Indo-China trade worsening for three years - FDI inflow/outflow fell rapidly

by Harish Gupta, National Editor, Lokmat Group

New Delhi, Sep 19

Indo-China relations may have soured after the Ladakh stand-off. But the FDI inflow from Chinese companies has been falling at a rapid pace to India for the past three years. Even Indian companies have been keeping away from China. 

This was revealed in the FDI inflow figures saying if $350 million was invested in India by the Chinese companies in 2017-18, it came down to $229 million next year and further fell to a record low of $ 163.77 during 2019-20.

It is not as if only FDI inflow has been falling regularly. The Indian companies have been investing less and less in China for the past three-four years. If Indian companies invested $49.19 million in 2017, it came down to just $12.61 million next year and rising slightly to $27.57 million during 2019. 

When the Minister asked in the Lok Sabha if the Government has any proposal to not accord any permission to any Chinese firms to invest in India, he emphatically denied “No.”

Piyush Goyal, Minister for Commerce, Industry and Railways informed the Parliament separately that India’s trade deficit with China came down to $5.8 billion in the April-June 2020-21 period from $13.1 billion in the same period of the last financial year. Even the total trade between the two nations also slipped to $16.55 billion in Q1 FY21 from $21.42 billion in the April-June period of 2019-20.

Interestingly, when asked if trade barriers have been imposed against China to ward off trade deficit, Goyal said at present, about 550 products) are under the restricted/prohibited category for imports under the Foreign Trade Policy not only from China but from all countries. Obviously, the ban was not China specific.

Pawar, Stalin, nixed Congress proposals - Lokmat Exclusive

Sonia wanted "physical not virtual" meeting with PM 

All-party meeting on China

by Harish Gupta, National Editor, Lokmat Group

New Delhi, June 20

No Opposition party leader supported the idea floated by the Congress that the Prime Minister should hold a face-to-face meeting rather than “virtual meeting.” The Congress wanted the PM should call leaders physically for effective interaction on thorny Galwan Valley crisis.

But no one agreed. Nationalist Congress president Sharad Pawar rejected the proposal out-right saying “virtual meeting is as good as physical meeting in the times of Covid.”

A senior NCP leader, on the condition of anonymity told Lokmat that Pawar Saheb reminded that Sonia Gandhi had herself held a virtual meeting with 22 leaders on May 22.

CPI’s Secretary D Raja told Lokmat over the phone confirmed saying, “I personally had no objection to the physical meeting. But other leaders were perhaps not willing,” he said.

DMK leader M K Stalin did not agree either. It transpires that a top aide of Sonia Gandhi contacted leaders personally after the government initiated move to hold the meeting on June 19. But there was no positive response from leading parties.

It also transpires that they were also uncomfortable with the very line the Congress and its leader Rahul Gandhi had taken on the Indo-China violent clashes.

This was reflected in the meeting yesterday where a combative Sonia Gandhi raised several tough questions and accused the government of many failed opportunities. Sonia spoke first and wanted to set the tone immediately after External Affairs Minister S Jaishankar made the presentation tracing the history of conflict.

But she stood virtually isolated as neither Sharad Pawar and nor DMK supported her line of attack. Pawar said, “issues such as whether soldiers carried arms are decided by international agreements, and everyone should respect such sensitive matters.” Obviously, he was distancing himself from Rahul Gandhi line. Stalin also supported the government on the issue including most Opposition parties.

Whom to Trust and When

by Harish Gupta, National Editor, Lokmat Group

Restraint surely has a “bottom line”, as the Chinese government spokesman reminded India. And that too after seven weeks of persistent effort by India to end, through negotiations, the standoff with the Chinese military in the Doklam plateau, a stone’s throw from the point where the boundaries of Sikkim, Tibet and Bhutan meet. India sent National Security Advisor Ajit Doval to Beijing to talk the matter over, but he came back empty-handed as China would not relent until hell freezes over.

China’s is typical bully’s logic. It questions India’s right to send troops, through a third country, Bhutan, into Doklam. But the ownership of the area is contested between Bhutan and China; it is anything but trespass by India to China’s territory. Further, the Indian action was in response to China constructing metal road that could bring artillery and tanks close to the thin land mass, the ‘chicken’s neck’, that connects the Indian plains with the eight north-eastern states. In 1962, when China and India went to war, the Chinese targeted that very spot as it moved its troops across Nathu La in Sikkim. Imagine how will China respond if India builds a string of missile bases that threaten the security of Tibet, or beyond?

While China says India must move back “with no strings”, and raises the pitch of its megaphone diplomacy, India’s policy-makers are in a double bind. On one hand, China is a goliath with GDP (in PPP terms) nearly three times that of India, and four times the southern neighbour’s military budget. On the other hand, India is saddled with a rather chaotic democracy in which the opposition turns even a foreign aggression into an opportunity to find fault with the government. China’s one-party rule doesn’t entertain the liability of gaining public support for its war efforts. In China, such leader’s accountability, if at all, may lie behind the closed doors at the forthcoming national congress of the communist party of China. There, President Xi Jinping’s return as chief of the party for another term is taken as given.  

