September 20, 2009 — drsubrotoroy
I have had slight experience with the so-called multilateral financial institutions — attending a conference and helping to produce a book on Asia & Latin America with the ADB back in Hawaii in the 1980s, and being a consultant for some months at the World Bank and the IMF in Washington DC in the 1990s. The institutions seemed to me gluttonous and incompetent though I did meet a dozen good economic bureaucrats and two or three who were excellent in Washington. The “Asian Development Bank” (under Japan’s sway as the Word Bank is under American sway and the IMF under European sway) was reputedly worst of the three, though the Big Daddy of wasteful intellectually corrupt international bureaucracies must be the UN itself, especially certain notorious UN-affiliates around the world.
Now there are newspapers reports the ADB has apparently voted, under Communist Chinese pressure, to prevent itself from
“formally acknowledging Arunachal Pradesh as part of India”.
This should be enough for any self-respecting Government of India to want to give notice to the ADB’s President that the Republic of India is moving out of its membership. Ongoing projects and any in the pipeline need not be affected as we would meet our debt obligations. There is no reason after all why a treaty-defined entity may not conclude deals with non-members or former members and vice versa.
But New Delhi’s bureaucrats may not find the guts to think on these lines as they would have to overcome their personal interests involved in taking up the highly lucrative non-jobs that these places offer. They will need some political kicking from the top. Thus in 1990-91 I had said to Rajiv Gandhi that “on foreign policy we should ‘go bilateral’ with good strong ties with individual countries, and drop all the multilateral hogwash”… “We do not ask for or accept public foreign aid from foreign Governments or international organizations at “concessional” terms. Requiring annual foreign aid is an indication of economic maladjustment, having to do with the structure of imports and exports and the international price of the Indian rupee. Receiving the so-called aid of others, e.g. the so-called Aid-India Consortium or the soft-loans of the World Bank, diminishes us drastically in the eyes of the donors, who naturally push their own agendas and gain leverage in the country in various ways in return. Self-reliance from so-called foreign aid would require making certain economic adjustments in commercial and exchange-rate policies, as well as austerity in foreign-exchange spending by the Government….”
Today, nineteen years later, I would say the problem has to do less with the structure of India’s balance of payments than with trying to normalise away from the rotten state of our government accounts and public finances. I have thus said “getting on properly with the mundane business of ordinary government and commerce… may call for a gradual withdrawal of India from all or most of the fancy, corrupt international bureaucracies in New York, Washington, Geneva etc, focussing calmly but determinedly instead on improved administration and governance at home.” We need those talented and well-experienced Indian staff-members in these international bureaucracies to return to work to improve our own civil services and public finances of the Union and our more than two dozen States.
As for India developing a Plan B (or a Plan A) in dealing with Communist China, my ten articles republished here yesterday provide an outline of both.
May 31, 2008 — drsubrotoroy
China’s force & diplomacy: The need for realism In India
First published in The Statesman, Editorial Page Special Article, May 31 2008,
It is almost as large an error to overestimate Chinese military aims and capabilities as it has been to underestimate them. On 8 May 2008 at Tokyo’s Waseda University, China’s President Hu Jintao declared in a speech broadcast live “China has taken a defensive military policy and will not engage in any arms race. We will not become a military threat to any country and we will never assert hegemony or be expansionistic”. This was as clear and authoritative a reply as possible to the June 2005 statement in Singapore of the then American defence minister Donald Rumsfeld: “China appears to be expanding its missile forces, allowing them to reach targets in many areas of the world, not just the Pacific region, while also expanding its missile capacities here in the region. Since no nation threatens China, one must wonder: why this growing investment?”
By 2006, Rumsfeld’s generals were saying China had “the greatest potential to compete militarily with the United States,” and could “field disruptive military technologies that could over time offset traditional US military advantages absent US counter strategies”. The “sizing” of China’s military by American and other Western analysts became a parlour game ~ one with major business implications since the threat perceived or misperceived from China affects American decisions on the size of its own military.
