The Peninsula Foundation

Category: India

  • Living Next to China: India’s Economic Challenge

    Living Next to China: India’s Economic Challenge

    Abstract

    Hampered by declining economic growth, India needs to take bold and practical economic measures to overcome the adverse impact of the coronavirus pandemic, compounded by past economic blunders such as the demonetisation and the haphazard implementation of the GST regime. Mohan Guruswamy analyses that the seeds of the current economic slide were sown by the UPA II regime by its populist measures that were wasteful, unproductive, and reduced capital expenditure. Non action by the NDA governments on these issues has made it worse. He argues that India must not shy away from recourse to deficit financing to overcome the current unprecedented challenges faced by the economy on account of the Covid-19 disruption. India needs to increase its stimulus package from a mere 0.3% of the GDP to at least 10% to boost economic revival and growth. India’s reserves of $490 billion ($530 billion as of recent figures) is available to be tapped for economic revival. The measures must focus on addressing the severe impact on weaker sections of the society such as the poor, lower middle-class, and the farmers.

    The Covid2019 shock hit all world economies and has caused a serious contraction in all of them. Ironically, in the advanced economies like the USA, UK, Japan, and others, it exposed their intrinsic strengths with highly evolved social security systems by and large being able to absorb the labor displacement and the ability to quickly put together a fiscal fight back plan. Even China has been able to quickly recover its pole position as the worlds leading exporter and industrial production center. In India, Covid2019 exposed our co-morbidities, and has further opened the traditional faultlines, with the large unorganized labor cohort bearing the brunt of the costs. At last count the CMIE estimates over 130 million daily wagers in the urban centers being rendered jobless and homeless.[i] India’s economy which has been in distress for most of the last decade in now seriously stricken.

    When India’s economic history is written in some future date, and when a serious examination is done of when India lost its way to its ‘tryst with destiny’, the decade of 2010-20 will be highlighted.

    When India’s economic history is written in some future date, and when a serious examination is done of when India lost its way to its ‘tryst with destiny’, the decade of 2010-20 will be highlighted. The facts speak for themselves. India’s real GDP growth was at its peak in March 2010 when it scaled 13.3%.  The nominal GDP at that point was over 16.1%. The nominal GDP in September 2019 was at 6.3%, it’s lowest in the decade. Since then the downward trend is evident and we are now scraping the bottom at about a real GDP growth rate of 4.5%, this too with the push of an arguably inflationary methodology. Our previous CEA, Arvind Subramaniam, estimated that India’s GDP growth is overestimated by at least 2.5%. BJP MP and economist Subramaniam Swamy was even more pessimistic. He estimated it to be 1.5%.

    The decline in the promise is amply evident by the change in the make up of the economy during this decade.  In 2010 Agriculture contributed 17.5% of GDP, while Industry contributed 30.2% and Services 45.4%.  In 2019 that has become 15.6%, 26.5% and 48.5% respectively.  The share of industry has been sliding.  This is the typical profile of a post-industrial economy.  The irony of India becoming post-industrial without having industrialized must not be missed.

    Decline in Capital Investment

    The most significant cause for the decline of growth is the decline in capital investment.  It was 39.8% of GDP in 2010 and is now a good 10% lower.  Clearly without an increase of capital investment, one cannot hope for more industrialization and hence higher growth.  What we have seen in this decade is the huge increase in Services, which now mostly means increase in Public Administration and informal services like pakora sellers.

    In 2010 it seemed we were well on track.  But now we are struggling to get past $3 trillion, and the $5 trillion rendezvous that Modi promised by 2024 will have to wait longer.

    At the turn of the century, as China’s GDP began its great leap forward (from about $1.2 trillion in 2010 to $14.2 trillion in 2019), was also a heady moment for India whose GDP of $470 billion began a break from the sub 5% level of most of the 1990’s to the rates we became familiar with in the recent past (to hit a peak stride of 10.7% in 2010). At that point in time, if growth rates kept creeping up, we could have conceivably gone past $30 trillion by 2050. But for that the growth rate should consistently be above 7%. It seemed so feasible then.  In 2010 it seemed we were well on track.  But now we are struggling to get past $3 trillion, and the $5 trillion rendezvous that Modi promised by 2024 will have to wait longer.

    To be fair to Modi and the NDA, the decline began early in the second term of the UPA when capital expenditure growth had begun tapering off.  Dr. Manmohan Singh is too canny an economist to have missed that.  But UPA II also coincided with the increasing assertion of populist tendencies encouraged by the Congress President and her extra-Constitutional National Advisory Council. The decline in the share of capital expenditure was accompanied by a huge expansion in subsidies, most of them unmerited.  Instead of an increase in expenditure on education and healthcare, we saw a huge expansion in subsidies to the middle and upper classes like on LPG and motor fuels. Even fertilizer subsidies, which mainly flow to middle and large farmers with irrigated farmlands, saw a great upward leap.  Clearly the money for this came from the reduction in capital expenditure.  Modi’s fault in the years since 2014 is that he did nothing to reverse the trend, and only inflicted more hardship by his foolish demonetization and ill-conceived GST rollout.

