan “Free, Free Balochistan,” and called PM Sharif “Bin Laden’s friend” while asking PM Sharif to “stop the war crimes in Balochistan.” The 2015 Human Rights Watch Report stated that the situation in Balochistan remains “abysmal” and that, while the civilian government was formed legitimately, the military in Pakistan is still deeply involved in Balochistan. Additionally, International Religious Freedom Report by the US State Department, enumerated various cases where law enforcement agencies were accused of oppressing religious minorities, of forced disappearances and of kidnappings in the region. While military leaders like Gen. Janjua have claimed that “the atmosphere of fear and harassment no more prevails in the province,” Human rights organizations are reporting a completely opposite narrative.

An otherwise uneventful trip, with no drastic changes from the status-quo relationship between Pakistan and the United States, was accepted as reaffirmation from the US of the Kerry-Lugar-Berman a.k.a. The Enhanced Partnership Pakistan Act of 2009 that involves a continued effort in “fostering a deeper, stronger, more multi-dimensional partnership.”

Nepal's First Female President: Moving away from Patriarchy?

Nepal joined its neighbours in electing its first female head of state last Wednesday. Bidya Devi Bhandari, of the Communist Party of Nepal - Unified Marxist Leninist (CPN-ML), is the second President to be elected since Nepal abolished its monarchy in 2008. The election of a woman for President is said to be an achievement for a country such as Nepal, where previous to the implementation of new constitution in September 2015, the legal rights for women were largely restricted. The 2015 Nepalese constitution has increased its quota for women in the parliament and has made it compulsory for government committees to have women members. Bindya Devi being elected President, in itself, is viewed as a great stride for gender equality in the political arena.  

President Bindya Devi started her political career in the late 1970s in a Leftist Student Union, and in 1980-1981 got membership of the then CPN-ML. After getting married to the Communist leader, Madan Kumar Bhandari, Bidya Devi left politics. She said that being a wife was her primary role. In 1993, Madan Kumar Bhandari was killed in a mysterious car crash, which led Bidya Devi to re-enter politics.

Bidya Devi, in the past, has held cabinet positions that include the Minister of Defense in the Madhav-Nepal led government of 2009-2011 and the Minister for Environment and Population in the 1990s. She is also known to have led demonstrations against King Gayendra in 2006 which finally led to the end of his authoritarian rule in 2008.

Additionally, Bidya Devi is a well-known women’s rights activist and has led her party's ‘women cell’ for more than a decade. For over two decades she also led the All Women Nepal Association that is “building powerful mass-based women's movement to uplift the status of women in the society.” More recently, she actively lobbied for the new constitution to either have a woman President or Prime Minister and is credited for the legislation requiring 33% of the members of parliament to be women. In the new constitution introduced in 2015, Bidya Devi’s activism led to the addition that “women be included in all government committees”. Although Bidya Devi has worked to include women in the workplace, she is criticized by women’s feminist groups for her support of recent changes in ‘citizenship by descent’ in the new constitution.

While the new constitution requires more women lawmakers and women in all governmental committees, the same constitution is discriminating against Nepalese women, their children and spouses. The Citizenship Provision in the 2015 Nepalese constitution clarifies that children of a foreign male and Nepalese female, Article 11.7, states that they are only entitled to naturalized citizenship. However, a child of a Nepalese male and foreign female is assured a Nepalese citizenship by descent.

It is also made more difficult for a female to get citizenship through descent compared to that for a male. A Nepalese female has to establish that her father is Nepali to receive citizenship through descent. For this to be done, the mother of the Nepalese female needs to present proof that her husband (father of female in question) is not a foreigner. Subsequently, the mother has to provide proof of Nepalese citizenship for her husband, so that the Nepalese female in question can become a citizen. If the mother cannot prove so, or her husband (father of female in question) denies their relationship, the female will be denied Nepalese citizenship through descent. This is an issue when looking at cases with children born due to sexual violence. A female child, in such a case, cannot claim citizenship through the mother. In this case, the female victim in this case would be forced to find and involve the father in the process in order to receive Nepalese citizenship for her female child.

President Bidya Devi’s acceptance of  the new citizenship provision is only one of several red flags that has caught the attention of the media. At a program, few months before she was elected, she discussed the new constitution and “criticized feminists and women’s rights advocates who are demanding more rights as being influenced by Western values.”. According to a Nepalese newspaper, she said

“Whether we agree with it or not, in Eastern culture and tradition, a woman is entirely devoted to a man ... This may be a discriminatory system, but our society has always functioned this way.”

This statement suggests that President Bidya Devi, while known to be a women’s rights activist, still believes that women should be ‘devoted’ to men and are consequently not equal to them. Additionally,  “She has claimed that the traditional role of women in Nepal - a homemaker - should be maintained.” While she is credited with increasing women’s participation in the Nepalese Government and thus challenging sexism at an institutional level, she doesn’t seem to challenge sexism at its roots. Therefore, “eastern culture and tradition” has become a reason to diminish the gender inequality in Nepalese society. While increasing the quota for women in the government will help Nepal shift from a traditionally male-dominated society, it might only benefit a small group of qualified and educated women. Even though it is important for more women to hold positions of power in the government, gender inequality issues in the general population cannot be ignored.

Pakistan’s Interior Minister says Pakistan is not accountable to the US

For a country that has received over $ 40 billion in aid from the United States and been part of numerous American alliances and treaties, Pakistan’s leaders insistence on asserting their independence is remarkably consistent.

During Prime Minister Nawaz Sharif’s recent trip to the US he spoke about terrorism being the greatest threatto his country. Pakistan’s Chief of Army Staff General Raheel Sharif has repeatedly stated that Pakistan will fight terrorism.

Pakistan has been an ally in the global war against terrorism since 2001 and of the security assistance Pakistan receives from the US a large section comprises Coalition Support Funds that is reimbursement to Pakistan for assisting the international and US troops in Afghanistan.

And yet in a recent statement Pakistan’s Minister for Interior Chaudhry Nisar Ali Khan stated that Pakistan was not accountable to the United States in the war against terrorism. “We are not accountable to the US. We are very clear about what we are going to do and what we are doing is in the interest of Pakistan, which lies in the fact that we must do everything to eliminate all kinds of terrorism. Terrorist of all kinds and colors will be eliminated from the soil of Pakistan.”

Mr Khan also dismissively asserted that Daesh or ISIS (Islamic State) does not have any presence in Pakistan, contrary to reports filed by its own agencies. According to Mr Khan, “On the issue of Daesh, it is a Middle Eastern outfit. No Middle Eastern outfit with the name of Daesh exists in Pakistan, but certain local terrorist organizations may be seeking inspiration or may be having some kind of interaction with Daesh. But this terrorist group as a Middle Eastern organization has no footprint in Pakistan.”


 

India and the Politics of Extremism

This article was originally published in The Diplomat

The diversity of the polity and the BJP’s own political future will limit Hindutva prominence in Indian politics.

The lynching of Mohammad Akhlaq and his family by Hindu extremists over rumored beef possession is a new symbol of Modi’s India. Instead of the good governance and economic reform that has been promised, Hindutva (Hindu nationalism) groups continue to aggressively push their agenda for a “Hindu” India rather than the secular nation envisioned by many of its founders, such as Mahatma Gandhi and its first prime minister, Jawaharlal Nehru. Between the ghar wapsi (lit. homecoming, reconversions of Christians and Muslims “back” to Hinduism), new draconian anti-beef laws, continued attacks on alleged beef smugglers, and rhetoric from some high-level ministers, it appears that Hindu extremism is becoming more prominent by the day. The lynching has brought further international scrutiny to the actions of Hindu extremists in India and their seemingly growing influence in the country.

These as well as many other actions of Hindutva organizations are worrying. Yet many writers havemisinterpreted the fight over beef as primarily a communal problem, a religious issue between Muslims and Hindus. While there is real anti-Muslim sentiment among Hindutva organizations, it is important to remember that beef eating is not viewed as scandalous among large segments of the Hindu population. In addition, the view of beef eating among the country’s different regions and castes also differs greatly from the view that Hindutva groups promote. This illustrates the challenges the Hindutva-rooted ruling Bharatiya Janata Party (BJP) would face in trying to mobilize politically around the issue.

Fundamentalist politics exists regardless of religion, but the practice of Hinduism, as such, is so diverse across ethnolinguistic communities and castes that few principles can be considered universal. This applies to beef consumption: By and large, the consumption of beef is culturally taboo, but this is far from universal in the Hindu hierarchy, with lower castes less likely to refrain from its consumption. Scriptural citation, as has been done by the mother of all Hindutva groups, the Rashtriya Swayamsevak Sangh (RSS), does not itself imply that such a belief is endorsed by a majority of Hindus. Even setting aside the caste and ethnic differences in observing what is understood to be Hindu, the philosophies attributable to Hindu civilization are manifold and sometimes self-contradictory.

Nevertheless, beef eating plays into a sensibility held by high-caste Hindus. A major political figure in Bihar, low-caste former Chief Minister Lalu Prasad Yadav, has allied with a former rival and another former Chief Minister, Nitish Kumar in a “Grand Alliance” against the BJP. But Yadav’s campaign trail comment, that poor Hindus do in fact eat beef, has met with political resistance. He later revised his statement to say simply that it would be unadvisable to eat beef because it is unhealthy.

Looking at the politics of beef at a regional level also shows the limits of any potential mobilization on the issue. While many Central and North Indian states continue to hold stringent cow slaughter and anti-beef laws, a different pattern emerges in the South, East, and Northeastern states. Particularly in the South and Northeast of India, beef remains an important part of the local cuisine. In the southern state of Kerala, beef constitutes up to 40 percent of the meat consumed in the state, including the state’s Hindu majority. Even the state’s BJP figures have come out to say that they are not opposed to the sale or consumption of beef. Indeed, some Hindus in the state organized a beef-eating festival in protest of the beef ban and the lynching of Akhlaq. Nor was Kerala the only state to feature such protests. These regions represent a significant part of India’s population, and contain their own diverse strains of the Hindu religion.

In becoming a credible national player in the 1990s, the BJP, traditionally a political voice for the RSS and other Hindutva groups driven by high caste Hindus, had to accommodate the concerns of lower caste political groups. Lower caste interests are politically represented differently state by state, but where caste interest groups have a strong political manifestation, the BJP has had trouble. Bihar was a pioneer in positive discrimination policies toward lower castes, which has progressed into leadership by lower caste groups, represented most prominently by former Chief Minister Lalu Prasad Yadav. As Bihar is crucial to the BJP’s task of achieving an upper-house majority and passing economic reforms, the core policy plank on which the BJP was elected, it would be short-sighted of the party leaders to allow the base to speak too freely. For example, the RSS recently had to walk backleader Mohan Bhagwat’s remarks calling for an end to positive discrimination policies in Bihar. The Modi government had trouble dealing with caste protests in Gujarat earlier this year relating to its policies.

Some Western observers tend to view communalism in India when violence is at its worst, such as the anti-Sikh riots in 1984, the Babri Masjid agitation in 1992, Godhra in 2002, and Muzaffarnagar in 2013. These outbursts invariably represent the outcome of divisive policies by India’s various political parties. The politics of beef play an important part in this divide-and-rule politics.

To be sure, communal rioting does not constitute the majority of political activity, but as media outlets amplify the incidents, they dominate the citizens’ political awareness. Elections currently underway in Bihar are must-win for Modi and the BJP. The key political activity, according to the BJP chief, is highly granular management of particular power brokers. In Indian political history, the communal card has been played, with far from sure success, as a volatile solution to reframe a caste, regional, or ethnicity-dependent political divide as simply Hindu-Muslim. The next round of state-level elections will take place in Pondicherry, Assam, Tamil Nadu, West Bengal, and Kerala, all outside of the BJP’s traditional sphere of influence. The BJP will face formidable regional parties, some of them with especially devoted followings. Perhaps even more so than in Bihar, it will have to be sensitive in its political conduct, reining in those who would be brazen in promoting a communal agenda. The Hindu right wing may be on a longer leash, but India is not under its thumb.

Hari Prasad is a Masters student at the Elliott School of International Affairs at George Washington University with a specialization in Middle East and South Asian Politics and Security. Samir Kumar is an independent researcher on South Asia’s political economy.