As recently as 13 May 2008, the Wall Street Journal carried opinion that China’s military expansion demanded America have a 1000-ship navy not a 280-ship one, 40 aircraft-carriers not 11, 1000 F-22 aircraft not 183. Exaggerating China’s military and the threat posed by it to the world can mean big business for militaries opposing it!
Communist China’s physical, political and psychological domination of independent India since the 1950s has been achieved more by diplomacy, subterfuge and threat of force than actual military conflict. In its first phase, the policy was expressed clearly by the Chinese Ambassador to New Delhi on 16 May 1959 when he told India’s Foreign Secretary: “Our Indian friends, what is your mind? Will you agree to our thinking regarding the view that China can only concentrate its main attention eastward of China but not south-westward of China, nor is it necessary for it to do so?…. Friends, it seems to us that you, too, cannot have two fronts. Is it not so? If it is, here then lies the meeting point of our two sides. Will you please think it over?” (BN Mullick, Chinese Betrayal, p. 229).
At the time, Pakistan was in military alliances with the USA through CENTO and SEATO, and the Pakistan-China alliance was still years away. The Chinese had used subterfuge to construct their road linking Tibet and Sinkiang through Aksai Chin, ignoring India’s sovereignty, and were now suggesting they had no interest in fighting India because their major military interests were to their east as India’s were towards Pakistan.
The second phase was the short border conflict itself in 1962-63, which consolidated China’s grip on occupied territory in Aksai Chin while establishing its threat to the Brahmaputra Valley that has been perpetuated to this day. The third phase is represented by the 27 November 1974 conversation between Henry Kissinger and Deng Xiaoping, recently made publicly available:
“Deng : There’s something very peculiar about Indian policy. For example, that little kingdom Sikkim. They had pretty good control of Sikkim. Why did they annex it?
Kissinger : It is a good thing India is pacifist, I hate to think (of what they would do) if they weren’t. (Laughs).
Deng : Sikkim was entirely under the military control of India.
Kissinger : I haven’t understood Sikkim. It is incomprehensible.
Deng : After the military annexation, their military position was in no way strengthened.
Kissinger : They had troops there already.
Deng : And they haven’t increased their troops since. We published a statement about it. We just spoke for the cause of justice.
Kissinger : Is it true that you set up loudspeakers to broadcast to the Indian troops on the border? It makes them very tense. (Laughs)
Deng : We have done nothing new along the borders, and frankly we don’t fear that India will attack our borders. We don’t think they have the capability to attack our borders. There was some very queer talk, some said that the reason why the Chinese issued that statement about Sikkim was that the Chinese were afraid after Sikkim that India would complete the encirclement of China. Well, in the first place we never feel things like isolation and encirclement can ever matter very much with us. And particularly with India, it is not possible that India can do any encirclement of China. The most they can do is enter Chinese territory as far as the Autonomous Republic of Tibet, Lhasa. And Lhasa can be of no strategic importance to India. The particular characteristic of Lhasa is that it has no air-because the altitude is more than 3,000 metres.
Kissinger : It’s a very dangerous area for drinking mao tai (a Chinese hard liquor).
Deng : Frankly, if Indian troops were able to reach Lhasa, we wouldn’t be able to supply them enough air! (Laughter)
Kissinger : I don’t think their intention is with respect to Tibet, their immediate intention is Nepal.
Deng : That is correct. They have been recently exercising pressure on Nepal, refusing to supply them oil. It is the dream of Nehru, inherited by his daughter, to have the whole subcontinent in their pocket.
Kissinger : And to have buffer zones around their border…. It is like British policy in the 19th Century. They always wanted Tibet demilitarized.
Deng : I believe even the British at that time didn’t make a good estimate of whether there was enough air. (Laughter)
Kissinger : I think an Indian attack on China would be a very serious matter that cannot be explained in terms of local conditions, but only in terms of a broader objective….”
The attitude that is revealed speaks for itself, and has been essentially continued by Deng’s successors in the next decades, especially Jiang Zemin and Hu Jintao. It is because China does not perceive a military threat from India that it has agreed to military exercises with us ~ exercises which, if anything, reinforce their psychological dominance by helping to spook our military’s morale. During this third phase also, China went about systematically creating a major military threat to India in its support of Pakistan’s military, exploiting our subcontinent’s communal conflicts fully to its own strategic advantage.