    The realities are indeed stark.  The savings/GDP ratio has been in a declining trend since 2011 and Modi has been unable to reverse it.  Consequently, the tax/GDP ratio and the investment/GDP ratio have also been declining.  The rate of economic growth has been suspect and all objective indicators point to it being padded up. The drivers of economic growth such as capital expenditure is dismal.  Projects funded by banks have declined by over half since 2014 to less than Rs.600 billion in 2018-19.  Projects funded by the market have dropped to rock bottom.  Subsequently the manufacturing/GDP ratio is now at 15%.  Corporate profits/GDP ratio is now at a 15-year-old low at about 2.7%.  You cannot have adequate job creation if these are dipping.  Declining rural labor wage indices testify to this.

    Between October 2007 and October 2013 rural wages in the agricultural and non-agricultural sectors grew at 17% and 15%, respectively.  Since November 2014, however, agricultural and non-agricultural sector wages grew at only 5.6% and 6.5%, respectively. In 2019 average rural wage growth has further fallen to 3.1%.[ii]

    Bharat and India Divide

    It is very clear now that the urban lane has been moving well in India.  Indeed, so well that an Oxfam study revealed that that as much as 73% of the growth during the last five years accrued to just 1% of the population.[iii] This does not mean it is just the tycoons of Bombay and Delhi who are cornering the gains.  Government now employs close to 25 million persons, and these have now become a high-income enclave.  The number of persons in the private and organized sector is about another ten million. In all this high-income enclave numbers not more than 175-200 million (using the thumb rule of five per family).  Much of the consumption we tend to laud is restricted to just these.

    The simple fact that the share of Agriculture is now about 15.6% of GDP and falling, while still being the source of sustenance for almost 60% of the population reveals the stark reality.  A vast section of India is being left behind even as India races to become a major global economy.

    Agriculture is still the mainstay of employment.  Way back in 1880 the Indian Famine Commission “had observed that India had too many people cultivating too little land”.  This about encapsulates the current situation also.  While as a percentage the farmers and farmworkers have reduced as a part of the work force, in absolute terms they have almost tripled since 1947.  This has led to a permanent depression in comparative wages but has also led to a decline in per farmer production due to fragmentation of holdings.  The average farm size is now less than an acre and it keeps further fragmenting every generation.[iv] The beggaring of the farming community is inevitable.  The only solution to this is the massive re-direction of the workforce into less skilled vocations such as construction.

    The simple fact that the share of Agriculture is now about 15.6% of GDP and falling, while still being the source of sustenance for almost 60% of the population reveals the stark reality.  A vast section of India is being left behind even as India races to become a major global economy.

    As the decade ends, the Bharat and India divide have never been more vivid.  Our social scientists are still unable to fix a handle to this because the class, cultural and ethnic divides still eludes a neat theoretical construct.  Yet there can be little disagreement that there are two broad parts to this gigantic country and one part is being left behind.  The distance between the two only increased from 2010 to 2020.  This is indeed the lost decade.  Recovering from this will take long and will be painful.  If we take too long, we might have used up a good bit of the ‘demographic dividend’ and the demographic window of opportunity.  The ageing of India will be upon us by 2050[v].

    Covid-19 Impact – Increasing Economic Disparities 

    In the recent months the onslaught of the Covid2019 induced lockdown has been quite relentless.  From 2004-2014 India’s GDP grew at an average of 7.8%.  At its peak it went past 10% in 2010-11 Then it started slowing down.  The new government was unable to return to the old growth rates because it did not care to learn from the experiences of the previous regime, which began to spend more on giveaways, misguidedly thinking it was welfare economics, and took the accelerator off capital expenditure.  Even though capital expenditure is driven in India by government spending, this government spending is very different from subsidies and giveaways.  Subsidies generally tend to be misdirected with the already well-off garnering most of it.  Minimum Support Prices (MSP) are a huge annual subsidy[vi]and 90% of it accrues to the states of Punjab, Haryana, and the coastal region of Andhra Pradesh.  Fertilizer subsidies tend to accumulate to the advantage of large and medium farmers or to about a quarter of all land holdings.  Ditto for free power.  The only welfare expenditure to benefit farmers is investment in irrigation, rural infrastructure, and social welfare like education and health.  Unfortunately, this has been on the decline.  This has exacerbated disparities, both local and regional.  With capital expenditures declining, job creation suffered and the inevitable slowdown of GDP growth happened.  As we started diving, the government inflicted the so-called Demonetization adding to our woes.  Just as things began to look up, the Covid2019 pandemic overtook us.

    Now the only dispute on national income is how much will be the contraction.  The Finance Ministry hopes there won’t be any. The IMF has officially said it will be 4.5%.  The rating agencies predict a contraction of 6.8%, while many more are suggesting something closer to 10%.  How do we deal with is now?  The government of India has tended to be “conservative” in its outlook and has made no serious suggestion on economic stimulus.  What it calls a stimulus is actually not a stimulus. The problem is more philosophical.

    The divide between the Keynesians and the Chicago school is as intense and often antagonistic as the Sunni-Shia, Catholic-Protestant or Thenkalai-Vadakalai Iyengar divides.

    Keynesian economics is a theory that says the government should increase demand to boost growth. Keynesians believe consumer demand is the primary driving force in an economy.  As a result, the theory supports expansionary fiscal policy.  The Chicago School is a neoclassical economic school of thought that originated at the University of Chicago in the 1930s.  The main tenets of the Chicago School are that free markets best allocate resources in an economy and that minimal or zero government intervention is best for economic prosperity.  They abhor fiscal deficits.