Pakistan’s Increasing Nuclear Stockpile: India the only threat factor?

 

In 2014, the Council of Foreign Relations reported that Pakistan now has the fastest growing nuclear program in the world, and estimates that by 2020, Islamabad could have as many as 200 nuclear weapons. Gregory Koblentz, an expert on arms control, has termed this development as “aggressive.” In 2011, reports suggested that Pakistan could overtake Britain as the fifth largest nuclear weapon state in the world. While a report published in August 2015 by Michael Krepon and Toby Dalton, predicts that Pakistan could exceed the nuclear weapons capabilities of France and China, making it the third largest nuclear weapon state.

Krepon and Dalton further suggest that Pakistan should shift its focus from full spectrum deterrence to strategic deterrence. However, as recent as in September 2015, the National Command Authority on the other hand, made clear that Pakistan is working towards maintaining ‘full spectrum deterrence.’ Pakistan aspires to achieve ‘full spectrum deterrence’ and would potentially increase its nuclear stockpile as a road towards achieving this capability. In addition to this, is the issue of a possible nuclear deal between the U.S. and Pakistan, which further raises concerns. While it is being assumed that the deal, if fructifies, may check Pakistan’s growing fissile material, Pakistan could divert its nuclear program towards nuclear weapons.

Pakistan cites its nuclear weapons development “solely aimed at India”. Prime Minister Nawaz Sharif on the other hand, claimed in September 2015 that Pakistan’s nuclear weapons are not aimed at any state. There are, however, several other factors that probably have motivated Pakistan to continue increasing its fissile material stockpile. This article therefore, analyses the trends in Pakistan’s nuclear weapons capability and the possible factors that has played in Pakistan’s desire to continue increasing its fissile material stockpile.

Several trends in nuclear weapons capability built up increasing global concerns:

1.     Islamabad refuses to join the Fissile Material Cut-off Treaty (FMCT). Pakistan is the only state opposing the FMCT, which bans the production of highly enriched uranium (HEU) and plutonium, the two main components of making nuclear weapons.

2.     In 2013, according to SIPRI reports, Pakistan was estimated to have three tons of HEU. Currently, Pakistan is believed to be using enrichment facilities in Kahuta, and in Gadwal in Punjab to develop nuclear warheads. Islamabad, however, is giving equal importance to developing plutonium warheads.

3.     The cooling capacities in the reactors at the Khushab nuclear site have also been increased, thereby enabling Islamabad to produce even more plutonium than previously estimated, according to the 2014 Stockholm International Peace Research Institute (SIPRI) Report.

4.     Islamabad is constructing heavy water reactors (HWRs) at Khushab, the Khushab IV reactors that were also operational in January 2015.

In addition, Pakistan has sought to develop Multiple Independently Targetable Re-entry Vehicles (MIRVs) for its Shaheen category ballistic missiles; its tactical nuclear weapons (TNWs), called the Nasr, and its nuclear-capable cruise Ra’ad missiles and submarine-launched missiles, which require nuclear warhead miniaturisation. Plutonium warheads, more powerful yet lighter, are capable of being easily miniaturised. The aircraft and land-based missile systems strengthen Pakistan’s ‘first-use’ posture. Islamabad is also aspires to develop sea-based nuclear deterrent capability to strengthen its second-strike capability. As Pakistan develops TNWs, there would be a requirement to deploy many of them in the forward posts during conflict times which would require increased number of TNWs in the nuclear arsenal.

It is unclear whether this rapid increase in a nuclear stockpile is to cater only to Pakistan’s own security challenges, or to Saudi Arabia’s nuclear ambitions as well. Reports in 2013 were already claiming that Pakistan’s nuclear weapons program was being funded by Riyadh. This was so that Saudi Arabia could possibly avail itself of Islamabad’s technology if the need for such weapons arose.

It would be also hard to believe that Pakistan is not weary of Israel’s nuclear weapons capabilities. Pakistan’s newest Shaheen version, the Shaheen 3 with a range of 2750 kms can strike targets in West Asia. In 1980s and 1990s, Israel planned a raid on Pakistan’s nuclear facilities which was stalled. Therefore, the existential threat from Israel remains intact.

While the United States and the P4+1 states have been busy trying to curb Iran’s nuclear ambitions, limited effort is being made to curb the nuclear weapons stockpile of Pakistan. Pakistan’s nuclear weapons could fall into the hands of asymmetric organizations. Although Islamabad claims to have worked on safety and security of its nuclear weapons, the introduction of TNWs could defy security measures; these weapons could fall into the hands of terrorist organizations when deployed in times of crisis.

According to Shyam Saran, post 2011, U.S. raids in Abbotabad to kill Osama Bin Laden, Pakistan has been apprehensive of U.S. intentions in Global War on Terror. Pakistan is concerned of America’s drone attacks on Pakistani territory and their capacity to wipe out Pakistan’s nuclear capability. According to Saran, “the Pakistani military and civilian elite is convinced that the United States has also become a dangerous adversary, which seeks to disable, disarm or take forcible possession of Pakistan’s nuclear weapons.”

In addition, the US Nuclear Supplier’s Group (NSG) waiver on India has been criticised by Pakistan and they believe that Pakistan deserves similar treatment as well. However, India has earned its NSG waiver due to its persistence as a responsible nuclear weapon state. India’s adoption of a ‘no-first use’ doctrine, its firm opposition to TNWs, its efforts on building nuclear proliferation resistant technologies for peaceful nuclear energy and its ratifying of the Additional Protocol, has earned it the NSG waiver.

Although the Obama Administration seems to be obsessed solely with courting Iran, the increase in Islamabad’s fissile material is a threat to global security. Therefore, such threats need to be addressed.

America could persuade Pakistan to consider signing onto the FMCT. As of now, Pakistan is the only country opposing the Treaty. Therefore, Pakistan’s acceptance of the Treaty would hasten the negotiating process of the FMCT. If Islamabad’s nuclear weapons program is aimed only at India or like it would be conducive for it to sign the FMCT: the Treaty would curb India’s future fissile material as well as Pakistan’s. Pakistan, whose fissile material stockpile exceeds that of India’s, with the Treaty being imposed would be at an advantage. While it could be believed that such an arrangement could create destabilization, it would prevent Islamabad from continuing to build its stockpile of nuclear weapons, and would greatly help regional stability. As far as India is concerned, India’s nuclear posturing is premised on ‘credible minimum deterrence’, which focuses on survivability of the nuclear arsenal than merely increasing stockpile.

It is a known fact that Pakistan has also been demanding of similar nuclear deal as the Indo-US 123 deal. It only remains to be seen if the U.S. provides Pakistan of a similar deal with a condition to limit Pakistan’s fissile material stockpile.

Debalina Ghoshal is Research Associate at the Delhi Policy Group, New Delhi, India.

 

Rising Intolerance in Modi's India

Recently, Indian media was embroiled with the ink attack on Sudheendra Kulkarni, speechwriter for former PM A. B. Vajpayee. Kulkarni had invited former Foreign Minister of Pakistan, Khurshid Mahmood Kasuri, to launch his book “Neither a Hawk, Nor a Dove: An Insider Account of Pakistan's Foreign Policy" in Mumbai, India. Members of Shiv Sena, a Hindu Nationalist organization, took responsibility for dousing Kulkarni in black ink, accusing him of having “the blood of soldiers” on his hands for inviting a former Pakistani leader. They continued to brag of the attack comparing Kulkarni to Kasab, a terrorist involved in the 26/11 terror attacks in Mumbai. And while Kulkarni attended all the events of the day covered in black ink as protest to the absurdity and communalist behavior that Shiv Sena is often associated with, this is just one of the recent examples of the rising intolerance against minorities in Modi’s secular India.

Former Chief Minister of Gujarat, Narendra Modi of the Bharatiya Janata Party (BJP), ran one of the most successful election campaigns in 2014 resulting in the biggest win by any party in the last three decades. He rejuvenated the promise of “India Shining,” which was marked by his campaign on economic optimism. He promised his electorates of economic growth, stable business environment, development and more jobs. However, the social landscape of India is experiencing a different of kind of shift under Modi. PM Modi, on cue from Obama’s words against religious intolerance in India, ensured his government’s commitment to the “complete freedom of faith” and vowed to protect any targeted religious groups. This was also in light of attacks on churches in the capital and protests by Christian groups. Almost nine months since that promise, there seems to be no end to this surge of intolerance.

The success of India as a rising power in South Asia and in the world is being questioned because its secular structure is dysfunctional. Only last week, Shiv Sena forced the cancellation of Pakistani Singer, Ghulam Ali’s concert in Mumbai and Pune, and Pakistani Sufi Rock Band, Mekaal Hasan Band’s concert in Ahmedabad. These cancellations are the mild form of bigotry and anti-Pakistani, anti-muslim sentiment. An extreme example came earlier in October when Mohammad Ikhlaq was beaten to death by a mob in a village in Uttar Pradesh. The 50-year-old man was suspected of slaughtering a cow and storing its meat. This was a tragic incident as a result of the imposition and spread of the ban on beef in states like Haryana, and Maharashtra. Shiv Sena as well as another Hindu nationalist organization, RSS (Rashtriya SwayamSevak Sangh) supported this ban. However, the frequency of these incidents is getting closer together and is on the rise. One of the most absurd documented incidents is caprured a video of the Kashmir State Assembly that went viral. Elected members of parliament of the BJP were caught beating up a Muslim member accused of eating beef. During a session of the assembly these elected representatives showed their thug-like behavior that is being used to impose the beef ban. And this intolerance isn’t limited to the beef ban. Last year in the city of Pune, after “morphed pictures of the late Shiv Sena chief Bal Thackery, Chhatrapati Shivaji and other Hindu gods” surfaced on social media, some Hindu groups were outraged. Members of Hindu Rashtra Sena, who were later arrested, beat and murdered Mohsin Sadiq Shaikh. The 24-year-old Muslim IT professional was in no way connected to the morphing or the distribution of the pictures. It was clearly a hate crime. This seamless string of communal violence has been a constant feature within Modi’s time in office. These recent incidents have triggered a national debate in the country over Narendra Modi’s affiliation and continued support to the RSS, while Modi’s economic optimism has not been enough to fill the empty rhetoric of protecting religious minorities.

It almost seems that the RSS and Shiv Sena and other Hindu nationalist organizations are protesting on the basis that their feelings are hurt because any wisdom other than their own is morally wrong and not within their value structure of India that is 80-81% Hindu. Arnab Goswami, host of Newshour Debate on Times Now hosted a debate on the Beef Ban, exposed a crucial point in the debate of the specific ban on beef as a reflection on banning movies, books, or food based on religious sentiment; in a country like India, if every single religious sentiment was to be kept in mind during legislation, 90% of the food items would not be available to the public. Saba Naqvi, journalist and panelist on the debate, also mentioned that the “upper caste hegemonic imposition” of these religiously motivated laws is not democratic and can’t be the basis of lawmaking. This intolerance towards supposedly dissenting religions (other than Hinduism) is anti-democratic, and by Nehru’s conception of India, anti-Indian as well.

These incidents cannot be ignored in the larger context of the campaign of Hindu revitalization of India. It goes much beyond violence against Muslims or Christians. There is an active emphasis on the “Ghar Vapsi” or “homecoming” initiative supported by organizations like Shiv Sena, Vishwa Hindu Parishad (VHP), and others mentioned earlier. This is a floundering crusade that targets the rural poor by providing monetary incentives to Muslims and Christians to convert to Hinduism. The campaign has two platforms. First, to facilitate conversions to Hinduism by providing daily Shakhas or training camps, mass "reconversion camps,” emphasis on Sanskrit diksha (education) and learning of old traditions. This has been prevalent most recently in the State of Kerala and Uttar Pradesh, converting 59 families in Kerala and 315 individuals in the latter. The second platform is based on a hardline against conversion to another religion (other than Hinduism). There has been support for Anti-Conversion bills in different states by these organizations. A leader of RSS, Dr Manmohan Vaidya, went on to call mass conversions of Hindus to Islam and Christianity fraudulent and coerced. The hypocrisy is obvious when he claims that conversion to Hinduism is “a natural urge” to “reconvert” back to original roots. This surveillance of conversions to other religions has been accentuated. When almost a 100 tribal families in Jharkhand converted to Christianity in part due to their oppression by upper caste Jats, or when almost 80 Dalit families converted to Islam in New Delhi, the VHP protested and launched investigations into the possibility of coercion and possible exploitation of the low socioeconomic class. And while this rising intolerance continues, there has been a significant development of opposition.

