Cash transfers will work, if…

…there are economic reforms, astute targeting and restructuring of government

Cash transfers are here. Okay, some cash transfers will be here in some districts for some people early next year, after which the programme will be implemented across the country. No one is in any doubt that this is a pre-election move by the Congress party—it was announced in the party headquarters and not a government office (See Soma Banerjee’s article in Economic Times). It is an election sop. However, unlike loan waivers and the national rural employment guarantee scheme, it is not a bad one. It can even be a good one provided certain important conditions are met.

But first, cash transfers are based on sound economic rationale. They are generally less inefficient than subsidies for goods and services. Also, because they put cash in the hands of the recipients, they are more respectful of individual freedoms and choices. Whether they are also effective in alleviating poverty is another question. Even so, to the extent that they are an improvement over the status quo—by reducing bureaucratic processes, lowering corruption and shortening delays—we should cautiously welcome the introduction of the cash transfer scheme.

There is some debate on why cash transfers work. In the case of conditional cash transfers—where the cash is allocated for specific purposes like education, food, fuel etc—there is debate as to whether it is the conditions that work or the cash. Abhijeet Banerjee and Esther Duflo, economists whose work this blogger respects, believe in the latter: that it’s the cash that makes the impact. (More at TechSangam)

It might sound heretical, but the best scheme might involve ending all subsidies in kind, closing down as many “welfare” ministries and departments, and using the funds to give unconditional cash transfers to the needy. Give the needy cash, respect their individual freedom and just let them spend it as they wish. (See this post for why the old, corrupt political economy of poverty alleviation resists this.)

We are, of course, far from this goal. Only “the benefits of 29 welfare schemes of the government would now be directly transferred to beneficiaries in 51 districts starting January in a pilot programme and then will be extended to 18 states from April.” A total of 42 schemes have been identified for the cash transfer programme. These exclude the big ticket ones—food and fertiliser subsidies—but might include some fuel subsidies. Whether this is intentional, compulsion or both, the impact will be limited. Despite the hoopla in the headlines, it’s not a game-changer. But it can be one, if accompanied by other policy changes.

First, as warned and subsequently noticed in the case of rural employment guarantee, merely putting more cash into the hands of people without doing anything to make the supply competitive will cause prices to rise. Inflation can eat into the higher incomes, especially if they are in the form of cash, undermining the effectiveness of cash transfers. So how does one make supply competitive? By liberalising land, labour and capital regulations. By completing roads, railways, airports. By breaking barriers to inter-state and intra-state commerce. By liberalising education and agriculture. In other words, we need Reforms 2.0 before we can expect cash transfers to have the desired effect. The UPA government’s commitment to the reform agenda is much weaker than its enthusiasm for entitlements and transfers.

Second, it is necessary to target the transfers correctly. In a diverse society where communities are sensitive to relative gains, this is particularly hard. Exercises to identify the recipients, include those who qualify and exclude those who don’t, and to keep this list updated are very expensive, riddled with inefficiencies and fraught with political controversy. With a degree of flippancy, we could argue that making the scheme universal might save a lot of these headaches. Let everyone from Mukeshbhai to the poorest person in the country receive the same cash amount from the government. Let the “inconvenience factor”—for instance, a requirement to physically queue up at a government office every three months to revalidate the cash transfer account—determine who avails of the facility. The Aadhaar UID could then be used as a tracking mechanism rather than a filtering one. We are far from this, and as Bibek Debroy points out on his ET blog, targeting will be a significant problem.

Third, and perhaps the most difficult one, is that the efficiencies realised through a programme like cash transfers must register in terms of lower government expenditure and, all else remaining the same, to lower taxes. This calls for a radical review of subsidies and transfer almost all of them into the cash transfer programme. It calls for the pruning of ministries and departments that currently administer subsidies. Few governments have the stomach for this kind of overhauling of government—the UPA government certainly doesn’t—but to not do this would be to abandon the real payoffs.

Finally, every spending programme must come with a sunset clause. Cash transfers must be reviewed every few years to assess whether they are still required, and automatically lapse if not renewed. Not doing so presumes that policymakers cannot conceive of a time when a substantial number of Indians will no longer be poor. This is defeatism.

