Delhi-DC, Economy Class

by Harish Gupta, National Editor, Lokmat Group

In Indo-US relations after Donald Trump's entry in White House, the noticeable change is in somewhat  diminution of relative stature of Prime Minister Narendra Modi. During his September 2014 visit to America, his first after being elected prime minister of India, there was a buoyancy in his movement that reflected in his triumphal address to his diaspora supporters at Madison Square Garden. Erstwhile US President Barack Obama, though apprehensive about Modi's alleged communally divisive inclinations, treated him with care as India remained important in his world view in the context of his pledge to withdraw American soldiers from Afghanistan. He thought Kabul might gain from Delhi's help to rebuild the country ravaged by decades of terrorism. India's importance in his scheme of things added to Modi's stature in America. This was an important platform for popularity in a country with a middle class hooked on the American dream.

Since Trump's election, however, Modi has lost his perkiness. The new US president’s world view is different. He seems non-committal on India but that only prolongs the anxiety of unpredictability. It came to the fore with the killing of Indian techie Srinivas Kuchivotla in Kansas on February 22 by a Navy veteran in a racist outburst. Had it been in the Obama days, the balmy touch of White House would have been promptly extended. But Trump remained silent for almost a whole week. He finally mentioned it in his address to a joint session of the US congress. Clubbing it with hate crimes on the Jewish communities, and couching it in lofty prose, he said it "reminded us that...we are a country that stands united in condemning hate and evil in all of its very ugly forms".

Two things related to President Trump's belated condemnation of the seemingly racist murder stand out, though. First, far from coming easily, it required quiet and high level palavering by India, led by Foreign Secretary S. Jaishankar, who was camping in Washington DC. Besides, the President's florid words neither include the name of the victim nor his nationality. On the other hand, the death in action of an American army officer in Yemen became, rightly, the subject of high-decibel presidential commiserations, with the slain soldier's widow among guests.

But this is not the only incident that highlights India's shrinking profile on the American radar. In the same speech in Capitol Hill, Trump had an indirect swipe at India for over-taxing the Harley-Davidson US luxury motorcycles. "In one country, they (HD executives who recently met the President) said another country taxed their motorcycle at 100 per cent". The fact is, Harley-Davidson enjoys 50% market share in India of the luxury range of motorcycles with above 800 cc engines. The issue of import duty does not arise for what its Indian subsidiary produces. But 100 per cent import duty is charged for its Completely Built Units (CBU) that account for only 20 per cent of its India sales. If India brings it down to 25 per cent, or so, it will not only pose an existential threat to India's buzzing two-wheeler industry but push the market towards using guzzlers, which is both expensive and polluting. The company's India unit, on the other hand, is flush with cash as its vehicles, mostly in the Rs 5-10 lakh range (the 1,600-cc bike costs 45 lakh rupees)  have enough buyers among the new affluent class.

Trump was obviously bullying. With time, such bullying may not remain low key. Indeed it may assume larger dimensions, just as he is doing with China. The saving grace for Modi is that India is, for America, a buyer's nation with little to sell except those who walk on a pair of legs, or the trained and educated Indians joining the American work force. In his speech, Trump spoke about how much he preferred merit-based immigration. But there is no clarity yet on how his administration will review terms of the crucial H1B visa going forward. Will it come with an unrealistically high wage stipulation (more than average domestic wage in the same category)? Can there be additional conditionalities about spouses accompanying?

There are 2.5 million Indian Americans, of whom more than half migrated after 2000. The future safety and prospects of the Indian diaspora in the US holds the key to India's attitude to that country. Earlier, Modi rode on a friendly tailwind that had actually begun much earlier, from the past decade, with large-scale exodus of Indian computer engineers to America. The famous personal rapport between former PM Dr Manmohan Singh and ex-President George W. Bush was an outcome of America's enlarging profile in India's public life, and consequently that of the people of America getting to know the Indians from close quarters, and in large numbers.

But the hand-shake at the people's level may be cut short by the wave of protectionism lashing most Western economies, of which Trump is a symbol. The strategic ties, which were of great value to all post-Second World War US presidents, do not seem to be of much consequence to Trump who looks upon security alliances as "cost" and expects partners to pay for the "help". In Trump's world, all global relations are purely transactional.

It is difficult to guess how India can retain its perceived relevance in America. Most other large nations still have resources that America cannot ignore. But bereft of China's industrial base, Japan's skill and Germany's technological mastery, India may suddenly discover it has to do a lot of hard work to remain a player in the game. India graduated to US’ strategic partner. But Trump has different ideas and there is a danger of India losing the plot. That's quite a bother for Modi who is used to grand reception in Washington. But Modi is not known for putting his foot in the mouth like Trump. He is in no hurry to visit Washington DC either and waiting for his moment to strike. He sees a silver lining in Trump’s battle against “Radical Islamic Terrorism.”

Trump: Never Forecast Future

by Harish Gupta, National Editor, Lokmat Group

Donald Trump is undoubtedly a complex personality, too complex to paint him, as the so-called liberal media in the West is doing, as an unredeemable rogue. On the other hand, it is too difficult to see the logic, if there’s any, in the statement of Shalabh Kumar, the Indian American Trump acolyte and founding chairman of Republican Hindu Coalition: “Mr. Trump is all about development, development, development; prosperity, prosperity, prosperity”. How will Trump be seen by his countrymen, or the world, a few years or even a few months from now? Nobody knows.

