Much as I might love Russia, England, France, America, I despise their spies & local agents affecting poor India’s policies: Memo to PM Modi, Mr Jaitley, Mr Doval & the new Govt. of India: Beware of Delhi’s sleeper agents, lobbyists & other dalals (2014)

 

1 July 2014

 

Dear Bibek,

 

The very elderly man I refer to as “Sonia’s Lying Courtier” herein

https://independentindian.com/2007/11/25/sonias-lying-courtier/

is someone who has known you, leading up to your appointment as Director at Sonia’s “Rajiv Gandhi Institute” and later. He has now published a purported memoir whose main aim is to conceal his Soviet connections during the Brezhnev era 1960s-1970s, besides trying to rub my name out from my role with Rajiv in 1990-1991. The woman journalist in Delhi who is named as having ghost-written his new book is someone you know quite well too.

 

The man was someone whom I worked with and who was introduced to me by Rajiv Gandhi on 25/9/1990, a Soviet trained “technocrat” who had inveigled himself into Rajiv’s circle as he had been a favoured one of Indira (presumably via PN Haksar) when he returned from the USSR. He was also the link explaining, again via PN Haksar, how Manmohan first became FM in 1991 after Rajiv’s assassination, then how Manmohan came to Sonia’s notice and attention, and was later crucial in the so-called Rajiv Gandhi Foundation and in the formation of Sonia’s so-called National Advisory Council.

 

His mandate was to keep INC policies predictable and agreeable in the areas of Soviet/Russian interest, in which he seems to have succeeded during the Sonia-Manmohan regime.

 

He found me an unknown force, and worked to edge me out, despite the fact the 25/9/90 group was formed by Rajiv as a sounding-board for the perestroika-for-India project I led in America since 1986 and which I brought to Rajiv the week before on 18/9/90…

 

I send this to you as a word of caution as you are clearly close to Mr Modi and Mr Doval, yet none of you may know the man’s background and intent, even in his dotage. Certainly the purported memoir written by the woman journalist is something whose main aim is to conceal the man’s Soviet/Russian background. Had it been an honest intent, he would have had no need to conceal any of this but would have addressed his own Russian experience openly and squarely. He may have had his impact already with the new Government, I do not know.

 

For myself, I have been openly rather pro-Russia on the merits of the current Ukraine issue, but, as you will appreciate, I despise any kind of deep foreign agent seeking to control Indian policy in long-term concealment.

 

Cordially

 

Suby Roy

Sonia’s Lying Courtier with Postscript 25 Nov 2007, & Addendum 30 June 2014

30th June 2014

“Sonia’s Lying Courtier” (see below) has now lied again! In a ghost-written 2014 book published by a prominent publisher in Delhi!

He has so skilfully lied about himself the ghost writer was probably left in the dark too about the truth.

**The largest concealment has to do with his Soviet connection: he is fluent in Russian, lived as a privileged guest of the state there, and before returning to the Indian public sector was awarded in the early 1970s a Soviet degree, supposedly an earned doctorate in Soviet style management!**

How do I know? He told me so personally! His Soviet degree is what allowed himself to pass off as a “Dr” in Delhi power-circles for decades, as did many others who were planted in that era. He has also lied about himself and Rajiv Gandhi in 1990-1991, and hence he has lied about me indirectly.

In 2007 I was gentle in my exposure of his mendacity because of his advanced age. Now it is more and more clear to me that exposing this directly may be the one way for Sonia and her son to realise how they, and hence the Congress party, were themselves influenced without knowing it for years…

25 November 2007

Two Sundays ago in an English-language Indian newspaper, an elderly man in his 80s, advertised as being “the Gandhi family’s favourite technocrat” published some deliberate falsehoods about events in Delhi 17 years ago surrounding Rajiv Gandhi’s last months. I wrote at once to the man, let me call him Mr C, asking him to correct the falsehoods since, after all, it was possible he had stated them inadvertently or thoughtlessly or through faulty memory. He did not do so. I then wrote to a friend of his, a Congress Party MP from his State, who should be expected to know the truth, and I suggested to him that he intercede with his friend to make the corrections, since I did not wish, if at all possible, to be compelled to call an elderly man a liar in public.

That did not happen either and hence I am, with sadness and regret, compelled to call Mr C a liar.

The newspaper article reported that Mr C’s “relationship with Rajiv (Gandhi) would become closer when (Rajiv) was out of power” and that Mr C “was part of a group that brainstormed with Rajiv every day on a different subject”. Mr C has reportedly said Rajiv’s “learning period came after he left his job” as PM, and “the others (in the group)” were Mr A, Mr B, Mr D, Mr E “and Manmohan Singh” (italics added).

In reality, Mr C was a retired pro-USSR bureaucrat aged in his late 60s in September 1990 when Rajiv Gandhi was Leader of the Opposition and Congress President. Manmohan Singh was an about-to-retire bureaucrat who in September 1990 was not physically present in India, having been working for Julius Nyerere of Tanzania for several years.

On 18 September 1990, upon recommendation of Siddhartha Shankar Ray, Rajiv Gandhi met me at 10 Janpath, where I handed him a copy of the unpublished results of an academic “perestroika-for-India” project I had led at the University of Hawaii since 1986. The story of that encounter has been told first on July 31-August 2 1991 in The Statesman, then in the October 2001 issue of Freedom First, then in January 6-8 2006, September 23-24 2007 in The Statesman, and most recently in The Statesman Festival Volume 2007. The last of these speaks most fully yet of my warnings against Rajiv’s vulnerability to assassination; this document in unpublished form was sent by me to Rajiv’s friend, Mr Suman Dubey in July 2005, who forwarded it with my permission to the family of Rajiv Gandhi.

It was at the 18 September 1990 meeting that I suggested to Rajiv that he should plan to have a modern election manifesto written. The next day, 19 September, I was asked by Rajiv’s assistant V George to stay in Delhi for a few days as Mr Gandhi wished me to meet some people. I was not told whom I was to meet but that there would be a meeting on Monday, 24th September. On Saturday, the Monday meeting was postponed to Tuesday 25th September because one of the persons had not been able to get a flight into Delhi. I pressed to know what was going on, and was told I would meet Mr A, Mr B, Mr C and Mr D. It turned out later Mr A was the person who could not fly in from Hyderabad.

The group (excluding Mr B who failed to turn up because his servant had failed to give him the right message) met Rajiv at 10 Janpath in the afternoon of 25th September. We were asked by Rajiv to draft technical aspects of a modern manifesto for an election that was to be expected in April 1991. The documents I had given Rajiv a week earlier were distributed to the group. The full story of what transpired has been told in my previous publications.

Mr C was ingratiating towards me after that first meeting with Rajiv and insisted on giving me a ride in his car which he told me was the very first Maruti ever manufactured. He flattered me needlessly by saying that my PhD (in economics from Cambridge University) was real whereas his own doctoral degree had been from a dubious management institute of the USSR. (Handling out such doctoral degrees was apparently a standard Soviet way of gaining influence.) Mr C has not stated in public how his claim to the title of “Dr” arises.

Following that 25 September 1990 meeting, Mr C did absolutely nothing for several months towards the purpose Rajiv had set us, stating he was very busy with private business in his home-state where he flew to immediately. Mr D went abroad and was later hit by severe illness. Mr B, Mr A and I met for luncheon at New Delhi’s Andhra Bhavan where the former explained how he had missed the initial meeting. Then Mr B said he was very busy with his house-construction, and Mr A said he was very busy with finishing a book for his publishers on Indian defence, and both begged off, like Mr C and Mr D, from any of the work that Rajiv had explicitly set our group. My work and meeting with Rajiv in October 1990 has been reported previously.

Mr C has not merely suppressed my name from the group in what he has published in the newspaper article two Sundays ago, he has stated he met Rajiv as part of such a group “every day on a different subject”, another falsehood. The next meeting of the group with Rajiv was in fact only in December 1990, when the Chandrashekhar Government was discussed. I was called by telephone in the USA by Rajiv’s assistant V George but I was unable to attend, and was briefed later about it by Mr A.

When new elections were finally announced in March 1991, Mr C brought in Mr E into the group in my absence (so he told me), perhaps in the hope I would remain absent. But I returned to Delhi and between March 18 1991 and March 22 1991, our group, including Mr E (who did have a genuine PhD), produced an agreed-upon document. That document was handed over by us together in a group to Rajiv Gandhi at 10 Janpath the next day, and also went to the official political manifesto committee of Narasimha Rao, Pranab Mukherjee and M. Solanki.

Our group, as appointed by Rajiv on 25 September 1990, came to an end with the submission of the desired document to Rajiv on 23 March 1991.

As for Manmohan Singh, contrary to Mr C’s falsehood, Manmohan Singh has himself truthfully said he was with the Nyerere project until November 1990, then joined Chandrashekhar’s PMO in December 1990 which he left in March 1991, that he had no meeting with Rajiv Gandhi prior to Rajiv’s assassination but rather did not in fact enter Indian politics at all until invited by Narasimha Rao several weeks later to be Finance Minister. In other words, Manmohan Singh himself is on record stating facts that demonstrate Mr C’s falsehood.

The economic policy sections of the document submitted to Rajiv on 23 March 1991 had been drafted largely by myself with support of Mr E and Mr D and Mr C as well. It was done over the objections of Mr B, who had challenged me by asking what Manmohan Singh would think of it. I had replied I had no idea what Manmohan Singh would think of it, saying I knew he had been out of the country on the Nyerere project for some years.

Mr C has deliberately excluded my name from the group and deliberately added Manmohan Singh’s instead. What explains this attempted falsification of facts – reminiscent of totalitarian practices in communist countries? Manmohan Singh was not involved by his own admission, and as Finance Minister told me so directly when he and I were introduced in Washington DC in September 1993 by Siddhartha Shankar Ray, then Indian Ambassador to the USA.

A possible explanation for Mr C’s mendacity is as follows: I have been recently publishing the fact that I repeatedly pleaded warnings that I (even as a layman on security issues) perceived Rajiv Gandhi to have been insecure and vulnerable to assassination. Mr C, Mr B and Mr A were among the main recipients of my warnings and my advice as to what we as a group, appointed by Rajiv, should have done towards protecting Rajiv better. They did nothing — though each of them was a senior man then aged in his late 60s at the time and fully familiar with Delhi’s workings while I was a 35 year old newcomer. After Rajiv was assassinated, I was disgusted with what I had seen of the Congress Party and Delhi, and did not return except to meet Rajiv’s widow once in December 1991 to give her a copy of a tape in which her late husband’s voice was recorded in conversations with me during the Gulf War.

Mr C has inveigled himself into Sonia Gandhi’s coterie – while Manmohan Singh went from being mentioned in our group by Mr B to becoming Narasimha Rao’s Finance Minister and Sonia Gandhi’s Prime Minister. If Rajiv had not been assassinated, Sonia Gandhi would have been merely a happy grandmother today and not India’s purported ruler. India would also have likely not have been the macroeconomic and political mess that the mendacious people around Sonia Gandhi like Mr C have now led it towards.

POSTSCRIPT: The Congress MP was kind enough to write in shortly afterwards; he confirmed he “recognize(d) that Rajivji did indeed consult you in 1990-1991 about the future direction of economic policy.”   A truth is told and, furthermore, the set of genuine Rajivists in the present Congress Party is identified as non-null.

 

Did Jagdish Bhagwati “originate”, “pioneer”, “intellectually father” India’s 1991 economic reform? Did Manmohan Singh? Or did I, through my encounter with Rajiv Gandhi, just as Siddhartha Shankar Ray told Manmohan & his aides in Sep 1993 in Washington? Judge the evidence for yourself. And why has Amartya Sen misdescribed his work? India’s right path forward today remains what I said in my 3 Dec 2012 Delhi lecture!

Did Jagdish Bhagwati “originate”, “pioneer”, “intellectually father” India’s 1991 economic reform?  Did Manmohan Singh? Or did I, through my encounter with Rajiv Gandhi, just as Siddhartha Shankar Ray told Manmohan & his aides in Sep 1993 in Washington?  Judge the evidence for yourself.  And why has Amartya Sen misdescribed his work? India’s right path forward today remains what I said in my 3 Dec 2012 Delhi lecture!

 

Contents

 

Part I:  Facts vs Fiction, Flattery, Falsification, etc

 

1. Problem

2.    Rajiv Gandhi, Siddhartha Shankar Ray, Milton Friedman & Myself

3.     Jagdish Bhagwati & Manmohan Singh?  That just don’t fly!

 4.    Amartya Sen’s Half-Baked Communism:  “To each according to his need”?

 

  Part II:    India’s Right Road Forward Now: Some Thoughtful Analysis for Grown Ups

5.   Transcending a Left-Right/Congress-BJP Divide in Indian Politics

6.   Budgeting Military & Foreign Policy

7.    Solving the Kashmir Problem & Relations with Pakistan

8.  Dealing with Communist China

9.   Towards Coherence in Public Accounting, Public Finance & Public Decision-Making

10.   India’s Money: Towards Currency Integrity at Home & Abroad

 

 

Part I:  Facts vs Fiction, Flattery, Falsification, etc

 

1. Problem


Arvind Panagariya says in the Times of India of 27 July 2013

 

 “…if in 1991 India embraced many of the Track-I reforms, writings by Sen played no role in it… The intellectual origins of the reforms are to be found instead in the writings of Bhagwati, both solely and jointly with Padma Desai and T N Srinivasan….”

 

Now Amartya Sen has not claimed involvement in the 1991 economic reforms so we are left with Panagariya claiming

 

“The intellectual origins of the reforms are to be found instead in the writings of Bhagwati…”

 

Should we suppose Professor Panagariya’s master and co-author Jagdish Bhagwati himself substantially believes and claims the same?  Three recent statements from Professor Bhagwati suffice by way of evidence:

 

(A)  Bhagwati said to parliamentarians in the Lok Sabha on 2 December 2010 about the pre-1991 situation:

 

“This policy framework had been questioned, and its total overhaul advocated, by me and Padma Desai in writings through the late 1960s which culminated in our book, India: Planning for Industrialization (Oxford University Press: 1970) with a huge blowback at the time from virtually all the other leading economists and policymakers who were unable to think outside the box. In the end, our views prevailed and the changes which would transform the economy began, after an external payments crisis in 1991, under the forceful leadership of Prime Minister Manmohan Singh who was the Finance Minister at the time….”

 

(B)  Bhagwati said to Economic Times on 28 July 2013:

 

“When finance minister Manmohan Singh was in New York in 1992, he had a lunch for many big CEOs whom he was trying to seduce to come to India. He also invited me and my wife, Padma Desai, to the lunch. As we came in, the FM introduced us to the invitees and said: ‘These friends of mine wrote almost a quarter century ago [India: Planning for Industrialisation was published in 1970 by Oxford] recommending all the reforms we are now undertaking. If we had accepted the advice then, we would not be having this lunch as you would already be in India’.”

 

(C)  And Bhagwati said in Business Standard of 9 August 2013:

 

“… I was among the intellectual pioneers of the Track I reforms that transformed our economy and reduced poverty, and witness to that is provided by the Prime Minister’s many pronouncements and by noted economists like Deena Khatkhate.. I believe no one has accused Mr. Sen of being the intellectual father of these reforms. So, the fact is that this huge event in the economic life of India passed him by…”

 

From these pronouncements it seems fair to conclude Professors Bhagwati and Panagariya are claiming Bhagwati has been the principal author of “the intellectual origins” of India’s 1991 reforms, has been their “intellectual father” or at the very least has been “among the intellectual pioneers” of the reform (“among” his own collaborators and friends, since none else is mentioned).  Bhagwati has said too his friend Manmohan Singh as Finance Minister participated in the process while quoting Manmohan as having said Bhagwati was the principal author. 

 

Bhagwati’s opponent in current debate,  Amartya Sen, has been in agreement with him that Manmohan, their common friend during college days at Cambridge in the 1950s, was a principal originating the 1991 reforms, saying to Forbes in 2006:

 

“When Manmohan Singh came to office in the early 1990s as the newly appointed finance minister, in a government led by the Congress Party, he knew these problems well enough, as someone who had been strongly involved in government administration for a long time.”

 

In my experience, such sorts of claims, even in their weakest form, have been, at best, scientifically sloppy and unscholarly,  at worst mendacious suppressio veri/suggestio falsi, and in between these best and worst interpretations, examples of academic self-delusion and mutual flattery.  We shall see Bhagwati’s opponent, Amartya Sen, has denied academic paternity of recent policies he has spawned while appearing to claim academic paternity of things he has not!  Everyone may have reasonably expected greater self-knowledge, wisdom and scholarly values of such eminent academics.  Their current spat has instead seemed to reveal something rather dismal and self-serving. 

 

You can decide for yourself where the truth, ever such an elusive and fragile thing, happens to be and what is best done about it.   Here is some evidence.

 

 

2.  Rajiv Gandhi, Siddhartha Shankar Ray,  Milton Friedman & Myself

 

Professor Arvind Panagariya is evidently an American economics professor of Indian national origin who holds the Jagdish Bhagwati Chair of Indian Political Economy at Columbia University.   I am afraid I had not known his name until he mentioned my name in Economic Times of  24 October 2001.   He said

 

panagariya

 

In mentioning the volume “edited by Subroto Roy and William E  James”,  Professor Panagariya did not appear to find the normal scientific civility to identify our work by name, date or publisher.  So here that is now:

 

 

indvol

 

This was a book published in 1992 by the late Tejeshwar Singh for Sage.  It resulted from the University of Hawaii Manoa perestroika-for-India project, that I and Ted James created and led between 1986 and 1992/93.   (Yes, Hawaii — not Stanford, Harvard, Yale, Columbia or even Penn, whose India-policy programs were Johnny-come-latelies a decade or more later…)   There is a sister-volume too on Pakistan, created by a parallel project Ted and I had led at the same time:

 

 

pakvol

 

In 2004 from Britain, I wrote to the 9/11 Commission saying if our plan to study Afghanistan after India and Pakistan had not been thwarted by malign local forces among our sponsors themselves, we, a decade before the September 11 2001 attacks on the USA, may  just have come up with a pre-emptive academic analysis.   It was not to be.

 

Milton Friedman’s chapter that we published for the first time was a memorandum he wrote in November 1955 for the Government of India which the GoI had effectively suppressed.  I came to know of it while a doctoral student at Cambridge under Frank Hahn, when at a conference at Oxford about 1979-1980, Peter Tamas Bauer sat me down beside him and told me the story.  Later in Blacksburg about 1981, N. Georgescu-Roegen on a visit from Vanderbilt University told me the same thing.  Specifically, Georgescu-Roegen told me that leading Indian academics had almost insulted Milton in public which Milton had borne gamely; that after Milton had given a talk in Delhi to VKRV Rao’s graduate-students,  a talk Georgescu-Roegen had been present at, VKRV Rao had addressed the students and told them in all seriousness “You have heard what Professor Friedman has to say, if you repeat what he has said in your exams, you will fail”.

 

In 1981-1982 my doctoral thesis emerged, titled “On liberty & economic growth: preface to a philosophy for India”,

 

phd

 

My late great master in economic theory, Frank Hahn (1925-2013), found what I had written to be a “good thesis” bringing “a good knowledge of economics and of philosophy to bear on the literature on economic planning”, saying I had  shown “a good knowledge of economic theory” and my “critique of Development Economics was powerful not only on methodological but also on economic theory grounds”.  

 

I myself said about it decades later “My original doctoral topic in 1976  ‘A monetary theory for India’ had to be altered not only due to paucity of monetary data at the time but because the problems of India’s political economy and allocation of resources in the real economy were far more pressing. The thesis that emerged in 1982 … was a full frontal assault from the point of view of microeconomic theory on the “development planning” to which everyone routinely declared their fidelity, from New Delhi’s bureaucrats and Oxford’s “development” school to McNamara’s World Bank with its Indian staffers.  Frank Hahn protected my inchoate liberal arguments for India; and when no internal examiner could be found, Cambridge showed its greatness by appointing two externals, Bliss at Oxford and Hutchison at Birmingham, both Cambridge men. “Economic Theory and Development Economics” was presented to the American Economic Association in December 1982 in company of Solow, Chenery, Streeten, and other eminences…” How I landed on that eminent AEA panel in December 1982 was because its convener Professor George Rosen of the University of Illinois recruited me overnight — as a replacement for Jagdish Bhagwati, who had had to return to India suddenly because of a parental death.  The results were published in 1983 in World Development.

 

Soon afterwards, London’s Institute of Economic Affairs published Pricing, Planning and Politics: A Study of Economic Distortions in India.  This slim work was the first classical liberal critique of post-Mahalonobis Indian economic thought since BR Shenoy’s original criticism decades earlier.  It became the subject of The Times’ lead editorial on its day of publication 29 May 1984 — provoking the Indian High Commission in London to send copies to the Finance Ministry in Delhi where it apparently caused a stir, or so I was told years later by Amaresh Bagchi who was a recipient of it at the Ministry.

 

ppp19842
londonti

The Times had said

 

“When Mr. Dennis Healey in the Commons recently stated that Hongkong, with one per cent of the population of India has twice India’s trade, he was making an important point about Hongkong but an equally important point about India. If Hongkong with one per cent of its population and less than 0.03 per cert of India’s land area (without even water as a natural resource) can so outpace India, there must be something terribly wrong with the way Indian governments have managed their affairs, and there is. A paper by an Indian economist published today (Pricing, Planning and Politics: A Study of Economic Distortions in India by Subroto Roy, IEA £1.80) shows how Asia’s largest democracy is gradually being stifled by the imposition of economic policies whose woeful effect and rhetorical unreality find their echo all over the Third World. As with many of Britain’s former imperial possessions, the rot set in long before independence. But as with most of the other former dependencies, the instrument of economic regulation and bureaucratic control set up by the British has been used decisively and expansively to consolidate a statist regime which inhibits free enterprise, minimizes economic success and consolidates the power of government in all spheres of the economy. We hear little of this side of things when India rattles the borrowing bowl or denigrates her creditors for want of further munificence. How could Indian officials explain their poor performance relative to Hongkong? Dr Roy has the answers for them. He lists the causes as a large and heavily subsidized public sector, labyrinthine control over private enterprise, forcibly depressed agricultural prices, massive import substitution, government monopoly of foreign exchange transactions, artificially overvalued currency and the extensive politicization of the labour market, not to mention the corruption which is an inevitable side effect of an economy which depends on the arbitrament of bureaucrats. The first Indian government under Nehru took its cue from Nehru’s admiration of the Soviet economy, which led him to believe that the only policy for India was socialism in which there would be “no private property except in a restricted sense and the replacement of the private profit system by a higher ideal of cooperative service.” Consequently, the Indian government has now either a full monopoly or is one of a few oligipolists in banking, insurance, railways, airlines, cement, steel, chemicals, fertilizers, ship-building, breweries, telephones and wrist-watches. No businessman can expand his operation while there is any surplus capacity anywhere in that sector. He needs government approval to modernize, alter his price-structure, or change his labour shift. It is not surprising that a recent study of those developing countries which account for most manufactured exports from the Third World shows that India’s share fell from 65 percent in 1953 to 10 per cent in 1973; nor, with the numerous restrictions on inter-state movement of grains, that India has over the years suffered more from an inability to cope with famine than during the Raj when famine drill was centrally organized and skillfully executed without restriction. Nehru’s attraction for the Soviet model has been inherited by his daughter, Mrs. Gandhi. Her policies have clearly positioned India more towards the Soviet Union than the West. The consequences of this, as Dr Roy states, is that a bias can be seen in “the antipathy and pessimism towards market institutions found among the urban public, and sympathy and optimism to be found for collectivist or statist ones.” All that India has to show for it is the delivery of thousands of tanks in exchange for bartered goods, and the erection of steel mills and other heavy industry which help to perpetuate the unfortunate obsession with industrial performance at the expense of agricultural growth and the relief of rural poverty.”…..

 

I felt there were inaccuracies in this and so replied  dated 4 June which The Times published on 16 June 1984:

 

timesletter-11

Milton and I met for the first time in the Fall of 1984 at the Mont Pelerin Society meetings at Cambridge when I gave him a copy of the IEA monograph, which he came to think extremely well of.   I told him I had heard of his 1955 document and asked him for it; he sent me the original blue/purple version of this soon thereafter.

 

[That original document was, incidentally,  in my professorial office among all my books, papers, theses and other academic items including my gown when I was attacked in 2003 by a corrupt gang at IIT Kharagpur —  all yet to be returned to me by IIT despite a High Court order during my present ongoing battle against corruption there over a USD 1.9 million scam !… Without having ever wished to, I have had to battle India’s notorious corruption first hand for a decade!]

 

I published Milton’s document for the first time on 21 May 1989 at the conference of the Hawaii project over the loud objection of assorted leftists… 

friedman-et-al-at-uh-india-conf-19891

Amartya Sen, Jagdish Bhagwati, Manmohan Singh or any of their acolytes will not be seen in this group photograph dated 21 May 1989 at the UH President’s House, because they were not there.  The Government of India was represented by the Ambassador to Washington, PK Kaul, as well as the Consul General in San Francisco, KS Rana (later Ambassador to Germany), besides the founding head of ICRIER who had invited himself.  

 

Manmohan Singh was not there as he precisely represented the Indian economic policy establishment I had been determined to reform!   In any case, he had left India about 1987 on his last assignment before retirement, with Julius Nyerere of Tanzania relating to the “South-South Commission”.  

 

I have said over more than a half dozen years now that there is no evidence whatsoever of Manmohan Singh having been a liberal economist in any sense of that word at any time before 1991, and scant evidence that he originated any liberal economic ideas since.  The widespread worldwide notion that he is to be credited for originating a sudden transformation of India from a path of pseudo-socialism to one of pseudo-liberalism has been without basis in evidence — almost entirely a political fiction, though an explicable one and one which has served, as such political fictions do, the purposes of those who invent them.

 

Jagdish Bhagwati and Amartya Sen were in their mid 50s and were two of the three senior-most Indians in US academic economics at the time.  I and Ted James, both in our 30s, decided to invite both Bhagwati and Sen to the Hawaii project-conference as distinguished guests but to do so somewhat insincerely late in the day, predicting they would decline, which is what they did, yet they had come to be formally informed of what we were doing.  We had a very serious attitude that was inspired a bit, I might say, by Oppenheimer’s secret “Manhattan project” and we wanted neither press-publicity nor anyone to become the star who ended up hogging the microphone or the limelight.

 

Besides, and most important of all, neither Bhagwati nor Sen had done work in the areas we were centrally interested in, namely, India’s macroeconomic and foreign trade framework and fiscal and monetary policies.   

 

Bhagwati, after his excellent 1970 work with Padma Desai for the OECD on Indian industry and trade, also co-authored with TN Srinivasan a fine 1975 volume for the NBER  Foreign Trade Regimes and Economic Development: India. 

 

TN Srinivasan was the third of the three senior-most Indian economists at the time in US academia; his work made us want to invite him as one of our main economic authors, and we charged him with writing the excellent chapter in Foundations that he came to do titled “Planning and Foreign Trade Reconsidered”.

 

The other main economist author we had hoped for was Sukhamoy Chakravarty from Delhi University and the Government of India’s Planning Commission, whom I had known since 1977 when I had been given his office at the Delhi School of Economics as a Visiting Assistant Professor while he was on sabbatical; despite my pleading he would not come due to ill health; he strongly recommended C Rangarajan, telling me Rangarajan had been the main author with him of the crucial 1985 RBI report on monetary policy; and he signed and gave me his last personal copy of that report dating it 14 July 1987.  Rangarajan said he could not come and recommended the head of the NIPFP, Amaresh Bagchi, promising to write jointly with him the chapter on monetary policy and public finance. 

 

Along with Milton Friedman’s suppressed 1955 memorandum which I was publishing for the first time in 1989, TN Srinivasan and Amaresh Bagchi authored the three main economic policy chapters that we felt we wanted. 

 

Other chapters we commissioned had to do with the state of governance (James Manor), federalism (Bhagwan Dua), Punjab and similar problems (PR Brass), agriculture (K Subbarao, as proposed by CH Hanumantha Rao), health (Anil Deolalikar, through open advertisement), and a historical assessment of the roots of economic policy (BR Tomlinson, as proposed by Anil Seal).  On the vital subject of education we failed to agree with the expert we wanted very much  (JBG Tilak, as proposed by George Psacharopolous) and so we had to cover the subject cursorily in our introduction mentioning his work.  And decades later, I apologised to Professor Dietmar Rothermund of Heidelberg University for having been so blinkered in the Anglo-American tradition at the time as to not having obtained his participation in the project.  

 

[The sister-volume we commissioned in parallel on Pakistan’s political economy had among its authors Francis Robinson, Akbar Ahmed, Shirin Tahir-Kehli, Robert La Porte, Shahid Javed Burki, Mohsin Khan, Mahmood Hasan Khan,  Naved Hamid, John Adams and Shahrukh Khan; this book came to be published in Pakistan in 1993 to good reviews but apparently was then lost by its publisher and is yet to be found; the military and religious clergy had been deliberately not invited by us though the name of Pervez Musharraf had I think arisen, and the military and religious clergy in fact came to rule the roost through the 1990s in Pakistan; the volume, two decades old, takes on fresh relevance with the new civilian governments of recent years.] [Postscript  27 November 2015: See my strident critique at Twitter of KM Kasuri, P Musharraf et al  e.g. at https://independentindian.com/2011/11/22/pakistans-point-of-view-or-points-of-view-on-kashmir-my-as-yet-undelivered-lahore-lecture-part-i/ passing off ideas they have taken from this volume without acknowledgement, ideas which have in any case become defunct  to their author, myself.]

 

Milton himself said this about his experience with me in his memoirs:

 

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And Milton wrote on my behalf when I came to be attacked, being Indian, at the very University that had sponsored us:

 

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My obituary notice at his passing in 2006 said: “My association with Milton has been the zenith of my engagement with academic economics…. I was a doctoral student of his bitter enemy yet for over two decades he not only treated me with unfailing courtesy and affection, he supported me in lonely righteous battles: doing for me what he said he had never done before, which was to stand as an expert witness in a United States Federal Court. I will miss him much though I know that he, as a man of reason, would not have wished me to….”

 

In August 1990 in Delhi I came to tell Siddhartha Shankar Ray about the unpublished India-manuscript resulting from the Hawaii project that was in my possession as it headed to its publisher. 

 

Ray was a family-friend whose maternal grandfather CR Das led the Congress Party before MK Gandhi and had been a friend and colleague of my great grandfather SN Roy in Bengal’s politics in the 1920s;  Ray had also consented to stand on my behalf as Senior Counsel in a matter in the Supreme Court of India. 

 

Ray was involved in daily political parlays at his Delhi home with other Congress Party personages led by PV Narasimha Rao.  These senior regional figures seemed to me to be keeping their national leader, Rajiv Gandhi, aloof in splendid isolation at 10 Jan Path. 

 

Ray told me he and his wife had been in London in May 1984 on the day The Times had written its lead editorial on my work and they had seen it with excitement.  Upon hearing of the Hawaii project and the manuscript I had with me, Ray immediately insisted of his own accord that I must meet Rajiv Gandhi, and that he would be arranging a meeting. 

 

Hence it came to be a month later that a copy of the manuscript of the completed Hawaii project was be given by my hand on 18 September 1990 to Rajiv Gandhi, then Leader of the Opposition and Congress President, an encounter I have quite fully described elsewhere.  I offered to get a copy to the PM, VP Singh, too but a key aide of his showed no interest in receiving it.

 

Rajiv made me a senior adviser, and I have claimed principal authorship of the 22 March 1991 draft of the Congress manifesto that actually shook and changed the political thinking of the Congress on economic matters in the direction Rajiv had desired and as I had advised him at our initial 18 September 1990 meeting. 

 

“… He began by talking about how important he felt panchayati raj was, and said he had been on the verge of passing major legislation on it but then lost the election. He asked me if I could spend some time thinking about it, and that he would get the papers sent to me. I said I would and remarked panchayati raj might be seen as decentralized provision of public goods, and gave the economist’s definition of public goods as those essential for the functioning of the market economy, like the Rule of Law, roads, fresh water, and sanitation, but which were unlikely to appear through competitive forces.

 

I distinguished between federal, state and local levels and said many of the most significant public goods were best provided locally. Rajiv had not heard the term “public goods” before, and he beamed a smile and his eyes lit up as he voiced the words slowly, seeming to like the concept immensely. It occurred to me he had been by choice a pilot of commercial aircraft. Now he seemed intrigued to find there could be systematic ways of thinking about navigating a country’s governance by common pursuit of reasonable judgement. I said the public sector’s wastefulness had drained scarce resources that should have gone instead to provide public goods. Since the public sector was owned by the public, it could be privatised by giving away its shares to the public, preferably to panchayats of the poorest villages. The shares would become tradable, drawing out black money, and inducing a historic redistribution of wealth while at the same time achieving greater efficiency by transferring the public sector to private hands. Rajiv seemed to like that idea too, and said he tried to follow a maxim of Indira Gandhi’s that every policy should be seen in terms of how it affected the common man. I wryly said the common man often spent away his money on alcohol, to which he said at once it might be better to think of the common woman instead. (This remark of Rajiv’s may have influenced the “aam admi” slogan of the 2004 election, as all Congress Lok Sabha MPs of the previous Parliament came to receive a previous version of the present narrative.)

 

Our project had identified the Congress’s lack of internal elections as a problem; when I raised it, Rajiv spoke of how he, as Congress President, had been trying to tackle the issue of bogus electoral rolls. I said the judiciary seemed to be in a mess due to the backlog of cases; many of which seemed related to land or rent control, and it may be risky to move towards a free economy without a properly functioning judicial system or at least a viable system of contractual enforcement. I said a lot of problems which should be handled by the law in the courts in India were instead getting politicised and decided on the streets. Rajiv had seen the problems of the judiciary and said he had good relations with the Chief Justice’s office, which could be put to use to improve the working of the judiciary.

 

The project had worked on Pakistan as well, and I went on to say we should solve the problem with Pakistan in a definitive manner. Rajiv spoke of how close his government had been in 1988 to a mutual withdrawal from Siachen. But Zia-ul-Haq was then killed and it became more difficult to implement the same thing with Benazir Bhutto, because, he said, as a democrat, she was playing to anti-Indian sentiments while he had found it somewhat easier to deal with the military. I pressed him on the long-term future relationship between the countries and he agreed a common market was the only real long-term solution. I wondered if he could find himself in a position to make a bold move like offering to go to Pakistan and addressing their Parliament to break the impasse. He did not say anything but seemed to think about the idea. Rajiv mentioned a recent Time magazine cover of Indian naval potential, which had caused an excessive stir in Delhi. He then talked about his visit to China, which seemed to him an important step towards normalization. He said he had not seen (or been shown) any absolute poverty in China of the sort we have in India. He talked about the Gulf situation, saying he did not disagree with the embargo of Iraq except he wished the ships enforcing the embargo had been under the U.N. flag. The meeting seemed to go on and on, and I was embarrassed at perhaps having taken too much time and that he was being too polite to get me to go. V. George had interrupted with news that Sheila Dixit (as I recall) had just been arrested by the U. P. Government, and there were evidently people waiting. Just before we finally stood up I expressed a hope that he was looking to the future of India with an eye to a modern political and economic agenda for the next election, rather than getting bogged down with domestic political events of the moment. That was the kind of hopefulness that had attracted many of my generation in 1985. I said I would happily work in any way to help define a long-term agenda. His eyes lit up and as we shook hands to say goodbye, he said he would be in touch with me again…. The next day I was called and asked to stay in Delhi for a few days, as Mr. Gandhi wanted me to meet some people…..

 

… That night Krishna Rao dropped me at Tughlak Road where I used to stay with friends. In the car I told him, as he was a military man with heavy security cover for himself as a former Governor of J&K, that it seemed to me Rajiv’s security was being unprofessionally handled, that he was vulnerable to a professional assassin. Krishna Rao asked me if I had seen anything specific by way of vulnerability. With John Kennedy and De Gaulle in mind, I said I feared Rajiv was open to a long-distance sniper, especially when he was on his campaign trips around the country.  This was one of several attempts I made since October 1990 to convey my clear impression to whomever I thought might have an effect that Rajiv seemed to me extremely vulnerable. Rajiv had been on sadhbhavana journeys, back and forth into and out of Delhi. I had heard he was fed up with his security apparatus, and I was not surprised given it seemed at the time rather bureaucratized. It would not have been appropriate for me to tell him directly that he seemed to me to be vulnerable, since I was a newcomer and a complete amateur about security issues, and besides if he agreed he might seem to himself to be cowardly or have to get even closer to his security apparatus. Instead I pressed the subject relentlessly with whomever I could. I suggested specifically two things: (a) that the system in place at Rajiv’s residence and on his itineraries be tested, preferably by some internationally recognized specialists in counter-terrorism; (b) that Rajiv be encouraged to announce a shadow-cabinet. The first would increase the cost of terrorism, the second would reduce the potential political benefit expected by terrorists out to kill him. On the former, it was pleaded that security was a matter being run by the V. P. Singh and then Chandrashekhar Governments at the time. On the latter, it was said that appointing a shadow cabinet might give the appointees the wrong idea, and lead to a challenge to Rajiv’s leadership. This seemed to me wrong, as there was nothing to fear from healthy internal contests for power so long as they were conducted in a structured democratic framework. I pressed to know how public Rajiv’s itinerary was when he travelled. I was told it was known to everyone and that was the only way it could be since Rajiv wanted to be close to the people waiting to see him and had been criticized for being too aloof. This seemed to me totally wrong and I suggested that if Rajiv wanted to be seen as meeting the crowds waiting for him then that should be done by planning to make random stops on the road that his entourage would take. This would at least add some confusion to the planning of potential terrorists out to kill him. When I pressed relentlessly, it was said I should probably speak to “Madame”, i.e. to Mrs. Rajiv Gandhi. That seemed to me highly inappropriate, as I could not be said to be known to her and I should not want to unduly concern her in the event it was I who was completely wrong in my assessment of the danger. The response that it was not in Congress’s hands, that it was the responsibility of the VP Singh and later the Chandrashekhar Governments, seemed to me completely irrelevant since Congress in its own interests had a grave responsibility to protect Rajiv Gandhi irrespective of what the Government’s security people were doing or not doing. Rajiv was at the apex of the power structure of the party, and a key symbol of secularism and progress for the entire country. Losing him would be quite irreparable to the party and the country. It shocked me that the assumption was not being made that there were almost certainly professional killers actively out to kill Rajiv Gandhi — this loving family man and hapless pilot of India’s ship of state who did not seem to have wished to make enemies among India’s terrorists but whom the fates had conspired to make a target. The most bizarre and frustrating response I got from several respondents was that I should not mention the matter at all as otherwise the threat would become enlarged and the prospect made more likely! This I later realized was a primitive superstitious response of the same sort as wearing amulets and believing in Ptolemaic astrological charts that assume the Sun goes around the Earth — centuries after Kepler and Copernicus. Perhaps the entry of scientific causality and rationality is where we must begin in the reform of India’s governance and economy. What was especially repugnant after Rajiv’s assassination was to hear it said by his enemies that it marked an end to “dynastic” politics in India. This struck me as being devoid of all sense because the unanswerable reason for protecting Rajiv Gandhi was that we in India, if we are to have any pretensions at all to being a civilized and open democratic society, cannot tolerate terrorism and assassination as means of political change. Either we are constitutional democrats willing to fight for the privileges of a liberal social order, or ours is truly a primitive and savage anarchy concealed beneath a veneer of fake Westernization….. Proceedings began when Rajiv arrived. This elite audience mobbed him just as the farmers had mobbed him earlier. He saw me and beamed a smile in recognition, and I smiled back but made no attempt to draw near him in the crush. He gave a short very apt speech on the role the United Nations might have in the new post-Gulf War world. Then he launched the book, and left for an investiture at Rashtrapati Bhavan. We waited for our meeting with him, which finally happened in the afternoon. Rajiv was plainly at the point of exhaustion and still hard-pressed for time. He seemed pleased to see me and apologized for not talking in the morning. Regarding the March 22 draft, he said he had not read it but that he would be doing so. He said he expected the central focus of the manifesto to be on economic reform, and an economic point of view in foreign policy, and in addition an emphasis on justice and the law courts. I remembered our September 18 conversation and had tried to put in justice and the courts into our draft but had been over-ruled by others. I now said the social returns of investment in the judiciary were high but was drowned out again. Rajiv was clearly agitated that day by the BJP and blurted out he did not really feel he understood what on earth they were on about. He said about his own family, “We’re not religious or anything like that, we don’t pray every day.” I felt again what I had felt before, that here was a tragic hero of India who had not really wished to be more than a happy family man until he reluctantly was made into a national leader against his will. We were with him for an hour or so. As we were leaving, he said quickly at the end of the meeting he wished to see me on my own and would be arranging a meeting. One of our group was staying back to ask him a favour. Just before we left, I managed to say to him what I felt was imperative: “The Iraq situation isn’t as it seems, it’s a lot deeper than it’s been made out to be.” He looked at me with a serious look and said “Yes I know, I know.” It was decided Pitroda would be in touch with each of us in the next 24 hours. During this time Narasimha Rao’s manifesto committee would read the draft and any questions they had would be sent to us. We were supposed to be on call for 24 hours. The call never came. Given the near total lack of system and organization I had seen over the months, I was not surprised. Krishna Rao and I waited another 48 hours, and then each of us left Delhi. Before going I dropped by to see Krishnamurty, and we talked at length. He talked especially about the lack of the idea of teamwork in India. Krishnamurty said he had read everything I had written for the group and learned a lot. I said that managing the economic reform would be a critical job and the difference between success and failure was thin….”

 

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“… I got the afternoon train to Calcutta and before long left for America to bring my son home for his summer holidays with me. In Singapore, the news suddenly said Rajiv Gandhi had been killed. All India wept. What killed him was not merely a singular act of criminal terrorism, but the system of humbug, incompetence and sycophancy that surrounds politics in India and elsewhere. I was numbed by rage and sorrow, and did not return to Delhi….”

 

In December 1991, I visited Rajiv’s widow at 10 Jan Path to express my condolences, the only time I have met her, and I gave her for her records a taped copy of Rajiv’s long-distance telephone conversations with me during the Gulf War earlier that year.   She seemed an extremely shy taciturn figure in deep mourning, and I do not think the little I said to her about her late husband’s relationship with me was comprehended.  Nor was it the time or place for more to be said.

 

In September 1993, at a special luncheon at the Indian Ambassador’s Residence in Washington, Siddhartha Shankar Ray, then the Ambassador to Washington, pointed at me and declared to Manmohan Singh, then Finance Minister, in presence of Manmohan’s key aides accompanying him including MS Ahluwalia, NK Singh, C Rangarajan and others,

 

“Congress manifesto was written on his computer”.

 

This was accurate enough to the extent that the 22 March 1991 draft as asked for by Rajiv and that came to explicitly affect policy had been and remains on my then-new NEC laptop.

 

At the Ambassador’s luncheon, I gave Manmohan Singh a copy of the Foundations book as a gift.  My father who knew him in the early 1970s through MG Kaul, ICS, had sent him a copy of my 1984 IEA monograph which Manmohan had acknowledged.  And back in 1973, he had visited our then-home at 14 Rue Eugene Manuel in Paris to advise me about economics at my father’s request, and he and I had ended up in a fierce private debate for about forty minutes over the demerits (as I saw them) and merits (as he saw them) of the Soviet influence on Indian economic policy-making.  But in 1993 we had both forgotten the 1973 meeting.  

 

In May 2002, the Congress passed an official party resolution moved by Digvijay Singh in presence of PV Narasimha Rao and Manmohan Singh that the 1991 reforms had originated with Rajiv Gandhi and not with either Narasimha Rao or Manmohan; no one dissented.  It was intended to flatter Sonia Gandhi as the Congress President,  but there was truth in it too which all Congress MPs of the 13th Lok Sabha had come to know in a publication of mine they had received from me at IIT Kharagpur where since 1996 I had become Professor.  

 

Manmohan Singh himself, to his credit, has not at any point, except once during his failed Lok Sabha bid, claimed the reforms as his own invention and has said always he had followed what his Prime Minister had told him. However, he has not been averse to being attributed with all the credit by his flatterers, by the media, by businessmen and many many others around the world, and certainly he did not respond to Ambassador Siddhartha Shankar Ray telling him and his key aides how the Congress-led reform had come about through my work except to tell me at the 1993 luncheon that when Arjun Singh criticised the reforms in Cabinet, he, Manmohan, would mention the manifesto. 

 

On 28 December 2009, Rajiv’s widow in an official Congress Party statement finally declared her late husband

 

left his personal imprint on the (Congress) party’s manifesto of 1991.″ 

 

How Sonia Gandhi, who has never had pretensions to knowledge of economics or political economy or political science or governance or history, came to place Manmohan Singh as her prime ministerial candidate and the font of economic and political wisdom along with Pranab Mukherjee, when both men hardly had been favourites of her late husband, would be a story in its own right.  And how Amartya Sen’s European-origin naturalised Indian co-author Jean Drèze later came to have policy influence from a different direction upon Sonia Gandhi, also a naturalised Indian of European origin, may be yet another story in its own right,  perhaps best told by themselves.

 

I would surmise the same elderly behind-the-scenes figure, now in his late 80s, had a hand in setting up both sets of influences — directly in the first case (from back in 1990-1991),  and indirectly in the second case (starting in 2004) .  This was a man who in a November 2007 newspaper article literally erased my name and inserted that of Manmohan Singh as part of the group that Rajiv created on 25 September following his 18 September meeting with me!   Reluctantly, I had to call this very elderly man a liar; he has not denied it and knows he has not been libeled.