The Indian opposition criticism of the Modi administration’s handling of the Doklam standoff has three layers, all of which have supposedly originated from the Congress. At one level, it cribs about Modi’s public displeasure with Beijing about President Xi’s One Belt One Road (OBOR) policy by not attending a widely attended meeting of the OBOR invitees earlier this year (Bhutan, India’s friend, was the other absentee). At another level, the opposition brushes aside the government version of the standoff. Congress vice president Rahul Gandhi dramatized his personal spite for Modi when he stayed away from an External Affairs Ministry briefing of the opposition leaders but had a well-publicised meeting with the Chinese envoy in India, as though he were hearing the truth from the horse’s mouth. Moreover, the opposition would put down the Modi government’s foreign policy per se and present the imbroglio in the north-east Himalayas as part of a general policy dislocation.

External Affairs Minister Sushma Swaraj, in a robust speech in the Rajya Sabha last week, addressed most of these issues with clarity. She rightly expressed her dismay at some opposition politicians in India—a Congress member in this case—questioning India abstaining from the OBOR summit. “The OBOR link to Gwadar port in Baluchistan goes through Pakistan-occupied Kashmir (POK), which India considers as an integral part of our country. How does an Indian political party expect us to attend the OBOR summit?” Swaraj crafted a credible defence of Modi’s foreign policy—“for most of its terms, India under the Congress had Russia as ally and the US as enemy but, under Modi, both Russia and the US are friends”—and went all out against Rahul for his offensive gesture.

However, the opposition efforts to pin down Modi on the China issue can lead to a self-goal as public opinion generally turns red hot on patriotism during military confrontations with foreign countries, as it was evident in the 1962 war with China, the 1971 Bangladesh war with Pakistan or the 1999 Kargil war. Unless India gets a bloody nose in a decisive war with China, there is little chance of Modi’s popularity hurtling down (it happened to Jawaharlal Nehru after the 1962 defeat but there was plenty of public support during the war). Besides, much water has flown down the Brahmaputra between 1962 and 2017; there may still be a huge mismatch between the military prowess of the two countries but both have increased their power to wreak havoc on each other. That has minimised the chances of a full-scale war.

Still, there is little chance of India being able to clinch a deal with China anytime soon for peaceful resolution of the existing, and future, problems. Future, because China is known for shifting goal posts to cause unexpected problems. Like it is doing in South China Sea by rewriting history to lay claims on newer islands dotting it, or in twisting past agreements along the 4,000-km border with India and Bhutan. Beijing does not accept the McMahon line as it was an “imperialist legacy” but now swears by the 1890 Calcutta treaty between British India and China under the Quing government because it allows the country’s present rulers to move troops close to the Indian border.

China is in a hurry to establish its hegemony across Asia and fill up as much of the power vacuum caused by the US lowering its global profile. For India, it is a long-term diplomatic challenge. It is not a diplomatic chin wag for aspiring political amateurs to pompously show off their legacy connections.

Kung-Fu master's Indian friends

by Harish Gupta, National Editor, Lokmat Group

The US civil society is riled no end by the alleged Russian intervention in last year’s presidential election, with an eye on seeing Hillary Clinton defeated. The fact that she lost the election, and Donald Trump won, is read by a good section of the American media and public as the outcome of machinations by Russian president Vladimir Putin.

If true, it is unprecedented for the world’s biggest power to have its internal affairs remote-controlled by another country. However, for India, an even larger democracy than America, the “foreign hand” nudging domestic policy is an old chestnut. India under the late Indira Gandhi was regarded as ‘client state’ of the former USSR, with the government orchestrating its domestic and foreign policy in step with Moscow’s diktat. Similarly, there were tell-tale signs of American intervention in several key events in the nation’s life that shaped its destiny, like the allegedly CIA-sponsored air crash leading to the death of Homi J. Bhabha, father of India’s nuclear programme. If he were alive, India would possibly have achieved its present nuclear capabilities several decades earlier, with cheap power triggering Asia’s industrial revolution not on the eastern coast of China but on Indian soil.

And now, it seems to be China’s turn to do its bit. In this space last week, I described China as  India’s “dangerous” neighbour. Dangerous, because it poses serious security risk. It is building roads that can bring its artillery right up to the border of the Indian state of Sikkim, with its bulldozers that were at work in the territory of Bhutan, a tiny mountainous country that depends on India for its foreign relations and external security. In China’s perception, India is a weakling, a perception born out of its 1962 experience, yet India cuts a profile high enough for a hit on it to reverberate across the world as a demonstration of the Dragon’s might. 

However, China, like America and Russia in the past, has also emerged as a player on the chequerboard of India’s internal politics. Apparently, it is rattled by the rise of Prime Minister Narendra Modi on the global stage, as a decisive leader of India’s 130 million people who carries no ideological baggage that hamstrung the country’s previous rulers. And, like the USSR in the past, it has kept a close watch not just on Modi but the entire political spectrum, and must have observed the extent of antipathy towards him that some of the opposition leaders, notably the top leaders of the Congress party, harbour against him. There are reasons for China to be soft towards the Congress as, under its leadership, India resolutely desisted from crossing the red line in response to various urgings from America to be a party to the mission to contain China.

But India under Modi has shown more spunk than what makes Beijing’s tolerance limit. It has joined in strategic partnership with Japan, Australia, Vietnam and the US—countries that are worried by China’s flexing of naval muscle on the maritime rights of all over South China Sea. In 2008, the US gave India the legal right to build on its civilian nuclear capabilities despite being a nuclear nation and a non-signatory to NPT. But it was an ineffective largesse as India was not a member of the exclusive Nuclear Suppliers’ Group (NSG); without its nod, it is not possible to obtain either nuclear fuel or technology. For over two years now, China, as an NSG member, has made it its mission to stall India’s entry into the all-important nuclear marketplace.