    Inadequate Stimulus Package 

    The instruments used to beat countries like India into submission are ratings agencies such as Moody’s, which just downgraded India.  We shouldn’t lose too much sleep over it.  India is a hardly a borrower abroad and is more of a lender holding $490 billion as reserves.

    The only reason why the actual stimulus package is only Rs.63K crs is the obsession with fiscal deficits by Chicago economists such as Raghuram Rajan and his former student the hapless Krishnamurthy Subramaniam, the present CEA. They are true disciples of the Washington Consensus to judge countries like India by the fiscal deficit size.  The instruments used to beat countries like India into submission are ratings agencies such as Moody’s, which just downgraded India.  We shouldn’t lose too much sleep over it.  India is a hardly a borrower abroad and is more of a lender holding $490 billion as reserves.

    That is why the CEA when asked about a big stimulus said: “There are no free lunches!” That’s exactly what Milton Friedman said. But they quite happily ignore the biggest deficit financed economy in the world is the USA.  Raghuram Rajan told Rahul Gandhi on his videoconference that a stimulus of Rs.65K crores would suffice in the present situation[vii]. The Nobel Laureate Abhijit Bhattacharya and former CEA Arvind Subramaniam suggest a stimulus package like the USA or Japan[viii].  The USA has just announced a stimulus of over $3.5 trillion or over 15% of GDP.  Modi’s stimulus is a mere 0.3% of GDP.

    What is ‘Fiscal Deficit?’ A fiscal deficit occurs when a government’s total expenditures exceed the revenue that it generates, excluding money from borrowings.  Deficit differs from debt, which is an accumulation of yearly deficits.

    Many serious economists regard fiscal deficits as a positive economic event.  For instance, the great John Maynard Keynes believed that deficits help countries climb out of economic recession.  On the other hand, fiscal conservatives feel that governments should avoid deficits in favor of balanced budgets.

    India’s debt/GDP ratio is by contrast a modest 62% and yet it intends to pump in a mere 0.3% of GDP as stimulus.

    The fastest growing economies in the world, and now its biggest – USA, China, Japan and most of Western Europe – have the highest debt/GDP ratios.  Japan’s debt/GDP is over 253% before the latest stimulus of 20% of GDP.  China’s debt is now over 180% of its GDP.  The USAs debt/GDP is close to 105% yet it is raising $3 trillion as debt to get it out of the Covid2019 quagmire.  India’s debt/GDP ratio is by contrast a modest 62% and yet it intends to pump in a mere 0.3% of GDP as stimulus.

    Pump priming the economy by borrowing per se is not bad.  It is not putting the debt to good use that is bad.  Nations prosper when they use debt for worthwhile capital expenditure with assured returns and social cost benefits.  But we in India have borrowed to give it away as subsidies and to hide the high cost of government.  To give an analogy, if a family has to make a choice of borrowing money to fund the children’s education or to support the man’s drinking habit, the rational choice is obvious. The children’s education will have a long-term payback, while the booze gives instant gratification. But unfortunately, our governments have always been making the wrong choices.

    If borrowed money is used productively and creates growth and prosperity, it must be welcomed.  What we want to hear from the government is not about fiscal deficit targets, but economic growth, value addition, employment, and investment targets.  Our governments have hopelessly been missing all these targets.

    Modi’s Options – Need for Bold Decisions

    So, what can Modi do now to get us out of this quagmire?  If the regime abhors a stimulus financed by deficit financing there are other options that can be exercised.  But he is hamstrung with a weak economic management team with novices as the two key players, the Finance Minister and RBI governor.

    India has over $490 billion nesting abroad earning ridiculously low interest.  Even if a tenth of this is monetized for injection into the national economy, it will mean more than Rs.3.5 lakh crores.  At last count the RBI had about Rs.9.6 lakh crores as reserves.  This is money to be used in a financial emergency.  We are now in an emergency like we have never encountered or foresaw before. Even a third of this or about Rs.3.2 lakh crores is about five times the present plan.

    There is money in the trees, and all it needs is a good shake up to pick the fruits. The pain of the lockdown must not be borne by the poor alone.  The government can easily target 5% of GDP or about Rs.10L crores for the recovery fund as an immediately achievable goal.

    There are other sources of funds also, but tapping these will entail political courage and sacrifices. Our cumulative government wages and pension bill amounts to about 11.4% of GDP.  After exempting the military and paramilitary, which is mostly under active deployment, we can target 1% of GDP by just by cancelling annual leave and LTC, and rolling back a few DA increases.

    The government can also sequester a fixed percentage from bank deposits, say 5% of deposits between Rs.10-100 lakhs and 15-20% from bigger deposits for tax-free interest-bearing bonds in exchange.  The ten big private companies alone have cash reserves of over Rs.10 lakh crores[ix].

    There is money in the trees, and all it needs is a good shake up to pick the fruits. The pain of the lockdown must not be borne by the poor alone.  The government can easily target 5% of GDP or about Rs.10L crores for the recovery fund as an immediately achievable goal.

    This money can be used to immediately begin a Universal Basic Income scheme, by transferring a sum of Rs.5000 pm into the Jan Dhan accounts for the duration of the financial emergency; fund GST concessions to move the auto and engineering sectors in particular; begin emergency rural reconstruction projects to generate millions of new jobs and get our core infrastructure sectors like steel, cement and transportation moving again.

    Getting money to move India again is not a huge problem.  What comes in between are the philosophical blinkers.  Call it Chicago economics or the Gujarati mindset.