 

One should never forget the two traditional powers interested in the subcontinent, Russia and Britain, have been never far from influence in Delhi.  In 1990-1991 what worried vested bureaucratic and business interests and foreign powers through their friends and agents was that they could see change was coming to India but they wanted to be able to control it themselves to their advantage, which they then broadly proceeded to do over the next two decades.  The foreign weapons’ contracts had to be preserved, as did other big-ticket imports that India ends up buying needlessly on credit it hardly has in world markets.  There are similarities to what happened in Russia and Eastern Europe where many apparatchiks and fellow-travellers became freedom-loving liberals overnight;  in the Indian case more than one badly compromised pro-USSR senior bureaucrat promptly exported his children and savings to America and wrapped themselves in the American flag.

 

The stubborn unalterable fact remains that Manmohan Singh was not physically present in India and was still with the Nyerere project on 18 September 1990 when I met Rajiv for the first time and gave him the unpublished results of the UH-Manoa project.  This simple straightforward fact is something the Congress Party, given its own myths and self-deception and disinformation, has not been able to cope with in its recently published history.   For myself, I have remained loyal to my memory of my encounter with Rajiv Gandhi, and my understanding of him.  The Rajiv Gandhi I knew had been enthused by me in 1990-1991 carrying the UH-Manoa perestroika-for-India project that I had led since 1986, and he had loved my advice to him on 18 September 1990 that he needed to modernise the party by preparing a coherent agenda (as other successful reformers had done) while still in Opposition waiting for elections, and to base that agenda on commitments to improving the judiciary and rule of law, stopping the debauching of money, and focusing on the provision of public goods instead.    Rajiv I am sure wanted a modern and modern-minded Congress — not one which depended on him let aside his family, but one which reduced that dependence and let him and his family alone.

 

As for Manmohan Singh being a liberal or liberalising economist, there is no evidence publicly available of that being so from his years before or during the Nyerere project, or after he returned and joined the Chandrashekhar PMO and the UGC  until becoming,  to his own surprise as he told Mark Tully,  PV Narasimha Rao’s Finance Minister.  Some of his actions qua Finance Minister were liberalising in nature but he did not originate any basic idea of a change in a liberal direction of economic policy, and he has, with utmost honesty honestly, not claimed otherwise.  Innumerable flatterers and other self-interested parties have made out differently, creating what they have found to be a politically useful fiction; he has yet to deny them.

 

Siddhartha Shankar Ray and I met last in July 2009, when I gave him a copy of this 2005 volume I had created, which pleased him much. 

 

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I said to him Bengal’s public finances were in abysmal condition, calling for emergency measures financially, and that Mamata Banerjee seemed to me to be someone who knew how to and would dislodge the Communists from their entrenched misgovernance of decades but she did not seem quite aware that dislodging a bad government politically was not the same thing as knowing how to govern properly oneself.  He,  again of his own accord, said immediately, 

 

“I will call her and her people to a meeting here so you can meet them and tell them that directly”. 

 

It never transpired.  In our last phone conversation I mentioned to him my plans of creating a Public Policy Institute — an idea he immediately and fully endorsed as being essential though adding “I can’t be part of it,  I’m on my way out”.

 

“I’m on my way out”.   That was Siddhartha Shankar Ray — always intelligent, always good-humoured, always public-spirited, always a great Indian, my only friend among politicians other than the late Rajiv Gandhi himself.

 

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In March February 2010, my father and I called upon the new Bengal Governor, MK Narayanan and gave him a copy of the Thatcher volume for the Raj Bhavan Library; I told him the story about my encounter with Rajiv Gandhi thanks to Siddhartha Shankar Ray and its result;  Narayanan within a few days made a visit to Ray’s hospital-bed, and when he emerged after several hours he made a statement, which in substance he repeated again when Ray died in November 2010:

 

“There are few people in post-Independence India who could equal his magnificent contribution to India’s growth and progress”.

 

To what facts did MK Narayanan, a former Intelligence Bureau chief, mean to refer with this extravagant praise of Ray?  Was Narayanan referring to Ray’s politics for Indira Gandhi?  To Ray’s Chief Ministership of Bengal?  To Ray’s Governorship of Punjab?  You will have to ask him but I doubt that was what he meant:  I surmise Narayanan’s eulogy could only have resulted after he confirmed with Ray on his hospital-bed the story I had told him, and that he was referring to the economic and political results that followed for the country once Ray had introduced me in September 1990 to Rajiv Gandhi. But I say again, you will have to ask MK Narayanan himself what he and Ray talked about in hospital and what was the factual basis of Narayanan’s precise words of praise. To what facts exactly was MK Narayanan, former intelligence chief, meaning to refer when he stated Siddhartha Shankar Ray had made a “magnificent contribution to India’s growth and progress”?

 

 

3.   Jagdish Bhagwati & Manmohan Singh?  That just don’t fly!

 

Now returning to the apparent desire of Professor Panagariya, the Jagdish Bhagwati Professor of Indian Political Economy at Columbia, to attribute to Jagdish Bhagwati momentous change for the better in India as of 1991, even if Panagariya had not the scientific curiosity to look into our 1992 book titled Foundations of India’s Political Economy: Towards an Agenda for the 1990s or into Milton Friedman’s own 1998 memoirs, we may have expected him to at least turn to his co-author and Columbia colleague, Jagdish Bhagwati himself, and ask, “Master, have you heard of this fellow Subroto Roy by any chance?”

 

Jagdish would have had to say yes, since not only had he received a copy of the proofs of my 1984 IEA work Pricing, Planning and Politics: A Study of Economic Distortions in India, he was kind enough to write in a letter dated 15 May 1984 that I had

 

“done an excellent job of setting out the problems afflicting our economic policies, unfortunately government-made problems!” 

 

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Also Jagdish may or may not have remembered our only meeting, when he and I had had a long conversation on the sofas in the foyer of the IMF in Washington when I was a consultant there in 1993 and he had come to meet someone; he was surprisingly knowledgeable about my personal 1990 matter in the Supreme Court of India which astonished me until he told me his brother the Supreme Court judge had mentioned the case to him!

 

Now my 1984 work was amply scientific and scholarly in fully crediting a large number of works in the necessary bibliography, including Bhagwati’s important work with his co-authors.  Specifically, Footnote 1 listed the literature saying:

 

“The early studies notably include: B. R. Shenoy, `A note of dissent’, Papers relating to the formulation of the Second Five-Year Plan, Government of India Planning Commission, Delhi, 1955; Indian Planning and Economic Development, Asia Publishing, Bombay, 1963, especially pp. 17-53; P. T. Bauer, Indian Economic Policy and Development, George Allen & Unwin, London, 1961; M. Friedman, unpublished memorandum to the Government of India, November 1955 (referred to in Bauer, op. cit., p. 59 ff.); and, some years later, Sudha Shenoy, India : Progress or Poverty?, Research Monograph 27, Institute of Economic Affairs, London, 1971. Some of the most relevant contemporary studies are: B. Balassa, `Reforming the system of incentives in World Development, 3 (1975), pp. 365-82; `Export incentives and export performance in developing countries: a comparative analysis’, Weltwirtschaftliches Archiv, 114 (1978), pp. 24-61; The process of industrial development and alternative development strategies, Essays in International Finance No. 141, Princeton University, 1980; J. N. Bhagwati & P. Desai, India: Planning for Industrialisation, OECD, Paris : Oxford University Press, 1970; `Socialism and Indian Economic Policy’, World Development, 3 (1975), pp. 213-21; J. N. Bhagwati & T. N. Srinivasan, Foreign-trade Regimes and Economic Development: India, National Bureau of Economic Research, New York, 1975; Anne O. Krueger, `Indian planning experience’, in T. Morgan et al. (eds.), Readings in Economic Development, Wadsworth, California, 1963, pp. 403-20; `The political economy of the rent-seeking society, American Economic Review, 64 (June 1974); The Benefits and Costs of Import-Substitution in India: a Microeconomic Study, University of Minnesota Press, Minneapolis, 1975; Growth, distortions and patterns of trade among many countries, Studies in International Finance, Princeton University, 1977; Uma Lele, Food grain marketing in India : private performance and public policy, Cornell University Press, Ithaca, 1971; T. W. Schultz (ed.), Distortions in agricultural incentives, Indiana University Press, Bloomington, 1978; V. Sukhatme, “The utilization of high-yielding rice and wheat varieties in India: an economic assessment”, University of Chicago PhD thesis, 1977….”

 

There were two specific references to Bhagwati’s work with Srinivasan:

 

“Jagdish Bhagwati and T. N. Srinivasan put it as follows : `The allocation of foreign exchange among alternative claimants and users in a direct control system . . .would presumably be with reference to a well-defined set of principles and criteria based on a system of priorities. In point of fact, however, there seem to have been few such criteria, if any, followed in practice.’”

 

and

 

“But as Bhagwati and Srinivasan report, `. . . the sheer weight of numbers made any meaningful listing of priorities extremely difficult. The problem was Orwellian: all industries had priority and how was each sponsoring authority to argue that some industries had more priority than others? It is not surprising, therefore, that the agencies involved in determining allocations by industry fell back on vague notions of “fairness”, implying pro rata allocations with reference to capacity installed or employment, or shares defined by past import allocations or similar rules of thumb’”

 

and one to Bhagwati and Desai:

 

“The best descriptions of Indian industrial policy are still to be found in Bhagwati and Desai (1970)…”

 

Professors Bhagwati and Panagriya have not apparently referred to anything beyond these joint works of Bhagwati’s dated 1970 with Padma Desai and 1975 with TN Srinivasan.  They have not claimed Bhagwati did anything by way of either publication or political activity in relation to India’s economic policy between May 1984, when he read my soon-to-be-published-work and found I had

 

done an excellent job of setting out the problems afflicting our economic policies, unfortunately government-made problems”,

 

and September 1990 when I gave Rajiv the University of Hawaii perestroika-for-India project results developed since 1986, which came to politically spark the 1991 reform in the Congress’s highest echelons from months before Rajiv’s assassination.   

 

There may have been no such claim made by Bhagwati and Panagariya because there may be no such evidence.  Between 1984 and 1990,  Professor Bhagwati’s research interests were away from Indian economic policy while his work on India through 1970 and 1975 had been fully and reasonably accounted for as of 1984 by myself.

 

What is left remaining is Bhagwati’s statement :

 

“When finance minister Manmohan Singh was in New York in 1992, he had a lunch for many big CEOs whom he was trying to seduce to come to India. He also invited me and my wife, Padma Desai, to the lunch. As we came in, the FM introduced us to the invitees and said: ‘These friends of mine wrote almost a quarter century ago [India: Planning for Industrialisation was published in 1970 by Oxford] recommending all the reforms we are now undertaking. If we had accepted the advice then, we would not be having this lunch as you would already be in India’

 

Now this light self-deprecating reference by Manmohan at an investors’ lunch in New York “for many big CEOs” was an evident attempt at political humour written by his speech-writer.   It was clearly, on its face, not serious history.   If we test it as serious history, it falls flat so we may only hope Manmohan Singh, unlike Jagdish Bhagwati, has not himself come to believe his own reported joke as anything more than that.  

 

The Bhagwati-Desai volume being referred to was developed from 1966-1970.  India saw critical economic and political events  in 1969, in 1970, in 1971, in 1972, in 1975, in 1977, etc.

 

Those were precisely years during which Manmohan Singh himself moved from being an academic to becoming a Government of India official, working first for MG Kaul, ICS, and then in 1971 coming to the attention of  PN Haksar, Indira Gandhi’s most powerful bureaucrat between 1967 and 1974: Haksar himself was Manmohan Singh’s acknowledged mentor in the Government, as Manmohan told Mark Tully in an interview.  

 

After Manmohan visited our Paris home in 1973 to talk to me about economics, my father — who had been himself sent to the Paris Embassy by Haksar in preparation for Indira Gandhi’s visit in November 1971 before the Bangladesh war —

 

scan0024

had told me Manmohan was very highly regarded in government circles with economics degrees from both Cambridge and Oxford, and my father had added, to my surprise, what was probably a Haksarian governmental view that Manmohan was expected to be India’s Prime Minister some day.  That was 1973.

 

PN Haksar had been the archetypal Nehruvian Delhi intellectual of a certain era, being both a fierce nationalist and a fierce pro-USSR leftist from long before Independence.  I met him once on 23 March 1991, on the lawns of 10 Jan Path at the launch of General V Krishna Rao’s book on Indian defence which Rajiv was releasing, and Haksar gave a speech to introduce Rajiv (as if Rajiv needed introduction on the lawns of his own residence);  Haksar was in poor health but he seemed completely delighted to be back in favour with Rajiv,  after years of having been treated badly by Indira and her younger son.  

 

 Had Manmohan Singh in the early 1970s gone to Haksar — the architect of the nationalisation of India’s banking going on right then — and said “Sir, this OECD study by my friend Bhagwati and his wife says we should be liberalising foreign trade and domestic industry”, Haksar would have been astonished and sent him packing.  

 

There was a war on, plus a massive problem of 10 million refugees, a new country to support called Bangladesh, a railway strike, a bad crop, repressed inflation, shortages, and heaven knows what more, besides Nixon having backed Yahya Khan, Tikka Khan et al. 

 

 

nixon-note

Then after Bangladesh and the railway strike etc, came the rise of the politically odious younger son of Indira Gandhi and his friends (at least one of whom is today Sonia Gandhi’s gatekeeper) followed by the internal political Emergency, the grave foreign-fueled problem of Sikh separatism and its control, the assassination of Indira Gandhi by her own Sikh bodyguards, and the Rajiv Gandhi years as Prime Minister. 

 

Certainly it was Rajiv’s arrival in office and Benazir’s initial return to Pakistan, along with the rise of Michael Gorbachev in the changing USSR, that inspired me in far away Hawaii in 1986 to design with Ted James the perestroika-projects for India and Pakistan which led to our two volumes, and which, thanks to Siddhartha Shankar Ray, came to reach Rajiv Gandhi in Opposition in September 1990 as he sat somewhat forlornly at 10 Jan Path after losing office. “There is a tide in the affairs of men, Which taken at the flood, leads on to fortune….

 

My friend and collaborator Ted James died of cancer in Manila in May 2010; earlier that year he came to say publicly

 

“Seldom are significant reforms imposed successfully by international bureaucracies. Most often they are the result of indigenous actors motivated by domestic imperatives. I believe this was the case in India in 1991. It may have been fortuitous that Dr. Roy gained an audience with a receptive Rajiv Gandhi in 1990 but it was not luck that he was prepared with a well-thought out program; this arose from years of careful thought and debate on the matter.”

 

Changing the direction of a ship of state is very hard, knowing in which direction it should change and to what degree is even harder; it has rarely been something that can be done without random shocks arising let aside the power of vested interests. Had Rajiv Gandhi lived to form a new Government, I have little doubt I would have led the reform that I had chalked out for him and that he had approved of;  Sonia Gandhi would have remained the housewife, mother and grandmother that she had preferred to be and not been made into the Queen of India by the Congress Party; Manmohan Singh had left India in 1987 for the Nyerere project and it had been rumoured at the time that had been slightly to do with him protesting, to the extent that he ever has protested anything, the anti-Sikh pogrom that some of Rajiv’s friends had apparently unleashed after Indira’s killing; he returned in November 1990, joined Chandrashekhar in December 1990, left Chandrashekhar in March 1991 when elections were announced and was biding his time as head of the UGC; had Rajiv Gandhi lived, Manmohan Singh would have had a governor’s career path, becoming the governor of one state after another; he would not have been brought into the economic reform process which he had had nothing to do with originating; and finally Pranab Mukherjee, who left the Congress Party and formed his own when Rajiv took over, would have been likely rehabilitated slowly but would not have come to control the working of the party as he did. I said in my Lok Sabha TV interview on 5 9 December 2012 that there have been many microeconomic improvements arising from technological progress in the last 22 years but the macroeconomic and monetary situation is grim, because at root the fiscal situation remains incoherent and confused. I do not see anyone in Manmohan Singh’s entourage among all his many acolytes and flatterers and apologists who is able to get to these root problems.  We shall address these issues in Part II.

 

What Manmohan Singh said in self-deprecating humour at an investors’ lunch in New York in 1992 is hardly serious history as Jagdish Bhagwati has seemed to wish it to be.  Besides, it would have been unlike Manmohan,  being the devoted student of Joan Robinson and Nicholas Kaldor as he told Mark Tully,  to have taken such a liberalising initiative at all.  Furthermore, the 1969 American Economic Review published asurvey of Indian economic policy authored by his Delhi University colleagues Jagdish Bhagwati and Sukhamoy Chakravarty which made little mention of his work, and it would have been unreasonable to expect him to have been won over greatly by theirs. Perhaps there is a generous review from the 1970s by Manmohan Singh of the Bhagwati-Desai volume hidden somewhere but if so we should be told where it is.  A list of Manmohan Singh’s publications as an economist do not seem easily available anywhere.  

 

Lastly and perhaps most decisively, the 1970 Bhagwati-Desai volume, excellent study that it was, was hardly the first of its genre by way of liberal criticism of modern Indian economic policy!   Bhagwati declared in his 2010 speech to the Lok Sabha

 

“This policy framework had been questioned, and its total overhaul advocated, by me and Padma Desai in writings through the late 1960s…”

 

But why has Bhagwati been forever silent about the equally if not more forceful and fundamental criticism of “the policy framework”, and advocacy of its “total overhaul”, by scholars in the 1950s, a decade and more earlier than him, when he and Manmohan and Amartya were still students?  Specifically, by BR Shenoy, Milton Friedman, and Peter Bauer?   The relevant bibliography from the mid 1950s is given in Footnote 1 of my 1984 work. 

 

 


topimg_15242_br_shenoy_300x400

baueronshenoy

Peter Tamas Bauer (1915-2002) played a vital role in all this as had he himself not brought the Friedman 1955 document to my attention I would not have known of it.

 

 

1902FN2

As undergraduates at the LSE, we had been petrified of him and I never spoke to him while there, having believed the propaganda that floated around about him; then while a Research Student at Cambridge, I happened to be a speaker with him at a conference at Oxford; he made me sit next to him at a meal and told me for the first time about Milton Friedman’s 1955 memorandum to the Government of India which had been suppressed.  I am privileged to say Peter from then on became a friend, and wrote, at my request, what became I am sure the kiss of death for me at the World Bank of 1982:

 

226258_10150168598862285_2325402_n

Later he may have been responsible for the London Times writing its lead editorial of 29 May 1984 on my work.

 

Now Milton had sent me in 1984, besides the original of his November 1955 memorandum to the Government of India, a confidential 1956 document also which seemed to have been written for US Government consumption.  I did not publish this in Hawaii in 1989 as I was having difficulty enough publishing the 1955 memorandum.  I gave it to be published on the Internet some years ago, and after Milton’s passing, I had it published in The Statesman  on the same day as my obituary of him. 

 

It makes fascinating reading, especially about Mahalanobis and Shenoy, of how what Bhagwati wishes to call “the policy framework” that, he claims, he and Desai called for a “total overhaul” of, came to be what it was in the decade earlier when he and Amartya and Manmohan were still students. 

 

Friedman’s 1956 document said

 

“I met PC Mahalanobis in 1946 and again at a meeting of the International Statistical Institute in September 1947, and I know him well by reputation. He was absent during most of my stay in New Delhi, but I met him at a meeting of the Indian Planning Commission, of which he is one of the strongest and most able members.   Mahalanobis began as a mathematician and is a very able one. Able mathematicians are usually recognized for their ability at a relatively early age. Realizing their own ability as they do and working in a field of absolutes, tends, in my opinion, to make them dangerous when they apply themselves to economic planning. They produce specific and detailed plans in which they have confidence, without perhaps realizing that economic planning is not the absolute science that mathematics is. This general characteristic of mathematicians is true of Mahalanobis but in spite of the tendency he is willing to discuss a problem and listen to a different point of view. Once his decision is reached, however, he has great confidence in it. Mahalanobis was unquestionably extremely influential in drafting the Indian five-year plan. There were four key steps in the plan. The first was the so-called “Plan Frame” drafted by Mahalanobis himself. The second was a tentative plan based on the “Plan Frame”. The third step was a report by a committee of economists on the first two steps, and the fourth was a minority report by BR Shenoy on the economists’ report. The economists had no intention of drafting a definitive proposal but merely meant to comment on certain aspects of the first two steps. Shenoy’s minority report, however, had the effect of making the economists’ report official. The scheme of the Five Year Plan attributed to Mahalanobis faces two problems; one, that India needs heavy industry for economic development; and two, that development of heavy industry uses up large amounts of capital while providing only small employment.  Based on these facts, Mahalanobis proposed to concentrate on heavy industry development on the one hand and to subsidize the hand production cottage industries on the other. The latter course would discriminate against the smaller manufacturers. In my opinion, the plan wastes both capital and labour and the Indians get only the worst of both efforts. If left to their own devices under a free enterprise system I believe the Indians would gravitate naturally towards the production of such items as bicycles, sewing machines, and radios. This trend is already apparent without any subsidy. The Indian cottage industry is already cloaked in the same popular sort of mist as is rural life in the US. There is an idea in both places that this life is typical and the backbone of their respective countries. Politically, the Indian cottage industry problem is akin to the American farm problem. Mohandas Gandhi was a proponent of strengthening the cottage industry as a weapon against the British. This reason is now gone but the emotions engendered by Gandhi remain. Any move to strengthen the cottage industry has great political appeal and thus, Mahalanobis’ plan and its pseudo-scientific support for the industry also has great political appeal.  I found many supporters for the heavy industry phase of the Plan but almost no one (among the technical Civil Servants) who really believes in the cottage industry aspects, aside from their political appeal. In its initial form, the plan was very large and ambitious with optimistic estimates. My impression is that there is a substantial trend away from this approach, however, and an attempt to cut down. The development of heavy industry has slowed except for steel and iron. I believe that the proposed development of a synthetic petroleum plant has been dropped and probably wisely so. In addition, I believe that the proposed five year plan may be extended to six years. Other than his work on the plan, I am uncertain of Mahalanobis’ influence. The gossip is that he has Nehru’s ear and potentially he could be very influential, simply because of his intellectual ability and powers of persuasion. The question that occurs to me is how much difference Mahalanobis’ plan makes. The plan does not seem the important thing to me. I believe that the new drive and enthusiasm of the Indian nation will surmount any plan, good or bad. Then too, I feel a wide diversity in what is said and what is done. I believe that much of Nehru’s socialistic talk is simply that, just talk. Nehru has been trying to undermine the Socialist Party by this means and apparently the Congress Party’s adoption of a socialistic idea for industry has been successful in this respect.  One gets the impression, depending on whom one talks with, either that the Government runs business, or that two or three large businesses run the government. All that appears publicly indicates that the first is true, but a case can also be made for the latter interpretation. Favour and harassment are counterparts in the Indian economic scheme. There is no significant impairment of the willingness of Indian capitalists to invest in their industries, except in the specific industries where nationalization has been announced, but they are not always willing to invest and take the risks inherent in the free enterprise system. They want the Government to support their investment and when it refuses they back out and cry “Socialism”..”

 

I look forward to seeing a fundamental classical liberal critique from India’s distinguished American friends at Columbia University, Professors Jagdish Bhagwati and Padma Desai and Arvind Panagariya, if and when such a critique arises,  of the  “policy framework” in India as that evolved from the mid 1950s to become what exists across India in 2013 today.  Specifically:  Where is the criticism from Bhagwati of Mahalanobis and friends?  And where is Bhagwati’s defence of Shenoy, leave aside of Milton Friedman or Peter Bauer?   They seem not to exist. The most we get is a footnote again without the civility of any references, in the otherwise cogent 1975 Desai-Bhagwati paper “Socialism and Indian Economic Policy” alleging 

 

” Of these three types of impact of the Soviet example, the Plan-formulation approach was to be enthusiastically received by most commentators and, indeed, to lead to demands on the part of aid agencies for similar efforts by other developing countries. However, the shift to heavy industry was seen as a definite mistake by economic opinion of the Chicago school variety, reflecting their basic unfamiliarity with the structural models of growth and development planning of the Feldman-Mahalanobis variety-an ignorance which probably still persists. The detailed regulation was not quite noticed at the time, except by conservative commentators whose position however was extreme and precluded governmental planning of industrial investments on any scale.”

 

Desai and Bhagwati naturally found no apparent desire to locate any possible scientific truth or reasonableness among

 

“conservative commentators”

 

nor among the unnamed and undescribed

 

“economic opinion of the Chicago school variety”.   

 

Could Desai and Bhagwati have done anything different after all, even when talking about India to an American audience, without being at risk of losing their East Coast Limousine Liberal credentials?  Bhagwati used to routinely declare his “socialist” credentials, and even the other day on Indian TV emphatically declared he was not a “conservative” and scornfully dismissed “Thatcher and Reagan” for their “trickle down economics”…

 

Jagdish Bhagwati has evidently wanted to have his cake and eat it too…

 


 

4.    Amartya Sen’s Half-Baked Communism: “To each according to his need”? 

 

If I have been candid or harsh in my assessments of Jagdish Bhagwati and Manmohan Singh as they relate to my personal experience with the change of direction in Indian economic policy originating in 1990-1991, I am afraid I must be equally so with Bhagwati’s current opponent in debate, Amartya Sen. Certainly I have found the current spat between Bhagwati and Sen over India’s political economy to be dismal, unscholarly, unscientific and misleading (or off-base) except for it having allowed a burst of domestic policy-discussion in circumstances when India needs it especially much.  

 

None of this criticism is personal but based on objective experience and the record.  My criticism of Professor Bhagwati and Dr Manmohan Singh does not diminish in the slightest my high personal regard for both of them.

 

Similarly, Amartya Sen and I go back, momentarily, to Hindustan Park in 1964 when there was a faint connection as family friends from World War II  (as Naren Deb and Manindranath Roy were friends and neighbours, and we still have the signed copy of a book gifted by the former to the latter), and then he later knew me cursorily when I was an undergraduate at LSE and he was already a famous professor, and I greatly enjoyed his excellent lectures at the LSE on his fine book On Economic Inequality, and a few years later he wrote in tangential support of me at Cambridge for which he was thanked in the preface to my 1989 Philosophy of Economics — even though that book of mine also contained in its Chapter 10 the decisive criticism of his main contribution until that time to what used to be called “social choice theory”. Amartya Sen had also written some splendid handwritten letters, a few pages of which remain with me, which puzzled me at the time due to his expressing his aversion to what is normally called ‘price theory’, namely the Marshallian and/or Walrasian theory of value. 

 

Professor Sen and I met briefly in 1978, and then again in 2006 when I was asked to talk to him in our philosophical conversation which came to be published nicely.  In 2006 I told him of my experience with Rajiv Gandhi in initiating what became the 1991 reform on the basis of my giving Rajiv the results of the Hawaii project,  and Amartya was kind enough to say that he knew I had been arguing all this “very early on”, referring presumably to the 1984 London Times editorial which he would have seen in his Oxford days before coming to Harvard.

 

This personal regard on my part or personal affection on his part aside, I have been appalled to find Professor Sen not taking moral and intellectual responsibility for and instead disclaiming paternity of the whole so-called “Food Security” policy which Sonia Gandhi has been prevailed upon over the years by him and his acolytes and friends and admirers to adopt, and she in her ignorance of all political economy and governance has now wished to impose upon the Congress Party and India as a whole:

 

“Questioner: You are being called the creator of the Food Security Bill.

Amartya Sen: Yes, I don’t know why. That is indeed a paternity suit I’m currently fighting. People are accusing me of being the father”.

 

Amartya Sen has repeatedly over the years gone on Indian prime-time television and declared things like

 

If you don’t agree there’s hunger in the world, there’s something morally wrong with you”

 

besides over the decades publishing titles like Poverty and Famines: An Essay on Entitlement and Deprivation, Hunger and Public Action, The Political Economy of Hunger etc and ceaselessly using his immense power with the media, with book publishing houses, with US academic departments and the world development economics business,  to promote his own and his acolytes’ opinions around the world, no matter how ill-considered or incoherent these may be.   A passage from his latest book with Jean Drèze reportedly reads

 

“If development is about the expansion of freedom, it has to embrace the removal of poverty as well as paying attention to ecology as integral parts of a unified concern, aimed ultimately at the security and advancement of human freedom. Indeed, important components of human freedoms — and crucial ingredients of our quality of life — are thoroughly dependent on the integrity of the environment, involving the air we breathe, the water we drink, and the epidemiological surroundings in which we live….”

 

Had such a passage reached me in an undergraduate essay, I would have considered it incoherent waffle, and I am afraid I cannot see why merely because it is authored  by an eminence at Harvard and his co-author, the evaluation should be any different.   I am reminded of my encounter in 1976 with Joan Robinson, the great tutor in 1950s Cambridge of Amartya and Manmohan:  “Joan Robinson cornered me once and took me into the office she shared with EAG… She came at me for an hour or so wishing to supervise me, I kept declining politely… saying I was with Frank Hahn and wished to work on money… “What does Frankie know about India?” she said… I said I did not know but he did know about monetary theory and that was what I needed for India;  I also said I did not think much about the Indian Marxists she had supervised… and mentioned a prominent name… she said about him, “Yes most of what he does can go straight into the dustbin”…”  The Indian Marxist whom I had referred to in this conversation with Joan was not Amartya but someone else much younger, yet her candid “can go straight into the dustbin” still applies to all incoherent waffle, whomsoever may produce it.

 

Indeed, Amartya Sen, if anyone, really should get down to writing his memoirs, and candidly so in order to explain his own thinking and deeds over the decades to himself and to the world in order that needless confusions do not arise.  

 

Else it becomes impossible to explain how someone who was said to be proud to have been a Communist student on the run from the police in West Bengal, who was Joan Robinson’s star pupil at a time she was extolling Maoist China and who has seemingly nurtured a deep lifelong fascination and affection for Communist China despite all its misdeeds, who was feted by the Communist regime of West Bengal after winning the Bank of Sweden Prize (on the same day that same regime had tossed into jail one unfortunate young Mr Khemkha merely for having been rude to its leaders on the Internet), and who seemed to share some of those winnings on social causes like primary education at the behest of the Communist regime’s ministers, etc, how someone with that noble comradely leftist personal history as an economist allows a flattering interviewer with a Harvard connection to describe him in Business Standard of 25 July 2013  as having been all along really a

 

“neoclassical economist”

 

who also happens to be

 

“the greatest living scholar of the original philosopher of the free market, Adam Smith”

 

Amartya Sen a neoclassical economist and a great scholar of Adam Smith?  It is hilarious to suppose so. The question arises, Does Sen, having published about Adam Smith recently in a few newspapers and leftist periodicals, agree with such a description by his flattering admirer from Harvard at Business Standard?  “Neoclassical” economics originated with men like Jevons, Menger, Walras, Pareto, Marshall, Wicksell, and was marked by the theory of value being explained by a demand-side too, and not, like classical economics, merely by the cost of production alone on the supply side.  Indeed a striking thing about the list below published by the Scandinavian Journal of Economics of Amartya’s books following his 1998 Bank of Sweden Prize

 

1467-9442.00152_p1is how consistently these works display his avoidance of all neoclassical economics, and the absence of all of what is normally called ‘price theory’, namely the Marshallian and/or Walrasian theory of value.   No “neoclassical economics” anywhere here  for sure!  

 

It would be fair enough if Professor Sen says he is hardly responsible for an admirer’s ignorant misdescription of his work — except the question still arises why he has himself also evidently misdescribed his own work!  For example, in his 13 July 2013 letter to The Economist in response to the criticism of Jagdish Bhagwati and Arvind Panagariya, he says he had always been keenly interested in

 

“the importance of economic growth as a means— not an end”

 

and that this

 

“has been one of the themes even in my earliest writings (including “Choice of Techniques” in 1960 and “Growth Economics” in 1970)”.

 

This is a very peculiar opinion indeed to have been expressed by Professor Sen about his own work because the 1970 volume Growth Economics listed above among his books hardly can be said at all to be one of his own “earliest writings” as he now describes it to have been!

 

What had happened back then was that Sen, as someone considered a brilliant or promising young Indian economist at the time, had been asked by the editors of the famous Penguin Modern Economics Readings series to edit the specific issue  devoted to growth-theory — a compendium of classic already-published essays including those of Roy Harrod, Evsey Domar, Robert Solow and many others, to which young Amartya was given a chance to write an editorial Introduction.   Every economist familiar with that literature knows too that the growth-theory contained in that volume and others was considered highly abstract and notoriously divorced from actual historical processes of economic growth in different countries.  Everyone also knew that the individual editors in that famous Penguin Modern Economics Series were of relative unimportance as they did not commission new papers but merely collected classics already published and wrote an introduction.

 

This is significant presently because neither Professor Sen nor Professor Bhagwati may be objectively considered on the evidence of his life’s work as an economist to have been a major scholar of economic growth, either in theory or in historical practice.  As of December 1989,  Amartya Sen himself described his own interests to the American Economic Association as

 

“social choice theory, welfare economics, economic development”

 

and Jagdish Bhagwati described his interests as

 

“theory of international trade and policy, economic development”. 

 

Neither Sen nor Bhagwati mentioned growth economics or economic history or even general economic theory, microeconomics, macroeconomics, monetary economics, public finance, etc.  Furthermore, Sen saying in his letter to The Economist  that he has been always interested in economic growth seems to be baseless in light of the list of his books above, other than the Penguin compendium already discussed.

 

Incidentally in the same American Economic Association volume of 1989, Padma Desai had described her interests as

 

“Soviet economy and comparative economic systems”; 

 

Arvind Panagariya had described his interests as

 

“economies of scale and trade; smuggling; parallel markets in planned economies”;

 

and one Suby Roy described his interests as

 

“foundations of monetary economics”.

 

Reflecting on Amartya Sen’s works over the 40 year period that I have known them

 

[and again, my personal copies of his books and those of Bhagwati and Desai, were all in my professorial office at IIT Kharagpur when I was attacked by a corrupt gang there in 2003; and IIT have been under a High Court order to return them but have not done so],

 

I wonder in fact if it might be fairly said that Sen has been on his own subjective journey over the decades around the world seeking to reinvent economics and political economy from scratch, and inventing his own terminology like “capabilities”, “functionings” and yes “entitlements” etc. to help him do so, while trying to assiduously avoid mention of canonical works of  modern world economics like Marshall’s Principles, Hicks’s Value and Capital, Debreu’s Theory of Value, or Arrow and Hahn’s General Competitive Analysis, all defining the central neoclassical tradition of the modern theory of value.  

 

But no contemporary science, economics and political economy included, is open to be re-invented from scratch, and what Amartya Sen has ended up doing instead is seeming to be continually trying to reinvent the wheel, possibly without having had the self-knowledge to realise this.  Wittgenstein once made a paradoxical statement that one may know another’s mind better than one knows one’s own…  

Here is a current example.  Professor Sen says

 

“First, unlike the process of development in Japan, China, Korea and other countries, which pursued what Jean Drèze and I have called “Asian economic development” in our book, India has not had enough focus on public spending on school education and basic healthcare, which these other countries have had….”

 

Does Sen really believes believe he and Drèze  have now in 2013 discovered and christened an economic phenomenon named “Asian economic development”?  Everyone, from Japan and Bangkok and Manila, to Hawaii and Stanford to the World Bank’s East Asia department, including  especially my Hawaii colleague Ted James, and many many others including especially Gerald M Meier at Stanford, were was publishing about all that every month — in the mid 1980s!  In fact, our project on India and Pakistan arose in the 1980s from precisely such a Hawaiian wave!  Everyone knows all that from back then or even earlier when the Japanese were talking about the “flying geese” model.  (And, incidentally,  Communist China did not at the time belong in the list.)  Where was Amartya Sen in the mid 1980s when all that was happening?  Jean Drèze was still a student perhaps. Is Professor Sen seeking to reinvent the wheel again with “Asian Economic Development” being claimed to be invented in 2013 by him and Drèze now? Oh please!  That just won’t fly either!

 

A second example may be taken from the year before Professor Sen was awarded the Bank of Sweden Prize when he gave a lecture on “human capital” theory which was published as a survey titled “Human Capital and Human Capability” in World Development 1997 Vol. 25, No. 12, 

 

Can you see any reference in this 1997 survey to TW Schultz’s 1960 American Economic Association Presidential Address or to Schultz’s classic 1964 book Transforming Traditional Agriculture or to his 1979 Bank of Sweden Prize address?  I could not.   If one did not know better, one might have thought from Professor Sen’s 1997 survey that there was nothing done worth talking about on the subject of “human capital” from the time of Adam Smith and David Hume until Amartya Sen finally came to the subject himself. 

 

Thirdly,  one is told by Sen’s admirer and collaborator, Professor James Foster of George Washington University, that what  Sen means by his notion of

 

“effective freedom”

 

is that this is something

 

“enhanced when a marginally nourished family now has the capability to be sufficiently nourished due to public action”…

 

Are Amartya and his acolytes claiming he has invented or reinvented welfare economics ab initio?   That before Amartya Sen, we did not know the importance of the able-bodied members of a community assisting those who are not able-bodied? 

 

Where have they been? Amartya needed merely to have read Marshall’s Principles evenslightly to find Marshall himself, the master of Maynard Keynes and all of Cambridge and modern world economics, declaring without any equivocation at the very start 

 

“….the study of the causes of poverty is the study of the causes of the degradation of a large part of mankind…”

 

But Marshall was interested in study, serious study, of poverty and its causes and amelioration, which is not something as easy or trivial as pontification on modern television.  My 1984 article “Considerations on Utility, Benevolence and Taxation” which also became a chapter of my 1989 Philosophy of Economics surveyed some of Marshall’s opinion.

 

“From each according to his ability, to each according to his need” was a utopian slogan around 1875 from Karl Marx, which generations of passionate undergraduates have found impressive. Amartya Sen deserves to tell us squarely about his engagement with Marx or Marxist thought from his earliest days until now.  His commitment in recent decades to democracy and the open and free society is clear;  but has he also at the same time all along been committed to a kind of half-baked communist utopia as represented by Marx’s 1875 slogan? 

 

“To each according to his need” sounds to be the underlying premise that is seeing practical manifestation in the Sonia Congress’s imposition of a so-called “right to food”; “from each according to his ability” is its flip side in the so-called “rural employment guarantee”.  Leave aside the limitless resource-allocation and incentive and public finance problems created by such naive ideas being made into government policy, there is a grave and fundamental issue that Amartya and other leftists have been too blinkered to see:

 

Do they suppose the organised business classes have been weakly cooperative and will just allow such massive redistribution to occur without getting the Indian political system to pay them off as well?   And how do the organised business classes get paid off?  By their getting to take the land of the inhabitants of rural India.   And land in an environment of a debauching of money and other paper assets is as good as gold.

 

So the peasants will lose their land to the government’s businessman friends on the one hand while purportedly getting “guaranteed” employment and food from the government’s bureaucrats on the other!  A landless, asset-less slave population, free to join the industrial proletariat! Is that what Amartya wants to see in India?  It may become what results within a few decades from his and his acolytes’ words and deeds. 

 

Rajiv Gandhi once gave me his private phone numbers at 10 Jan Path.  I used them back in January 1991 during the Gulf war.  But I cannot do so now as Rajiv is gone.  Amartya can.  Let him phone Sonia and prevail upon her to put the brakes on the wild food and employment schemes he and his friends have persuaded her about until he reads and reflects upon what I said in January 2007 in “On Land-Grabbing” and in my July 2007 open letter to him, reproduced below:

 

“At a business meet on 12 January 2005, Dr Manmohan Singh showered fulsome praise on Buddhadeb Bhattacharjee as “dynamic”, “the Nation’s Best Chief Minister”, whose “wit and wisdom”, “qualities of head and heart”, “courage of conviction and passionate commitment to the cause of the working people of India” he admired, saying “with Buddhadeb Babu at the helm of affairs it appears Bengal is once again forging ahead… If today there is a meeting of minds between Delhi and Kolkata, it is because the ideas that I and Buddhadebji represent have captured the minds of the people of India. This is the idea of growth with equity and social justice, the idea that economic liberalization and modernization have to be mindful of the needs of the poor and the marginalized.”…. Dr Singh returned to the “needs of the poor and the marginalized” at another business meet on 8 January 2007 promising to “unveil a new Rehabilitation Policy in three months to increase the pace of industrialisation” which would be “more progressive, humane and conducive to the long-term welfare of all stakeholders”, while his businessman host pointedly stated about Singur “land for industry must be made available to move the Indian manufacturing sector ahead”. The “meeting of minds between Delhi and Kolkata” seems to be that agriculture allegedly has become a relatively backward slow-growing sector deserving to yield in the purported larger national interest to industry and services: what the PM means by “long-term welfare of all stakeholders” is the same as the new CPI-M party-line that the sons of farmers should not remain farmers (but become automobile technicians or IT workers or restaurant waiters instead).   It is a political viewpoint coinciding with interests of organised capital and industrial labour in India today, as represented by business lobbies like CII, FICCI and Assocham on one hand, and unions like CITU and INTUC on the other. Business Standard succinctly (and ominously) advocated this point of view in its lead editorial of 9 January as follows: “it has to be recognised that the world over capitalism has progressed only with the landed becoming landless and getting absorbed in the industrial/service sector labour force ~ indeed it is obvious that if people don’t get off the land, their incomes will rise only slowly”.  Land is the first and ultimate means of production, and the attack of the powerful on land-holdings or land-rights of the unorganised or powerless has been a worldwide phenomenon ~ across both capitalism and communism.  In the mid-19th Century, white North America decimated hundreds of thousands of natives in the most gargantuan land-grab of history. Defeated, Chief Red Cloud of the Sioux spoke in 1868 for the Apache, Navajo, Comanche, Cheyenne, Iroquois and hundreds of other tribes: “They made us many promises, more than I can remember, but they never kept any except one: they promised to take our land, and they took it.”  Half a century later, while the collapse of grain prices contributed to the Great Depression and pauperisation of thousands of small farmers in capitalist America in the same lands that had been taken from the native tribes, Stalin’s Russia embarked on the most infamous state-sponsored land-grab in modern history: “The mass collectivisation of Soviet agriculture (was) probably the most warlike operation ever conducted by a state against its own citizens…. Hundreds of thousands and finally millions of peasants… were deported… desperate revolts in the villages were bloodily suppressed by the army and police, and the country sank into chaos, starvation and misery… The object of destroying the peasants’ independence…was to create a population of slaves, the benefit of whose labour would accrue to industry. The immediate effect was to reduce Soviet agriculture to a state of decline from which it has not yet recovered… The destruction of the Soviet peasantry, who formed three quarters of the population, was not only an economic but a moral disaster for the entire country. Tens of millions were driven into semi-servitude, and millions more were employed as executants…” (Kolakowski, Main Currents of Marxism).   Why did Stalin destroy the peasants? Lenin’s wishful “alliance between the proletariat and the peasantry” in reality could lead only to the peasants being pauperised into proletarians. At least five million peasants died and (Stalin told Churchill at Yalta) another ten million in the resultant famine of 1932-1933. “Certainly it involved a struggle ~ but chiefly one between urban Communists and villagers… it enabled the regime to obtain much of the capital desired for industrialization from the defeated village… it was the decisive step in the building of Soviet totalitarianism, for it imposed on the majority of the people a subjection which only force could maintain” (Treadgold, 20th Century Russia).  Mr Bhattacharjee’s CPI-M is fond of extolling Chinese communism, and the current New Delhi establishment have made Beijing and Shanghai holiday destinations of choice. Dr Singh’s Government has been eager to create hundreds of “Special Economic Zones” run by organised capital and unionised labour, and economically privileged by the State. In fact, the Singur and Nandigram experiences of police sealing off villages where protests occur are modelled on creation of “Special Economic Zones” in China in recent years.  For example, Chinese police on 6 December 2005 cracked down on farmers and fishermen in the seaside village of Dongzhou, 125 miles North East of Hong Kong. Thousands of Dongzhou villagers clashed with troops and armed police protesting confiscation of their lands and corruption among officials. The police immediately sealed off the village and arrested protesters. China’s Public Security Ministry admitted the number of riots over land had risen sharply, reaching more than seventy thousand across China in 2004; police usually suppressed peasant riots without resort to firing but in Dongzhou, police firing killed 20 protesters. Such is the reality of the “emergence” of China, a totalitarian police-state since the Communist takeover in 1949, from its period of mad tyranny until Mao’s death in 1976, followed by its ideological confusion ever since.  Modern India’s political economy today remains in the tight grip of metropolitan “Big Business” and “Big Labour”. Ordinary anonymous individual citizens ~ whether housewife, consumer, student, peasant, non-union worker or small businessman ~ have no real voice or representation in Indian politics. We have no normal conservative, liberal or social democratic party in this country, as found in West European democracies where the era of land-grabbing has long-ceased. If our polity had been normal, it would have known that economic development does not require business or government to pauperise the peasantry but instead to define and secure individual property rights and the Rule of Law, and establish proper conditions for the market economy. The Congress and BJP in Delhi and CPI-M in Kolkata would not have been able to distract attention from their macroeconomic misdeeds over the decades ~ indicated, for example, by increasing interest-expenditure paid annually on Government debt as a fraction of tax revenues… This macroeconomic rot originated with the Indira Gandhi-PN Haksar capriciousness and mismanagement, which coincided with the start of Dr Singh’s career as India’s best known economic bureaucrat….”