After the beef ban killing of Ikhlaq, President Pranab Mukherjee’s recalled to a “tradition of tolerance” in India and there has been an increasing opposition to rising intolerance from scholars, writers, Bollywood and politicians as well. In disapproval of a weak protest by the Modi government, around 41 Indian writers have returned their literary awards and honors as a unique protest to bringing attention to the issues of food politics and censorship. This also came as a response to the killing of an atheist blogger, Malleshappa M. Kalburgi, who criticized idol worship and superstition. Karnataka Chief Minister called this incident “highly condemnable.” And BJP MP, Mahesh Sharma called the murder of Iqlakh in relation with the beef ban “an accident.” This kind of response is not surprising as it runs parallel to Modi’s national rhetoric of having downplayed similar tragedies as simply “unfortunate.” The Indian government along with state governments needs to investigate these extremists groups and religious hardliners. The political leaders must improve their rhetoric to condemn these acts of violence against minorities. There should be a smooth and quick justice system response to these attacks in order to de-incentivize these groups to continue exploiting and murdering individuals on the basis of their religious beliefs.

Currently, this conflict remains unabated and unresolved. While PM Modi’s voice is heard loud and clear while talking of “Digital India” and “Swach Bharat” (Clean India) and “Acche Din Aayenge” (Good days are on their way) in India and his missions abroad, there is poor rhetoric condemning these bans, and for the most part there seems to be a deafening silence.

Generating Fiscal Space: A Suggested Framework

Dr Mukul Asher reviewed the theoretical concept of fiscal space, and presented an integrated framework for generating fiscal space in the Indian context. The framework focuses on growth; ways to increase conventional and non-conventional sources of revenue; and better expenditure management.

Originally published here at the Centre for Policy Research.

The Effective Implementation of OROP

This was originally published here in Pragati - The Indian National Interest Review.

The decision by the current government to implement One-Rank-One-Pension (OROP) for military personnel is a welcome move as it reduces the long-standing unfairness in pension arrangements between uniformed military personnel and employees of the Union Government. India is one of the few countries where military personnel have lower pension benefits relative to the civil service. While many design details of OROP are not yet fully clear, the OROP decision can only be effectively implemented and its fiscal implications managed if complementary reforms in three broad areas are sustained: Improving Professionalism In Administering OROP, Sustaining Economic Growth, and Creating Fiscal Space.

The first, Improving professionalism (i.e. the competence and quality of services provided) with which current military pensions programs are administered is an urgent necessity. Four specific initiatives in this regard are outlined.

One, the Ministry of Defence (MoD) must construct a demographic profile of all personnel including their dependents. This is to estimate current and future costs of the pension scheme, and make make arrangements to meet this expenditure. The quality of the debate on OROP has been severely constrained by the lack of available data on basic pension design-related features: e.g. the age-specific composition of beneficiaries and eligible dependents over the next several decades; estimates on mortality and morbidity rates in retirees, and how they vary across cohorts, geographical regions, or occupational groups.

Estimates available in the public domain suggest that most military personnel (about 80 per cent) retire between the ages of 35-40, 19 percent retire between the ages of 54-60, and less than one percent retire above the age of 60. Increasing longevity trends (the average life expectancy at age 60 in India is 17 years in 2014) underscore the importance of such data in shaping the design of pension schemes, and subsequent reforms to ensure that pension promises remain credible and sustainable.

Two, the Government must periodically conduct an actuarial evaluation of the current value of the liabilities and the arrangements made to meet them. Such actuarial evaluations of statutory expenditure are essential for sound management decisions on how such spending is to be sustained and to project cash flow needs. Reforms in managing public accounts, i.e. a shift from cash-accounting to accrual-accounting, where feasible for e.g. in public enterprises, are useful as they underscore the continual need to match long-term liabilities and assets. To facilitate this, there is significant merit in all government agencies maintaining a registry of their assets. The Government does not need to make this registry publicly available if national interest concerns are compromised. However, constructing such a registry is imperative for the government to assess various options to meet contingent liabilities.

Three, Governance Boards that oversee military pension arrangements must include independent professionals that are well versed in actuarial sciences, economics, finance and information management systems. The mandate of the Board would be to ensure that the Ministry of Defence has access to core areas of expertise that are vital for a modern pension program. As civil service personnel are routinely rotated between government agencies, access to such expertise is imperative.

Four, given the complexity in the design of OROP and the periodic revisions that retirees will face, the MoD must strengthen its communication strategies. Annual Reports, Web Portals, Wikis that contain necessary information will be needed. Such tools place competitive pressures to provide quality services across all government agencies.

The Second, credibility of any Defined-Benefit pension scheme, including the OROP, is based on sustaining high rates of economic growth. Specific reforms that contribute to improved economic growth in India are therefore essential. This will require complementary and structural reforms to increase the flexibility in labour markets, lower the cost of doing business, attract investments and create jobs. This however requires a systemic approach and coordination across government agencies. There are two initiatives that MoD can consider to sustain economic growth.

One, investments in human capital and equipping military personnel with skill-sets that can be used in employment post retirement merit consideration. As most personnel retire before the age of 40, and can continue to contribute to the economy for many years, labour market reforms that encourage retired personnel to be absorbed across the economy must be prioritised. It is often the case that many military personnel contribute to security, administrative and organisational management post retirement. Creating avenues to utilise the vast skill-set and experience of personnel in other areas in the economy are also important.

Two, many Ministries including the MoD manage large public enterprises. More productive use of resources under these enterprises is another avenue to contribute to economic growth. For instance, many government agencies manage large parcels of land that are not being used efficiently. Once a national registry of assets becomes available, concrete efforts to monetise unproductive assets or generate revenue from these assets (i.e. land-use rights or leases) must be prioritised.

The third, creating fiscal space. Simply put, fiscal space refers to the ability of an economy to finance expenditure without impinging its other priorities. Creating fiscal space to finance OROP is fundamental to ensuring the sustainability and credibility of military pension arrangements. In this context, fiscal space can be created by either or a combination of a) reducing expenditure needs of the MoD; b) increasing revenue or share of national income devoted to the MoD; c) sustained increases in national income.

Lowering administrative costs of pension programs by relying on information technology or saving costs through efficient procurement practices are examples of lowering expenditure requirements. Similarly, monetising unproductive assets or using land-use rights to generate income is an example of creating fiscal space. For example, the recently completed coal and spectrum auctions will, over time, generate revenue equivalent to 2.5 percent of 2013 GDP. Sustained efforts by all government agencies, including the MoD, to implement reforms that create fiscal space must therefore be emphasised.

The cost of the pension program for civil servants (employed in central and state governments) prior to the National Pension System (NPS) was about 1.9 percent of GDP. Such disproportionately high spending on less than 4 percent of the labour force precipitated reforms to pension arrangements for newly recruited civil servants.

The co-contributory design of the NPS may not be effective for military personnel as most retire before the age of 40. The NPS however provides a framework for managing pension arrangements that MoD could customise. For example, over time, the MoD could make annual transfers to sinking funds to meet pension expenditure for future retirees. The proceeds of these funds could be managed by NPS or under the NPS architecture. Such arrangements would strengthen the fiscal sustainability, and improve the professionalism of military pension arrangements in India.

The Ministry must undertake complementary and concomitant reform in the three broad areas discussed here if public support for OROP and the credibility of military pension arrangements is to be sustained. This would require MoD to depart from current practices and its business-as-usual mind-set.

Photo: .Uvitra

Goods and Services Tax in India

This was originally published here in Pragati - The Indian National Interest Review.

The introduction of the goods and services tax (GST) involving the unification and rationalisation of multiple production and consumption taxes at the Union and State levels, into a unified value added taxes on goods and services (GST) at Union and State levels, has been on the reform agenda for considerable period of time. The reform is considered to be extremely important to improve the ease of doing business and enhance productivity in the economy. The Union Finance Minister has termed it as a “game changer” and a “the reform of the century”.

However, the introduction of GST is like a bullock cart stuck in the mud. It has missed repeated deadlines. The latest one set by the Union Finance Minister is to introduce the tax in April 2016 and with the inability to pass the 122nd Constitution Amendment Bill, it would be difficult to see the introduction of GST by April 2016. The Bill, after being passed in the Lok Sabha was referred to the Select Committee of Rajya Sabha, but could not be passed in the Monsoon session of the Parliament.

Admittedly, the proposed GST in the Bill even after the incorporating the recommendations of the Select Committee, has significant shortcomings. Furthermore, the entire structure of the tax and its implementation details will have to be finalised by the GST council, and compromises from the ideal structure are unavoidable. In this context, the important questions are: One, To what extent the GST reform will be a game changer considering the infirmities implicit in amendment bill and the compromises likely to be reached between the Union and States and among the states themselves on the other? Two, What is the structure of the dual GST that is likely to emerge in terms of the thresholds and tax rates? Three, Can the reform be carried through for its final implementation by April 2016 or is it better to plan for its implementation after proper preparedness in a more accommodating time frame? Four, If indeed, the full-fledged GST takes longer time, is there a middle ground where the Union government can reform its own tax system which will be a significant move towards the adoption of GST and which will provide the necessary confidence for the switchover to full-fledged GST in the next year?

GST reform: A game changer?

GST is an important component in any modern tax system in most countries in the world with the major exception of the United States of America. In fact, few fiscal innovations in the 20th Century have had such a pervasive influence on the countries’ fiscal arsenal as the GST (Bird and Gendron, 2007). The promise of greater revenue productivity and neutrality in resource allocation has led to over 140 countries in the world to adopt one form of VAT or another and the discussion of reform is gaining ground even in the United States, the last bastion which has resisted its imposition thus far. Over the last 60 years since VAT was first introduced, there have been several lessons learnt, innovations made and different variants of the levy implemented depending upon not merely best practices but also political acceptability. Needless to add, except for 5 countries which repealed the tax after its imposition, all others found it worthwhile to continue with the tax.

The most important argument for GST is its neutrality. Relieving the taxes on inputs removes cascading from the tax and as tax credit has to be taken at every stage of transaction, there is an implicit incentive to comply with the tax due to an element of self-enforcement.   For this reason, the tax is considered to be a money spinner (Keen, 2007). Properly structured, the GST is expected to improve the competitiveness of the reform by relieving all input taxes on exports. Efficiency gains are reasoned to accrue from the seamless trade the reform promises to achieve. All these are expected to result in productivity gains to the economy.

Expectations of the gains from GST in India have been far too optimistic. The gains arising from lower distortions due to broader base, lower and less differentiated rates, benefits of seamless trade across the country, greater export competitiveness due to comprehensive relief of domestic taxes on exports, and lower administrative and compliance costs are seen as the gains. The Finance Minister has stated that this is the single most important tax reform of the century and has stated that the growth rate of the economy will accelerate by 1.4 per cent on account of this. Writing on the issue the President of CII has asserted that the acceleration in the growth of the economy will be 1.5 per cent. The academic support for this comes from the NCAER study done for the 13thFinance Commission in which, the reform has estimated to accelerate the growth rate of the economy ranging from 0.9 to 1.7 percentage points and the gain in exports will be between 3.2 to 6.3 per cent.

The study assumed that the GST will be flawless and comprehensive and based its estimate of gains on the 2003-04 input-output table.   Unfortunately, the GST that will emerge will be far from being flawless as it will be based on a number of compromises. Furthermore, productivity gains based on 2003-04 input – output table does not take account of subsequent developments enhancing efficiency including the application of new technology in economic activity and replacement of cascading type sales tax with a number of rates with a harmonised VAT on goods by the States in 2005.

In international practice, it is difficult to find examples of flawless GST. In most countries GST is essentially a Central tax. The subnational GST experience is available only in Canada, European Union and Brazil, which may be characterised as the “good, the bad and the ugly”. Canadian system is the best we have seen among the countries levying GST at subnational level and even there, the province of Alberta does not levy the tax at all and Quebec collects both provincial and federal GST and passes on the latter to the federal government. In European Union, despite the need to adhere to the Sixth Directive all the countries except Denmark have two tax rates or more and in most, the standard practice to have two rates. Furthermore, in these countries the standard rate varies from 15 to 25 per cent and the mean standard rate works out to 19.5 per cent. In Brazil, it is a combination of origin based and destination based system with multiple rates and the singular lesson from its experience is that it is not a model to follow.

