Return and reforms

Will Manmohan Singh’s return to the finance ministry result in some reforms?

Pranab Mukherjee, an over-rated, over-respected and over-portfolioed cabinet minister presided over the finance ministry at a time when the results of UPA government’s gross mismanagement of the Indian economy began to show. His remedies worsened the malaise—not only has the economy slowed down, domestic and foreign investors have been given reason to believe that India’s economic managers are not only unserious, but also nearly banana. Retrospective taxation—Mr Mukherjee’s gift to economic policymaking—is an abomination and exemplifies how awfully perverted the UPA government’s thinking has been.

So, with Mr Mukherjee out of the cabinet (and undeservingly heading for Rashtrapati Bhavan) and Manmohan Singh taking over the finance portfolio, what are the prospects for reforms? None at all, argues the astute Swaminathan Anklesaria-Aiyar. Quite a lot, contends Sanjaya Baru. The truth may be in the middle, but despite Mr Baru’s valiant cheerleading, the odds are stacked up in favour of Mr Aiyar’s prognosis.

Samanth Subramanian sought my views for his report in The National. Here is my full response to his questions:

Q. Do you think the PM has the political capital he needs to make bold changes? Do you think, for that matter, that the government will risk making possibly unpopulist changes with the elections less than two years away?

Whether or not there will be any reforms depends on how much Manmohan Singh is willing to face down the Congress party establishment in order to secure his own place in history. It’s not so much about political capital but as he said in his 1991 speech “Sarfaroshi ki tamanna ab hamare dil mein hai/Dekhna hai zor kitna baazu-e-qatil mein hai.” Does he have Sarfaroshi ki tamanna?

Q. How much can any possible economic reforms redeem Manmohan Singh’s otherwise awful leadership of this UPA government?

What Manmohan Singh can do at this stage is revive the narrative of reforms, by setting out a long-term road map and by implementing the ones he can. The signal this will send will help set the economy back on track and hopefully redeem his own record.

Q. If you had to make a short, three-item wish list of reforms you hope he could enact, what would that list be?

Liberalise education, liberalise labour laws and start fixing land acquisition. Toying with fuel subsidies, reversing GAAR etc is mere signaling…the fundamental strengths of the economy can be reinforced only by liberalising education, labour and land acquisition. Playing around with financial markets and FIIs is mere tinkering. He must do what is necessary to revive direct investment, both domestic and foreign.

Direct channel to Rawalpindi

Engaging the Pakistani army chief is a good idea. Conceding anything is not.

In a Pax Indica column in September 2010 I wrote about India’s engagement paradox:

New Delhi talks to the powerless but can’t talk to those in power, or vice versa. It’s most obvious in Pakistan. General Ashfaq Kayani is the man calling the shots. India has no direct channel of communication with him. The people New Delhi does talk to — the likes of President Asif Zardari and Prime Minister Yusuf Raza Gilani — have little say in the subjects that New Delhi talks to them about. This creates an illusion of movement in bilateral relations when, fundamentally, there is none. To be fair, the fact that Pakistan has such a complicated political structure (I’m being charitable here) is not India’s fault. But if the Americans can rejig their foreign policy apparatus such that some people talk to the generals while others talk to the politicians, surely, so can we. [The Acorn/Yahoo!]

Why might this be the case? In last Monday’s Business Standard column I argued that:

(One) reason why India finds itself in a bind with respect to Pakistan, where it needs to engage the real power centre but finds itself with no means to. It is not a matter of matching protocol, for it is not purely military matters that we wish to discuss with General Kayani. Washington, in comparison, handles this a lot better through Admiral Mullen and General David Petraeus, the CENTCOM chief, who are the primary interlocutors with the Pakistan army. Given that these admirals and generals are engaged in diplomatic activities of serious importance to India, can we afford to stay out of the military diplomatic loop?[The Acorn/Business Standard]

While India has not shied from talking to Pakistani army chiefs after they become dictators, dealing with General Ashfaq Kayani directly challenges diplomatic optics. The 26/11 attacks and their aftermath left no doubt that it was he, and not the Zardari-Gilani government, that was in charge. Yet, because he did not announce himself to be the dictator, chief executive or president of Pakistan, the Indian government couldn’t openly deal with him.

