Another Tyranny In The Neighbourhood

The brutal Maoist’s leader in Nepal, Prachanda, has full control over the unfolding political situation in Nepal. The current parliament invited to form the government, by the King Gyanendra, elected a dying ineffective 85-year old former PM. There is no political strategy from the elected representatives other than bending over backwards to accommodate the Maoists killing force while savaging Nepalese Army, police and security forces.

United We Blog (via The Acorn) details what Prachanda is up to with the help of Indian communist parties and how ineffective the traditional political parties are been to take the lead on the future of Nepal.

The Acorn thinks India and Indian Army should play a role stabilizing Nepal. I doubt that's going to happen.

With the communists hold on Manmohan's government, India would do nothing to upset the rise of Nepalese Maoists - apparently they are part of the political process and we (along with US and UK) helped their revolutionary cause. If pushed too hard, the Maoists, learning from our Bangladeshi friends, will most likely say, after taking the hundreds of millions of dollars that Manmohan is doling out, that India is the big bully in the neighbourhood to cover up what would be at least a generation of tyrannical rule in Nepal. China will have another client state in South Asia. Pakistani Islamic jihadists will have another haven to attack India from. And the Indian and western media will be rooting for the never ending revolutionary cause.

If Bangladesh falls into Islamic rule, won't South Asia be a wonderful place - five tyrannies in the nieghbourhood to the east, north, and west!

Foreign Affairs Essays: The Rise of India II

C. Raja Mohan wasn't his usual self with silly phrases and words such as "laser like focus" sprinkled in the essay. Explaining how India increasingly holds the Balance of Power, he wrote a lucid and clear headed essay about growing Indian global power and reach. There is some focus on the Bush-Singh nuclear accord but the essay was more general and tried to present what Indian foreign policy is trying to achieve - usually the activities are not very clear reading the Indian media's piece meal quotation based coverage of foreign news.

"Unlike their U.S. counterparts, Indian leaders do not announce new foreign policy doctrines....New Delhi has made concerted efforts to reshape its immediate neighborhood, find a modus vivendi with China and Pakistan (its two regional rivals), and reclaim its standing in the "near abroad": parts of Africa, the Persian Gulf, Central and Southeast Asia, and the Indian Ocean region. At the same time, it has expanded relations with the existing great powers -- especially the United States.

"As it rises, India has the potential to become a leading member of the "political West" and to play a key role in the great political struggles of the next decades."

While I doubt India would be political "west", I have no doubt about the latter phrase. His explanation of three strategic circles was pretty interesting.

"India's grand strategy divides the world into three concentric circles. In the first, which encompasses the immediate neighborhood, India has sought primacy and a veto over the actions of outside powers. In the second, which encompasses the so-called extended neighborhood stretching across Asia and the Indian Ocean littoral, India has sought to balance the influence of other powers and prevent them from undercutting its interests. In the third, which includes the entire global stage, India has tried to take its place as one of the great powers, a key player in international peace and security."

He also talks about what held back India from pursuing these strategic objective: partition during independence (I actually think partition was the best thing that happended to India - more on that in a different post) and J&K terrorism sponsorship by Pakistan; pursuing (that silly and devastating) socialism causing the great decline in economy; and Cold War - with US allied with China and Pakistan, India was pushed into Soviet sphere. Now the change in direction of the second cause along with disappearance of third cause frees India to pursue its "grand strategy."

He rightly says Clinton didn't do much to have closer relationship with India (other than that presidential visit to India just before his eight-year term expired); Bush did. And I would venture to add that if Al Gore had become the president, he would have listened to all the nay-sayers and, India and US would still be distant democracies talking to each other through the media.

For those in US and India with an illusion that India will have to kowtow to US after the nuclear deal is sealed, he tries to make the case that India will never be a junior ally to US.

And US does not like having allies having a say in its actions; so the question of alliance, especially against a third country like China, is still up in the air and won't be resolved unless something changes on the ground.

"But shared interests do not automatically produce alliances. The inequality of power between the two countries, the absence of a habit of political cooperation between them, and the remaining bureaucratic resistance to deeper engagement in both capitals will continue to limit the pace and the scope of strategic cooperation between India and the United States. Still, there is no denying that India will have more in common with the United States than with the other great powers for the foreseeable future.

...

"It will never become another U.S. ally in the mold of the United Kingdom or Japan. But nor will it be an Asian France, seeking tactical independence within the framework of a formal alliance."

Overall a good read on strategic issues facing India (and to some extent US). Raja Mohan's forth coming book is Impossible Allies: Nuclear India, United States, and the Global Order.

Contd...

Foreign Affairs Essays: The Rise of India I

September/October 2005 issue of Foreign Affairs examined the role of rise of China with a lot of talk about its peaceful rise. The current, July/August 2006, issue is about the rise of India.