Differences arose even on issues related to terror as China, as member of the 15-strong UNSC, flatly refused to ban Masood Azhar, head of terror group Jaish-e-Muhammad, which had attacked Indian parliament in 2001 and the Air Force base at Pathankot in 2016. It was China’s gift to Pakistan in exchange of the latter’s help in mobilising members of the Organisation of Islamic Nations (OIC) in support of China. And of course for gleefully offering China land to build rail and road communication from Kashgar, the oasis city in Xinjiang, to Gwadar port in Pakistan’s Baluchistan. Interestingly, the more Modi sought to befriend the US, the more China began putting pressure on him. It multiplied as Modi’s global image got enlarged, the latest being his historic red-carpet reception in Israel as the first Indian PM in that country. The irritation of his critics at home rose in direct proportion to China’s hostility. It was as if some of them were enjoying India’s humiliation. This is enigmatic, because Jawaharlal Nehru, the first Congress PM, was a victim of China's deliberate betrayal: he had taken China as friend, but was betrayed by an aggression of unmatched ferocity. Unable to bear the shock, he died within two years. However, in what remains of his family, there are elements making money by exporting handicraft and other objects to China against unrealistically high invoice, and some party leaders close to the family have strong Chinese links.

It is likely that the recent Chinese hostility north of Sikkim had a bearing on the Congress-led move to unite the opposition parties in India against Modi. And, as the opposition unity effort tends to fizzle out, it is a Chinese gambit that looks like having gone for a toss. The stand off in the Doklam area, therefore, may end sooner than expected. No wonder Modi and Chinese president X Jinping, in their meeting at the G20 summit in Hamburg last Friday, held a brief talk on the side line, disproving Beijing’s hawkish bureaucrats who’d discounted the chance of a meeting. But everyone was happy as they shook hands. The only unhappy soul was Congress vice president Rahul Gandhi who snarled: “Why is Modi silent on China?”

Steak and Dhokla

by Harish Gupta, National Editor, Lokmat Group

Defying gravity, when Donald Trump made his way to the White House last year, it was generally seen as a mostly local catastrophe whereas the US foreign policy, it was hoped, is too big to fail, resting on the long pillow of seemingly unshakable global business and defence ties. But Trump is a new persona amidst foreigners in Washington.

Till recently, in the French presidential election this month, he seemed championing populist right-wing leader Marine Le Pen as “strongest on borders, and she’s the strongest on what’s been going on in France”. After rolethe liberal pro-EU candidate Emmanuel Macron soundly beat her, Trump did a somersault as he told Macron: “You are my guy.” With other European leaders, he was downright caddish. In his recent trip across the pond, he called Germans “bad” because they sell “just too many cars” in America. At a NATO meet photo-op, he shoved the leader of Montenegro, a small Balkan nation, who happened to be at the centre, to occupy his place.

Before flying into Europe, Trump was in Riyadh where he became a picture of cordiality, starting his interactions with a traditional all-male swordplay, and promising a bonanza of aid for arms to fend against “radical Islamist terrorism”. What he forgot was that it was his host that was the engine powering jihadism based on the tenets of Wahhabism, and Saudi nationals constituted most of the fighters of both Al Qaeda and Islamic State. In the process, attention got deflected from the significant fact that the Saudi priority being to mount attacks on all non-Sunni nations, notably Iran, Trump’s promised aid has the potential to derail Teheran from the path of non-nuclearization. Tehran had earlier agreed to tread after patient persuasions from the Western powers. However, Trump, in stark contrast to his inexplicable show of magnanimity in Riyadh, was all petulance in Europe as he reminded his NATO colleagues that what mattered most (to him) was the regularity of their payments into the alliance’s coffers. NATO was born in the early years of the Cold War as a bulwark of the Western democracies against the communist USSR under its totalitarian leader Stalin. It is obvious that Trump, with hitherto unstated Russian affinity that he and his family members reportedly cherish, is finding NATO’s very idea to be flawed from his perspective from the beginning.

In fact, the Trump presidency has got deeply mired in the Russian muddle. FBI, America’s top investigative agency, which was given the task of investigating possible links between Trump’s campaign team and entities in Russia, has now got its chief fired by the President. Yet there is no sign of the agency closing the investigation. On the other hand, it has zeroed in on Trump’s son-in-law and White House senior advisor Jared Kushner, apparently to investigate the extent and nature of his alleged interactions with Russians. It has been reported that, a month after Trump’s election, Kushner discussed with some Russians a project to set up a secret line of communication with Moscow.

Also under the scanner are the extensive business dealings that officials close to Trump had with Russian proxies in Ukraine. It is the Russian military intervention in Ukraine that brought a new urgency into NATO. After all, Ukraine is the most pro-West of the ex-Soviet satellite nations which former US President Barack Obama fully appreciated. It was Trump’s predecessors who made his country share the concern of Europe and the cost of containing Russian president Putin’s fury. In his election campaign, Trump turned it into his ammunition as he presented the European powers as parasites that were leeching on America for their security. On the other hand, he presented Russia as a victim. Strangely, this fanciful narrative not only went unchallenged in the American public space but created a lot of interest in within the Putin administration to install  “our man” in White House. This is an idea that might make the remains of Stalin turn in its grave. Trump’s deeply troubled five months’ presidency, and the continuance of governmental and congressional probes into his affairs, have got Washington shrouded in an uncertainty not seen till the end of the Nixon years.