Bharat Karnad first alluded to a direct back channel engagement late last month (linkthanks Swami Iyer). However, it was a London Times report over the weekend that captured attention in India. The Prime Minister’s Office has issued a carefully worded denial while the Pakistani military spokesman declined to comment. It is highly likely that the reports are generally accurate and a direct channel, albeit with some deniability, has been in place for the last few months. [See this post at Pragmatic Euphony]

Why it makes sense to engage
It makes sense to directly engage the real centre of power in Pakistan. First, it allows India’s policymakers to both understand the Pakistani army’s motivations, thinking and demands, and also to communicate its own positions (both bilateral and those relating to Afghanistan). [See editorials in Mint and Indian Express]

Second, initiating an engagement “ten months ago” could have helped tactically buy respite from terrorist attacks during a critical period—post-crisis economic recovery and the world cup cricket tournament. Tactically again, it could be intended to reduce the heat of the 2011 summer in Kashmir.

To induce co-operation, though, India might have to indicate its flexibility on some issues: most likely, downplaying demands to prosecute Lashkar-e-Taiba leaders and playing up the resolution of the Sir Creek and Siachen issues.

Why such engagement is risky
For all its advantages, engaging Kayani & Co is not without risks.

First, there is a risk that it will lull the Indian security establishment into believing in the other sides’ bona fides, as after Vajpayee’s bus ride to Lahore. Keeping it secret mitigates this risk to some extent, but to the extent that it affects the psychologies of the prime minister and the top echelon of the national security apparatus, the risk of being backstabbed should concern us. Even if General Kayani himself were to have a miraculous change of heart, the Musharraf’s Musharraf effect, wherein the military-jihadi complex will act to pull the rug from under its own leader, cannot be discounted.

Second, there is a risk that the flexibility that the Indian negotiator must show in order to induce co-operation will end up locking New Delhi in. There is a perception that Siachen, for instance, is a low-hanging fruit that India can “give” to show sincerity. This is wrong: India must climb down from the Saltoro ridge entirely on its own terms. The larger issue here is that allowing the Pakistani military-jihadi complex to believe that the threat of terrorism under a nuclear umbrella will force India to concede anything is a very bad idea.

Third, a consistent impression has been created in the Indian mind that India’s approach to Pakistani aggression is to turn the other cheek. Prime Minister Manmohan Singh’s dogmatic approach to pursuit talks, first with Zardari-Gilani & Co and now with Kayani, risk a public backlash that risk undermining any mutual gains that might have been made as a result of it.

Fourth, Dr Singh is bargaining from a position of personal weakness, the worst position to be in while opening negotiations. He has long been out on a limb on Pakistan policy, and is just one terrorist attack away from being out of office. His government is now on the ropes on the matter of corruption and malgovernance. This compounds the risks of him making concessions in order to stay afloat.

Finally, New Delhi is reducing the pressure on General Kayani at a time when Washington is raising it. The Pakistani military-jihadi complex must be contained in the short-term. Squandering opportunities to bring forward the crunch time in Rawalpindi is an unwise move.

So what should we make of it?
On the balance, that New Delhi has chosen to open up a direct line with the Pakistani Army’s GHQ is a good thing. It could have been better timed though. We should be concerned that it is a dogmatic Dr Singh who is handling the secret, opaque process. For that reason, public debate and the political process should put a backstop on the proceedings. Opposition parties, especially the BJP, would do well to prohibit the Prime Minister from making even the smallest concession of substance.

My op-ed in WSJ Asia – Dr Singh’s leap of faith

India’s decision to resume dialogue with Pakistan is a triumph of faith over reason

The following is the original draft of my op-ed that appeared in the pages of the Wall Street Journal Asia earlier this week:

Prime Minister Manmohan Singh waited until public memory of the terrorist attacks on Mumbai on 26th November 2008 faded to a level that it was politically feasible for him to resume the composite bilateral dialogue with Pakistan. The attacks had compelled him to reluctantly suspend official talks two years ago. Despite increasingly compelling evidence that the Lashkar-e-Taiba carried out those attacks with the connivance of the Pakistani military establishment, Islamabad has preferred to engage in a dilatory game of dossiers-and-lawsuits to avoid having to take any action against the perpetrators of one of the most provocative acts of terrorism in recent years. Yet, in the absence of the tiniest acts of good faith from his Pakistani counterparts, Prime Minister Singh has dogmatically persisted with his pursuit of dialogue — a policy which last week saw New Delhi effectively yielding to Pakistan’s demand of talks without preconditions.