Gurcharan Das wrote about the economy, C. Raja Mohan about security and over strategic thought of India, Ashton Carter primarily focused on the current nuclear agreement between US and India, and Sumit Ganguly wrote on prospect of Kashmir derailing India's rise. Those who read Das’s India Unbound and Raja Mohan's Crossing the Rubicon may find their essays familiar. Ashton Carter was a lot more circumspect about the nuclear agreement then I would have expected. Sumit Ganguly used to promote strategic and moral equivalence with respect to Pakistan and India on J&K, but not in this essay.

Gurcharan Das talks about The India Model - a model in which the economy grows despite the corrupt and obstructive government. He gives the Indian entrepreneurs - the real Indian economic story - their due. He tears down Nehru and Indira and the apparently self serving "steel frame" bureaucracy.

"But what is most remarkable is that rather than rising with the help of the state, India is in many ways rising despite the state. The entrepreneur is clearly at the center of India's success story."

He tears down Nehru and Indira and the apparently self-serving "steel frame" bureaucracy.

"Indians mournfully called this "the Hindu rate of growth." Of course, it had nothing to do with Hinduism and everything to do with the Fabian socialist policies of Prime Minister Jawaharlal Nehru and his imperious daughter, Prime Minister Indira Gandhi, who oversaw India's darkest economic decades."

"No single institution has come to disappoint Indians more than their bureaucracy. In the 1950s, Indians bought into the cruel myth, promulgated by Nehru, that India's bureaucracy was its "steel frame," supposedly a means of guaranteeing stability and continuity after the British raj....But in the holy name of socialism, the Indian bureaucracy created thousands of controls and stifled enterprise for 40 years. India may have had some excellent civil servants, but none really understood business -- even though they had the power to ruin it."

Being a close observer of Indian economy, it was just a joy to read to Das's essay.

Contd...

Why Manmohan Doesn't Have Anything to Say

Sharanya Manivannan, a Malaysian blogger, wrote an open letter to Indian PM Manmohan Singh asking him why he hasn't said anything about the continued destruction of Hindu temples in Malaysia. Link

"The Government of India has thus far taken no official stand on the issue. This is not for lack of knowing. Although the available information about these demolitions remains little, almost all the non-Internet media that has picked up on the situation has been from India. These are state-sanctioned demolishings, not the work of small factions of zealots...

When the Taliban destroyed the Bamiyan Buddhas in 2001, the Indian government, along with academics and former state officials, responded with the outrage demanded of the situation.

Some months back, the Government of India sent an official criticism to the Government of Denmark regarding the publication in a Danish newspaper of cartoons insulting the Prophet Muhammad, resulting in the cancellation of Danish PM Anders Fogh Rasmussen's official visit to India at that time."

Sharanya, you are looking for the wrong man to take action.

And I think I know why Mr. Manmohan (I used to call him PM Manmohan, but I don't think he deserves the respect any more) doesn't have anything to say.

Mr. Manmohan is busy:

- he is busy providing reservations and quotes that divide Hindus into their castes, perhaps forever, for short term political gains;

- he is busy courting the minority vote in India; the Muslim minority vote that is. So don’t expect him to speak out against a Muslim nation’s atrocities against other minorities, especially against Hindus – it is not being secular you see;

- he is busy making peace with terrorists and terror sponsoring country; those are the same who ethnically cleansed a region of India of Hindus;

- he is busy making borders irrelevant to the terror perpetrators in our land but not for the minorities that are being terrorized in other lands.

CH: India raises a stink over Krishna Temple demolition in Pakistan

ANI's headline on June 15, 2006, after India protests demonition of the last Hindu Temple in Pakistan by it's government. Link

Part of the Classic Headlines Series

End of Colonial Empire Companies, At Last?

IBM's Sam Palmisano calls for a change in the structure of multinational companies - stop being colonial East India type companies in order to reduce anti-globalizers ire. The classical colonial companies are multinational companies that currently do research and development in developed countries and make and sell wares - cars to TVs - in developing countries. He gives GM, Ford, and IBM as examples. But there are plenty more - from European to Japanese companies.

Palmisano wants companies to be full integrated globally with R&D everywhere and manufacturing everywhere – in a globally integrated model. Justifying his recent announcement of spending $6 billion in R&D in India, Palmisano thinks that is the only way big business can keep both the anti-globalizers and developing countries protectionist instincts at bay.

“The globally integrated enterprise is an inherently better and more profitable way to organise business activities – and it can deliver enormous economic benefits to both developed and developing nations." Link

Palmisano also had an assay in May/June 2006 issue of Foreign Affairs on Globally Integrated Enterprises.

In many ways, this is already happening. Intel and other major IT companies are designing small part of chips and software in India, China, Russia, and Israel. But there are many more companies, such as pharamacutical and biotech, that do not. Hopefully Palmisano's call will embolden these companies to distribute R&D and manufacturing more evenly based on their geographical markets.