All this is bad news for Prime Minister Narendra Modi, who has visited 57 countries since assuming office, but whose foreign policy turns on the pivot of America. A Modi visit to the US towards the end of next month is on the anvil. But the problem is, India is not prominently placed in Trump’s attention span and priorities. In his recent speech in Riyadh, he mentioned India, among others, as a victim of terrorism. But, unlike his predecessor, he lacks a world view, not to speak of a civilizational compass. India in his mind may be lost in a landmass which seem to be distant.

It is not that Trump’s mind-space is limited to the Trump Towers in America. He has a dealmaker’s shrewd understanding of who’re the ones that matter, and is careful to set the chocolate cake moment with Chinese president Xi Jinping at his Florida club Mar-a-Lago, or play golf with Japanese prime minister Shinzo Abe, and beam at his Saudi hosts when served his favourite all-American fare, well-done steak and ketchup.

He is a Conservative elite and will remain so, impeachment or no impeachment. Personality wise, he is so far removed the liberal Obama that Modi must rewrite his manual of self-projection—the “my friend Bahrahak” types—with care. And food is an issue; committed steak-lovers may hold dhokla-eaters as the ET.

The real problem is, Trump’s dealings with people are purely transactional. If India is jointly pounded by Pakistan and China, he is unlikely to promptly act, at least that’s the impression one gets. Secondly, Trump in unpredictable. And that’s why the coming US visit is Modi’s litmus test.

"A" in politics but low in Economics

by Harish Gupta, National Editor, Lokmat Group

In democracy, completion of three years in power is a time for perturbation as that’s when the curse of “anti-incumbency” sets in.

Prime Minister Narendra Modi is an exception. Into his fourth year in power, there is hardly any popular disgruntlement against his incumbency. It was evident in the assembly election in Uttar Pradesh last March when the BJP under Modi and party president Amit Shah succeeded in pulverising the ruling Samajwadi Party much to the same extent to which the saffron party had steamrolled its rivals in the mega-state in the 2014 general elections.

By now, BJP is armed with an election machinery which is unparalleled. Its leadership’s ardour to win every poll is legendary. And for the party, the importance of the year 2019, when Modi’s second innings in power is expected to begin, is underlined. At least this is the impression one gets after talking to a number of Opposition leaders. Bihar Chief Minister Nitish Kumar’s statement that he is not in the race for the Prime Minister’s post and veteran politician Sharad Pawar is not ready to play ball with the Congress clearly give the impression that they are unwilling to fight with Modi.  

It is obvious that BJP is shining in the absence of competition. Congress president Sonia Gandhi, Trinamool chief Mamata Banerjee, CPI(M)’s Sitaram Yechuri—all of them seem trapped in a single strategic silo to combat Modi, which is to “unite” the opposition. The Presidential poll, due in July, can be the first test of unity. But that’s most likely to be fighting a losing battle, as there are unbridgeable fissures in the opposition—Mamata Vs CPM, AAP’s Kejriwal Vs Congress, Samajwadi Party Vs BSP’s Mayawati. Beside, Modi’s inclusive style of campaigning has gravely challenged the traditional parties’ vote-banks. Mayawati’s Jatav, Mulayam Singh Yadav’s once famous Muslim (M)-Yadav (Y) amalgam, Delhi’s Bihari immigrant voters loyal to AAP—recent elections show that the lure of Modi’s “mitron” call brought about seemingly irreparable cracks in these traditional alliances.

Besides, the opposition is bereft of tall leaders. Unlike its UPA predecessor, the Modi administration is not protective about politicians involved in graft cases. Instead, its in-the-face attitude has dragooned most opposition stalwarts in cases from which escape is not guaranteed. Like Laloo and his family members in money-laundering charges; Congress former Home and Finance Minister P. Chidambaram and his son, Karti, in the allegation of siphoning off huge amounts to acquire, among other things, large property in Britain; most of Mamata’s ministers and party leaders waiting to be picked up by CBI on the charge of accepting bribe as shown in the ‘Narada’ sting operation. In the National Herald illegal share-transfer case, the noose may also tighten on Sonia Gandhi and her son, Rahul, the Congress vice-president.

The opposition calls it “witch hunt” but its voice is feeble, with the media prone to self-censorship, and the government, armed with summary provision under Sec 124A of the IPC, being empowered to swoop down on its critics in the social media on the charge of being ‘seditious’. Besides, hit by a blizzard of serious corruption charges, the opposition seems to have lost its moral heft to stand up and question the government. It is more serious than comparable global developments, like near-evaporation of the Labour Party in UK, or the US Democratic Party being in eclipse. Unlike these mature democracies, the Indian opposition parties are personality-based and not much remains of them when the central towering figure collapses.

Though Modi’s political victory so far is undeniable, there are signs of weariness in governance and vision. In 2014, he promised: “I will make such a wonderful India that all Americans will stand in line to get a visa for India”. Unfortunately, things have moved in a different direction. Somewhat embarrassingly, the government Central Statistics Office’s (CSO) figures of national income refuse to tally with estimates of industrial production. In the quarter covering demonetisation of large notes last November, the index of industrial production was flat but national income grew at 7%, like in magic. With large malls lying near-empty, or being converted to office space, a shortfall in demand is self-evident.