Dialogue for Mr Singh is neither an eyewash to satisfy the international community nor a pragmatic policy tied to outcomes. It is almost a matter of faith, oblivious to facts or reason. Continue reading My op-ed in WSJ Asia – Dr Singh’s leap of faith

Manmohan Singh’s foreign travel

The Indian prime minister is going to places he shouldn’t. And not going to places he should.

It’s becoming a pattern. First, Prime Minister Manmohan Singh attends a summit of an international grouping that has little relevance to India’s foreign policy priorities. Then, at the “sidelines”, he meets the Pakistani leader who happens to be there too, and then surprises everyone with the outcome. His imprudently went to the SCO meeting at Yekateriburg, met a usually conciliatory Asif Ali Zardari, and appeared to blow hot. He unnecessarily went to a NAM meeting at Sharm-el-Sheikh, met a usually belligerent Yousuf Raza Gilani and handed him a lollipop. He now plans to go to Trinidad to attend a meeting of an irrelevant international organization—the Commonwealth—and intends to meet the Pakistani leader at the sidelines.

Now, if Dr Singh believes that he has to attend meetings of outfits that are peripheral to India’s interests, then he has gotten his priorities very wrong. Since he became prime minister in May 2004, he is yet to visit capitals of countries that are of direct relevance to India. The absence of top-level stewardship has meant that relations with Jakarta, Ho Chi Minh City, Singapore, Canberra, Seoul and Tokyo—some of India’s most important geopolitical partners—have been at drift. Other than through SAARC, another non-performing outfit, he has not visited even neighboring capitals. Yet he finds the time for not one, but three multilateral summits in the first four months of his second-term. At a time when China is rapidly developing its influence in East Asia and the subcontinent, the UPA government’s failure—and Dr Singh’s personal absence—in Asia has damaged India’s interests in the region.

On the other hand, Dr Singh might merely be using these faraway places as an excuse to meet a Pakistani leader at a neutral venue. If so, then he is not only running an important part of India’s foreign policy by subterfuge, but also, running the risk of damaging outcomes like that at Sharm-el-Sheikh. As K P Nayar wrote in the Calcutta Telegraph, the key official in the foreign ministry handling Pakistan affairs was not even in the delegation that went to Egypt. Without criticising the prime minister’s authority to use his own judgement on key foreign policy decisions, it borders on the irresponsible not to pay attention to composing the negotiating team properly.

The Prime Minister’s Office must state clearly what exactly Dr Singh hopes to achieve at these trips. If the purpose is to attend diplomatic Club-Meds, then he is guilty of very misplaced priorities. If the purpose is to meet a Pakistani leader, then it must not be done by stealth. Dr Singh can invite his Pakistani counterpart, visit Islamabad or indeed, set-up a Reykjavik like summit in a third country.

And he’s doing it before even winning the Booker prize

Chetan Bhagat uses sophisms to advance an argument for surrender

So how many cliched sophisms can you squeeze into one 900-word op-ed piece? Chetan Bhagat manages to do five. More than a defence of the prime minister as it announces itself to be, his op-ed in Hindustan Times (linkthanks Rohit Pradhan) is merely a series of lazy arguments and an intellectual superficiality that is more suited to a discussion of Hindi films, cricket matches and cafeteria-gossip, not the grave issues surrounding geopolitics, foreign policy and national security.

Mr Bhagat begins with a profound misunderstanding of “our attitude”. Instead of reconciling with Pakistan, he says, Indians want to “teach Pakistan a lesson” and put them in their place. Now assuming this is true, does Mr Bhagat pause to examine why? Is it perhaps because Pakistan has devoted itself to damaging India right from the word go? Reconciliation is not a rational response towards Pakistan until the time it unequivocally transforms itself into a country that is at peace with itself and its neighbour. Yet, the story since 1998 at least is one where India has made repeated attempts to reconcile—at political and popular levels—and on each occasion received a dagger in its flesh in return. So yes, bashing Pakistan might be considered patriotic and make good politics, but for good reason. Mr Bhagat doesn’t get into these reasons, of course, because they wouldn’t lend themselves to his conclusions.

The second sophism that Mr Bhagat uses is that ‘every Indian’s future is inextricably linked to Pakistan…because of what India spends on defence.’ This is not the (flawed) “we can’t change our neighbours” argument, it’s not even the (flawed) “guns vs butter” argument. It is a (flawed) “let’s submit to our neighbour’s blackmail” argument. It is disguised as (or confused for, if you want to be charitable) a guns-vs-butter argument by pointing to the opportunity costs of defence expenditure. But it sounds plausible for only as long as it takes you to realise that there are opportunity costs of non-defence too. Ask the Morioris, if there are any left to tell the tale.