 

“Professor Amartya Sen, Harvard University,  Dear Professor Sen,  Everyone will be delighted that someone of your worldwide stature has joined the debate on Singur and Nandigram; The Telegraph deserves congratulations for having made it possible on July 23.  I was sorry to find though that you may have missed the wood for the trees and also some of the trees themselves. Perhaps you have relied on Government statements for the facts. But the Government party in West Bengal represents official Indian communism and has been in power for 30 years at a stretch. It may be unwise to take at face-value what they say about their own deeds on this very grave issue! Power corrupts and absolute power corrupts absolutely, and there are many candid communists who privately recognise this dismal truth about themselves. To say this is not to be praising those whom you call the “Opposition” ~ after all, Bengal’s politics has seen emasculation of the Congress as an opposition because the Congress and communists are allies in Delhi. It is the Government party that must reform itself from within sua sponte for the good of everyone in the State.  The comparisons and mentions of history you have made seem to me surprising. Bengal’s economy now or in the past has little or nothing similar to the economy of Northern England or the whole of England or Britain itself, and certainly Indian agriculture has little to do with agriculture in the new lands of Australia or North America. British economic history was marked by rapid technological innovations in manufacturing and rapid development of social and political institutions in context of being a major naval, maritime and mercantile power for centuries. Britain’s geography and history hardly ever permitted it to be an agricultural country of any importance whereas Bengal, to the contrary, has been among the most agriculturally fertile and hence densely populated regions of the world for millennia.  Om Prakash’s brilliant pioneering book The Dutch East India Company and the Economy of Bengal 1630-1720 (Princeton 1985) records all this clearly. He reports the French traveller François Bernier saying in the 1660s “Bengal abounds with every necessary of life”, and a century before him the Italian traveller Verthema saying Bengal “abounds more in grain, flesh of every kind, in great quantity of sugar, also of ginger, and of great abundance of cotton, than any country in the world”. Om Prakash says “The premier industry in the region was the textile industry comprising manufacture from cotton, silk and mixed yarns”. Bengal’s major exports were foodstuffs, textiles, raw silk, opium, sugar and saltpetre; imports notably included metals (as Montesquieu had said would always be the case).  Bengal did, as you say, have industries at the time the Europeans came but you have failed to mention these were mostly “agro-based” and, if anything, a clear indicator of our agricultural fecundity and comparative advantage. If “deindustrialization” occurred in 19th Century India, that had nothing to do with the “deindustrialization” in West Bengal from the 1960s onwards due to the influence of official communism.  You remind us Fa Hiaen left from Tamralipta which is modern day Tamluk, though he went not to China but to Ceylon. You suggest that because he did so Tamluk effectively “was greater Calcutta”. I cannot see how this can be said of the 5th Century AD when no notion of Calcutta existed. Besides, modern Tamluk at 22º18’N, 87º56’E is more than 50 miles inland from the ancient port due to land-making that has occurred at the mouth of the Hooghly. I am afraid the relevance of the mention of Fa Hiaen to today’s Singur and Nandigram has thus escaped me.  You say “In countries like Australia, the US or Canada where agriculture has prospered, only a very tiny population is involved in agriculture. Most people move out to industry. Industry has to be convenient, has to be absorbing”. Last January, a national daily published a similar view: “For India to become a developed country, the area under agriculture has to shrink, urban and industrial land development has to take place, and about 100 million workers have to move out from agriculture into industry and services. This is the only way forward for bringing prosperity to the rural population”.   Rice is indeed grown in Arkansas or Texas as it is in Bengal but there is a world of difference between the technological and geographical situation here and that in the vast, sparsely populated New World areas with mechanized farming! Like shoe-making or a hundred other crafts, agriculture can be capital-intensive or labour-intensive ~ ours is relatively labour-intensive, theirs is relatively capital-intensive. Our economy is relatively labour-abundant and capital-scarce; their economies are relatively labour-scarce and capital-abundant (and also land-abundant). Indeed, if anything, the apt comparison is with China, and you doubtless know of the horror stories and civil war conditions erupting across China in recent years as the Communist Party and their businessman friends forcibly take over the land of peasants and agricultural workers, e.g. in Dongzhou. All plans of long-distance social engineering to “move out” 40 per cent of India’s population (at 4 persons per “worker”) from the rural hinterlands must also face FA Hayek’s fundamental question in The Road to Serfdom: “Who plans whom, who directs whom, who assigns to other people their station in life, and who is to have his due allotted by others?”  Your late Harvard colleague, Robert Nozick, opened his brilliant 1974 book Anarchy, State and Utopia saying: “Individuals have rights, and there are things no person or group may do to them (without violating their rights)”. You have rightly deplored the violence seen at Singur and Nandigram. But you will agree it is a gross error to equate violence perpetrated by the Government which is supposed to be protecting all people regardless of political affiliation, and the self-defence of poor unorganised peasants seeking to protect their meagre lands and livelihoods from state-sponsored pogroms. Kitchen utensils, pitchforks or rural implements and flintlock guns can hardly match the organised firepower controlled by a modern Government.   Fortunately, India is not China and the press, media and civil institutions are not totally in the hands of the ruling party alone. In China, no amount of hue and cry among the peasants could save them from the power of organised big business and the Communist Party. In India, a handful of brave women have managed to single-handedly organise mass movements of protest which the press and media have then broadcast that has shocked the whole nation to its senses.  You rightly say the land pricing process has been faulty. Irrelevant historical prices have been averaged when the sum of discounted expected future values in an inflationary economy should have been used. Matters are even worse. “The fear of famine can itself cause famine. The people of Bengal are afraid of a famine. It was repeatedly charged that the famine (of 1943) was man-made.” That is what T. W. Schultz said in 1946 in the India Famine Emergency Committee led by Pearl Buck, concerned that the 1943 Bengal famine should not be repeated following dislocations after World War II. Of course since that time our agriculture has undergone a Green Revolution, at least in wheat if not in rice, and a White Revolution in milk and many other agricultural products. But catastrophic collapses in agricultural incentives may still occur as functioning farmland comes to be taken by government and industry from India’s peasantry using force, fraud or even means nominally sanctioned by law. If new famines come to be provoked because farmers’ incentives collapse, let future historians know where responsibility lay.  West Bengal’s real economic problems have to do with its dismal macroeconomic and fiscal position which is what Government economists should be addressing candidly. As for land, the Government’s first task remains improving grossly inadequate systems of land-description and definition, as well as the implementation and recording of property rights.  With my most respectful personal regards, I remain, Yours ever, Suby”

 

How does India, as a state, treat its weakest and most vulnerable citizens? Not very well at all.  It is often only because families and society have not collapsed completely, as they have elsewhere, that the weakest survive.  Can we solve in the 21st Century, in a practical manner appropriate to our times, the problem Buddha raised before he became the Buddha some twenty six centuries ago?  Says Eliot,

 

“The legend represents him as carefully secluded from all disquieting sights and as learning the existence of old age, sickness and death only by chance encounters which left a profound impression”

 

It is to this list we add “the poor” too, especially if we want to include a slightly later and equally great reformer some miles west of the Terai in the Levant.  I said some years ago “As we as infants and children need to be helped to find courage to face the start of life, we when very elderly can need to be helped to find courage to face life’s end”.   Old age carries with it the fear of death, fear of the end of life and what that means, which raises the meaning of life itself, or at least of the individual life, because we can hardly grasp what the end of life is if we haven’t what it is supposed to be the end of in the first place. What the very elderly need, as do the dying and terminally ill, is to find courage within themselves to comprehend all this with as much equanimity as possible. Companionship and camaraderie — or perhaps let us call it love — go towards that courage coming to be found; something similar goes for the sick, whether a sick child missing school or the elderly infirm, courage that they are not alone and that they can and will recover and not have to face death quite yet, that life will indeed resume.  

 

As for the poor, I said in 2009 about the bizarre Indian scheme of “interrogating, measuring, photographing and fingerprinting them against their will” that “the poor have their privacy and their dignity. They are going to refuse to waste their valuable time at the margins of survival volunteering for such gimmickry.”

 

“What New Delhi’s governing class fails to see is that the masses of India’s poor are not themselves a mass waiting for New Delhi’s handouts: they are individuals, free, rational, thinking individuals who know their own lives and resources and capacities and opportunities, and how to go about living their lives best. What they need is security, absence of state or other tyranny, roads, fresh water, electricity, functioning schools for their children, market opportunities for work, etc, not handouts from a monarch or aristocrats or businessmen….” Or, to put it differently in Kant’s terms, the poor need to be treated as ends in themselves, and not as the means towards the ends of others…

 

 

Part II India’s Right Road Forward Now: Some Thoughtful Analysis for Grown Ups

 

5.   Transcending a Left-Right/Congress-BJP Divide in Indian Politics

6.   Budgeting Military & Foreign Policy

 

7.    Solving the Kashmir Problem & Relations with Pakistan

 

8.  Dealing with Communist China

 

9.   Towards Coherence in Public Accounting, Public Finance & Public Decision-Making

 

10.   India’s Money: Towards Currency Integrity at Home & Abroad

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Twenty Years Ago Today: March 23 1991 (An Excerpt)

From Facebook May 21, 2011

Rajiv Gandhi, assassinated this day 20 years ago, May 21 1991, an irreparable loss for India.

“On March 23, our group was to meet Rajiv at noon. There was to be an event in the inner lawns of Rajiv’s residence in the morning, where he would launch Krishna Rao’s book on India’s security. Krishna Rao had expressly asked me to come but I had to wait outside the building patiently, not knowing if it was a mistake or if it was deliberate. This was politics after all, and I had ruffled feathers during my short time there. While I waited, Rajiv was speaking to a farmers’ rally being held at grounds adjoining his residence, and there appeared to be thousands of country folk who had gathered to hear him. When it was over, Rajiv, smiling nervously and looking extremely uncomfortable, was hoisted atop people’s shoulders and carried back to the residence by his audience. As I watched, my spine ran cold at the thought that any killer could have assassinated him with ease in that boisterous crowd, right there in the middle of Delhi outside his own residence. It was as if plans for his security had been drawn up without any strategic thinking underlying them.

Krishna Rao arrived and graciously took me inside for his book launch. The event was attended by the Congress’s top brass, including Narasimha Rao whom I met for the first time, as well as foreign military attaches and officers of the Indian armed forces. The attaché of one great power went about shaking hands and handing out his business card to everyone. I stood aside and watched. Delhi felt to me that day like a sieve, as if little could be done without knowledge of the embassies. One side wanted to sell arms, aircraft or ships, while the other wanted trips abroad or jobs or green cards or whatever for their children. And I thought Islamabad would be worse — could India and Pakistan make peace in this fetid ether?

Proceedings began when Rajiv arrived. This elite audience mobbed him just as the farmers had mobbed him earlier. He saw me and beamed a smile in recognition, and I smiled back but made no attempt to draw near him in the crush. He gave a short very apt speech on the role the United Nations might have in the new post-Gulf War world. Then he launched the book, and left for an investiture at Rashtrapati Bhavan.

We waited for our meeting with him, which finally happened in the afternoon. Rajiv was plainly at the point of exhaustion and still hard-pressed for time. He seemed pleased to see me and apologized for not talking in the morning. Regarding the March 22 draft, he said he had not read it but that he would be doing so. He said he expected the central focus of the manifesto to be on economic reform, and an economic point of view in foreign policy, and in addition an emphasis on justice and the law courts. I remembered our September 18 conversation and had tried to put in justice and the courts into our draft but had been over-ruled by others. I now said the social returns of investment in the judiciary were high but was drowned out again. Rajiv was clearly agitated that day by the BJP and blurted out he did not really feel he understood what on earth they were on about. He said about his own family, “We’re not religious or anything like that, we don’t pray every day.” I felt again what I had felt before, that here was a tragic hero of India who had not really wished to be more than a happy family man until he reluctantly was made into a national leader against his will. We were with him for an hour or so. As we were leaving, he said quickly at the end of the meeting he wished to see me on my own and would be arranging a meeting. One of our group was staying back to ask him a favour. Just before we left, I managed to say to him what I felt was imperative: “The Iraq situation isn’t as it seems, it’s a lot deeper than it’s been made out to be.” He looked at me with a serious look and said “Yes I know, I know.” It was decided Pitroda would be in touch with each of us in the next 24 hours. During this time Narasimha Rao’s manifesto committee would read the draft and any questions they had would be sent to us. We were supposed to be on call for 24 hours. The call never came. Given the near total lack of system and organization I had seen over the months, I was not surprised. Krishna Rao and I waited another 48 hours, and then each of us left Delhi. Before going I dropped by to see Krishnamurty, and we talked at length. He talked especially about the lack of the idea of teamwork in India. Krishnamurty said he had read everything I had written for the group and learned a lot. I said that managing the economic reform would be a critical job and the difference between success and failure was thin.

I got the afternoon train to Calcutta and before long left for America to bring my son home for his summer holidays with me. In Singapore, the news suddenly said Rajiv Gandhi had been killed. All India wept. What killed him was not merely a singular act of criminal terrorism, but the system of humbug, incompetence and sycophancy that surrounds politics in India and elsewhere. I was numbed by rage and sorrow, and did not return to Delhi. Eleven years later, on 25 May 2002, press reports said “P. V. Narasimha Rao and Manmohan Singh lost their place in Congress history as architects of economic reforms as the Congress High command sponsored an amendment to a resolution that had laid credit at the duo’s door. The motion was moved by…. Digvijay Singh asserting that the reforms were a brainchild of the late Rajiv Gandhi and that the Rao-Singh combine had simply nudged the process forward.” Rajiv’s years in Government, like those of Indira Gandhi, were in fact marked by profligacy and the resource cost of poor macroeconomic policy since bank-nationalisation may be as high as Rs. 125 trillion measured in 1994 rupees. Certainly though it was Rajiv Gandhi as Leader of the Opposition in his last months who was the principal architect of the economic reform that came to begin after his passing….”

An Excerpt from

Rajiv Gandhi and the Origins of India’s 1991 Economic Reform\

Twenty Years Ago in New Delhi March 18-23 1991: Excerpt from “Rajiv Gandhi & the Origins of India’s 1991 Economic Reform”

Twenty Years Ago in New Delhi March 18-23 1991: Excerpt from https://independentindian.com/thoughts-words-deeds-my-work-1973-2010/rajiv-gandhi-and-the-origins-of-indias-1991-economic-reform/

“I returned to Delhi on Monday, March 18, 1991 as new elections had been announced.  Rasgotra said I should be in touch with Krishna Rao, and the next day March 19 Krishna Rao met me for several hours. I told him what I thought were the roots and results of the Gulf war. He in turn generously told me what had happened while I had been away. He said the group had met Rajiv in December with the proposal that Rajiv better organize his time by having an “office manager” of larger political stature than George. The name of a UP Congressman of integrity had been put forward, but nothing had come of it. Rajiv had been advised to keep Chandrashekhar in power through the autumn of 1991, as Chandrashekhar was doing Rajiv’s work for him of sidelining V. P. Singh. The idea was to cooperate with Chandrashekhar until he could be pushed up to the Presidency when that fell vacant. Rajiv had been advised not to work in a Chandrashekhar cabinet, though in my opinion, had we been like the Scandinavians, it was not impossible for a former prime minister to enter another cabinet on the right terms in the national interest of providing stable government, which was imperative at the time. Things seem to have slipped out of control when Chandrashekhar resigned. At that point, Rajiv called the group together and instructed them to write a draft of the manifesto for the impending elections. I had advised readiness back in September but the lack of organization had prevented much tangible progress at the time. Our group was to now report to a political manifesto-committee of three senior party leaders who would report to Rajiv. They were Narasimha Rao, Pranab Mukherjee and Madhavsingh Solanki. Krishna Rao liased with Narasimha Rao, Krishnamurty with Mukherjee, Pitroda with Solanki. While Rajiv would obviously lead a new Congress Government, Mukherjee was the presumptive Finance Minister, while Narasimha Rao and Solanki would have major portfolios though Narasimha Rao was expected to retire before too long.

Krishna Rao said I should be in touch with Krishnamurty who was preparing the economic chapters of the draft of the manifesto. Krishnamurty told me he had brought in A. M. Khusro to the group, and there would be a 5 p.m. meeting at Khusro’s office at the Aga Khan Foundation. I arrived early and was delighted to meet Khusro, and he seemed pleased to meet me. Khusro seemed excited by my view that India and Pakistan were spending excessively on defence against each other, which resonated with his own ideas, and he remarked the fiscal disarray in India and Pakistan could start to be set right by mutually agreed cuts in military spending. (Khusro was eventually to accompany Prime Minister Vajpayee to Lahore in 1999).

Krishnamurty had prepared a draft dated March 18 of several pages of the economic aspects of the manifesto. After our discussions, Krishnamurty was hospitable enough to open the draft to improvement. That evening, the 19th, I worked through the night and the next morning to get by noon copies of a revised version with all the members of the group. At 4 p.m. on the 20th there was a meeting at Andhra Bhavan of the whole group except Pitroda, which went on until the night. The next day the 21st , Krishnamurty, Khusro and I met again at Andhra Bhavan for a few hours on the economic aspects of the draft. Then in mid-afternoon I went to Rasgotra’s home to work with him and Krishna Rao. They wanted me to produce the economic draft which they could then integrate as they wished into the material they were dictating to a typist. I offered instead to absorb their material directly on to my laptop computer where the economic draft was. Rasgotra was reluctant to let go control, and eventually I gave in and said I would get them a hard copy of the economic draft, which they then planned to re-draft via a stenographer on a typewriter. At this, Rasgotra gave in and agreed to my solution. So the work began and the three of us continued until late.

That night Krishna Rao dropped me at Tughlak Road where I used to stay with friends. In the car I told him, as he was a military man with heavy security cover for himself as a former Governor of J&K, that it seemed to me Rajiv’s security was being unprofessionally handled, that he was vulnerable to a professional assassin. Krishna Rao asked me if I had seen anything specific by way of vulnerability. With John Kennedy and De Gaulle in mind, I said I feared Rajiv was open to a long-distance sniper, especially when he was on his campaign trips around the country.

This was one of several attempts I made since October 1990 to convey my clear impression to whomever I thought might have an effect that Rajiv seemed to me extremely vulnerable. Rajiv had been on sadhbhavana journeys, back and forth into and out of Delhi. I had heard he was fed up with his security apparatus, and I was not surprised given it seemed at the time rather bureaucratized. It would not have been appropriate for me to tell him directly that he seemed to me to be vulnerable, since I was a newcomer and a complete amateur about security issues, and besides if he agreed he might seem to himself to be cowardly or have to get even closer to his security apparatus. Instead I pressed the subject relentlessly with whomever I could. I suggested specifically two things: (a) that the system in place at Rajiv’s residence and on his itineraries be tested, preferably by some internationally recognized specialists in counter-terrorism; (b) that Rajiv be encouraged to announce a shadow-cabinet. The first would increase the cost of terrorism, the second would reduce the potential political benefit expected by terrorists out to kill him. On the former, it was pleaded that security was a matter being run by the V. P. Singh and then Chandrashekhar Governments at the time. On the latter, it was said that appointing a shadow cabinet might give the appointees the wrong idea, and lead to a challenge to Rajiv’s leadership. This seemed to me wrong, as there was nothing to fear from healthy internal contests for power so long as they were conducted in a structured democratic framework. I pressed to know how public Rajiv’s itinerary was when he travelled. I was told it was known to everyone and that was the only way it could be since Rajiv wanted to be close to the people waiting to see him and had been criticized for being too aloof. This seemed to me totally wrong and I suggested that if Rajiv wanted to be seen as meeting the crowds waiting for him then that should be done by planning to make random stops on the road that his entourage would take. This would at least add some confusion to the planning of potential terrorists out to kill him. When I pressed relentlessly, it was said I should probably speak to “Madame”, i.e. to Mrs. Rajiv Gandhi. That seemed to me highly inappropriate, as I could not be said to be known to her and I should not want to unduly concern her in the event it was I who was completely wrong in my assessment of the danger. The response that it was not in Congress’s hands, that it was the responsibility of the V. P. Singh and later the Chandrashekhar Governments, seemed to me completely irrelevant since Congress in its own interests had a grave responsibility to protect Rajiv Gandhi irrespective of what the Government’s security people were doing or not doing. Rajiv was at the apex of the power structure of the party, and a key symbol of secularism and progress for the entire country. Losing him would be quite irreparable to the party and the country. It shocked me that the assumption was not being made that there were almost certainly professional killers actively out to kill Rajiv Gandhi — this loving family man and hapless pilot of India’s ship of state who did not seem to have wished to make enemies among India’s terrorists but whom the fates had conspired to make a target. The most bizarre and frustrating response I got from several respondents was that I should not mention the matter at all as otherwise the threat would become enlarged and the prospect made more likely! This I later realized was a primitive superstitious response of the same sort as wearing amulets and believing in Ptolemaic astrological charts that assume the Sun goes around the Earth — centuries after Kepler and Copernicus. Perhaps the entry of scientific causality and rationality is where we must begin in the reform of India’s governance and economy. What was especially repugnant after Rajiv’s assassination was to hear it said by his enemies that it marked an end to “dynastic” politics in India. This struck me as being devoid of all sense because the unanswerable reason for protecting Rajiv Gandhi was that we in India, if we are to have any pretensions at all to being a civilized and open democratic society, cannot tolerate terrorism and assassination as means of political change. Either we are constitutional democrats willing to fight for the privileges of a liberal social order, or ours is truly a primitive and savage anarchy concealed beneath a veneer of fake Westernization.

The next day, Friday March 22, I worked from dawn to get the penultimate draft to Krishna Rao before noon as planned the night before. Rasgotra arrived shortly, and the three of us worked until evening to finish the job. I left for an hour to print out copies for a meeting of the entire group, where the draft we were going to submit would come to be decided. When I got back I found Rasgotra had launched an extended and quite unexpected attack on what had been written on economic policy. Would someone like Manmohan Singh, Rasgotra wanted to know, agree with all this talk we were putting in about liberalization and industrial efficiency? I replied I did not know what Manmohan Singh’s response would be but I knew he had been in Africa heading something called the South-South Commission for Julius Nyrere of Tanzania. I said what was needed was a clear forceful statement designed to restore India’s credit-worthiness, and the confidence of international markets. I said that the sort of thing we should aim for was to make clear, e.g. to the IMF’s man in Delhi when that person read the manifesto, that the Congress Party at least knew its economics and was planning to make bold new steps in the direction of progress. I had argued the night before with Rasgotra that on foreign policy we should “go bilateral” with good strong ties with individual countries, and drop all the multilateral hogwash. But I did not wish to enter into a fight on foreign policy which he was writing, so long as the economic policy was left the way we said. Krishnamurty, Khusro and Pitroda came to my defence saying the draft we had done greatly improved on the March 18 draft. For a bare half hour or so with all of us present, the draft was agreed upon. Later that night at Andhra Bhavan, I gave Krishna Rao the final copy of the draft manifesto which he was going to give Narasimha Rao the next day, and sent a copy to Krishnamurty who was liaising with Pranab Mukherjee. Pitroda got a copy on a floppy disc the next day for Solanki.

In its constructive aspects, the March 22 1991 draft of the Congress manifesto went as follows with regard to economic policy: “CHAPTER V AGENDA FOR ECONOMIC ACTION 1. Control of Inflation …. The Congress believes the inflation and price-rise of essential commodities… is a grave macroeconomic problem facing the country today. It has hit worst the poorest and weakest sections of our people and those with fixed incomes like pensioners. The Congress will give highest priority to maintaining the prices of essential commodities, increasing their production and supply using all appropriate economic instruments. 2. Macroeconomic Policy Framework To control inflation of the general price-level, the Congress will provide a predictable long-term policy framework. The average Indian household and business will not have their lives and plans disrupted by sudden changes in economic policy. Coherent monetary policy measures will be defined as called for by the Report of Experts of the Reserve Bank of India in 1985. The Long-Term Fiscal Policy introduced by the Congress Government of 1984-1989 will be revived. Medium and long-term export-import policies will be defined. The basis for a strong India must be a strong economy. The Congress believes a high rate of real growth is essential for securing a strong national defence, social justice and equity, and a civilized standard of living for all. As the party of self-reliance, Congress believes resources for growth must be generated from within our own economy. This means all wasteful and unproductive Government spending has to be cut, and resources transferred from areas of low priority to areas of high national priority. Subsidies have to be rationalized and reduced, and productivity of investments already made has to be improved. The widening gap between revenue receipts and revenue expenditure must be corrected through fiscal discipline, and the growing national debt brought under control as a matter of high priority. These policies in a consistent framework will create the environment for the freeing of the rupee in due course, making it a hard currency of the world of which our nation can be proud. Public resources are not unlimited. These have to be allocated to high priority areas like essential public services, poverty-reduction, strategic sectors, and protection of the interests of the weaker sections of society. Government has to leave to the initiative and enterprise of the people what can be best done by themselves. Government can now progressively vacate some areas of activity to the private, cooperative and non-government sectors. Black money in the parallel economy has become the plague of our economic and political system. This endangers the social and moral fabric of our nation. Artificial price controls, excessive licensing, capacity restrictions, outmoded laws on rent control and urban ceiling, and many other outdated rules and regulations have contributed to pushing many honest citizens into dishonest practices. The Congress will tackle the problem of black money at its roots by attacking all outmoded and retrograde controls, and simplifying procedures in all economic spheres. At the same time, the tax-base of the economy must be increased via simplification and rationalization of tax-rates and coverage, user-fees for public goods, and reduction of taxes wherever possible to improve incentives and stimulate growth. 3. Panchayati Raj India’s farmers and khet mazdoors are the backbone of our economy. Economic development is meaningless until their villages provide them a wholesome rural life. The Congress will revitalize Panchayat Raj institutions to decentralize decision-making, so development can truly benefit local people most effectively. 4. Rural Development Basic economic infrastructure like roads, communications, fresh drinking water, and primary health and education for our children must reach all our villages. The Congress believes such a policy will also relieve pressures from migration on our towns and cities…… Through the Green Revolution which the Congress pioneered over 25 years, our farmers have prospered. Now our larger farmers must volunteer to contribute more to the national endeavour, and hence to greater equity and overall economic development. Equity demands land revenue should be mildly graduated so that small farmers holding less than one acre pay less land revenue per acre…. 9. Education and Health The long-run prosperity of our nation depends on the general state of education, health and well-being of our people. Small families give themselves more choice and control over their own lives. Improving female literacy, promoting the welfare of nursing mothers and reducing infant mortality will have a direct bearing on reducing the birth-rate and improving the health and quality of all our people. Primary and secondary education has high social returns and is the best way in the long-run for achievement of real equality. Efforts will be made to reduce the cost of education for the needy through concessional supply of books and other study materials, scholarships and assistance for transportation and residential facilities. The Congress Party pledges to dedicate itself to promoting education, especially in rural areas and especially for girls and the weaker sections of society. The next Congress Government will prepare and launch a 10-year programme for introduction of free and compulsory primary education for all children of school age. It will continue to emphasize vocational bias in education, integrating it closely with employment opportunities…. 11. Industrial Efficiency Our industrial base in the private and public sectors are the core of our economy. What we have achieved until today has been creditable, and we are self-reliant in many areas. Now the time has come for industry to provide more efficiency and better service and product-quality for the Indian consumer. The public sector has helped the Indian economy since Independence and many national goals have been achieved. Now it has become imperative that the management of public sector units is made effective, and their productivity increased. Major steps must be taken for greater accountability and market-orientation. Failure to do this will make our country lose more and more in the international economy. Budgetary support will be given only for public sector units in the core and infrastructure sectors. Emphasis will be on improving performance and productivity of existing investments, not on creating added organizations or over manning. Units not in the core sector will be privatised gradually. Even in core sectors like Telecommunications, Power, Steel and Coal, incremental needs can be taken care of by the private sector. The Government-Enterprise interface must be properly defined in a White Paper. The Congress believes privatisation must distribute the profits equitably among the people of India. In order to make our public enterprises truly public, it is essential that the shares of many such enterprises are widely held by the members of the general public and workers. Congress pledges to allot a proportion of such shares to the rural Panchayats and Nagarpalikas. This will enhance their asset-base and yield income for their development activities, as well as improve income-distribution. 12. Investment and Trade Indian industry, Government and professional managers are now experienced enough to deal with foreign companies on an equal footing, and channel direct foreign investment in desired directions. Foreign companies often bring access to advanced technological know-how, without which the nation cannot advance. The Congress Government will formulate a pragmatic policy channelling foreign investment into areas important to the national interest. Every effort must be made also to encourage Indians who are outside India to invest in the industry, trade and real estate of their homeland. Because of the protected and inflationary domestic market, Indian industry has become complacent and the incentive for industrial exports has been weakened. When all production is comfortably absorbed at home, Indian industry makes the effort to venture into exports only as a last resort. This must change. A Congress Government will liberalize and deregulate industry to make it competitive and export-oriented, keeping in mind always the interests of the Indian consumer in commercial policy. Export-oriented and predictable commercial policies will be encouraged. Existing procedural constraints and bottlenecks will be removed. Quotas and tariffs will be rationalized. Thrust areas for export-development will be identified and monitored. Efforts will be made to develop a South Asian Community. Trade and economic cooperation among South Asian countries must be increased and simplified.”

This March 22 1991 draft of the Congress’s intended economic policies got circulated and discussed, and from it rumours and opinions appeared that Congress was planning to launch a major economic reform in India. Economic Times said the manifesto “is especially notable for its economic agenda” and Business Standard said “if party manifestos decide election battles” Congress must be “considered home and dry”. A senior IMF official told me three years later the manifesto had indeed seemed a radical and bold move in the direction of progress, which had been exactly our intended effect.

When I met Manmohan Singh at the residence of S. S. Ray in September 1993 in Washington, Ray told him and his senior aides the Congress manifesto had been written on my computer. Manmohan Singh smiled and said that when Arjun Singh and other senior members of the Congress had challenged him in the cabinet, he had pointed to the manifesto. Yet, oddly enough, while the March 22 draft got discussed and circulated, and the Indian economic reform since July 1991 corresponded in fundamental ways to its contents as reproduced above, the actual published Congress manifesto in April 1991 was as tepid and rhetorical as usual, as if some party hack had before publication put in the usual nonsense about e.g. bringing down inflation via price-controls. Certainly the published manifesto was wholly undistinguished in its economic aspects, and had nothing in it to correspond to the bold change of attitude towards economic policy that actually came to be signalled by the 1991 Government.

On March 23, our group was to meet Rajiv at noon. There was to be an event in the inner lawns of Rajiv’s residence in the morning, where he would launch Krishna Rao’s book on India’s security. Krishna Rao had expressly asked me to come but I had to wait outside the building patiently, not knowing if it was a mistake or if it was deliberate. This was politics after all, and I had ruffled feathers during my short time there. While I waited, Rajiv was speaking to a farmers’ rally being held at grounds adjoining his residence, and there appeared to be thousands of country folk who had gathered to hear him. When it was over, Rajiv, smiling nervously and looking extremely uncomfortable, was hoisted atop people’s shoulders and carried back to the residence by his audience. As I watched, my spine ran cold at the thought that any killer could have assassinated him with ease in that boisterous crowd, right there in the middle of Delhi outside his own residence. It was as if plans for his security had been drawn up without any strategic thinking underlying them.

Krishna Rao arrived and graciously took me inside for his book launch. The event was attended by the Congress’s top brass, including Narasimha Rao whom I met for the first time, as well as foreign military attaches and officers of the Indian armed forces. The attaché of one great power went about shaking hands and handing out his business card to everyone. I stood aside and watched. Delhi felt to me that day like a sieve, as if little could be done without knowledge of the embassies. One side wanted to sell arms, aircraft or ships, while the other wanted trips abroad or jobs or green cards or whatever for their children. And I thought Islamabad would be worse — could India and Pakistan make peace in this fetid ether?

Proceedings began when Rajiv arrived. This elite audience mobbed him just as the farmers had mobbed him earlier. He saw me and beamed a smile in recognition, and I smiled back but made no attempt to draw near him in the crush. He gave a short very apt speech on the role the United Nations might have in the new post-Gulf War world. Then he launched the book, and left for an investiture at Rashtrapati Bhavan.

We waited for our meeting with him, which finally happened in the afternoon. Rajiv was plainly at the point of exhaustion and still hard-pressed for time. He seemed pleased to see me and apologized for not talking in the morning. Regarding the March 22 draft, he said he had not read it but that he would be doing so. He said he expected the central focus of the manifesto to be on economic reform, and an economic point of view in foreign policy, and in addition an emphasis on justice and the law courts. I remembered our September 18 conversation and had tried to put in justice and the courts into our draft but had been over-ruled by others. I now said the social returns of investment in the judiciary were high but was drowned out again. Rajiv was clearly agitated that day by the BJP and blurted out he did not really feel he understood what on earth they were on about. He said about his own family, “We’re not religious or anything like that, we don’t pray every day.” I felt again what I had felt before, that here was a tragic hero of India who had not really wished to be more than a happy family man until he reluctantly was made into a national leader against his will. We were with him for an hour or so. As we were leaving, he said quickly at the end of the meeting he wished to see me on my own and would be arranging a meeting. One of our group was staying back to ask him a favour. Just before we left, I managed to say to him what I felt was imperative: “The Iraq situation isn’t as it seems, it’s a lot deeper than it’s been made out to be.” He looked at me with a serious look and said “Yes I know, I know.” It was decided Pitroda would be in touch with each of us in the next 24 hours. During this time Narasimha Rao’s manifesto committee would read the draft and any questions they had would be sent to us. We were supposed to be on call for 24 hours. The call never came. Given the near total lack of system and organization I had seen over the months, I was not surprised. Krishna Rao and I waited another 48 hours, and then each of us left Delhi. Before going I dropped by to see Krishnamurty, and we talked at length. He talked especially about the lack of the idea of teamwork in India. Krishnamurty said he had read everything I had written for the group and learned a lot. I said that managing the economic reform would be a critical job and the difference between success and failure was thin.

I got the afternoon train to Calcutta and before long left for America to bring my son home for his summer holidays with me. In Singapore, the news suddenly said Rajiv Gandhi had been killed. All India wept. What killed him was not merely a singular act of criminal terrorism, but the system of humbug, incompetence and sycophancy that surrounds politics in India and elsewhere. I was numbed by rage and sorrow, and did not return to Delhi. Eleven years later, on 25 May 2002, press reports said “P. V. Narasimha Rao and Manmohan Singh lost their place in Congress history as architects of economic reforms as the Congress High command sponsored an amendment to a resolution that had laid credit at the duo’s door. The motion was moved by…. Digvijay Singh asserting that the reforms were a brainchild of the late Rajiv Gandhi and that the Rao-Singh combine had simply nudged the process forward.” Rajiv’s years in Government, like those of Indira Gandhi, were in fact marked by profligacy and the resource cost of poor macroeconomic policy since bank-nationalisation may be as high as Rs. 125 trillion measured in 1994 rupees. Certainly though it was Rajiv Gandhi as Leader of the Opposition in his last months who was the principal architect of the economic reform that came to begin after his passing.”

 rajiv_gandhi Rajiv Gandhi 20 August 1944- 21 May 1991

Rajiv-Gandhi-and-the-origins-of-indias-1991-economic-reform/
. See also https://independentindian.com/2013/08/23/did-jagdish-bhagwati-originate-pioneer-intellectually-father-indias-1991-economic-reform-did-manmohan-singh-or-did-i-through-my-encounter-with-rajiv-gandhi-just-as-siddhartha-shan/also

https://independentindian.com/2011/05/21/twenty-years-ago-today-march-23-1991-an-excerpt/

Two Different Models for India’s Political Economy: Mine & Dr Manmohan Singh’s (Updated 2013)

see

https://independentindian.com/2013/05/19/cambridge-economics-the-disputation-in-indias-economic-policy/

https://independentindian.com/2013/08/23/did-jagdish-bhagwati-originate-pioneer-intellectually-father-indias-1991-economic-reform-did-manmohan-singh-or-did-i-through-my-encounter-with-rajiv-gandhi-just-as-siddhartha-shan/

https://independentindian.com/2009/06/12/mistaken-macroeconomics-an-open-letter-to-prime-minister-dr-manmohan-singh/

From Facebook

February 24 2011

Subroto Roy does not know if he just heard Manmohan Singh say “inflation will soon come down” — excuse me Dr Singh, but how was it you and all your acolytes uniformly said back in July 2010 that inflation would be down to 6% by Dec 2010? 6%?! 16% more likely! I said. Until he explains his previous error, we may suppose he will repeat it.

January 11 2011:

Subroto Roy can stop the Indian inflation and bring integrity to the currency over time, and Manmohan Singh and his advisers cannot (because they have the wrong economic models/theories/data etc and refuse to change), but then they would have to make me a Minister and I keep getting reminded of what Groucho Marx said about clubs that would have him.

Subroto Roy does not think Dr Manmohan Singh or his acolytes and advisers, or his Finance Minister and his acolytes and advisers, understand Indian inflation. If you do not understand something, you are not likely to change it.

March 6 2010:

Subroto Roy  says the central difference between the Subroto Roy Model for India as described in 1990-1991 to Rajiv Gandhi in his last months, and the Manmohan Singh Model for India that has developed since Rajiv’s assassination, is that by my model, India’s money and public finances would have acquired integrity enough for the Indian Rupee to have become a hard currency of the world economy by now, allowing all one billion Indians access to foreign exchange and precious metals freely, whereas by the model of Dr Singh and his countless supporters, India’s money and public finance remain subject to government misuse and abuse, and access to foreign exchange remains available principally to politicians, bureaucrats, big business and its influential lobbyists, the military, as well as perhaps ten or twenty million nomenclatura in the metropolitan cities.

April 8 2010:

Subroto Roy notes a different way of stating his cardinal difference with the economics of Dr Manmohan Singh’s Govt: in their economics, foreign exchange is “made available” by the GoI for “business and personal uses”. That is different from my economics of aiming for all one billion Indians to have a money that has some integrity, i.e., a rupee that becomes a hard currency of the world economy. (Ditto incidentally with the PRC.)

 

Updates:

From Facebook:

Subroto Roy  reads in *Newsweek* today  (Aug 19) Manmohan Singh “engineered the transition from stagnant socialism to a spectacular takeoff”.  This contradicts my experience with Rajiv Gandhi at 10 Janpath in 1990-91. Dr Singh had not returned to India from his years with Julius Nyerere in his final assignment before retiring from the bureaucracy when Rajiv and I first met on 18 September 1990.

“After (Rajiv Gandhi’s) assassination, the comprador business press credited Narasimha Rao and Manmohan Singh with having originated the 1991 economic reform.  In May 2002, however, the Congress Party itself passed a resolution proposed by Digvijay Singh explicitly stating Rajiv and not either of them was to be so credited… There is no evidence Dr Singh or his acolytes were committed to any economic liberalism prior to 1991 and scant evidence they have originated liberal economic ideas for India afterwards. Precisely because they represented the decrepit old intellectual order of statist ”Ma-Bap Sarkari” policy-making, they were not asked in the mid-1980s to be part of a “perestroika-for-India” project done at a foreign university ~ the results of which were received…by Rajiv Gandhi in hand at 10 Janpath on 18 September 1990 and specifically sparked the change in the direction of his economic thinking…”

Subroto Roy notes that current Indian public policy discussion has thus far failed to realise that the rise in money prices of real goods and services is the same as the fall in the real value of money.

Subroto Roy  is interested to hear Mr Jaitley say in Parliament today the credibility of Government economists is at stake. Of course it is. There has been far too much greed and mendacity all around, besides sheer ignorance. (When I taught for a year or so at the Delhi School of Economics as a 22 year old Visiting Assistant Professor in 1977-78, I was told Mr Jaitley was in the law school and a student leader of note. I though was more interested in teaching the usefulness of Roy Radner’s “information structures” in a course on “advanced economic theory”.)

 

 

 

 

July 31 2010

Subroto Roy reads in today’s pink business newspaper the GoI’s debt level at Rs 38 trillion & three large states (WB, MH, UP) is at Rs 6 trillion, add another 18 for all other large states together, another 5 for all small states & 3 for errors and omissions, making my One Minute Estimate of India’s Public Debt Stock Rs 70 trillion (70 lakh crores). Interest payments at, say, 9%, keep the banking system afloat, extracting oxygen from the public finances like a cyanide capsule.

July 28 2010

Subroto Roy observes Parliament to be discussing Indian inflation but expects a solution will not be found until the problem has been comprehended.

July 27 2010:

Subroto Roy continues to weep at New Delhi’s continual debauching of the rupee.

July 25 2010:

Subroto Roy  has no idea why Dr Manmohan Singh has himself (along with all his acolytes and flatterers in the Government and media and big business), gone about predicting Indian inflation will fall to 6% by December. 16% may be a more likely figure given a public debt at Rs 40 trillion perhaps plus money supply growth above 20%! (Of course, the higher the figure the Government admits, the more it has to pay in dearness allowance to those poor unionized unfortunates known as Government employees, so perhaps the official misunderestimation (sic) of Indian inflation is a strategy of public finance!)

July 12 2010:

Subroto Roy is amused to read Dr Manmohan Singh’s Chief Acolyte say in today’s pink business newspaper how important accounting is in project-appraisal — does the sinner repent after almost single-handedly helping to ruin project-appraisal  & government accounting & macroeconomic planning over decades?  I  rather doubt it.   For myself, I am amused to see chastity now being suddenly preached from within you-know-where.

July 4 2010:

Subroto Roy does not think the Rs 90 billion (mostly in foreign exchange) spent by the Manmohan Singh Government on New Delhi’s “Indira Gandhi International Airport Terminal 3” is conducive to the welfare of the common man (“aam admi”) who travels, if at all, mostly within India and by rail.

Subroto Roy hears Dr Manmohan Singh say yesterday “Global economic recession did not have much impact on us as it had on other countries”. Of course it didn’t. I had said India was hardly affected but for a collapse of exports & some fall in foreign investment. Why did he & his acolytes then waste vast public resources claiming they were rescuing India using a purported Keynesian fiscal “stimulus” (aka corporate/lobbyist pork)?

May 26 2010:

Subroto Roy  would like to know how & when Dr Manmohan Singh will assess he has finished the task/assignment he thinks has been assigned to him & finally retire from his post-retirement career: when his Chief Acolyte declares on TV that 10% real GDP growth has been reached? (Excuse me, but is that per capita? And about those inequalities….?)

“I’m on my way out”: Siddhartha Shankar Ray (1920-2010)

I  am grieved to hear of the death of Siddhartha Shankar Ray last night.

I was introduced to him by an uncle who had been his college-buddy, and he took up a grave personal matter of mine in the Supreme Court of India in 1990 with great kindness, charging me not a penny, being impressed by a little explicit “civil disobedience” I had had to show at the time towards Judge Evelyn Lance.

He also told me he and his wife had been in London on May 29 1984 and had seen *The Times*’s leader that day about my critique of Indian economic policy. He invited me to his Delhi home where I told him about the perestroika-for-India project I had led at the University of Hawaii since 1986, at which he, of his own accord, declared

“You must meet Rajiv Gandhi.  I will arrange a meeting”.

That led to my meeting with Rajiv Gandhi, then Congress President & Leader of the Opposition, on September 18 1990, which contributed to the origins of India’s 1991 economic reform as has been told elsewhere. https://independentindian.com/thoughts-words-deeds-my-work-1973-2010/rajiv-gandhi-and-the-origins-of-indias-1991-economic-reform/

Rajiv’s assistant George told me Rajiv had said he had not heard more fulsome praise.

In Bengal, he took me as a guest to visit the Legislative Assembly in session when he was Leader of the Opposition; it was the legislature of which my great grandfather, Surendranath Roy, had been a founder, being the first Deputy President and acting President too; Surendranath had been friends with his maternal grandfather, CR Das, leader of the Congress Party before MK Gandhi, and he said to me in the car heading to the legislature about that relationship in Bengal’s politics some seven decades earlier “They were friends”.

He introduced me to all the main leaders of the Bengal Congress at the time (except Mamata Banerjee who could not come) and I was tasked by him to write the manifesto for the State elections that year, which I did (in English, translated into Bangla by Professor Manjula Bose); the Communists won handily again but one of their leaders (Sailen Dasgupta) declared there had never been a State Congress manifesto of the sort before, being as it was an Orwell-like critique of Bengal’s Stalinism.

In a later conversation, I said to him I wished he be appointed envoy to Britain, he instead came to be appointed envoy to the USA.

In Washington in September 1993, he said “You must meet Manmohan Singh”, and invited me to a luncheon at the Ambassador’s Residence where, to Manmohan Singh and all his aides, he declared pointing at me

“The Congress manifesto (of 1991) was written on his (laptop) computer”.

In later years I kept him informed of developments and gave him my publications.   We last met in July last year where I gave him a copy, much to his delight, of *Margaret Thatcher’s Revolution: How it Happened and What it Meant*.

I said to him Bengal’s public finances were in abysmal condition, calling for emergency measures financially, and that Mamata Banerjee seemed to me to be someone who knew how to and would dislodge the Communists from their entrenched misgovernance of decades but not quite aware that dislodging a bad government politically was not the same thing as knowing how to govern properly oneself.

He,  again of his own accord, said immediately,

“I will call her and her main people to a meeting here so you can meet them and tell them that directly”.

It never transpired.

He and I were supposed to meet a few months ago but could not due to his poor health; on the phone in our last conversation I mentioned to him my plans of creating a Public Policy Institute — an idea he immediately and fully endorsed as being essential though adding

“I can’t be part of it,  I’m on my way out”.

“I’m on my way out”.   🙂

That was Siddhartha Shankar Ray — always intelligent, always good-humoured, always public-spirited, always a great Indian.

I shall miss a good friend, indeed my only friend among politicians other than the late Rajiv Gandhi himself.

 

Well done! The Sonia-Manmohan Congress takes a *third* Rajivist step!

From Facebook October 15  2010

Subroto Roy thinks the Sonia-Manmohan Govt throwing auditors with their rule-books ex post facto at the Games’ organisers is a good if miniscule first step (though it is, in my estimation, the third Rajivist step in total, see infra…). May we please have the same done asap to military contracts (especially for Russian fighter jets, used aircraft carriers etc), Boeing & Airbus contracts, railway contracts, power sector contracts including nuclear business contracts, IIT and IIM building contracts, in fact *all* government sector building contracts, in fact *all* government sector contracts……

 

From Facebook March 28 2010

Subroto Roy is pleased that according to this morning’s news reports of a “national convention” on “Law, Justice & the Common Man”, the Sonia-Manmohan Congress took a small second step yesterday on the same road that Rajiv Gandhi and I had chalked out in 1990-1991.  Better late than never!