Also, I wonder what he plans to do about the protectionist instincts of developed countries already in full force in Europe and budding in US. And what about the protectionist instinct of developing countries like China and India if their companies want to design and do research in developed countries - this probably is less of a concern because so little of it happens now in their own countries.

National barriers are breaking down, at least in business world. May be not for too long. Naill Ferguson, that Harvard and Oxford economic historian, the British historians (apparently most other British professors) love to hate, has written a book, The War of the World: History’s Age of Hatred, that tries to show there may be signs that all the globalization hoopla may be coming to end with nation state reigning supreme once again in the near future (a not so favorable Economist of the book is here - link). More about that latter...

Books That Were Banned in India Since the 70s

Nilanjana S. Roy writes about books that were banned in India since the 70s in Business Standard. Apparently 70s was the decade when most books were banned – peak of Indira’s power.

“It was increasingly books that “misrepresented” India that were targeted. Desmond Steward’s Early Islam and Michael Edwards Nehru: A Political Biography were both banned in 1975 for what the government considered grievous factual errors, as were Charles Bettelheim’s India Independent and Alan Lawrence’s China’s Foreign Relations Since 1949. Lourenco de Sadvandor’s incendiary, and sadly ill-researched, Who Killed Gandhi was banned in 1979, while the ban on Arthur Koestler’s scathing (but hardly well-informed) view of Eastern religion, The Lotus and the Robot, was carried over from the late ‘60s.”

Satanic Verses ban in late 80s made a big splash…but there were others.

Apparently the newest book to be banned, The True Furqan: the 21st century Quran, was in 2005 – an anti-Islamic book by evangelical Christian proselytizing group.

I wonder if it is an exhaustive list. If it is, I am surprised at how few books were banned in the past three and half decades. My perception was a lot different. May be the banners have just moved on to movies what with latest the Da Vinci Code and Fanaa – they never read the books anyway. Link

New Dow Jones BRIC 50 Index

Dow Jones Indexes created BRIC index – Dow Jones BRIC 50 Index to track performance of 50 largest companies in the four countries. Fifteen companies from Brazil, India, and China and five from Russia are included in the index. Link

Indian companies included are:

Hindalco Industries Ltd., Hindustan Lever Ltd., Housing Development Finance Corp., ICICI Bank Ltd., Infosys Technologies Ltd., ITC Ltd., Larsen & Toubro Ltd., Oil & Natural Gas Corp., Reliance Industries Ltd., Satyam Computer Services Ltd., State Bank of India, Suzlon Energy Ltd., Tata Consultancy Services Ltd., Tata Motors Ltd. and Tata Steel Ltd.

“The number of components in the index is fixed at 15 each for Brazil, India and China and five for Russia to reflect the size of each market. Each component's weight is capped at 10% of the index's total free-float market capitalization. For China, only "H" shares and U.S.-listed shares of Chinese companies, such as Netease.com Inc. on the Nasdaq Stock Market, are used.”

One of the Best Op-Ed I Have Read in Years

Gautam being a chemi may have played into his beautiful writing in Indian Express about slimy Arjun's plans to divide Indians...again.

You have made me feel low again, Mr Arjun Singh

Posted online: Thursday, June 08, 2006 at 0000 hrs IST

I am an OBC. I come from a place where discrimination on the basis of caste is common. I grew up hearing I was inferior because I was from a backward class. All through my childhood I regretted the fact that I belonged to a backward class.

When friends would tease me over my caste, my mother would tell me the only way to shut them up was to study well and top in class. I took her advice seriously and channelised my frustration into my studies. This brought about a big change in me: I started working very hard. From performing poorly in class I, I now excelled in studies, coming second in the district (supaul) in the class X exams in 1996.

Even after that achievement, some of my casteist friends disparaged my success, insinuating that I must have had some connection with the state government—I shared my caste with the then chief minister of Bihar. I was very disappointed. It wasn’t just the barbs of friends. My disappointment was more over belonging to my particular caste. But then once again I began preparing very hard to prove that my performance in the board exams had been the result of my own effort.

I worked very hard and got through IIT JEE 2000, ultimately obtaining admission to the B-Tech programme in Chemical Engineering at IIT Kharagpur. Initially, I was apprehensive about facing the same discrimination here as well. But I was surprised when no one asked me my caste. Nobody really cared which caste, creed or religion one belonged to. For the first time in my life, I felt a sense of equality.

It is my deep conviction that no place on earth can ever be as secular and free of casteism as IIT. Slowly, the feeling of inferiority engendered by my caste began fading away. I started believing in the equality of humankind. I started loving people—not based on their caste, but based on their values and ideas. I forgot all the discrimination I had faced earlier in life.

