Saturday, January 28, 2012

India not shining any more

It's a testimony to the lingering effects of a four-decades-old socialistic economy. Each time India makes a policy move towards creating wealth, it does so with a grudging sense of sacrifice and insistence it's doing the world, specifically the United States and the West, a favour.

The most recent example came in November when India's coalition government, headed by the Congress party, attempted to liberalise investment by foreign companies in organised retail. Protests from the opposition soon had the government retracing its steps.

Such backtracking and a logjam on reforms explain how India, in three years, has gone from being globali-sation's poster child to becoming the laggard among the major emerging economies. In 2008-09, India and China were the standout survivors of the financial crisis, invited to the Group of Twenty high table and expected to steer the course for 21st century commerce. As the sun sets on 2011, however, key stakeholders in the Indian economy are contemplating rough, cold nights ahead.

Prime Minister Manmohan Singh's government had proposed that 51% foreign direct investment be allowed in the multi-brand retail space. This would have let companies such as Walmart and Carrefour, banned from investing a dollar in front-end retail stores in India, set up shop in Asia's third-largest economy. The Singh government also announced a decision to enhance permissible FDI in single-brand retail -- Marks and Spencer or Apple outlets being examples -- to 100% from the previous 51%. With the government's retreat, the multi-brand decision is off, though the single-brand policy change will go ahead.

The FDI-in-retail controversy is telling for three reasons. First, it's a reminder that despite the country being among the biggest beneficiaries of the globalisation process over the past two decades significant sections of Indian society remain deeply suspicious of foreign investment and are too willing to believe downright bizarre conspiracy theories. In the past fortnight, several public figures -- including Gandhian activist Kisan Baburao "Anna" Hazare, who has emerged in 2011 as India's leading anti-corruption crusader -- actually compared multi-brand retail chains like Walmart to the East India Company. Arriving in India in the early 17th century as a trading entity, the East India Company eventually raised its own army and government and became India's paramount power by the mid-18th century.

Second, the outcry has pointed to the difficulties of pursuing even fairly obviously needed economic reform and policy change in India's extraordinarily competitive and fractious democracy. Limits to foreign equity in retail are decided by executive order and do not require parliamentary approval and legislation change. 

Nevertheless facing broad opposition -- ranging from the Communists to the notionally rightwing but economically confused Bharatiya Janata Party -- and blackmail by junior parties in the ruling coalition, particularly the Trinamool Congress regional party that runs the eastern state of Bengal, the government had to capitulate.

Finally, the episode renewed pressure on the Singh government to restore India's momentum. Growing at close to 10% three years ago, the economy is showing alarming signs of slowdown. GDP growth in 2011-12 -- the Indian financial year runs from April to March -- is likely to fall below 7%, against the government's target of 9%. The fiscal deficit is certain to overshoot the 4.6% figure promised in the 2011 budget and could be closer to 6%. The rupee is sliding at a historic low vis-à-vis the dollar.

Statistics released by the government report that in October 2011 industrial production declined 5.1% compared to the same month in 2010. The contraction in the capital goods sector was an astonishing 25.5%, indicating business pessimism and wariness in investing in new capacities. Declining FDI and investor confidence in India's capital markets are also causing concern.

Unremitting inflation and the government's use of fiscal measures to check it -- the Reserve Bank of India has raised interest rates 13 times in the past 20 months -- have created a vicious circle. "The economy," Anand Mahindra, managing director of the Mahindra Group and among India's best-known business tycoons, tweeted on December 12, "is in a perfect storm."

To optimise the advantages of an interlinked economic system, a country needs to keep its eyes not just on globalisation, but another "g" word -- governance. This is where India has faltered. Complacent about the inevitability of rapid growth, the Congress-led government has an internal dilemma as to the necessity and political legitimacy of deregulation, decontrol and market-friendly reform. While Prime Minister Singh is clearly a believer, his party president and political boss, Sonia Gandhi, does not see growth as an overriding priority -- and the mounting bill of a range of welfare and dole programmes she favours have combined to leave a devastating impact. Paradoxically, the rural constituency she is keen to protect would have benefited the most from the now botched reform. One Indian economist warns that India could easily become another Brazil: "We've been hearing about Brazil as the next great power since the 1960s. Every few years it offers hope, but never does take off."

The initiative to allow greater FDI in retail came after a considerable reformist lull. It was an attempt by Singh to break the perception of policy paralysis. As it happens, his government has been buffeted by a series of corruption scandals for the past year and depleted its reserves of political capital. As India's finance minister admitted while putting the FDI decision "on hold," to persevere with opening up retail at this stage was to risk a midterm election. Essentially the government waved the white flag.