Question for the Sonia-Manmohan Govt: is a little polo in Washington expected to benefit India’s “aam admi”?

From Facebook:

Subroto Roy must ask Dr Manmohan Singh’s Government how it sees India’s “aam admi” coming to benefit by the United States Polo Team welcoming India in 2010 in the world championship polo matches on the DC National Mall, as has been very kindly reported by Mr and Mrs Tareq Salahi following the “Sensational Night honoring India”.

Do diplomatic parties help the common man?

From Facebook

Subroto Roy is afraid he does not think the interests of the common man and woman of India come to be served in the slightest by a fancy dinner-party whether given by the Queen of  England at Buckingham Palace for the President of India or by the President of the United States at the White House for the Prime Minister of India….(…though some businessmen and bureaucrats become happy…)

Is Dr Manmohan Singh the “aam admi” that the Congress Party means?

Dr Manmohan Singh has in a televised meeting with children said about himself:

“I am an aam admi“.

I am afraid this caused me to say at Facebook today:

Subroto Roy  finds disconcerting Prime Minister Manmohan Singh’s claim of being himself  “a common man”.

In “Rajiv Gandhi and the Origins of India’s 1991 Economic Reform”, I wrote about my encounter with Rajiv:

“I said the public sector’s wastefulness had drained scarce resources that should have gone instead to provide public goods. Since the public sector was owned by the public, it could be privatised by giving away its shares to the public, preferably to panchayats of the poorest villages. The shares would become tradable, drawing out black money, and inducing a historic redistribution of wealth while at the same time achieving greater efficiency by transferring the public sector to private hands. Rajiv seemed to like that idea too, and said he tried to follow a maxim of Indira Gandhi’s that every policy should be seen in terms of how it affected the common man. I wryly said the common man often spent away his money on alcohol, to which he said at once it might be better to think of the common woman instead. (This remark of Rajiv’s may have influenced the “aam admi” slogan of the 2004 election, as all Congress Lok Sabha MPs of the previous Parliament came to receive a previous version of the present narrative.)”

I am afraid I do not think Dr Singh was whom Rajiv or Indira had in mind in speaking of the common man.

Subroto Roy

Kolkata

Finally, a dozen years late, the Sonia-Manmohan Congress takes a small Rajivist step: Yes Prime Minister, our Judiciary is indeed a premier public good (or example of “infrastructure” to use that dreadful bureaucratic term)

I was very harsh and did not beat about the bush in my Sep 23-24 2007 article  in The Statesman “Against Quackery” when I said in its subtitle

“Manmohan and Sonia have violated Rajiv Gandhi’s intended reforms”.

I said inter alia

“WASTE, fraud and abuse are inevitable in the use and allocation of public property and resources in India as elsewhere, but Government is supposed to fight and resist such tendencies. The Sonia-Manmohan Government have done the opposite, aiding and abetting a wasteful anti-economics ~ i.e., an economic quackery. Vajpayee-Advani and other Governments, including Narasimha-Manmohan in 1991-1996, were just as complicit in the perverse policy-making. So have been State Governments of all regional parties like the CPI-M in West Bengal, DMK/ AIADMK in Tamil Nadu, Congress/NCP/ BJP/Sena in Maharashtra, TDP /Congress in Andhra Pradesh, SP/BJP/BSP in Uttar Pradesh etc. Our dismal politics merely has the pot calling the kettle black while national self-delusion and superstition reign in the absence of reason. The general pattern is one of well-informed, moneyed, mostly city-based special interest groups (especially including organised capital and organised labour) dominating government agendas at the cost of ill-informed, diffused anonymous individual citizens ~ peasants, small businessmen, non-unionized workers, old people, housewives, medical students etc….Rajiv Gandhi had a sense of noblesse oblige out of remembrance of his father and maternal grandfather. After his assassination, the comprador business press credited Narasimha Rao and Manmohan Singh with having originated the 1991 economic reform. In May 2002, however, the Congress Party itself passed a resolution proposed by Digvijay Singh explicitly stating Rajiv and not either of them was to be so credited. The resolution was intended to flatter Sonia Gandhi but there was truth in it too. Rajiv, a pilot who knew no political economy, was a quick learner with intelligence to know a good idea when he saw one and enough grace to acknowledge it. …Rajiv was entirely convinced when the suggestion was made to him in September 1990 that an enormous infusion of public resources was needed into the judicial system for promotion and improvement of the Rule of Law in the country, a pre-requisite almost for a new market orientation. Capitalism without the Rule of Law can quickly degenerate into an illiberal hell of cronyism and anarchy which is what has tended to happen since 1991. The resources put since Independence to the proper working of our judiciary from the Supreme Court and High Courts downwards have been abysmal, while the state of prisons, borstals, mental asylums and other institutions of involuntary detention is nothing short of pathetic. Only police forces, like the military, paramilitary and bureaucracies, have bloated in size….Neither Sonia-Manmohan nor the BJP or Communists have thought promotion of the Rule of Law in India to be worth much serious thought ~ certainly less important than attending bogus international conclaves and summits to sign expensive deals for arms, aircraft, reactors etc. Yet Rajiv Gandhi, at a 10 Janpath meeting on 23 March 1991 when he received the liberalisation proposals he had authorized, explicitly avowed the importance of greater resources towards the Judiciary. Dr Singh and his acolytes were not in that loop, indeed they precisely represented the bureaucratic ancien regime intended to be changed, and hence have seemed quite uncomprehending of the roots of the intended reforms ever since 1991.”

Days after the article appeared there were press reports Dr Singh was murmuring about quitting, and then came a fierce speech in Hindi from the Congress President saying “enemies” would receive their dues or whatever – only to be retracted a few days later saying that no more had been meant than a local critique of the BJP in Haryana politics!  (Phew! I said to myself in relief…)

Today I am very happy to learn that Dr Manmohan Singh spoke on Sunday of the importance of the Rule of Law and an effective and efficient judiciary. The new Law Minister in the second Sonia-Manmohan Government has been eagerly saying the same.

All this is constructive and positive, late as it is since Sonia Gandhi and Manmohan Singh both became heavy-duty Congress Party politicians for the first time a dozen years ago.

I was privileged to advise a previous Congress President in his last months from September 1990 as has been told elsewhere. And six years before that I had  said:

“….….The most serious examples of the malfunctioning of civil government in India are probably the failure to take feasible public precautions against the monsoons and the disarray of the judicial system. …The Statesman lamented in July 1980:`The simplest matter takes an inordinate amount of time, remedies seldom being available to those without means or influence. Of the more than 16,000 cases pending in the Supreme Court, about 5,000 were introduced more than five years ago; while nearly 16,000 of the backlog of more than 600,000 cases in our high courts have been hanging fire for over a decade. Allahabad is the worst offender but there are about 75,000 uncleared cases in the Calcutta High Court in addition to well over a million in West Bengal’s lower courts.” Such a state of affairs has been caused not only by lazy and corrupt policemen, court clerks and lawyers, but also by the paucity of judges and magistrates. . . . a vast volume of laws provokes endless litigation as much because of poor drafting which leads to disputes over interpretation as because they appear to violate particular rights and privileges…. When governments determinedly do what they need not or should not do, it may be expected that they will fail to do what civil government positively should be doing.” A few months ago was the 25th anniversary of this statement… ! 🙂

Yes Prime Minister, having an effective and efficient judiciary is indeed a premier public good and one that has failed to be provided to India’s people from Nehru’s time and through Indira’s. I managed to persuade Rajiv about it completely. Might I next be so bold as to draw attention as well to the paragraphs of the 2007 article that followed?

“Similarly, Rajiv comprehended when it was said to him that the primary fiscal problem faced by India is the vast and uncontrolled public debt, interest payments on which suck dry all public budgets leaving no room for provision of public goods.  Government accounts: Government has been routinely “rolling over” its domestic debt in the asset-portfolios of the nationalised banks while displaying and highlighting only its new additional borrowing in a year as the “Fiscal Deficit”. More than two dozen States have been doing the same and their liabilities ultimately accrue to the Union too. The stock of public debt in India is Rs 30 trillion (Rs 30 lakh crore) at least, and portends a hyperinflation in the future. There has been no serious recognition of this since it is political and bureaucratic actions that have been causing the problem. Proper recognition would entail systematically cleaning up the budgets and accounts of every single governmental entity in the country: the Union, every State, every district and municipality, every publicly funded entity or organisation, and at the same time improving public decision-making capacity so that once budgets and accounts recover from grave sickness over decades, functioning institutions exist for their proper future management. All this would also stop corruption in its tracks, and release resources for valuable public goods and services like the Judiciary, School Education and Basic Health. Institutions for improved political and administrative decision-making are needed throughout the country if public preferences with respect to raising and allocating common resources are to be elicited and then translated into actual delivery of public goods and services. Our dysfunctional legislatures will have to do at least a little of what they are supposed to. When public budgets and accounts are healthy and we have functioning public goods and services, macroeconomic conditions would have been created for the paper-rupee to once more become a money as good as gold ~ a convertible world currency for all of India’s people, not merely the metropolitan special interest groups that have been controlling our governments and their agendas.”

Subroto Roy

Kolkata


Schoolboys exchanging fisticuffs in a school playground or elderly men battling over power and policy? Why did Manmohan Singh and LK Advani apologize to one another? Is Indian politics essentially collusive, not competitive, aiming only to preserve and promote the post-1947 Dilli Raj at the expense of the whole of India? We seem to have no Churchillian repartee (except perhaps from Bihar occasionally)

Yesterday the PM is reported to have been asked by someone travelling on his aeroplane from Moscow “whether he had forgiven Advani for calling him a ‘weak Prime Minister’”.

The question was absurd, almost ridiculous, typical of our docile ingratiating rather juvenile English-language press and media, as if any issue of forgiveness arises at all about what one politician says during an election campaign about another politician’s performance in office.

Dr Manmohan Singh’s answer was surprising too: “I was compelled to reply to what Advani said…On May 16 when (Advani) telephoned me, he told me that he was hurt by some of my statements. He said he was hurt and regretted his statements… I apologised to him if I have hurt him. I am looking forward to a close relationship with the Leader of the Opposition.”

So LK Advani appears to have apologised to Manmohan Singh and Manmohan Singh to LK Advani for what they said about each other during the recent general election campaign! What is going on? Were they schoolboys exchanging fisticuffs in a school playground or elderly men battling over power and policy in modern Indian politics?

What would we have done if there was a Churchill in Indian politics today – hurling sarcastic insults at domestic opponents and foreign leaders while guiding a nation on its right course during turbulent times?

Churchill once famously said his parents had not shown him “The Boneless Wonder” in PT Barnum’s circus because it was too horrible a sight but now he had finally seen such a “Boneless Wonder” in his opponent on the Treasury Benches, namely, Ramsay MacDonald. Of the same opponent he said later “He has the gift of compressing the largest number of words into the smallest amount of thought”.

When accused of being drunk by a woman MP he replied “And you are very ugly, but tomorrow I’ll be sober”. Today’s politically correct world would scream at far less. Field Marshall Montgomery told Churchill, “I neither drink nor smoke and am 100% fit,” to which Churchill replied, “I drink and smoke and I am 200% fit”. That too would be politically incorrect today.

Churchill described Prime Minister Clement Attlee as “a modest man with much to be modest about”; also about Attlee: “If any grub is fed on Royal Jelly it turns into a Queen Bee”. Yet Attlee had enough dignity and self-knowledge and self-confidence to brush it all off and instead respect and praise him. In the 1954 volume Winston Spencer Churchill Servant of Crown and Commonwealth Attlee added his own tribute to his great opponent: “I recall…the period when he was at odds with his own party and took a seat on the Bench below the Gangway on the Government side. Here he was well placed to fire on both parties. I remember describing him as a heavily armed tank cruising in No Man’s Land. Very impressive were the speeches he delivered as the international horizon grew darker. He became very unpopular with the predominant group in his own party, but he never minded fighting a lone battle.”

Stanley Baldwin, who as PM first appointed Churchill as Chancellor of the Exchequer, once said “There comes Winston with his hundred horsepower mind”. Yet Churchill was to later say harshly “I wish Stanley Baldwin no ill, but it would have been much better had he never lived.”

Of Lenin, Churchill said, he was “transported in a sealed truck like a plague bacillus from Switzerland into Russia”. Of Molotov: “I have never seen a human being who more perfectly represented the modern concept of a robot.” Of Hitler, “If [he] invaded hell I would at least make a favourable reference to the devil in the House of Commons”. Of De Gaulle, “He was a man without a country yet he acted as if he was head of state”.” Of John Foster Dulles, “[He] is the only bull who carries his china shop with him”. Of Stafford Cripps, British Ambassador to the USSR, “…a lunatic in a country of lunatics”; and also “There but for the Grace of God, goes God”.

Decades later, that great neo-Churchillian Margaret Thatcher was on the receiving end of a vast amount of sarcasm. “President Mitterrand once famously remarked that Thatcher had ‘the eyes of Caligula and the lips of Marilyn Monroe’. Rather less flatteringly, Dennis Healey described her as Attila the Hen. She probably took both descriptions as compliments.” (Malcolm Rifkind in Margaret Thatcher’s Revolution: How it Happened and What it Meant edited by Subroto Roy and John Clarke, 2005).

Politics is, and should be, grown up stuff because it deals with human lives and national destinies, and really, if you can’t take the heat please do not enter the kitchen. The slight Churchillian sarcasm that does arise within modern Indian politics comes very occasionally from Bihar but nowhere else, e.g. about the inevitability of aloo in samosas and of bhaloos in the jungle but no longer of Laloo being in the seat of power. In general, everyone seems frightfully sombre and self-important though may be in fact short of self-knowledge and hence self-confidence.

What had Manmohan Singh said about LK Advani that he felt he had to apologise for? That Advani had no substantial political achievement to his credit and did not deserve to be India’s PM. Manmohan was not alone in making the charge – Sonia Gandhi, Rahul Gandhi and numerous other spokesmen and representatives of their party said the same. Has Manmohan’s apology to Advani been one on behalf of the whole Congress Party itself?

Was Advani’s apology to Manmohan one on behalf of the whole BJP too?

What had the BJP charged Manmohan with that Advani felt he had to apologise for?  Being a “weak PM”.

Hmmm. Frankly, thinking about it, it is hard to count who has not been weak as a PM in India’s modern history.

Certainly Vallabhai Patel as a kind of co-PM was decisive and far from weak back in 1947-48.

Lal Bahadur Shastri was not weak when he told Pakistan that a Pakistani attack on Kashmir would result in an Indian attack on Pakistan.

Indira Gandhi was not weak when she resisted the Yahya Khan-Tikka Khan tyranny against Bangladesh.

Had he not been assassinated, Rajiv Gandhi in a second term would have been decisive and not weak in facing up to and tackling the powerful lobbies and special interest groups that have crippled our domestic economic policy for decades.

But the number of such examples may be counted by hand.  Perhaps VP Singh might count, riding in an open jeep to Amritsar, as might AB Vajpayee’s Pokhran II and travelling on a bus to Lahore. In general, the BJP’s charge that Manmohan was “weak” may have constructively led to serious discussion in the country about the whole nature of the Prime Ministership in modern India, which means raising a whole gamut of issues about Indian governance – about India being the softest of “soft states”, with the softest of “soft government budget constraints” (i.e., endless deficit finance and paper money creation) etc.

Instead, what we have had thus far is apologies being exchanged for no real political reason between the leaderships of the Government and the Opposition. If two or three sellers come to implicitly carve up a market between themselves they are said by economic theory to be colluding rather than being in competition. Indian politics may be revealing such implicit collusive behaviour. The goal of this political oligopoly would seem to be to preserve and promote the status quo of the post-1947 Dilli Raj with its special hereditary nomenclatura, at the expense of anonymous diffused teeming India.

Subroto Roy

Postscript July 15 2009: Churchill’s mature opinion of Baldwin was one of the fullest praise at the 20 May 1950 unveiling of a memorial to him.  See his In the Balance, edited by Randolph S Churchill, 1951, p. 281

Mistaken Macroeconomics: An Open Letter to Prime Minister Dr Manmohan Singh 12 June 2009

 

 

12 June 2009

The Hon’ble Dr Manmohan Singh, MP, Rajya Sabha

Prime Minister of India

 

 

Respected Pradhan Mantriji:

 

In September 1993 at the residence of the Indian Ambassador to Washington, I had the privilege of being introduced to you by our Ambassador the Hon’ble Siddhartha Shankar Ray, Bar-at-Law. Ambassador Ray was kind enough to introduce me saying the 1991 “Congress manifesto had been written on (my laptop) computer” – a reference to my work as adviser on economic and other policy to the late Rajiv Gandhi in his last months. I presented you a book Foundations of India’s Political Economy: Towards an Agenda for the 1990s created and edited by myself and WE James at the University of Hawaii since 1986 — the unpublished manuscript of that book had reached Rajivji by my hand when he and I first met on September 18 1990. Tragically, my pleadings in subsequent months to those around him that he seemed to my layman’s eyes vulnerable to the assassin went unheeded.

 

 

When you and I met in 1993, we had both forgotten another meeting twenty years earlier in Paris. My father had been a long-time friend of the late Brahma Kaul, ICS, and the late MG Kaul, ICS, who knew you in your early days in the Government of India. In the late summer of 1973, you had acceded to my father’s request to advise me about economics before I embarked for the London School of Economics as a freshman undergraduate. You visited our then-home in Paris for about 40 minutes despite your busy schedule as part of an Indian delegation to the Aid-India Consortium. We ended up having a tense debate about the merits (as you saw them) and demerits (as I saw them) of the Soviet influence on Indian economic “planning”. You had not expected such controversy from a lad of 18 but you were kindly disposed and offered when departing to write a letter of introduction to Amartya Sen, then teaching at the LSE, which you later sent me and which I was delighted to carry to Professor Sen.

 

 

I may add my father, back in 1973 in Paris, had predicted to me that you would become Prime Minister of India one day, and he, now in his 90s, is joined by myself in sending our warm congratulations at the start of your second term in that high office.

 

 

The controversy though that you and I had entered that Paris day in 1973 about scientific economics as applied to India, must be renewed afresh!

 

 

This is because of your categorical statement on June 9 2009 to the new 15th Lok Sabha:

 

 

“I am convinced, since our savings rate is as high as 35%, given the collective will, if all of us work together, we can achieve a growth-rate of 8%-9%, even if the world economy does not do well.” (Statement of Dr Manmohan Singh to the Lok Sabha, June 9 2009)

 

 

I am afraid there may be multiple reasons why such a statement is gravely and incorrigibly in error within scientific economics. From your high office as Prime Minister in a second term, faced perhaps with no significant opposition from either within or without your party, it is possible the effects of such an error may spell macroeconomic catastrophe for India.

 

 

As it happens, the British Labour Party politician Dr Meghnad Desai made an analogous statement to yours about India when he claimed in 2006 that China

 

 

“now has 10.4% growth on a 44 % savings rate… ”

 

Indeed the idea that China and India have had extremely high economic growth-rates based on purportedly astronomical savings rates has become a commonplace in recent years, repeated endlessly in international and domestic policy circles though perhaps without adequate basis.

 

 

 

1.   Germany & Japan

 

What, at the outset, is supposed to be measured when we speak of “growth”? Indian businessmen and their media friends seem to think “growth” refers to something like nominal earnings before tax for the organised corporate sector, or any unspecified number that can be sold to visiting foreigners to induce them to park their funds in India: “You will get a 10% return if you invest in India” to which the visitor says “Oh that must mean India has 10% growth going on”. Of such nonsense are expensive international conferences in Davos and Delhi often made.

 

You will doubtless agree the economist at least must define economic growth properly and with care — what is referred to must be annual growth of per capita inflation-adjusted Gross Domestic Product. (Per capita National Income or Net National Product would be even better if available).

 

West Germany and Japan had the highest annual per capita real GDP growth-rates in the world economy starting from devastated post-World War II initial conditions. What were their measured rates?

 

West Germany: 6.6% in 1950-1960, falling to 3.5% by 1960-1970 falling to 2.4% by 1970-1978.

 

Japan: 6.8 % in 1952-1960 rising to 9.4% in 1960-1970 falling to 3.8 % in 1970-1978.

 

Thus in recent decadesonly Japan measured a spike in the 1960s of more than 9% annual growth of real per capita GDP. Now India and China are said to be achieving 8%-10 % and more year after year routinely!

 

Perhaps we are observing an incredible phenomenon of world economic history. Or perhaps it is just something incredible, something false and misleading, like a mirage in the desert.

 

You may agree that processes of measurement of real income in India both at federal and provincial levels, still remain well short of the world standards described by the UN’s System of National Accounts 1993. The actuality of our real GDP growth may be better than what is being measured or it may be worse than what is being measured – from the point of view of public decision-making we at present simply do not know which it is, and to overly rely on such numbers in national decisions may be unwise. In any event, India’s population is growing at near 2% so even if your Government’s measured number of 8% or 9% is taken at face-value, we have to subtract 2% population growth to get per capita figures.

 

 

 

 

 

2.  Growth of the aam admi’s consumption-basket

 

 

The late Professor Milton Friedman had been an invited adviser in 1955 to the Government of India during the Second Five Year Plan’s formulation. The Government of India suppressed what he had to say and I had to publish it 34 years later in May 1989 during the 1986-1992 perestroika-for-India project that I led at the University of Hawaii in the United States. His November 1955 Memorandum to the Government of India is a chapter in the book Foundations of India’s Political Economy: Towards an Agenda for the 1990s that I and WE James created.

 

At the 1989 project-conference itself, Professor Friedman made the following astute observation about all GNP, GDP etc growth-numbers that speaks for itself:

 

 

“I don’t believe the term GNP ought to be used unless it is supplemented by a different statistic: the rate of growth of the average consumption basket consumed by the ordinary individual in the country. I think GNP rates of growth can give very misleading information. For example, you have rapid rates of growth of GNP in the Soviet Union with a declining standard of life for the people. Because GNP includes monuments and includes also other things. I’m not saying that that is the case with India; I’m just saying I would like to see the two figures together.”

 

 

You may perhaps agree upon reflection that not only may our national income growth measurements be less robust than we want, it may be better to be measuring something else instead, or as well, as a measure of the economic welfare of India’s people, namely, “the rate of growth of the average consumption basket consumed by the ordinary individual in the country”, i.e., the rate of growth of the average consumption basket consumed by the aam admi.

 

 

It would be excellent indeed if you were to instruct your Government’s economists and other spokesmen to do so this as it may be something more reliable as an indicator of our economic realities than all the waffle generated by crude aggregate growth-rates.

 

 

 

 

3.  Logic of your model

 

Thirdly, the logic needs to be spelled out of the economic model that underlies such statements as yours or Meghnad Desai’s that seek to operationally relate savings rates to aggregate growth rates in India or China. This seems not to have been done publicly in living memory by the Planning Commission or other Government economists. I have had to refer, therefore, to pages 251-253 of my own Cambridge doctoral thesis under Professor Frank Hahn thirty years ago, titled “On liberty and economic growth: preface to a philosophy for India”, where the logic of such models as yours was spelled out briefly as follows:

 

Let

 

 

Kt be capital stock

 

Yt be national output

 

It be the level of real investment

 

St be the level of real savings

 

By definition

 

It = K t+1 – Kt

 

By assumption

 

Kt = k Yt 0 < k < 1

 

St = sYt 0 < s <1

 

In equilibrium ex ante investment equals ex ante savings

 

It = St

 

Hence in equilibrium

 

sYt = K t+1 – Kt

 

Or

 

s/k = g

 

where g is defined to be the rate of growth (Y t+1-Yt)/Yt  .

 

The left hand side then defines the “warranted rate of growth” which must maintain the famous “knife-edge” with the right hand side “natural rate of growth”.

 

Your June 9 2009 Lok Sabha statement that a 35% rate of savings in India may lead to an 8%-9% rate of economic growth in India, or Meghnad Desai’s statement that a 44% rate of savings in China led to a 10.4% growth there, can only be made meaningful in the context of a logical economic model like the one I have given above.

 

[In the open-economy version of the model, let Mt be imports, Et be exports, Ft net capital inflows.

 

Assume

 

Mt = aIt + bYt 0 < a, b < 1

 

Et = E for all t

 

Balance of payments is

 

Bt = Mt – Et – Ft

 

In equilibrium It = St + Bt

 

Or

 

Ft = (s+b) Yt – (1-a) It – E is a kind of “warranted” level of net capital inflow.]

 

 

 

You may perhaps agree upon reflection that building the entire macroeconomic policy of the Government of India merely upon a piece of economic logic as simplistic as the

 

s/k = g

 

equation above, may spell an unacceptable risk to the future economic well-being of our vast population. An alternative procedural direction for macroeconomic policy, with more obviously positive and profound consequences, may have been that which I sought to persuade Rajiv Gandhi about with some success in 1990-1991. Namely, to systematically seek to improve towards normalcy the budgets, financial positions and decision-making capacities of the Union and all state and local governments as well as all public institutions, organisations, entities, and projects in general, with the aim of making our domestic money a genuine hard currency of the world again after seven decades, so that any ordinary resident of India may hold and trade precious metals and foreign exchange at his/her local bank just like all those glamorous privileged NRIs have been permitted to do. Such an alternative path has been described in “The Indian Revolution”, “Against Quackery”, “The Dream Team: A Critique”, “India’s Macroeconomics”, “Indian Inflation”, etc.

 

 

 

4. Gross exaggeration of real savings rate by misreading deposit multiplication

 

 

Specifically, I am afraid you may have been misled into thinking India’s real savings rate, s, is as high as 35% just as Meghnad Desai may have misled himself into thinking China’s real savings rate is as high as 44%.

 

 

Neither of you may have wanted to make such a claim if you had referred to the fact that over the last 25 years, the average savings rate across all OECD countries has been less than 10%. Economic theory always finds claims of discontinuous behaviour to be questionable. If the average OECD citizen has been trying to save 10% of disposable income at best, it appears prima facie odd that India’s PM claims a savings rate as high as 35% for India or a British politician has claimed a savings rate as high as 44% for China. Something may be wrong in the measurement of the allegedly astronomical savings rates of India and China. The late Professor Nicholas Kaldor himself, after all, suggested it was rich people who saved and poor people who did not for the simple reason the former had something left over to save which the latter did not!

 

 

And indeed something is wrong in the measurements. What has happened, I believe, is that there has been a misreading of the vast nominal expansion of bank deposits via deposit-multiplication in the Indian banking system, an expansion that has been caused by explosive deficit finance over the last four or five decades. That vast nominal expansion of bank-deposits has been misread as indicating growth of real savings behaviour instead. I have written and spoken about and shown this quite extensively in the last half dozen years since I first discovered it in the case of India. E.g., in a lecture titled “Can India become an economic superpower or will there be a monetary meltdown?” at Cardiff University’s Institute of Applied Macroeconomics and at London’s Institute of Economic Affairs in April 2005, as well as in May 2005 at a monetary economics seminar invited at the RBI by Dr Narendra Jadav. The same may be true of China though I have looked at it much less.

 

 

How I described this phenomenon in a 2007 article in The Statesman is this:

 

 

“Savings is indeed normally measured by adding financial and non-financial savings. Financial savings include bank-deposits. But India is not a normal country in this. Nor is China. Both have seen massive exponential growth of bank-deposits in the last few decades. Does this mean Indians and Chinese are saving phenomenally high fractions of their incomes by assiduously putting money away into their shaky nationalized banks? Sadly, it does not. What has happened is government deficit-financing has grown explosively in both countries over decades. In a “fractional reserve” banking system (i.e. a system where your bank does not keep the money you deposited there but lends out almost all of it immediately), government expenditure causes bank-lending, and bank-lending causes bank-deposits to expand. Yes there has been massive expansion of bank-deposits in India but it is a nominal paper phenomenon and does not signify superhuman savings behaviour. Indians keep their assets mostly in metals, land, property, cattle, etc., and as cash, not as bank deposits.”

 

 

An article of mine in 2008 in Business Standard put it like this:

 

 

“India has followed in peacetime over six decades what the US and Britain followed during war. Our vast growth of bank deposits in recent decades has been mostly a paper (or nominal) phenomenon caused by unlimited deficit finance in a fractional reserve banking system. Policy makers have widely misinterpreted it as indicating a real phenomenon of incredibly high savings behaviour. In an inflationary environment, people save their wealth less as paper deposits than as real assets like land, cattle, buildings, machinery, food stocks, jewellery etc.”

 

 

If you asked me “What then is India’s real savings rate?” I have little answer to give except to say I know what it is not – it is not what the Government of India says it is. It is certainly unlikely to be anywhere near the 35% you stated it to be in your June 9 2009 Lok Sabha statement. If the OECD’s real savings rate has been something like 10% out of disposable income, I might accept India’s is, say, 15% at a maximum when properly measured – far from the 35% being claimed. What I believe may have been mismeasured by you and Meghnad Desai and many others as indicating high real savings is actually the nominal or paper expansion of bank-deposits in a fractional reserve banking system induced by runaway government deficit-spending in both India and China over the last several decades.

 

 

 

 

5. Technological progress and the mainsprings of real economic growth

 

 

So much for the g and s variables in the s/k = g equation in your economic model. But the assumed constant k is a big problem too!

 

During the 1989 perestroika-for-India project-conference, Professor Friedman referred to his 1955 experience in India and said this about the assumption of a constant k:

 

“I think there was an enormously important point… That was the almost universal acceptance at that time of the view that there was a sort of technologically fixed capital output ratio. That if you wanted to develop, you just had to figure out how much capital you needed, used as a statistical technological capital output ratio, and by God the next day you could immediately tell what output you were going to achieve. That was a large part of the motivation behind some of the measures that were taken then.”

 

The crucial problem of the sort of growth-model from which your formulation relating savings to growth arises is that, with a constant k, you have necessarily neglected the real source of economic growth, which is technological progress!

 

I said in the 2007 article referred to above:

 

“Economic growth in India as elsewhere arises not because of what politicians and bureaucrats do in capital cities, but because of spontaneous technological progress, improved productivity and learning-by-doing on part of the general population. Technological progress is a very general notion, and applies to any and every production activity or commercial transaction that now can be accomplished more easily or using fewer inputs than before.”

 

In “Growth and Government Delusion” published in The Statesman last year, I described the growth process more fully like this:

 

“The mainsprings of real growth in the wealth of the individual, and so of the nation, are greater practical learning, increases in capital resources and improvements in technology. Deeper skills and improved dexterity cause output produced with fewer inputs than before, i.e. greater productivity. Adam Smith said there is “invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many”. Consider a real life example. A fresh engineering graduate knows dynamometers are needed in testing and performance-certification of diesel engines. He strips open a meter, finds out how it works, asks engine manufacturers what design improvements they want to see, whether they will buy from him if he can make the improvement. He finds out prices and properties of machine tools needed and wages paid currently to skilled labour, calculates expected revenues and costs, and finally tries to persuade a bank of his production plans, promising to repay loans from his returns. Overcoming restrictions of religion or caste, the secular agent is spurred by expectation of future gains to approach various others with offers of contract, and so organize their efforts into one. If all his offers ~ to creditors, labour, suppliers ~ are accepted he is, for the moment, in business. He may not be for long ~ but if he succeeds his actions will have caused an improvement in design of dynamometers and a reduction in the cost of diesel engines, as well as an increase in the economy’s produced means of production (its capital stock) and in the value of contracts made. His creditors are more confident of his ability to repay, his buyers of his product quality, he himself knows more of his workers’ skills, etc. If these people enter a second and then a third and fourth set of contracts, the increase in mutual trust in coming to agreement will quickly decline in relation to the increased output of capital goods. The first source of increasing returns to scale in production, and hence the mainspring of real economic growth, arises from the successful completion of exchange. Transforming inputs into outputs necessarily takes time, and it is for that time the innovator or entrepreneur or “capitalist” or “adventurer” must persuade his creditors to trust him, whether bankers who have lent him capital or workers who have lent him labour. The essence of the enterprise (or “firm”) he tries to get underway consists of no more than the set of contracts he has entered into with the various others, his position being unique because he is the only one to know who all the others happen to be at the same time. In terms introduced by Professor Frank Hahn, the entrepreneur transforms himself from being “anonymous” to being “named” in the eyes of others, while also finding out qualities attaching to the names of those encountered in commerce. Profits earned are partly a measure of the entrepreneur’s success in this simultaneous process of discovery and advertisement. Another potential entrepreneur, fresh from engineering college, may soon pursue the pioneer’s success and start displacing his product in the market ~ eventually chasers become pioneers and then get chased themselves, and a process of dynamic competition would be underway. As it unfolds, anonymous and obscure graduates from engineering colleges become by dint of their efforts and a little luck, named and reputable firms and perhaps founders of industrial families. Multiply this simple story many times, with a few million different entrepreneurs and hundreds of thousands of different goods and services, and we shall be witnessing India’s actual Industrial Revolution, not the fake promise of it from self-seeking politicians and bureaucrats.”

 

 

Technological progress in a myriad of ways and discovery of new resources are important factors contributing to India’s growth today. But while India’s “real” economy does well, the “nominal” paper-money economy controlled by Government does not. Continuous deficit financing for half a century has led to exponential growth of public debt and broad money, and, as noted, the vast growth of nominal bank-deposits has been misinterpreted as indicating unusually high real savings behaviour when it in fact may just signal vast amounts of government debt being held by our nationalised banks. These bank assets may be liquid domestically but are illiquid internationally since our government debt is not held by domestic households as voluntary savings nor has it been a liquid asset held worldwide in foreign portfolios.

 

 

What politicians of all parties, especially your own and the BJP and CPI-M since they are the three largest, have been presiding over is exponential growth of our paper money supply, which has even reached 22% per annum. Parliament and the Government should be taking honest responsibility for this because it may certainly portend double-digit inflation (i.e., decline in the value of paper-money) perhaps as high as 14%-15% per annum, something that is certain to affect the aam admi’s economic welfare adversely.

 

 

 

 

 

 

 

6. Selling Government assets to Big Business is a bad idea in a potentially hyperinflationary economy

 

 

Respected PradhanMantriji, the record would show that I, and really I alone, 25 years ago, may have been the first among Indian economists to advocate  the privatisation of the public sector. (Viz, “Silver Jubilee of Pricing, Planning and Politics: A Study of Economic Distortions in India”.) In spite of this, I have to say clearly now that in present circumstances of a potentially hyperinflationary economy created by your Government and its predecessors, I believe your Government’s present plans to sell Government assets may be an exceptionally unwise and imprudent idea. The reasoning is very simple from within monetary economics.

 

Government every year has produced paper rupees and bank deposits in practically unlimited amounts to pay for its practically unlimited deficit financing, and it has behaved thus over decades. Such has been the nature of the macroeconomic process that all Indian political parties have been part of, whether they are aware of it or not.

 

Indian Big Business has an acute sense of this long-term nominal/paper expansion of India’s economy, and acts towards converting wherever possible its own hoards of paper rupees and rupee-denominated assets into more valuable portfolios for itself of real or durable assets, most conspicuously including hard-currency denominated assets, farm-land and urban real-estate, and, now, the physical assets of the Indian public sector. Such a path of trying to transform local domestic paper assets – produced unlimitedly by Government monetary and fiscal policy and naturally destined to depreciate — into real durable assets, is a privately rational course of action to follow in an inflationary economy. It is not rocket-science to realise the long-term path of rupee-denominated assets is downwards in comparison to the hard-currencies of the world – just compare our money supply growth and inflation rates with those of the rest of the world.

 

The Statesman of November 16 2006 had a lead editorial titled Government’s land-fraud: Cheating peasants in a hyperinflation-prone economy which said:

 

 

“There is something fundamentally dishonourable about the way the Centre, the state of West Bengal and other state governments are treating the issue of expropriating peasants, farm-workers, petty shop-keepers etc of their small plots of land in the interests of promoters, industrialists and other businessmen. Singur may be but one example of a phenomenon being seen all over the country: Hyderabad, Karnataka, Kerala, Haryana, everywhere. So-called “Special Economic Zones” will merely exacerbate the problem many times over. India and its governments do not belong only to business and industrial lobbies, and what is good for private industrialists may or may not be good for India’s people as a whole. Economic development does not necessarily come to be defined by a few factories or high-rise housing complexes being built here or there on land that has been taken over by the Government, paying paper-money compensation to existing stakeholders, and then resold to promoters or industrialists backed by powerful political interest-groups on a promise that a few thousand new jobs will be created. One fundamental problem has to do with inadequate systems of land-description and definition, implementation and recording of property rights. An equally fundamental problem has to do with fair valuation of land owned by peasants etc. in terms of an inconvertible paper-money. Every serious economist knows that “land” is defined as that specific factor of production and real asset whose supply is fixed and does not increase in response to its price. Every serious economist also knows that paper-money is that nominal asset whose price can be made to catastrophically decline by a massive increase in its supply, i.e. by Government printing more of the paper it holds a monopoly to print. For Government to compensate people with paper-money it prints itself by valuing their land on the basis of an average of the price of the last few years, is for Government to cheat them of the fair present-value of the land. That present-value of land must be calculated in the way the present-value of any asset comes to be calculated, namely, by summing the likely discounted cash-flows of future values. And those future values should account for the likelihood of a massive future inflation causing decline in the value of paper-money in view of the fact we in India have a domestic public debt of some Rs. 30 trillion (Rs. 30 lakh crore) and counting, and money supply growth rates averaging 16-17% per annum. In fact, a responsible Government would, given the inconvertible nature of the rupee, have used foreign exchange or gold as the unit of account in calculating future-values of the land. India’s peasants are probably being cheated by their Government of real assets whose value is expected to rise, receiving nominal paper assets in compensation whose value is expected to fall.”

 

Shortly afterwards the Hon’ble MP for Kolkata Dakshin, Km Mamata Banerjee, started her protest fast, riveting the nation’s attention in the winter of 2006-2007. What goes for government buying land on behalf of its businessman friends also goes, mutatis mutandis, for the public sector’s real assets being bought up by the private sector using domestic paper money in a potentially hyperinflationary economy. If your new Government wishes to see real assets of the public sector being sold for paper money, let it seek to value these assets not in inconvertible rupees that Government itself has been producing in unlimited quantities but perhaps in forex or gold-units instead!

 

 

In the 2004-2005 volume Margaret Thatcher’s Revolution: How it Happened and What it Meant, edited by myself and Professor John Clarke, there is a chapter by Professor Patrick Minford on Margaret Thatcher’s fiscal and monetary policy (macroeconomics) that was placed ahead of the chapter by Professor Martin Ricketts on Margaret Thatcher’s privatisation (microeconomics). India’s fiscal and monetary or macroeconomic problems are far worse today than Britain’s were when Margaret Thatcher came to power. We need to get our macroeconomic problems sorted before we attempt the  microeconomic privatisation of public assets.

 

It is wonderful that your young party colleague, the Hon’ble MP from Amethi, Shri Rahul Gandhi, has declined to join the present Government and instead wishes to reflect further on the “common man” and “common woman” about whom I had described his late father talking to me on September 18 1990. Certainly the aam admi is not someone to be found among India’s lobbyists of organised Big Business or organised Big Labour who have tended to control government agendas from the big cities.

 

With my warmest personal regards and respect, I remain,

Cordially yours

Subroto Roy, PhD (Cantab.), BScEcon (London)

 

see also https://independentindian.com/thoughts-words-deeds-my-work-1973-2010/rajiv-gandhi-and-the-origins-of-indias-1991-economic-reform/did-jagdish-bhagwati-originate-pioneer-intellectually-father-indias-1991-economic-reform-did-manmohan-singh-or-did-i-through-my-e/

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Parliament is supposed to control the Government, not be bullied or intimidated by it: Will Rahul Gandhi be able to lead the Backbenches in the 15th Lok Sabha?

Any Lok Sabha MP who neither sits with the Opposition nor is a sworn-in member of the Government is a Backbench MP of the Government party or its coalition.

Shrimati Sonia Gandhi is the most prominent of such Backbench MPs in the 15th Lok Sabha, just as she was of the 14th Lok Sabha, and has chosen to be in a most peculiar position from the point of view of parliamentary law. As the leader of the largest parliamentary party, she could have been not merely a member of the Government but its Prime Minister. She has in fact had a decisive role in determining the composition of the Manmohan Government as well as its policies. She in fact sits on the Frontbenches in the Lok Sabha along with the Manmohan Government. But she is not a member of the Government and is, formally speaking, a Backbench MP who is choosing to sit in the Frontbenches.

(Dr Manmohan Singh himself, not being a member of the Lok Sabha, may, formally speaking, sit or speak from among the Frontbenches of his own Government only by invitation of the Lok Sabha Speaker as a courtesy – such would have been the cardinal reason why Alec Douglas-Home resigned from being Lord Home and instead stood for a House of Commons seat when he was appointed British Prime Minister.)

Sonia Gandhi’s son, Mr Rahul Gandhi, is also a Backbench MP. From all accounts, including that of Dr Singh himself, he could have been a member of Dr Singh’s Government but has specifically chosen not to be. He has appeared to have had some much lesser role than Sonia Gandhi in determining the composition of the Government and its policies but he is not a member of it. He is, formally speaking, a Backbench MP, indeed the most prominent to actually sit in the Backbenches, as he had done in the 14th Lok Sabha, which, it is to be hoped, he does in the 15th Lok Sabha too.

Now Rahul Gandhi, Sonia Gandhi and their 541 other fellow 15th Lok Sabha MPs were declared winners by May 16 2009 having won the Indian people’s vote.

(Incidentally, I predicted the outcome here two hours before polls closed on May 13 – how I did so is simply by having done the necessary work of determining that some 103 million people had voted for Congress in 2004 against some 86 million for the BJP; in my assessment Congress had done more than enough by way of political rhetoric and political reality to maintain if not extend that difference in 2009, i.e., the BJP had not done nearly enough to even begin to get enough of a net drift in its favour. I expect when the data are out it shall be seen that the margin of the raw vote between them has been much enlarged from 2004.)

As I have pointed out here over the last fortnight, there was no legal or logical reason why the  whole 15th Lok Sabha could not have been sworn in latest by May 18 2009.

Instead, Dr Manmohan Singh on May 18 held a purported “Cabinet” meeting of the defunct 14th Lok Sabha – an institution that had been automatically dissolved when Elections had been first announced! The Government then went about forming itself over two weeks despite the 15th Lok Sabha, on whose confidence it depended for its political legitimacy, not having been allowed to meet. Everyone – the Congress Party’s Supreme Court advocates, the Lok Sabha Secretariat, the Election Commission, Rashtrapati Bhavan too –  seems to have gotten it awfully wrong by placing the cart before the horse.

In our system it is Parliament that is sovereign, not the Executive Government. In fact the Executive is accountable to Parliament, specifically the Lok Sabha, and is supposed to be guided by it as well as hold its confidence at all times.

What has happened instead this time is that Government ministers have been busy taking oaths and entering their offices and making policy-decisons days before they have taken their oaths and their seats as Lok Sabha MPs!  The Government has thus started off by diminishing Parliament’s sovereignty and this should not be allowed to happen again.

(Of course why it took place is because of the peculiarity of the victory relative to our experience in recent decades – nobody could remember parliamentary traditions from Nehru’s time in the 1950s.  Even so, someone, e.g. the former Speaker, should have known and insisted upon explaining the relevant aspect of parliamentary law and hence avoided this breach.)

A central question now is whether a Government which has such a large majority, and which is led by someone in and has numerous ministers from the Rajya Sabha, is going to be adequately controlled and feel itself accountable to the Lok Sabha.

Neither of the Lok Sabha’s most prominent Backbenchers, Sonia Gandhi and Rahul Gandhi, have thus far distinguished themselves as Parliamentarians on the floor of the Lok Sabha. In the 14th Lok Sabha, Sonia Gandhi, sitting in the Frontbenches, exercised the  enormous control that she did over the Government not on the floor of the House itself but  from outside it.

It would be best of all if she chose in the 15th Lok Sabha to actually physically sit in the Congress’s Backbenches because that would ensure best that the Government Party’s ministers in the Frontbenches will keep having to seek to be accountable to the  Backbenches!

But this seems unlikely to happen in view of the fact she herself seems to have personally influenced the choice of a Speaker for the 15th Lok Sabha and it may be instead expected that she continues to sit on the Frontbenches with the Government without being a member of it.

That leaves Rahul Gandhi. If he too comes to be persuaded by the sycophants to sit on the Frontbenches with the Government, that will not be a healthy sign.

On the other hand, if he continues to sit on the Backbenches, he may be able to have a salubrious influence on the 15th Lok Sabha fulfilling its responsibility of seeking to seriously control and hold accountable the Executive Government,  and not be bullied or intimidated by it. His paternal grandfather, Feroze Gandhi, after all, may have been India’s most eminent and effective Backbench MP yet.

Subroto Roy, Kolkata

Note to Posterity: 79 Ministers in office but no 15th Lok Sabha until June 1 2009!

The Government of India’s 79 Ministers have taken to their offices like bees to honey yet the 15th Lok Sabha that the people of India elected a fortnight ago is still three days from being convened.

In other words, people have been taking oaths and entering offices as Ministers even before they have taken their oaths or their seats in the 15th Lok Sabha which accords the Government its political legitimacy by its confidence!

Let posterity recall that the 15th Lok Sabha was made to needlessly wait from May 16 2009 until June 1 2009 and despite this the Government formed itself and entered office during that time.  It cannot be something that helps the psychology or morale of  our elected representatives nor be something conducive to the smooth working of the House.