Looking back, I feel proud of having lived in such an environment. This place not only educated me technically, but socially as well. After my stint in Kharagpur, I believe I am truly secular. I’m not merely saying it; I feel it.

Perhaps it’s the way of the world that the moment you begin feeling good about something, it’s taken away from you. Before this 27 per cent education for OBCs was introduced, I had begun believing that India was growing not only economically, but also socially. I was beginning to feel free from the restrictions of of caste and creed.

But then our leaders reminded me of my caste. They made me feel ‘‘backward’’ all over again. They made me remember my childhood days. It has suddenly become difficult for me to feel the same as I did before this latest announcement.

I am truly worried about my alma mater. I feel our leaders are going to spoil our haven on earth for their own narrow, selfish motives. I would like to propose a solution: send all our leaders to the IITs. Only then would they come to realise the real meaning of secularism, the value they keep trumpeting. I would not take umbrage if IIT seats were given to our leaders to make them understand the true meaning of secularism.

But now I am sure that once they make reservations mandatory for admissions in institutes, equality shall be replaced with hatred and discrimination. I urge our leaders: please don’t do this to us. Our generation has changed. Please don’t separate us on the basis of our birth, something over which one has no control. We have the power to mould our destinies and fortunes; allow us to do that. We have started believing in equality, hard work and dedication as the recipe for success. Please don’t break our faith. It will endanger the unity of our nation. Please let the new generation of India live in a world where ideas matter, not the caste or religion into which one is born.

The writer was in the Class of 2004, B-Tech Chemical Engineering, IIT Kharagpur. gautamiit@yahoo.co.in link

Market Sell Off Impact: Higher Rates and Slower Growth?

Just when Indian economy started to crack the 9% self-imposed growth ceiling, the stock market turned south. As of today, the market is still up more than 10% for 2006, but it is off from its lofty gains of more than 40% until early May.

Indian GDP has finally crossed $800 billion mark and is working towards a respectable $1trillion economy by 2009. Now is the time accelerate, not slow down. Ever obliging Manmohan and Chidambaram take half a step forward and two steps back. Their brilliant ideas to fight the communist idiots are endless spin on their lack of reforms and quotas in IITs.

With no (even, slow) release from the government bureaucracy chock hold on the economy, will the economy slow down because of falling market?

There seems to be two schools of thought on this:

In a Morgan Stanley brief, their India analysts think RBI will have to increase rates, to hold the outflow of foreign funds, ending up slowing the economy.

India: Portfolio Flows - The Critical Macro Link

Chetan Ahya (Mumbai) and Mihir Sheth, (Mumbai)

What’s new: The recent sell-off in emerging market equities and outflow of portfolio flows have again brought to the fore the macro challenge presented by India’s over-dependence on portfolio flows. Portfolio flows have accounted for about one-third of the total capital flows into India over the last three years, and have been a key factor behind the low real interest rates during this period.

Implications: Rising US short-term rates and India’s current account balance swinging into deficit have already pushed real interest rates higher. Given portfolio equity outflows of US$2.6 billion over the last 15 trading days, there is now a risk of this low-real-rate-dependent, credit-driven growth cycle breaking.

Conclusion: We think the reversal of portfolio flows, which has been the anchor of India’s growth acceleration trend in the last three years, highlights the need to initiate bold reforms in the area of privatization, FDI and infrastructure (PFI reforms) to sustain the 8%-plus growth rates.

However, Ila Patnaik says, in her June 6th column, FIIs are not a major impact on Indian stock market – they are market seekers rather than market leaders - making up only 8% of market turnover.

To attribute domination to something smaller than 8% would be like asking the tail to wag the dog. On the equity spot market, too, the share of FIIs in trading works out to a value close to 8%.

…

If we add up, the total net sale by FIIs works out to an average of roughly Rs 500 crore a day. This is a small value, considering that on most days, the total volume (NSE plus BSE, spot plus derivatives) works out to roughly Rs 50,000 crore a day.

She also had an interesting note on what type of companies FII invest and how long they stay invested. (More in the paper she co-wrote with Ajay Shah.)

In total, FIIs own 11% of all companies. Their share has risen from 8.5% in 2001 to 11.1% in 2005.

…

Once companies achieve FII investment, this tends to stay. There is an 82% chance that a company with over 5% FII investment will continue to have this after a period of one year. This makes FIIs looks more like a stable source of equity capital than a capricious and unreliable bunch.

So what is RBI to do? Unlike Chidambaram, now apparently also the chief Indian market analyst, who is asking small investors to buy into falling market (would he dole out our taxes to pay for their loses?), RBI should ignore the markets and worry about, what else, inflation. The economy can grow at 10% or more, untouched by RBI, as long as inflation is contained. RBI should not be business of propping up market as MS analysts are hoping for. Market has been on the see-saw ride before and let investors and SEBI worry about it.