Behind decline in demand is the stark reality of job opportunities shrinking. It is not merely due to Donald Trump’s visa policy, or problems in the IT sector due to shifts in technology (entry of robots in workplaces, for example). There are other reasons too, such as:

·      India has 10 million new workers to the workforce annually, but available non-agricultural jobs are less than 5 per cent;

·      Poor education system has rendered most Indians unemployable, including 90 % of the 10 lakh engineers passing out every year;

·      China became the world’s factory in the 1980’s. Now protectionism rules the roost, with global trade remaining subdued at 2.7% in volume terms. India may not be able to do the China act.

·      CRISIL estimates 12 million people will join agricultural workforce between 2011-12 and 2018-19. But agri workers’ number is declining very fast. So the country cannot move up the value chain to become a modern nation.

·      Agriculture, construction, manufacturing—sectors that employ people are lagging GDP growth. Though agriculture production has shown improvement. But its after two years’ of consecutive drought. What have outpaced GDP growth are financial services, real estate, public administration, and trade, hotels and restaurants. Except the last, all other growing sectors have little job potential. The country is indeed experiencing jobless growth. In the proposed GST regime, the last two have been hit hard.

From the rough and tumble of electoral politics, can Modi take a creative leap to make India a hub of innovation and growth? In the next two years, he must prove he can think big on governance. Or else the queues in India for American visa will continue to be longer than the other way round.

It's Modi Vs Gandhis, let India wait

by Harish Gupta, National Editor, Lokmat Group

As a joke, it is clever but contrived. As a jibe in parliament, it is rank graceless. Prime Minister Narendra Modi’s latest remark in the Rajya Sabha about his predecessor Dr. Manmomohan Singh—only Doctor saab knows the art of bathing wearing a raincoat in the bathroom—looks like having put paid to the budget session when it resumes on March 9 after a month-long adjournment. The Congress, which is Lilliputian in the Lok Sabha but ‘big brother’ in the Upper House, has threatened to keep out of the rest of the session if Modi doesn’t apologize. And that’s asking for the moon unless the stand is changed after March 11.

However, beyond the frightening display of “indigestion”  at the highest level of India’s political life, the incident also highlights just what CPI(M) party chief and Rajya Sabha member Sitaram Yechury  remarked, that it is not a reply (to President’s address) but an election speech. For that matter, on demonetisation, none from the treasury benches, including the Prime Minister, ventured to respond to the fact of the GDP dropping a full percentage point post-note ban. During the winter session, it was Dr Singh who had got Modi’s goatby forecasting that GDP would be dented by a percentage point, and even upped the ante, in an uncharacteristic way, by calling demonetisation as “organized loot” and “legalized plunder”. Dr Manmohan Singh’s sharp attack on the Modi government surprised all because he rarely spoke in such strong words before, even when Rahul Gandhi tore his Ordinance in full public view. Modi who was sitting in the Rajya Sabha then, kept his cool and waited for an opportune time to strike back. And when he did, all hell broke.

Congress’ leaders did their best to counter Modi’s offensive, but it was not enough. BJP president Amit Shah promptly sprinkled salt on the wound by reminding Congress vice president Rahul Gandhi about his mother Sonia Gandhi’s famous invective at Modi during the days when he was chief minister of riot-hit Gujarat, that he’s maut ka saudagar (merchant of death). Shah did a bit more chest-thumping as he claimed that BJP has given a prime minister who “speaks” and before him “there was one whose voice could be heard only by you and your mother”.

It is evident that if the existing ill will between BJP and Congress continues—and there is not a snowball’s chance in hell that it will go anytime soon—there will hardly be any significant legislative action in the present Lok Sabha. Modi’s ‘raincoat’ jibe was undoubtedly unbecoming of him, but so was Manmohan Singh’s “organised loot” and “plunder”, words that the Prime Minister said Singh had been “made to utter” (implying off-stage prompting by the Congress president). Looking backward, it is obvious that what was mere obstructionism by BJP during UPA 1 (2004-09) turned into splenetic outbursts in the UPA 2 (2009-14) period, when the opposition led by BJP blocked every legislative move by the UPA. Political analysts gave it a sober name, ‘policy paralysis’, but it was actually a series of outbursts against the Congress’ dynastic leaders.

Now the table has turned, and it is ‘Modi V. Dynasty’. At an election rally in Haridwar last week, Modi was at the height of vexation with the Congress’ top leadership. “I tell the Congress leaders: hold your tongue, else I have your detailed horoscope. I do not want to desert dignity and reason, but if your desert dignity and reason and speak nonsense, your history will always chase you”. It can well be empty bluster; but who knows if it has ammunition?

Beyond the clash of ego, however, there is a looming threat that the medium to long term effects of demonetisation by the Modi administration may put India on an unexpectedly slippery slope of economic slow growth against strong global headwinds. IMF has trimmed India’s growth forecast for current (2016-17) and next fiscal by one percentage point (giving some credence to Manmohan Singh’s forecast though he said there will be two per cent fall ) and 0.4 percentage point, respectively, primarily to choking of consumption due to cash shortage and payment disruptions across the economy. But the same IMF, in its World Economic Outlook (WEO) update, has upped China’s growth estimate for 2016-17 from 6.5 per cent to 6.7 per cent. China is an aging country with a per capita GDP over five times that of India. It will be difficult, if not impossible, for India to catch up with economies that have raced ahead if it has no national strategy to put its youthful population to productive use. But, going by the Modi-Gandhi feud, national consensus on any issue is unlikely.