China has been engaged for more than a decade now in a massive exercise of modernisation of its armed forces, improving productivity, technology, organisation and discipline while trying to cut corruption. It has a right to do so, and such modernisation does not in and of itself signal aggressive intent. The last aggressive war China fought was almost 30 years ago against Vietnam. It is possible that what simply explains the military modernisation (besides conflict with Taiwan) is China’s awful history of being exploited by foreign powers over the centuries.
Indian analysts have expressed concern about nuclear submarines based in Hainan; but where else would China put them? We delude ourselves if we think we are the guardians of the Straits of Malacca. We may do better being concerned to try to modernise, improve productivity and reduce corruption in our own forces, as well as integrate them better with national goals as China has done instead of continuing to maintain them in a rather old-fashioned colonial / imperial manner.
April 25, 2008 — drsubrotoroy
The Doctor of Deficit Finance should realise the currency is at stake
by Subroto Roy
First published in The Statesman, Editorial Page Special Article, April 25 2008,
The best thing that may be said of the Manmohan Singh premiership is that when it began in May 2004, it seemed, for a short while, refreshing in comparison to the dysfunctional arrogance and brutality displayed by its predecessor. By the last months of the Vajpayee-Advani Government, there were party appointees who had ended all pretence of purportedly Hindu values and were raking it in shamelessly. The Golden Rule of Democracy is “Throw the rascals out”, which is what Indian democracy upheld as it has done time and again. By 2009, India’s electorate will have the chance to decide whether the incumbent government deserves the same fate.
Manmohan Singh was seriously discussed as the Congress’s putative nominee for PM as early as 2001. The idea brewing at the time with the party’s next generation of wannabe leaders (in their 50s and 60s, where Manmohan was near 70) was that they needed to maintain good relations with the Great White Queen and wait out one term of an inevitable Singh premiership before having a shot at the top job themselves.
What is surprising is Dr Singh appeared never to feel it necessary to educate himself privately on how to retool himself for the necessary transformation from being the archetypal bureaucrat he had been in his working career to becoming the national statesman he wished to be after retirement. It is doubtful, for example, if he ever stood in front of a mirror and practised an extempore political speech in Hindi in preparation for the highest executive post in the country, let aside writing a clear-headed, original vision or mission statement of substance as to where he wished to lead it. As Narasimha Rao’s Finance Minister, he could meekly take orders from his PM; it seemed he wished to continue in the same mode even when PM himself.
Jawaharlal Nehru is supposed to have been a hero of Dr Singh’s ~ but Nehru was a thorough parliamentarian, among the finest anywhere, and someone who always respected the Lok Sabha immensely. Dr Singh, after he lost to VK Malhotra for the South Delhi seat in 1999, made not the slightest effort to enter the Lok Sabha again, even when the Akalis indicated they might not oppose him in a Punjab contest. When asked specifically at a large press conference about not entering the Lok Sabha, Dr Singh murmured words to the effect he had better uses of his time ~ a display, if anything, of the misplaced arrogance of many New Delhi academics and intellectuals. Dr Singh may be the first PM in any parliamentary democracy never to have won a seat in the lower house nor felt a need to do so.
Dr Singh’s bureaucratic expertise assisted him well in the first national crisis that came his way, which was the Tsunami of 26 December 2004. There appeared to be an air of efficiency about the Government’s response and he seemed in his element as commander of bureaucratic forces while working with Pranab Mukherjee in enlisting the military. George W. Bush (not a great geographer or historian) was apparently impressed to see on a map that India had naval forces deployed as far as the Andamans.