Ironically, a robust presence of big retail could provide India medium-run solutions to some notably trenchant challenges -- food inflation, the lack of agricultural productivity and produce wastage. Deploying the wage-arbitrage principle, as exploited, for instance, by India's information technology industry, could have someday made Indian farmers meaningful exporters of food. That aside, the transcontinental supply chains of retail behemoths such as Walmart would also bring gains to Indian consumers, given half of India's gross domestic product is driven by private consumption.

Instead, the perennial chicken-or-egg conundrum has been used to thwart FDI in retail. Critics have argued global manufacture will swamp Indian markets and under-mine Indian manufacture. Others have claimed that a network of politically influential intermediaries -- who end up squeezing both food producers and consumers -- will lose out and deserve protection. The truth is every piece of policy change presents immediate losers and winners. Yet without short-term turbulence and risk-taking, the long-term potential may never be reached.

India's politicians, 20 years after their country opened its economy to the world, should have come to grips with this basic verity of policymaking. For some reason they haven't, or more likely wilfully refused. As a result, there is an unwillingness as well as inability to sell economic reform and globalisation to a broader domestic constituency using an idiom with expansive appeal. In their smugness, India's political leaders expect the rest of the planet to wait until they fine-tune that idiom. Meanwhile, the rest of the planet may decide to just get on with life and pass India by.

BY : 

Border Violence Tests Fragile Peace on India-Bangladesh Frontier

A video clip showing a Bangladeshi man being beaten by Indian guards is testing the fragile peace on what has been called one of the world’s bloodiest borders. The footage, which was released on YouTube, shows an alleged cow smuggler being stripped and beaten by guards somewhere along the 1300-mile frontier that abuts the Indian state of West Bengal. Although it is illegal to export cows from India, demand from neighboring Bangladesh fuels a $500 million market, and an estimated 1.5 million cows are moved across the border each year. The incident made headlines in both countries, sparking fear of escalation.

Although India helped Bangladesh gain independence from Pakistan in 1971 — Bangladesh was at the time “East Pakistan”, separated from its western half by the Indian landmass — relations between the two countries are frequently tense, particularly along the border. The illegal cow trade, arms smuggling, disputes over water rights and illegal migration regularly cause trouble. On Jan. 7, 2011, Felani Khatun,  a 15-year-old girl who was illegally crossing the border with her father to get married in Bangladesh, was shot dead. A man named Mohammed Rashed was shot and killed by the Indian border guards on Jan. 21, giving rise to anti-India sentiment in Bangladesh. Both incidents sparked outrage and are credited with fueling anti-Indian sentiment in Bangladesh.

Strained as the relationship may be, there are reasons for optimism. Over the last few years, the two countries have signed a series of agreements to ease tension on the border. In March 2011, both parties agreed on the use of non-lethal weapons by the border guards and in Sept. 2011, the neighbors inked a protocol agreement clarifying the demarcation of the land boundary. Experts say these modest steps may have prevented the violence from spreading. “When the news came out it created a lot of concern,” said Veena Sikri, a former Indian high commissioner to Bangladesh. But, she said, “ties between India and Bangladesh are very robust and one incident cannot be a setback as long as there is political will.”

Indeed, the reaction from both sides has been measured. India’s Border Security Force condemned the violence as “despicable” and eight soldiers were suspended. They also ordered a high-level inquiry into the affair. On Saturday, India’s finance minister, Pranab Mukherjee, said that the incident would not impact bilateral relations and that there was “no need to blow up such incidents.” Mukherjee also assured reporters in Kolkata that the two countries will “settle the matter through dialogue.” In Dhaka, meanwhile, Syed Ashraful Islam, a government minister, dismissed the video as “nothing new.”

They are wise to be cautious. Bangladesh is one of India’s most important trading partners, with trade totaling $5.09 billion in 2010-2011.  There is also fear that anti-Indian sentiment could be used as a pretense for a coup in Bangladesh, an outcome that would surely hurt both sides. “New Delhi needs to guard against becoming an unwitting cause for political instability in its eastern neighbor,” warned a recent editorial in The Hindu, an leading English-language Indian daily. Prosecuting the guards is a start, but the real challenge is preventing another incident. “Human rights abuses anywhere, everywhere [have] to be looked at,” Sikri said. “Action has to be taken.”

Bangladesh coup bid or conspiracy?

India must take some bold steps quickly to let Dhaka know that as a friendly neighbour it is committed to help the country and its people.

As the dust over an attempted coup or conspiracy in Bangladesh settles, it is confirmed that the Indian intelligence agencies warned army top brass in Dhaka about the conspiracy hatched against the Shaikh Hasina government. On this occasion, the Bangladesh army acted in time and nipped the defiance in the bud. 