It is even more unfortunate that India’s electoral politics does not hold out any prospect for political unanimity on national cause. It is because over time, particularly in the present decade, the two warring parties, BJP and Congress, are increasingly becoming driven by personalities. Modi and the Gandhis, to be precise. If there are others, they’re bit players. Or like new organs growing from original stem cells, like Sasikala has grown out of the late Jayalalithaa of Tamil Nadu. The party system is under pressure, not merely in India but all over. The Grand Old Party of America, the Republican Party, has been totally eclipsed by Trump, who is anything but a republican, be it a small ‘r’ or capital. The British Labour Party is on stretcher and the Conservative Party died with Brexit. In India, the Congress resembled a party in the classical sense so long as it had a full-scale party as its main adversary, the BJP. But the fig-leaf is gone. And a couple of battling individuals have taken the charge to define the destiny of the world’s largest democracy!

Stand by India

by Harish Gupta, National Editor, Lokmat Group

Deepavali, the Hindu festival of light, is not just an Indian event. It is a public holiday in as many as 11 countries, including Pakistan, as it signifies the victory, among other things, of hope over despair.

As far as India's economy is concerned, it is doubtful if the coming Deepavali has much bright tidings to offer. The indicators on the ground, like sluggish sales of fancy cars, expensive flats and such big-ticket items, are matched with an array of drooping indicators. Of the latter, I think the most significant is the sharp fall in the second quarter of 2016-17 of the Gross Fixed Capital Formation (GFCF). The GFCF measures the capital deployed in investment at a given point. From the first quarter of the current financial year to the second, it dropped from Rs 8,861.47 billion to Rs 8,639.56 billion. If investible capital shrinks, how will industry grow?

The fact that industry is caught in a mess is apparent from data churned out by the Central Statistical Office. Industrial production in India has contracted 0.7 per cent year-on-year in August 2016. It follows a 2.5 per cent squeeze in July. The declining industrial production figures show sector-wise collapse. Like a 49.4 per cent drop in electrical machinery and apparatus, and a 22.4 per cent fall in furniture and wearing apparel. Arguably, it points towards a downward spiral in standard of living. Such a conclusion is logical in view of the poor growth of bank credit, which stood at around 10-12 per cent year-on-year most of this year against 16-18 per cent in 2013-14 and in subsequent years. 

Cement production is down to 22,283 thousands of tonnes in August, from over 25,000 thousand tonnes most of 2015. The number of cars registered in September, though a respectable 268,058, is still way behind the previous monthly high of 304,000 in March 2012. The index measuring infrastructure output has levelled to 3 after reaching an 8-plus high earlier this year. Although steel has rebounded in the past few months, electricity, coal, natural gas and crude continue to be a dismal story. What is certainly on the rise is the government's military spending, from US $48,403 million in 2013 to US $51,115.9 in 2015. And like most other indices, the export growth languishes and so does import.

Simultaneously, there is a general decline in global interest in the so-called "India story", as evident from more guarded reports on Indian economy in the western media. An ominous silence has descended on the IT sector, India's proud emblem of technological maturity. IT czars like TCS and Infosys, after showing anaemic results for quarter after quarter, are now engaged in a battle for survival. Their Western clients are now reluctant to outsource operations to foreign vendors as globalisation as a concept is facing rough weather politically. But the brick-and-mortar alternative to information technology is gasping. The recent news of a few hundred graduate engineers being among seven thousand applicants for 120-odd sweepers' jobs, at Amroha in Uttar Pradesh, was found so commonplace that it buried it in the inside pages.

Narendra Modi, before becoming prime minister, routinely condemned the previous government for "jobless growth". On assuming office, he launched a slew of projects such as Start up India, Digital India, Smart City, Skill India, MUDRA. All these were aimed at creating a new class of Indians educationally and professionally equipped to manage their careers themselves. But so far these have remained largely signboards. On the other hand, a million boys and girls are entering the labour market each month with little hope to land a job. In a recent sample survey, 77 per cent of households were found without a single member with regular income. Unemployment rate has hit a five-year high of five per cent. It is argued that definition of employment and employability has changed with the change of time and merely obtaining an engineering degree alone cannot take the person to an upper income bracket. Lakhs of such graduates passing out each year are casual employees or have some seasonal income.

Modi came to power promising a remedy to jobless growth, but it seems he does not have a silver bullet. The new entrants in the labour market severely lack training. Just 2.5 per cent of the country's working population have any vocational training, compared to 60 to 70 per cent in OECD countries. As its natural consequence, reservation demands in jobs and educational institutions from caste groups like Patel, Maratha and Jat have become the defining feature of electoral politics. 

Modi is a globe-trotter and claims having strong views on all nations, including China, the neighbour with which he is involved in duelling on terrorism. Since he has a deeper knowledge of global economy, he’d have noticed that China emerged as the ‘workshop of the world’ by systematically keeping its currency devalued for decades, with its workers producing goods cheaply because they were paid very little. Something similar, though on a smaller scale, is happening in Bangladesh, where unskilled or semi-skilled workers, mainly women, have turned the country into an international hotspot for ready-made garments.