So, for cash transfers to work in the national interest, they must be accompanied by broad economic reforms, astute targeting and restructuring the government. From what has been announced by the UPA government, there is little evidence that the scheme only aims for anything more than limited efficiency gains in welfare disbursements. The Congress party evidently believes that this is sufficient to attain its electoral objectives.

Tailpiece: The final examination of Takshashila’s GCPP programme‘s January 2012 term asked students to design a programme “to support the country’s needy” (more details in the question paper). A few students proposed cash transfer programmes. You’ll find summaries of two of the responses on Logos, Takshashila’s public policy network blog.

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Why protests are not constitutional methods

The right to protest peacefully is not in doubt. The wisdom is.

Longtime readers of this blog will know that The Acorn has been a relentless advocate of constitutional methods in conducting our public affairs. We never tire of citing Ambedkar’s Grammar of Anarchy speech (whose anniversary, incidentally, we celebrated yesterday). Ambedkar said:

“we must…hold fast to constitutional methods of achieving our social and economic objectives. It means we must abandon the bloody methods of revolution. It means that we must abandon the method of civil disobedience, non-cooperation and satyagraha. When there was no way left for constitutional methods for achieving economic and social objectives, there was a great deal of justification for unconstitutional methods. But where constitutional methods are open, there can be no justification for these unconstitutional methods. These methods are nothing but the Grammar of Anarchy and the sooner they are abandoned, the better for us. [More here]”

One of the most frequent reactions to criticism of protests and advocacy of constitutional means is “Do you mean to say protests are unconstitutional?” The question has been raised frequently enough so it is important to answer it.

Ambedkar calls these actions “unconstitutional methods“. He does not say that they are unconstitutional. There is a difference. No serious person will deny that Indians have a constitutional right to protest. Article 19(1) explicitly guarantees as fundamental rights the freedoms of speech, expression and peaceful assembly. The constitutionality of peaceful protests is therefore unquestionable.

The question, though, is not whether we have a right to protest or not. The mere exercise of liberty is neither an indication as to its wisdom nor to its efficacy. The question is therefore, about the wisdom and the efficacy of particular actions and their consistency with constitutional morality. This is the crux of Ambedkar’s argument.

For instance, praying to the Almighty is a constitutional act. Sleeping over it is a constitutional act. Protesting peacefully is a constitutional act. Civil disobedience is a special case of peaceful protest, for where it involves disobeying laws of the land, it is an illegal and unconstitutional act. None of these are constitutional methods.

What are constitutional methods? The full answer deserves a book-length treatment. In short, constitutional methods involve engaging the executive, legislature and the judiciary. Through representations to government officials, through persuading and working with legislators, through voting and through actions in court.

These methods are regularly used, do work and in fact deliver the most substantive changes. But there is a curious asymmetry in terms of their standing in the public discourse. While protests and ‘unconstitutional methods’ are romanticised and have a reflexive public appeal, their actual achievements fade in comparison to those achieved by constitutional methods. As Rohit Pradhan asked in an article in Pragati, what are the achievements of Jayaprakash Narayan’s “total revolution” of the mid-1970s? Violence fares even worse. No insurgency has succeeded. We await rigorous empirical evidence but it does appear that change through politics, parliament, legislatures and courts has a much better record on delivering lasting change.

However there is less glorification of these methods and diminishing awareness of what they are and how they can be exercised. This last must be addressed. (At Takshashila, we are attempting this. We have an ongoing policy research project on constitutional methods for civic action and are introducing a course on constitutionalism in our GCPP programme)

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The genesis of a draconian section

Bad laws pave the way for worse ones

You only have to look at Section 66A of the Information Technology (IT) Act 2008 to realise that it is so badly worded that it not only permits draconian abuse by the government but allows individuals to get fellow citizens arrested for merely sending an electronic message that they consider grossly offensive. Don’t take this blogger’s word for it. Read it yourself.

It is obviously ultra vires of the Constitution’s Article 19, which enshrines freedom of speech as a fundamental right. If a statute renders “blasphemy” a crime in the Republic of India—as the IT Rules for Intermediaries, 2011, which draw their authority from the IT Act, have done—then it doesn’t take a legal genius to notice that a lot of things have gone ultra vires of the Constitution. The higher courts ought to strike it down when the matter comes up for hearing in a few public interest litigations that are in the works.