In 1975 too when Bangabandhu Shaikh Mujibur Rehman and 15 of his family members were killed by the army, Indian intelligence had warned about an attack on Shaikh Mujib. But then the top brass were themselves in the midst of coup and the army deliberately did not act. The result is known to all. 

That the Bangladesh army is not interested in taking over the country was clear when it gave back power to the civil authority in 2008 and held free and fair elections which returned Shaikh Hasina with a three-fourths majority in parliament. When the army was backing the caretaker government and cleansing the stable, it found the top politicians of both Shaikh Hasina's Awami League and Khaleda Zia's Nationalist Bangladesh Party involved in corruption. Many in the army were worried that the revival of the political process would bring in its wake the same old graft. Yet the army preferred civil rule and bowed to the prerogative of the people to have their representatives in power. 

Things are not what the electorate expected and the administration has been found wanting in many ways respects. Corruption and nepotism are back with a vengeance. Yet it is the people who have to fight against such evils. The army cannot do the job because this is the difference between democracy and dictatorship. 

Disgruntled elements
"Instigated by some non-resident Bangladeshis, a band of fanatic retired and serving officers led a failed attempt to thwart the democratic system by creating anarchy in the army, banking on others' religious zeal," said the army statement, adding that "such heinous attempts are being foiled." 

It is apparent that the coup was attempted by a few elements representing religious fanaticism and disgruntled army officers. The fundamentalists are unhappy because they have been firmly suppressed by the Hasina government which is liberal and secular. Yet there are other forces which are inimical to India and they resort to all kinds of methods to foul the atmosphere. That was also the case when Shaikh Mujib was killed. He too did not show any quarter to the extremists and the forces that were unhappy over the creation of Bangladesh.
Shaikh Hasina has regretted that the Islamists have penetrated the army. It is ominous because this is what has happened in Pakistan as well. 

My information is that the coup leaders this time were helped by forces operating from India. The rump of United Liberation Front of Asom was there and so were the hostile Nagas. The Manipur insurgents were also part of the conspiracy. It is strange that while Bangladesh does not allow any anti-India forces to operate from its soil, as it used to happen in the past, India is lethargic and inactive. 

For the larger picture, New Delhi must share the blame. It fails to have connectivity with Dhaka. Promises made in the fields of trade, power and business have remained unfulfilled. Shaikh Hasina has done so much unilaterally to foster good relations that there are many people in Bangladesh who are resentful. Yet bureaucrats in Delhi are not allowing the implementation of what Prime Minister Manmohan Singh had signed with the Bangladesh prime minister in terms of trade, power and money. Bureaucrats are not anti-Bangladesh but they represent the red tape which retards progress of any plan or project. 

I recall when Bangladesh broke away from Pakistan, Delhi made a five-year plan which would dovetail Dhaka's economic projects with those of India. It was an undertaking to develop the region as a whole. New Delhi was reminded often but there was little follow-up. 

The failed coup is not only a warning but also an opportunity for the government in New Delhi. It must take some bold steps quickly to let the people disillusioned in Bangladesh with Shaikh Hasina's government know that India r will go to any limit to help Bangladesh in its needs and, at the same time, foster closer relations with Dhaka. 

Singh transferred a few tracts of land in Assam to Bangladesh, its rightful owner. He should bring the constitutional amendment in the next session of parliament to make what is de facto as de jure. The BJP and some elements in Assam are opposed to the transfer. But they must realise that this is the territory which belongs to Bangladesh and has stayed wrongly with India for some 40 years. One recurring complaint of Dhaka is that border police is cruel to any Bangladesh national who even strays into India by mistake. 

Television channels have shown recently how the border police was beating a boy mercilessly because he had crossed the border by mistake. 

West Bengal Chief Minister Mamata Banerjee would be well advised to visit Bangladesh where she is popular and where the expectation is that she would make amends for her absence from the Prime Minister's team that visited Dhaka a few weeks ago. 

BY : Kuldip Nayar.

Analysing the failed Coup in Bangladesh

The news of a coup attempt by ‘fanatic’ mid-level officers instigated and supported by some Bangladeshi expatriates and retired Army officials that was foiled by the Bangladesh Army did not come as a major surprise. There have been whispers about such a conspiracy in Dhaka’s power corridors for quite some time. The fear that such a possibility cannot be completely ruled out re-emerged after the 2009 mutiny by the Bangladesh Rifles, in which 59 Army officers were killed. There were indications that the BDR mutiny might have been instigated by Islamists who feared reprisals from the secular forces that had come to power in the December 2008 general elections. The Awami League government’s reluctance to allow an immediate Army operation against the mutineers was touted as a major source of anger among many army officers. Even though there were three inquiry commissions into the 2009 incident, the reason and motivations behind that mutiny have not been established in any conclusive manner. 