In India, with a number of players with varying perspectives and diverse economies involved in the negotiations to levy the GST, compromise is unavoidable. Therefore, pursuing flawless GST is a mirage, but nevertheless, it is important to get the basics of the reform right. As already mentioned, the GST Bill has some basic shortcomings. Surely, GST is an important reform for improving productivity of Indian economy and revenues, but the extent of gains will depend upon the structure and operational details of the levy that will eventually emerge. The Constitution amendment Bill, even after taking into account the recommendations of the select committee has some serious defects which will undermine the gains. It is neither comprehensive nor flawless. The exclusion of electricity, real estate, petroleum products and alcohol will render the tax base narrower add to cascading and adversely impact on the competitiveness of domestic businesses. Retaining one per cent tax on interest sale of goods and services contributes to inefficiency through cascading and balkanising the market. In fact, it would have been better for the Constitution amendment bill to leave out these infirmities and provide a broad framework for the levy leaving out the details for the GST Council to decide.

Even if the GST council decides to leave out the above sectors in their respective acts, these could have been included over time without having to go through the Constitution amendment route. Leaving out electricity and petroleum products from GST will deny input tax credit in transportation services. Not including real estate transaction in the tax base, besides creating an imperfect input tax credit mechanism in the construction sector, will deny the government important information from audit trail of these transactions that could help to contain the generation of black money in the sector. Even in the case of ‘sin taxes’ like alcohol and tobacco products, the input tax credit will be denied even when they are used in pharmaceutical and other products as inputs. Indeed, inclusion of these in GST does not mean that they will suffer lower tax rates. Human consumption of alcohol and tobacco products will have to be subjected to additional sumptuary excises.

As mentioned above, the Constitution Amendment Bill leaves the structure and operational details entirely to the GST Council. This implies that the entire gamut of issues relating to the structure and operation of the levy has to be negotiated and decided upon by the GST Council. These include the taxes to be subsumed, the list of goods and services to be exempted, thresholds for CGST and SGST, the structure of rates, place of supply rules, special arrangement for special category states, harmonised tax laws and date of including the tax on petroleum products alcohol and tobacco products, operational details of tax administration including GST Network and dates for discontinuing the tax on inter-state sale of goods and services.

In each of the matters, the interests of the Union and States differ and the interests of the producing states differ from those of the consuming states. Take for example, the determination of the threshold for CGST. The States would not like the Union government to reduce the threshold from the present level of Rs. 1.5 crore because, that would impact on the smaller producers and traders who have not been paying the tax so far and the being closer to them, the States would not like to burden them. On the other hand, retaining the threshold at the prevailing level would not help to broaden the base of the tax. Similarly, the imposition of service tax on small traders would have to be avoided from the viewpoint of the States as that will be an additional tax in the new arrangement, but the prevailing threshold is Rs. 10 lacs. The important issue to note is, the GST that will eventually emerge out of compromises will have a number of infirmities.

There has been considerable debate on the structure of rates of the proposed GST. The Constitution Amendment Bill has left the issue to be settled by the GST Council. The Council will have to consider the revenue neutral rate of tax estimated by an expert body. However, the report of the Select Committee has suggested that the rate should not exceed   per cent. The note of dissent of the Congress party members of the Select Committee has also suggested that the rate should not exceed 18 per cent.

The NIPFP made a series of estimates based on the prowess data base of 2011-12 and by making assumptions about the possible revenue collections from the informal sector. The alternative estimates were based on the inclusion or otherwise of entry tax in GST and taking into account the revenues from central sales tax at 4 per cent and 2 per cent. Some relevant estimates are summarised in Table 1. The important point to note is that when the States levy the tax at one rate the Revenue Neutral Rate (RNR) is 10.3 per cent when the CST revenue is taken at 4 per cent but declines to 8.9 per cent when CST revenue is taken at 2 per cent. Since the single rate RNR for the Union government is 9.6 per cent, the combined GST rate works out to 19.9 per cent and 18.3 per cent in the two cases. When the SGST is levied at two rates with the lower rate fixed at 5 per cent ad RNR is estimated taking 4 per cent CST into account, the general rate works out to 13.9 per cent. The general rate works out to 11.4 per cent when CST revenue is assumed at 2 per cent. As regards CGST is concerned, when the essential consumption items are taxed at 5 per cent, the standard rate works out to 12.2 per cent. Thus, the combined incidence on essential items of consumption will be 10 per cent (5 per cent SGST and 5 percent CGST) and the standard rate will be 26.5 per cent when CST is taken at 4 per cent 24.6 per cent when it is taken at 2 per cent.

The above relates to the average of the States and there are significant inter-state variations in the RNR. The range in the single rate is from 6 per cent to 12 per cent for a single rate when CST is taken at 4 per cent and 5.8 to 10.2 per cent when CST at 2 per cent is taken.   The variations in the standard rate when two rates are considered are from 6 per cent to 18 per cent in the first case and 5.8 per cent to 14.2 per cent in the second case (Table 1). The important question is, when the nominal rates of tax are broadly identical why should there be such a large difference in RNRs. The explanation lies in the differences in administrative efficiency, and perhaps, variations in the extent of unorganised economy. This shows that taking average rates need not necessarily result in large revenue losses even when we switch over to the destination based GST from the prevailing partially origin based levy.

Before concluding discussion on the rate structure, it is important to emphasise an important factor. So long as it is decided to levy the tax at two rates both in CGST and SGST, it will be difficult to see the standard rate relating to RNR at less than 25 per cent. It is here that the Union government will have to take leadership to assure a combined rate of less than 20 per cent. This could mean that if the compliance of the tax does not increase, the Union government may have to earmark substantial funds for compensating the states for revenue loss. In contrast, if the reform is properly calibrated and the tax is placed on an efficient information technology platform, the compensation amount may not be large and both the Union and the States may gain substantially. In fact, it is possible that if the technology platform of GST is harmonised with that of Income tax, there can be a significant increase in income tax. We may actually see the tax – GDP ratios rising significantly as was seen in the direct taxes during the period 2003-04 to 2007-08 when the tax information network was put in place in a phased manner.

The GST reform agenda has been on the table for quite some time. The proposal for the reform was first announced by the Union Finance Minister in his 2005-06 budget speech. In the 2007-08 budget speech, the Finance Minister stated that the reform will be implemented from April 2010. The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST was introduced in the Lok Sabha in March 2011 was referred to a Parliamentary Standing Committee (PSC) which submitted its report in August 2013. The Bill however lapsed with the dissolution of the 15th Lok Sabha. The Union Finance Minister in the 2015-16 budget speech has announced that the GST will be implemented from April 2016.

The time frame and the art of feasible

However, there are questions about the feasibility of introducing the tax by April 2016. First, 122ndConstitution Amendment Bill, after revisions in the light of the recommendations by the select Committee of Rajya Sabha has to be passed by both Lok Sabha and Rajya Sabha by two-third majority. With the present Logjam continuing in the Parliament, passing the Bill is doubtful, particularly in the Rajya Sabha where the government does not even have a majority. Once this is passed in the Parliament, this has to be endorsed by one half of the states before the amendment comes into effect. Thereafter, both the Parliament and each of the State legislatures will have to pass the respective acts and rules relating to the implementation of GST.

Apart from the Constitutional and legislative tasks, there is considerable work that has to precede the introduction of GST. The GST Council is required to finalise decisions on the exemption list, thresholds for SGST and CGST, mechanism to deal with inter-state transactions, application of place of supply rules relating to the apportionment of revenue from inter-state transactions in services, special provisions for the special category states, harmonised forms and procedures across states, administrative arrangements, treatment of dealers with small turnovers, dispute resolution mechanisms, technology platform, capacity building of tax administration, information and publicity and education of taxpayers on GST and creation of an effective taxpayer service. It is doubtful whether all these can be accomplished within the next eight months. It must also be noted that half-baked reform is more harmful and therefore, it is advisable to tread the ground carefully.

Politically, while continuing the efforts to implement the reform, it may be worthwhile for the government to take a via media of merging the Union Excise Duty with the Service tax to introduce the GST at the manufacturing stage. This can be achieved by working out a common threshold for excise duty and service tax, rationalise the excise duty by converting all the rates into ad valorem, converge and unify the rates into two – one for items of common consumption and a standard rate which will be applied on services as well and provide input tax credit for goods against services and vice versa. This will transform the prevailing Central domestic indirect taxes into a GST at the manufacturing stage. Of course, on sumptuary items like cigarettes, in addition to the GST, the government can levy a separate excise duty. This, in fact, was the recommendation of the Expert Group in taxation of services in 2001 and can be carried out by the Union government without going through the Constitutional amendment (India, 2001). Implementation of this reform will also demonstrate the seriousness of the government in bringing about reform and also help in the eventual introduction of full-fledged GST. This reform can be accomplished in April 2016 and the Finance minister can claim that under the circumstances and constraints placed on him, he has tried to bring about the reform in Central indirect taxes.

Concluding remarks

The reform of domestic trade taxes to evolve a destination based GST is important from the viewpoint of improving business climate, improving tax compliance and long term revenue productivity and improving the productivity of the economy. However, it is important to keep in view four important issues. First, given that India suffers from the tyranny of status quo and given the numbers of actors involved, it would be too much to expect to transform the existing indirect taxes into a ‘flawless’ GST. It would be useful to approach the reform as a process rather than as an event. In other words, it is necessary to introduce reforms and improve it upon rather than trying the get the ideal system in place. Second, as arriving at consensus on the basic parameters of the reform reform entails a number of compromises, while considering that it is an important reform, it is important keep pour expectations on the gains from reform at a realistic level. Burdening the reform with overly optimistic expectations to consider it to be a “game changer” and the “reform of the century”, could lead to disappointments later. Third, it would be inappropriate to rush through to introduce the reform in April 2016, without adequate preparations. A lot of work needs to be done to get the basics of the reform correct. Fourth, inability to accomplish the reform by April 2016, should not deter the Union government from unifying its own indirect taxes to evolve a GST at the manufacturing stage.

Photo: Phillip Ingham

Dr M Govinda Rao is an economist and a member of the 14th Finance Commission. He is an advisor at the Takshashila Institution.

The Future of India's Blue Water Navy

In August 2015, the United States Navy hosted a delegation of senior Indian naval officers for the inaugural Joint Working Group on Aircraft Carrier Cooperation. The Indian delegation consisted of aircraft carrier designers who are expected to aid the joint U.S.-India effort to build a second domestic aircraft carrier. These plans are a reflection of India’s intent to enhance its blue water capabilities, thereby projecting power by carrying out operations beyond its territorial boundaries.

Senior naval officials stated that within the next three years, the Indian Navy aims to have around 200 warships, with three aircraft carriers in each of the three naval commands. Whether this goal can be achieved within the designated timeframe remains to be seen as presently, the Indian Navy has around 137 ships. Given recent developments, there is no doubt that India is aggressively expanding and modernizing its navy for various reasons. In 2014, India acquired the Russian-made aircraft carrier, the INS Vikramaditya, for over $2 Billion dollars. The INS Vikramaditya is expected to be operational through 2018, which is also when India is scheduled to complete its first indigenous carrier, the Vikrant.

India’s long term Maritime Capabilities Perspective Plan identified two major goals for its navy – one, to develop blue water capabilities and two, to effectively counter threats close to its coast. India seeks to project its power in the Indian Ocean and beyond. The navy has increased its presence in the Persian Gulf, the Horn of Africa and the Malacca Straits. Working with other major navies, the Indian navy also conducts partnership exercises and anti-piracy missions in these areas. In the islands of Andaman and Nicobar, India has established a Far East Command to enhance surveillance around the region.

The Indian navy aims to counter China's influence in the Indian Ocean, which is highlighted by the Chinese "String of Pearls" strategy. The strategy indicates Beijing has ambitions to build maritime facilities in countries such as Sri Lanka, Bangladesh, Myanmar and Pakistan. With China building up its own blue water navy, India seeks to counter Beijing’s influence in the Indian Ocean. In addition, China’s claims to the hotly contested waters of the South China Sea give India greater reason to bulk up its naval power. While India is not yet a prominent player in these waters, it does not want to be excluded from the possibility of scouring resources in the region.