The question is how did this appalling section make it into the statutes in the first place? Here’s where it gets murky. By all accounts, the IT Act was sought to be amended in 2006, when Dayanidhi Maran was the IT minister. The concern at that time was over hacking and circulation of covertly-shot pornographic videos on mobile phones. An expert committee, of which Kiran Karnik, then the chairman of NASSCOMM was a member, recommended changes to the Act. In its Summary Report it said:

“Language of Section 66 related to computer related offences has been revised to be in lines with Section 43 related to penalty for damage to computer resource. These have been graded with the degree of severity of offence when done by any person, dishonestly or fraudulently without the permission of the owner. Sometimes because of lack of knowledge or for curiosity, new learners/Netizens unintentionally or without knowing that it is not correct to do so end up doing certain undesirable act on the Net. For a country like India where we are trying to enhance the positive use of Internet and working towards reducing the digital divide, it need to be ensured that new users do not get scared away because of publicity of computer related offences. Section 43 acts as a reassuring Section to a common Nitizen (sic). IT Act in order to ensure that it promotes the use of e-commerce, e-governance and other online uses has been cautious not to use the word cyber crime in the text.” [Expert Committee’s Summary Report at MCIT, doc]

This, however, does not sound like an explanation for the wording of Section 66A. That’s because it explains the Expert Committee’s draft of Section 66, which is very different from what eventually went into the amendment.

Somewhere between then and the report being tabled in the Lok Sabha for vote, during Andimuthu Raja’s controversial tenure IT minister, the wordings were changed. We do not at whose behest these changes were made. We do not know why. The Union Cabinet and the Ministry of Communications and IT are accountable, of course, but there is no transparency at all on the motives and the actors behind these changes. If there were national security reasons, they should at least have been mentioned as reasons. Without transparency, we will not be wrong in assuming that the draconian measures were intentionally introduced to stifle free speech and target political opponents of the parties in power. CIS India’s Pranesh Prakash has more on where they got the wording from in his detailed deconstruction of the offending section.

There’s worse.

Shouldn’t one of the hundreds of members of parliament noticed this section for its potential abuse, and flagged the issue? Shouldn’t the parties in Opposition, from the BJP to the Communists to the various regional parties, held the Government’s feet to the fire? After all, that’s what the parliament is for. How could this Bill make it past the two houses of Parliament, where there still are many individuals with the knowledge, inclination and position who could have intervened? Well, because it was passed in mindless haste at the fag end of the 2008 Winter Session of Parliament, when eight bills were passed in a mere seven minutes!

This happened because of the anti-defection laws introduced in the 1980s has turned Parliament from a debating chamber to a puppet theatre where the MP’s strings are pulled by the party leaderships. Bills are passed more through political deal-making between the party leaderships than through debate. It was not always like this. It changed because of one bad law. So bad is that law that it is hard to change it, because changing it requires the consent of the very party leaderships that it will disempower. Shanti Bhushan, now associated with India Against Corruption, was one of its drafters. It was enacted by the Rajiv Gandhi government.

This begs the question. How seriously can we take the laws made by a parliament that overlooked such a flagrant assault on our fundamental rights? The legitimacy of every single law, every single section made by this parliament is suspect. That does not mean citizens can disregard them. It means citizens ought to scan every bit of legislation going in and coming out of parliament with extreme diligence. This is where the work of neutral research bodies like PRS Legislative Research becomes extremely useful. It’s out there, for those willing to pay attention and act.

Parliament must redeem itself. If it wants to restore its credibility, parliamentarians should act in ways that corrects their big mistake. They must get rid of Section 66A in its entirety.

Related Link: See what Kiran Karnik says in on NDTV 24X7’s We The People show, where I was also a panelist.

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A new system is not the answer

The best way to transform India is by making the system work as it should

In a post on his very active Facebook page, Ashwin Mahesh—public policy activist, scientist and politician, all rolled into one—briefly minutes the key theme at workshops he attended in New Delhi: “The basic premise before us now is that the ‘whole system is broken’, so we can’t just offer different solutions that we would like to implement within the existing system. Instead, we need to come up with a new system itself, and that’s where the real hope for the country lies.”