It is all a terrible constitutional muddle  which I doubt the PM or his party or Government, or even the Opposition, will admit to or want to clear up on their own but shall probably have to await a Constitutional Bench of the Supreme Court of India telling them  what  parliamentary law is in due course.

Subroto Roy

Why does India not have a Parliament ten days after the 15th Lok Sabha was elected? Nehru and Rajiv would both have been appalled

There are at least three Supreme Court lawyers, all highly voluble, among the higher echelons of Congress Party politicians; it is surprising that not one of them has been able to get the top Party leadership of Sonia Gandhi and Manmohan Singh to see the apparent breach of normal constitutional law in Parliament not having met more than 10 days after it was elected.

A Government has been formed, Ministers have entered their offices and have been holding press-conferences and taking executive decisions,  wannabe-Ministers continue to be wrangling night-and-day for the plums of office — BUT THERE IS NO PARLIAMENT!

Today is the death-anniversary of Jawaharlal Nehru and last week was the death anniversary of  Rajiv Gandhi.

Nehru, whatever his faults and infirmities, was an outstanding parliamentarian and a believer in the Westminster model in particular.  He was intimately familiar with its  unpoken customs and unwritten laws.   He would have been completely appalled by the situation today where luminaries of the party that goes by the  same name as the one he had led are paying obeisance to his memory 45 years after his death but have failed to see the absurdity in having a Government in office with no new Parliament ten days after a month-long General Election was over!  (Incidentally, had he not left explicit instructions against any hero-worship  taking place of himself too?)

Rajiv knew his grandfather and had acquired a sense of noblesse oblige from him.  He too would have been appalled that the procedural business of government  had been simply  procrastinated over like this.

It surprises me that Dr Manmohan Singh, having been a post-graduate of Cambridge, having earned a doctorate from Oxford, and more recently having been awarded honorary doctorates from both Ancient Universities, should seem so unaware of the elements of the Westminster model of  constitutional jurisprudence which guides our polity too.

It is too late now and the mistakes have been made.   I hope his  new Government will  come to realise at some point and then keep in mind that our Executive receives political legitimacy from Parliament, not vice versa.   An Executive can hardly be legitimately in office until the  Parliament that is supposed to elect it has been sworn in.

As for our putative Opposition in the Parliament-yet-to-meet, it seems to have drawn a blank too, and eo ipso revealed its own constitutional backwardness and lethargy.

Subroto Roy

Parliament’s sovereignty has been diminished by the Executive: A record for future generations to know (2009)

Sad to say, Parliament’s sovereignty has been diminished, indeed usurped, by the new Executive Government.

Here is a brief record for future generations to know.

India’s people completed their voting in the 15th General Elections on Wednesday May 13 2009.

The results of how they had spoken, what was their will, were known and declared by Saturday May 16 2009.

There was no legal or logical reason why the 543 members of the 15th Lok Sabha could not have been sworn in as new MPs by the close-of-business on Monday May 18 at the latest.

On Tuesday May 19 the 15th Lok Sabha could have and should have met to elect itself a pro tem or even a permanent Speaker.

The Speaker would have divided the new House into its Government Party and its Opposition.

There would have been a vote of confidence on the floor of the House, which in the circumstances would have been in favour of the Government Party.

Observing this to have taken place, the Hon’ble President of India as the Head of State would have sent for the leader of the Government Party and invited her to form the new Government.

In this particular case, the leader of the largest political party, namely Sonia Gandhi, would have been accompanied perhaps by the Leader of the Lok Sabha, Pranab Mukherjee, as well as her personal nominee for the position of PM, namely, Manmohan Singh.

Sonia Gandhi would have respectfully declined the invitation of the President to be the new Prime Minister, and she would have also explained that she wanted Manmohan Singh to have the position instead.

The President would have said “Very well, Dr Singh, can you please form the Government?”

He would have said, “Yes Madame President it shall be a privilege and an honour to do so”.

The President would have added, “Thank you, and I notice you are not a member of the Lok Sabha at the moment but I am sure you are taking steps towards becoming one.”

End of visit.

Manmohan Singh would have been sworn in as PM and would have gone about adding Ministers at a measured pace.   Later, he would have resigned his Rajya Sabha seat and sought election to the Lok Sabha on the parliamentary precedent set by Alec Douglas-Home.

What has happened instead?

On May 18 2009, instead of 543 members of the 15th Lok Sabha taking their oaths as required by parliamentary law and custom, Dr Singh held a purported “Cabinet”  meeting of the 14th Lok Sabha — a long-since dead institution!

Some of the persons attending this  meeting as purported “Cabinet ministers” had even lost their seats in the elections decided a few days earlier and so had absolutely zero democratically legitimate status left. All these persons then submitted their purported resignations which Dr Singh carried to the President, stating his Government had resigned. The President then appointed him a caretaker PM and he, along with Sonia Gandhi, then went about “staking claim” to form the next Government — turning up at the President’s again with “letters of support” signed by some 322 persons  who were MP-elects but were yet to become MPs formally by not having been sworn in.

The President appeared satisfied the party Sonia Gandhi and Manmohan Singh belonged to would command a majority in prospect in the Lok Sabha and invited him to be PM.   Some major public wrangling then took place with at least one of his allies about cabinet berths — and that is the situation as of the present moment except that Dr Singh and several others have been sworn in as the Council of Ministers even though the  new 15th Lok Sabha of 543 members has still not convened!  It has been all rather sloppy and hardly uplifting.

Parliament is supposed to be sovereign in India.

Not the Executive Government or the largest political party or its leader.

The sovereignty of Parliament required Sonia Gandhi and Dr Singh to have realised

first, that the 14th Lok Sabha stood automatically dissolved when elections were announced;

secondly, that the 15th Lok Sabha could have and should have been sworn in by Monday May 18;

thirdly, that there should have been a vote of confidence in the Lok Sabha immediately which would have gone in favour of the Government Party;

fourthly, that only then should the Executive Government have been sought to be formed;

and of course fifthly, that if that Executive Government was to be led by someone who happened to be a member of the Rajya Sabha and not the Lok Sabha, parliamenary law and custom required him to follow the Douglas-Home precedent of resigning from the former and seeking election to the latter at the earliest opportunity.

Let future generations know that as of today, May 25, the 543 persons whom the people of India voted to constitute the 15th Lok Sabha still remain in limbo without having been sworn in though we already have an Executive Government appointed!

The sovereignty of Parliament, specifically that of the Lok Sabha, has come to be diminished, indeed usurped, by the Executive.   It is the Executive that receives its political legitimacy from Parliament, not vice versa.  Nehru and his generation knew all this intimately well and would have been appalled at where we in the present have been taking it.

Subroto Roy

Why has the Sonia Congress done something that the Congress under Nehru-Indira-Rajiv would not have done, namely, exaggerate the power of the Rajya Sabha and diminish the power of the Lok Sabha?

We in India did not invent the idea of Parliament, the British did.  Even the British did not invent the idea of a “Premier Ministre”, the French did that, though the British came to develop its meaning most.  Because these are not our own inventions, when something unusual happens in contemporary India to political entities and offices known as “Parliament”, “Prime Minister” etc, contrast and comparison is inevitable with standards and practices that have prevailed around the world in other parliamentary democracies.

Indeed we in India did not even fully invent the idea of our own Parliament though the national struggle led by the original Indian National Congress caused it to come to be invented.  The Lok Sabha is the outcome of a long and distinguished constitutional and political history from the Morley-Minto reforms a century ago to the Montagu-Chelmsford reforms and Government of India Act of 1919 to the Government of India Act of 1935 and the first general elections of British India in 1937 (when Jawaharlal Nehru briefly became PM for the first time) and in due course the 1946 Constituent Assembly.   Out of all this emerged the 1950 Constitution of India, drafted by that brilliant jurist BR Ambedkar as well as other sober intelligent well-educated and dedicated men and women of his time, and thence arose our first Lok Sabha following the 1951 General Elections.

About the Lok Sabha’s duties, I said in my March 30 2006 article “Logic of Democracy” in The Statesman

“What are Lok Sabha Members and State MLAs legitimately required to be doing in caring for their constituents? First of all, as a body as a whole, they need to elect the Government, i.e. the Executive Branch, and to hold it accountable in Parliament or Assembly. For example, the Comptroller and Auditor General submits his reports directly to the House, and it is the duty of individual legislators to put these to good use in controlling the Government’s waste, fraud or abuse of public resources.   Secondly, MPs and MLAs are obviously supposed to literally represent their individual constituencies in the House, i.e. to bring the Government and the House’s attention to specific problems or contingencies affecting their constituents as a whole, and call for the help, funds and sympathy of the whole community on their behalf.  Thirdly, MPs and MLAs are supposed to respond to pleas and petitions of individual constituents, who may need the influence associated with the dignity of their office to get things rightly done. For example, an impoverished orphan lad once needed surgery to remove a brain tumour; a family helping him was promised the free services of a top brain surgeon if a hospital bed and operating theatre could be arranged. It was only by turning to the local MLA that the family were able to get such arrangements made, and the lad had his tumour taken out at a public hospital. MPs and MLAs are supposed to vote for and create public goods and services, and to use their moral suasion to see that existing public services actually do get to reach the public.”

What about the Rajya Sabha?  I said in the same article:

“Rajya Sabha Members are a different species altogether. Most if not all State Legislative Councils have been abolished, and sadly the present nature of the Rajya Sabha causes similar doubts to arise about its utility. The very idea of a Rajya Sabha was first mooted in embryo form in an 1888 book A History of the Native States of India, Vol I. Gwalior, whose author also advocated popular constitutions for the “Indian India” of the “Native States” since “where there are no popular constitutions, the personal character of the ruler becomes a most important factor in the government… evils are inherent in every government where autocracy is not tempered by a free constitution.”  When Victoria was declared India’s “Empress” in 1877, a “Council of the Empire” was mooted but had remained a non-starter even until the 1887 Jubilee. An “Imperial Council” was now designed of the so-called “Native Princes”, which came to evolve into the “Chamber of Princes” which became the “Council of the States” and the Rajya Sabha.  It was patterned mostly on the British and not the American upper house except in being not liable to dissolution, and compelling periodic retirement of a third of members. The American upper house is an equal if not the senior partner of the lower house. Our Rajya Sabha follows the British upper house in being a chamber which is duty-bound to oversee any exuberance in the Lok Sabha but which must ultimately yield to it if there is any dispute.  Parliament in India’s democracy effectively means the Lok Sabha — where every member has contested and won a direct vote in his/her constituency. The British upper house used to have an aristocratic hereditary component which Tony Blair’s New Labour Government has now removed, so it has now been becoming more like what the Rajya Sabha was supposed to have been like.”

The Canadian upper house is similar to ours in intent: a place for “sober second thought” intended to curb the “democratic excesses” of the lower house.   In the Canadian, British, Australian, Irish and our own cases, the Prime Minister, as the chief executive of the lower house has immense indirect power over the upper house, whether in appointing members or even, in the Australian case, dissolving the entire upper house if he/she wishes.

Now yesterday apparently Shrimati Sonia Gandhi, as the duly elected leader of the largest political party in the 15th Lok Sabha, accompanied by Dr Manmohan Singh, as her party’s choice for the position of Prime Minister, went to see the President of India where the Hon’ble President apparently appointed Dr Singh to be the Prime Minister of India – meaning the Prime Minister of the 15th Lok Sabha, except that Dr Singh is not a member of the Lok Sabha and apparently has had no intent of becoming one.

In 2004 Shrimati Gandhi had declined to accept an invitation to become PM and instead effectively recommended Dr Singh to be PM despite his not being a member of the Lok Sabha nor intending to be so.   This exploited a constitutional loophole to the extent that the drafters of our 1950 Constitution happened not to have explicitly stated that the PM must be from the Lok Sabha.  But the reason the founders of our democratic polity such as BR Ambedkar and Jawaharlal Nehru did not specify that the PM must be from the Lok Sabha was quite simply that it was a matter of complete obviousness to them and to their entire generation that this must be so — it would have been  appalling to them and something beyond their wildest imagination that a later generation, namely our own, would exploit such a loophole and allow a PM to be appointed who is not a member of the Lok Sabha and intends not to be so.

Ambedkar, Nehru and all others of their time knew fully well that the history and intended purpose of the Lok Sabha was completely different from the history and intended purpose of the Rajya Sabha.  They knew too fully well that Lord Curzon had been explicitly denied the leadership of Britain’s Tory Party in 1922 because that would have made him a potential PM  when he was not prepared to be a member of the House of Commons.  That specific precedent culminated a centuries’-old  democratic trend of  political power flowing from monarchs to lords to commoners, and has governed all parliamentary democracies  worldwide ever since — until Dr Singh’s appointment in 2004.

When such an anomalous situation once arose in Britain, Lord Home resigned his membership of the House of Lords to contest a House of Commons seat as Sir Alec Douglas Home so that he could be PM in a manner consistent with parliamentary law.

Dr Singh instead for five years remained PM of India while not being a member of the Lok Sabha.  Even if reasons and exigencies of State could have been cited for such an anomalous situation during his first term, there was really no such reason for him not to contest the 2009 General Election if he wished to be the Congress Party’s prime ministerial candidate a second time.  Numerous Rajya Sabha members alongside him have contested Lok Sabha seats this time, and several have won.

As of today, Dr Singh is due to be sworn in tomorrow as Prime Minister for a second term while still having no declared intention of resigning from the Rajya Sabha and contesting a Lok Sabha seat instead.   What the present-day Congress has done is elect him the leader of the “Congress Parliamentary Party” and claim that it is in such a capacity that he received the invitation to be Prime Minister of India.   But surely if the question had been asked to the Congress Party under Nehru or Indira or Rajiv: “Can you foresee a circumstance ever in which the PM of India is not a member of the Lok Sabha?” their answer in each case would have been a categorical and resounding  “no”.

So the question does arise why the Congress under Sonia Gandhi has with deliberation allowed such an anomalous situation to develop.  Its effect is to completely distort the trends of relative political power between the Lok Sabha and Rajya Sabha.  On the one hand, the Lok Sabha’s power is deliberately made to diminish as the chief executive of the Government of India shall not be from the Lok Sabha but from “the other place” despite the Lok Sabha having greater political legitimacy by having been directly elected by India’s people.   This sets a precedent that  might  get repeated in India  in the future but which contradicts the worldwide trend in parliamentary democracies over decades and centuries in precisely the opposite direction –  of power flowing in the direction of the people not away from them.   On the other hand, the fact this anomalous idea has been pioneered by the elected leader of the largest political party in the Lok Sabha while her PM is in the Rajya Sabha causes a member of the lower house to have unexpected control over the upper house when the latter is supposed to be something of an independent check on the former!

It all really seems an unnecessary muddle and a jumbling up of normal constitutional law and parliamentary procedure.  The Sonia-Manmohan Government at the outset of its second term should hardly want to be seen by history as having set a poor precedent using brute force.  The situation can be corrected with the utmost ease by following the Alec Douglas Home example, with Dr Singh being given a relatively safe seat to contest as soon as possible, if necessary by some newly elected Congress MP resigning and allowing a bye-election to be called.

Subroto Roy

What’s all this business about political parties “staking a claim” to Government? Can there not be more dignified behaviour towards the President of India?

Press reports today say “With a comfortable majority in the Lok Sabha, UPA Chairperson Sonia Gandhi and Prime Minister Manmohan Singh will meet President Pratibha Patil to stake claim (sic) to form the new government. This was decided unanimously at a meeting of the leaders of the United Progressive Alliance in which Gandhi was re-elected its Chairperson.” (emphasis added)

“Stake claim”?

“To stake a claim” is  to show that you believe something is yours or to declare that something belongs to you.

Is that what Jawaharlal Nehru did with Dr Rajendra Prasad or Dr Radhakrishnan?  He went and said something like “Now look here Mr President, I would like to stake my claim to be Prime Minister of India now that this here General Election is over and I won”?

Is anyone else at present submitting any competing “claims” to the President?  Of course not.   Is the President unaware of the fact the General Elections are now over, or that she has a solemn duty to perform of inviting the leader of the largest political party in the new Lok Sabha to Rashtrapati Bhavan for an important chat?  Why does it have to be said that someone has to “stake a claim” to be asked to form the Government when the field is open and there is no sign of any other “claimant”?   Besides there has been the rush of political parties shooting off letters to the President declaring their support of Shrimati Gandhi and Dr Singh when they “stake claim” to the Government.  What does the President of India do with such letter-carriers when they turn up at her doorstep uninvited?  Offer each of them a cup of tea and a smile?

It is all hardly sober or uplifting — in fact, it is all rather undignified.

Perhaps a President of India might someday murmur something to the politicians like “Really, why do we need such talk about “staking claims”; I was going to invite you anyway.”

Inviting a new Prime Minister of India to form a Government: Procedure Right and Wrong (updated 2019 since 2009)

2019

Better Procedure:

 

 

So please follow my timetable for : Th 23/5 Results declared Fri 24/5 EC certifies results Sat Sun 25 26/5 Members sworn in Mon 27/5 Speaker pro tem divides House; Prez invites new to form a Gov’t Tue 28/5 Cabinet appointed

Better Procedure for .. Respected 16LS no longer exists as soon as results are certified by … Let 543 members of new be sworn in immediately one by one; let them elect a Speaker pro tem.

Let the Speaker pro tem divide the House between a putative Government & Opposition… Let then invite the leader of the former side to visit him for a chat… better then before please

Gen Chohan: Utopia not possible Prof. We can only dream IMO.

It’s the correct parliamentary logic tho.. Not hard to do… informs of winning candidates; LS informs 543 new members of to turn up pronto and be sworn in; elect a Speaker pro tem, divide the House; invites

Worse Procedure: 

Halla gulla … lists… parades of signatories… you know… Dilliwalla histrionics… 

 

 

2009:

Better Procedure

The Hon’ble President of India invites the leader of the single largest political party in the 15th Lok Sabha to visit Rashtrapati Bhavan.

The leader does so, bringing with her, her own nominee for the Prime Ministership of India as she herself wishes to decline the invitation to be PM.

The President meets the leader alone and extends the invitation.

The invitation is respectfully declined with the recommendation that the Hon’ble President may perhaps consider instead the name of the person nominated by the leader.

The President agrees and extends the invitation to the latter in the presence of the leader.  The latter accepts with thanks.

The President observes that since the PM-elect in this case happens not to be  a member of the Lok Sabha, she hopes that he shall soon become one.

The meeting ends.

Worse Procedure

The leader of the single largest political party in the 15th Lok Sabha publicly announces her nominee for the position of Prime Minister.

The Hon’ble President of India comes to learn of this from the newspapers or television and extends an invitation to the latter.

The latter visits Rashtrapati Bhavan, receives and accepts the President’s invitation to form a Government.

Of related interest:

Parliament’s sovereignty has been diminished by the Executive

Memo to the Hon’ble President of India: It is Sonia Gandhi, not Manmohan Singh, who should be invited to our equivalent of the “Kissing Hands” Ceremony

Starting with Procedural Error: Why has the “Cabinet” of the 14th Lok Sabha been meeting today AFTER the results of the Elections to the 15th Lok Sabha have been declared?!

Memo to the Hon’ble President of India (May 16, 2009)

H.E. The Hon’ble Shrimati Pratibha Patil

President of India

Your Excellency,

As India is fortunately a Republic and not a Monarchy, we do not have  a “Kissing Hands Ceremony”  where “the monarch invites the incoming prime minister to form a government and swear allegiance to the throne”.

While we do not have such a ceremony literally, we do have its republican equivalent in the well-established constitutional custom of the President of India after a General Election inviting one person to be Prime Minister and to form the new  Government.

It soon shall be your solemn duty to invite such a new Prime Minister of India to form the Government.

Given the results of the 15th General Elections to the Lok Sabha, that invitation may be extended only to the Leader of the winning coalition in the Lok Sabha, who is Shrimati Sonia Gandhi.

The outgoing Prime Minister, Dr Manmohan Singh, not having contested the Lok Sabha election, may not by  you be invited to be Prime Minister at this stage.

What happened in 2004 was that Shrimati Sonia Gandhi declined to accept such an invitation and instead effectively appointed Dr Singh to be PM despite his not being a member of the Lok Sabha nor intending to be so.

This exploited a constitutional loophole to the extent that our Constitution did not explicitly state that the PM must be from the Lok Sabha.

What may have been passable as the hurried exploitation of a loophole in 2004 is surely not acceptable in 2009.

Why the founders of our democratic polity such as BR  Ambedkar and Jawaharlal Nehru did not specify that the PM must be from the Lok Sabha was quite simply that it was a matter of complete obviousness to them and to their entire generation that this must be so — it would have been  appalling to them and something beyond their wildest imagination that a later generation, namely our own, would exploit this loophole and allow a PM to be appointed who is not a member of the Lok Sabha and intends not to be so.

Ambedkar, Nehru and all others of their time knew fully well that Lord Curzon had been explicitly denied the leadership of Britain’s Tory Party in 1922 because that would have made him a potential PM  when he was not prepared to be a member of the House of Commons.

That specific precedent (culminating a centuries-old  democratic trend of  political power flowing from monarchs to lords to commoners) has governed all parliamentary democracies  worldwide ever since  — until Dr Singh’s appointment in 2004.

In fact,  when such an anomalous situation once arose in Britain, Lord Home resigned his membership of the House of Lords to contest a House of Commons seat as Sir Alec Douglas Home  so that he could be PM in a manner consistent with parliamentary law.

I believe you are fully within constitutional law and precedent to invite Shrimati Sonia Gandhi to form the new Government of India after the 15th General Elections to the Lok Sabha.  If she declines and instead requests again the use of the loophole to appoint Dr Singh as PM,  I believe that parliamentary law and precedent requires him to resign from the Rajya Sabha and instead contest a seat in the Lok Sabha.

Respectfully submitted

Subroto Roy, PhD (Cantab.), BScEcon (London)

Citizen and Voter

Postscript: Please see also here “Inviting a new Prime Minister of India to form a Government: Procedure Right and Wrong”.

My 2009 prediction of the Sonia Congress election win

It is now coming up to be 3 pm Indian Standard Time on May 13, the last day of India’s 2009 General Elections, and there are two hours left for the polls to close.   I am happy to predict a big victory for the Congress Party, and Sonia Gandhi and her son Rahul will deserve congratulations for it.

How the victory takes shape is, I think, by their having won the median voter on both the economic and the secular-communal axes of Indian politics.  (See my 2008 published graph on the Median Voter Model in Indian politics, available elsewhere here).

I have met Sonia Gandhi once, in December 1991 at her home, where I gave her a tape of her husband’s conversations with me during the first Gulf War in 1991.   Her son and I met momentarily in her husband’s office in 1990-1991 but I do not recall any conversation.   I have had nothing to do with her Government.   Dr Manmohan Singh and I have met twice, once in Paris in the autumn of 1973 and once in Washington in September 1993; on the latter occasion, I was introduced to him and his key aides by Siddhartha Shankar Ray as the person on whose laptop the Congress manifesto of 1991 had been composed for Rajiv, something described elsewhere here.   (I also gave him then a copy of the published book that emerged from the University of  Hawaii perestroika-for-India project, Foundations of India’s Political Economy: Towards an Agenda for the 1990s, edited by myself and WE James.)  On the former occasion,  Dr Singh had kindly acceded to my father’s request to visit our then-home to advise me on economics before I started as a freshman undergraduate at the London School of Economics.

In May 2004 I was interviewed by BBC television in England and I praised the UPA in prospect — in comparison  to the horrors of the Vajpayee-Advani regime (including my personal experience of it, when their Education Minister had sent an astrology-believing acolyte to supposedly run a scientific/technical institute).

Since 2005, especially in the columns of The Statesman, I have dispensed rational criticism of the UPA Government as harshly as I have criticised the BJP/RSS and the Communists.  Principally, I believe they have got  some (perhaps most) much of their  economics (quite badly) wrong as well as their jurisprudence and foreign policy; they have also been willingly under the influence of the powerful organised lobbies and interest groups that populate our capital cities.

Even so, I think there is a large electoral victory in prospect for the Congress, and I send them my early congratulations.  They have done enough by way of political rhetoric and political reality to maintain or enhance their vote-share; their oppositions on either side have both failed badly. The BJP may make some marginal gains especially in Bihar but they have generally done enough to lose the day.  The CPM too will lose popularity especially in Bengal, and will never progress until they fire their JNU economists which they are never going to do.

So, Sonia-Rahul, well done!

But please try to improve your economics.

And, also, you simply must get Dr Manmohan Singh a seat in the Lok Sabha if he is to be PM — Ambedkar and Nehru and all their generation did not specify that India’s PM must be from the Lok Sabha because it was something totally OBVIOUS.

Subroto Roy

Postscript: Someone at a website has referred to my prediction above and remarked: “Perhaps the good doc is aware of the money in play”. The answer is no, I have absolutely no special information about any “money in play” on any side. My prediction is based on a layman’s observation of the campaign, as well as more specialised analysis of past voting data from the EC. In an earlier post, I pointed out the BJP had gotten some 17 million fewer votes than the Congress in 2004, and I asked if they had done enough to get enough of a net change in their favour. The answer I think is that they have not done so. To the contrary, I think there will be a quite large net change in favour of Congress thanks to a better-run and better-led campaign. Of course it is just a prediction that may be found to be incorrect.
SR

Mapping of Votes into Assembly Segments Won into Parliamentary Seats Won in the 2004 India Election

We in India shall soon be hearing the talking-heads on TV, mostly in New Delhi,  jabbering away about “swings” and “anti-incumbency” and “mandates” and “fractured mandates” etc.  Most of it will be waffle without any basis in hard facts because nobody wants to actually do any of the work necessary to acquire a serious opinion.

Just as you cannot win at cricket unless you bowl out the other side and you cannot win at soccer unless you score more goals than the other side, you are not going to win a General Election in India unless you win more Assembly Segments of Parliamentary Constituencies than your competitors.

It is not logically impossible but it is factually unlikely that you can lose, say, five out of six Assembly Segments and still win the Parliamentary Constituency by winning the sixth with a sufficiently large margin.  Raw votes generally translate into winning Assembly Segments and winning Assembly Segments generally translate into winning Lok Sabha seats.

In 2004, the top five winners were as follows, where the first number is raw votes won, the second the number of Assembly Segments won, and the third the number of Lok Sabha seats won:

INC    103,118,475    1,157    145
BJP    86,181,116    1,076    138
CPM    22,065,283    322    43
BSP    21,037,968    107    17
SP    16,822,902    167    39

Notice the BSP won some 4 million more raw votes than the SP but fewer Assembly Segments and fewer Lok Sabha Seats.  And the CPM won barely a million more raw votes than did the BSP but 215 more Assembly Segments and 26 more Lok Sabha seats.  Clearly Uttar Pradesh voting patterns need a lot more detailed analysis — my ex ante hypothesis would be that the BSP’s results are affected by the policy of some  constituencies being “reserved”.

More significantly, at the head of the race, notice that the BJP lost the raw vote to the Indian National Congress by a margin of almost 17 million votes which translated into winning 81 Assembly Segments fewer than the INC which translated into winning 7 fewer Lok Sabha seats — and hence ended up sitting in the Opposition in the Lok Sabha for five years.

A central question is whether the BJP has or has not done enough over the last five years to get in its favour a net change in the raw vote — and that too by a sufficient amount to change the number of Assembly Segments won in its favour.

Putting it differently, has the INC done enough to at least maintain its share of the raw-vote and its leading position, and hence  be likely to win the largest number of Assembly Segments and Lok Sabha seats again?

Here is the overall picture:

book1_17442_image001And yes, of course, there have been demographic changes over five years so those changed parameters shall have affected the  new outcome too (notice the INC’s emphasis on the “youth vote”).

This is original research which could come to be published in a scientific journal if I find the time to send it, so please try not to steal and instead acknowledge its source properly if you want to discuss it elsewhere.

Subroto Roy

Will someone please teach the BJP’s gerontocracy some Economics 101 on an emergency basis?

Two years ago, I said in “Political Paralysis”,

“[I]f Atal Behari Vajpayee and Lal Krishna Advani could bring themselves to honestly walk away from BJP politics, there would have to be a genuine leadership contest and some new principles emerging in their party. There is an excellent and very simple political reason for Vajpayee and Advani to go, which is not that they are too old (which they are) but that they led their party to electoral defeat. Had they walked away in May 2004, there might have been by now some viable conservative political philosophy in India and some recognisable new alternative leadership for 2009. Instead there is none and the BJP has not only failed very badly at being a responsible Opposition, it will go into the 2009 General Election looking exceptionally decrepit and incompetent.”

Lest anyone think this was a tirade against the BJP, most of the article was actually a criticism of the Congress and the Communists!

Mr LK Advani’s claim that Indian resources have been illegally shipped overseas is hardly new or interesting — what is truly grotesque is the sheer irresponsibility of his claim that if somehow this could be reversed, it would suffice to

” Relieve the debts of all farmers and landless • Build world-class roads all over the country – from national and state highways to district and rural roads; • Completely eliminate the acute power shortage in the country and also to bring electricity to every unlit rural home; • Provide safe and adequate drinking water in all villages and towns in India • Construct good-quality houses, each worth Rs. 2.5 lakh, for 10 crore families; • Provide Rs. 4 crore to each of the nearly 6 lakh villages; the money can be used to build, in every single village, a school with internet-enabled education, a primary health centre with telemedicine facility, a veterinary clinic, a playground with gymnasium, and much more. “

This is simply appalling in its sheer mendacity. The BJP is going to give an amnesty to all those with such money and then confiscate it or requisition it or forcibly borrow it to make these resources equivalent to tax-revenues for the purposes of Indian public finance? What can one say beyond this being grotesque in its incomprehension of both facts and economic principles? Could someone who supports the BJP please teach them some Econ 101 asap?

As I have said elsewhere, only quackery, fallacious finance and multitudinous intellectual fraud seem destined to emerge from New Delhi’s governing class of all political parties and their media and businessman friends. “Government finance requires scientific honesty, especially by way of clear rigorous accounting and audit of uses and origins of public resources. That scientific honesty is what we have not had at Union or State level for more than half a century.”

Subroto Roy, Kolkata

Of a new New Delhi myth and the success of the University of Hawaii 1986-1992 Pakistan project (with 2015 Postscript)

A leading Indian commentator says in this morning’s paper (November 15 2008) about Manmohan Singh:

“His formulation on Kashmir (“I have no mandate to change borders, but we can make borders irrelevant”), became the obvious solution once he articulated it.”

Such may be how  modern New Delhi’s myths and self-delusions  get born — since in fact there is no evidence that Manmohan Singh  or any of his acolytes had anything to do with originating the Pakistan-India peace process in recent decades, just as there has not been that Manmohan Singh or  any of his acolytes had anything to do with originating the  Congress Party’s new economic thinking in 1990-1991.

(Lest I be misunderstood I should add at the outset that I have the highest personal regard for Dr Singh, he has been  in decades past a friend of my father’s, he at my father’s request consented to discuss economics with me in Paris in 1973 when I was a callow lad of 18, he himself has not claimed the originality that has been frequently mis-attributed to him by others for whatever reason, etc.)

The origins of  the idea  about India-Pakistan and J&K expressed by Manmohan Singh’s words are to be found in the last paragraph of the Introduction by the Editors of a book which arose from the University of Hawaii’s 1986-1992 Pakistan project, which read:

“Kashmir… must be demilitarised and unified by both countries sooner or later, and it must be done without force. There has been enough needless bloodshed on the subcontinent… Modern Pakistanis and Indians are free peoples who can voluntarily agree in their own interests to alter the terms set hurriedly by Attlee or Mountbatten in the Indian Independence Act 1947. Nobody but we ourselves keeps us prisoners of superficial definitions of who we are or might be. The subcontinent could evolve its political identity over a period of time on the pattern of Western Europe, with open borders and (common) tariffs to the outside world, with the free movement of people, capital, ideas and culture. Large armed forces could be reduced and transformed in a manner that would enhance the security of each nation. The real and peaceful economic revolution of the masses of the subcontinent would then be able to begin.”

The University of Hawaii’s Pakistan project, involving Pakistani and other scholars, including one Indian, led to the volume Foundations of Pakistan’s Political Economy: Towards an Agenda for the 1990s published in Karachi, New Delhi and elsewhere. The book reached Nawaz Sharif and the Islamabad elite, including the most hawkish of Islamabad’s hawks, and Pervez Musharraf’s 2006 proposal on J&K, endorsed warmly by the US State Department,  may have grown from that paragraph. The Editors of the book, as economists themselves, decried the waste of resources involved in the Pakistan-India confrontation, saying it had

“greatly impoverished the general budgets of both Pakistan and India. If it has benefited important sections of the political and military elites of  both countries, it has done so only at the expense of the general welfare of the masses.”

Such words were impossibly bold in the  late 1980s-early 1990s.  However,  as stated in  a special editorial article “What to tell Musharraf”     in The Statesman of December 16 2006, they seemed  in recent years incomplete and rather naïve even to their author, who was myself, the only Indian in that project and the one who had conceived it. Most significantly, the position in international law in the context of historical facts had been wholly neglected. So had been the manifest nature of the Pakistani state (as it had become prior to the splendid 2008 elections).

The Hawaii project had involved top Pakistani economists, political scientists and other commentators but had deliberately chosen to keep the military and the religious clergy out of its chapters.  And it was the military and religious clergy who in fact came to dominate Pakistan’s agenda in the 1990s, at least until the 9/11 attacks in America indirectly  altered the political direction of the country.

The peaceful and mundane economic agenda outlined for Pakistan in the Hawaii project  has come into its own  by way of  relevance ever since.  A few weeks ago, the first trucks filled with fruit, woolens and many other goods traversed across the “Line of Control” in J&K for the first time in sixty years.   The Pakistan project that James and I led at the University of Hawaii in the late 1980s may be now declared a success.   Among other things, our book explained to Indians that there does exist a Pakistani point of view and perhaps explained to Pakistanis that there does exist an Indian point of view.  That  is something that had not existed before our book.

pak

Postscript 18 Nov 2015:  I have made clear at Twitter that I find the K.M. Kasuri book promoted and publicized in India by MS Aiyar, S Kulkarni, B Dutt and others in Delhi and Mumbai is mendacious where it is not merely self-serving.  Its clear intent is to get India to accept the (false) ISI/Hurriyat narratives about 1947, Kashmir, Bangladesh, terrorism etc.  Its purported ideas of demilitarisation and a borderless Kashmir are essentially lifted from my earlier 1980s work in America cited above — which I myself have rejected as naive since the Pakistani aggression in Kargil in 1999.  More anon.

Origins of India’s Constitutional Politics: Bengal 1913

This is a 1913 photograph of the Indian members of the  first Bengal Legislative Council elected (in 1912)  after the 1909 Morley-Minto reforms; the members apparently were being greeted by gentlemen of the sub-urban areas south of Calcutta.  The Englishman sitting at the centre  seems to be Sir Henry Cotton (1845-1915), the 1904 President of the Indian National Congress and a  great political friend of India.   To his right sits Surendranath Roy, who may have been the Council’s first President.

 

Academic studies include notably those by JH Broomfield, “The Vote and the Transfer of Power: A Study of the Bengal Election 1912-1913” Journal of Asian Studies, Feb 1962, his book Elite Conflict in a   Plural Society: 20th Century Bengal (Berkeley 1968); and Rajat Kanta Ray, Social Conflict and Political Unrest in Bengal 1875-1927 (Oxford 1984).  Professor Ray writes about the 1912 election: “Only  a few candidates of the “Popular Party” — Surendranath Banerjea, Abul Kasim, Byomkesh Chakravarti and Surendranath Ray — scraped through…. (A) sympathetic moderate wrote in 1919: ‘The Popular Party is a bundle of disjoined units which cannot resist the slightest pressure from without.’  This charge was eventually disproved by the stand taken by (the Popular Party) in the Bengal Legislative Council.  It showed no sign of wilting under the pressure exerted by the European group…”

 

Other studies of the period include John R McLane, Indian Nationalism and the Early Congress (Princeton 1977), Anil Seal, The Emergence of Indian Nationalism (Cambridge 1971),  Gordon Johnson, Provincial Politics and Indian Nationalism (Cambridge 1973) etc.

By way of incidental reference, the young Jawaharlal Nehru had returned from his studies in England in 1912; MK Gandhi was still in South Africa and would not be returning until 1915.  The Tilak-Gokhale clash though had been in full swing since 1907.

 

 

Subroto Roy

Nota Bene: The text and photograph in this post may be considered in the public domain and may be freely used for purposes of a Wikipedia article or any other publication in the common interest.

Surendranath Roy (1860-1929)


Surendranath Roy was my paternal great grandfather. He was an eminent statesman of his time, sometime President of the Bengal Legislative Council, and close political friend of CR Das who led the Indian National Congress before MK Gandhi.  SN Roy helped pioneer Indian constitutionalism under several British governments: Carmichael, Ronaldshay, Lytton, the Simon Commission too.

Lytton’s letter dated 1 May 1922  denied SN Roy appointment as President of the Bengal Legislative Council; instead, Lytton imported HEA (Evan) Cotton (1868-1939) from England in a classic case of British imperial racism in Indian governance.

SN Roy was a pioneer of primary education, and a legislative expert on local and general public finance as well as the federal politics of his time, authoring books on the “Princely” States of Gwalior and Kashmir, and proposing the origins of what became the Rajya Sabha. He also protested the Salt Tax as early as 1918. SN Roy Road in Kolkata is named after him.  The first photograph is of him as a newly graduated advocate-at-law, the second may have been after his book on Gwalior was published in 1888.   He also gave the Tagore Law Lectures in 1905, on the subject of customary law; these are available at India’s National Library.  His friends included the academician Ashutosh Mukherjee and the scientist Jagdish Chandra Bose. His role in the development of the legislative process in Bengal after the Morley-Minto reforms will be described further here in due course, as will be his role as a pioneer of primary education.

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Postscript: We did not know until recently he was present and badly injured, along with Ardeshir Dalal, by Bhagat Singh’s bomb thrown in the Central Legislative Assembly on 8 April 1929 during the Simon Commission deliberations. He died seven months later.

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see also

S N Roy hears from Lytton: A 1922 case of British imperial racism in Indian governance (with lessons for today) [Draft text 10 Feb 2018]

 

Origins of India’s Constitutional Politics: Bengal 1913

Carmichael visits Surendranath, 1916

MK Gandhi, SN Roy, MA Jinnah in March 1919: Primary education legislation in a time of protest

Bengal Legislative Council 1921

Jaladhar Sen writes to Manindranath at Surendranath’s death, c. Nov-Dec 1929

Sarat Chandra visits Surendranath Roy 1927

The Roys of Behala 1928

Manindranath Roy 1891-1958

Two scientific Boses who should have but never won Nobels

Pre-Partition Indian Secularism Case-Study: Fuzlul Huq and Manindranath Roy

Life of my father, 1915-2012

“I’m on my way out”: Siddhartha Shankar Ray (1920-2010)

Leadership vacuum

First published in The Statesman, Editorial Page Special Article, June 7 2008, http://www.thestatesman.net

Leadership vacuum

Time & Tide Wait For No One In Politics: India Trails Pakistan & Nepal!

Subroto Roy

The Karnataka legislative elections, as well as to lesser extent the Bengal panchayat polls, have revealed the vacuum that exists across the leadership of India’s national-level politics today.

To start with the BJP: had India been a normal democratic country on the Western pattern, Mr Arun Jaitley would have rocketed to the top of his party’s leadership by now. Besides being articulate in both Hindi and English and in his fifties (the age-group of most leaders in democratic countries), Mr Jaitley’s political acumen and organisational skills have been acknowledged even by his Congress adversaries after the Karnataka result. He himself has been frank and expansive about his formula for winning in Karnataka, which was simply to focus on real issues, especially state-specific ones, as well as to project a single credible leader. Had the BJP been a normal political party in a normal country, Mr Jaitley would have been given the task of leading it to victory in the next General Election and, assuming he won a Lok Sabha seat, to become its prime ministerial candidate.

Dadagiri

Instead, the BJP chooses to remain backward, backward, backward in the majority of its thought-processes and behaviour-patterns ~ from its kneejerk anti-Muslim psychology via its hyperinflationary macroeconomics and protectionist trade to its embrace of astrology and bovine exclusiveness. The idea of uniting behind someone relatively modern-minded in his politics like Mr Jaitley would be simply unacceptable not merely to people in the party within his own age-cohort (including the present party president) but even more so to those in age-cohorts decades older (including the party’s present prime ministerial candidate).

The opposition of the first group would arise from, in a word, jealousy. The opposition of the second group would arise from, in a word, dadagiri, i.e. the gerontocratic idea that merely because one is older, one is owed respect, authority and the plums of office in precedence over someone who is younger. Jealousy is a universal emotion not something specific to Indian politics, but dadagiri and the lack of meritocracy in our political culture is one reason India remains an abnormal polity in the modern democratic world.

LK Advani, driven by his unfulfilled personal ambition, will likely lead the BJP in the next election and do so with Mr Jaitley’s explicit support; Mr Advani may lead it into defeat or even to a victory in which he, given his age, is not as successful a PM as a Jaitley might have been. Yet our sclerotic political culture is such that neither Mr Advani nor Mr Rajnath Singh will simply stand aside now and hand over the reins to a newer, more competent and progressive leadership.

The same idea of dadagiri pervades what passes for the official “Left” in India as exemplified by the CPI-M. Mr Jyoti Basu has in a recent letter to Harkishen Singh Surjeet reminisced of their times together, and in doing so remarked that he remained the Chief Minister of West Bengal for as many years as he did because the Party had instructed him to do so, and when he handed over power to Buddhadeb Bhattacharjee, he did so with the Party’s agreement.

Those who believe in India’s parliamentary democracy might have thought that what our system requires is for a Chief Minister to hold the confidence of the legislative assembly from the bottom up but clearly that is not so because what a CM or PM seems to need are Party instructions from the top down. When Mr Bhattacharjee was anointed the new CM, the present author had remarked to the then Editor of The Statesman that the transition seemed to take place even without a formal vote of confidence in the Assembly. Does anyone in fact recall the last confidence vote debated and passed in the West Bengal Assembly? Democratic legislatures the world over routinely begin their new sessions with a debate and vote of no confidence being brought by the Opposition against the Government-of-the-day.

Does that happen with us, purportedly the world’s largest democracy? Let aside State legislatures, even our Parliament sees only the rare vote of confidence, and LK Advani specifically as Leader of the Opposition seems to have introduced none. Oppositions that do not wish to properly oppose are of course complicit in a government’s misdeeds.

It is the dadagiri culture shared by the official Communists that has caused the generational handover of power from Mr Basu and Mr Surjeet to the JNU coterie of the Karats and Mr Sitaram Yechuri. The “Left” like the “Right” and everyone else in Indian politics, can only handle cherubic “known” faces at the top ~ genuine grassroots activists like Binayak Sen or Medha Patkar must languish in jail or starve on hunger-strike in seeking to represent the politically and economically powerless in India while the entrenched dadas of Indian politics continue with their dissimulation.

Puppet-masters

In case of the Congress, it is an even deeper aspect of the Indian joint family system than dadagiri that has dominated its political culture, namely, the question who is the karta of the family and, if the karta is or seems too young or naïve or inexperienced, who will act as Regent on the karta’s behalf? Indira Gandhi was successfully guided in international politics for several years by a coterie led by PN Haksar. Rajiv Gandhi was attempted to be guided by several different competing coteries of senior party dadas ~ one of whom first brought up the name of Manmohan Singh in Indian politics on 22 March 1991 in a challenge addressed to the present author on liberalisation plans that Rajiv had authorised.

It is almost true to say that Sonia Gandhi and Rahul Gandhi have been in recent years played by puppet-masters of whose personal interests and intrigues they remain clueless. As has been said before by this author, the most salubrious thing Sonia Gandhi could have done for the Congress Party was to remain steadfast in her decision to stay out of Indian politics, and to have organised a fair, tough intra-party contest among its putative senior leaders based on differences of political and economic ideology.

Instead there is now paralysis in decision-making induced by Sonia Gandhi and Manmohan Singh each mistakenly relying upon the other’s purported economic wisdom and political acumen. This confusion came to be most clearly illustrated in the choice of Head of State last year though that was something politically costless ~ the failures of which Karnataka is the current example may lead the Congress to lose what it, like other Indian parties, loves most of all, namely political power in Lutyens’ Delhi.

Indians should make no mistake: our good neighbours in Pakistan and Nepal (Muslim in Pakistan, Hindu and Buddhist and communist in Nepal) have been through healthy cathartic political experiences in recent months and years of a kind we have not. There continues to remain a dangerous intellectual vacuum around the throne of Delhi.

Assessing Manmohan: The Doctor of Deficit Finance should realise the currency is at stake

Assessing Manmohan:

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.

Lok Sabha

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.

Inflation

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.)

Irresponsible Governance

Irresponsible Governance

Congress, BJP, Communists, BSP, Sena Etc Reveal Equally Bad Traits

By Subroto Roy

First published in The Statesman, March 4 2008, Editorial Page Special Article, http://www.thestatesman.net

A “black” American, born of a black Kenyan father and white American mother, and having a Muslim middle name Hussein though Christian by faith, may become the freely elected President of the USA in January 2009. He has stood up himself and anyone who knows Western cultures will know how hard it would have been to overcome workplace prejudices. Martin Luther King Jr’s dream of America becoming a nation where people “will not be judged by the colour of their skin but by the content of their character” might start to be fulfilled.

Can the same be said of modern India, ever? When will Muslims, Dalits, tribals and whomever become well enough integrated with mainstream Hindu societies ~ and vice versa ~ that we have army generals, fighter pilots, submarine commanders, nuclear scientists, media moghuls, top executives, and yes, freely elected Prime Ministers of India from any externally identifiable group without batting an eyelid? The policies followed by the Congress, BJP, Communists, BSP etc., exemplified by Mr Chidambaram’s pandering Budget-Speech last week, suggest that the answer will be never.