India’s blue water ambitions have not gone unnoticed by other countries. India has held joint naval exercises with countries like Vietnam and Indonesia – countries that view Chinese claims in the region as a threat to their security and economy - and expects India to take on a greater role in the region. Furthermore, in October of this year, India is expected to take part in joint naval exercises with Japan and the United States. This expresses a desire, on India’s part, to strengthen military relations with both countries. The Indian navy is also expected to hold bilateral naval exercises with Australia next month for the first time.

The Indian navy continues to transform into a self-sufficient force with aggressive plans to continue developing indigenous platforms, carriers, and systems. It remains to be seen how India’s blue water ambitions will tilt the balance of power in the Indian Ocean and beyond.

Is Pakistan Ready To Take on Sectarianism?

Leading Islamic clerics in Pakistan have announced that their support for a new legislative effort to curb sectarianism and religious hatred. According to news reports, members of Pakistan’s Council on Islamic Ideology (CII) will help draft a new law against sectarianism and religious hate speech following the Eid-al-Adha holiday at the end of this month. While such efforts sound encouraging, they are unlikely to bring relief to many of Pakistan’s most vulnerable religious minorities.

These new efforts to combat sectarianism and ‘Takfir’ are mostly a response to threats against mainstream Muslim groups and national unity. ‘Takfir’ – the practice of declaring someone an apostate and, therefore, deserving of death – is an essential component of the ideology of jihadi groups at war with Pakistan, especially the Tehreek-e-Taliban Pakistan (TTP) and the self-described “Islamic State.” In this context, Pakistan’s efforts to counter Takfirism are less about promoting religious tolerance than preventing mainstream Sunni Muslims from turning against the state.

Pakistan’s Shia community, which has been under near constant attack by terrorist groups, probably stands to gain the most from such legislation. Over the past few years, nearly 4,000 Shia have been killed and over 6,800 injured by militant groups. Despite public statements condemning anti-Shia attacks, these groups are politically well connected and operate openly in Pakistan.

Before being killed earlier this year in an ‘encounter’ with police, Malik Ishaq not only operated with impunity, but with the support of state agencies. The Lashkar-e-Jhangvi leader received a monthly stipend from the Punjab government as well as arms licenses from the governments of Sindh and Balochistan despite not being a resident of either province. After being released from custody in 2013, Malik Ishaq was photographed leaving Kot Lakhpat jail in a car wearing a garland of flowers and smiling next to CII Chairman Tahir Asrafi – the same cleric who says he will help draft a new anti-sectarianism law.

Terrorist leader Malik Ishaq with CII Chairman Tahir Ashrafi leaving Kot Lakhpat jail.

Terrorist leader Malik Ishaq with CII Chairman Tahir Ashrafi leaving Kot Lakhpat jail.

While there has been a recent crackdown against certain sectarian militants like Malik Ishaq, their organizations continue to openly recruit and propagandize freely under other names. Ahle Sunnat Wal Jamaat (ASWJ), a spin-off of Ishaq’s Lashkar-e-Jhangvi (itself a spin-off of the banned terrorist organization Sipah-e-Sahaba), continues to work openly in Pakistan’s capital.

Far from feeling political heat, ASWJ has been successfully cultivating political alliances with mainstream political parties including Imran Khan’s Pakistan Tehreek-e-Insaaf (PTI) and, allegedly, the governing Pakistan Muslim League – Nawaz (PMLN).

PTI and ASWJ representatives at a political press conference.

PTI and ASWJ representatives at a political press conference.

If there is a chance that the situation could improve for Pakistan’s Shia, it is that decision makers recognize that allowing anti-Shia hatred to spread threatens Pakistan’s already tenuous relationship with neighboring Iran. The nation’s foreign policy strategists may see the need to keep anti-Shia activities to a minimum for appearances sake, even if they are unable or unwilling to come down hard against well connected groups like ASWJ.

If Shia have some hope of respite, there is no reason to believe that Pakistan has any intention of providing any semblance of protection to Pakistan’s Ahmadis. Ahmadi Muslims accept the main tenets of Islam (“There is no God but God and Muhammad is God’s messenger”), but they also follow the teachings of Mirza Ghulam Ahmad, a 19th Century Islamic reformer who fundamentalist clerics reject as a false prophet.

In 1974, Pakistan amended its constitution to legally declare every Ahmadi “not a Muslim.” Ten years later, military dictator Gen. Ziaul Haq promulgated Ordinance XX, amending the penal code to criminalize Ahmadi proselytizing, their use of certain Islamic religious practices, and even their usage of Islamic terms and phrases. Since then, Ahmadis in Pakistan have been the subject of systematic persecution both by Islamist extremists and the state itself. Ahmadi mosques are routinely forcibly demolished by Pakistani authorities. Adding to the humiliation, the government of Pakistan requires all citizens to sign a declaration denouncing Mirza Ghulam Ahmad as “an impostor” before receiving a passport.

Like anti-Shia militant groups, anti-Ahmadi militant groups operate openly in Pakistan. At the annual Khatm-e-Nabuwat Conference in Lahore earlier this month, hardline clerics openly called for Ahmadis to be killed.

In Pakistan’s current political environment, protecting Ahmadis is almost certainly an impossibility. In 2010, PMLN leader Nawaz Sharif came under attack from a broad coalition of political and religious organizations after he expressed sympathy for Ahmadis following a pair of suicide attacks targeting Ahmadi mosques that killed almost 100 innocent people. Five years later, no one has been held accountable for the attacks.

Nor are Pakistan’s “moderate” clerics likely to offer any religious cover for political change. CII Chairman Tahir Ashrafi has himself publicly rejected any attempt to change either the country’s draconian blasphemy laws or Gen. Zia’s anti-Ahmadi ordinances, even threatening politicians who might attempt to do so.

Pakistan understands that Takfiri ideology threatens the unity of the Sunni majority in countering anti-state terrorists like the TTP, and attacks against Shia provide a bad public image in international relations, particularly with Iran. While there are many extremely brave individuals in Pakistan who champion religious tolerance and minority rights, they receive almost no support from the country’s influential religious scholars or its powerful military. As a result, they are more likely to be hunted and killed, as in the cases of Punjab Governor Salmaan Taseer, Federal Minister for Minority Affairs Shahbaz Bhatti, journalist Raza Rumi, and activist Sabeen Mahmud. Sadly, what this amounts to is that any new law to curb sectarianism and religious hatred in Pakistan is unlikely to be more than window dressing.

Seth Oldmixon is the founder of Liberty South Asia, an independent, privately funded campaign dedicated to supporting religious freedom and political pluralism in South Asia.

State-Sponsored Terrorism: A Non-Solution for India’s Relationship with Pakistan

This was originally published here in the International Affairs Review.

In May 2015, India’s Defense Minister Manohar Parrikar made a series of remarks that sparked strong reactions in India and Pakistan. Parrikar said that he would take aggressive steps to counter Pakistani sponsored terrorism, and that only “terrorists can neutralize terrorists”.  To some Pakistanis, this comment confirmed that India is sponsoring terrorism against their state. While Pakistanis routinely accuse India of sponsoring terrorism, what is surprising in the wake of Minister Parrikar’s statements is that some Indians are advocating for such a policy. With the continuation of Pakistani sponsored attacks against the Indian state, it is unlikely that such foolish and futile policy suggestions will disappear soon.

Proponents of this argument maintain that a policy of retaliation was successful in ending Pakistan’s support for an Indian based insurgency in the past.[1] These advocates claim that if India now pursues a similar policy of retaliation against Pakistan for its contemporary support of terrorism, Pakistan will inevitably face more severe consequences for its actions. By this logic, tit for tat action can help deter Pakistani support for terrorism.

Yet the argument that India should support terrorism against Pakistan is unwise. Putting aside moral arguments against aiding terrorism, a policy of supporting violent non-state actors is ill-advised. First, terrorist organizations are not reliable allies for states. While there are some long lasting relations (e.g. Hezbollah and Iran, Pakistan and Lashkar-e-Taiba), these remain relatively rare. Many terrorist groups have their own agenda and interests that inevitably clash with those of a state. As Stephen Tankel explains in his 2011 publication on Lashkar-e-Taiba, the aftermath of 9/11 forced Pakistan to clamp down on several of its proxies due to international pressure. While this was just a temporary measure to please the international community at a sensitive time, groups like Jaish-e-Mohammad, previously supported by the Pakistani state, saw this as a betrayal and soon began to attack Pakistan. Even reliable proxies like Lashkar-e-Taiba have argued that they will take action against the Pakistani state, but only after they defeat India.[2]

Second, India’s own experience with proxies and militias should demonstrate how dangerous a policy like this is to follow. India supported the Tamil Tigers in the late 1970s and early 1980s. When India’s policy changed, the Tamil Tigers turned their guns against their former sponsor. As a result, India engaged in what can only be described as “India’s Vietnam” and saw the former Prime Minister, Rajiv Gandhi, killed by a Tamil suicide bomber. Even the Khalistan movement came to life due to the fact that the national government (led by the Congress party) initially supported the campaign’s ideological mentor, Jarnail Singh Bhindranwale, in an attempt to subvert the control of domestic rivals. Instead, what happened was the creation of a deadly insurgency that lasted for nearly a decade.

India’s previous success at curbing Pakistan support for Khalistani insurgents also proves to be a faulty analogy. During the 1980s and early 1990s, the Pakistani government provided material and diplomatic support to Sikh terrorists in India’s Punjab, and in response India’s external intelligence agency initiated a program of retaliation against Pakistani cities. Every attack carried out by Khalistani militants was met with a retaliatory strike in Pakistan. Eventually this forced the ISI (Inter-Service Intelligence, Pakistan’s primary intelligence agency) to cut their support (which proved to be crucial in defeating the insurgency), and the covert operation was shut down by Indian Prime Minister I K Gujral.

Initially, this case study would seem to indicate that a similar campaign of vindictive violence will be successful at halting Pakistan’s support for terrorist organizations in India, however a closer investigation shows that the Khalistan case remains an outlier. For one, the Pakistani state had little in common with the Sikh insurgent’s ideology. The Sikh insurgents did not provide protection for the Pakistani deep state, nor were the Sikh insurgents proving themselves to be a domestic aid like many Islamist militants today.[3] Also important was that the Pakistani state remained wary of the Khalistani insurgents, as Pakistani Punjab was also claimed by the Sikh militants to be part of a future Khalistan. While the Khalistan movement provided Pakistan an avenue from which to strike India from, it ultimately was not a long-term interest.

Finally, the belief that supporting terrorism against Pakistan will force a change in policy fundamentally fails to understand the political situation in the country. Pakistan’s sponsorship of terrorism has been primarily advocated for and carried out by the Pakistani military – which retains control of national security matters. Even today, the military has wrestled control of national security matters away from the civilian government. Any India-sponsored terror attacks against Pakistan will have little effect on policy. Instead, the military will use the opportunity to make the civilian government look weak, and possibly force more concessions from the civilian government.

The current terrorist organizations sponsored by Pakistan share an ideological goal and fulfill an important domestic role. As South Asia analyst Christine Fair has pointed out, Lashkar-e-Taiba plays an important role in the Pakistani state. Besides its provision of social services, the group also counters anti-Pakistan organizations. If anything, Pakistani reliance on its proxies will only deepen should India use terrorism to attack Pakistan.

When it comes to trying to end terrorism from Pakistan, India has limited options. A limited air strike or Special Forces raid against Pakistan remains impractical, with a conventional strike also being too costly for the Indian state. For the reasons laid out above, the idea of using terrorism to fight terrorism remains a foolish idea. Instead, India must rely on intelligence, border surveillance, and international pressure to fight terrorism emanating from Pakistan.

[1] An insurgency located primarily in India’s Punjab state to establish a Sikh state called Khalistan.

[2] Stephen Tankel, Storming the World Stage: The Story of Lashkar-e-Taiba (London: Hurst & Company, 2011), 261.

[3] Lashkar-e-Taiba, through its front Jamaat-ud-Dawa, operates a large chain of schools, mosques, and libraries allowing it to be effectively integrated and useful for the state.