A reasonable case can perhaps be made around the concept of a peace dividend—that giving Pakistan something would result in a lower defence expenditure that would in turn allow India to channel the ‘savings’ for development. That depends on what is the “something” that would satisfy Pakistan, and whether the act of giving that something away will actually result in a net positive dividend. Instead, Mr Bhagat asks “how badly do we want Kashmir?” As if giving away Kashmir would automatically lead to the building of colleges, irrigation projects, roads and power plants. This is the third sophism—the plausibility of which lasts only as long as it takes for you to listen to a Hafiz Mohammed Saeed’s speech. Giving in to Kashmir fatigue is a terrible idea. Mr Bhagat doesn’t bother to explain just conceding on Kashmir will lead to lower defence expenditure, less more colleges and roads. It’s a double sophism, actually, because Mr Bhagat presumes that government expenditure is required to build colleges, irrigation projects, roads and power plants. You know, just like it was government expenditure that put phones in almost everyone’s hands.

You should really put up your hands when you see India described as the land of Buddha and Gandhi which has somehow lost its peace goals, the fourth sophism. India’s national symbol is not The Other Cheek. As much as Buddha and Gandhi, this is also the land of the Mahabharata, Ramayana and the Arthashastra—treatises that reveal a sophisticated approach to statecraft. These books do not advocate peace at any cost. Even Gandhi drew inspiration from the Bhagavad Gita.

When you don’t have to support your argument with evidence, you can just about say anything you like. Like, for instance, “we need to have peace…because we can’t afford to fight or stay prepared to fight for the next 20 years.” How does Mr Bhagat arrive at this extraordinary conclusion? If India struggling at economic growth rates of 5% or lower could afford to fight and stay prepared for the last 20 years and yet achieve over 8% growth today, surely, it can more easily afford it now? To use Mr Bhagat’s own analogy, if you could afford a security guard when you were poorer, you certainly can afford him now when you are richer.

The byline identifies Mr Bhagat as the author of The Three Mistakes of My Life. With this op-ed he’s made one more.

The difference between Vajpayee and Manmohan Singh

Statesmanship and not

Much of the public debate over Prime Minister Manmohan Singh’s bad wager at Sharm-el-Sheikh as been framed wrongly. It is not about the need for India to diplomatically engage Pakistan (although presenting a binary choice between war and talks, and advocating talks suits the UPA government just fine).

It is about how. Shekhar Gupta’s op-ed today inadvertently demonstrates what exactly was wrong with Dr Singh’s approach:

“Everybody wants to go to war. The armed forces are so angry. But ek samasya hai (there is a problem). You can decide over when you start a war. But once started, when it will end, how it will end, nobody knows. That is a call leaders have to take,” (Prime Minister Atal Behari Vajpayee) said (in December 2001, after the jihadi attack on the Indian parliament), focusing entirely on his soup. Once again it was a statesman speaking rather than an angry Indian.

After almost 16 months of stand-off on the borders and coercive diplomacy when, as disclosed by Brajesh Mishra in an interview with me on NDTV’s Walk the Talk, an all-out war nearly broke out on two occasions, Vajpayee again made a dramatic “turnaround”. Addressing a crowd in April 2003 in Srinagar, he made yet another unilateral peace offer, to his own Kashmiris as well as Pakistan, and it yielded the Islamabad Declaration after a summit with Musharraf in January 2004. [IE]

In a situation not unlike the present, Mr Vajpayee moved unilaterally. Doing so meant that he could do it on his own terms. Doing so meant that he didn’t have to agree to the ‘price’ his Pakistani counterpart would ask for in order a joint statement. In Dr Singh’s case, the price paid was not only high, it was paid unnecessarily.

Notwithstanding this blog’s criticism (see a representative post) of the content of the ‘peace process’ that followed the Islamabad summit in 2004, it is undeniable that Mr Vajpayee’s move was real statesmanship. For all its faults, the direction and pace of the 2004-2008 ‘peace process’ was in India’s hands. Dr Singh’s move, in comparison, was a poorly conceived, badly managed and dangerously risky gamble. His own fate is in Pakistan’s hands.

Delhi, its honest rulers and their foolish gambles

The strategic consequences of Manmohan Singh’s vulnerability

So he stood his ground, and didn’t make use of the lifelines that were created for him by the foreign ministry.