At a time when jobs are disappearing everywhere, and Artificial Intelligence has been to industry what steam was two centuries ago, it requires innovative thinking to create jobs for the multitude. It calls for a deeper understanding of how resource-poor nations engage large number of workers in making export-grade products. Maybe India needs to rethink its strategy of holding the exchange value of its currency at a high level, as it is more necessary to earn dollars than to let the rich buy his BMW cheap. It is also necessary to enable more women to join the productive work force. That will be more useful than leaders showering advice on women about dressing and lifestyle.

All BRICS no mortar

by Harish Gupta, National Editor, Lokmat Group

If the eighth summit in Goa of BRICS—the geography-defying grouping of Brazil, Russia, India, China and South Africa—ended Sunday on a subdued note, it was because of the presence-in-absence of a non-member, Pakistan. The summit, inarguably, was timed rather awkwardly. The mind-space of India, host for the event, was preoccupied with the western neighbour ever since the attack by Pakistan-based terrorists on an Indian army brigade headquarters at Uri in Kashmir, leading to the death of 19 security personnel. It led India to make unanimity on "terror" its continuous refrain through the summit.

BRICS is a grouping focused on cooperation in trade, but two developments have lately got it derailed. First, the rise of China has changed the dynamic of trade. By 2013, China had grabbed a fifth of all manufacturing export worldwide, compared to only two per cent in 1991. In the first decade of this millennium, when BRICS got going, there was hope that China could be the engine to drive a trading bloc forward. But such optimism has now given way to the fear of being swamped by Chinese imports. 

The other problem relates to the changing dynamic of strategic power. Of the five-nation group, the three leading military powers—Russia, China and India—have their individual strategic objectives. Russia under President Vladimir Putin is bent upon regaining the respect it commanded in the Cold War era as a formidable war machine. It is a growth trajectory that expectedly leaves the US uptight. It responded by extending NATO, the five-decades-old anti-Soviet strategic alliance, to Ukraine at Russia's doorstep. Russia has hit back in a complex bag of stratagem, from helping Syrian president Bashar al Assad, whom America regards as foe, to reportedly interfering with the US presidential elections by using its agents to hack the computers of the Democratic Party. The rapidly declining US-Russia relations have put India in a double bind as it needs both. The US is its life-line to technology, foreign capital and remittances whereas Russia is not only its sole supplier of basic military hardware but its only dependable 'big daddy' to extend help at international forums. The escalating conflict between the Cold War gladiators has left even the Western powers in a dilemma, not to speak of India, Brazil or South Africa.

Besides, China has Pakistan as it strategic partner, its "iron brother". To China, Pakistan is a trusted interlocutor to the Islamic world, and a useful guide to the US security establishment due to Pakistan's close links with the American army for decades. Unleashing Pakistan on India, or at least egging it on, is also China's way of acting tough on India without dirtying its own hand. This Chinese tactic has become rather obvious in its dogged Chinese persistence to protect Masood Azhar, the chief of Jaish-e-Mohammed. The JeM is a terror group reportedly responsible for the Uri attack as well as the 2001 attack on Indian Parliament. Its due to China that JeM couldn't be declared by the UN as a terrorist group. It points at the possibility of a substantial Chinese stake in the terror factory that Pakistan has nurtured.

In 2006, when BRIC (South Africa was yet to join) took shape, it was visualized as a club of large and fast-growing economies. But they have slowed down since then. South Africa, which came on board in 2010, grew at only 1% in 2015. Brazil is in its worst recession in the past 80 years. Russia is grappling with a slew of sanctions. The drop in oil and gas prices has combined with the global downturn in consumption of manufactured goods, Russia's forte, to make its condition worse. On the other hand, triggered by a wage spiral, China's slowdown is a drag on global growth. India's PPP GDP is 40% of China. It is growing reasonably fast but not fast enough to catch up with China in the foreseeable future. Besides, rather than giving India access to its market, it is demanding unhindered entry into the Indian market.

The BRICS talks reflected an uneasy and troubled relations between China and India and, in the process, turning the summit into an exchange of litany on terror. It is no wonder that, for India, the only concrete outcome is a costly shopping list from Russia of missile systems, stealth frigates, fighters and helicopters.

Significantly, the BRICS summit in Goa coincides with a meeting of the BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), an avowedly economic partnership of seven nations: India, Nepal, Bhutan, Bangladesh, Myanmar, Thailand and Sri Lanka. The BIMSTEC outreach wants to keep away from big power rivalries, though there are temptations galore. Chinese president Xi Jinping’s next destination, after Goa, is Dhaka where he has a 24 billion dollar loan-and-aid package to offer. It is unlikely that China’s heart is melting for Bangladesh. China was on the aide of Pakistan in the 1971 Bangladesh war. It recognized Bangladesh as late as 1977, two years after the assassination of Sheikh Mujibur Rahman, architect of the new nation. Besides, most gifts from China prove costly to the recipient as they involve a cluster of Chinese private investments that are based in inflated revenue expectations. Failure to repay such debt become sovereign liability. It has happened with Chinese-financed Hambantota port in Sri Lanka which has negligible revenue but high cost.