    Notes

    [i] https://www.businesstoday.in/sectors/jobs/india-unemployment-rate-hits-26-amid-lockdown-14-crore-lose-employment-cmie/story/401707.html

    [ii] https://www.financialexpress.com/economy/farm-wages-growth-fell-to-a-four-quarter-low-in-q3-fy-20/1789235/

    [iii] https://economictimes.indiatimes.com/news/economy/indicators/wealth-of-indias-richest-1-more-than-4-times-of-total-for-70-poorest-oxfam/articleshow/73416122.cms?from=mdr#:~:text=Wealth%20of%20India’s%20richest%201%25%20more%20than%204%2Dtimes%20of,total%20for%2070%25%20poorest%3A%20Oxfam&text=The%20Oxfam%20report%20further%20said,particularly%20poor%20women%20and%20girls.

    [iv] https://www.prsindia.org/policy/discussion-papers/state-agriculture-india

    140 million hectares of land is used as agricultural area, as of 2012-13.  Over the years, this area has been fragmented into smaller pieces of land.  As seen in Table 3, the number of marginal land holdings (less than one hectare) increased from 36 million in 1971 to 93 million in 2011.  Marginal and small land holdings face several issues, such as problems with using mechanization and irrigation techniques.

    [v] https://economictimes.indiatimes.com/news/politics-and-nation/demographic-time-bomb-young-india-ageing-much-faster-than-expected/articleshow/65382889.cms

    [vi] https://www.thehindubusinessline.com/opinion/all-you-wanted-to-know-about-minimum-support-price/article7342789.ece

    [vii] https://www.hindustantimes.com/india-news/in-video-conversation-with-rahul-rajan-suggests-65k-crore-aid-for-poor/story-CtrtvW6HErR16L9m1t9wHP.html

    [viii] https://economictimes.indiatimes.com/news/economy/policy/rahul-gandhi-in-conversation-with-abhijit-banerjee-india-needs-a-bigger-stimulus-package-like-us-japan-to-revive-economy/videoshow/75549770.cms

    [ix] https://www.screener.in/screens/2551/Cash-Rich-Companies/

     

    Image credit: Adobe Stock

  • Trade during the Sangam Age: Exploring the Sangam literature and Keezhadi excavations

    Trade during the Sangam Age: Exploring the Sangam literature and Keezhadi excavations

    The sculpted marvels which bejewel the ancient temples all across Tamil Nadu stand testimony to the magnificence of Sangam age (3rd century BC to 3rd century AD) and the prolific artistic innovations which are characteristic of that period. But that’s not all there is to it. Matching the artistic and cultural fervour, trade activities were also at an all-time high during the Sangam age. Evidentiating this claim, the Sangam literature chronicles details of all the fine merchandise which were produced in Ancient Tamilakam. Building up on their strengths, the Tamils ventured into lands far and wide, establishing trading associations in foreign countries, some of which till date retain imprints of their existence. Coupled with manifest cultural similarities, archaeological and inscriptional evidence add on to the credibility of Sangam literature by making a strong case for the existence of an extensive trade between Tamilakam and the rest of the Old World.

    Sangam Literature: Valuable source of Information on Trade

    Pattinappalai, one of the poems (301 lines in ‘Vanji’ meter and Asiriyapa/Akaval meter) in Pattuppāṭṭu which is a corpus of ten poems, talks in great detail about Kaveripoompattinam, the capital city of the Early Cholas.

    Even though only half of what is claimed to have been created remains, the Sangam literature is too big a chunk to be thoroughly studied in a short time. There might still be parts of it that are waiting to be looked into. But of what has been discovered, the details pertinent to trade can predominantly be found in three major literary works, namely Pattuppāṭṭu, Silappatikaram and its sequel Manimekalai. Pattinappalai, one of the poems (301 lines in ‘Vanji’ meter and Asiriyapa/Akaval meter) in Pattuppāṭṭu which is a corpus of ten poems, talks in great detail about Kaveripoompattinam, the capital city of the Early Cholas. The port of Puhar / Kaveripoompattinam had ” an abundance of horses brought over the seas, sacks of black pepper brought overland in carts, gemstones and gold from the northern mountains, and sandalwood and eaglewood from the Western hills, pearls from the southern seas and coral from the eastern seas, grains from the regions of Ganga and Kaveri, food grains from Eelam (Sri Lanka) and products from Burma and other rare and great commodities.”

    A description of the port warehouses of Kaveripoompattinam in Pattuppattu is revealing of the flourishing trade – “Like the monsoon season when clouds absorb ocean waters and come down as rains on mountains, limitless goods for export come from inland and imported goods arrive in ships. Fierce, powerful tax collectors are at the warehouses collecting taxes and stamping the Chola tiger symbols on goods that are to be exported.”

    Silappatikaram and Manimekalai, on the other hand, talk about the cities of Madurai, Puhar and Kanchipuram, which served as major centres for cloth weaving, from whence fine quality fabrics were manufactured and exported through the Coromandel Coast. Silk, cotton and wool are some of the fabrics which are mentioned to have been exported from the coast. The epics also present a vivid description of the urban market scenes. The details paint the picture of a buzzing market where trade was carried out in a variety of supreme quality products, starting from agricultural products like black pepper, food grains, areca nuts, white sugar, eaglewood to luxury commodities like gold, pearls, gems, jewels, coral and silk, among other things. In fact, the urban markets are said to have had a separate street dedicated to food grains alone. So high was the demand for food grains that despite having close to eighteen indigenous varieties, grains also had to be imported from other countries in exchange for white salt. Likewise, the demand for aromatic products were too high to be met by home-gown eagle woods and sandalwoods, resulting in the import of the same from South East Asian countries, particularly from China and Indonesia.