Selling illusions

Mr Chidambaram mentioned “Scheduled Caste” six times and “Minority” (meaning “Muslim”) five times in his speech~ if he or the Sonia-Manmohan Government genuinely felt any of the schemes mentioned were in the true interest of these groups, these schemes could have been simply and quietly implemented without fanfare or political advertisement. Making a big deal about them in Parliament during a Budget-Speech precisely reveals the actual underlying cynicism and hypocrisy. The fact may be it is not the schemes themselves that are important but the illusions created and sold about them, illusions that have electoral value because they deceive the purported beneficiaries into thinking that somebody powerful cares about them and controls their well-being.

A quarter-century ago in Pricing, Planning & Politics: A Study of Economic Distortions in India, I applied the arguments of the black American economist Thomas Sowell to the Indian case. I said: “the racial composition of contemporary American society is a complex mosaic, and no-one can say with certainty how it has come to be what it is today. In such circumstances, for the government to try to isolate a single contingent characteristic like “race”, partition society on the basis of census data according to this characteristic, and then construct public policies accordingly, is to introduce an enormous arbitrariness into economic life. By merely defining a group by reference to a single contingent characteristic, which all its members seem to possess, the intrinsic complexity of the individual person is lost or overlooked. Two members of the same race may be very different from each other in every relevant characteristic (income, education, political preference, and so on), and indeed resemble members of other races more closely in them. A policy which introduces a citizen’s race as a relevant factor in the assignment of jobs or college places partitions the citizenry into vague groups: members of groups who are very different from members of other groups in characteristics other than race rarely competing with each other anyway, while the burden and beneficence of the State’s policies fall on members of groups who are not very different from members of other groups in characteristics other than race”.

Sowell himself (in Knowledge and Decisions) put it like this: “costs are borne disproportionately by those members of the general population who meet standards with the least margin and are therefore most likely to be the ones displaced to make room for minority applicants. Those who meet the standards by the widest margin are not directly affected ~ that is, pay no costs. They are hired, admitted or promoted as if blacks did not exist. People from families with the most general ability to pay also have the most ability to pay for the kind of education and training that makes such performance possible. The costs of special standards are paid by those who do not. Among the black population, those most likely to benefit from the lower standards are those closest to meeting the normal standards. It is essentially an implicit transfer of wealth among people least different in non-racial characteristics. For the white population it is a regressively graduated tax in kind, imposed on those who are rising but not on those already on top.’”

What Sowell said about American blacks may well apply to India’s religious and caste minorities today. Problems of tribal India are more subtle requiring more technical sociological and anthropological study.

The Leftist idea common to the Congress, Communists, BSP etc has been to perpetuate dependency of Muslims, Dalits, OBCs etc upon the whims of State power (as wielded by such Leftists themselves). By contrast, the Rightist/Fascistic idea of the BJP, its RSS parent, the Sena etc has been to try to bludgeon Muslims, Dalits and everyone else into submission whereby they must adopt majority customs, habits or political beliefs or (in true Nazi fashion) come to be exiled or banned from mainstream society. Both Left and Right in India have also promoted new government-induced “Sex Wars” between males and females ~ passing laws drastically raising the risk and cost of maintaining marriages and family households, which then simply collapse as has happened elsewhere.

In general, the Congress, BJP, Communists, BSP etc have been united in being wholly incapable of seeing India’s people as individuals in their own right in all the diversity and complexity that entails ~ as free citizens who possess individual rights to belief, property, security, privacy etc. Instead the idea has been to politically categorize people as members of mass-groups that may be then manipulated as puppets using State power in one direction or another. The result has been a general failure in the country to develop the notion of responsible individual citizens (hundreds of millions in number) dealing with responsible public and civic institutions including the State.

Citizens and State

Even in nations that are heirs to a long history of democratic political development, the link often has not been made in the public mind between enjoyment or lack of enjoyment of public services, and costs upon individual citizens from whom resources must be ultimately raised. In a fiscal democracy “those who bear the costs of public services are also the beneficiaries” (JM Buchanan); conversely, those who demand public services must pay for them in real resources one way or another. If citizens feel they receive little or nothing of value from government, there is an obvious loss of incentive to be counted as responsible voting members of the same community, and instead reason to evade taxes or flee the country or cynically believe everything to be corrupt.

On the other hand, if citizens demand public services without expecting to contribute private resources for their production, this amounts to being no more than a wish to be free-riders on the general budget. While Indian citizens have been arbitrarilty partitioned by government according to religion, caste etc., widespread cynicism has prevailed about secular provision of public services by government at any level. At the same time the idea is far from understood that beneficiaries of public services must sooner or later expect to bear real resource-costs one way or another. Everyday politics thus becomes highly irresponsible. Political New Delhi has created such a state of affairs over decades and continues to contribute to it.

Our Dismal Politics: Will Independent India Survive Until 2047? (from 2008)

Our Dismal Politics
Will Independent India Survive Until 2047?

By SUBROTO ROY

First published in The Statesman Editorial Page, Special Article, Feb 1 2008

Mayawati and Narendra Modi are both in their 50s. So are the current leaders of Russia, Germany, Britain, France, the USA. No country, not even Communist Party China, is as pretentiously corrupt as ours in allowing a whole generation to be bred of “babalog” politicians among children of dead politicians or existing elderly politicians in their 70s and 80s. These babalog, Rahul Gandhi pre-eminent among them, are usually in their late 30s or early 40s. Having developed no useful marketable skills in life nor done anything worthwhile or creative, they have tended to arbitrage the political positions of their parents (whether departed or living) into gaining access and advantage in Delhi or the State capitals. Some nepotism is being seen in the USA with the Bush and Clinton families but nobody had heard of a Putin, Merkel or Sarkozy before they won their way into political power.

Inheriting advantage

The Indian phenomenon of the inheritance of advantage is also seen in organised business, in Bollywood and in journalism, which, like our politics, tend to be sold via TV. Academic institutions and the civil and military services are not far behind although there the phenomenon more usually involves exporting adult children (and bank accounts) especially to the USA or UK or Australia, and then making annual trips abroad during the hot summer months to be able to tell the neighbours about later.

The idea that the future of Indian politics is in the hands of a babalog GenNext is sheer nonsense and fantasy. The victories of Mayawati and Modi were also defeats of the expectations raised by Rahul Gandhi’s Congress. There is a continuity of years between someone like Sonia Gandhi and her children which implies there can be no discontinuous jump from Sonia to Rahul in the leadership of the Congress. In between, as it were, are people like Kamal Nath among “Friends of Sanjay” or Mani Shankar Aiyar (a solitary Rajivist), both of whom have won seats in the Lok Sabha unlike Sonia’s current elderly PM. If Sonia Gandhi devolves political power to her son who then leads the Congress into another defeat, of which UP and Gujarat have been examples, there will be a revolt among senior middle-aged politicians in the Congress, and the Congress may splinter into a Right Faction and Left Faction leaving Rajiv Gandhi’s family to look after the Rajiv Gandhi Foundation which is what they should have been doing in the first place rather than playing at Indian politics.

A Congress disintegration may or may not finally cause a useful bipolarisation in Indian politics because Indian politics has not only an economic dimension, it has a social or communal dimension too. Besides being (ostensibly) pro-poor or anti-poor, you can be either “Islamophilic” or “Islamophobic” ~ i.e. either pro-Muslim “secularist” /”pseudo-secularist”/minorityist, or anti-Muslim “communalist”/ “fascist”/majority communitarian.

Narasimha Rao cleverly manipulated the median parliamentary vote along these two dimensions so as to maintain a weak Government in power for five years by seeming to ally with the BJP on economic issues and seeming to ally with Leftists on social issues. If the Congress splits after another major defeat caused by Sonia-Rahul incompetence, with the Right Faction joining hands with whatever the BJP morphs into, and the Left Faction joining hands with whatever the CPI-M and CPI morph into, the central question will become which side of the split along the economic dimension holds the median voter along the pro-Muslim/anti-Muslim social dimension.

The BJP remains as dreadful and unscientific a gathering as it has been always without displaying the slightest creative trace of being able to evolve into a serious Conservative Party that India remains in desperate need of. AB Vajpayee and LK Advani led it into electoral defeat but that was not enough for their patriarchy to be disturbed by competent new younger people. In any case, the BJPs more articulate better-educated members in their 50s and 60s are unable to command nation-wide respect nor, with the exception of Modi, are they able to win an election on their own steam. The idea that e.g. Pramode Mahajan’s son could “succeed” him on the 10 JanPath pattern fortunately self-exploded. The best the BJP could do was to choose an inarticulate member as its nominal head while the patriarchy continued unchanged in its backward communalised thinking. Its RSS parent occasionally shows a little savant-like intelligence but generally remains in mental and physical regression.

As for the so-called Left, its multi-dimensional hypocrisy and incompetence has been permanently exposed in the heartland of what passes for Indian communism, Bengal. After the demise of the USSR and transition of Communist China towards Capitalism/ Fascism, there has been no real reason why the CPI and CPI-M cannot merge into one and then renounce together their retrograde ideology in favour of becoming a genuine Social Democratic and Labour Party representing working people and the poor. But that, like any corporate merger, would mean administrative redundancies, retrenchment and new management, and the last thing Stalinist politburo members like is the idea of losing their Rajya Sabha sinecures (in Russia and China they lost their heads but Indian conditions are kinder, gentler, more non-violent).

Besides the Congress, BJP and “Left”, most other parties in India revolve around the whims, personality and IQ of some single local political warlord/warlady. The Naxals and other extremists, including Hindu and Muslim religious terrorists, at least make some pretence at representing political interests of some sections of the people; there is thus at least a slight authenticity about them, no matter how disengaged their thought processes may be from realities around them.

Endless deficit finance

The 2008 Budget or the 2009 General Election seem likely to remain in the grip of all such dramatis personae permanently on the Indian stage, and no new real creative constructive force seems likely to appear. Every political misdemeanour will be paid for by endless deficit finance and money-printing, the accounts and auditing of all public institutions shall remain in a shambles while private pockets of the heads of public institutions come to be lined with gold, the armed forces shall be ready to fight their Pakistani counterparts while deferring to any more formidable adversary, rich business people will continue with their grotesque conspicuous consumption, young people graduating from India’s pampered institutions of tertiary education will continue to line up outside foreign embassies to seek hope and escape.

Can India survive as an independent democratic republic for 100 years after 1947, let alone be a country where all citizens are reasonably free and comfortable? A worst-case scenario may see North India in endless conflict with a chaotic Pakistan, Eastern India hived off under Beijing’s influence, and peninsular India from Surat to Vizag being Western-dominated with “SEZs” on the pattern of pre-communist Coastal China. The failure of our elite classes to provide healthy creative governance over generations must inevitably result in the putrefaction of our body politic.

(Author’s Note: The graph that accompanied this article is published elsewhere here under the title “Median Voter Model of India’s Electorate”.)

Introduction and Some Biography

My two main works, namely my book of 19 years ago Philosophy of Economics: On the Scope of Reason in Economic Inquiry (first published by Routledge, London & New York, 1989, 1991), and my monograph of 24 years ago Pricing, Planning and Politics: A Study of Economic Distortions in India (first published by the Institute of Economic Affairs, London, 1984) are both now republished here, each with a new preface. I have also published here for the first time the full story of my encounter with Rajiv Gandhi — an abbreviated version appeared in Freedom First in October 2001 which focussed on economic policy and deliberately excluded mention of my warnings about his vulnerability to assassination and my attempts in vain to get people around him to do something about it. I have also republished my three advisory memoranda to him between September 1990 and March 1991, which were first published in The Statesman‘s Editorial Page of July 31, August 1 and August 2 1991.

I have also published here now for the first time a public lecture I gave as the Wincott Visiting Professor of Economics at the University of Buckingham in 2004 titled “Science, Religion, Art and the Necessity of Freedom”. Also republished is “A General Theory of Globalization and Modern Terrorism” which was my keynote address to the Council of Asian Liberals and Democrats at their Manila meeting in November 2001; it appeared first in September 11 & Political Freedom: Asian Perspectives (eds. Smith, Gomez & Johannen) in Singapore in 2002.

I have also published for the first time my April 29 2000 address titled “Towards a Highly Transparent Monetary & Fiscal Framework for India’s Union and State Governments” to the Reserve Bank’s Annual “Conference of State Finance Secretaries”.

Also to be found in one place are my most recent signed writings since 2005 in The Statesman and elsewhere on India’s economy and foreign policy, Jammu & Kashmir, Pakistan, Afghanistan, China, Tibet, Taiwan, the United States, etc.

My political affiliation in India would be to a non-existent party — as may be seen from the article on a Liberal Party for India; and I trust it will be seen that I have dispensed criticism upon the present-day Congress Party, BJP/RSS and Communists equally harshly.

Readers are welcome to quote from my work under the normal “fair use” rule, but please quote me by name and indicate the place of original publication. Readers are also welcome to comment or correspond by email, though please try to introduce yourself.

The new preface of Philosophy of Economics is reproduced below as it is partly biographical.

“(Philosophy of Economics) germinated when I was 18 or 19 years of age in Paris, Helsinki and London, and it was first published when I was 34 in Honolulu. I came to economics from natural science (biology, chemistry, physics), not mathematics. It was inevitable I would be drawn to the beauty of philosophy as a theoretical discipline while being driven, as a post-Independence Indian, to economics as the practical discipline that might unlock secrets to India’s prosperity and progress. I belonged to an ancient family of political men, and my father, who had joined India’s new foreign service the year before I was born, inculcated in me as a boy an idea that I had “a mission” (though he later forgot he had done so).

I was fortunate to fail to enter Oxford’s PPE and instead go to the London School of Economics. LSE was at an intellectual peak in the early 1970s. DHN Johnson in international law, ACL Day in international monetary economics, Brian Griffiths vs Marcus Miller in monetary economics with everyone still in awe of Harry Johnson’s graduate lectures in macroeconomics, Ken Wallis, Graham Mizon, JJ Thomas, David Hendry in econometrics with the odd lecture by Durbin himself – I was exposed to a fully grown up intellectual seriousness from the day I arrived as an 18 year old. Michio Morishima as my professorial tutor told me frankly that, as an Indian, I would face less prejudice in Western academia than in the private sector, and said he was speaking from experience as a fellow-Asian. He turned out to be wrong but it was wise advice nevertheless, just as wise as his requiring pupils to read Hicks’ Value and Capital (which, in our undergraduate mythology, he himself had read inside a Japanese gunboat during war).

What was relatively weak at LSE was general economic theory. We were good at deriving the Best Linear Unbiased Estimator but left unsatisfied with our grasp of the theory of value that constituted the roots of our discipline. I managed a First and was admitted to Cambridge as a Research Student in 1976, where fortune had Frank Hahn choose me as a student. That at the outset was protection from the communist cabal that ran “development economics” with whom almost all the Indians ended up. I was wholly impecunious in my first year as a Research Student, and had to, for example, proof-read Arrow and Hahn’s General Competitive Analysis for its second edition to receive 50 pounds sterling from Hahn which kept me going for a short time. My exposure to Hahn’s subtle, refined and depthless thought as an economist of the first rank led to fascination and wonderment, and I read and re-read his “On the notion of equilibrium in economics”, “On the foundations of monetary theory”, “Keynesian economics and general equilibrium theory” and other clear-headed attempts to integrate the theory of value with the theory of money — a project Wicksell and Marshall had (perhaps wisely) not attempted and Keynes, Hicks and Patinkin had failed at.

Hahn insisted a central question was to ask how money, which is intrinsically worthless, can have any value, why anyone should want to hold it. The practical relevance of this question is manifest. India today in 2007 has an inconvertible currency, vast and growing public debt financed by money-creation, and more than two dozen fiscally irresponsible State governments without money-creating powers. While pondering, over the last decade, whether India’s governance could be made more responsible if States were given money-creating powers, I have constantly had Hahn’s seemingly abstruse question from decades ago in mind, as to why anyone will want to hold State currencies in India, as to whether the equilibrium price of those monies would be positive. (Lerner in fact gave an answer in 1945 when he suggested that any money would have value if its issuer agreed to collect liabilities in it — as a State collects taxes – and that may be the simplest road that bridges the real/monetary divide.)

Though we were never personal friends and I did not ingratiate myself with Hahn as did many others, my respect for him only grew when I saw how he had protected my inchoate classical liberal arguments for India from the most vicious attacks that they were open to from the communists. My doctoral thesis, initially titled “A monetary theory for India”, had to be altered due to paucity of monetary data at the time, as well as the fact India’s problems of political economy and allocation of real resources were more pressing, and so the thesis became “On liberty and economic growth: preface to a philosophy for India”. When no internal examiner could be found, the University of Cambridge, at Hahn’s insistence, showed its greatness by appointing two externals: C. J. Bliss at Oxford and T. W. Hutchison at Birmingham, former students of Hahn and Joan Robinson respectively. My thesis received the most rigorous and fairest imaginable evaluation from them.

I had been attracted to Cambridge partly by its old reputation for philosophy, especially that of Wittgenstein. But I met no worthwhile philosophers there until a few months before I was to leave for the United States in 1980, when I chanced upon the work of Renford Bambrough. Hahn had challenged me with the question, “how are you so sure your value judgements promoting liberty blah-blah are better than those of Chenery and the development economists?” It was a question that led inevitably to ethics and its epistemology — when I chanced upon Bambrough’s work, and that of his philosophical master, John Wisdom, the immense expanse of metaphysics (or ontology) opened up as well. “Then felt I like some watcher of the skies, When a new planet swims into his ken; Or like stout Cortez when with eagle eyes, He star’d at the Pacific…”

It has taken me more than a quarter century to traverse some of that expanse; when I returned to Britain in 2004 as the Wincott Visiting Professor of Economics at the University of Buckingham, I was very kindly allowed to deliver a public lecture, “Science, Religion, Art and the Necessity of Freedom”, wherein I repaid a few of my debts to the forgotten work of Bambrough and Wisdom — whom I extravagantly compared with the Bodhisattvas of Mahayana Buddhism, also saying that the trio of Wittgenstein, Wisdom and Bambrough were reminiscent of what Socrates, Plato and Aristotle might have been like.

I had written to Bambrough from within Cambridge expressing my delight at finding his works and saying these were immensely important to economics; he had invited me to his weekly discussion groups at St John’s College but I could not attend. Between 1979 and 1989 we corresponded while I worked in America on my application of his and Wisdom’s work to problems in economics. We met only once when I returned to Cambridge from Blacksburg for my doctoral viva voce examination in January 1982. Six years later in 1988 he said of my Philosophy of Economics, “The work is altogether well-written and admirably clear”, and on another occasion he said he was “extremely pleased” at the interest I had taken in his work. The original preface of Philosophy of Economics said he was not responsible for the use I had made of his writings, which I reiterated in the 2004 lecture. At our meeting, he offered to introduce me to Wisdom who had returned to Cambridge from Oregon but I was too scared and declined, something I have always regretted. It is only in the last few years that I have begun to grasp the immensity of Wisdom’s achievement in comprehending, explaining and extending the work of both Wittgenstein and Freud. His famous “Virginia Lectures” of 1957 were finally published by his admirers with his consent as Proof and Explanation just before his death in 1993. As for Bambrough, I believe he may have been or become the single greatest philosopher since Aristotle; he told me in correspondence there was an unfinished manuscript Principia Metaphysica (the prospectus of which appeared in Philosophy 1964), which unfortunately his family and successors knew nothing about; the fact he died almost in obscurity and was soon forgotten by his University speaks more about the contemporary state of academic philosophy than about him. (Similarly, the fact Hahn, Morishima and like others did not receive the so-called Economics “Nobel” says more about the award than it does about them.)

All I needed in 1980 was time and freedom to develop the contents of this book, and that I found in America — which I could not have done in either Britain or India. It would take eight or nine very strenuous years before the book could be written and published, mostly spent at Virginia Polytechnic Institute (1980-1985) and University of Hawaii (1986-1990) Economics Departments, with short interludes at Cornell (Fall 1983) and Brigham Young (1985-86). I went to Virginia because James M. Buchanan was there, and he, along with FA Hayek, were whom Hahn decided to write on my behalf. Hayek said he was too old to accept me but wrote me kind and generous letters praising and hence encouraging my inchoate liberal thoughts and arguments. Buchanan was welcoming and I learnt much from him and his colleagues about the realities of public finance and democratic politics, which I quickly applied in my work on India, published in 1984 in London as Pricing, Planning & Politics: A Study of Economic Distortions in India and republished elsewhere here. The visit to the Cornell Economics Department was really so I could talk to Max Black the philosopher, who represented a different line of Wittgenstein’s students, and Max and I became friends until his death in 1988.

Buchanan’s departure from Blacksburg led to a gang of inert “game theorists” to arrive, and I was immediately under attack – one senior man telling me I was free to criticise the “social choice” work of Amartya Sen (since he was Indian too) but I was definitely unfree to do the same of Sen’s mentor, Kenneth Arrow, who was Jewish! (Arrow was infinitely more gracious when he himself responded to my criticism.) On top of that arose a matter of a woman, fresh off the aeroplane from India, being assaulted by a senior professor, and when I stood for her against her assailant, my time in Blacksburg was definitely up.

The manuscript of this book was at the time under contract with University of Chicago Press, and, thanks to Mrs Harry Johnson there, I had come in contact with that great American, Theodore W. Schultz. Schultz, at age 81, told me better to my face what the book was about than I had realised myself, namely, it was about economics as knowledge — its subject-matter was the epistemology of economics. Schultz wrote letters all over America on my behalf (as did Milton Friedman at Stanford and Sidney Alexander of MIT, whom I had also met and become friends with), and I was able to first spend a happy year among the Mormons at Brigham Young, and then end up at the University of Hawaii where I was given responsibility for the main graduate course in macroeconomics. I taught Harry Johnson-level IS-LM theory and Friedman-Tobin macroeconomics and then the new “rational expectations” vs Keynesian material.

I was also offered a large University grant to work on “South Asia”, which led to the books Foundations of India’s Political Economy: Towards an Agenda for the 1990s, and Foundations of Pakistan’s Political Economy: Towards an Agenda for the 1990s, both created by myself and WE James, and which led to the origins of India’s 1991 economic reform and the India-Pakistan peace process as told elsewhere. Also, this book came to be accepted for publication by Routledge, as the first economics book in its famed International Library of Philosophy.

Just as I was set to be evaluated for promotion and tenure at the University of Hawaii, I became the victim of a most vicious racist defamation (and there was some connection with Blacksburg). Quite fed up with the sordidness of American academia as I had experienced it, I sued in the federal court, which consumed much of the next half dozen years as the case worked its way through the United States Supreme Court twice. Milton Friedman and Theodore W. Schultz stood as expert witnesses on my behalf but you would not have known it from the judge’s ruling. There had been not only demonstrable perjury and suborning of perjury by the State of Hawaii’s officers, there was also “after-discovered” evidence of bribery of court-officers in the US District Court for the District of Hawaii, and I had to return to India in 1996 quite exhausted to recuperate from the experience. “Solicitation of counsel, clerks or judges” is “embracery curialis”, recognized as extrinsic fraud and subversion of justice since Jepps 72 E R 924 (1611), “firmly established in English practice long before the foundation” of the USA, Hazel Atlas, 322 US 238 (1943). “Embracery is an offense striking at the very foundation of civil society” says Corpus Juris 20, 496. A court of equity has inherent power to investigate if a judgement has been obtained by fraud, and that is a power to unearth it effectively, since no fraud is more odious than one to subvert justice. Cases include when “by reason of something done by the successful party… there was in fact no adversary trial or decision of the issue in the case. Where the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practised on him by his opponent, as…where an attorney fraudulently or without authority assumes to represent a party and connives at his defeat; or where the attorney regularly employed corruptly sells out his client’s interest to the other side ~ these, and similar cases which show that there has never been a real contest in the trial or hearing of the case, are reasons for which a new suit may be sustained to set aside and annul the former judgment or decree, and open the case for a new and a fair hearing….” (Hazel Atlas). There is no time-limit in United States federal law for rectification of fraud on the court of this sort, and I remain fully hopeful today of the working of American justice in the case.

The practical result was that this book was never able to be properly publicized among economists as it would have been had I become Professor of Economics at the University of Hawaii by 1992 as expected. The hardback sold out quickly on its own steam and went into paperback by 1991, and a friend told me it was being used for a course at Yale Law School. The reviews were mostly intelligent. Upon returning to Britain as the Wincott Visiting Professor in 2004, I found times had changed and so had Routledge who would not keep it in print let alone permit a second revised edition. But I am now free to republish the book as I please, and today in 2007, with the Internet growing to a maturity which allows the young geeks at WordPress.com to want to encourage blogging worldwide, I can think of no more apt place to reproduce the first edition of this book than here at my own blog http://www.independentindian.com.

This is not a second or revised edition, and it is unchanged in content except for this lengthy new preface made necessary by the adventures and dramas the book’s author found himself unwittingly part of since its first publication. I am 52 now and happy to say I endorse the book just as I had published it at 34, though I do find it a little impatient and too terse in a few places. The 1991 paperback corrected a few slight errors in the 1989 hardback, and has been used. I am planning an entirely new book which shall have its roots in this one though it will be mostly in philosophy and not economics — the outlines it may take may be seen in the 2004 public lecture I gave on the work of Bambrough and Wisdom mentioned above and published elsewhere; its main aim will be to uncover for new generations the immense worth there is in their work which is in danger of being lost.

At least two names failed to appear in the original list of acknowledgements. G. Bruce Chapman, now of the University of Toronto, and I talked much of serious ethics and political philosophy when I first arrived at Cambridge in 1976. And in 1980 in Blacksburg, Anil Lal, then a graduate student and house-painter, borrowed my copy of Bambrough’s work, read it, and later made a comment on the metaphysics of John Wisdom which allowed me to see things more clearly.

Ballygunge, Kolkata,
April 7 2007″

Lessons from the 1962 War: there are distinct Tibetan, Chinese and Indian points of view that need to be mutually comprehended (2007)

Prefatory Note: This is part of a series of articles published in The Statesman since October 2007 and republished here, viz., Understanding China, India-USA Interests, China’s India Aggression, Surrender or Fight?, China’s Commonwealth, Nixon & Mao vs India, China’s India Example and China’s Force and Diplomacy. See https://independentindian.com/2009/09/19/my-ten-articles-on-china-tibet-xinjiang-taiwan-in-relation-to-india/

Lessons from the 1962 War

 

 

Beginnings of a solution to the long-standing border problem: there are distinct Tibetan, Chinese and Indian points of view that need to be mutually comprehended.

 

 

SUBROTO ROY

First published in The Sunday Statesman, January 13 2008,  Editorial Page Special Article

 

 

WAR is an existential experience from which nations emerge altered, reflective and sometimes more mature. Germany tried to purge anti-Jewish hatred, Japan to adopt pacifism, Britain to break class-structures, Russia to explode Stalin’s cult. America learnt little from its Vietnam debacle, creating new tactics and technologies to reduce American casualties in war but not showing any improved capacity to comprehend the world beyond its shores and borders.

 

 

India after the 1962 defeat by Mao’s China learnt less than was possible and necessary to do. The Government’s official history concluded: “In a fundamental sense, the origins of the 1962 Sino-Indian conflict lay in Chinese expansionism and occupation of Tibet. The issue got further aggravated due to failure of the Chinese to win over the Tibetans. Indian asylum to the Dalai Lama raised Chinese suspicions about ultimate Indian intentions. On the other hand, India, while tacitly accepting the Chinese occupation of Tibet through a treaty in 1954, failed to obtain any quid pro quo on the border issue.” This is true enough but a deeper probe is also possible.

 

 

India’s 20th Century political and intellectual leadership may have grossly failed to comprehend critical world events in a realistic manner, specifically Vladimir Ulyanov’s German-assisted Bolshevik coup d’etat, the Kuomintang and Maoist takeovers in China, as well as India’s own struggle for Independence. After BG Tilak, Annie Besant, GK Gokhale and other founders of Indian nationalism passed from the scene, leaders arose like MK Gandhi, MA Jinnah, SC Bose and J Nehru who tended to be consumed, to lesser or greater extent, by their own hubris and were less able to see India’s fortunes and capacities in context of a larger world. None had military, administrative or public finance experience needed for practical government; instead there arose almost a new hereditary caste of the “professional politician” who has no other vocation or anything better to do in life. Nazi-admirers like Mashriqi and Rahmat Ali among Muslims and the Mahasabha and RSS among Hindus also lent mainstream Indian nationalism a harsh distasteful colouration.

 

 

Czechoslovakia’s great nationalist Masaryk (who famously denounced Austro-Hungary as a “corrupt, pretentious, senseless relic”) was said to be “a leader who planned further ahead than his contemporaries, understood the corroding effects of power, the vital need of restraint in the ruler, and above all the need for taking the nation into his confidence, educating it in the sense of drawing out all its innate qualities and sharing its manifold aspirations” (Seton-Watson). India’s clear-headed statesmen of that calibre were not among its most visible or ambitious. Vallabhbhai Patel, MAK Azad, C Rajagopalachari and others were left on the sidelines of free India’s politics ~ as Plato predicted, the genuine pilot of the ship of state will be hardly invited to take its wheel nor even want to do so.

 

 

Nehru alone, as chosen by Gandhi, came to wield actual power in the 1950s, having maneuvered Rajendra Prasad to being President. And Nehru, besotted in middle age with a married British woman, seemed awestruck by appearance of a victorious Maoist communism in China just as he had been adoring of Stalin’s Russia two decades earlier. The Congress’s friends among India’s official Communists and fellow-travelers never had much original indigenous grassroots support and always looked abroad for guidance. Non-alignment needed to be made of sterner stuff.

 

 

Nehru’s flawed management of the relationship with Communist China included not merely choosing a favourite like Krishna Menon to head India’s military, but also imagining himself a competent world diplomatist. Girja Shankar Bajpai would have been far superior as India’s first Foreign Minister. In 1952, Bajpai, then Governor of Bombay, wrote to Nehru saying India should inform Zhou Enlai the McMahon Line was firm in law and non-negotiable.

 

 

Was the McMahon Line firm and just? Nehru was no Curzon but it was as a Curzonian imperialist that Mao and Zhou saw him. All Chinese, whether Communist or Nationalist, chafed at the way the Manchu-dynasty’s Empire had been carved up. “China is our India” was Czarist Russia’s intent towards China itself. China had an awful political and military history from when foreign depredations began in the 1840s all the way until the Mao-Zhou era ended in the 1970s. Indeed China’s polity between the 1840s and 1940s suffered far greater chaos and anarchy than India’s in the same period.

 

 

From a Chinese standpoint, Younghusband’s diplomatic and military invasion of Gyantze and Lhasa in 1903-1904 was an insult they had been unable to militarily confront. Curzon sent Younghusband’s expedition because there appeared to be Russian intrigues with the Dalai Lama via the Russian/Mongolian agent Dorjiev who had transmitted Russian ideas of extending its new Siberian railway to Lhasa and posting Cossack soldiers there. The Russians seemed to want to adopt the Dalai Lama given his religious influence over Mongolia. The British were alarmed and determined to annihilate the influence of Dorjiev which they did. Thence came the Anglo-Russian Treaty of 1907 which specified British and Russian spheres of influence in Iran and Afghanistan, and stated Tibet would be dealt with internationally only through the Chinese Empire. The McMahon Line, as a recognition of the traditional boundary, flowed naturally from the legitimacy of the Anglo-Russian Treaty. As for Sinkiang, though a Chinese province since 1884 it came to be ruled by warlords under Russian influence.

 

 

The Mao-Zhou war machine was determined to take over and militarily hold both Sinkiang and Tibet as an assertion of new China’s self-definition against Russia and Britain; hence their denunciation of Nehru as a pawn first of Britain and then of Russia. China building a road surreptitiously between Sinkiang and Tibet through Aksai Chin was reminiscent of Russia’s coercive behaviour against China in building the Trans-Siberian Railway through Chinese territory to Vladivostok. At worst, the Indians would have to admit that erstwhile J&K State since October 1947 had become an ownerless entity whose unclaimed territory had been carved up by force by the new Pakistan, new India and new China.

 

 

From an Indian standpoint, the traditional recognised boundary placed Aksai Chin clearly in Ladakh and not Tibet. Aksai Chain is a salt pit without “a blade of grass” but for all anyone knows, it could be rich in minerals. Karakorum Pass is also newly valuable to the Chinese as they seek to develop a land-route from Baluchistan’s Gwadar Port through Pakistan to China. If India has lost Aksai Chin and Karakorum Pass by force of arms without compensation, force of arms may be the only means of retrieval. Due compensation from China could be Chumbi Valley between Sikkim and Bhutan, and China seems once to have mentioned mutual perpetual lease of Aksai Chin and Chumbi Valley.

 

 

From a Tibetan point of view, the Amban representing the Chinese Emperor was driven out of Lhasa in 1912 and Tibet was independent of China for 38 years. Tibet has as much of a claim to be independent of China as Poland or Ukraine have had to be of Russia. As for the McMahon Line, it is indeed legally non-negotiable between China and India as it flowed directly out of the Anglo-Russian Treaty of 1907, and it was under that Treaty that China received international recognition of its formal suzerainty over Tibet since 1720 until that time. Mao once likened Tibet to the palm of a hand with Ladakh, Nepal, Sikkim, Bhutan and Assam as five fingers. Modern China must decide between such a metaphor of Maoist expansionism (which India would have to militarily resist) and joining the world of international law created since Grotius. Democratic conditions in Tibet would also have to be insisted upon so the Dalai Lama and other Tibetans may return home from India in peace and freedom.

 

 

Sonia’s Lying Courtier with Postscript 25 Nov 2007, & Addendum 30 June 2014

30th June 2014

“Sonia’s Lying Courtier” (see below) has now lied again! In a ghost-written 2014 book published by a prominent publisher in Delhi!

He has so skilfully lied about himself the ghost writer was probably left in the dark too about the truth.

**The largest concealment has to do with his Soviet connection: he is fluent in Russian, lived as a privileged guest of the state there, and before returning to the Indian public sector was awarded in the early 1970s a Soviet degree, supposedly an earned doctorate in Soviet style management!**

How do I know? He told me so personally! His Soviet degree is what allowed himself to pass off as a “Dr” in Delhi power-circles for decades, as did many others who were planted in that era. He has also lied about himself and Rajiv Gandhi in 1990-1991, and hence he has lied about me indirectly.

In 2007 I was gentle in my exposure of his mendacity because of his advanced age. Now it is more and more clear to me that exposing this directly may be the one way for Sonia and her son to realise how they, and hence the Congress party, were themselves influenced without knowing it for years…

25 November 2007

Two Sundays ago in an English-language Indian newspaper, an elderly man in his 80s, advertised as being “the Gandhi family’s favourite technocrat” published some deliberate falsehoods about events in Delhi 17 years ago surrounding Rajiv Gandhi’s last months. I wrote at once to the man, let me call him Mr C, asking him to correct the falsehoods since, after all, it was possible he had stated them inadvertently or thoughtlessly or through faulty memory. He did not do so. I then wrote to a friend of his, a Congress Party MP from his State, who should be expected to know the truth, and I suggested to him that he intercede with his friend to make the corrections, since I did not wish, if at all possible, to be compelled to call an elderly man a liar in public.

 

That did not happen either and hence I am, with sadness and regret, compelled to call Mr C a liar.

 

The newspaper article reported that Mr C’s “relationship with Rajiv (Gandhi) would become closer when (Rajiv) was out of power” and that Mr C “was part of a group that brainstormed with Rajiv every day on a different subject”. Mr C has reportedly said Rajiv’s “learning period came after he left his job” as PM, and “the others (in the group)” were Mr A, Mr B, Mr D, Mr E “and Manmohan Singh” (italics added).

 

In reality, Mr C was a retired pro-USSR bureaucrat aged in his late 60s in September 1990 when Rajiv Gandhi was Leader of the Opposition and Congress President. Manmohan Singh was an about-to-retire bureaucrat who in September 1990 was not physically present in India, having been working for Julius Nyerere of Tanzania for several years.

 

On 18 September 1990, upon recommendation of Siddhartha Shankar Ray, Rajiv Gandhi met me at 10 Janpath, where I handed him a copy of the unpublished results of an academic “perestroika-for-India” project I had led at the University of Hawaii since 1986. The story of that encounter has been told first on July 31-August 2 1991 in The Statesman, then in the October 2001 issue of Freedom First, then in January 6-8 2006, September 23-24 2007 in The Statesman, and most recently in The Statesman Festival Volume 2007. The last of these speaks most fully yet of my warnings against Rajiv’s vulnerability to assassination; this document in unpublished form was sent by me to Rajiv’s friend, Mr Suman Dubey in July 2005, who forwarded it with my permission to the family of Rajiv Gandhi.

 

It was at the 18 September 1990 meeting that I suggested to Rajiv that he should plan to have a modern election manifesto written. The next day, 19 September, I was asked by Rajiv’s assistant V George to stay in Delhi for a few days as Mr Gandhi wished me to meet some people. I was not told whom I was to meet but that there would be a meeting on Monday, 24th September. On Saturday, the Monday meeting was postponed to Tuesday 25th September because one of the persons had not been able to get a flight into Delhi. I pressed to know what was going on, and was told I would meet Mr A, Mr B, Mr C and Mr D. It turned out later Mr A was the person who could not fly in from Hyderabad.

 

The group (excluding Mr B who failed to turn up because his servant had failed to give him the right message) met Rajiv at 10 Janpath in the afternoon of 25th September. We were asked by Rajiv to draft technical aspects of a modern manifesto for an election that was to be expected in April 1991. The documents I had given Rajiv a week earlier were distributed to the group. The full story of what transpired has been told in my previous publications.

 

Mr C was ingratiating towards me after that first meeting with Rajiv and insisted on giving me a ride in his car which he told me was the very first Maruti ever manufactured. He flattered me needlessly by saying that my PhD (in economics from Cambridge University) was real whereas his own doctoral degree had been from a dubious management institute of the USSR. (Handling out such doctoral degrees was apparently a standard Soviet way of gaining influence.) Mr C has not stated in public how his claim to the title of “Dr” arises.

 

Following that 25 September 1990 meeting, Mr C did absolutely nothing for several months towards the purpose Rajiv had set us, stating he was very busy with private business in his home-state where he flew to immediately. Mr D went abroad and was later hit by severe illness. Mr B, Mr A and I met for luncheon at New Delhi’s Andhra Bhavan where the former explained how he had missed the initial meeting. Then Mr B said he was very busy with his house-construction, and Mr A said he was very busy with finishing a book for his publishers on Indian defence, and both begged off, like Mr C and Mr D, from any of the work that Rajiv had explicitly set our group. My work and meeting with Rajiv in October 1990 has been reported previously.

 

Mr C has not merely suppressed my name from the group in what he has published in the newspaper article two Sundays ago, he has stated he met Rajiv as part of such a group “every day on a different subject”, another falsehood. The next meeting of the group with Rajiv was in fact only in December 1990, when the Chandrashekhar Government was discussed. I was called by telephone in the USA by Rajiv’s assistant V George but I was unable to attend, and was briefed later about it by Mr A.

 

When new elections were finally announced in March 1991, Mr C brought in Mr E into the group in my absence (so he told me), perhaps in the hope I would remain absent. But I returned to Delhi and between March 18 1991 and March 22 1991, our group, including Mr E (who did have a genuine PhD), produced an agreed-upon document. That document was handed over by us together in a group to Rajiv Gandhi at 10 Janpath the next day, and also went to the official political manifesto committee of Narasimha Rao, Pranab Mukherjee and M. Solanki.

 

Our group, as appointed by Rajiv on 25 September 1990, came to an end with the submission of the desired document to Rajiv on 23 March 1991.

 

As for Manmohan Singh, contrary to Mr C’s falsehood, Manmohan Singh has himself truthfully said he was with the Nyerere project until November 1990, then joined Chandrashekhar’s PMO in December 1990 which he left in March 1991, that he had no meeting with Rajiv Gandhi prior to Rajiv’s assassination but rather did not in fact enter Indian politics at all until invited by Narasimha Rao several weeks later to be Finance Minister. In other words, Manmohan Singh himself is on record stating facts that demonstrate Mr C’s falsehood.

 

The economic policy sections of the document submitted to Rajiv on 23 March 1991 had been drafted largely by myself with support of Mr E and Mr D and Mr C as well. It was done over the objections of Mr B, who had challenged me by asking what Manmohan Singh would think of it. I had replied I had no idea what Manmohan Singh would think of it, saying I knew he had been out of the country on the Nyerere project for some years.

 

Mr C has deliberately excluded my name from the group and deliberately added Manmohan Singh’s instead. What explains this attempted falsification of facts – reminiscent of totalitarian practices in communist countries? Manmohan Singh was not involved by his own admission, and as Finance Minister told me so directly when he and I were introduced in Washington DC in September 1993 by Siddhartha Shankar Ray, then Indian Ambassador to the USA.

 

A possible explanation for Mr C’s mendacity is as follows: I have been recently publishing the fact that I repeatedly pleaded warnings that I (even as a layman on security issues) perceived Rajiv Gandhi to have been insecure and vulnerable to assassination. Mr C, Mr B and Mr A were among the main recipients of my warnings and my advice as to what we as a group, appointed by Rajiv, should have done towards protecting Rajiv better. They did nothing — though each of them was a senior man then aged in his late 60s at the time and fully familiar with Delhi’s workings while I was a 35 year old newcomer. After Rajiv was assassinated, I was disgusted with what I had seen of the Congress Party and Delhi, and did not return except to meet Rajiv’s widow once in December 1991 to give her a copy of a tape in which her late husband’s voice was recorded in conversations with me during the Gulf War.

 

Mr C has inveigled himself into Sonia Gandhi’s coterie – while Manmohan Singh went from being mentioned in our group by Mr B to becoming Narasimha Rao’s Finance Minister and Sonia Gandhi’s Prime Minister. If Rajiv had not been assassinated, Sonia Gandhi would have been merely a happy grandmother today and not India’s purported ruler. India would also have likely not have been the macroeconomic and political mess that the mendacious people around Sonia Gandhi like Mr C have now led it towards.

 

POSTSCRIPT: The Congress MP was kind enough to write in shortly afterwards; he confirmed he “recognize(d) that Rajivji did indeed consult you in 1990-1991 about the future direction of economic policy.”   A truth is told and, furthermore, the set of genuine Rajivists in the present Congress Party is identified as non-null.

 

See also

https://independentindian.com/2014/07/03/much-as-i-might-love-russiaengland-france-america-i-despise-their-spies-local-agents-affecting-poor-indias-policies-memo-to-pm-modi-mr-jaitley-mr-doval-the-new-govt-of-india-bew/

https://independentindian.com/thoughts-words-deeds-my-work-1973-2010/rajiv-gandhi-and-the-origins-of-indias-1991-economic-reform/did-jagdish-bhagwati-originate-pioneer-intellectually-father-indias-1991-economic-reform-did-manmohan-singh-or-did-i-through-my-e/

Against Quackery

Against Quackery

 

 

First published in two parts in The Sunday Statesman, September 23 2007, The Statesman September 24 2007

 

by

Subroto Roy

 

 

Manmohan and Sonia have violated Rajiv Gandhi’s intended reforms; the Communists have been appeased or bought; the BJP is incompetent

 

 

WASTE, fraud and abuse are inevitable in the use and allocation of public property and resources in India as elsewhere, but Government is supposed to fight and resist such tendencies. The Sonia-Manmohan Government have done the opposite, aiding and abetting a wasteful anti-economics ~ i.e., an economic quackery. Vajpayee-Advani and other Governments, including Narasimha-Manmohan in 1991-1996, were just as complicit in the perverse policy-making. So have been State Governments of all regional parties like the CPI-M in West Bengal, DMK/ AIADMK in Tamil Nadu, Congress/NCP/ BJP/Sena in Maharashtra, TDP /Congress in Andhra Pradesh, SP/BJP/BSP in Uttar Pradesh etc. Our dismal politics merely has the pot calling the kettle black while national self-delusion and superstition reign in the absence of reason.

 

 

The general pattern is one of well-informed, moneyed, mostly city-based special interest groups (especially including organised capital and organised labour) dominating government agendas at the cost of ill-informed, diffused anonymous individual citizens ~ peasants, small businessmen, non-unionized workers, old people, housewives, medical students etc. The extremely expensive “nuclear deal” with the USA is merely one example of such interest group politics.

 

 

Nuclear power is and shall always remain of tiny significance as a source of India’s electricity (compared to e.g. coal and hydro); hence the deal has practically nothing to do with the purported (and mendacious) aim of improving the country’s “energy security” in the long run. It has mostly to do with big business lobbies and senior bureaucrats and politicians making a grab, as they always have done, for India’s public purse, especially access to foreign currency assets. Some $300 million of India’s public money had to be paid to GE and Bechtel Corporation before any nuclear talks could begin in 2004-2005 ~ the reason was the Dabhol fiasco of the 1990s, a sheer waste for India’s ordinary people. Who was responsible for that loss? Pawar-Mahajan-Munde-Thackeray certainly but also India’s Finance Minister at the time, Manmohan Singh, and his top Finance Ministry bureaucrat, Montek Ahluwalia ~ who should never have let the fiasco get off the ground but instead actively promoted and approved it.

 

 

Cost-benefit analysis prior to any public project is textbook operating procedure for economists, and any half-competent economist would have accounted for the scenario of possible currency-depreciation which made Dabhol instantly unviable. Dr Singh and Mr Ahluwalia failed that test badly and it cost India dearly. The purchase of foreign nuclear reactors on a turnkey basis upon their recommendation now reflects similar financial dangers for the country on a vastly larger scale over decades.

 

 

Our Government seems to function most expeditiously in purchasing foreign arms, aircraft etc ~ not in improving the courts, prisons, police, public utilities, public debt. When the purchase of 43 Airbus aircraft surfaced, accusations of impropriety were made by Boeing ~ until the local Airbus representative said on TV that Boeing need not complain because they were going to be rewarded too and soon 68 aircraft were ordered from Boeing!

 

 

India imports all passenger and most military aircraft, besides spare parts and high-octane jet fuel. Domestic aviation generates near zero forex revenues and incurs large forex costs ~ a debit in India’s balance of payments. Domestic airline passengers act as importers subsidised by our meagre exporters of textiles, leather, handicrafts, tea, etc. What a managerially-minded PM and Aviation Minister needed to do before yielding to temptations of buying new aircraft was to get tough with the pampered managements and unions of the nationalized airlines and stand up on behalf of ordinary citizens and taxpayers, who, after all, are mostly rail or road-travellers not jet-setters.

 

 

The same pattern of negligent policy-behaviour led Finance Minister P. Chidambaram in an unprecedented step to mention in his 2007 Union Budget Speech the private American companies Blackstone and GE ~ endorsing the Ahluwalia/Deepak Parekh idea that India’s forex reserves may be made available to be lent out to favoured private businesses for purported “infrastructure” development. We may now see chunks of India’s foreign exchange reserves being “borrowed” and never returned ~ a monumental scam in front of the CBI’s noses.

 

 

The Reserve Bank’s highest echelons may have become complicit in all this, permitting and encouraging a large capital flight to take place among the few million Indians who read the English newspapers and have family-members abroad. Resident Indians have been officially permitted to open bank accounts of US $100,000 abroad, as well as transfer gifts of $50,000 per annum to their adult children already exported abroad ~ converting their largely untaxed paper rupees at an artificially favourable exchange-rate.

 

 

In particular, Mr Ratan Tata (under a misapprehension he may do whatever Lakshmi Mittal does) has been allowed to convert Indian rupees into some US$13,000,000,000 to make a cash purchase of a European steel company. The same has been allowed of the Birlas, Wipro, Dr Reddy’s and numerous other Indian corporations in the organised sector ~ three hundred million dollars here, five hundred million dollars there, etc. Western businessmen now know all they have to do is flatter the egos of Indian boxwallahs enough and they might have found a buyer for their otherwise bankrupt or sick local enterprise. Many newcomers to New York City have been sold the Brooklyn Bridge before. “There’s a sucker born every minute” is the classic saying of American capitalism.

 

 

The Sonia-Manmohan Government, instead of hobnobbing with business chambers, needed to get Indian corporations to improve their accounting, audit and governance, and reduce managerial pilfering and embezzlement, which is possible only if Government first set an example.

 

 

Why have Indian foreign currency reserves zoomed up in recent years? Not mainly because we are exporting more textiles, tea, software engineers, call centre services or new products to the world, but because Indian corporations have been allowed to borrow abroad, converting their hoards of paper rupees into foreign debt. Forex reserves are a residual in a country’s international balance of payments and are not like tax-resources available to be spent by Government; India’s reserves largely constitute foreign liabilities of Indian residents. This may bear endless repetition as the PM and his key acolytes seem impervious to normal postgraduate-level economics textbooks.

 

 

Other official fallacies include thinking India’s savings rate is near 32 per cent and that clever bureaucratic use of it can cause high growth. In fact, real growth arises not because of what politicians and bureaucrats do but because of spontaneous technological progress, improved productivity and learning-by-doing of the general population ~ mostly despite not because of an exploitative parasitic State. What has been mismeasured as high savings is actually expansion of bank-deposits in a fractional reserve banking system caused by runaway government deficit-spending.

 

 

Another fallacy has been that agriculture retards growth, leading to nationwide politically-backed attempts at land-grabbing by wily city industrialists and real estate developers. In a hyperinflation-prone economy with wild deficit-spending and runaway money-printing, cheating poor unorganised peasants of their land, when that land is an asset that is due to appreciate in value, has seemed like child’s play.

 

 

What of the Opposition? The BJP/RSS have no economists who are not quacks though opportunists were happy to say what pleased them to hear when they were in power; they also have much implicit support among organised business lobbies and the anti-Muslim senior bureaucracy. The official Communists have been appeased or bought, sometimes so cheaply as with a few airline tickets here and there. The nonsensical “Rural Employment Guarantee” is descending into the wasteland of corruption it was always going to be. The “Domestic Violence Act” as expected has started to destroy India’s families the way Western families have been destroyed. The Arjun-DMK OBC quota corrodes higher education further from its already dismal state. All these were schemes that Congress and Communist cabals created or wholeheartedly backed, and which the BJP were too scared or ignorant to resist.

 

 

And then came Singur and Nandigram ~ where the sheer greed driving the alliance between the Sonia-Manmohan-Pranab Congress and the CPI-M mask that is Buddhadeb, came to be exposed by a handful of brave women like Mamata and Medha.

 

 

A Fiscal U-Turn is Needed For India to Go in The Right Economic Direction

 

Rajiv Gandhi had a sense of noblesse oblige out of remembrance of his father and maternal grandfather. After his assassination, the comprador business press credited Narasimha Rao and Manmohan Singh with having originated the 1991 economic reform. In May 2002, however, the Congress Party itself passed a resolution proposed by Digvijay Singh explicitly stating Rajiv and not either of them was to be so credited. The resolution was intended to flatter Sonia Gandhi but there was truth in it too. Rajiv, a pilot who knew no political economy, was a quick learner with intelligence to know a good idea when he saw one and enough grace to acknowledge it.

 

 

Rule of Law

 

The first time Dr Manmohan Singh’s name arose in contemporary post-Indira politics was on 22 March 1991 when M K Rasgotra challenged the present author to answer how Dr Singh would respond to proposals being drafted for a planned economic liberalisation that had been authorised by Rajiv, as Congress President and Opposition Leader, since September 1990. It was replied that Dr Singh’s response was unknown and he had been heading the “South-South Commission” for Tanzania’s Julius Nyerere, while what needed to be done urgently was make a clear forceful statement to restore India’s credit-worthiness and the confidence of international markets, showing that the Congress at least knew its economics and was planning to take bold new steps in the direction of progress.

 

 

There is no evidence Dr Singh or his acolytes were committed to any economic liberalism prior to 1991 as that term is understood worldwide, and scant evidence they have originated liberal economic ideas for India afterwards. Precisely because they represented the decrepit old intellectual order of statist ”Ma-Bap Sarkari” policy-making, they were not asked in the mid-1980s to be part of a “perestroika-for-India” project done at a foreign university ~ the results of which were received, thanks to Siddhartha Shankar Ray, by Rajiv Gandhi in hand at 10 Janpath on 18 September 1990 and specifically sparked the change in the direction of his economic thinking.

 

 

India is a large, populous country with hundreds of millions of materially poor citizens, a weak tax-base, a vast internal and external public debt (i.e. debt owed by the Government to domestic and foreign creditors), massive annual fiscal deficits, an inconvertible currency, and runaway printing of paper-money. It is unsurprising Pakistan’s economy is similar, since it is born of the same land and people. Certainly there have been real political problems between India and Pakistan since the chaotic demobilisation and disintegration of the old British Indian Army caused the subcontinent to plunge into war-like or “cold peace” conditions for six decades beginning with a bloody Partition and civil war in J&K. High military expenditures have been necessitated due to mutual and foreign tensions, but this cannot be a permanent state if India and Pakistan wish for genuine mass economic well-being.

 

 

Even with the continuing mutual antagonism, there is vast scope for a critical review of Indian military expenditures towards greatly improving the “teeth-to-tail” ratio of its fighting forces. The abuse of public property and privilege by senior echelons of the armed forces (some of whom have been keen most of all to export their children preferably to America) is also no great secret.

 

 

On the domestic front, Rajiv was entirely convinced when the suggestion was made to him in September 1990 that an enormous infusion of public resources was needed into the judicial system for promotion and improvement of the Rule of Law in the country, a pre-requisite almost for a new market orientation. Capitalism without the Rule of Law can quickly degenerate into an illiberal hell of cronyism and anarchy which is what has tended to happen since 1991.

 

 

The Madhava Menon Committee on criminal justice policy in July proposed a Hong Kong model of “a single high-tech integrated Criminal Justice complex in every district headquarters which may be a multi-storied structure, devoting the ground floor for the police station including a video-installed interrogation room; the first floor for the police-lockups/sub-jail and the Magistrate’s Court; the second floor for the prosecutor’s office, witness rooms, crime laboratories and legal aid services; the third floor for the Sessions Court and the fourth for the administrative offices etc…. (Government of India) should take steps to evolve such an efficient model… and not only recommend it to the States but subsidize its construction…” The question arises: Why is this being proposed for the first time in 2007 after sixty years of Independence? Why was it not something designed and implemented starting in the 1950s?

 

 

The resources put since Independence to the proper working of our judiciary from the Supreme Court and High Courts downwards have been abysmal, while the state of prisons, borstals, mental asylums and other institutions of involuntary detention is nothing short of pathetic. Only police forces, like the military, paramilitary and bureaucracies, have bloated in size.

 

 

Neither Sonia-Manmohan nor the BJP or Communists have thought promotion of the Rule of Law in India to be worth much serious thought ~ certainly less important than attending bogus international conclaves and summits to sign expensive deals for arms, aircraft, reactors etc. Yet Rajiv Gandhi, at a 10 Janpath meeting on 23 March 1991 when he received the liberalisation proposals he had authorized, explicitly avowed the importance of greater resources towards the Judiciary. Dr Singh and his acolytes were not in that loop, indeed they precisely represented the bureaucratic ancien regime intended to be changed, and hence have seemed quite uncomprehending of the roots of the intended reforms ever since 1991.

 

 

Similarly, Rajiv comprehended when it was said to him that the primary fiscal problem faced by India is the vast and uncontrolled public debt, interest payments on which suck dry all public budgets leaving no room for provision of public goods.

 

 

 

Government accounts


Government has been routinely “rolling over” its domestic debt in the asset-portfolios of the nationalised banks while displaying and highlighting only its new additional borrowing in a year as the “Fiscal Deficit”. More than two dozen States have been doing the same and their liabilities ultimately accrue to the Union too. The stock of public debt in India is Rs 30 trillion (Rs 30 lakh crore) at least, and portends a hyperinflation in the future.

 

 

There has been no serious recognition of this since it is political and bureaucratic actions that have been causing the problem. Proper recognition would entail systematically cleaning up the budgets and accounts of every single governmental entity in the country: the Union, every State, every district and municipality, every publicly funded entity or organisation, and at the same time improving public decision-making capacity so that once budgets and accounts recover from grave sickness over decades, functioning institutions exist for their proper future management. All this would also stop corruption in its tracks, and release resources for valuable public goods and services like the Judiciary, School Education and Basic Health. Institutions for improved political and administrative decision-making are needed throughout the country if public preferences with respect to raising and allocating common resources are to be elicited and then translated into actual delivery of public goods and services. Our dysfunctional legislatures will have to do at least a little of what they are supposed to. When public budgets and accounts are healthy and we have functioning public goods and services, macroeconomic conditions would have been created for the paper-rupee to once more become a money as good as gold ~ a convertible world currency for all of India’s people, not merely the metropolitan special interest groups that have been controlling our governments and their agendas.

Posted in Accounting and audit, asymmetric information, Banking, Big Business and Big Labour, BJP, Communists, Congress Party, Deposit multiplication, DMK, Economic Policy, Economic quackery, Economics of Public Finance, Governance, Government accounting, Government Budget Constraint, Government of India, India's Big Business, India's savings rate, India's stock and debt markets, India's 1991 Economic Reform, India's aviation, India's balance of payments, India's Banking, India's Budget, India's Capital Markets, India's communists, India's corporate governance, India's corruption, India's Democracy, India's Economic History, India's Economy, India's Energy, India's Exports, India's Families, India's Foreign Exchange Reserves, India's Foreign Trade, India's Government Budget Constraint, India's Government Expenditure, India's Industry, India's inflation, India's Judiciary, India's Land, India's Macroeconomics, India's Monetary & Fiscal Policy, India's nomenclatura, India's political lobbyists, India's Politics, India's Polity, India's pork-barrel politics, India's poverty, India's Public Finance, India's Reserve Bank, India's State Finances, India's Union-State relations, India-Pakistan peace process, India-US Nuclear Deal, Indira Gandhi, Inflation, Interest group politics, Mamata Banerjee, Manmohan Singh, Mendacity in politics, Non-Resident Indians, Pakistan, Balochistan, Afghanistan, Iran, Political corruption, Political cynicism, Political Economy, Political mendacity, Political Philosophy, Politics, Pork-barrel politics, Power-elites and nomenclatura, Public Choice/Public Finance, Public property waste fraud, Rajiv Gandhi, Reason, Redeposits, Singur and Nandigram, Sonia Gandhi, Unorganised capital markets, Welfare Economics. 2 Comments »

An Open Letter to Professor Amartya Sen about Singur etc

A letter to Prof. Sen

First published in The Statesman 31 July 2007, Editorial Page Special Article

Professor Amartya Sen, Harvard University

Dear Professor Sen,

Everyone will be delighted that someone of your worldwide stature has joined the debate on Singur and Nandigram; The Telegraph deserves congratulations for having made it possible on July 23.

I was sorry to find though that you may have missed the wood for the trees and also some of the trees themselves. Perhaps you have relied on Government statements for the facts. But the Government party in West Bengal represents official Indian communism and has been in power for 30 years at a stretch. It may be unwise to take at face-value what they say about their own deeds on this very grave issue! Power corrupts and absolute power corrupts absolutely, and there are many candid communists who privately recognise this dismal truth about themselves. To say this is not to be praising those whom you call the “Opposition” ~ after all, Bengal’s politics has seen emasculation of the Congress as an opposition because the Congress and communists are allies in Delhi. It is the Government party that must reform itself from within sua sponte for the good of everyone in the State.

The comparisons and mentions of history you have made seem to me surprising. Bengal’s economy now or in the past has little or nothing similar to the economy of Northern England or the whole of England or Britain itself, and certainly Indian agriculture has little to do with agriculture in the new lands of Australia or North America. British economic history was marked by rapid technological innovations in manufacturing and rapid development of social and political institutions in context of being a major naval, maritime and mercantile power for centuries. Britain’s geography and history hardly ever permitted it to be an agricultural country of any importance whereas Bengal, to the contrary, has been among the most agriculturally fertile and hence densely populated regions of the world for millennia.

Om Prakash’s brilliant pioneering book The Dutch East India Company and the Economy of Bengal 1630-1720 (Princeton 1985) records all this clearly. He reports the French traveller François Bernier saying in the 1660s “Bengal abounds with every necessary of life”, and a century before him the Italian traveller Verthema saying Bengal “abounds more in grain, flesh of every kind, in great quantity of sugar, also of ginger, and of great abundance of cotton, than any country in the world”. Om Prakash says “The premier industry in the region was the textile industry comprising manufacture from cotton, silk and mixed yarns”. Bengal’s major exports were foodstuffs, textiles, raw silk, opium, sugar and saltpetre; imports notably included metals (as Montesquieu had said would always be the case).

Bengal did, as you say, have industries at the time the Europeans came but you have failed to mention these were mostly “agro-based” and, if anything, a clear indicator of our agricultural fecundity and comparative advantage. If “deindustrialization” occurred in 19th Century India, that had nothing to do with the “deindustrialization” in West Bengal from the 1960s onwards due to the influence of official communism.

You remind us Fa Hiaen left from Tamralipta which is modern day Tamluk, though he went not to China but to Ceylon. You suggest that because he did so Tamluk effectively “was greater Calcutta”. I cannot see how this can be said of the 5th Century AD when no notion of Calcutta existed. Besides, modern Tamluk at 22º18’N, 87º56’E is more than 50 miles inland from the ancient port due to land-making that has occurred at the mouth of the Hooghly. I am afraid the relevance of the mention of Fa Hiaen to today’s Singur and Nandigram has thus escaped me.

You say “In countries like Australia, the US or Canada where agriculture has prospered, only a very tiny population is involved in agriculture. Most people move out to industry. Industry has to be convenient, has to be absorbing”. Last January, a national daily published a similar view: “For India to become a developed country, the area under agriculture has to shrink, urban and industrial land development has to take place, and about 100 million workers have to move out from agriculture into industry and services. This is the only way forward for bringing prosperity to the rural population”.

Rice is indeed grown in Arkansas or Texas as it is in Bengal but there is a world of difference between the technological and geographical situation here and that in the vast, sparsely populated New World areas with mechanized farming! Like shoe-making or a hundred other crafts, agriculture can be capital-intensive or labour-intensive ~ ours is relatively labour-intensive, theirs is relatively capital-intensive. Our economy is relatively labour-abundant and capital-scarce; their economies are relatively labour-scarce and capital-abundant (and also land-abundant). Indeed, if anything, the apt comparison is with China, and you doubtless know of the horror stories and civil war conditions erupting across China in recent years as the Communist Party and their businessman friends forcibly take over the land of peasants and agricultural workers, e.g. in Dongzhou.

All plans of long-distance social engineering to “move out” 40 per cent of India’s population (at 4 persons per “worker”) from the rural hinterlands must also face FA Hayek’s fundamental question in The Road to Serfdom: “Who plans whom, who directs whom, who assigns to other people their station in life, and who is to have his due allotted by others?”

Your late Harvard colleague, Robert Nozick, opened his brilliant 1974 book Anarchy, State and Utopia saying: “Individuals have rights, and there are things no person or group may do to them (without violating their rights)”. You have rightly deplored the violence seen at Singur and Nandigram. But you will agree it is a gross error to equate violence perpetrated by the Government which is supposed to be protecting all people regardless of political affiliation, and the self-defence of poor unorganised peasants seeking to protect their meagre lands and livelihoods from state-sponsored pogroms. Kitchen utensils, pitchforks or rural implements and flintlock guns can hardly match the organised firepower controlled by a modern Government.

Fortunately, India is not China and the press, media and civil institutions are not totally in the hands of the ruling party alone. In China, no amount of hue and cry among the peasants could save them from the power of organised big business and the Communist Party. In India, a handful of brave women have managed to single-handedly organise mass movements of protest which the press and media have then broadcast that has shocked the whole nation to its senses.

You rightly say the land pricing process has been faulty. Irrelevant historical prices have been averaged when the sum of discounted expected future values in an inflationary economy should have been used. Matters are even worse. “The fear of famine can itself cause famine. The people of Bengal are afraid of a famine. It was repeatedly charged that the famine (of 1943) was man-made.” That is what T. W. Schultz said in 1946 in the India Famine Emergency Committee led by Pearl Buck, concerned that the 1943 Bengal famine should not be repeated following dislocations after World War II. Of course since that time our agriculture has undergone a Green Revolution, at least in wheat if not in rice, and a White Revolution in milk and many other agricultural products. But catastrophic collapses in agricultural incentives may still occur as functioning farmland comes to be taken by government and industry from India’s peasantry using force, fraud or even means nominally sanctioned by law. If new famines come to be provoked because farmers’ incentives collapse, let future historians know where responsibility lay.

West Bengal’s real economic problems have to do with its dismal macroeconomic and fiscal position which is what Government economists should be addressing candidly. As for land, the Government’s first task remains improving grossly inadequate systems of land-description and definition, as well as the implementation and recording of property rights.

With my most respectful personal regards, I remain

Yours ever

Suby

Political Stonewalling

Political Stonewalling
Only Transparency Can Improve Institutions

By Subroto Roy

First published in The Statesman, July 20 2007, Editorial Page Special Article http://www.thestatesman.net


“Stonewalling” has come to mean being continually evasive and misleading in politics by, for example, parroting a party line against fair public inquiry or criticism. “I want you to stonewall it”, was Richard Nixon’s infamous instruction during Watergate. (The original meaning was not ignoble: General T. J. “Stonewall” Jackson, during the US Civil War stayed on his horse under constant fire, taking all the bullets “like a stonewall” until he was killed.)

Stonewalling is what we are likely ever to receive from Pratibha Patil and the present day Congress Party. It is not as if India and the world will not survive if she becomes our President. Rashtrapati Bhavan has had undistinguished occupants before, even ones with clouds of disreputable or nefarious public deeds hanging over their heads. All that will happen is that our political institutions shall retrogress for five years; a pity but not something catastrophic in view of our long history ~ Nadir Shah’s brief stay set the standard for catastrophic behaviour in Delhi.

“Individuals may form communities, but it is institutions alone that can create a nation”, said Disraeli. Nation-building would become that much harder, our pessimism and disillusionment about whether we will ever succeed would become that much greater.

Corrosion
The corrosion of our political, financial, academic and other public institutions over decades has been something in which all our official political parties and religious formations are hand-in-glove complicit. In the case of Pratibha Patil, it is the PM and UPA Chair who are directly responsible for the institutional corrosion taking place in full view of all with respect to the highest office of the land.

But then Dr Manmohan Singh, despite his sojourns as a young social scientist in Britain, has not cared a hoot that the Prime Minister in a parliamentary democracy must seek to be an elected member of the House of the People. Also, ever since 1991, he has permitted the flattering fiction to develop that he or any of his acolytes had something to do with the origins of the economic reform.  As for Sonia Gandhi, her list of naïve misjudgements only grows longer ~ cardinal among them being her having apparently retained as trusted advisers around her persons who had been warned about the vulnerability of her husband to assassination. Had Rajiv not been assassinated, Sonia would have been today merely a happy grandmother and not India’s purported ruler.

Stonewalling has become standard government practice in 21st century India across party-lines. The BJP stonewalled after the post-Godhra pogrom in 2002 and held none of its own responsible; the CPI-M has done precisely the same after the Nandigram pogrom a few months ago.

In October 2005, the Supreme Court ~ proving yet again that there are or can be institutions which do work in India ~ found the Union Government had behaved unconstitutionally. Lesson 101 of Constitutional Politics says: If you are uncertain whether a head of government commands confidence, ask him/her to prove his majority on the floor of the house. Instead the Sonia-Manmohan Government had launched a pre-emptive putsch against an aspirant for a democratic majority in a State assembly. What Sonia-Manmohan should have done in response to the Supreme Court’s finding was to recall or transfer the apparent culprit, and express regret to Parliament and the Court. That would have ended the matter and also engendered some moral growth in the polity. What they did instead was stonewall. Worse stonewalling was to follow from the whole of Parliament itself in the “office-for-profit” scandal.

Aristotle said politics was the supreme good because the ends of all other activities are subsumed in politics. This means that if the politics of a national society gets corroded, so does everything else. It is because India’s politics have become rotten, that our financial, academic and other institutions have followed.

The private American “equity group” Blackstone recently purchased Hilton Hotels for 26 thousand million American dollars cash. Why is that significant to Indians? Because India’s Finance Minister, P. Chidambaram, took the unprecedented step of naming Blackstone along with one private Indian citizen, Deepak Parekh in his February 2007 Budget Speech. He referred to a Government of India financial scheme by which favoured private businesses can “borrow” India’s foreign exchange reserves to pay for purchases of foreign assets. The same Reserve Bank of India which cracked down on Pratibha Patil’s dubious bank-dealings has now been bullied into allowing India’s foreign exchange reserves to be “borrowed” ~ and quite possibly never to be returned. Furthermore, foreign exchange reserves are not like tax-revenues but largely constitute already borrowed funds!
In academia, Mr Arjun Singh tyrannises defenceless medical students but presides (like his predecessor Dr Murli Manohar Joshi) over appointments at national institutes of full professors without postgraduate degrees or any experience of teaching or research. The Union Finance and Education Ministers report in the Government and their party to the PM and the UPA Chair. But neither Dr Singh nor Mrs Gandhi can have any effective control over the rot in India’s macroeconomic, financial, academic or other institutions when they are presiding over political rot themselves.

Shameless behaviour

Stonewalling is the political behavour of the shameless. Shame used to be a cultural means of political self-control in traditional societies. Modern politics makes a distinction between private and public domains, and says that transmuting valuable public property of any kind into private wealth or advantage constitutes nefarious corruption. It is possible our subcontinent has not wished to or has not yet entered the world of modern politics. Instead we remain feudal in our political behaviour ~ where large rival clans perpetually battle over what is the ill-defined common property of the realm. In Pakistan and Bangladesh, the militaries predominate and participate in this feuding. In India the feuds take place within a framework which outwardly seems democratic with institutions of a free society like a free press and official civilian control of the military. Our feuds are between three large rival clans: the Indira-Sonia Patriarchal Matriarchs, the Hindu Patriarchs, and the Communist Matriarchal Patriarchs. The Congress, BJP and Communists are yet to become modern parties, and unless and until they do, our politics shall remain in retrogression.


Political Paralysis

POLITICAL PARALYSIS

India has yet to develop normal conservative, liberal and socialist parties. The Nice-Housing-Effect and a little game-theory may explain the current stagnation

By SUBROTO ROY

First published in The Sunday Statesman, Editorial Page Special Article, June 24 2007, http://www.thestatesman.net

THE theatrics surrounding the choice of presidential candidates refer to the highest and most dignified office of the land. Otherwise, India’s public would have been justified to think we were watching an absurd farce. Even so, lessons may be learnt about the nature of our polity, especially our purported Government and its purported Opposition.

Consider first how the name of the Congress’s candidate apparently arose. “Why don’t you think of Pratibha Patil?” was the rhetorical suggestion apparently made by Manmohan Singh to Sonia Gandhi at a joint meeting of the UPA and Left where no other person could be agreed upon. What could have been the emotional state of the Prime Minister of India in addressing such a question to its specific addressee? It had to be the same unconscious perplexity and mental contradiction he has experienced throughout the UPA Government, saying to himself: “I am the Prime Minister but I am not the Prime Minister, I am the Head of India’s Government but I am not the Head of India’s Government”.

Instead of leading the country as he was chosen to do in the belief he possessed some superior wisdom and capability for the job, Dr Singh has constantly deferred to and followed the person who chose him to lead. The Head of Government in our system recommends an appropriate Head of State. If Dr Singh truly felt himself India’s leader, not merely someone permitted for some time to enjoy the office and perquisites of India’s Prime Minister and being nominally referred to as such, he could have said: “I think we should consider Pratibha Patil, what say all of you?”

Such words would have displayed too much assertiveness in the presence of Sonia Gandhi, too much leadership from someone flatteringly described as mild and gentle but unflatteringly described as obsequious in the face of power. It is the same excess of deference displayed when he allows himself to be bullied or insulted by the DMK or receive the open contempt of his own Cabinet ministers. Dr Singh has just returned from the so-called “G-8 summit” where he was an invitee. In a group photo standing above and behind the American President, Dr Singh was seen gently touching George Bush on the shoulder as if Bush was a rich younger brother who needed a lift in spirits. Afterwards Dr Singh reportedly said the summit was useless ~ from his long bureaucratic experience he should have known that long beforehand, and declined to waste India’s time there. But then Europe is nice this time of year when Delhi is so hot. China is next on his itinerary, and he will surely not want to miss the Great Wall despite China’s continuing insults.

What the Pratibha episode reveals about Sonia Gandhi is her continuing bewilderment and confusion about the parameters of her life since her husband’s assassination sixteen years ago. There is a very simple candid explanation why, after her years in mourning, she entered politics following the Sitaram Kesri period: she and her children could not financially sustain a lifestyle to which they had become accustomed at 10 Janpath except as part of India’s politics via the Congress Party. Running the Rajiv Gandhi Foundation was not enough, and Rahul Gandhi’s income in a normal private sector career would have been unexceptional. Hence the lure of power has remained strong and cannot be walked away from even if walking away would be the right thing to do for sake of the political health of the Congress Party ~ which would finally have to grow up, find some political principles, and develop some normal processes of internal competition.

When Pratibha Patil’s name was mentioned for the first time in this manner, the rational course of action for the UPA Chair would have been to say, wait, if we are now thinking about a woman definitely, may we please have two or three such names to consider for a few days? But it was Dr Singh mentioning the name, and his supposed wisdom is what Sonia Gandhi believes, in her bewilderment, she should defer to, so she agreed at once in a parallel state of mental confusion as his: “I am India’s Leader but I am not India’s Leader”. Hence Pratibha Patil becomes the nominee. A little “game-theory” may help to explain the outcome (see table).

The paralysis and/or sclerosis of the Congress’s thinking processes is matched by the BJP and Communists. If Sonia Gandhi could bring herself to walk away from Indian politics, a genuine leadership contest in the Congress would have to occur for the first time in decades. Similarly, if Atal Behari Vajpayee and Lal Krishna Advani could bring themselves to honestly walk away from BJP politics, there would have to be a genuine leadership contest and some new principles emerging in their party. There is an excellent and very simple political reason for Vajpayee and Advani to go, which is not that they are too old (which they are) but that they led their party to electoral defeat. Had they walked away in May 2004, there might have been by now some viable conservative political philosophy in India and some recognisable new alternative leadership for 2009. Instead there is none and the BJP has not only failed very badly at being a responsible Opposition, it will go into the 2009 General Election looking exceptionally decrepit and incompetent.

Indeed, Vajpayee and Advani may not have walked away for the same reason as Sonia Gandhi, namely, the “10 Janpath Effect” or what may be generalised to the “Nice-New Delhi-Government-Housing-Effect”. Besides, like our ageing cricketers, cinema stars, playback singers and tons of ageing bureaucrats and corporate executives, where would they go, what would they do, how would they live, what do they know how to do if they were not doing what they have been doing for so long? Golf and grandchildren is the usual American formula.

In case of the Communists, it is not electoral but ideological defeat, indeed ideological annihilation, that their leaders have led them into. When was the last time we heard our Communist leaders extolling Marx, Engels, Lenin, Stalin, Mao, Zhou or even Fidel Castro? Not for a long time. The bankruptcy of official communism is obvious even to them, at least in their candid moments in front of the mirror every morning. Even for the CPI and CPI(M) to merge into a genuine modern socialist party is too creative and productive an outcome to be handled since top and middle management retrenchments would be inevitable. Also, the Cannot-Leave-Nice-Housing-Effect applies here too, and so the most we find by way of communist transformation is a perverse alliance with organised big business in trying to cheat very poor and unorganised peasants of their land in an economy where runaway paper money printing threatens a hyperinflation.

Nobody in power wants to address the rotten state of our public finances, since all of them have contributed to causing the stench. Our Finance Minister finds time to attend posh parties and publish books while presiding over an RBI-supported capital flight of India’s super-rich: “ultrahigh networth individuals are looking forward to buy overseas equities and real estate” Business Standard (25 April 2007) blithely said. The Finance Minister should have been instead burning the midnight candle getting public budgets and government accounting cleaned and healthy nationwide.

We in India have had more than enough time and democratic experience to have developed by now a set of normal conservative, liberal democrat, social democrat and socialist parties. That we have nothing of the kind speaks to the rot in the political culture we are witnessing in our capital and other major cities. Politically, we may be in for an especially ugly, unpleasant and incoherent few years starting with the presidential election currently underway.

Unhealthy Delhi

Unhealthy Delhi

When will normal political philosophy replace personality cults?

by Subroto Roy

First published in The Statesman, Editorial Page Special Article, June 11 2007,

A decade after Solzhenitsyn’s classic 1962 memoir One day in the life of Ivan Denisovitch, an ambitious young Delhi photographer published a hagiography called A life in the day of Indira Gandhi. Indira was shown gambolling with her little grandchildren, guiding her dutiful daughter-in-law, weeping for her father, greeting her loyal subjects from around India, reprimanding her ingratiating sycophants, imperiously silent during political meetings, smiling and scolding alternately at press conferences, and of course standing in victory at Shimla beside the defeated Bhutto. “Indira is India” the sycophantic slogan went, and the cult of her personality was one of showing her as omniscient and omnipotent in all earthly matters of Indian politics.

She had indeed fought that rarest of things in international law: the just war. Supported by the world’s strongest military, an evil enemy had made victims of his own people. Indira tried patiently on the international stage to avert war, but also chose her military generals well and took their professional judgement seriously as to when to fight if it was inevitable and how to win. Finally she was magnanimous (to a fault) towards the enemy ~ who was not some stranger to us but our own estranged brother and cousin.

It seemed to be her and independent India’s finest hour. A fevered nation was thus ready to forgive and forget her catastrophic misdeeds until that time, like bank-nationalization and the start of endless deficit-finance and unlimited money-printing, a possible cause of monetary collapse today four decades later under Manmohan Singh whose career as an economic bureaucrat began at that time.

Hitler, Stalin, Mao

Modern personality cults usually have had some basis in national heroism. In Indira’s case it was the 1971 war. Hitler, Stalin and Mao were seen or portrayed as war heroes too. Because there has been leadership in time of war or national crisis, nervous anxious masses extend their hopes and delusions to believe such a leader has answers to everything. The propaganda machinery available as part of modern state apparatus then takes over, and when it is met on behalf of the citizenry with no more than a compliant docile ingratiating mass media, the public image comes to be formed of a parental god-like figure who will protect and guide the community to its destiny.

Beneath this public image, the cunning play of self-interest by anonymous underlings in the allocation of public resources continues unabated, and so it is possible some truth attaches to the idea that an individual leader is not as responsible for evil misdeeds or depredations done by “the party” in his/her name.

In the Indian case, hero-worship and ancestor-worship are part of the culture of all our major religions. Hence we have parades of parliamentarians garlanding or throwing flowers and paying obeisance at this or that statue or oil-painting or photograph regularly ~ though as a people we have yet to produce rigorous intellectual biographies of any major figures of our own modern history, comparable to, say, Judith Brown’s work on Gandhi or Ayesha Jalal’s on Jinnah.

Indira continued to dominate our political culture until her assassination more than a decade later, but there was hardly a shred of political or economic good in what she left the country. Her elder son (leaving aside his blunders in Sri Lanka, J&K etc.) did have the sense to initiate fundamental change in his party’s economic thinking when he found a chance to do so in the months before his own assassination.

Rajiv was the son of Feroze Gandhi too and a happy family man; he seemed not to have psychological need for as much of the kind of personality cult his mother clearly loved to indulge in. It is not clear if his widow is today trying to follow his example or his mother’s ~ certainly, the party that goes by the name of Indian National Congress would like to relive for a second time the worst of the Indira personality cult around Sonia Gandhi. And Rahul Gandhi, instead of seeking to develop or display any talent as befits a young man, has shown disconcerting signs of longing for the days of his grandmother’s personality cult to return. He may have been more effective pursuing a normal career in the private sector.

The Congress’s perpetual tendency towards personality cults has extended by imitation to other political parties in New Delhi and the States. Atal Behari Vajpayee at his peak as PM did not find it at all uncomfortable to be portrayed by his sycophants as a wise, heroic and loving father-figure of the nation ~ an image shattered when, immediately after perfunctorily commiserating the Godhra and post-Godhra horrors, he was pictured fashionably on a Singapore golf-cart sporting designer sunglasses.

India’s organised communists make a great show of collective decision-making since they most intimately followed the details of Kruschev’s denunciation of Stalin’s personality cult. It has not stopped them routinely genuflecting to China’s communists. There also has been a communist tendency to deny individual merit and creativity at junior levels and instead appropriate all good things for the party bosses. New brilliant faces will never arise in the Left and we may be condemned to see the usual characters in perpetuity. If personality cults around Jyoti Basu or Buddhadeb Bhattacharya have failed to thrive it has not been through lack of trying on part of the publicly paid communist intelligentsia and their docile artists, but rather because of resistance from Bengal’s newspapers and a few clear-headed journalists and well known opposition politicians.

Tamil Nadu has seen grotesque rivalry between Karunanidhi and Jayalalitha as to whose personality cult can alternately outdo the other, supplanting all normal political economy or attempts at discovery of the public interest. In Andhra Pradesh, Maharashtra, J&K, Bihar and Uttar Pradesh (but not Gujarat or Rajasthan lately), two-party democratic politics has succeeded in limiting tendencies for personality cults to develop. The North Eastern States have had inadequate coverage by modern media, which, fortuitously, along with tribal traditions, may have restrained personality cults from developing.

Facts explode cults

Facts are the most reliable means by which to explode personality cults. It is not a coincidence that facts are also the source by which to develop modern political philosophies, whether conservative, classical liberal/ libertarian, or socialist. Facts have to be discovered, ferreted out, analysed, studied and reflected upon by those civil institutions that are supposed to be doing so, namely university social science, economics and related departments, as well as responsible newspapers, radio and other mass media. Julian Benda once titled a book The Treason of the Intellectuals. India will begin to have a normal political philosophy when the treason of its modern intellectual classes begins to be corrected.

It is not a treason in which the state has been betrayed to an enemy. Rather it is one in which the very purposes of public conversation, such as the discovery of the public interest, have been betrayed in the interests of immediate private gain. This may help to explain why there is so little coherent public discussion in India today, and certainly almost nothing on television, or in the business papers or what passes for academia.

India and Her Neighbours

We & Our Neighbours
Pakistanis And Bangladeshis Would Do Well To Learn From Sheikh Abdullah

by Subroto Roy

First published in The Statesman May 15 2007, Editorial Page Special Article, http://www.thestatesman.net

Pakistan and Bangladesh, unlike ourselves in India, have yet to properly establish elementary constitutional institutions. “Individuals may form communities, but it is institutions alone that can create a nation”, said Benjamin Disraeli. The continual political chaos on the streets of Pakistan and Bangladesh ~ not just in recent weeks but in recent years and decades ~ indicate such institutions are still lacking or stillborn there. Tear gas, water cannon and hordes of armed policemen to charge at enraged stone-throwing crowds are not part of any solution but part of the political problem itself.

One main purpose of constitutional institutions has to do with peaceful transfer of power from one political party to its adversary. Mulayam Singh Yadav has just transferred political power to Mayawati in Uttar Pradesh, an Indian State more populous than either Pakistan or Bangladesh. Not long ago Lalu Prasad Yadav did the same to Nitish Kumar in Bihar, and Atal Behari Vajpayee to an appointee of Sonia Gandhi for all India itself. Modern democratic institutions are precisely about such peaceful transfers of power after voters have acted periodically to try to “throw the rascals out”.

Honeymoon period
It would be foolish to suppose an incoming Government of UP, Bihar or all India itself will be very much better than the one it displaces. But certainly in its first few “honeymoon” months or weeks at least, it will not be any worse. The tail-end of any scheduled democratic government, whether in India, Britain, the USA or elsewhere, is quite a disgusting sight, as those in their last days of power grab whatever they can from office before departure without any pretence of shame or embarrassment. Serious decision-making in the public interest would have long ago ceased. Almost anything new would be better.

At the same time, among those coming into power there will be some earnest wish at least to make some small difference for the better ~ a wish that will surely disappear within weeks of entering office after which the old cynicism and corruption will take hold again, and it will be the same ugly business as usual. But certainly, voters can expect slightly fresh air for a brief time after they have thrown one party out of power and chosen to bring in another. That is as about as good as democracy gets in modern practice.

Of India’s dozen or more larger States, we have, in the sixth decade of our Constitution, quite a few in which bipartisan democratic processes have been taking shape. UP was not one of them, and it is to Mayawati’s credit that she has broken the pattern of hung assemblies and now heads a majority government. Bihar too had seemed in the monolithic grip of Lalu Yadav until Nitish Kumar broke it, though the latter’s honeymoon period is now long over and it is business quite as usual there. Madhya Pradesh, Punjab, Maharashtra, Rajasthan, Haryana, Andhra Pradesh, Karnataka, Kerala and even J&K each have a noticeable bipartisan nature developing with at least one “national” party present to be counted. Tamil Nadu has been bipartisan but in an unhealthy way based on the personality cults of antagonistic leaders rather than any political principles or class-interests ~ which is a pity as the old Madras once had seemed a source of some new rationality in Indian politics. West Bengal’s voters have been definitely bipartisan, the communist vote being no more than that of the Congress and Trinamul combined. But for decades the local Congress has been notoriously sold down the river to its communist adversary by the Congress “leadership” in Delhi, and that has allowed an entrenched and wholly corrupted communist cultural and political mindset to rule in Kolkata. The Basu-Bhattacharjee Government was palpably bewildered over the Singur and Nandigram events because of their self-induced delusion about the economic and political realities of the State.

Throughout India though, periodic elections have acquired enough legitimacy to be accepted as the means of peaceful change of government. And with bipartisan politics there is a tendency for the median voter to be wooed at election-time.

We have of course many other continuing problems in our political economy ~ most notorious of which is the rotten state of our public finances and the continuous massive deficit finance that has ruined our paper currency and banking system ever since Indira Gandhi’s rule, coinciding with the start of Manmohan Singh’s career as an economic bureaucrat and Pranab Mukherjee’s as a politician in the early 1970s. Our acceptance of the democratic way has to an extent depended on our notoriously irresponsible macroeconomic policies ~ since every State and Union Government entity has been allowed to face no effective binding financial budget-constraint, and all its perverse decision-making can flow eventually into the swamp that is our Public Debt which constitutes the asset-side of the domestic banking system. India’s cardinal problem then becomes one of how to improve our macroeconomics without losing our democracy ~ something the Sonia-Manmohan-Pranab Congress, the BJP/RSS and the Communists are all equally clueless about.

Across our borders, our Pakistani and Bangladeshi cousins were cut from the same constitutional cloth as ourselves, namely the 1935 Government of India Act and the Montague-Chelmsford reforms before that. But after Jinnah’s death they refused to admit this and instead embarked on trying to write and implement a Constitution for a new Caliphate. The initial demand was “That the sovereignty in Pakistan belongs to God Almighty alone and that the Government of Pakistan shall administer the country as His agent”. In Rashid Rida and Maulana Maududi’s words, Islam becomes “the very antithesis of secular Western democracy. The philosophical foundation of Western democracy is the sovereignty of the people. Lawmaking is their prerogative and legislation must correspond to the mood and temper of their opinion… Islam… altogether repudiates the philosophy of popular sovereignty and rears its polity on the foundations of the sovereignty of God and the viceregency (Khilafat) of man.” (Rosenthal, Islam & the Modern National State, Cambridge 1965). Pakistan’s constitutionalists thus have faced an impossible battle to overcome the ontological error of assuming that any mundane government can be in communication with God Almighty.

J&K’s Constitution
Now Sheikh Mohammad Abdullah was as pious a Muslim as any but was far more modern in his 5 November 1951 speech to J&K’s Constituent Assembly: “You are the sovereign authority in this State of Jammu & Kashmir; what you decide has the irrevocable force of law”. Referring to the American and French Constitutions, he said the “basic democratic principle” was of the “sovereignty of the nation”. “We should be clear about the responsibilities that this power invests us with. In front of us lie decisions of the highest national importance which we shall be called upon to take. Upon the correctness of our decisions depends not only the happiness of our land and people now, but the fate as well of generations to come.”

Can a modern conclave of Pervez Musharraf, Nawaz Sharif, Benazir Bhutto and Chaudhry Iftikhar Ahmed decide or declare any better for Pakistan today? Or one of Khaleda, Hasina and whichever cabal of generals and bureaucrats happens to head Bangladesh at present?

If Pakistan and Bangladesh each chose to restart with the modern-minded constitutional example Sheikh Abdullah set more than a half century ago in J&K, they may find their political problems less severe in due course. It is a long road ahead.

Maharashtra’s Money

Maharashtra Govt Finance 2004 Table

 

Maharashtra’s Money: Those Who Are Part Of The Problem Are Unlikely To Be A Part Of Its Solution

first published in The Statesman April 24 2007, Editorial Page

by Subroto Roy

Mr Percy Mistry, according to the World Bank’s official chronology, worked there with Moeen Qureshi, and S Javed Burki. Mr Qureshi was doyen of Pakistani bureaucrats in Washington and something of a king-maker back home, briefly becoming Pakistan’s PM himself; Mr Burki briefly became Pakistan’s Finance Minister and is an author in the book Foundations of Pakistan’s Political Economy created by WE James and myself in the 1980s in the USA. Although Mr Mistry claims no special expertise about India’s monetary economy or public finances, he was appointed by Finance Minister P. Chidambaram to head an official committee that has given an opinion on a crucial monetary issue facing the country today, namely, the rupee’s convertibility. Mr Mistry apparently authored the report but resigned before its release, making it unclear who is responsible for its contents.

 

Mr Mistry has glossed over India’s present fiscal circumstances, said nothing of the limitless waste, fraud and abuse of the public purse the Sonia-Manmohan Government have been indulging in (like their Vajpayee-Advani predecessor) yet declared the rupee should be freed in 2008 ~ telling Business Standard a convertible rupee will allow people like “Ratan” and “Kumar” to raise capital in India for their foreign purchases, and not have to go to London as they must do now, poor things. All this in a report purporting to be a plan to make Mumbai an “international financial centre”, which is a different subject altogether.

Mr Mistry thus becomes a certifiable member of the “Dream Team” of Dr Singh, Mr Chidambaram, Mr Montek Ahluwalia, Mr Deepak Parekh and their big business/big labour/big media friends across political parties. Dreaming involves constructs in which normal logic and facts have no place. In the waking world, India is a labour-rich, capital-scarce country where wages are lower and interest-rates are higher respectively than in labour-scarce, capital-rich Western countries; hence India will be importing not exporting capital. In the real world too, Mumbai is not an off-shore island-resort outside India (like the so-called SEZs are going to be from a legal standpoint) but happens to be located in Maharashtra, whose public finances urgently require hard investigation and sober thought.

 

Now there used to be a “Bombay State” coinciding with the old Bombay Presidency plus “princely states” plus Marathi-majority districts of MP and Hyderabad and excluding Kannada-majority districts to Mysore. On May 1 1960, after much agitation, this became the new States of Gujarat and Maharashtra. There was talk of making Bombay city a Union Territory but the Marathis would have none of it. In fact, within a few weeks, Maharashtra reverted to calling itself “Bombay State” and it was not until the end of the year the Government of India officially declared it must be called Maharashtra.