Little promise of break-out

by Harish Gupta, National Editor, Lokmat Group

2017 has begun on a heap of misconfigurations from the year that is just over. Brexit, Donald Trump’s victory in the US presidential election, rise of ultra-nationalism, and potential ‘great dictators’, at all corners of the world. 

At home, Prime Minister Narendra Modi’s aggressive foreign policy has begun losing its sheen, with traditional India-baiters China and Pakistan wresting old ally Russia from India’s embrace. Trump’s entry into the White House still a few days ahead, and with his legendary unpredictability, events in 2017 may put India in a diplomatic isolation it never experienced. On the economic front, the post-2010 stalemate continues, with demand subdued, exports stunted and consumer prices ruling high. There is little promise of the new year being a break-out year either for India or the world. 

However, Modi’s shock move on November 8 to scrap the high denomination notes of 500 and 1,000 rupees has come with the promise of bringing about a series of systemic changes in the economy. The demonetisation exercise has brought large amounts of money into the banking system, thus enabling the government to take a host of fiscal measures to address India’s enduring problem of inequality. It looks like note-scrapping is only the first of a series of measures on the anvil, and may extend to locking up the channels through unmonitored cash flows—property, gold, etc. The biggest distortion caused by unaccounted money is in politics as the untold cost of elections is met from illicit ‘donations’ from persons and organizations with elaborate post-poll agenda. Much of UPA-2’s (2009-14) troubles over price and distribution of natural resources, for that matter, had originated from shadowy poll financiers insisting on their demands being met by the government after election. Under Representation of the People Act, a political party is not liable to disclose identities of donors below Rs. 20,000. Modi, in his new year’s eve speech, has used strong language to remind all parties of their moral duty to help change the elections laws so that election finance becomes transparent, thus clogging perhaps the most toxic outflow channel of unaccounted cash. There is a possibility that some action may follow in the days to come.

Modi’s position in the world, which looked robust till last year, may be badly amiss now. Apart from the diplomatic isolation which I mentioned at the beginning of this article, what he may face is some chilling after-effect of growing protectionism which is threatening global trade and, consequently, the hope of India using FDI as fuel of future growth. 

It is evident that Modi is not without an early apprehension about global investment drying up. That may be the real trigger for his de-monetisation move, as all that he wanted, perhaps, was to mobilise domestic cash for giving a push to the economy. May be it will work even in the medium term as the promises he has made in his new year’s eve speech focuses on housing for the poor which, by itself, can be catalyst for general growth. The government banks, reeling under bad debt (the stressed advances to gross advances in June 2016 being 12%), were compelled to shut their doors to all sorts of borrowers, including the small and medium sector, in the recent past, that being the main reason for economic slow-down. 2017 may witness the banks resuming advances to the SME sector which contributes 40% to exports and 45% to the total manufacturing output.  

However, in the rapid course corrections the Centre will be forced to make this year on practically all fronts, its success will greatly depend on Modi’s ability to ride out the political storm at home. It appears that the Congress had put all its eggs on the single basket of de-monetisation, thinking that it could not but fail miserably, leading to a massive backlash. Congress vice president Rahul Gandhi happily stayed in this bubble of illusion, and was supported by Mamata Banerjee and Arvind Kejriwal. But Rahul’s de-monetisation ‘bomb’ turned out to be a damp squib with no visible backlash. As he is reportedly holidaying abroad, there is slender chance of his party clawing its way back to a respectable height in near future. 

In Uttar Pradesh, the election is likely to be bellwether for general elections in 2019 owing to its size and also due to the closeness of the race between BJP and the ruling Samajwadi Party. In 2012, SP won over half the 403 assembly seats and Akhilesh Singh Yadav, the young chief minister, became the poster boy of the party founded by his father, Mulayam Singh Yadav. But the Yadav family’s primacy was severely dented when, in 2014, BJP grabbed 73 of the state’s 80 LS sets. Trouble erupted in the Yadav clan since then, as Mulayam and his aides began doubting Akhilesh’s capability to measure up to BJP’s challenge while Akhilesh held his father, and his proneness to drive the government from back seat, squarely responsible for the defeat. 

The state’s third player, Mayawati, has somehow lost the charisma that enabled her in 2007 to cobble together a multi-caste canvas in which upper castes coexisted with the jatav—her own caste. It did not last in the 2012 election. Nor is there much indication of its revival this time round. Akhilesh is still a leader who commands respect for bringing about some improvement in the quality of life in Uttar Pradesh—a so-called ‘bimaru’ state—by investing in electricity, roads and girls’ education. But doubt persists about his family feud ending before elections, thus giving BJP a valuable edge in a state which is home to a fifth of the country’s population. Armed with Modi's December 31 largesse and project the PM as  messiah of the poor, the Sangh Parivar has launched massive blitzkrieg in UP. Undoubtedly, round one has gone to Modi post-demonitization.