There are reports that some officers involved in the recent plot were linked to the urban radical Islamist group -- the Hizb ut-Tahrir (HuT) -- which was banned by the Bangladesh government in 2009. HuT has been active in Bangladesh since 2001 and had been campaigning against the Awami League. Its activists were seen distributing pamphlets in various mosques during the military-backed caretaker regime. In spite of the crackdown on them during that period, they had remained active. It needs to be emphasised that like the Jamaat, the Hizbut Tahrir has strong links with Bangladeshi expatriates in the UK, who subscribe to its views. The HuT Bangladesh website reads “O Army Officers! Remove Hasina, the killer of your brothers and establish the Khilafah to save yourselves and the Ummah from subjugation to US-India” (

After assuming office in January 2009, Hasina has taken steps to deal with Islamic radicals. Regular raids, arrests of radicals and seizure of arms and ammunition have paralysed the Jamaatul Mujahideen Bangladesh (JMB) and other terrorist groups. The war crime trial for the purpose of which five Jamaat-i-Islami leaders and two BNP leaders were arrested is also in progress. Coupled with these efforts to address the rise of radicalism, the Bangladesh Supreme court declared the 5th and 8th amendments to the country’s Constitution as illegal and termed military coups as unconstitutional, thus facilitating the Awami League’s objective of restoring the 1972 constitution. The government, keeping in mind the present political reality, has restored the four foundational principles of liberation and Article 12 which dealt with secularism, while retaining Article 2 (b) pertaining to Islam as the state religion. It also retained the article that allowed religious political parties to operate on a non-communal basis. 

All this has angered many Islamists who feel that their electoral base will shrink if Hasina continues in power. The Islamists hope that the Army will come to their rescue as they have openly supported military rule in the past. 

The Army has always been politically divided along party lines, although traditionally its sympathies have been with the BNP. Nevertheless, in the past, the tussle between officers who fought for the liberation and those who did not has led to as many as 19 coup attempts; the previous unsuccessful attempt came in 1996 and was led by General Abu Saleh Mohammad Nasim, a freedom fighter.

Interestingly, the latest arrests of Army officials plotting a coup was made public against the backdrop of Begum Zia, Chairperson of the BNP, alleging at a rally held in Chittagong on January 9 that the government had a role in the disappearance of Army officers and is engaged in confining and torturing them. While Khaleda’s statement was publicly refuted by the Inter Service Public Relation (ISPR), the Army admitted that it was indeed trying some officers for dereliction of duty as per its rules. Perhaps, the Army felt compelled to admit to the coup attempt after various media reports revealed the arrest of some Army officials. 

According to the ISPR statement, the coup was unearthed in December 2011 when some middle level officers numbering around 16, whom the Army termed as ‘religious fanatics’, were attempting to recruit sympathizers for carrying out a coup. Some of these officers who were approached informed senior Army officials about it. 

At the centre of the controversy is a Lieutenant Colonel who has been arrested and a Major who is absconding. According to media reports, the Facebook profile of the main conspirator, Major Zia, noted that “Army is soon going to bring change”. This has to be seen against the backdrop of fears raised by certain quarters in Bangladesh that some cadres of religious parties recruited into the Army during the BNP-led coalition government rule may act as supporters in such a coup.

The coup attempt was not just aimed at derailing democracy but at stopping the ongoing war crimes trial. The BNP, which initially supported the trial, has come out openly against it. It has questioned the objectives of the trial and has been pressing the government to stop it. Initially, some Muslim countries had tried to dissuade Bangladesh from opening the cases in this regard. However, in the face of popular demand to try the people involved in war crimes, the government refused to buckle under such pressure from foreign countries.

To bring about any political change in the country which is currently ruled by a party that has overwhelming majority, it was imperative for the Islamists to enlist the support of the Army. But the fact remains that the Army itself is struggling to wriggle out of its historical legacy of military coups and the resulting stigma. The latest coup attempt by radicals within the army indicates the penetration of Islamists and more specifically that of the Hizb ut-Tahrir whose main support base is among the educated youth, who are highly motivated and belong to affluent families in urban areas. The coup attempt is also an indication of the nature as well as future direction of radicalism whose fulcrum lies in the relatively more affluent urban space rather than in the impoverished madrassas that are generally believed to be a source of fundamentalism in Bangladesh.