From a PPP to Public Sector Control of Metronet in the UK: Implications for India

This was originally published here in Swarajya.

The primary objective of this article is to understand how a large transport sector PPP (Public Private Partnership) in UK, a high-income[1] country, with a reputation for good public financial management,  came to be restructured from a PPP to full public sector control in less than a decade, and the implications this episode holds for India, a middle-income[2] country.

A critical examination of this episode is particularly relevant at this juncture as Indian government organizations, at both the Union and State government levels, hope to use the PPP method to complement traditional sources of public sector financing, undertaking construction and operations of infrastructure projects and public amenities.

The PPP under consideration is called the “Metronet PPP” which was carried out by the United Kingdom (UK) Government for the London Tube. This PPP, initiated in 2003, was designed to carry out refurbishment of a part of the London Underground. Envisioned as a 30 year project, the private holding company of the PPP was declared bankrupt in 2007, and was fully taken over by the public sector Transport for London (TfL) in 2008. Hence, the PPP was wound up a few years after its inception, with operations fully reverting back to the public sector organisation, and this continues until today.

The Metronet PPP Arrangement

Before understanding the reasons for Metronet PPP’s failure, we first need to consider some details of the PPP arrangement. The Metronet PPP became operational in April 2003, and at the time it was the largest PPP in the UK. It comprised two PPP contracts for renovation of two different parts of the London Tube: Metronet BCV (for the Bakerloo, Central and Victoria tube lines) and Metronet SSL (for the Sub Surface tube lines of the London Tube such as District, Circle, Metropolitan, Hammersmith & City, Waterloo & City tube lines). Alongside, another PPP contract, called the Tubelines PPP, was also operational for the remaining part of the London Tube (Jubilee, Northern, Piccadilly tube lines). Metronet and Tubelines were each a consortium of private sector companies.

It was envisaged that the public sector will gain from the PPP, as compared to conventional public procurement, due to stability of finance and the private sector’s project management skills.  A 2002 report of the UK Parliament indicated that for the work under the PPPs, an investment of about GBP 16 billion (in terms of present value in 2002) was expected over the next 15 years; and as compared to conventional public sector funding, the PPP arrangements were expected to lead to a saving of GBP 2 billion and faster and more reliable journeys on the London Tube, as compared to the alternatives, worth as much as a further GBP 2 billion to the passengers through the life of the projects.

Under the PPP arrangements, the responsibility to carry out the renovation and refurbishment of different parts of the London Tube was handed over to private sector consortia under the three PPP contracts. However, the day-to-day functioning of the London Tube including responsibility for stations, train operations, signalling and safety, service patterns and setting fares was retained by the London Underground Limited (hereafter referred to as LUL), a public sector organisation.

The Department for Transport (DfT) at the UK Government would provide a yearly grant of GBP 1-1.1 billion to Transport for London (TfL) which would, in turn, give this to the three private consortia as payments for their services. The payments as annual “Infrastructure Service Charge” would vary based on four performance indicators. Further, the financing structure of the Metronet PPP was constituted by about 12 percent equity and the remaining as debt. The equity was split equally among five private companies which formed the private consortium for Metronet; while the debt was a combination of senior debt through bank loans (which would have to be paid off first in case of the failure of the PPP) and bonds.  A clause in the PPP contracts required a review of the contracts at the interval of every 7.5 years, and also a decision at these intervals on the price of the contract for the next 7.5 year tranche. A PPP Arbiter’s post was created to mediate between the private consortia and LUL in case they were not able to agree on the price.

Implications for India

The main question discussed is what challenges led to the Metronet PPP being transferred to public ownership and control, and what are the policy and operational implications of this episode for pursing the PPP method in India.

1. Tied supply chains

First, a significant part of Metronet’s obligations, nearly 60 percent of its projected capital expenditure in the first 7.5 year period, were to be delivered through contracts with its own five shareholders. This meant that each equity partner had contracts with Metronet to supply services for the work of refurbishment, implying a case of “tied supply chains”.

Tied supply chains have benefits but they require two pre-conditions: the scope of work is well established prior to the start of work, and a strong governance structure which while understanding the incentives of the shareholders, maintains tight oversight on the supply chain (Gannon et al. 2013). This implies that in a PPP arrangement, tied supply chain should be avoided, unless these two pre-conditions are satisfied – which was not the case in Metronet PPP, leading to a conflict of interest which remained unresolved and only profited the shareholders.

2. Project management

Second, the Metronet PPP case highlights too much dependence on the private sector for project management.  According to the National Audit Office (NAO) of UK, the project management arrangements actually remained unclear and a majority of the supply contracts were not competitively tendered under the Metronet PPP.

The main implication is that any government body or department, which is involved in a PPP or any such project, must get involved in the implementation with the aim of improving its own project management capabilities. The PPP Division (or Cell) at the Ministry of Finance, Government of India, is well-placed to improve project management abilities in the public sector. This could also enable retained in-house government knowledge (in areas including bid evaluation) to support further PPP engagements of government departments.

3. Financing structure

Third, given the financing structure of the Metronet PPP, it may be perceived that a bulk of the risk was with the debt owners. However, TfL had given a 95 percent guarantee to the senior debt providers, and the DfT had given an informal assurance to them that the financial debt obligations would be met. This created contingent fiscal liabilities for the UK Government, which turned into actual liabilities when the Metronet PPP failed. Further, the Metronet PPP had been classified as a “private non-financial corporation” from 2003 to 2007 and hence, until then these liabilities were not accounted for in the national accounts.

The assurance by DfT meant that DfT actually faced the maximum amount of risk. However, it did not directly monitor the PPP and instead relied on other actors, who in turn did not act as expected. For instance, it relied on LUL to keep a track of the costs and performance of Metronet but LUL had access to only high-level cost information for Metronet and found it difficult to define various performance indicators; further, it relied on the shareholders of Metronet to monitor the costs too, but due to the tied supply chains, they had little incentive to reduce costs, instead they actually functioned as though they had agreed to cost-plus contracts, expecting to be paid for additional costs incurred.

This has two implications for PPPs in India. First, if any guarantees are given, they should be explicit and the related contingent liabilities, and the associated cost to the public sector in the case of a PPP failure, ought to be estimated at the inception stage. Second, the public agencies which face risks must have the necessary risk management processes in place. This also requires structures and human resource policies which enable government organisations to nurture needed skill-sets, much less rigid than the current practices.

4. Precise contract specifications

Fourth, the Metronet faced two challenges with regard to its contract specifications. There was uncertainty regarding the information on assets and associated costs, and definitions of words such as “modernisation”, “refurbishment” and “enhanced refurbishment” were not clear, leaving them open for interpretation and consequently, repeated, time consuming disagreements between Metronet and LUL.

This implies that during the formulation of a PPP contract, processes of contract specification, including asset information and whole-life costing, need to be carried out in consultation with experts placed at a higher, more central level. In case of India, these efforts can be led by the PPP Division (or Cell) at the Ministry of Finance, Government of India. The Union Budget for 2014-15 had proposed the setting up of an entity called “3P India” which would be entrusted with the primary task of mainstreaming PPPs and increasing focus on delivery of efficient PPPs. Not only does such an entity merit consideration, but as NITI Aayog has recently suggested, it could carry out restructuring of existing PPP contracts due to specialised skills, which it is expected to house.

Moreover, sector specific units such as the PPP Division at the Indian Railways or National Highway Authority or the Ministry of Defence could also develop its own knowledge base; and can also review contracts to check for the language. In this context, the NITI Aayog has also suggested that every Ministry engaged in PPPs should create a dedicated division for monitoring of PPPs with full time staff and budgets to hire appropriate experts.

5. Attention to information and data system

Fifth, cost and performance data on Metronet PPP was not adequately available and not regularly analysed. Indeed, assessment of efficiency requires relevant international benchmarking, but such exercises are time consuming, and require commitment from those involved, and hence, it is important to establish them early and maintain them to provide time series data.

This implies that information and data systems for performance monitoring as well as for benchmarking would need specific attention. This would not only need to be established as soon as the PPP is implemented, but the data would also need to be periodically analysed to give feedback to the private and public sector stakeholders involved in the PPP, through the life of the project.

6. Adapting in accordance to the Indian model

Sixth, the Metronet PPP contract and its close comparison with the similar Tube Lines PPP contract, reveals that as of 2007, in relative terms, the Tube Lines PPP was more successful. In other words, though the two PPPs were for the same purpose and similarly designed, the outcomes were different.

The above implies that it is not appropriate to rely on a “model PPP contract” or a “blueprint” for PPP projects even within the same sector. In the Indian context, it is necessary to note that standardised documents such as model concession agreements across infrastructure sectors were developed previously; however, concerns have been raised about their rigidity and the need to introduce greater flexibility for unforeseen circumstances.

Risks and relationships among various stakeholders are unique in each PPP contract and hence, a “one-size fits all” approach is not appropriate. Further, since citizens’ needs and expectations change with time, every PPP contract must have a mechanism to identify and adapt the delivery framework, which implies that the framework has to be necessarily flexible, over its lifespan.

A remarkable feature of the Metronet PPP case is that when the failure emerged, the structures and institutions of the UK Government were able to reverse the PPP decision within a relatively short time of around five years, demonstrating welcome capacity for reversal, albeit at high cost. Indeed, it was on the horizon of the first 7.5 year periodic review that the cost escalations and other challenges facing the Metronet PPP started getting identified. This implies that, strong public sector institutions and periodic reviews have a key role to play in case of wrong decisions or failure of a PPP.

For the PPPs in India, weak public institutions have led the private sector to bear project implementation risks (and hence, associated costs) relating to activities such as delays in land acquisition and environmental clearances, and there has been an absence of structures for ex-ante negotiation. Both these would need urgent attention if indeed PPPs are to be used more widely.

Finally, the importance of requisite intent to be citizen-centric, and integrity of the system governing the relevant stakeholders, including public authorities and political leadership, cannot be overemphasized in the Indian context. A set of complementary reforms in government organizations, and better social and political norms consistent with broader public interest, are also needed for the PPP method to succeed.

[1] The World Bank’s estimate for UK’s Gross National Income (GNI) per capita in PPP terms $ 38,370 in 2014. In July 2015, the World Bank defined high-income economies are those with a GNI per capita of $12,736 or more in 2014.

[2] The World Bank’s estimate for India’s Gross National Income per capita in PPP terms $ 5,760 in 2014. In July 2015, the World Bank defined middle-income economies as those with a GNI per capita of more than $1,045 but less than $12,736 in 2014.

The Revival of Indian Foreign Policy

Since the Modi government came to power in May 2014, Indian foreign policy has been drastically transformed. It is initiating new bilateral ties, reviving dormant ones, and upgrading the existing relations with more comprehensive and strategic cooperation. Prime Minister Modi’s policies are more international and ambitious than ever before.

India has traditionally been perceived as a passive power with an ambitious, but undefined, regional and international agenda. It has positioned itself as a friend to all and a foe to none, which has allowed it to win the confidence of many major nations. The majority of India’s international engagements has resulted from its geostrategic advantage in Asia and its growing economy, which other ambitious states could not afford to ignore. India has attracted significant foreign investment and has been part of many regional and international programs focusing on a variety of issues.  However, India’s regional and international influence has been constantly challenged either by China or by its own over-ambitious nature. The Modi government is exploring a unique avenue in its foreign policy by reaching out to not only strategically active global powers but also passive states.  In addition, Modi is making an effort to strengthen bilateral ties with countries of similar cultural backgrounds. India is transforming its inward-looking foreign policy of attracting investment and strategic favoritism into an outward-bound foreign policy of expanding its sphere of influence and identifying markets to further expand Indian trade and culture. Although India’s desire to become a serious international player has existed since the time of Nehru, it has never been pursued with such vigor and enthusiasm.

Modi’s strides in foreign policy became evident starting from his inauguration day, where the prime minister invited all of the leaders of the SAARC (South Asian Association for Regional Cooperation) conference. Since then, Modi has had a keen focus on the immediate neighbors of India. On his trip to Sri Lanka in March, Modi emphasized improving the bilateral ties between two countries. Although few major deals or projects were signed, apart from the ones which were agreed upon between previous governments, a visit from an Indian PM after 28 years is of great strategic importance considering China’s growing influence in South Asia. In a similar attempt Modi visited Nepal and announced multiple new treaties on traditional medicine, education, and tourism in order to lure the Himalayan nation into the Indian sphere. During the visit the two countries also finalized a $1 billion credit line. Since then, apart from its unclear and ever-changing policy towards Pakistan, the Modi government has successfully resolved several border issues with Bangladesh, improved trade ties with Bhutan, enhanced its strategic influence in Maldives, and strengthened its friendship with Afghanistan.

The Modi government is essentially creating a second neighbourhood sphere by increasing its influence in countries which are in its close proximity but are not direct neighbours. India’s Look East policy which was rebranded theAct Eastpolicy by Modi during his visit to Myanmar, has only strengthened India’s relations with ASEAN and other Eastern nations through several trade, energy, and development agreements. Prime Minister Modi is taking initiative and conducting visits to states where no Indian leader has stepped before. His recent visit to the Central Asian states of Mongolia, Kazakhstan, Uzbekistan, Kyrgyzstan, Turkmenistan and Tajikistan not only resulted in a range of trade treaties, but also established important military cooperation pacts and energy trade deals. On his most recent visit to UAE, Modi highlighted the critical role of the Gulf country in India’s economic, energy and security interest. Large investment commitments, to forge new partnerships are a result of Modi’s lucrative moves.

India, in cooperation with Japan, Germany and Brazil, has been pushing for reforms in the United Nations Security Council, only to continuously lose to opposition led by China. In order to forward the inter-governmental negotiations, a framework document was introduced with an intention of developing it into formal text based negotiations. However, in response to China’s recent opposition to UNSC reforms, India has significantly increased its outreach programs to the Pacific Islands and African states. India increased its efforts in aligning African nations by organizing the largest ever India-Africa Summit in 2015 and in building a new partnership  with fourteen pacific island states by initiating Forum for India-Pacific Island Cooperation during Modi’s Visit to Fiji in 2014. In order to balance China’s tactical pressure, India has come out in full open support of the UN Convention on Law of Sea, which questions China’s blatant expansionist agenda in the South China Sea. Additionally, Indian government is not only expanding and improving its bilateral ties, but also is familiarizing these nations with the larger goal of the UNSC reforms to counteract China’s efforts.

India has developed its international presence and strategic influence greatly through soft power initiatives rather than through its military. The Indian government under Modi is taking the right steps to make India a major international player.

Why India Needs Stronger IPR

 

Originally published in Business Standard

Earlier this year, the market capitalisation of Apple surpassed $700 billion - marking the first time a US company had ever reached that milestone. One of the factors contributing to Apple's strong performance has been its investments in research and development. And the company is doubling down on those investments. Its R&D spending surged to $1.9 billion in the second quarter of its fiscal year - a 36 per cent increase relative to a year earlier. Apple says R&D investments are "critical" to its "future growth and competitive position in the marketplace and are directly related to timely development of new and enhanced products that are central to the Company's core business strategy."

 

Apple's willingness to allocate billions to R&D reflects an under-appreciated reality about the US economy: industries with higher levels of R&D spending than the average across all manufacturing industries ("IP-intensive") perform better than industries that spend less than average on R&D ("non-IP-intensive"). Moreover, there's a well-documented correlation between spending on R&D in major markets around the world and the quality of IP protections in those markets. In short, the more robust the protections, the greater the likelihood that businesses - domestic and foreign - will make investments.

These conclusions are contained in two recent reports showcasing the nexus between R&D spending, IP protections, and performance indicators for companies and countries. The first report, by NDP Analytics, shows that from 2000-2012, IP-intensive industries in the United States outperformed non-IP-intensive industries across a number of economic measures. For example, IP-intensive industries produced more than triple the exports per employee than non-IP-intensive industries. And output per employee in IP-intensive industries was double that of non-IP-intensive industries. Employee income in IP-intensive industries was also 50 per cent higher than the wages of counterparts in non-IP-intensive industries.

Underpinning the R&D investments in all industries, but particularly those that are IP-intensive, is confidence that the IP regimes in the countries receiving investment will protect IP rights. The reality of R&D is that it is costly and risky, and in order for companies to justify investments, they need some confidence they can achieve a strong return on these investments. A climate in which innovators do not enjoy legal protections will not be conducive to attracting investment. Srinivas Reddy, a director at Hetero Pharma, estimates that India has sacrificed nearly $10 billion in investment because it does not respect IP norms.

India's history of IP violations being tolerated - or even encouraged as industrial policy - explains why R&D spending has traditionally been quite low in the country. In 2011, R&D expenditures were just 0.8 per cent of GDP - the equivalent figure was 1.2 per cent in Brazil and 1.8 per cent in China. And in 2013, India attracted a mere 2.7 per cent of global spending on R&D; China, with stronger IP rights, attracted close to 18 per cent; and the US brought in more than 30 per cent.

The weak IP protections have also undermined innovation and invention in India. Patent filings, a rough proxy for innovation, tell the story. Data from the World Intellectual Property Organisation show that India accounted for a small portion of the patents filed from Asia. While there were close to 1,400 patent applications filed from India, there were nearly 24,000 filed from China, more than 45,000 filed from Japan, and more than 63,000 from the US.

As noted in a recent speech by Infosys co-founder N R Narayana Murthy, "Is there one invention from India that has become a household name in the globe? Is there one technology that has transformed the productivity of global corporations? Is there is one idea that has led to an earth-shaking invention to delight global citizens? Folks, the reality is that there is no such contribution from India in the last sixty years."

This is not a problem of Indian creativity, but of Indian government policy. If India adopted more robust IP protections, greater R&D and innovation would follow, by both foreign and Indian companies. A 2015 study by economists Robert Shapiro and Aparna Mathur shows that upgrading India's IP protections to China's level would increase the R&D intensity of India's domestic information technology firms, over time, by more than 80 per cent.

What's more, according to Drs Shapiro and Mathur, the R&D intensity of foreign firms in India's auto, aerospace, and IT industries would increase by between 13 per cent and 41 per cent if India upgraded its IP regime to the levels of China; or by between 33 per cent and more than 100 per cent if upgrading to the level of the US. The strengthened IP protections and higher levels of R&D would also lead to stronger growth, employment and wages across a number of industries in India. Rising to the level of China's IP regime would, for example, increases wages nearly four per cent in the IT industry, while rising to the level of the US IP regime would increases wages nearly 10 per cent.

Prime Minister Modi has championed around the world his "Make in India" programme, seeking to attract investment to power growth and job creation. A broad reform agenda will be essential to securing his vision. An essential component of that agenda is the creation of a reliable IP environment to spur R&D spending by domestic and foreign investors. And that spending can contribute to higher performance by companies while also helping to deliver jobs, rising wages and accelerated growth.

The writer, a senior vice president at the Pharmaceutical Research and Manufacturers of America, served as a senior director at the White House's National Security Council under President George W Bush

Why Dawood (and Others) Remain Free

In the wake of the cancellation of NSA-level talks between India and Pakistan, in part due to Indian insistence that terrorism be the only issue on the agenda, a TV news channel decided to take matters into its own hands and track down India’s infamous don. On Saturday, an anchor for Times Now called a number believed to be Dawood Ibrahim’s land line and a woman answered confirming that she was in Karachi, was Ibrahim’s wife, and the don himself was there asleep. Beyond adding fuel to the fire of Indo-Pakistani tensions and amplifying the voices against Pakistani sheltering of terrorists, this phone call merely provided new affirmation of rather old news. Yet Dawood is hardly alone in living under the protection of the Pakistani state. Notorious Lashkar-e-Taiba (LeT) members Zaki-ur-Rehman Lakhvi and Hafiz Muhammad Saeed also find a safe haven in Pakistan. Unless the Pakistani government decides to cooperate with Indian efforts  to extradite and prosecute these and other wanted individuals, justice will remain unattainable.

Upon the opening of a new session of Parliament last month, India once again renewed its efforts to extradite high profile terrorists from Pakistan. Indian National Security Advisor (NSA) Ajit Doval requested an updated, comprehensive dossier on Dawood Ibrahim, 2008 Mumbai attack mastermind Zaki-ur-Rehman Lakhvi, and co-conspirator and chief of Jamaat-ud-Dawa (a LeT front) Hafiz Saeed. Doval was expected to present this document to his Pakistani counterpart during NSA-level talks in New Delhi scheduled for August 23rd-24th, before the talks were called off. Indian news outlets have reported that the dossier, which exceeds 100 pages, contains evidence that Ibrahim is conducting operations from Pakistan. Details include call records obtained in the past four months, numbers of various passports used by the don, and four new safe houses addresses located in Karachi and near Islamabad.

NSA Doval’s request for this document on the three fugitives came just a week after what has been called a “U-turn” by Pakistan in regards to earlier cooperation on the 2008 Mumbai attacks case. Since Lakhvi’s initial arrest in Pakistan in December 2008, India’s requests for his extradition have all been denied. In December 2014, a mere two days after the Peshawar school massacre in which 132 children lost their lives, Lakhvi was granted bail—prompting outrage from India. This bail was initially rejected, but Lakhvi was ultimately released on April 10, 2015. While investigators in Pakistan had spent four years pursuing samples of Lakhvi’s voice for comparison with recorded communications from the 2008 attacks, on July 18th, Pakistan’s Federal Investigation Agency claimed that there is no Pakistani law under which an accused can be forced to provide voice samples. This assertion was seen as backtracking from the joint statement by Narendra Modi and Nawaz Sharif at their July 10th bilateral meeting in Ufa, Russia, in which they agreed to expedite the 2008 Mumbai case trial—which has been pending since 2009. Meanwhile, Lakhvi remains free on bail in Pakistan.

Although he spent nearly seven years incarcerated, reports indicate that Lakhvi received special treatment while in a maximum security facility in Rawalpindi. Journalists have claimed that Lakhvi retained access to his cell phone, internet, and television, and was allowed to receive guests (including Lashkar-e-Taiba operatives). Abu Jundal, the highest-ranking Indian in LeT, also alleged that members of Pakistan’s intelligence service, the ISI, demolished a control room in Karachi that was used during the 26/11 attacks after Lakhvi’s December 2008 arrest, presumably to destroy evidence against him.

For his part in the same attacks, Hafiz Saeed was placed under house arrest by Pakistani authorities only a handful of times between 2008 and 2009, when Pakistan came under pressure from the international community. Despite India’s attempts at extradition and the US placing a $10 million bounty on him, Saeed moves and preaches freely within Pakistan. He even launched a successful case recently to stop the Indian film “Phantom”—which depicts his assassination, from showing in Pakistan.

Meanwhile, Dawood Ibrahim has continued to accumulate investments and assets while avoiding extradition. It is estimated that his criminal syndicate D Company owns 50 properties in 10 different countries, including the UK, the UAE, and India. Further, informants have claimed that Dawood is in contact with the ISI and operates from safe houses in Pakistan protected by ISI guards—an idea that has gained even more popular support after the Times Now phone call.

Despite all this, there has been some optimism in India surrounding the Modi government’s attempts to stand up to terrorism. India’s fresh dossier in the cases against Ibrahim, Lakhvi, and Saeed has generated hype for details concerning Dawood Ibrahim, a scathing assessment of faults in Pakistan’s 26/11 investigation, and an expanded list of Pakistani-harbored fugitives. Under Modi, India was also able to ensure that the Asia Pacific Group on Money Laundering will monitor Pakistan’s work against terrorist financing and report to the Financial Action Task Force (FATF), despite strong opposition from China and the fact that Pakistan is not a member of the FATF. Finally, on July 30, 2015, an Indian court executed Yakub Memon, a middleman in the 1993 bombing attacks on Mumbai, making him the third man executed in India on charges of terrorism in the last 15 years. While this may have been an attempt at signaling India’s hard stance on terrorism Supreme Court and public opinion were divided on this result.

Still, in the years since the 1993 and 2008 attacks, a pattern has emerged of Pakistani government actors providing privileges to fugitives wanted by India and even actively thwarting Indian efforts to prosecute them. The abrupt shift on the Lakhvi voice samples is just the latest example of this. While the Modi government has attempted to pressure Pakistan to give up fugitives, expedite the 26/11 trials, and signal its hard stance on terrorism, these efforts are likely to yield more of the same hollow commitments from the Pakistani side and little substantive progress.