    Tamilakam: Maritime Trade hub-centre between the East and the West

    Both literary and archaeological evidence have time and again reaffirmed one another; the merchants of Tamilakam had traded with the East and the West with equal flair. While there is a substantial amount foreign and native literature, and archaeological findings to assert the latter, there is relatively less evidence to support the former. And not only did Tamilakam engage in direct trade with the West, but because all products from Southeast Asia had to be sent through ports along the coast of South India, Tamilakam also acted as the hub-centre for the trade between the East and the West.

    Commodities from Tamilakam had a great demand in Rome. Black pepper, cardamom, pearls and gemstones, especially Beryl which was mined from sites in Kodumanal, Padiyur and Vaniyampadi, were highly sought after in Rome.

    With regard to the West, Tamil merchants have had a long-standing trade relationship with the Egyptians and the Romans. Beginning from the period when Alexandria was the centre of Mediterranean commerce, trade with the West extended well into the time when Rome assumed dominance and became the centre-stage of Mediterranean economy. Trade with Tamilakam was in fact a deciding factor in the question of dominance in sea trade. The Arabs held ground against the competing Romans by monopolizing the knowledge regarding direct sea route to India and information about the source markets in India. Nevertheless, eventually the Romans established direct trade links with India and Rome became the largest market ground for Indian products. Commodities from Tamilakam had a great demand in Rome. Black pepper, cardamom, pearls and gemstones, especially Beryl which was mined from sites in Kodumanal, Padiyur and Vaniyampadi, were highly sought after in Rome.

     

    Picture: Interpretation map from ‘The Periplus of the Erythraean Sea”.

    In the interpretations of a historical document called ‘The Periplus of the Erythraean Sea, originally authored by a Greek Navigator in the 1st century, there is said to have been  mentions of a marketplace called Poduk’e in the historical text . G.W.B. Hunting Ford, a historian, has postulated that this place might have been Arikamedu, a location two miles away from modern day Pondicherry.  Hunting Ford also notes that Roman pottery have been excavated in Arikamedu and that these evidence point at the possibility that this region might have been a trading centre for Roman goods in the 1st century AD. Arikamedu, known as Poduk’e in the Greco-Roman world was a manufacturing hub of textiles particularly of Muslin clothes, fine terracotta objects, jewelleries from beads of precious and semi-precious stones, glass and gold. The city had an extensive glass bead manufacturing facilities and is considered as “mother of all bead centres” in the world. Most of their production were aimed for export.

    Picture: Arikamedu – credit: Wikipedia

    Arikamedu, known as Poduk’e in the Greco-Roman world was a manufacturing hub of textiles particularly of Muslin clothes, fine terracotta objects, jewelleries from beads of precious and semi-precious stones, glass and gold. The city had an extensive glass bead manufacturing facilities and is considered as “mother of all bead centres” in the world.

    Descriptions of Puhar, Korkai, Muziris and Arikamedu in Sangam literature indicate extensive presence of Yavanas’ (foreigners) settlements in port cities on account of trade. Pattinapalai describes the port activities and the Chola customs revenue system in detail.

    Keezhadi: Evidences of  Industrial and Trade Centre

     In addition to these, the Keezhadi excavation, conducted by the Archaeological Survey of India in 2016, has unearthed around 13000 antiquities like shells, glass beads, rusted old coins, weapons, pottery of various kinds and iron tools, belonging to the Sangam age. Among the fine quality red and black ware bowls excavated in the region, are the Roman roulette wares which evidentiate the existence of trade links between the Tamils and Romans. Moreover, seven furnaces were discovered at the site and these, according to the archaeologists, are an indication of the possibility that the site might have been a textile unit and settlers in the region might have been involved in industrial activities.

    Keezhadi findings places the Sangam age to an even earlier period starting from 6th century BC. As per Amarnath Ramakrishna, who led the first two phases of excavations, Keezhadi site was one among the 100 sites of possible human habitation shortlisted for excavation. Discovery of Tamil Brahmi inscriptions and graffiti that date back to earliest times as compared to any other findings in India. Quite obviously, Keezhadi points to the potential of a huge trading and manufacturing habitation and a distinct civilization – the Tamil Vaigai River Valley Civilisation. The Sangam literature is rich and a huge treasure trove of information that needs to be researched extensively.

     

    Picture: Australian seaboard, Statue of Garuda and Tamil Inscriptions, symbolising maritime culture – Credit: ancient-origins.net

    Maritime Trade in Tamilakam: A Core Activity

    Several artefacts with Tamil Brahmi inscriptions have been excavated in foreign countries as well. In Thailand, potsherd with Brahmi inscriptions were unearthed. Likewise, Cheena Kazhakam ( Chinese gold coins) were discovered in Srivijaya (modern day Sumatra in Indonesia) and Kadaram (modern day Kedah in Malaysia), places which were under the occupation of the Cholas.

    The aforementioned evidence when correlated with the inscriptional evidence, found in foreign lands about Tamil trading settlements, will help in the historical reconstruction of the maritime trade links of Ancient Tamilakam and will attest to the extensive nature of trade carried out by the Tamils during the Sangam age.

     

    References

     Mukund, Kanakalatha. The Trading World of the Tamil Merchant: Evolution of Merchant Capitalism in the Coromandel. Orient Blackswan, 1999. https://books.google.co.in/books?id=tjXdDYChdGsC&lpg=PP1&pg=PP1#v=onepage&q&f=false.

    Mukund, Kanakalatha. The World of the Tamil Merchants. Portfolio Books Limited, 2015. https://books.google.co.in/books?id=Bha2eLqMPWcC&lpg=PT6&ots=tw2qDuzDlf&dq=trade during sangam age kanakalatha mukund&pg=PT5#v=onepage&q=trade during sangam age kanakalatha mukund&f=false.

    “Roman Trade with India.” Roman Trade with India – New World Encyclopedia. Accessed June 24, 2020. https://www.newworldencyclopedia.org/entry/Roman_trade_with_India#cite_ref-31.

    Kannan, Gokul. “Keezhadi Excavation Points to Vaigai River Civilisation in Sangam Period.” Deccan Chronicle. October 1, 2016. Accessed June 24, 2020. https://www.google.com/amp/s/www.deccanchronicle.com/amp/nation/in-other-news/011016/keezhadi-excavation-points-to-vaigai-river-civilisation-in-sangam-period.html.

    Annamalai, S. “Uncovered: Pandyas-Romans Trade Link.” The Hindu. May 16, 2017. Accessed June 24, 2020. https://www.google.com/amp/s/www.thehindu.com/news/national/tamil-nadu/archaeological-excavation-in-sivaganga-uncovers-pandya-roman-trade-links/article10879282.ece/amp

    Saju, M.T. “Tamil Trade Ships That Sailed to Foreign Shores.” Times of India. March 29, 2018. Accessed June 24, 2020. https://www.google.com/amp/s/timesofindia.indiatimes.com/blogs/tracking-indian-communities/tamil-trade-ships-that-sailed-to-foreign-shore

    Main Image: Keezhadi Excavation Site – Credit – ASI

  • India-China Border Stand-Off

    India-China Border Stand-Off

    On the 5th and 6th May 2020, Chinese incursions were reported at a very large frontage along the Line of Actual Control (LAC); starting from Naku La in north Sikkim, in Finger area of Pangong Tso, in Galwan Valley, Hot springs and Gogra heights located north-east of Galwan Valley. These incursions were a little different from all previous border standoffs. This time the Chinese incursion has been at multiple places and also, they had come prepared with weapons, vehicles and tents. They had come in large numbers with an intent to dig in.
    The issue came to light when scuffles were reported by the media on 10 May that some Chinese had intruded into the Muguthang Valley at Naku La and asked Indians to vacate the area as they claimed that it was their land. A scuffle ensued . According to PTI, the incident involved 150 soldiers. During the incident, the two sides threw stones at each other.

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  • India-China Trade In Ancient Times: Southern Silk Route

    India-China Trade In Ancient Times: Southern Silk Route

    To follow the Silk Road is to follow a ghost. It flows through the heart of Asia, but it has officially vanished leaving behind the pattern of its restlessness: counterfeit borders, unmapped peoples. The road forks and wanders wherever you are. It is not a single way, but many: a web of choices.

    Colin Thubron, Shadow of the Silk Road.

    Introduction

    India and China, two Asian giants, share a lot of similarities in terms of history and culture. Both countries represent age old civilizations and unique history. Cultural and economic ties between the two countries date back to about 2000 years ago. The Silk Route, which is an ancient network of trade routes, formally established by the Han Dynasty, served as a connection between the two countries. It was also through this route that Buddhism spread to China and East Asia from India. The routes were more than just trade routes; it was the carrier of ideas, innovations, inventions, discoveries, myths and many more.
    The earliest mention of China can be found in the Indian text “Arthashastra” which was written by Kautilya in the fourth century BC. Kautilya made a remark about Cinapattasca Cinabhumjia (Cinapatta is a product of China)[1]. Whereas, the earliest mention of India in Chinese records dates between 130 and 125 BC. Zhang Qian, a Chinese envoy to Central Asia, referred to India as Shendu, in his report about India to Emperor Wu of the Han dynasty.
    This article will look into the ancient trade route that existed between South Western China and India’s North East region via Myanmar and the future of the trade route.

    Ancient trade links between India and China

    Shiji, which is the first Chinese dynastic history, compiled between 104 and 87 BCE talks about the existence of a trading route between India and South West China. According to Chinese records, Emperor Wu of the Han dynasty, tried to establish a trade route from Changan, the Chinese capital to North East India through Yunnan and adjoining areas. However, the rulers of Yunnan were against the idea of establishing a direct trade between India and China and Emperor Wu failed to establish the trade route. Even though the trade route failed to take off, the trade in Cinapatta and Chinese square bamboo continued without any hindrance.

    Political Geography of the Southern Silk Route

    The Southern Silk route (SSR), one of the least studied overland route, is a trade route which is about 2000 km long and linked East and North East India with Yunnan Province of China via Myanmar. This is a relatively unknown, ancient trade route that is considered a part of the larger web of Silk Roads. This route existed before the Central Asian Silk route became popular. This trade route between Eastern India and China came to be known during the early 3rd century BCE, and it became popular by the 2nd century BCE. By 7th century AD various other branches of the SSR emerged to create web of trading routes.
    Traders carried silk from Yunnan through Myanmar, across India and joined the main silk route in Afghanistan. In addition, silk was also transported from South West China through the Shan states and North Myanmar into East India and then down to the Coromandel Coast.
    The Qing dynasty which ruled China from 1644-1912, recorded the cross cultural exchanges that took place across SSR. This route contributed to cultural exchanges between China and the West. It also promoted interactions among different nationalities.
    Indian sources have failed to provide abundant evidence about the SSR and the interaction that took place across this route but there is enough evidence that indicates that trade and migration did take place in the Eastern India-Upper Myanmar-Yunnan region. For example, modern scholars believed that the Tai Ahoms were originally from Yunnan but they migrated to North East India and founded a small kingdom around 13th century, which grew to become the powerful Ahom Kingdom of Assam.
    The areas through which the SSR passed were inhabited by various ethnic groups whose political, social and economic organizations were primitive and backward. As a result, the safety of the route was often questioned. Archeological evidences have been found along the Southern banks of Brahmaputra up to Myanmar border, which shows that trade did exist along this route.
    The main items that were exported from China via this route included Silk, Sichuan cloth, Bamboo walking sticks, ironware and other handicrafts items. Sichuan, a South Western province was the main source of silk. Glass beads, jewels, emeralds etc were some of the items that were imported to China.
    Another important trade route is the South West Silk route or the Sikkim Silk route, which connected Yunnan, and India through Tibet. A section of the route from Lhasa crossing Chumbi Valley, Nathu La Pass connected to the Tamralipta Port (present day Tamluk in West Bengal). From the Tamralipta port, this trade route took to the sea to traverse to Sri Lanka, Bali, Java and other parts of the Far East. Another section of the route crossed Myanmar and entered India through Kamrup (Assam) and connected the ports of Bengal and present day Bangladesh.
    Over time, the Southern Silk Route lost its prominence and it was in 1885 that it re- emerged as a strategic link as the British tried to control some parts of the route in order to access and gain control over Southern China.
    The strategic importance of the route increased during World War II. In 1945, Ledo Road or Stilwell Road was constructed from Ledo, Assam to Kunming, Yunnan to supply aid and troops to China for the war with Japan. Ledo Road is the shortest land route between North East India and South West China. However, after the war the road was left unused and in 2010, BBC reported that much of the Ledo road has been swallowed up by jungle.
    The Assam-Myanmar-Yunnan road is very difficult to traverse not only in the present times but also during the ancient times. However, despite the hard conditions, it is through this route that a golden triangle of drug trafficking, movement of terrorist and smuggling functions today.

    Future Potential: Reviving the Southern Silk Route Economy

    North-East India and the Yunnan province share many similarities. Both are landlocked as well as under developed regions. Both are home to a large number of ethnic groups and have witnessed secessionist movement from time to time. Apart from this, Yunnan and North East India are geographically isolated from their political capitals.
    Yunnan and North East India, home to rich varieties of subtropical fruits with high nutritional values and medicinal plants, can cooperate and transform the hills of North East India and South West China into plantations, factories, laboratories to produce processed food products and lifesaving drugs that can find a huge market in developing and developed countries.
    In a bid to revive the Southern Silk route, Bangladesh, China, India and Myanmar, signed the Kunming Initiative, a sub-regional organization, in 1999. This initiative was replaced by the Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC) in 2015. The BCIM-EC was announced by China as a part of its Belt-Road Initiative, which has been boycotted by India since the beginning. In 2019, the BCIM-EC was dropped from the list of 35 projects that are to be undertaken under BRI, indicating that China has disreagrded the project. However, in the same year India has sought to keep the BCIM-EC project alive.
    If the BCIM-EC project does take place, it will reduce the travel time, cut transportation cost, open up markets, provide way for joint exploration and development of natural resources and create production bases along the way. Before the BCIM-EC takes off, it is important to develop the roadways infrastructure of India’s North East region.
    Even though the BCIM-EC promises to elevate the economic conditions of the backward North-East region of India, it has not gained sufficient steam as both China and India have different apprehensions. China sees India’s reluctance to support BRI as the barrier for any progress in the project. Given the current stand-off in Ladakh, India’s apprehensions about China seeking to exploit the insurgent groups operating in the region gains significance. Either way realizing the Southern Silk Road as a viable project in the form of BCIM-Economic Corridor looks distant now.
    [1]Haraprasad Ray, “Southern Silk Route: A Perspective,” in The Southern Silk Route : Historical Links and Contemporary Convergences (Routledge, 2019).

    References

    Ray, Haraprasad. “Southern Silk Route: A Perspective.” Essay. In The Southern Silk Route: Historical Links and Contemporary Convergences. Routledge, 2019.
    “Continental and Maritime Silk Routes: Prospects of India- China Co-operations.” In Proceedings of the 1st ORF-ROII Symposium. Kunming, 2015.
    Mukherjee, Rila. “Routes into the Present.” Essay. In Narratives, Routes and Intersections in Pre-Modern Asia, 37–40. Routledge, 2017.
    UNESCO. Accessed June 20, 2020. https://en.unesco.org/silkroad/content/did-you-know-great-silk-roads.
    “The Silk Route.” Accessed June 21, 2020. http://www.sikkimsilkroute.com/about-silk-route/.
    Ray, Haraprasad. Introduction. In North East India’s Place in India-China Relations and Its Future Role in India’s Economy, n.d.
    Chowdhury, Debasish Roy. “’Southern Silk Road’ Linking China and India Seen as Key to Boosting Ties.” South China Morning Post, October 23, 2013.
    “China Wants to Revive ‘Southern Silk Road’ with India.” The Times of India, June 9, 2013.