Such sentiments have never been uncommon in India, and certainly not over the last two years, when the confluence of a bad governance, policy paralysis, economic mismanagement and flagrant corruption pushed the middle class out from apathy to outrage. As serious observers have noticed—see, for instance, Anil Padmanabhan’s Mint column today—this churning is due to a gap in what India is and what its crop of politicians think it is. While it is unclear at this time what the churning will lead to, how India’s elite and its middle class act now will determine whether or not the inevitable change will be for the better or for worse.

The quest for ‘a new system’, however, ignores the Indian reality. If it gains traction, it risks plunging us into an even more illiberal system.

Why so? First, contrary to the middle class narrative, Indian democracy is actually working for those who participate in it. Those who find the system “broken” are usually those who are excluded from it, or those who have chosen to exclude themselves from it. Those who are satisfied with the current system are unlikely to be enthusiastic supporters of upheaval. How do we know there are these satisfied people? Because we don’t have blood on the streets despite the immense diversity, social inequality and income disparity. No matter what India Against Corruption and the urban middle classes might say, corruption is not an issue that’ll move the masses into supporting an overhaul. What outrages the middle class, what the middle class says it is outraged by is just one of the many factors in the voter’s mind.

Second, if there has to be a “new system”, then very long established interest groups—with more crowd-pulling power than Arvind Kejriwal—have their own ideas what it should look like. Some of them—like the Naxalites—have guns and do not hesitate to use violence to push their own case. Delegitimising the existing system will create openings for various groups wishing to overthrow the Indian state. The ultimate arbiter in a contest between them will be force.

Third, studying the Constitution and the debates that led to its creation leads one to the conclusion that the founding fathers were far more visionary, liberal and broad-minded than the current lot. Any election for a constituent assembly is going to throw up people who won’t be dissimilar in disposition than the current members of parliament and legislative assemblies. Looking at the way successive generations of MPs have distorted the letter & spirit of the constitution, it is reasonable to assume that the product of their deliberations will be a grotesque assault on liberties. (No, the good people who lead apolitical movements do not have any legitimacy to create a new constitution for an already-functioning democratic republic).

Finally, there’s no guarantee that the new system will work any better than the current one if our attitudes do not change. Our attitudes are the reason why we have bad governance, and not vice versa. If this causal direction is right, even if we acquire a ‘new system’, we’re back to square one. Actually, accounting for the above, perhaps to square minus-ten.

The Constitution and the Indian Republic are India’s best hope. Strengthening the Republic by getting better people into parliament, into government and at all levels of government is the right way. The talent, passion and energy of middle India, its intellectuals and its leaders ought to be directed towards this end.

http://twitter.com/acorn/status/262020843138347009

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Cyber security to Cyber strategy

Plans and implementation

India’s National Security Council Secretariat (NSCS) has announced a roadmap of action on the cyber security front, involving partnership with the private sector. (See the recommendations of the joint working group and related media reports)

In an op-ed in Indian Express I make two sets of arguments. The first set points out that the government has realised that it needs expertise from outside its cloisters to address contemporary policy challenges and must reform itself in order to be able to use it.

The second set distinguishes three aspects of information policy in the geo-strategic and national security context: cyber security, addressing physical threats that emerge from cyber space and finally cyber-strategy. Much of the emphasis in the government’s plan is on the first of the three. It ought to place adequate emphasis on the other two. Without debating and evolving a new balance on the bounds of government in cyberspace, it will be difficult to manage the threats that emerge from it. Without investing in intellectual inquiry into the fundamentals of cyber conflicts, it will be difficult to shape a cyber strategy that protects and promotes India’s national interests in the international arena. Also, India ought to be wary of both premature and delayed militarisation of cyber strategy. You can read the whole essay here.

Subimal Bhattacharjee’s op-ed in Mint presents another perspective. Mr Bhattacharjee argues that while institutionalising cyber security management in a joint working group under the NSCS is a good thing “the key point is the cohesive functioning of the permanent JWG and the implementation of these recommendations.”

Related Link: My Takshashila colleagues, Srijith Nair & Rohan Joshi responded to the draft national cyber security policy in May 2011.