Speaking Truth to the Great Orator

Originally published in IndiaToday.

There can't be much doubt now that Narendra Modi is our most powerful political figure after Indira Gandhi. But if you qualify your search, you could argue that he is our most domineering, instinctive leader. Instinctive leadership, as defined in the context of Thatcher, was, I follow my conviction, I don't bother for consensus.

That out of the way, Modi is also our most powerful public speaker and communicator. You can complain about his not speaking in Parliament very much, or taking direct questions, but he is hyper-communicative in an environment that he can control fully. Once he can define his audience and put it in a controlled setting, he is a master of the set-piece as we haven't before seen in India. Vajpayee was a great orator, but an occasional one. Even he did not use the big stage to sell his ideas, or even ideology.

Over the past week, Modi has given us two confirmations of these qualities: in his Independence Day address and his speech to the NRI community in Dubai. His speech from Delhi's Red Fort was deliberately understated. More like a long-distance rider settling into cruise control. There weren't any new ideas now, which was probably deliberate because the ones put forward earlier have seen indifferent progress, particularly toilets, Swachh Bharat, Make in India. But the fact that he did not make any quick announcement under pressure on the OROP issue showed a sharp mind.

Strong leaders do not make policy responses to incidents. And instinctive leaders do not do what everybody expects them to do. Instead, they surprise. By not talking on OROP in any terms other than general platitudes, Modi surprised most of all the media, particularly television channels which had stationed TV crews at Jantar Mantar. Powerful, instinctive leaders also do not allow others to steal their limelight from the big stage. If Modi had indeed made a specific dramatic announcement on OROP, even if it had fully pleased the veterans, it would have made Independence Day their event rather than his. In any case, why reduce his big stage to a grievance redressal platform.

Similarly, in Dubai, conscious of the fact that it was his first visit to an Islamic country, with which India has had a patchy relationship-Dubai has been the traditional haven for Indian tax evaders, smuggling syndicates and, is, more importantly, Dawood Ibrahim's karmabhoomi-he delivered the message he needed to, with panache and dignified firmness.

No complaints about Pakistani support to terror, no appeals to their patrons, the UAE Sheikhs, to lean on them to mend their ways, but just a subtle message: South Asia is also integrating like Europe, on the east everybody is coming together, and if to the west the Pakistanis continue blocking, India will leapfrog them and reach out to the UAE and complete the loop. So join it, or risk being left out. At the same time, he did not curse Pakistan even while firing continued on the border. You can see he is setting a new agenda. He wants talks with Pakistan to resume and would not let anybody, friend or political foe, to disrupt or even finesse it.

Play the tapes of his Dubai address again. Note the number of times he gets the crowd to shout slogans in praise of the "Crown Prince". Now think. Is it usual for an Indian prime minister to rouse a crowd of Indians, even those living and working in a foreign land, to shout slogans in praise of the ruler there? It is also no coincidence that it was a largely Hindu audience praising the royalty of an Islamic kingdom. Never mind that Doordarshan cameras and Modi's image managers ruined it by bunching traditionally dressed Bohra Muslims together in one area and repeatedly panning on them.

In my recollection, there are two similar events where an Indian leader used Indian crowds to flatter a foreign strongman like this. The first, when Nehru took Khrushchev and Bulganin to Ramlila Maidan in 1955. And the second, when Narasimha Rao had Rafsanjani address a massive congregation at the Imambara in Lucknow in 1995, when the Babri wound was still raw. Yet there is a difference. The Khrushchev visit was at the peak of Nehru's socialist phase, so there was an ideological affinity. And crowds cheering Rafsanjani were all Muslim, or rather Shias, although what he said to them ranks, in my book, as one of the shrewdest diplomatic successes in our history: Indian Muslims are safe in the Indian system of secularism. That by itself underlines and justifies India's very special relationship with Iran, in spite of the sanctions, Pakistan and occasional irritants.

Modi's critics complained that he had not visited an Islamic country. Muslim-majority countries, Bangladesh, the Central Asian Repu?blics, yes. But not a truly Islamic country. He was making up for that now, but not simply by sticking another pin on the map of the world of his travels. But by making a strategic beginning, and if he could, as India's most unapologetically Hindu prime minister, have 50,000 of his mostly Hindu fans cheer a hereditary Muslim ruler in a foreign land, it speaks for his instinct, power and skill.

With all these wonderful attributes in place, why does his government's performance still seem to be patchy, if not floundering? Why are his biggest and also non-controversial ideas, from cleaning the Ganga to Swachh Bharat to Make in India, drifting? Why is economic growth not recovering, particularly if you discount the statistical creativity that mythically bumped up the figure by changing some norms? Why does a specific, sharp and prime ministerial decision, such as the purchase of just about two squadrons of Rafale fighters, get stuck in follow-up negotiations and formalities?

Why does he let nutcases, from Giriraj Singh to Sakshi Maharaj to Gajendra Chauhan, steal his headlines? How does he make a strategic blunder like trying to bring a new land acquisition law through an overnight ordinance? Why does his government look like it has declared war on the news media, with formal notices to news channels on Yakub Memon coverage (even if some of it was silly), his home ministry invoking "national security" to withdraw the Sun group's media licences, and his CBI turning Teesta Setalvad into a "national security threat" as if she were some malevolent cousin Dawood Ibrahim had left behind? All these are fights he and his government will lose in substance even if they succeed in sending somebody they don't like to jail for a few days or forcing some media outlet to stop publishing briefly.

Smart, instinctive, powerful, confident leaders, who are also great communicators, do not fritter away their energies and goodwill in issues as petty as these.

Could it be that while he has all these great qualities, he also shares a weakness with many other leaders who deny themselves real greatness: the inability, disinclination or lack of humility to attract, welcome talent wherever they can find them, even if it is outside of their immediate circle of political or ideological comfort? Or bring into their system smart people with spine, to speak truth to power internally. Somebody who would have told him, for example, that that suit, though sharp, was a bad idea.

Or that while the situation in Parliament this monsoon session was irritating, it would have been better if as leader of the Lok Sabha, he had made a statement, suo motu, on issues the opposition was raising. It would not have convinced them, but he denied himself the opportunity to exercise his moral authority as prime minister. Or that he should caution his home and information ministries to not open fronts in areas such as media freedom where his government and party are, rightly or wrongly, seen as usual suspects. And there should have been somebody in the system to keep nagging him to tell Ram Vilas Pawan to take a chill pill rather than file that ludicrous class action suit against Nestle on Maggi. You are a powerful sovereign government, you regulate Nestle according to your Republic's food safety laws, you own laboratories, so test everything and, if you can establish anything wrong or criminal, prosecute. But class action suit? That is no statement of strength, but only of stupidity.

You can say a prime minister is much too busy, has many more important things to address than these. But then why let your government be hobbled by these? It's an interesting idea to be a majestic one-man cavalry, but you can't win wars without building real armies to follow you.

Follow the writer on Twitter @ShekharGupta

What India Day Celebrations in the U.S. Say About the Indian-American Diaspora

On Aug. 9, New Jersey held its annual India Day Parade. Approximately 38,000 people participated on floats and on foot. Attending the post-parade grand celebration along with a 1,000 guests was an experience. I met TV stars who had been invited from India, local elected officials and community enthusiasts from the tri-state region of New York, New Jersey and Connecticut. Sen. Cory Booker and Arun K. Singh, Indian ambassador to the U.S., took center stage and addressed the crowd together. Booker praised the IDP celebration as "the best of what America represents." Singh lauded the Indian-American community's achievements. The enthusiastic welcome to both dignitaries captured the community's pride in its Indian heritage and its aspirations as Americans. The cordiality between the senator and the ambassador reflected the strength of the U.S.-India relationship today, and the potential role of the diaspora in promoting bilateral trade and enhancing people-to-people ties. More subtly, I believe it established that this diaspora matters to the political calculus -- as voters, election donors and drivers of local economies. Their business decisions can impact both India and the U.S.

This was New Jersey's 11th IDP. New York City will host its 35th annual IDP, the largest outside of India, on Aug. 16. But these celebrations are only the beginning of the "noise" India Day -- and the Indian diaspora -- is making in America.

In the mid-1990s when I first lived in the U.S., celebrations of India's Independence Day were mostly noticeable among larger Indian clusters in New York, Chicago, New Jersey or Texas. Today, communities across America are creating a buzz. Aug. 15, 2015, has been declared as "India Day" in the state of Minnesota. The New York State legislature has declared August as "Indian-American Heritage Month." In the past, gatherings of flag-hoisting events were typically hosted by Indian embassies and consulates worldwide. Today, "India fests" are parallel community-driven celebrations. They are massive, multigenerational, multicultural and public. These renderings reflect economic success, community aspirations and demographic shifts among Indian communities. They also suggest the increased engagement of Indian diaspora communities in bilateral relations.

Twenty-five million people of Indian origin live overseas. Indian diasporas today exude a confidence and energy be it in Britain, Canada, the Middle East, Mauritius or Fiji. The 3 million-strong Indian-American diaspora looms especially large in global business, science and innovation. Although Indian immigration to the U.S. dates back to over a century, the current consolidation of this community emerged after the passage of the Immigration and Naturalization Act of 1965, which abolished the "national origins" quota and facilitated the migration of thousands of Indian engineers, scientists and physicians from India. After the 1980s, the tech boom brought in the next influx of professionals who were young, urban-educated and highly skilled. Satya Nadella of Microsoft and Sundar Pichai of Google are the icons of this generation!

Today, California and New Jersey have the largest Indian communities. Their influence is growing. As I heard Booker lauding the Indian-American community for its "hard work and successes in promoting business in the state of New Jersey," it meshed well with the fact that New Jersey's 300,000 Indians do shape the economic and social landscape of their state. But why should Minnesota declare India Day? And why is this declaration so important?

During recent interviews with Indian-Americans in Minnesota, I discovered some interesting trends and demographic shifts after the 1980s. "When I came in 1989, there were some 300 Indians in Minneapolis; today there are approximately 44,000," Seann Nelipinath, an IT entrepreneur, told me. So, are India Day proclamations a polite nod to "cultural inclusion?" No. It's about demography and economics. There are about 2,200 Indian doctors in Minnesota. Given Minnesota's two giant medical institutions, Mayo Clinic and Medtronic, Indian doctors intersect many segments of health care: clinical, cutting-edge research, innovation, device design, manufacturing and business. At Minnesota's first U.S.-India Healthcare Summit, organized by Nelipinath, I witnessed an entrepreneurial attempt to generate a synergy between health care businesses in Minnesota and India, tapping into Prime Minister Modi's"Make in India" initiative. Such initiatives are attractive to any local administration.

Professor Chari, an economist living in Minnesota for over 30 years, explained the demographic shifts to me: "Minnesota hosts two of America's largest retail brands, Target and Best Buy," he said. "Retail is increasingly becoming IT-intensive and thousands of Indians with H1B visa sponsorships have filled this job sector after the 1980s." According to Chari, the immigrant generation of the 1960s-70s today comprises less than half of the Minnesotan Indian diaspora. Thus, when mid-sized communities are economically strong, they alter the demography of corporations and residential neighborhoods. Their community events acquire a value addition for local governments. This weekend, over 12,000 are expected to gather for the IndiaFest on the Minnesota State Capitol grounds. Although IDPs in America are not new, their exponential growth is making an impact -- socially, politically and spatially.

Indian-origin communities are clearly enjoying their collective visibility and global media attention. The massive crowds that thronged to Madison Square Garden last September to hear Prime Minister Modi created big international media buzz. India Day parades and events like International Yoga Day go one step further. On June 21, 2015 as 35,985 participants performed yoga on Delhi's majestic avenue Rajpath, Forbes contributor Rani Singh called it "a spectacular that might be about more than spiritual growth." Yoga Day had global reverberations. For many, it was a pride-in-heritage moment.

 

This weekend on Aug. 15, millions of Indians will gather at the historic Red Fort in Delhi to hear Prime Minister Modi's address to the nation. Well after these crowds have dispersed, India Day will pop up in different spots across global time zones as overseas Indians celebrate their national heritage. Diasporic renderings of India Day are emblematic of the confidence and growing aspirational energy of global Indians. Well beyond promoting Indian curry-n-culture, they showcase the collective capital that Indians bring to their adopted homelands.