By 2005 though, Dr Singh’s bureaucratic mindset had its negative impact. Montek Ahluwalia had been his Finance Secretary when he was Finance Minister. Mr Ahluwalia’s spouse had been a main supporter of Dr Singh’s unsuccessful Lok Sabha attempt. During the Vajpayee Government, Mr Ahluwalia remained a Planning Commission Member for several years before moving to Washington. With Dr Singh as PM, Mr Ahluwalia returned from the USA in mid 2004 to become Deputy Chair at the Planning Commission. Simultaneously with his return, the idea that the American nuclear industry would like to sell “six to eight lightwater reactors” to India arose.
That is as much as is presently known in public. Dr Singh and Mr Ahluwalia may in the national interest want to frankly and precisely explain to the Indian people the full story of the sudden origins of this idea. Certainly, none of the lessons of the Dabhol fiasco a decade earlier seemed to have been learnt, and the Maharasthtra Government (and hence the Government of India) ended up paying some $300 million to General Electric and Bechtel Corporation for Dabhol before any nuclear talks with the USA could begin. Nor had any serious cost-benefit analysis been done or discussion taken place comparing nuclear energy with coal, hydro and other sources in the Indian case.
Indian foreign policy became frozen in its focus on nuclear negotiations with the USA, swirling around Dr Singh’s fife-and-drum welcome at the White House and President Bush’s return visit to India. At the same time arose the issue of Paul Volcker’s UN committee mentioning the name of India’s foreign minister. As The Statesman put it, regardless of the latter’s involvement, “the damage to India’s diplomatic reputation in the world” was done and it was inevitable a new foreign minister would be necessary. After dilly-dallying and much 10 Janpath to-and-fro, Dr Singh followed Nehru’s mistake of becoming his own foreign minister. The idea was that this would be temporary but it became almost a year.
Instead of transforming himself towards Indian political statesmanship, Dr Singh advanced other retired bureaucrats’ ambitions on similar career-paths. Foreign policy went out of the MEA’s control and seemingly into the control of the new “National Security Adviser”. Dr Singh, sometimes with MK Narayanan beside him, travelled a large number of countries from Brazil to Finland and Uzbekistan to South Africa and Japan. Dr Singh also found time and willingness to accept honorary degrees from British and Russian universities during these short months.
While Dr Singh seemed thus preoccupied, two of India’s main neighbours underwent massive democratic revolutions (leave aside magnificent Bhutan). Nepal’s people practically stormed their Bastille while Dr Singh and Mr Narayanan visited Germany to discuss BMWs. Pakistan’s democratic forces could hardly believe the cold indifference shown to them by a New Delhi merely following Bush’s support for Pervez Musharraf. While Pakistan and Nepal, and to lesser extent Bangladesh, saw movements towards better governance, Sri Lanka descended towards civil war ~ India’s PM remained obsessed with the magic wand that the nuclear deal was supposed to be.
Then suddenly the magic vanished ~ Dr Singh seemed to finally come to a silent private recognition that the economics of the nuclear deal simply did not add up if it meant India importing “six to eight lightwater reactors” on a turnkey basis from the USA or anywhere else. Dr Singh seemed to come out of his self-imposed trance and return a little better to reality. By the time he visited China, although he was as deferential to Hu Jintao in his body language as he had been to Bush and Musharraf and even accepted an indoor guard of honour, he also seemed willing to stand up for India. The Arunachal visit was a reality-check.
Now there is inflation ~ and one year left in the UPA’s term. What the country needs is tough sensible macroeconomics and clean public finance. A pandering profligate budget in February was not a healthy sign. Instructing Mr Ahluwalia to close down the Planning Commission and make it a minor R&D wing of the Finance Ministry would be instead a good step. Instructing the RBI to clean up its bureaucratic wastefulness and prepare itself for institutional independence from the Finance Ministry would be even better. Getting proper financial control over every Union and State government entity spending public money and resources would be most important of all. Such major institutional changes in the policy-making process are what an economist might expect of an economist prime minister who wishes to lead India in the 21st Century. India’s currency is at stake.
(See also: “The Politics of Dr Singh”, May 2006; “Mistaken Macroeconomics”, June 2009, etc.)
February 21, 2008 — drsubrotoroy
This map accompanied my article Lessons from the 1962 War published in The Sunday Statesman of January 13 2008: