Ever since the Devas and Asuras churned the ‘Ksheerasaagaram’ (the ocean of milk) and found a lot of things – good and bad – India is associated with intellectual, social and political churn.

Yesterday, the Supreme Court cancelled the allocation of licenses made by the previous Telecom Minister for 2G spectrum. Several friends threw up their hands and fretted over the sanctity of the contracts signed with Government of India. If the contracts had no sanction either in common law or written law, where is the sanctity left to protect? It requires some special chutzpah to go on record to state that the judgment was not an indictment of the UPA government,as the incumbent Telecom Minister has done.

This order of the Supreme Court too is worth studying. These orders may have short-term costs but they are vital for the long-term health of the nation.

India revised its GDP growth numbers for the previous three fiscal years. I am not that happy to recount here that I had warned of the risk of stagnation or decline in the savings rate at a guest lecture I made at the class of Dr. Sanjaya Baru at the National University of Singapore some time in early 2009. That is what came through in the GDP revisions. High fiscal deficit means that government savings are not there. Negative real interest rates are no big inducements for household savings. India and Indians are happy to see shopping malls constructed and frequented. Mindless aping of the West is the bane of a civilisational culture like India’s. India’s consumption share of GDP is already high enough. Perhaps, it is too high.

Indian household income and savings have to rise (think jobs, incomes, low inflation) for GDP growth to sustain. It is worth saying ad nauseam, ad infinitum. These words are not mine: consumption ought to be a consequence of economic growth and not the cause of economic growth. If it is the latter, you have indebted societies, broken homes, crimes and high stress. Think America today.

Only in a society that thinks that consuming more of everything is the goal of life can we have consumption driving growth. More over less puts quantity ahead of quality. Pits humans in an acquisitive competition with their friends, colleagues and neighbours. Makes humans choose instant gratification over delayed gratification. Puts the needs and desires of the present generation ahead of their inter-generational obligations.

India currently has the worst of both worlds – that of foreigners and that of its own foreign-born. As Ms. Madhu Kishwar said in her recent talks in Singapore, the British succeeded in destroying India by colonising our minds more than colonising our land. They destroyed our self-esteem. For all its faults, the NDA government did not do that. The UPA government set out to emulate the Britishers systematically with their doles, hand-outs and through the culture of enshrining people’s rights as opposed to responsibilities. Empowerment was out and enfeeblement was in. The cornerstone of official policy is not just enfeeblement of the Indian poor but enfeeblement of India.

A concerned Indian suggested recently that Prof. Amartya Sen could be more useful in his adopted homeland with all its present problems than in India. Many Indians would be grateful if he agreed with the suggestion. Then, the National Advisory Council could be disbanded. Many of the members of the UPA Government could return to their prior vocations and the country would not miss them. The Education Ministry comes to mind.

The Right to Education caps fees, reserves seats and disenfranchises private schools that do a better job of educating the poor than Government schools in India ever did or could ever hope to do so, so that Kyrgyzstan could push us to the last spot when our children’s mathematics and science skills are tested the next time. Perhaps, the Government missed out the verb in the ‘Right to Education’ bill.  It should have been labelled ‘Right to kill Education’. India’s demographic dividend is about to be squandered irreparably.

The rise and fall of the Indian cricket team mirror that of the Indian economy. So far, the verdict is that they do not have what it takes to stay at the top. They can get there by chance or by an occasional display of skill combined with luck. They have not invested in staying there at the top.

Taking pride in one’s achievements, in one’s history and heritage are the essential ingredients/investments on the journey to greatness. Forces within and without are working hard to make sure that Indians have neither pride nor awareness of their history, heritage and culture. That is the place to start.

(I must credit listening to Madhu Kishwar in the last week and my reading of Michel Danino’s ‘Indian Culture and India’s future’ for some of the thoughts conveyed in this post. More on Michel’s book later, perhaps in a separate post)

Will the language of values return to the foreign policy of democracies after they attain a certain amount of power?

(First of a two-part conversation with David Malone)

Dealing with a nuclear Iran is better than suffering an international war to stop it.

Led by the United States, much of the international community has tightened economic sanctions on Iran in an attempt to prevent it from building nuclear weapons. India and China are among the few countries that have stayed out of this initiative and have been criticised for it. In a piece in the Wall Street Journal that comprehensively captures the argument against New Delhi’s current policy of not participating in the sanctions regime, Sadanand Dhume argues:
An India that uses its oil purchases and diplomatic clout to create breathing room for Iran risks scuppering the notion New Delhi has benefited from for more than a decade: that India’s rise is beneficial to the West. By contrast, should India throw its weight behind a powerful anti-Iran coalition, it stands to gain by halting the further nuclearization of its neighborhood, blunting the spread of radical Islam and bolstering its credentials as a force for stability. [WSJ]

Mr Dhume makes an important point when he says that “India’s quest for security and prosperity is most effectively pursued in a predictable and stable US-led international order.” Yet there is room—and indeed, a need—for discrimination within agreement over this worldview. In the case of Iran Washington’s policy position is dogmatic to the point of rejecting without any consideration the benefits—to the United States and to the US-led order—of a grand rapprochement with Iran. In a recent article on FP, Neil Padukone, a new fellow for geopolitics at Takshashila, details the scale and the scope of this geopolitical opportunity. I have argued that New Delhi well-placed to lubricate this process.

We have to criticise New Delhi, but for a different reason. It did not even attempt to avoid being crunched by Washington on one side and its own interests with Iran on the other. The situation in Afghanistan can change dramatically if Iran and the United States could cooperate. Where we needed imaginative and deft diplomacy, we saw resignation and default. Opportunities to improve ties with Washington on issues unrelated to Iran—from the fighter plane purchase, to UN Security Council positions over Libya and Syria—were gratuitously squandered.

On the nuclear issue, if the question were asked at a time when Iran was far away from building a bomb, the answer to whether an Iranian bomb is in India’s interests would have been a “No.” But now, at a time when the only way to prevent Iran from building a nuclear weapon is a war, the answer is different. In fact, the question for governments around the world now is whether an Iranian bomb is worse than an international war to prevent it.

A military conflict against Iran is not in India’s interests. Not only will it further destabilise a region that is already in deep crisis, it will do so in a form where India will be directly affected. Fuel supplies from Iran and supply routes from the Persian Gulf will come under threat and could precipitate a domestic economic crisis with unpredictable consequences. Also, doesn’t a war with Iran once again provide the Pakistani military-jihadi complex, with the encouragement of the Saudis, to once again become a frontline ally in an American war? Washington’s predisposition to turn a blind eye to Pakistan’s shenanigans in the context of its own geopolitical projects was and will be expensive to India.

Those who have long enough memories will recall that General Zia-ul-Haq was in Washington’s doghouse until the United States had to intervene in Afghanistan. Those who have shorter memories will recall General Musharraf being in a similar place and his dictatorship getting a ticket to respectability when the United States had to do it again. The Pakistani military establishment used these periods to first develop and expand its strategic assets—nuclear weapons and jihadi groups. Another reprieve will be no different.

It takes a lot to believe sanctions can prevent a determined, modern state like Iran from building a bomb it wants to. The costs of these ineffective sanctions are subjective—and unless there’s a short-term way to ensure the long-term security of 11 percent of India’s energy imports—for New Delhi they are not worth incurring.

Where does this leave us? Well, with the reality of having to deal with a nuclear Iran, and consequently perhaps with an overtly nuclear Saudi Arabia too. This need not necessarily make the region more unstable, even considering a triangular dynamic that includes Israel. Let’s not forget Western nuclear deterrence theory has always lagged deterrence in practice—be it during the Cold War or in the case of the subcontinent.

This does not mean that the Iranian regime is all Persian fragrance towards India. It’s not. But you can’t survive as a regime or as a state—even a revolutionary one—without realism. There’s a reason why Mullah Omar had to flee on a motorcycle while the leaders of Viet Nam are now Washington’s strategic allies. Regimes devoid of realism write their own obituaries. The survival of the Iranian theocratic-democracy is evidence of there being an underpinning of realism. Iran’s realists, however, are eclipsed by fundamentalists like Ayatollah Khamenei and President Mahmoud Ahmedinejad who feed on hostility with the United States. To the extent that the hostility can be ratcheted down, the realists in the regime will be strengthened. Even otherwise, the Iranian regime, despite its foundations on the Shia narrative, is unlikely to desire civilisational suicide. [Update: How states act after they acquire nuclear weapons - on The Monkey Cage, linkthanks @chennaikaran]

New Delhi’s position might differ from that of Washington and Tel Aviv. But just as their positions are based on their perceptions of self-interest, so is ours. While there is no need to be apologetic about its positions over Iran, New Delhi must not lose other opportunities to strengthen its relationship with the United States and Israel.

Where militant defend the military from foreign sponsors and domestic puppets

When the jihadi face of Pakistan’s military-jihadi complex brazenly showed itself in the form of a Difa-e-Pakistan (Defence of Pakistan) rally in Lahore last month, it appeared that the military face had used ‘non-state actors’ to send a signal both to Washington and its own people. The street power and anti-Americanism of jihadi militants would impress upon Washington the need to continue to do business with the relatively more reasonable military establishment. At the same time, the rally and the rhetoric would channelise public anger at the US/NATO attack on a border position in the Mohmand Agency in a way the military establishment liked.

It also revealed the utter contempt the military establishment has for the game of dossiers-and-lawsuits over the 26/11 terrorist attacks on Mumbai the powerless civilian government of Pakistan has engaged New Delhi in. For here was Hafiz Saeed, the chief of the Jamaat-ud-Dawa/Lashkar-e-Taiba, not only out in the open, but addressing a massive, high profile public rally. It is unlikely though, that the show was staged for India’s benefit.

A month later, and after another such rally in Multan, it appears that the Difa-e-Pakistan project has at least two other objectives.

First, the presence of Deobandi leaders and groups at these rallies suggests that the military establishment is attempting to close the gap that arose between the two after the Lal Masjid massacre of 2007. If the military establishment can forge a ‘common minimum programme’ with the key Deobandi groups, the likelihood of the Pakistan Taliban and related groups ratcheting down their war against the Pakistan army increases considerably. There is a price Pakistan will have to pay for such a compromise, but because it benefits the military establishment, that price will be paid.

Second, the Difa-e-Pakistan movement provides the military establishment with a way to split Imran Khan’s base. Why would they do that, because wasn’t Mr Khan their man? Well, whether or not he is their man, it would not suit the military establishment’s purpose for him to more powerful than it would like.

It may well be that Mr Khan, convinced of his own power, is dancing less to the piper’s tune. In his interview on Indian television in November 2011, Mr Khan declared that he would bring the armed forces under civilian control, wind down all militant groups and deweaponise Pakistan. That’s not quite what the men in khaki would like. That’s certainly not what the jihadi groups would like. So even if Mr Khan is trying to be everything to everyone—he didn’t turn up at the Difa-e-Pakistan rally, but sent a letter that was read out—the prospect of a popular Prime Minister Imran Khan attempting to boss over the military-jihadi complex would be unwelcome to both the generals and the jihadis. Difa-e-Pakistan claims to be, err, ‘non-political’. It nevertheless can exert pressure on Mr Khan. More importantly, it can split his vote in the upcoming elections.

All this is fine as far as Pakistan’s domestic power struggles go. The immediate question for India and the rest of the world is the risk of spillover. Would emboldened jihadi groups be satisfied with mere rhetorical attacks against India and the United States?

Teasing the hidden truth out of common-place observations

Yesterday, good friend and lapsed blogger @Primary_Red wrote a blogpost on the framework of a debate. He says that while most debates get caught in the arguments at human and institutional layers, the only layer which matters is the one of ideas. Here is the crux of his argument:

There was a lot of human suffering and institutional failure in Ashoka slaughtering Kalinga. Today, his Chakra is India’s national emblem. Not to diminish anyone’ suffering, but we don’t remember the names of those who died at his sword. We remember his embrace of Buddhism as a consequence. In the end, this big idea is all that mattered.

I believe that some ideas are better than others and, in time, they always prevail.

In my eyes, there are no better political ideas than secular democracy and free markets. All other ideas have had their moment in the sun, and they have always come up short. Always.

Regardless of how I feel at the human and institutional levels, ultimately the only question that really matters for me is this:

Will my argument advance secular democracy and free markets or set these winning ideas back?[SRI]

Read the complete post here.

Many of you will turn around and say what’s the big deal in what he is saying here. It is so blindingly obvious. Perhaps that is true. But Nicholas G Carr captures the bit about obvious explanation best.

The most memorable explanations strike us as alarmingly obvious. They take commonplace observations—things we’ve all experienced—and tease the hidden truth out of them. Most of us go through life bumping into trees. It takes a great explainer… to tell us we’re in a forest.[Edge]

That is precisely what @Primary_Red does. When you next make an argument or hear one, pause and think: Will my argument advance secular democracy and free markets or set these winning ideas back?

Water, water, every where, nor any drop to drink.

Ramaswamy Iyer makes an excellent point about the Indus Waters Treaty in his op-ed in The Hindu.  Everyone, including the saner voice in Pakistan, has expressed apprehension about the mechanics of sharing the Indus waters between India and Pakistan.  Some of these, are indeed, attributable to lower riparian anxiety, while others are more malicious in intent.  However, it is very premature for India to accede to any compromise on the treaty, particularly given Pakistan’s own callous attitude towards terrorism in India, much of which is perpetrated — directly, or indirectly — by agents of Rawalpindi.

Quite simply, there is no need for India to express enthusiasm towards a recalibration of the treaty; moreso, as I’ve argued in December’s Pragati, when Pakistan is unwilling to take steps to help itself in managing its own water resources more efficiently.  The best India can do is abide by the terms already articulated in the Indus Waters Treaty.

The only circumstance which will ensure a total absence of anxiety on Pakistan’s part would be a total absence of Indian structures on the western rivers, but that is not what the IWT says. It permits Indian projects on the western rivers, but stipulates restrictions and conditions that safeguard Pakistan’s interests. The best reassurance that Pakistan can have is full Indian compliance with those Treaty provisions, and this is zealously watched by the Indus Commissioner for Pakistan in the Permanent Indus Commission.

Incidentally, the myth that there was a serious and deliberate violation of the Treaty by India during the initial filling of the Baglihar reservoir is now an established belief in Pakistan. This writer has dealt with this elsewhere and will not go into the details here. Assuming that the flow at Merala during the filling period fell below the prescribed minimum level (this itself is debatable because there is no joint observation), the important point is that the lapse, if any, was a minor one and lasted only for a short period — less than a day — and could not possibly have caused serious damage.

Why was this minor matter blown up into a huge controversy by Pakistan? The answer is perhaps that Pakistan was deeply disappointed over the Baglihar arbitration and was ready to take advantage of an opportunity to put India on the mat for an alleged deviation from the Treaty. The Indus Commission has now closed this issue.

Pleas are also made for holistic, integrated management of the entire system, joint watershed management, etc. These are unexceptionable ideas, but it was because this kind of approach was not found possible that the system was partitioned into two in 1960. Even today, it cannot be said that the relationship between the two countries has dramatically and durably changed for the better. For the present, what one can ask for is the operation of the existing Treaty in a constructive, cooperative spirit. [The Hindu]

Defending free speech is best done by voting

The Indian governments’ second cave-in over Salman Rushdie at Jaipur last week should worry us. The Rajiv Gandhi government’s surrender to Muslim ‘sentiment’ over Satanic Verses triggered the process of competitive intolerance that has created an environment where anyone—citing religious feelings—can have books, movies and art banned, and their creators persecuted. A quarter of a century is usually sufficient to reflect on the follies of the past, realise the consequences of the mistakes made and resolve not to repeat them. The UPA government could have managed Salman Rushdie’s appearance at the Jaipur Literary Festival better. Here was an opportunity to not only reverse the tide of competitive intolerance but also secure an unassailable position in the political landscape.

Yet, the Congress regime failed. And failed abjectly. All it could do was to use low cunning to create fear and uncertainty among the participants. Those who believe that the first duty of the government is to protect citizens from violence will conclude that the UPA government in New Delhi and the Congress government in Jaipur have failed. After all, if we are to allow violent people to determine what a citizen can or cannot do, why do we need government in the first place?

“But it’s about UP elections!” comes the reply, as if fundamental rights are subject to the political exigencies of state assembly elections. While it is understandable that political partisans—who see everything through the lens of costs and benefits to the party they support—will offer this as an explanation, excuse and justification rolled into one, there is no reason for the rest of the citizenry to accept this as the ‘logic’.

“But under the Indian Constitution, fundamental rights are not absolute and the government has the right to place reasonable restrictions on them” comes another reply. This is an accurate statement. From the debates in the Constituent Assembly, to the verdicts of the Supreme Court and to the opinion of experts in constitutional law, there is no doubt that the Indian Republic seeks a balance between individual liberty and public order. Ergo, some actions by the government to abridge liberty in the interests of maintaining order are constitutionally legitimate. This is intended to give the government flexibility. It would be ridiculous to argue that the Constitution is so constructed to cause the government to yield to threats of violence. It would be wrong to blame the Constitution for a particular government’s cravenness or failure.

What then should we make of this affair? As Andre Beteille explains in his masterful essay on constitutional morality, the Indian system is prone to swings between constitutionalism and populism, with the former asserting liberty and the latter assailing it. Why, though, should populism be opposed to individual liberty?

Phrased differently, why should the government cave in to the demands of the intolerant and not to demands of the liberal? Actually, this is the same as asking “why is it unsafe for women to walk on our streets, why is it that our courts take too long to decide cases, why is it that we need a scores of licenses to start a business, why is it that it is so difficult for our children to get a seat in a good school, why is it that we don’t have decent drinking water, electricity supply, hospitals and, and, and …?” Given the public awareness and indeed consensus that these issues need to be tackled, why is the government so uninterested in pursuing these goals with any seriousness?

The answer might surprise you. It’s because India’s democracy is functioning as it should and the politicians are sensitive to the demands of their voters. The electorate is getting what it wants. The population isn’t. Public discourse in India is unduly influenced by the middle class, not least because it constitutes the market for our media. Middle India believes that that issues that it is preoccupied with should also concern political parties and the government. And when it observes that this isn’t quite what is happening, it is disappointed and—like a hopeless romantic who hits the bottle—drowns its sorrows in cynicism.

Democracy is a numbers game. Those with larger numbers can use the flexibility in the Indian Constitution to have their way to a larger extent. Now we can wish that we had a less flexible constitution where this wouldn’t be possible. But not all wishes have their Santa Clauses. Or, we could start practising democracy. Explaining the failure of the old Indian Liberal Party (in 1943!) B R Ambedkar drew attention to what he called “the elementary fact”, that “organization is essential for the accomplishment of any purpose and particularly in politics, where the harnessing of so many divergent elements in a working unity is so great.”

Technology has made organisation of large numbers of like-purposed people fairly easy. As Atanu Dey has argued, forming voluntary voter’s associations can make an individual voter more effective. It’s being put into action too—see the United Voters of India online platform.

Ultimately, though, it depends on how much of the population becomes the effective electorate. In other words, it depends on whether you vote or not. If you don’t, why blame political parties or the government for giving voters what they want?

The Prime Minister’s Office is on Twitter. Good. But what about the rest?

On NDTV’s Trending This Week show Shashi Tharoor, L Rajagopalan and I spoke to Sunetra Choudhry about the Prime Minister’ Office entering the fray on Twitter (as @PMOIndia). The points I made (or tried to):

1. This is the Prime Minister’s Office that is tweeting and not Manmohan Singh the person.

2. We should welcome it for two reasons: First, the PMO is not ceding or absenting itself from an important space in public discourse. Second, that it sets a precedent for the rest of government—across all levels, across the country—that Twitter is a legitimate place for it to put out information. “Don’t wait for an RTI application before you release information, you can do it proactively on a timely basis.”

3. However, Twitter is only a part of an overall information strategy and complements media appearances, press conferences, public speeches, online content and blog posts. Since Prime Minister Singh has been conspicuous by is absence on this front, merely being on Twitter is the icing without the cake.

4. You can’t govern a country of a billion people by remaining silent.

5. The median age of an Indian is less than 29 years, which means half the population is below this age. It is important for the government to engage them. If the tweets are boring, rehashes of press releases (or worse, approved by a committee,) the PMO might look like a middle-aged uncle turning up at a teenagers’ party pretending to be cool.

Related Links:
My on the “rise of netions” at MEA’s Public Diplomacy Conference 2010; my Shala talk on radically networked societies; and Business Standard column.

The implications of Pakistan’s power triangle

Those who follow Pakistan are familiar with the metaphor that describes that country as “negotiating with a gun to its own head.” Here’s an update: it’s now run by three power centres—the military establishment, the higher judiciary and the civilian government—, where one holds a gun to the another’s head, while not so subtly stroking the back of the third. That makes the drama complex and absorbing, but the upshots for the rest of us are simple.

First, you can’t deal with Pakistan any more. You need to deal with bits, pieces, factions and quarters of Pakistan. Since none of them has the power to see through whatever they might agree, any commitment or deal they make involves, shall we say, immense counter-party risks. In other words, it means they are not worth the paper they are printed on. Whether it’s the IMF dealing with the Pakistani treasury apparatus, or the Indian commerce ministry discussing trade with its Pakistani counterpart or the United States government working on a deal over Afghanistan, there’s no guarantee that the Pakistani side is in a position to see through its end of the bargain. The only reason to persist is perhaps because, well, “the show has to go on.”

Second, the civilian government has neither any control over Pakistan’s foreign and security policies nor has any real means to bring terrorists to justice. The military establishment controls the former and the higher judiciary controls the latter. There is a degree of tacit but not-so-subtle complicity between the two. In other words the military-jihadi complex not only remain in charge but now has a lot more latitude because there are fewer pretenses to keep and fig leaves to hold up. The complex has also regained narrative dominance. To the extent that the presence of US and international forces in Afghanistan keeps the Pakistani army strategically focused on that front, General Kayani and his colleagues are unlikely to want to escalate tensions with India through renewed terrorist or insurgent attacks.

Third, while the general view is that the US-Pakistani alliance is over, it is difficult to shake-off the perception that Washington has decided to work with the Pakistani military establishment rather than strengthen the hands of the civilian government. Therefore, at a critical juncture in Pakistan’s history, Washington has again let go of an opportunity to put the military monster back in the pen. There are good excuses for this, but as much as they are good, they are still excuses.

This does not mean that President Asif Zardari will lose and General Kayani will win decisively. On the contrary, Mr Zardari might be considered to have won if he and his government just survive in office for their term. General Kayani, on the other hand, needs to meet the standards set by his successful coup-making predecessors. That is not a victory for democracy. It is at best an establishment of a new, tenuous distribution of power which, as described above, involves gun-pointing and back-stroking.

At the end of its two-day policy meeting on January 25th, the Federal Reserve revealed its new communication strategy. It will now share with us all the forecasts made by all of the voting members of the Federal Open Market Committee (FOMC) and more on interest rates. It has a formal medium-term inflation target of 2% based on the price index for personal consumption expenditure (PCE). It does not have an employment target or unemployment rate. It has concluded, for better or worse, that it has more influence over inflation outcomes than over employment outcomes. It thinks that the natural rate of unemployment in the US is between 5.2% and 6.0%.

FOMC in December 2011

In addition to all of the above, what else did the FOMC decide on January 24-25? It decided that interest rates would stay low up to late 2014. The last time the FOMC met was on December 13th. The FOMC decided the following at that time:

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 per cent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

What was the economy doing then? This is what they said:

Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth.

Now, what did the FOMC decide on Jan. 25th?

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy.  In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 per cent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

That is a 15-18 month extension of the zero interest rate policy, pre-committed. What does the Federal Reserve need monetary policy autonomy and independence for, if they are going to chain themselves more and more? At least, is there any incremental logic in what they did between December 2011 and now? They repeated the same assessment of the economy:

Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth.

There was no incremental deterioration in their assessment. It was identical to the December statement, in fact.

In terms of actual economic data, the housing market index has improved beyond what they could have imagined. The unemployment rate has declined and so have did the initial jobless claims. Purchasing Managers’ indices in various Federal Reserve regions have shown first order or second order improvement. As usual, the US stock market is defying gravity.

Now, let us make one thing clear. We do not think these are lasting signs of economic recovery. We may even venture to add that some of the improvements do not pass the test of rigour. However, from a rational decision-making angle, what matters is the change; what happens at the margin. At the margin, things have certainly not deteriorated but got better.

Lastly, if we examined the forecasts developed by the Federal Reserve Board members and Federal Reserve Bank Presidents, it is hard to discern a case for extending the zero rate (or, low rate) pledge until late 2014. If anything, their unemployment rate projections are more optimistic now than the ones they made in November 2011!

(Click on the image for a clearer view)

Medium-term inflation target – case for tightening

If the natural rate of unemployment is now estimated at between 5.2% and 6.0%, then it is logical that the output gap is not as negative as is deemed. When the excess capacity is not as large as thought of earlier, then it further weakens the case for extending the period of exceptional policy setting.

The Federal Reserve has now announced a medium-term inflation target of 2% measured by the annual change in the price index for PCE. The average annual inflation rate measured by the PCE Price Index is 3.2%. If we are somewhat more charitable to the Federal Reserve, omit the early years of the 1980s when the inflation rate was in double-digits and calculate the average inflation rate from the 1990s, the rate is 2.2% – still above the Federal Reserve target of 2.0%. The annual inflation rate in the last two quarters (June and September 2011) has been 2.5% and 2.9% respectively.

(Click on the image for a clearer view)

In other words, there is nothing in the data to warrant the Federal Reserve extending its zero interest rate policy by another 18 months.

Lastly, empirical evidence over the last three decades has shown that inflation targeting is useless in helping central banks avoid or contain systemic crises. If anything, inflation at or below target lulls central banks into policy complacency. Central banks need to look at a wide variety of indicators to identify and eliminate risks before they become too big to handle.  In a well-functioning market economy, prices of goods and services would automatically adjust as both demand and supply respond to price signals. There is really nothing for central banks to do except to oversee prudent money supply and credit growth.

Forsaking policy independence is irrational

What did the last episode of pre-commitment under Greenspan achieve? He kept the Federal Funds rate at 1.0% from 2003 until 2004 (he need not have brought it down to 1.0% in the first place) and then increased them gradually at a pre-announced pace of 25 basis points per meeting? Did it cause market participants to taper off their risk-exposure gradually? No. It made them take on more risk because he had removed monetary policy unpredictability and uncertainty, which are legitimate weapons in the policy arsenal.

So, what was the logic in extending the zero per cent interest rate commitment by another 15 to 18 months when mid-2013 is already some 18 months away? Is there something that they know that we do not know about the underlying economy? Are all the recent improvements in the data fabricated? If they do expect the economy to remain as sluggish as to warrant zero per cent interest rate for almost another three years, then why are they not simultaneously warning of irrational exuberance in the stock market?

With his excessively loose monetary policy in 2001-2004 and with his gradual tightening from 2004 to 2006, Greenspan played a major role in precipitating the global financial crisis of 2008. His successor has exceeded him in many ways. It should not surprise us if the consequences too are far worse.

So, why is the Federal Reserve doing this?

There are many reasons.  First, they suffer from intellectual paralysis. All policymakers (and economists) work with dogmas and not with open minds. If they are lucky, the dogmas do not lead to disasters. Otherwise, it does. That is what happened in 2008. They do not learn from errors. They are human beings, after all.

Second, to be charitable to them, American policymakers see deflation and depression in every corner. Every other risk is worth taking to avoid that one risk. To be uncharitable and honest, their true goal is monetary debasement and inflation. That is how one takes care of the mountain of present, future and contingent debt. Savers, pensioners and creditors – domestic or foreign – be damned.

Third, given that they are worried about deflation, they could have considered another round of money printing as they did in 2009 and in 2010. Republican Presidential hopefuls have set their face against it. Hence, Bernanke has to resort to this subterfuge.

Fourth, the Federal Reserve was smug with confidence that they were the only one in the race to debase money. Now, they have a rival who has either already closed the gap or raced ahead of the Federal Reserve. The expansion of the European Central Bank (ECB) balance-sheet in recent months has been astounding. It does not even require high-school mathematics to estimate that the growth rate of the ECB balance-sheet has been just under 50% in the last seven months.

(Click on the image for a clearer view)

Economists would argue that this would not cause inflation immediately because either (a) the money multiplier is weak or that (b) these are temporary expansions of the balance-sheet or (c) that the market believes them to be temporary and hence, they would not influence expectations. May be, all of it is true although we are sceptical of all the claims made above.

Even if they were true, the distortions it causes to human behaviour (encouraging speculation in contrast to investment), to asset prices (bubble-creation), to competitiveness of developing countries (their currencies appreciate too much too soon for them to adjust) and to social equality (asset price gains do not accrue to the majority of the population) are too serious to be intellectualised or dismissed with a wave of hand.

The actions of the Federal Reserve are irresponsible and hence, indefensible. Their putative gains, if any, outweigh both local and global costs.

Investors react like flies drawn to fire

In response to this decision, stock markets went up in the US and in Asia. May be, that pleases the FOMC. After all, they measure their success in terms of the reaction in stock markets. Previous episodes of excessive and prolonged loose monetary policy have shown that such gains are not sustainable. This one will be no different.

Commodity and carry-trade currencies have also surged ahead (Australian dollar, South African rand and Brazilian real, to name a few). Such gains are neither economically desirable for their countries nor are they sustainable.

Gains in precious metals and commodities are the only things that matter, as the race to make paper currencies worthless is now well under way. The number of participants is increasing by the day. We only have to wait for the Bank of Japan to join. They have resisted wisely so far. Will politicians and exporters let them stick to their sensible approach? When they too succumb, expect gold to soar.  Of course, gold does not need further impetus than what the Federal Reserve and the ECB have provided already.

On constitutionalism, a competent state and the importance of strengthening federalism

For quiet contemplation on Republic Day:

On constitutional morality; the need to get basic functions right; and on the wages of an imperfect federalism.

Join the Indians for a Strong Republic page on Facebook.

The Three Thoughts Archive:
Three thoughts on on Republic Day 2011, 2010, 2009, 2008, 2007, 2006, 2005;
and on Independence Day 2011, 2010, 2009, 2008, 2007, 2006, 2005, 2004.

Freedom, self-restraint, recognition of plurality and the scepticism to claims of representation

Here are some excerpts from Pratap Bhanu Mehta’s essay on on constitutional morality from the November 2010 issue of Seminar.

What are the elements of constitutional morality that Ambedkar is so concerned about? His invocation of Grote is meant not as a reference merely to historical rarity, but also as a pointer to the distinctiveness of constitutionalism as a mode of association…For him, the real anxiety was not ‘Constitution’ the noun, as much as the adverbial practice it entailed.

For Grote, the central elements of constitutional morality were freedom and self-restraint. Self-restraint was a precondition for maintaining freedom under properly constitutional government. The most political expression of a lack of self-restraint was revolution. Indeed constitutional morality was successful only in so far as it warded off revolution. Ambedkar also takes on the explicitly anti-revolutionary tones of constitutionalism. In a strikingly odd passage, he says that the maintenance of democracy requires that we must ‘hold fast to constitutional methods of achieving our social and economic objectives. It must mean that we abandon the bloody methods of revolution. It means we must abandon the method of civil disobedience, non-cooperation and satyagraha.’

For the second element of constitutional morality is the recognition of plurality in its deepest form. What is surprising is that Ambedkar turns out to be as, if not more, committed to a form of non-violence as Gandhi…The only way of non-violent resolution amidst this fact of difference is securing some degree of unanimity on a constitutional process, a form of adjudication that can mediate difference. Unilaterally declaring oneself to be in possession of the truth, setting oneself up as a judge in one’s own cause, or acting on the dictates of one’s conscience might be heroic acts of personal integrity. But they do not address the central problem that a constitutional form is trying to address, namely the existence of a plurality of agents, each with his/her own convictions, opinions and claims.

Constitutional morality requires submitting these to the adjudicative contrivances that are central to any constitution – parliament, courts and so on. In the face of difference, the only point of unanimity that one can seek is over an appropriately designed adjudicative process. This is one reason, for example, why Ambedkar does not think socialism should be part of the constitution, even though equality is of paramount concern to him. What the parties have to agree to, as Ambedkar recognizes over and over, is an allegiance to a constitutional form, not an allegiance to a particular substance.

Therefore, constitutional morality requires that allegiance to the constitution is non-transactional. The essence of constitutional morality is that allegiance to the constitution cannot be premised upon it leading to outcomes that are a mirror image of any agent’s beliefs. A constitutional morality requires putting up with the possibility that what eventually emerges from a process is very different from what citizens had envisaged.

The third element of constitutional morality is its suspicion of any claims to singularly and uniquely represent the will of the people…In part what rendered satyagraha ominous, from a constitutional point of view, was not just its uncompromising character; it was also the fact that its agents saw themselves as personifying the good of the whole. Ambedkar is hugely suspicious of any form of hero worship. (This) suspicion of personification was part of a larger sensibility that formed a crucial element of his constitutional morality: he was suspicious of any claims to embody popular sovereignty.

In short, any appeal to popular sovereignty has to be tempered by a sense that the future may have at least as valid claims as the present. [Seminar]

Are we destined to oscillate between populism and constitutionalism?

Here’s an extended excerpt from Andre Beteille’s Dr B R Ambedkar Lecture, delivered at the Administrative Staff College of India, on February 25th, 2008, as published in EPW.

While independence was no doubt a watershed in the life of the nation, things have not stood still since it was attained. I have referred to those days as days of high expectations. Not surprisingly, many of those expectations could not be met. The people of India have gradually learnt that their own elected leaders can be as deaf to their pleas as the ones who came from outside. Sometimes they have shown themselves to be even more venal and self-serving than the British who ruled India. Or perhaps, because Indians had developed such high expectations of their own elected leaders, they lost patience with them more quickly and became more peremptory with their demands on them.

The strength or weakness of constitutional morality in contemporary India has to be understood in the light of a cycle of escalating demands from the people and the callous response of successive governments to those demands. In a parliamentary democracy, the obligations of constitutional morality are expected to be equally binding on the government and the opposition. In India, the same political party treats these obligations very differently when it is in office and when it is out of it. This has contributed greatly to the popular perception of our political system as being amoral.

In a political system in which the principal parties, whether in office or in opposition, have shown themselves to be venal and self-serving, it would be folly to close the door on civil disobedience. But civil disobedience, as no one understood better than Gandhi, is not a panacea, and it does not come without a price. Gandhi was unyielding in his view that civil disobedience had to be non-violent, and he was prepared to eat humble pie, and call it off when it took a violent turn.

Reflective advocates of it have pointed out that civil disobedience cannot be a matter only of disobedience, it must also be civil. For Gandhi, civil disobedience, as a form of non-violent resistance, was essentially a moral force. It required the cultivation of distinctive moral qualities to pass muster as a form of non-violent resistance. In particular, it required among its practitioners a habit of obedience to the laws, including inconvenient ones [Gandhi 1961]. Civil disobedience, in this view, cannot be aimed against inconvenient laws, but only against unjust ones. It is another matter that leaders of public protest in India have never found it difficult to present inconvenient laws as unjust ones.

The virtue of civility is an important component of constitutional morality. It calls for tolerance, restraint and mutual accommodation in public life. Civility is a moderating influence which acts against the extremes of ideological politics. “It restrains the exercise of power by the powerful and restrains obstruction and violence by those who do not have power but who wish to have it” [Shils 1997: 4]. Civility is an important condition for the smooth operation of public institutions such as universities. Universities in the modern world have learnt to live with protests, agitations and demonstrations. But when these acquire an adversarial or an antinomian form as a matter of habit, as they did on the eve of the Emergency and in its aftermath, something goes out of the life of the university as a centre of science and scholarship. It is against this kind of possibility that Ambedkar had issued his warning about the grammar of anarchy.

Civil disobedience may take a persuasive or a coercive form [Haksar 1986]. Gandhi certainly did not intend it to be used as an instrument of coercion. He agonised all the time that the movements he led might degenerate into anarchy and violence; he was no less mindful than Ambedkar of the destructive potential of the grammar of anarchy. Yet, it will be hard to deny that agitations, demonstrations and rallies undertaken in the name of civil disobedience have increasingly become coercive not only in their consequences but even in their intentions. What Ambedkar had hoped would die down after independence has in fact become intensified since 1977.

There are responsible citizens who would make a case for mass rallies and demonstrations even though they are fully aware that they can become coercive. They say that they are forced to take the risk of anarchy and disorder where they know that the authorities, whether in the government or in public institutions such as universities, pay no heed to reasonable persuasion but respond only to threats. It is a fact that in recent decades public authorities have tended to respond more readily to threats than to persuasion even to the point of violating their own norms. As I have said, citizens alone cannot be expected to adhere to the norms of constitutional morality if the state persistently disregards those norms.

Populism has not only become a part of our democracy, but from time to time it puts forward its demands in a very imperious form. When that happens, many naturally feel that the Constitution itself is under threat. At the same time, no serious move has ever been made to discard the Constitution, or to design a different one to replace it.

Even during the darkest days of the Emergency, Indira Gandhi retained a residual attachment to the Constitution, and JP’s defiance of it in the cause of total revolution was at best half-hearted. Our politicians may devise ingenious ways of getting round the Constitution and violating its rules from time to time, but they do not like to see the open defiance of it by others. In that sense the Constitution has come to acquire a significant symbolic value among Indians. But the currents of populism run deep in the country’s political life, and they too have their own moral compulsions. It would appear therefore that the people of India are destined to oscillate endlessly between the two poles of constitutionalism and populism without ever discarding the one or the other. [EPW]

“We the people of India”

Indian Republic is in danger. It is is not in the danger of being killed by a military coup or a Tahrir Square type revolution. It is not even in the danger of going into coma for a few years as it happened under Mrs. Indira Gandhi in the 1970s. Entering its 64th year, the Indian Republic has gone well past that stage.

The danger to Indian Republic comes from being bled to death by a thousand cuts. Every single day it is stabbed, jabbed and knifed — in seen and unseen ways. Some of these wounds are superficial. They heal quickly. Others need more care. Sometimes when they heal, they leave permanent scars. At times, some wounds don’t heal fully. They continue to fester, weakening the body and soul of the Republic.

In an ideal world, the Republic either would never be hurt or would have the capacity for self-healing. In a real world, it is a constant process of getting hurt and healing. That healing touch and care for the Republic, in the real world, is provided by democracy. Democracy means that it is “We the people of India” who will help the Republic recover once it is hurt. No messiahs are going to alight from a different planet to take care of our Republic.

That is the reason on 26th of January, 1950, it was “We the people of India” — not the Queen of England or Mahatma Gandhi or Dr. Ambedkar — who solemnly resolved “to constitute India into a Sovereign, Democratic Republic”. It is our Republic… of We the people of India. We need to look after it. Happy Republic Day everyone.

Related Posts:

I want my constitution

Differentiating between the Independence Day and the Republic Day

Let us stop this jamboree of a Republic Day Parade

Republic Day parade in the 1950s

Bloomberg consensus expectations pointed to no change in monetary policy setting in India, ahead of the meeting of the Reserve Bank of India (RBI) held on January 24th. However, RBI left interest rates unchanged but reduced the cash reserve ratio (CRR) to 5.5% from 6.0% effective from January 28th. Many feel that the RBI had sent confusing signals again. Some of the analysis of the monetary policy action of the RBI also reflect that confusion.

RBI was expected to engage in Open Market Operations and tweak the Statutory Liquidity Ratio if it wanted to address liquidity. A cut in CRR is now interpreted to presage aggressive rate cuts. I wonder if it is the case. A 50-basis point cut in CRR could be a substitute for aggressive rate reductions.

Elsewhere, RBI lowered its growth estimate down to 7.0% from 7.6% for the current financial year ending March 2012. It expects growth in 2012-13 to be slightly better (we are not so sure). It left its forecast for the wholesale price index based inflation rate unchanged at 7% for 2011-12 and said that the forecast for inflation in 2012-13 is subject to considerable uncertainties. In other words, the central bank is not confident – and rightly so – that inflation would decline materially. Core inflation is not only higher now than when RBI began hiking rates but is showing no signs of topping out, yet.

Both in the press statement accompanying the policy decision and in its review of the macro-economic and monetary developments in the third quarter (Oct. – Dec. 2011), the central bank minced no words in holding profligate government spending responsible for higher inflation, for tight liquidity and for lower growth (crowding out effect on private sector capital formation). RBI expects the central government budget deficit for 2011-12 to be substantially higher than original estimates.

While State governments have made progress on consolidating their finances, their contingent liabilities arising from the guarantees they have extended on bank loans to electric power distribution companies are considerable and could nullify the progress on budget consolidation, if the guarantees are invoked.

India’s import of crude oil is rising and along with it, the subsidies extended by the government on fuel prices rise too. India’s energy policy encourages private means of transport as opposed to more efficient public transportation, environmental pollution and compounds its fiscal woes. RBI is correctly realistic about the outlook for the price of crude oil in the months ahead, in the light of aggressive monetary easing in the West and potential supply disruptions if the geopolitical environment worsens.

In sum, the picture one gets is that – going by the stated intent of the central bank – rate cuts would be slow and gradual. Rate cuts in the year 2012-13 might amount to 50-100 basis points but aggressive rate cuts are, by no means, assured. Much depends on the central government’s intent and delivery on budget consolidation. Both are suspect, to say the least.

It is hard to divine the intent and the ability of the central bank to deliver on its intent, based on its statements. That is no criticism. For the most part, RBI is making up policy on the fly, I guess.That perhaps is the only way to make policy under the circumstances – if it is buffeted by domestic growth and inflation challenges, global inflation pressures and political pressures from the government.

For what it is worth, I am not betting on aggressive rate cuts from RBI in 2012-13. May be, I am taking the Reserve Bank of India’s tough-talk on fiscal deficits and uncertain inflation outlook more seriously than it deserves to be.

Caught up with the ‘Economist’ newspaper of the said date. Found several articles interesting:

(1) One is on the arrangement of mirrors that capture and help to convert sunlight into energy. Read the article. I doubt if ‘Economist’ understands the implications of its own sub-header but many ‘pagans’ would do.

(2) The article on Mangolia (‘Minegolia’) was well written too. The statement by the CEO of mining company is so quintessential. Reminds one of the glee that many robber-barons and the so-called voyagers like Columbus must have felt on discovering bounties to be expropriated or seized:

remarks made in the past by Robert Friedland, Ivanhoe’s boss, about “the cash machine we intend to build”, and how nice it was to have so few people around and “no NGOs”.

(3)  I do not think we should be surprised by how executives time their  share buybacks. Insider selling or buying is a poor signal?

(4) I wonder whether this article on corporate shareholder anonymity is an indirect response to the Indian Supreme Court’s verdict on the Vodafone tax demand by Indian Income-Tax authorities. Methinks they were on a stronger wicket vs. Vodafone.

(5) Did not know that there is a ‘Occupy London’ movement analogous to ‘Occupy Wall Street’. Ravin Thambapillai’s letter on ‘the City’ is a good one.

(6) Nearly 40% of America’s top 1% is made up by medical practitioners, lawyers and people from finance. That seems to be up from just over 30% in 1979. Difficult to reject the argument that they could be taxed more.

These are my links for 23-01-2012:

• Dutch Council on Int’l Affairs’ Advise On Digital Warfare – In December 2011 the Dutch Advisory Council on International Affairs published an advisory (.pdf, in Dutch) entitled "Digitale Oorlogsvoering" (English: "Digital Warfare") intended for the Dutch government. The council describes itself as "an independent body which advises government and parliament on foreign policy, particularly on issues relating to human rights, peace and security, development cooperation and European integration". Its existence originates in Dutch law (.pdf, in Dutch). The council is administratively co-located at the Dutch Ministry of Foreign Affairs.

1. Links for 25-11-2011
2. Links for 2-11-2011
3. Links for 17-11-2011
4. Links for 9-11-2011
5. RIM – India’s and UAE’s objections

The government, armed services, media, and business community must shoulder some of the blame for the state of India’s think tanks.

Having worked for three public policy institutes in Washington and closely with half a dozen more, and having interacted in some capacity with almost every Indian strategic think tank, I have some strong views on their development and future. So I was naturally intrigued by the results of the latest annual Global Go To Think Tank Index produced by the University of Pennsylvania (in full disclosure, I contributed to last year’s survey). Unlike  previous editions, this year’s index received some attention in India, with the media registering that no Indian think tank featured in the world’s top 30. Jason Miks, editor of the online publication The Diplomat, also wrote a post on the subject:

At their best, think tanks can be a hotbed of ideas for government to draw upon, and if India has aspirations toward looking past its neighborhood and stepping up on the global stage it will need to draw upon the vigorous exchange and debate of ideas and policy proposals that such research centers can offer. And yet clearly, in the eyes of their peers, Indian think tanks lack the rigor and influence of a Germany, Canada or indeed Kenya, at least according to the latest list.

I’m going to quote here at some length from one of our writers on this issue from a couple of years back:

“Apart from (the) persistence of endemic poverty and poor infrastructure, India faces other critical challenges in its search for great power status: its acute shortage of critical human capital. At one level, the country can justifiably claim that it has some institutions of higher education which can compete with their peers on a global basis. But these institutions are mostly confined to the realms of science, engineering and management and despite the existence of these centers of excellence, mediocrity is the hallmark of many of India’s other educational institutions.

“For example, with the possible exception of the discipline of economics, India lags woefully behind in the other social sciences such as sociology, anthropology and political science. Few, if any, significant contributions to these fields of intellectual endeavor have emerged from India in recent decades. Most scholarship in these areas is either derivative, or worse, still mostly descriptive and hortatory.”

It’s the kind of damning indictment I’ve come to expect from those engaged in the China vs India debate that rages on our site and elsewhere. And yet these words were written by one of our Indian Decade bloggers, Sumit Ganguly.

And he’s right. When we’re sourcing material for the site, too often we find Indian think tank analyses littered with basic errors, unsubstantiated claims or rehashings of long debunked theories (Flashpoints contributor James Holmes is just one of many to have expressed frustration at how a likely non-event involving the Chinese and Indian navies last summer is still treated as fact in Indian media and policy circles).

It goes without saying that India has an enormous amount to offer the international community. But there’s no excuse for its absence on a list like this. [The Diplomat]

I want to first be clear that the results of the University of Pennsylvania report are not as damning an indictment as they may appear, because the methodology used to compile the rankings is unscientific and deeply flawed. The study is based on the opinions of select experts, and as such, there are enormous fluctuations in the rankings each year. Factors such as operating budgets, number of scholars, number of citations, and social media metrics are not used, even though these are all important and quantifiable factors that speak to the quality and influence of public policy institutions. In past editions of the survey, India’s premier defence think tank IDSA has – for example – been ranked rather high among Asian think tanks, and there is no clear explanation as to why its rating has deteriorated over time. Another example: note that the rankings for regional think tanks do not correspond to  the overall rankings at all, which speaks to some of the methodological shortcomings of this survey. So I would not put too much stock into the University of Pennsylvania study as evidence, particularly in comparing Indian institutions in quality or influence to those of other Asian countries and the wider developing world.

That said, this represents a valuable opportunity to discuss why India – despite having more think tanks than any country other than China and the United States, and a culture of debate and openness – still lags in this realm. The quality of Indian academia, that Professor Ganguly focuses upon, is a real problem, and most think tank products are still largely descriptive – relying only on public source information of sometimes dubious quality – rather than comprehensive or analytical.  But that is only one factor. In fact, the blame for India’s sub-par think tanks lies in equal measure with India’s government, its media, and its business community.

The success of think tanks depends as much on the consumers of information as the producers. While the Indian government has made welcome efforts in recent years to reach out to think tanks, it is still incredibly limited in doing so. Serving diplomats, bureaucrats, and military officers are often unable or unwilling to make presentations, limited by their own capacity constraints, their own research abilities, the possible  political consequences, and strict limits to their jurisdictions. When IDSA was first formed, serving military officers were banned from coming into contact with it. That policy has since been remedied, but the culture has not entirely dissipated. By contrast, serving military officers in the United States interact regularly with most security think tanks, making presentations, contracting out research, and bringing in scholars as external sounding boards. Think tanks, for example, played a vital role in developing the surge strategy in Iraq. In Europe, the model is different, but even then, think tanks with strong party affiliations provide mechanisms for aspiring political leaders to hone their skills and expertise. India’s government and military – in other words – must be more open and receptive, and far more knowledgeable about how to use think tanks to advance their objectives if they are to succeed. Recent interviews I conducted with officials at India’s Ministry of External Affairs in New Delhi suggest that many Indian diplomats are completely unaware of the role and potential value of think tanks.

Secondly, the Indian media has not yet produced a public debate in India that clamors for greater information and insight on international and security affairs. In a media environment dominated by political theatre, Bollywood gossip, cricket scores, and corporate quarterly returns, there is little appetite for world or defence news, which is often sidelined in favour of reporting that generates higher ratings or readership. Consequently, scholars with expertise and quality research on important but niche topics – when it is produced – rarely receive the attention they deserve. For example, India, by virtue of its own nuclear program, has produced a very capable and knowledgeable cohort of experts on nuclear strategy and non-proliferation, of higher quality than almost anywhere else in the world. But their views never received adequate attention, particularly outside of India. The media has to take seriously its job of informing its readers or viewers if think tanks are to become more effective and have a greater impact.

Third, what is rarely understood and appreciated is that the world of think tanks, like any other industry, is driven by funding. Brookings and Carnegie were established only by the generous donations of industrial oligarchs with a keen interest in shaping public policy. Even today, both institutions receive millions of dollars in annual donations from the American corporate sector, as do most other leading American think tanks. The corporations receive tax benefits by donating to registered non-profits, and the think tanks are generally transparent about the sources of their funding and make available any research products to the wider public rather than to their sponsor alone for any competitive advantage. India’s newly rich business community has yet to make that leap in understanding the value of think tanks. From their standpoint, there are few financial incentives and the returns are often intangible. Most Indian think tanks are, consequently, chronically underfunded and under-resourced. If India is to have world-class think tanks, the incentives must be made clear to business leaders, and they must fill the funding breach. India is in this regard unlike China, which due to the role of the state, has think tanks that are primarily state-affiliated and -funded.

None of this is meant to excuse the overall quality of think tanks in India. Given the level of existing expertise, the English language faculty of its scholars, and the openness of Indian society, India’s think tanks should be playing a much greater role both nationally and internationally. The absence of analytical rigour and healthy institutional competition is often shocking. Domain expertise in many realms is lacking: I am often hard-pressed to come up with any leading Indian experts on important issues as diverse as the Chinese economy, Latin America, international human rights, defence budgeting, and drug trafficking. Even in areas where India boasts considerable domain expertise, such as Afghanistan, non-proliferation, or U.S.-India relations, the bench is incredibly thin. That said, the problems afflicting India’s think tanks are most certainly wider and deeper than one is often made to believe.

A 6-day sojourn through oil and gas-rich Arab countries in the past week by China’s premier Wen Jiabao has drawn global attention to tensions over fresh Western sanctions against Iran and its consequences for energy security in Asia. The European Union and the United States are pushing major importers of Iranian oil such as India, China, Japan, South Korea, and Turkey to join an economic embargo for pressuring Tehran into halting its advancing nuclear programme.

Although China rebuffed Western entreaties to reduce oil imports from Iran, the choice of Saudi Arabia, United Arab Emirates and Qatar as the only destinations in Wen’s Middle East itinerary tells a tale of precautionary diplomacy. These three Arab states are pro-Western, Sunni Arab suppliers of oil and gas to Asia’s booming economies, and they are presenting themselves as substitutes to energy products that Iran has been providing. While China publicly plays down talk of forsaking Iranian oil and replacing it with Arab alternatives, Wen repeatedly raised the prospect of drastically increasing energy imports from the anti-Iranian Arab regimes he just visited.

Chinese communiques during Wen’s Middle East tour referred to “complicated regional trends” and to shaky energy horizons due to “geopolitical factors”, codes for the growing chorus in the West to compel Iran on its suspected nuclear weapons development. Counter-threats from Tehran to shut down the Straits of Hormuz, through which much of Asia’s oil imports flow, and the ever present danger that Israel might unilaterally attack Iran, have creased brows in Beijing for coinciding with China’s slowing economic growth.

Yet, China is confident that its size and economic leverage over the US are such that ignoring Washington on embargoing Iranian oil will not incur real damage. When one Chinese oil firm was recently placed on the financial sanctions list for trading with Iran, Beijing reacted furiously and conveyed “strong dissatisfaction and adamant opposition.” There is no automatic trigger for closing American financial markets to all foreign companies that trade in Iranian oil, and this discretionary element in the sanctions architecture gives China and other Asian powers scope to wiggle out of the proposed embargo.

Despite their strategic closeness to the US, countries like India, Japan, South Korea and Turkey are wary of costly economic fallouts from sanctions and war in the Persian Gulf. New Delhi has rightly decided not to heed the West on abandoning Iranian oil imports, and it is proceeding to negotiate alternative payment processing mechanisms to continue trading with Tehran. But since we are not in a position to prevent a violent conflagration involving Israel and Iran, it is being reported that India’s petroleum ministry has instructed public sector oil refiners to “reduce their dependence on crude imports from that country (Iran).”

As with other Asian importers of Iranian oil who are on tenterhooks because of the cold war between Iran and the West, India will have to diversify away from (though not totally renounce) a politically unstable supplier like Iran. With international sea freight rates declining steadily, India can think of entering into long-term contracts to raise oil imports from geographically more distant but predictable countries such as Venezuela, Brazil and Angola. Currently, we depend on the volatile Middle East for 70 percent of oil and gas imports, an unhealthy addiction laden with grave international political risks.

While seeking to gradually free ourselves from Iranian and other Arab energy producers, India and other Asian powers must also factor in the larger structural implications— for the Middle East as a region— of suddenly deserting Iran at a time when the US and the EU are aiming at Tehran’s jugular. If the Iranian regime falls to a mix of economic woes and US-Israeli sanctions or war, it could leave the Middle East bereft of any counterbalancing force to the West.

It is in the interests of Asian powers to avert a Middle East entirely under the Western thumb simply because India and its continental peers profess a desire for a multipolar world where there is no single global hegemon. It makes tactical sense to slowly retrench from Iranian oil, but it would be a strategic disaster for Asian powers to become reliant on Western approval to access Middle Eastern energy, which will remain important in our energy mixes for at least some more years.

Unlike China, which has a first mover advantage, India is realising the value of Africa and Latin America as stable sources of energy and trade rather late. The fracas over Iran’s oil embargo should be a wakeup call to redouble Indian diplomacy and foreign investment in these two hitherto neglected continents, while not passively turning our backs on the still pivotal Middle East.

1. Jayarava investigates if there is any truth to the claim that Buddha’s family followed Dravidian marriage customs? Read the entire post to get the answer.

A cross cousin marriage is one in which a boy would marry his mother’s brother’s daughter, or a girl would marry her father’s sister’s son. This is one of the preferred matches in South India amongst the Dravidian speaking peoples, and also practised in Sri Lanka. However Good (1996) has been critical of the idea that cross-cousin marriage is the only or most preferred kin relationship, and shows that other marriage matches are made. Be that as it may, cross-cousin marriage is a feature of South Indian kinship, and the Brahmanical law books (the Dharmasūtras) make it clear that cousin marriage is forbidden for Aryas. (Thapar 2010: 306). The perception, then is that if the Buddha’s family practised cross-cousin marriage, they cannot have been Aryas and were likely Dravidians.

2. While we know about the English, Portuguese and Dutch factories in India, less known is the fact that there was a Danish factory in Calicut in the 18th century.

The Calicut lodge was not very much in the scheme of things as far as the Danish were concerned and was just an outpost for pepper procurement. However it also served as a listening post to sound out the English overtures in the Malabar Coast. The Danish were wary of supplying arms and armaments to the Travancore kingdom and the Mysore rajas though they did quite a bit of that quietly under the British eyes and the response from the buyers were not too enthusiastic and the equipment was old, outdated and even unusable at times. But they continued on. Sometimes brown sugar and salt from the Calicut factory found their way to the ships headed back to Copenhagen. The ships came from Tranquebar in Jan/Feb and got back by April/May. During the incoming trip they brought in weapons offloaded at Colachel and later at Calicut for Hyder & Tipu. The principal items of trade were saltpeter, pepper, salt, soft brown sugar, textiles, rattan, indigo & tea (from China). For the Danish ships, the journey to Europe was direct from Tranquebar and not touching the Malabar coasts.

3. Usually we don’t find elaborate descriptions of the Zamorin. But thanks to Italian traveller Pietro Della Valle who visited Calicut in December 1623, we have a bit more details.

Pietro had no difficulty in walking into Zamorin’s Palace where he and his Captain were almost forced to have an audience with the Zamorin. His description of the Zamorin as he walked into the hall to meet the visitors is graphic: After a short space the King came in at the same door, accompanied by many others. He was a young Man of thirty, or five and thirty, years of age, to my thinking; of a large bulk of body, sufficiently fair for an Indian and of a handsome presence. … His beard was somewhat long and worn equally round about his Face; he was naked, having only a piece of fine changeable cotton cloth, blue and white, hanging from the girdle to the middle of the Leg.

4. Do you know why Tiruvarur is famous for? Sriram writes:

Tiruvarur town is also the birthplace of the Carnatic music trinity – Syama Sastry (1762-1827), Tyagaraja (1767-1847) and Muttuswami Dikshitar (1775-1835). The houses in which they were born were later acquired by a trust which built memorials for them at the spots. Though not aesthetically appealing, they serve to commemorate three geniuses who between them, revolutionized South Indian classical music, rather like Bach, Beethoven and Mozart in the world of Western Classical Music. Of the Trinity, Muttuswami Dikshitar is completely associated with Tiruvarur. Several of his compositions are in praise of the deities here.

The Bhakti movement in Tamil Nadu is associated with the 63 devotees of Shiva, known as the Nayanmars, all of whom lived between the 2nd and 8th centuries. Of these, the last- Sundaramurthy has a shrine to himself here. It is believed that he first came up with the idea of the 63, including himself, at the Devashraya – a many-pillared hall that stands within this temple.

Just four posts for this month. The next carnival will be up on Feb 15th. Send your links to varnam dot blog @gmail before that.