BRIC is the brain wave of an executive in Goldman Sachas, an American bank, who used the acronym in 2001 to hype up the emerging economies. It is now a platform for power play of two ambitious global powers, Russia and China. It is BIMSTEC, on the other hand, which has the beginner’s simplicity. All it’s passionate about is a road from India to Myanmar and Thailand.

Come back oh, charkha

by Harish Gupta, National Editor, Lokmat Group

If you are running marathon but joined the race an hour or so late, it is likely that you will reach the final post 26 miles away some time. But the competition will certainly close before that. A similar fallacy is staring India. When government"s financial data were released last week, and it was found that the Gross Domestic Product (GDP) had grown 7.1 per cent in the April-June quarter, against 7.9 per cent in the last quarter of the previous fiscal, there was dismay and consternation all around.

LET DIPLOMACY BEGIN AT HOME

by Harish Gupta, National Editor, Lokmat Group

After getting a bloody nose from China at the Nuclear Suppliers Group (NSG) plenary in Seoul (South Korea) last week, it is not only India’s ambition to get a foot in the door of the 48-member club that has been shattered. It has also put the red flag on Prime Minister Narendra Modi’s overreaching diplomacy. It clearly emerged that his diplomacy is high on jet miles but modest on finesse. On the eve of the plenary, the Prime Minister hopped across five capitals in four days and pressed the octogenarian President, Pranab Mukherjee, to keep pace with him across different destinations. Modi’s picture with Chinese president Xi Jinping at Tashkent, the capital of Uzbekistan, hours before the Seoul meet, made headlines in India as if the “deal” is clinched. But when the crunch came, China did not shift the breadth of a hair from its consistent position that no country staying out of Non-Proliferation Treaty (NPT) could claim NSG membership.

But it is not just that China remained frosty to Modi. Following the plenary, it appears that some countries that Modi recently visited, with an impression given that there had been a change of heart, actually proved steely in their rejection of India’s case as a non-NPT aspirant. And so were New Zealand and Austria, both regarded as US allies. Even Modi’s charm failed to swing Switzerland. Nor was there any proof that a Skype call from White House would work wonders. It seems Modi and his team was somewhat lacking in the fast-changing dynamic of power with the US no more the last word as it used to be in 2008. The US signed the civil nuclear deal with India then and gave it a one-time waiver to participate in nuclear trade with NSG countries. But even that advantage was short-lived. What was considered a feather in Manmohan Singh’s cap in 2008 under Republican Bush faded  fast by a wave of amendments made to NSG guidelines in 2011. One of them banned trade in enrichment and reprocessing with any country which is not a signatory to NPT.

Enrichment of uranium, from its natural form to the fissile isotope uranium 235 and reprocessing technology form the core of using nuclear energy for making weapon as well as generating electricity. By banning transfer of enrichment and reprocessing technology, the 2011 amendments virtually negated the spirit of the 2008 Indo-US civil nuclear deal. It hinged on the US ‘trusting’ India that it would not stoop to divert fissile fuel from power reactors to making nuclear weapons. The amendments came after President Barack Obama had taken charge in the US, after President George W. Bush. There was no protest from Washington against NSG amendments, which again suggests a marked loss of real interest in the US in the treaty with India signed by the previous Republican presidency.

Added to that is the irresistible rise of China as a global superpower, a fact that the Modi administration failed to factor in while thinking it has got US support in its pocket. Modi visited the US four times after becoming prime minister, but it was China that correctly plumbed the depth of Indo-US relations and knew America wouldn’t raise hell if it stopped India at the NSG door. In stark contrast, when the Indian Army liberated Bangladesh from Pakistan in 1971, the US, then Pakistan’s godfather, got its Seventh Fleet sailing down to the Bay of Bengal yet it did not fire a single shot as it was fully aware of the former Soviet Union’s commitment to Indira Gandhi. Developing real close ties with the US, or any big power, for that matter, is certainly more challenging that holding its leader in a bear hug, or sitting with him on a swing in one’s home state. Diplomacy is a lot more than just photo-op.

Besides, the one-time waiver that President Bush had gifted to India was good enough for the moment as it enabled India to lawfully shop around for advanced reactors from Russia, US, France, Japan or Britain for peaceful purposes. Of course these will be under international safeguards. But where is the problem if we are not pinching plutonium from them to make weapons? Of what value is NSG membership then, other than gaining respectability?

The drive shown by Modi in foreign policy could be better employed, perhaps, in winning friends at home. His government is into its third year but, barring liberalization of FDI, there is not a single mega reform initiated. Of course, Modi is trying his best to simplify procedures and rules. But can the posterity will remember his regime in the same way as the Narasimha Rao-Manmohan Singh regime is remembered for ending the “licence permit raj”. The effect of Modi’s dramatic clinching of majority in the lower House in 2014 is fading away in the wake of a bitter row between Arun Jaitley, his finance minister and confidante, and maverick MP Subramaniam Swamy. Though Modi’s own graph remains high. But his government’s image is taking a beating due to various domestic factors.

The drive and energy Modi has displayed in foreign relations, though admirable per se, were better invested if he had won back the party, including the sullen faces that enjoy his trusted finance minister’s public humiliation. That alone would have won him the trophy of GST a year ago, making possible seamless trade on almost uniform tariff across a nation of 28 states. It is as bold a reform as abolition of licence-permit raj, and certainly more honourable than jetting across the planet to finally have the door of NSG slammed on the face.