 

The same quest for, or confusion about, cultural and political identity continues in recent times and may be at the root of the Shiv Sena’s erratic political behaviour which rocks Maharashtra politics so frequently. “Bombay” may be “Mumba Bai” or “Mumba Devi” but it had not been a Marathi town any more than Calcutta had been a Bengali town. Bombay’s traders and businessmen descended there while it developed after the decline of Surat, where the British initially came to trade in the 17th Century. Modern Bombay retains some of its “all-India” character and even today you cannot make money in its markets unless you speak Gujarati. Marathi-speakers have tended to wish Maharashtra was “Maratha-rashtra” reminiscent of the great Shivaji Bhonsla (1627-1680) but others have read the name only as “Great State”.

 

This continuing identity crisis had its most devastating costly impact through the Dabhol-Enron fiasco. As recently as March 4 2007, Chief Minister Vilasrao Deshmukh said frankly “We could not generate a single megawatt of electricity in the last 10 years due to the Enron issue”, adding demand for electric power had been growing in the State at 10% per annum.

 

Indeed, before the 2005-2006 nuclear or any other deal could be contemplated with the Americans, the US-India Business Council, the American business lobbyist (and recent guest and soon-to-be host of the CPI-M’s Buddhadeb Bhattacharya), insisted India pay up fully for the Dabhol-Enron fiasco. Maharashtra and its sovereign guarantor the Government of India, duly paid out at least $140-$160 million ($14-$16 crore) to each General Electric and Bechtel Corporation in “an amicable settlement”. It was only then that Dr Manmohan Singh could be hosted in the White House and in turn play host to President George W. Bush.

 

Without entering the intricacies of the fiasco, it may be still asked who was responsible. And in retrospect the finger must point both at the Mahajan-Munde BJP/ Thakeray-Joshi Shiv Sena, and at the Sharad Pawar Government and Manmohan-Montek Union Finance Ministry at the time. The BJP-Shiv Sena declared an intent to “throw Enron into the Arabian Sea” and thus vitiated the atmosphere with the Americans. Americans are shrewd and practical people in commercial matters and accounted for such contingencies in their deal-making, tidily earning their money anyway, winning the arbitration awards in due course. Maharashtra’s identity confusion was exemplified by Rebecca Mark having to visit Bal Thakeray before a policy flip-flop could be permitted.

 

If the basic technical cause Enron’s electricity became too expensive was that it was denominated in dollar prices and the rupee depreciated rapidly during and after the deal-making, then the financial responsibility for the fiasco must be ultimately traced to India’s Finance Minister in the early 1990s, namely Dr Singh, and his chief acolyte and Finance Secretary Mr Ahluwalia. Maharasthtra is not a sovereign country, and it was the Union Finance Ministry’s responsibility to oversee the necessary cost-benefit and project appraisal analyses, and these if properly done would have accounted for exchange-rate depreciation scenarios. It is no wonder the World Bank later refused to finance the project because they had done their studies better. The same kind of cavalier unprofessional attitude in spending scarce foreign moneys earned by India’s public has been displayed now more than a decade later by the Manmohan-Montek duo, though on a vastly larger scale, in regard to the planned purchase of nuclear reactors from Russia, the USA etc on a turnkey basis.

 

Maharashtra may be a Great State but its public finances are in as great a shambles as any other. The table for 2003-2004 (before the Enron payments were made) reveals the very high continuing public indebtedness, and the same pattern as the budgets of West Bengal and Uttar Pradesh described in these columns earlier. A closer look would reveal, e.g., that Rs 814.36 crore (Rs. 8.14 billion) were spent in collecting Rs1,205.97 crore. (Rs. 12.05 billion) of “Vehicle Tax”! There is much that Mumbai’s and Maharashtra’s and India’s citizens have to ponder over and act upon before serious thought can be put to restoring the integrity of India’s money. In that process, those who have been part of the problem are unlikely to be part of its solution.

 

Govt. of Maharashtra Finances 2003-04
EXPENDITURE ACTIVITIES: RsBn (Hundred Crore)
governance & local governance 18.19 2.58%
judiciary 2.96 0.42%
police (including vigilance etc) 19.81 2.81%
prisons 0.86 0.12%
bureaucracy 27.97 3.97%
collecting land revenue & taxes 42.25 6.00%
government employee pensions 26.36 3.74%
schools, colleges, universities, institutes 93.74 13.31%
health, nutrition & family welfare 23.42 3.33%
water supply & sanitation 10.22 1.45%
roads, bridges, transport etc. 12.96 1.84%
electricity 16.96 2.41%
irrigation, flood control, environ, ecology 70.79 10.05%
agricultural subsidies, rural development 41.30 5.86%
industrial subsidies 2.60 0.37%
capital city development 6.25 0.89%
social security, SC, ST, OBC, lab.welfare 25.40 3.61%
tourism 0.89 0.13%
arts, archaeology, libraries, museums 0.75 0.11%
miscellaneous -0.47 -0.07%
debt amortization & debt servicing 261.03 37.07%
total expenditure 704.22

INCOME SOURCES:
tax revenue 285.52
operational income 35.49
grants from Union 22.70
loans recovered 4.82
total income 348.53

GOVT. BORROWING REQUIREMENT (total expenditure minus total income) 355.70

financed by:
new public debt issued 317.02
use of Trust Funds etc 38.68
355.70
from author’s research and using C&AG data

Swindling India

SWINDLING INDIA

by

Subroto Roy

First published in slightly abbreviated form as “A scam in the making” in The Sunday Statesman April 1 2007, Front page comment

A gigantic financial scheme is in the making. Will it come to be seen in future years as having been in fact a scam – indeed India’s scam of the 21st Century for which India’s unknowing masses will be made to pay for many generations? The scheme is mind-boggling in size as well as its sheer audacity. Bofors, Quattrochi etc amount to peanuts in comparison.

No less a personage than the Finance Minister of India, P Chidambaram, has openly praised the potential of this financial scheme. And he has done so in no less an open and transparent place than his latest Budget Speech to Parliament last February.

It is a scheme openly advocated and currently being developed by our Prime Minister Dr Manmohan Singh’s closest acolytes, Planning Commission head Mr Montek Singh Ahluwalia and HDFC head Mr Deepak Parekh, in collaboration with Reserve Bank Governor Dr YV Reddy and the Finance Ministry’s top bureaucrats. The PM himself has come close to endorsing it explicitly. And this PM is not an elected member of the Lok Sabha but holds office and acts as the executive agent of the UPA Chairperson and Lok Sabha Member from Rae Bareilly, Sonia Gandhi.

I hasten to add nobody in the BJP has objected to this financial scheme — in fact had the BJP been in power today instead of Congress, they would have been likely even more agreeable to the scheme given their close proximity to business lobbies and organized capital. As for the Communists, none of their JNU economics professors is technically competent enough to comprehend or recognize what is going on.

The scheme involves private companies “borrowing” India’s foreign exchange reserves from the Reserve Bank of India, allegedly for purpose of “infrastructure” creation — in collaboration with the American bank Citigroup, the American financial business, Blackstone Group, and possibly the American giant, GE Capital too. Mr Chidambaram took the unprecedented step of naming Mr Deepak Parekh as well as Citigroup and Blackstone in the text of his Budget Speech.

To begin to comprehend the nature of this scheme, we need to recall an earlier case.

Foreign exchange reserves of countries typically include foreign currency holdings as well as gold stocks. One of the biggest Wall Street scams of the 1980s-1990s involved private companies borrowing not countries’ foreign currency reserves but their gold reserves.

In that scam, it was not the Reserve Bank of India that was cheated but the Central Banks of Poland, Malaysia, Portugal and Yugoslavia. The New York financial company involved was a subsidiary of the Drexel Burnham Lambert Group. The Drexel parent went bankrupt on February 13 1990 and its subsidiary followed on May 9 1990.

A report on June 4 1990 by Leah J. Nathans (now Leah Nathans Spiro) in New York’s highly respected Business Week magazine said: “Central banks, those pillars of monetary virtue, lost $219 million ($21.9 crore) to an obscure commodities subsidiary called Drexel Burnham Lambert Trading Corporation”. The sum was small by American standards but it was “a big, big number” for the countries involved at the time.

What had these national central banks done? They had been lured into becoming greedy. They had been sitting on stocks of gold as part of their national reserves which they felt “just collect dust”. So they yielded to the temptation offered by the Drexel subsidiary of leasing the gold to private parties.

In Ms. Nathans’ words, “By leasing gold, a central bank earns a modest interest rate, ranging from less than 0.5% to 2.5%. Typically, the central bank consigns the gold to a dealer – say, for 90 days. The dealer can then lend the gold to a customer, at a higher interest rate. It may be a speculator, who hopes to repay the borrowed gold when the price falls, or a gold mine that wants to repay the broker with gold produced later.”

But the Drexel parent and subsidiary went bankrupt through bad financial decisions. Drexel’s Michael Milken went to jail. The Central Banks of Poland, Malaysia, Portugal and Yugoslavia were left empty-handed – and had to sue as creditors in New York’s courts trying desperately to get back the gold they had been lured into parting with. It would be unwise to take bets on how much of their gold they ever got back.

All the present PM’s men — Messrs Chidambaram, Ahluwalia, Parekh, Reddy et al in collaboration with one or two American financial companies – now have a scheme that will use not the RBI’s gold but its foreign currency reserves.

Mr Ahluwalia and Mr Parekh have made the outlandish claim that “India needs US$320 billion” (US 32,000 crore) by way of “investment for physical infrastructure” during the so-called “Eleventh Five-Year Plan”. (How many so-called “Five Year Plans” is India going to have incidentally? We had our “First Plan” when Manmohan Singh was a student at Punjab University. Stalin, who invented the “Five Year Plan”, died during that time, and even his old USSR has ceased to exist, let alone its “Five Year Plans”.)

That vast amount of “investment for physical infrastructure” is what Mr Ahluwalia says he knows India needs for his purported “9% growth rate” to be achieved. Where are the macroeconomic models and time-series data sets from him or his friends to back such assertions? There are none. None of the PM’s men, no one in the Finance Ministry or RBI or Planning Commission, nor any of their JNU economics professor friends or anyone else in Delhi, Mumbai, Kolkata etc have any such models or data with which to back such assertions. Nor do the World Bank etc. It is all sheer humbug – all a lie. It is part of the mendacity and self-delusion that our capital city has been floating upon.

In any event, the RBI reportedly has “opposed the idea of deploying forex reserves for infrastructure development on the grounds that it will create monetary expansion”. But Mr Chidambaram’s Finance Ministry owns the RBI, and the Ministry has said “the RBI’s concerns had been taken care of, as the investments would be deployed only through a structured mechanism”. (Business Standard 23 March 2007, p. 3)

What is a “structured mechanism”? Mr Chidambaram, mentioning Citigroup and Blackstone Group specifically, said in his Budget Speech that Mr Deepak Parekh has “suggested the establishment of two wholly-owned overseas subsidiaries of India Infrastructure Finance Company Ltd with the following objectives: (i) to borrow funds from the RBI and lend to Indian companies implementing infrastructure projects in India, or to co-finance their External Commercial Borrowings for such projects, solely for capital expenditure outside India; and (ii) to borrow funds from the RBI, invest such funds in highly rated collateral securities, and provide ‘credit wrap’ insurance to infrastructure projects in India for raising resources in international markets. The loans by RBI to these two subsidiary companies will be guaranteed by the Government of India and the RBI will be assured of a return higher than the average rate of return on its incremental investment.”

You do not understand? Well, no one is supposed to. The most exquisite thievery occurs after all not in darkness but in broad daylight with everyone watching but no one able to see or comprehend anything. So let us return to elementary first principles.

What are foreign exchange reserves and why do countries hold them? It is quite simply answered. Consider the USA and Canada, each with its own dollar. Canadians want to purchase American goods and services, give gifts and make loans to American residents, and make investments in the USA. Americans want to do the same in Canada. Each has to use the domestic money of the other when it does so. If an American wishes to lend money to a Canadian or to purchase something from him, he receives Canadian dollar notes from the Canadian Government to make his Canadian transactions, handing over his American dollar notes instead. The American dollar notes he hands over become part of Canada’s foreign exchange reserves, held by its Central Bank. Roughly speaking, a country’s foreign exchange reserves are the residual foreign currency assets its central bank holds after all these transactions are carried out on both sides of the border.

In the US-Canada case, neither Government prevents its citizens from exchanging domestic money for foreign money. In India, our rupee has been inconvertible since about 1940. The average Indian cannot freely exchange his/her rupee-denominated assets for foreign exchange denominated ones even if he/she wished to. There has been some import-liberalisation in recent years but only someone with the political access of Mr Tata or Mr Birla can purchase foreign assets and foreign companies using their Indian money – because the rupee is inconvertible, any bad financial decisions they make in using their foreign assets will be implicitly paid for by the Indian public.

Now a country’s central bank, such as our Reserve Bank, is the custodian of its foreign exchange reserves. India’s reserves are supposed to have reached $195.96 Billion ($19,596 Crore) as of March 16 2007. Keep in mind we do not know why they have risen: they can rise merely because foreigners (including NRIs) have lent us more of their money, not because foreigners have bought more of our goods and services. In fact Business Standard yesterday 31 March 2007 said on its front page “external commercial borrowing” was “a major source of accretion” of India’s reserves.

Also keep in mind that the Reserve Bank has the duty to manage these foreign-denominated assets against which it has already issued Indian rupees. It might receive a small conservative income from the cash-management aspect of this but it may not risk them or place them in any jeopardy!

Yet the whole idea behind the Chidambaram-Ahluwalia-Parekh-Reddy scheme under discussion by the Sonia-Manmohan Government is that the RBI will “lend” some of the billions of Americans dollars in its custody to overseas subsidiaries of Indian companies – say, for example, to the Tatas who have now bought foreign “capital assets” of some US$ 12 Billion ($1200 Crore) from Corus without having anything near that kind of foreign income.

Such favoured Indian companies might then use these “borrowed” funds as collateral for other borrowings. In exchange, they will go about undertaking purported “infrastructure” projects in India. So much for the “structured mechanisms” being touted by Messrs Chidambaram, Ahluwalia, Parekh et al.

Before India’s public understands it, the schemers will shout (as they have done with the SEZ Act) that Parliament has passed it. The BJP will applaud with envy. The Communists might uncomprehendingly complain a little, and then be bought off with a sop or two that they do understand, like a little pro-China rhetoric or being let off lightly on Nandigram.

Now international institutions like the International Monetary Fund and the Bank of International Settlements officially exist to advise central banks to stay along the straight and narrow and to avoid all such mischief. Here is what the IMF explicitly warned about such schemes in its Guidelines for Foreign Exchange Reserve Management dated September 20 2001:

Liquidity risk. The pledging of reserves as collateral with foreign financial institutions as support for loans to either domestic entities, or foreign subsidiaries of the reserve management entity, has rendered reserves illiquid until the loans have been repaid. Liquidity risks have also arisen from the direct lending of reserves to such institutions when shocks to the domestic economy led to the borrowers’ inability to repay their liabilities, and impairment of the liquidity of the reserve assets.
Credit risk. Losses have arisen from the investment of reserves in high-yielding assets that were made without due regard to the credit risk associated with the issuer of the asset. Lending of reserves to domestic banks, and overseas subsidiaries of reserve management entities, has also exposed reserve management entities to credit risk.”

Dostoevsky believed man could have evil intent. Socrates was more generous and said man does not do wrong knowingly. It is not impossible our Indian schemers have innocent intent and do not even realize how close they are to becoming scamsters, or are already in the grip of scamsters. But at least we are now forewarned: India faces a clear risk of being swindled of its foreign exchange reserves. Prevention is better than cure.

Uttar Pradesh Polity and Finance

Uttar Pradesh Polity & Finance


A Responsible New Govt May Want To Declare A Financial Emergency

First published in

The Statesman Editorial Page, March 24 2007

by

Subroto Roy

 

 

Uttar Pradesh goes to the polls beginning April 7. Nothing may succeed better in focusing the minds of its citizens and political candidates than some hard macroeconomic realities. Discussing UP’s public finances may be the first step to bringing cool rationality to the cauldron of its politics ~ consisting as it does of seemingly deep and irreconcilable divisions of religion, caste and personality.

 

UP shared initials of the old British “United Provinces of Agra and Oudh”, and in 1947 was mostly the same territory. It deserves better than to be known merely as our “Northern State”: UP has been India’s fulcrum, deeply affecting our history, culture and politics. There could have been today not merely a new Uttarakhand but also perhaps Agra, Bareilly (Rohilkhand), Jhansi (Bundelkhand), Meerut, Avadh (Ayodhya, Oudh), Kanauj, Varanasi etc.

 

 

History and politics

 

Each has had its history. Oudh was seen by the British before Dalhousie as a northern buffer for their Bengal possessions. Bareilly was “an important centre of disaffection” of Muslim soldiers against the British in 1857 and also where Hindus after Aurangzeb’s death in 1707 had “thrown off the imperial yoke” refusing to pay tribute to Delhi. The very idea of “Pakistan” was mostly a UP-invention. Long before Iqbal and Jinnah, Sayyid Ahmad Barelvi (1786-1831) initiated a mass migration of Muslims and created a theocratic principality in the NWFP (Tariqah-i-Muhammadiyah) which collapsed due to conflict between his Pashtun and North Indian followers. Pervez Musharraf’s family were frankly nostalgic during their India-visit, and indeed Pakistan’s Mohajirs long for fertile UP more than the arid country they in fact possess ~ even more than for J&K on which Pakistanis since Liaquat (UP’s most prominent Muslim legislator between 1926-1940) became fixated instead.

 

 

In the 1980s and 1990s, the “Ram Janambhoomi/Babri Masjid” dispute may have been mostly a gigantic, inchoate, incoherent national exercise in defining our identity: “Who are we?” or perhaps “Who are we not?” as modern Indians, questions that remain unanswered. Certainly, in 1908 the Imperial Gazetteer of India Vol XIX pp 279-280 reported: “After Babar had gained a footing in Hindustan by his victory at Panipat in 1526, and had advanced to Agra, the defeated Afghan house of Lodhi still occupied the Central Doab, Oudh, and the eastern districts of the present United Provinces. In 1527, Babar, on his return from Central India, defeated his opponents in Southern Oudh near Kanauj, and passed on through the Province as far as Ajodhya where he built a mosque in 1528, on the site renowned as the birthplace of Rama. The Afghans remained in opposition after the death of Babar in 1530, but were defeated near Lucknow in the following year.”

 

 

History books and doctoral theses should have been perhaps where all such old facts deserved to remain in a modern self-confident, self-aware India.

 

 

Today’s UP at more than 166 million people exceeds in population France and Germany combined. One in every six or seven Indians is from UP. The State has become notorious for its chaotic politics, its “history-sheeters”, its corruption, crimes, badlands, astrology and other superstition. Its popular power gets divided between Mulayam, Mayawati and the BJP: each the self-appointed spokesman of Muslims, “Bahujans” and Hindu upper castes respectively. Congress, once India’s grand old secular national party, has been side-lined in UP politics.

 

 

Yet UP’s pivotal role remains such that the healthiest development for Indian democracy today may be for the Lok Sabha Member from Rae Bareilly to close down 10 Janpath as a residence and office for herself, and live instead as an exemplary parliamentarian among the common people of her constituency, setting the example too for her son to do the same in Amethi. Their permanent departure from New Delhi, becoming prominent UP politicians instead, would be the desperately needed “tough love” required by the Congress Party ~ which finally, after many decades, would be compelled to grow up and elect a leadership for itself based on some real political principles and not mere sycophancy.

 

 

Focussing on UP’s Public Finances is the first constructive step towards a rational political economy arising in the interests of its many citizens. As with other States of our Union, it is not impossible to understand what is going on with UP’s finances, though it does take some serious effort. The State receives tax revenues, income from State operations (like bus fares etc), and grants transferred from the Union. Of these revenues, more than 70% arise from taxation. Of those taxes, about 45% is collected by the Union on behalf of the State according to the Finance Commission’s formulae; 55% is collected by the State itself, and about 50% of what the State collects is Sales Tax. On the expenditure side, some 43% has been going to repay the State’s debts plus interest owed on that debt. The remainder gets distributed as summarily shown in the table.

 

 

Audit and restructuring

As with the Union of India, as well as with other States like West Bengal, the wide difference between income and expenditure implies the Government must then issue new public debt, which typically has been a larger and larger sum every year, greater than the maturing debt being amortised or extinguished. The grave consequences of this will be obvious to any householder, and makes it imperative that calm, sober thought and objective analysis occur about UP’s financial condition and budget constraint. E.g., what is revealed at a higher level of detail is that in 2003-2004, Rs. 5.43 Bn (Rs 543 crores) were spent to collect Rs. 1.18 Bn (Rs. 118 crores) of land revenue! UP has also spent extraordinarily vast public resources (and World Bank loans) on electricity ~ yet its power supply remains dismal.

 

 

These kinds of facts may be enough for any responsible new Government of UP (perhaps even a “Unity Government”) to declare a financial emergency under Article 360 of the Constitution, followed by ordering the most stringent of audits of all government departments and projects using public resources as well as recognition of public assets, followed in turn by a restructuring of the public budget over a few years with the aim of cutting all waste, fraud and abuse, and directing public resources instead to areas of highest social usefulness.

The author is Contributing Editor, The Statesman

UP Government Finance 2003-2004
EXPENDITURE ACTIVITIES : Rs Billion (Hundred Crore)
government & local government
judiciary
police (including vigilance etc)
prisons
bureaucracy
collecting land revenue & taxes
government employee pensions
schools, colleges, universities, institutes
health, nutrition & family welfare
water supply & sanitation
roads, bridges, transport etc.
electricity
irrigation, flood cntrl., environ, ecology
agricultural subsidies, rural development
industrial subsidies
capital city development
social security, SC, ST, OBC, lab.welfare
tourism
arts, archaeology, libraries, museums
miscellaneous
debt amortization & debt servicing
total expenditure

30.33
3.17
25.81
1.13
11.63
8.41
29.00
62.79
18.97
6.04
16.13
200.22
29.98
16.07
8.19
1.08
18.36
0.20
0.37
0.53
373.60

3.52%
0.37%
2.99%
0.13%
1.35%
0.98%
3.36%
7.28%
2.20%
0.70%
1.87%
23.23%
3.48%
1.86%
0.95%
0.13%
2.13%
0.02%
0.04%
0.06%
43.34%

tax revenue
operational income
grants from Union
loans recovered
total income
268.74
22.82
24.82
124.98
Govt. Borrowing Requirement:
(total expenditure minus total income) 420.67
financd by:
new public debt issued
use of Trust Funds etc.

385.41
35.26
420.67

From the author’s research based on latest available data published by the C&AG of India

Fallacious Finance: Congress, BJP, CPI-M et al may be leading India to hyperinflation (2007)

Fallacious Finance: Congress, BJP, CPI-M et al may be leading India to hyperinflation

by

Subroto Roy

first published in The Statesman, March 5 2007

Editorial Page Special Article

It seems the Dream Team of the PM, Finance Minister, Mr. Montek Ahluwalia and their acolytes may take India on a magical mystery tour of economic hallucinations, fantasies and perhaps nightmares. I hasten to add the BJP and CPI-M have nothing better to say, and criticism of the Government or of Mr Chidambaram’s Budget does not at all imply any sympathy for their political adversaries. It may be best to outline a few of the main fallacies permeating the entire Governing Class in Delhi, and their media and businessman friends:

1. “India’s Savings Rate is near 32%”. This is factual nonsense. Savings is indeed normally measured by adding financial and non-financial savings. Financial savings include bank-deposits. But India is not a normal country in this. Nor is China. Both have seen massive exponential growth of bank-deposits in the last few decades. Does this mean Indians and Chinese are saving phenomenally high fractions of their incomes by assiduously putting money away into their shaky nationalized banks? Sadly, it does not. What has happened is government deficit-financing has grown explosively in both countries over decades. In a “fractional reserve” banking system (i.e. a system where your bank does not keep the money you deposited there but lends out almost all of it immediately), government expenditure causes bank-lending, and bank-lending causes bank-deposits to expand. Yes there has been massive expansion of bank-deposits in India but it is a nominal paper phenomenon and does not signify superhuman savings behaviour. Indians keep their assets mostly in metals, land, property, cattle, etc., and as cash, not as bank deposits.

2. “High economic growth in India is being caused by high savings and intelligently planned government investment”. This too is nonsense. Economic growth in India as elsewhere arises not because of what politicians and bureaucrats do in capital cities, but because of spontaneous technological progress, improved productivity and learning-by-doing on part of the general population. Technological progress is a very general notion, and applies to any and every production activity or commercial transaction that now can be accomplished more easily or using fewer inputs than before. New Delhi still believes in antiquated Soviet-era savings-investment models without technological progress, and some non-sycophant must tell our top Soviet-era bureaucrat that such growth models have been long superceded and need to be scrapped from India’s policy-making too. Can politicians and bureaucrats assist India’s progress? Indeed they can: the telecom revolution in recent years was something in which they participated. But the general presumption is against them. Progress, productivity gains and hence economic growth arise from enterprise and effort of ordinary people — mostly despite not because of an exploitative, parasitic State.

3. “Agriculture is a backward sector that has been retarding India’s recent economic growth”. This is not merely nonsense it is dangerous nonsense, because it has led to land-grabbing by India’s rulers at behest of their businessman friends in so-called “SEZ” schemes. The great farm economist Theodore W. Schultz once quoted Andre and Jean Mayer: “Few scientists think of agriculture as the chief, or the model science. Many, indeed, do not consider it a science at all. Yet it was the first science – Mother of all science; it remains the science which makes human life possible”. Centuries before Europe’s Industrial Revolution, there was an Agricultural Revolution led by monks and abbots who were the scientists of the day. Thanks partly to American help, India has witnessed a Green Revolution since the 1960s, and our agriculture has been generally a calm, mature, stable and productive industry. Our farmers are peaceful hardworking people who should be paying taxes and user-fees normally but should not be otherwise disturbed or needlessly provoked by outsiders. It is the businessmen wishing to attack our farm populations who need to look hard in the mirror – to improve their accounting, audit, corporate governance, to enforce anti-embezzlement and shareholder protection laws etc.

4. “India’s foreign exchange reserves may be used for ‘infrastructure’ financing”. Mr Ahluwalia promoted this idea and now the Budget Speech mentioned how Mr Deepak Parekh and American banks may be planning to get Indian businesses to “borrow” India’s forex reserves from the RBI so they can purchase foreign assets. It is a fallacy arising among those either innocent of all economics or who have quite forgotten the little they might have been mistaught in their youth. Forex reserves are a residual in a country’s balance of payments and are not akin to tax revenues, and thus are not available to be borrowed or spent by politicians, bureaucrats or their businessman friends — no matter how tricky and shady a way comes to be devised for doing so. If anything, the Government and RBI’s priority should have been to free the Rupee so any Indian could hold gold or forex at his/her local bank. India’s vast sterling balances after the Second World War vanished quickly within a few years, and the country plunged into decades of balance of payments crisis – that may now get repeated. The idea of “infrastructure” is in any case vague and inferior to the “public goods” Adam Smith knew to be vital. Serious economists recommend transparent cost-benefit analyses before spending any public resources on any project. E.g., analysis of airport/airline industry expansion would have found the vast bulk of domestic airline costs to be forex-denominated but revenues rupee-denominated – implying an obvious massive currency-risk to the industry and all its “infrastructure”. All the PM’s men tell us nothing of any of this.

5. “HIV-AIDS is a major Indian health problem”. Government doctors privately know the scare of an AIDS epidemic is based on false assumptions and analysis. Few if any of us have met, seen or heard of an actual incontrovertible AIDS victim in India (as opposed to someone infected by hepatitis-contaminated blood supplies). Syringe-exchange by intravenous drug users is not something widely prevalent in Indian society, while the practise that caused HIV to spread in California’s Bay Area in the 1980s is not something depicted even at Khajuraho. Numerous real diseases do afflict Indians – e.g. 11 children died from encephalitis in one UP hospital on a single day in July 2006, while thousands of children suffer from “cleft lip” deformity that can be solved surgically for 20,000 rupees, allowing the child a normal life. Without any objective survey being done of India’s real health needs, Mr Chidamabaram has promised more than Rs 9.6 Billion (Rs 960 crore) to the AIDS cottage industry.

6. “Fiscal consolidation & stabilization has been underway since 1991”. There is extremely little reason to believe this. If you or I borrow Rs. 100,000 for a year, and one year later repay the sum only to borrow the same again along with another Rs 40,000, we would be said to have today a debt of Rs. 140,000 at least. Our Government has been routinely “rolling over” its domestic debt in this manner (in the asset-portfolios of the nationalised banking system) but displaying and highlighting only its new additional borrowing in a year as the “ Fiscal Deficit” (see graph, also “Fiscal Instability”, The Sunday Statesman, 4 February 2007). More than two dozen State Governments have been doing the same though, unlike the Government of India, they have no money-creating powers and their liabilities ultimately accrue to the Union as well. The stock of public debt in India may be Rs 30 trillion (Rs 30 lakh crore) at least, and portends a hyperinflation in the future. Mr Chidambaram’s announcement of a “Debt Management Office” yet to be created is hardly going to suffice to avert macroeconomic turmoil and a possible monetary collapse. The Congress, BJP, CPI-M and all their friends shall be responsible.

Of related interest: Mistaken Macroeconomics,
“The Indian Revolution”, “Against Quackery”, “The Dream Team: A Critique”, “India’s Macroeconomics”, “Indian Inflation”

Posted in Academic research, Banking, Big Business and Big Labour, BJP, China, China's macroeconomics, China's savings rate, China's Economy, Communists, Congress Party, Deposit multiplication, Economic Policy, Economic quackery, Economic Theory of Growth, Economics of exchange controls, Economics of Public Finance, Economics of real estate valuation, Finance, Financial Management, Financial markets, Financial Repression, Foreign exchange controls, Governance, Government accounting, Government Budget Constraint, Government of India, India's Big Business, India's credit markets, India's Government economists, India's interest rates, India's savings rate, India's stock and debt markets, India's agriculture, India's Agriculture & Food, India's balance of payments, India's Banking, India's Budget, India's bureaucracy, India's Capital Markets, India's corporate finance, India's corporate governance, India's currency history, India's Democracy, India's Economic History, India's Economy, India's Exports, India's farmers, India's Finance Commission, India's Foreign Exchange Reserves, India's Foreign Trade, India's Government Budget Constraint, India's Government Expenditure, India's grassroots activists, India's Health/Medicine, India's Industry, India's inflation, India's Labour Markets, India's Land, India's Macroeconomics, India's Monetary & Fiscal Policy, India's nomenclatura, India's peasants, India's political lobbyists, India's Polity, India's pork-barrel politics, India's poverty, India's Public Finance, India's Reserve Bank, India's State Finances, India's Union-State relations, Inflation, Interest group politics, Macroeconomics, Manmohan Singh, Mendacity in politics, Monetary Theory, Money and banking, Paper money and deposits, Political cynicism, Political Economy, Political mendacity, Public Choice/Public Finance, Redeposits, Unorganised capital markets. 3 Comments »

Bengal’s Finances

BENGAL’S FINANCES

First published in The Sunday Statesman February 25 2007, Editorial Page  Special Article, www.thestatesman.net

There is urgent need for calm, sober thought, not self-delusion. Foreign trade, world politics are not what State Governments are constitutionally permitted to do.

By SUBROTO ROY

Mr Buddhadeb Bhattacharjee is fond of saying his hoped for industrialization plans will lead to jobs for “thousands” of unemployed young men and women emerging from West Bengal’s many schools, colleges and universities.

Now ever since JM Keynes’s time, economists have understood the phenomenon of unemployment quite well. Some unemployment is voluntary: where someone declines to accept a job at the prevailing wage or chooses leisure instead, e.g. withdraws from the labour-force in order to go to college or care for children or family or be involved in search for a better job. Some unemployment is seasonal, as in agriculture ~ where there often is “overfull” employment at harvest-time. Some unemployment may be frictional or structural, depending on dynamic unpredictable industrial or technological changes. In none of these cases is any large role defined for government investment using public resources, though there can be smaller roles like providing job-information, advice and training.

Keynes himself was concerned with systematic “involuntary” unemployment, where masses of people are willing but unable to find work at the going wage because there has been a general collapse of the market economy, as arguably happened in the 1930s in the Western countries. There has been no such situation in independent India.

And it is important to remember our labour markets are mostly unrestricted by State boundaries: unlike totalitarian China, we do not have internal passports in the country, and Indians are mostly free to work anywhere they wish to. Talk from CPI-M, Congress, BJP or other politicians of alleged Keynesian “multiplier” effects arising from government expenditure is mostly talk. And as for Sonia Gandhi’s “National Rural Employment Guarantee”, to the extent it was argued for at all by Amartya Sen’s disciples like Jean Drèze, the argument was not on Keynesian grounds but of a purportedly more equitable distribution of government expenditure.

What then is the Bhattacharjee Government supposed to be doing?

Chandrababu Naidu started a trend among Chief Ministers flying off to exotic foreign vistas, addressing international conferences and signing memoranda with foreign businessmen. But world politics, international relations and foreign trade are not what Indian State Governments are permitted by our Constitution to be engaged in doing. Nelson Mandela is a great man of history but Jyoti Basu’s Government had no constitutional right or business to gift him five million American dollars of West Bengal public money after he was released from jail in South Africa in 1990 by De Klerk.

Our Constitution is crystal clear that the legitimate agenda of India’s State Governments is something very mundane and wholly unglamorous: State Governments are supposed to be managing Courts of Law; the Police, Civil Order, Prisons; Water, Sanitation, Health; State Debt Service; Intra-State Infrastructure & Communications; Local Government; Liquor & Other Public Sector Industry; Trade, Local Banking & Finance; Land, Agriculture, Animal Husbandry; Libraries, Museums, Monuments; State Civil Service & Administration. In addition, “concurrent” with the Union Government are Criminal, Civil & Family Law, Contracts & Torts; Forests & Environmental Protection; Unemployment & Refugee Relief; Electricity; Education. It is relative to that explicit agenda that State Government performances around the country must be evaluated.

The finances of the West Bengal Government and those of every other State of the Union appear in a condition of Byzantine confusion. Even so, it is not impossible for any citizen to understand them with a little serious effort. The State receives tax revenues, income from State operations (like bus fares, lottery tickets etc), and grants transferred from the Union. Of the State’s total revenues, more than 80% arise from taxation. Of those taxes, about 30% is collected by the Union on behalf of the State in accordance with the Finance Commission’s formulae; 70% is collected by the State itself, and about 60% of whhat the State collects is Sales Tax. On the expenditure side, more than 60% goes in repaying the State’s debts as well as interest owed on that debt. The remainder gets distributed as summarily shown in the table. (What would be revealed at a higher level of detail is that e.g. Rs. 2.63 Bn is spent in collecting Rs. 9.93 Bn of land revenue!) The wide difference between the State’s income from all sources and its expenditures implies the State must then issue new public debt. That typically has been a larger and larger sum every year, greater than the amount of maturing debt being amortised or extinguished. The potentially grave consequence of this will be obvious to any householder, and makes it imperative that calm, sober thought and objective analysis occur about the State’s financial condition and budget constraint. There is no room for self-delusion, especially on the part of the Bhattacharjee Government. We are still paying interest on the money we borrowed to make Nelson Mandela a gift seventeen years ago.

Govt. of W. Bengal’s Finances 2003-2004
Rs Billion (Hundred Crore)
EXPENDITURE ACTIVITIES:
government & local government 8.68 1.68%
judiciary 1.27 0.25%
police (including home guard etc.) 13.47 2.61%
prisons 0.62 0.12%
bureaucracy 5.69 1.10%
collecting land revenue & taxes 4.32 0.84%
government employee pensions 26.11 5.05%
schools, colleges, universities, institutes 45.06 8.72%
health, nutrition & family welfare 14.70 2.84%
water supply & sanitation 3.53 0.68%
roads, bridges, transport, etc. 8.29 1.60%
electricity (mostly loans to power sector) 31.18 6.03%
irrigation, flood control, environment, ecology 10.78 2.09%
agricultural subsidies, rural development, etc. 7.97 1.54%
industrial subsidies 2.56 0.50%
capital city development 7.29 1.41%
social security, SC, ST, OBC, labour welfare 9.87 1.91%
tourism 0.09 0.02%
arts, archaeology, libraries, museums 0.16 0.03%
miscellaneous 0.52 0.10%
debt amortization & debt servicing 314.77 60.89%
total expenditure 516.92

tax revenue 141.10
operational income 6.06
grants from Union 18.93
loans recovered 0.91
total income 167.00
INCOME SOURCES:

GOVT. BORROWING REQUIREMENT
(total expenditure
minus total income ) 349.93

financed by:
new public debt issued 339.48
use of Trust Funds etc 10.45
349.93
From the author’s research and based on latest available data published by the Comptroller & Auditor General of India

On Land-Grabbing

ON LAND-GRABBING

Dr Singh’s India, Buddhadeb’s Bengal, Modi’s Gujarat have notorious US, Soviet and Chinese examples to follow ~ distracting from the country’s real economic problems

By SUBROTO ROY

First published in The Sunday Statesman, Editorial Page Special Article, Jan 14 2007

AT a business meet on 12 January 2005, Dr Manmohan Singh showered fulsome praise on Buddhadeb Bhattacharjee as “dynamic”, “the Nation’s Best Chief Minister”, whose “wit and wisdom”, “qualities of head and heart”, “courage of conviction and passionate commitment to the cause of the working people of India” he admired, saying “with Buddhadeb Babu at the helm of affairs it appears Bengal is once again forging ahead… If today there is a meeting of minds between Delhi and Kolkata, it is because the ideas that I and Buddhadebji represent have captured the minds of the people of India. This is the idea of growth with equity and social justice, the idea that economic liberalization and modernization have to be mindful of the needs of the poor and the marginalized.”

With such support of a Congress Prime Minister (as well as proximity to Pranab Mukherjee), Mr Bhattacharjee could hardly have feared the local Congress and Trinamul would pose any threat in the 2006 Assembly Elections despite having more potential voters between them than the CPI-M.

Dr Singh returned to the “needs of the poor and the marginalized” at another business meet on 8 January 2007 promising to “unveil a new Rehabilitation Policy in three months to increase the pace of industrialisation” which would be “more progressive, humane and conducive to the long-term welfare of all stakeholders”, while his businessman host pointedly stated about Singur “land for industry must be made available to move the Indian manufacturing sector ahead”.

The “meeting of minds between Delhi and Kolkata” seems to be that agriculture allegedly has become a relatively backward slow-growing sector deserving to yield in the purported larger national interest to industry and services: what the PM means by “long-term welfare of all stakeholders” is the same as the new CPI-M party-line that the sons of farmers should not remain farmers (but become automobile technicians or IT workers or restaurant waiters instead).

It is a political viewpoint coinciding with interests of organised capital and industrial labour in India today, as represented by business lobbies like CII, FICCI and Assocham on one hand, and unions like CITU and INTUC on the other. Business Standard succinctly (and ominously) advocated this point of view in its lead editorial of 9 January as follows: “it has to be recognised that the world over capitalism has progressed only with the landed becoming landless and getting absorbed in the industrial/service sector labour force ~ indeed it is obvious that if people don’t get off the land, their incomes will rise only slowly”.

Land is the first and ultimate means of production, and the attack of the powerful on land-holdings or land-rights of the unorganised or powerless has been a worldwide phenomenon ~ across both capitalism and communism.

In the mid-19th Century, white North America decimated hundreds of thousands of natives in the most gargantuan land-grab of history. Defeated, Chief Red Cloud of the Sioux spoke in 1868 for the Apache, Navajo, Comanche, Cheyenne, Iroquois and hundreds of other tribes: “They made us many promises, more than I can remember, but they never kept any except one: they promised to take our land, and they took it.”

Half a century later, while the collapse of grain prices contributed to the Great Depression and pauperisation of thousands of small farmers in capitalist America in the same lands that had been taken from the native tribes, Stalin’s Russia embarked on the most infamous state-sponsored land-grab in modern history: “The mass collectivisation of Soviet agriculture (was) probably the most warlike operation ever conducted by a state against its own citizens…. Hundreds of thousands and finally millions of peasants… were deported… desperate revolts in the villages were bloodily suppressed by the army and police, and the country sank into chaos, starvation and misery… The object of destroying the peasants’ independence…was to create a population of slaves, the benefit of whose labour would accrue to industry. The immediate effect was to reduce Soviet agriculture to a state of decline from which it has not yet recovered… The destruction of the Soviet peasantry, who formed three quarters of the population, was not only an economic but a moral disaster for the entire country. Tens of millions were driven into semi-servitude, and millions more were employed as executants…” (Kolakowski, Main Currents of Marxism).

Why did Stalin destroy the peasants? Lenin’s wishful “alliance between the proletariat and the peasantry” in reality could lead only to the peasants being pauperised into proletarians. At least five million peasants died and (Stalin told Churchill at Yalta) another ten million in the resultant famine of 1932-1933. “Certainly it involved a struggle ~ but chiefly one between urban Communists and villagers… it enabled the regime to obtain much of the capital desired for industrialization from the defeated village… it was the decisive step in the building of Soviet totalitarianism, for it imposed on the majority of the people a subjection which only force could maintain” (Treadgold, 20th Century Russia).

Mr Bhattacharjee’s CPI-M is fond of extolling Chinese communism, and the current New Delhi establishment have made Beijing and Shanghai holiday destinations of choice. Dr Singh’s Government has been eager to create hundreds of “Special Economic Zones” run by organised capital and unionised labour, and economically privileged by the State. In fact, the Singur and Nandigram experiences of police sealing off villages where protests occur are modelled on creation of “Special Economic Zones” in China in recent years.

For example, Chinese police on 6 December 2005 cracked down on farmers and fishermen in the seaside village of Dongzhou, 125 miles North East of Hong Kong. Thousands of Dongzhou villagers clashed with troops and armed police protesting confiscation of their lands and corruption among officials. The police immediately sealed off the village and arrested protesters. China’s Public Security Ministry admitted the number of riots over land had risen sharply, reaching more than seventy thousand across China in 2004; police usually suppressed peasant riots without resort to firing but in Dongzhou, police firing killed 20 protesters. Such is the reality of the “emergence” of China, a totalitarian police-state since the Communist takeover in 1949, from its period of mad tyranny until Mao’s death in 1976, followed by its ideological confusion ever since.

Modern India’s political economy today remains in the tight grip of metropolitan “Big Business” and “Big Labour”. Ordinary anonymous individual citizens ~ whether housewife, consumer, student, peasant, non-union worker or small businessman ~ have no real voice or representation in Indian politics. We have no normal conservative, liberal or social democratic party in this country, as found in West European democracies where the era of land-grabbing has long-ceased. If our polity had been normal, it would have known that economic development does not require business or government to pauperise the peasantry but instead to define and secure individual property rights and the Rule of Law, and establish proper conditions for the market economy. The Congress and BJP in Delhi and CPI-M in Kolkata would not have been able to distract attention from their macroeconomic misdeeds over the decades ~ indicated, for example, by increasing interest-expenditure paid annually on Government debt as a fraction of tax revenues (see Table). This macroeconomic rot originated with the Indira Gandhi-PN Haksar capriciousness and mismanagement, which coincided with the start of Dr Singh’s career as India’s best known economic bureaucrat.

Hypocrisy of the CPI-M

Hypocrisy of the CPI-M

Political Collapse In Bengal: A Mid-Term Election/Referendum Is Necessary

First published in The Statesman, Editorial Page Special Article, January 9 2007,

By Subroto Roy

For the 1991 Assembly elections, I happened to draft the West Bengal Congress’s election manifesto although I was not then or ever a member of that or any other party. There was no Trinamul but its future leader had made her jibe of there being watermelons who were red inside and green outside, aptly in case of a few senior leaders. The manifesto quoted George Orwell’s denunciation of communist ruling classes, and was so hard-hitting that the CPI-M’s Sailen Dasgupta came out with a statement he had never read a Congress manifesto that had been so harsh on them; privately, I took that to be a compliment though the Congress of course lost the election. There is no one in Bengal who does not want to see Bengal prosper, and the most candid vigorous political conversation is necessary to discover what in fact is true and what ought or not to be done.

Democratic norms

The functioning of the Basu-Bhattacharjee CPI-M is quite utterly amazing. It deserves to be called such because of the seamless transfer of power that occurred between the two men in November 2000. The Chief Minister in a parliamentary democracy is supposed to have the confidence of the House, yet when Jyoti Basu stopped being CM and anointed Buddhadeb Bhattacharjee to succeed him, not even a perfunctory vote of confidence was asked for in the House ~ a fact I brought to the attention of the-then editor of The Statesman who agreed with me it signified the CPI-M’s contempt for the parliamentary institution they have been ruling over for decades. By contrast, there is already talk in Britain of an early general election as soon as Gordon Brown takes over from Tony Blair.

It is the same contempt for democratic parliamentary norms that Mr Bhattacharjee and company reveal today in pushing through their diabolical plan to acquire farmers’ lands on behalf of their businessmen friends.

All of 37% of those voting in the 2006 Assembly Elections voted for the CPI-M. By contrast, 41.2% voted for Trinamul and Congress together. Add also the 11.4% of those who voted for the Forward Bloc, RSP and CPI all of whom though part of the Left Front have been opposing the CPI-M on this cardinal issue. That constitutes prima facie evidence that a majority of 52.6% vs. 37% of voters may oppose the CPI-M’s present course of action. Mr Bhattacharjee heads a Government that is supposed to act not merely in the interest of members or groups of his own party or those who have flattered or financed it, but everyone in West Bengal including those who voted against the CPI-M as well as those who did not vote at all.

Gerhard Schröder dissolved the German Bundestag in 2005 though his own party held a majority there. He did so merely because his party lost a provincial election and he