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Mirpur se Birmingham tak

A thrilling ride across continents

This is the unedited draft of today’s op-ed in the Indian Express.

For a mere $200 you get a 12-day, 6400 km “thrilling ride” across the English channel through France, Belgium, Germany, Austria, Slovenia, Croatia, Serbia and Bulgaria, Turkey, Iran before the journey–and perhaps your enthusiasm–ends at Mirpur, in Pakistani-administered Kashmir.

If the ‘Azad’ Jammu & Kashmir transport minister’s plans come to fruition, Birmingham and Mirpur, two parts of the same city separated by distance but joined together by immigration, shall be connected by the world’s longest local bus route. Families will reunite more frequently. Nephews will find jobs more easily. Tourists who have plenty of accumulated annual leave will be able to spend $525 more on supporting the local economies instead of on air tickets.

It’s hard for many of us to get our minds around the idea of a bus that crosses a dozen national borders today. Yet, just over three decades ago, there were many intrepid travellers who could make the journey.

Between 1968 to 1976, Albert Tours operated a Sydney-Calcutta-London route, doing 15 overland trips in those years. I found an old brochure advertising departure from London’s Victoria terminus on July 25th 1972 and arrival at Calcutta’s Fairlawn Hotel on September 11th. You could experience “Banaras on the Ganges, The Taj Mahal, Afghan Tribesmen, The Khyber Pass, The Peacock Throne, Communist Bulgaria, The Blue Danube and the Golden Horn”, while enjoying shopping days in New Delhi, Tehran, Salzburg, Kabul, Istanbul and Vienna. Unscheduled adventures included having to “dig out a dry riverbed plus a piece of the mountain.” The fare for the journey of around seven weeks, including food and sundries was £145, which in those days was a lot of money.

Geopolitics put an end to those adventures. By the late-1970s, the Ayatollah Khomeini’s revolution in Iran, General Zia-ul-Haq’s coup in Pakistan and the Soviet invasion of Afghanistan made it all but impossible for an ordinary passenger to innocently sit in a bus and get off at the next continent.

Violence, sanctions, travel restrictions and international suspicions cut off the Indian subcontinent from Europe since then. Hiram Warren Johnson, the US Republican politician who declared that truth is the first casualty of war was obviously wrong. It’s the bus route that suffers first. (Our own Atal Bihari Vajpayee thought starting a bus would end the war, with rather mixed results).

Is a trans-continental bus service from Birmingham to Mirpur feasible today? Three decades ago, the European leg had to traverse two geopolitical blocs. Today the entire stretch from the United Kingdom to the border with Turkey is within the European Union. It’s the journey from Turkey to Pakistan that is, to put it mildly, rocky. Turkey to Iran across restive Kurdish areas, Iran to Pakistan through a Balochistan under an insurgency and military occupation. Then through a Pakistan undergoing a political transformation under the shadow of severe violence.

While it may well be possible to squeeze past these conflicts, it is unclear if people will want to take the risk to save a few hundred dollars. Or, whether it will be possible to price the ticket at $200 after factoring in security risks. In any case, twelve days’s food, accommodation, transit fees and other administrative costs might already bring the fare close to that of a cheap air ticket. It is quite likely that the Pakistani politician allowed his excitement to get ahead of the business case.

Given the differences in purchasing power in Birmingham and Mirpur, the bus is likely to appeal more to those making the journey into the EU. Immigration authorities in the UK and elsewhere in the EU are likely to scrutinise visa applications a little more than they usually do. The security dimension adds to the economic one. Birmingham’s MP, a British politician of Pakistani origin, was putting it mildly when he suggested that “there could be a guarantee from the Pakistani government that there would be rigorous security checks.” A Pakistani government guarantee? On rigorous security checks? Seriously, now.

The idea of seamless overland connectivity across countries and continents is a good one. It is possible, for instance, to drive from northern Thailand, across Malaysia into Singapore. Even if few people actually drive down this route, international road connectivity has contributed to the economic development of South East Asia. China is plugging into South East Asian road networks by building good connections. India is late in the game and trying to build its own road links to the region. The ASEAN-India car rally, covering 7448 km from India to Indonesia is a showpiece of this effort (and has been scaled down due to budget cuts at the Ministry of External Affairs). There is sound economic, strategic and common sense in building good road connections.