Whether he intended it or not, Prime Minister Manmohan Singh has made himself personally vulnerable. Whether he intended it or not, his Sharm-el-Sheikh lollipop is a gamble: if there is another Pakistan-originated terrorist attack during his tenure, Dr Singh will be thrown to the dogs by his own party; if there isn’t one, as the phrase goes, Singh is King. Since the only people who can prevent a Pakistan-originated terrorist attack are the powers that be in Pakistan—whether it is Asif Ali Zardari, Yousuf Raza Gilani or the military-jihadi complex—Dr Singh’s fate is effectively in the hands of his Pakistani adversaries. Another terrorist attack during the UPA government’s second innings will certainly hurt India; but it will (okay, okay, it might) end Dr Singh’s prime ministerial career.

And just what will Messrs Zardari, Gilani and Kayani do when they realise that they have Dr Singh by the, well, jugular? In addition to using the Balochistan reference to obfuscate their culpability in the Talibanisation of Pakistani society, first they’ll rub their hands in glee: they suddenly have more than just ‘mutual interdependency’ without even having to build a gas pipeline and then blackmail India over it.

Second, they can—with genuine or faux sincerity—suggest that unless India makes concessions over Jammu & Kashmir and a number of other bilateral issues, it will be very hard to rein in the jihadis. Dr Singh’s gamble leaves him ever more vulnerable to this old blackmail. It does not matter if Messrs Zardari & Gilani can or cannot actually do anything about the Lashkar-e-Taiba, and it does not matter if they do anything about it or not, they will still be able to ask India to make progress on the composite dialogue to keep the ‘peace process’ moving.

Third, should another terrorist attack occur, Messrs Zardari & Gilani can first deny, then offer to investigate, then admit that it originated in Pakistan. And anyway, what’s a little terrorism between dialogue partners? In New Delhi, like they sacked the incompetent Shivraj Patil after too much damage had already occurred, the Congress Party might be compelled to seek Dr Singh’s resignation.

The only way Singh can be King is when there is no major terrorist attack. Only major concessions by India might prevent those attacks from happening. Marammat muqaddar ki kar do Maula, mere Maula!

The man who knows exactly how to fix India’s problems

But still won’t

This blog would be remiss if it missed pointing out an excellent post by Raju Narisetti, the editor of Mint, on his blog. Dr Manmohan Singh, he writes, should be an op-ed writer.

Usually, it is the opinion page editors of newspapers who are in the habit of telling the government and the people as to what ought to be done. In India, however, it is Prime Minister Manmohan Singh’s speciality as the man who can get things done and who is supposed to get things done has increasingly turned into an editorial writer (or editorial speech maker), often simply telling the country what ought to be done rather than actually doing it. [A Romantic Realist]

Next year, a grateful Indian electorate should allow Dr Singh to do what he does best.

The hole that the UPA dug India into

Caught in a storm without an umbrella

Mint makes a very important point in today’s editorial:

We have often said in these columns that the UPA government made a cardinal mistake during its term: buoyant tax revenues should have been used to fix the fiscal problem. The money that flowed into the kitty was frittered away, even as the promise to restructure government spending was not followed up on. India is in a fiscal mess at precisely the point when it needs fiscal muscle to support weakening demand. The blame for this has to be laid squarely at the door of the Manmohan Singh government.

The overall tone of ministerial statements is one of innocent helplessness: The domestic slowdown is because of the global economic crisis. That is technically correct. But then the domestic acceleration, too, was partly because of the global boom between 2003 and 2007. The UPA government can’t have it both ways: claiming credit in good times and blaming others during bad times.[Mint]

By invitation: How can we be sure Dr Singh has answers?

V Anantha Nageswaran

TN Ninan’s weekend rumination on Manmohan Singh’s purported successes on the external front is disappointing for two reasons: it does not make any useful point and it is misleading. The ongoing global financial and economic crisis is neither about global financial regulation nor its architecture.

In all fairness—whether or not Dr Singh was and is a great economist is beside the point—his tenure this time around, even after the Communists left the alliance, has not exactly been inspiring. He might not have been able to carry the day with his proposals. But he could have, at least, articulated the change, the vision and the blueprint that India needs, thus helping whoever comes after him (or himself) when conditions turn more propitious. The only thing we know is that he missed the Communists in his coalition. Continue reading By invitation: How can we be sure Dr Singh has answers?