It does not follow, though, that good overland connectivity must have an end-to-end bus route. The economics of bus routes might not hold up favourably compared to air, rail and sea transport for distances that span several thousand kilometres. Like the old Albert Tours, the journey will certainly appeal to those with the time, taste and money for adventure. It is unlikely to result in bringing Birmingham and Mirpur any closer together.

Copyright © 2012. The Indian Express. All rights reserved.

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On the government’s decision to block some social media content

On free speech and extraordinary circumstances

Here’s a segment from yesterday’s NDTV’s Nine ‘o Clock News

You can catch the entire programme here. For more details and an analysis of the blocked sites, see Pranesh Prakash’s post at CIS.

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Three thoughts on Independence Day

We and our politics

For contemplation in Independence Day—V’s question, on a law that takes away our freedom and on the reality of our political spectrum.

The Three Thoughts Archive:
Three thoughts on Independence Day 2011, 2010, 2009, 2008, 2007, 2006, 2005, 2004;
and on Republic Day 2012, 2011, 2010, 2009, 2008, 2007, 2006, 2005.

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The migration problem unpacked

Without a pragmatic approach to migration, instability will only increase.

The surge in communal clashes in parts of Assam—between Bodos and Muslim migrants—earlier this month was serious enough to require the army to be called out to subdue the violence. Such violence is a clear indicator of failure of governance at various levels. Good intelligence, sensitive local governance and astute political tactics should have kicked in long before violence escalated to riot levels. This didn’t happen. It is important to ask why it didn’t happen and hold the state government to account.

That shouldn’t blind us to the big underlying problem—an inability to evolve a workable policy towards migrations into India’s north-eastern region from the regions around it. This problem is more than a century old. The British couldn’t deal with it satisfactorily and ended up sowing the seeds of discord that exist to this day. The Indian republic’s record is no better. As Sanjoy Hazarika points out in his Strangers of the Mist (or Sudeep Chakravarti in a recent Mint article), while the issue of migration (of which illegal immigration from Bangladesh is an important subset) has been exploited politically, there has been no serious attempt to evolve a national policy response.

Yes, it requires a national policy response, for two reasons. First, while border fencing and patrolling can work to some extent, migration can be managed by reducing people’s incentive to migrate. People move in search of greener pastures. Second, the heart of the problem is not the flow of migrants, but their concentration in some areas. 10,000 Bengali-speaking Muslim people from Bangladesh arriving in India is not as much a problem as the same people settling in one village in Assam. [See this editorial in the Assam Sentinel]

Therefore it’s important for Bangladeshi economy to grow at a rate that will reduce incentives for Bangladeshis to want to migrate to India. It is in India’s interests to ease demographic pressure by supporting Bangladesh’s development. Proximity geopolitics is not easy. One of two mainstream Bangladeshi political parties is plainly hostile towards India. Even so, it is meaningless to think India can address the problems of illegal immigration if Bangladesh fails to keep pace with India’s own development.

More importantly, as this blogger has argued elsewhere, the focus of India’s national approach to migration must be to manage the flows in a manner that does not undermine the already weak social capital across the country, and especially in ‘remote’ regions. A work permit system that allows Bangladeshis and others to legally work in India and travel back to their homeland is necessary. This might not be a popular idea—but it is a better alternative to both pretending that there are no illegal immigrants and to hyperventilating that there are too many of them. Issuing work permits and allowing state and local governments to assign limits on the number of work permit holders in their communities will be an improvement on the status quo.

What about the politics, you ask? There is something in the idea for either side of the political spectrum. The Congress party’s fortunes in Assam will brighten once the illegal migration issue is settled. It can claim to have protected the rights of Bengali-speaking Indian Muslims who no longer face the risk of harassment. The BJP, for its part, can credibly call for the repatriation of all illegal immigrants.

Work permits for Bangladeshis offers absolute gains for most political parties. Their own calculations, however, are on the basis of relative gains — “does it benefit our party more than the other party.” Both great leaders and good politicians would smell a political opportunity here. We do have some of the latter.[How to fix illegal Bangladeshi immigration]

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Should Pakistani TV channels be allowed in India?

A debate on NDTV

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