    Image: Stilwel Road from Ledo in Northeast India to Kunming in Yunnan province, China

  • India-Australia Strategic Partnership: Leveraging Aerospace Capacity

    India-Australia Strategic Partnership: Leveraging Aerospace Capacity

    Category : India India’s, Military, India-Australia Relations
    Title : India-Australia strategic partnership: Leveraging aerospace capacity
    Author : M Matheswaran 02-06-2020

    The forthcoming virtual summit between Indian Prime Minister Narendra Modi and Australian Prime Minister Scott Morrison assumes considerable significance for an India-Australia strategic partnership, particularly as it comes against the backdrop of heightened friction with China for both countries. Enhanced defence cooperation between the two countries could be an important signal to Beijing of the costs of overly assertive strategic behaviour – whether in the Himalaya or in trade. For some years, defence cooperation has largely focused on the naval relationship. Now is the time for enhanced air-power cooperation.

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  • What After The Galwan Incident?

    What After The Galwan Incident?

    As one writes, a phase of the events in the Galwan valley near the Line of Actual Control (LAC) has come to an end. Inputs from government, media and private commentators, have provided a perspective of the events preceding the incidents of 15/16 June and thereafter till the current day. For the world, the occasion has provided the opportunity yet again to witness the fighting spirit and junior leadership of all ranks of the Indian Army, who despite being outnumbered, were able to inflict far greater casualties on their adversaries, in inhospitable terrain under fading light conditions. The sacrifices of the men of 16 BIHAR, 3 PUNJAB, 3 Medium Regiment, and individual personnel from 81 Field Regiment, Corps of Signals and the Army Medical Corps have added lustre to the reputation of the Indian military. Their deeds shall remain enshrined in the memory of a grateful nation. At this watershed moment, we salute them.
    China is contesting control over settled areas (Galwan), exploiting laid down rules and norms of border management by resorting to use of primitive weapons instead of firearms, and pushing the envelope on the ground in attempting to increase areas under control such as at Hot Springs and Pangong Tso – all actions just short of war.
    One theory gaining currency in attempting to understand China’s recent behaviour, pertains to its unhappiness over what it perceives as alteration of the status quo on the LAC by designating Ladakh as a Union Territory – resulting in active collusion with Pakistan which shares Beijing’s sentiments on this issue, amongst others. However, there is no doubt that the strategy applied by China in East Ladakh comes straight out of its manual on Grey Zone Warfare. It is contesting control over settled areas (Galwan), exploiting laid down rules and norms of border management by resorting to use of primitive weapons instead of firearms, and pushing the envelope on the ground in attempting to increase areas under control such as at Hot Springs and Pangong Tso – all actions just short of war.

    While the situation on the Pangong Tso awaits resolution, what is amply clear is that the era of explaining away patrol clashes on the LAC to the Indian public, in terms of ‘varying perceptions held by both sides’, is past. By its perfidious actions in East Ladakh this year, China has shredded in letter and spirit the border agreements built up over the last three decades. The recent incidents have brought greater clarity to the public mind, with a consensus that China’s salami slicing tactics cannot be tolerated any further. Indian soldiers see the LAC as a line marked on the map. Commanders are clear that the areas up to that line are to be either physically occupied or patrolled at will from bases in the vicinity, supplemented by other forms of surveillance. As per media reports, the Government has over the weekend ‘revised the Rules of Engagement’, giving ‘a free hand to the Army’ to deal with occurrences of this nature. By implication, in future if patrols cannot resolve their face offs peacefully, there will be no resorting to hand to hand scuffles with primitive weapons – unsuccessful efforts at border management will give way to border defence, through resort to tactical military operations.
    As per media reports, the Government has over the weekend ‘revised the Rules of Engagement’, giving ‘a free hand to the Army’ to deal with occurrences of this nature. By implication, in future if patrols cannot resolve their face offs peacefully, there will be no resorting to hand to hand scuffles with primitive weapons – unsuccessful efforts at border management will give way to border defence, through resort to tactical military operations.
    Response to this new paradigm places another set of challenges before the Indian Army. Prior to May 2020, Galwan was not in the category of disputed areas, as understood in LAC parlance. Neither had any Chinese activity been sensed in the preceding years. While construction of the DSDBO road could be the trigger, the fact that an area where the LAC had lain undisturbed since 1962 could become the scene of such a violent action, warrants scrutiny of PLA intent across the board. Previous assumptions with respect to the PLAs likely areas of interest across the entire Northern border, therefore, certainly warrants a relook. Conclusions drawn would mandate contingency planning and consequent tasking at strategic, operational and tactical levels. Such plans doubtless exist. However, it is obvious that their scope, timelines, and imperatives for successful implementation will need review in conjunction with the other services.
    Outcomes of such reviews would inevitably renew the focus on capability building and in the middle term, might even alter priorities for the same. Substantial enhancements in the areas of surveillance, tactical and strategic air mobility and real time communication links continue to retain their importance. Induction of greater varieties of kinetic non-contact weapon systems, complemented by force multipliers such as cyber warriors and special forces too remain on top of the list. Also, the continued ceasefire violations on the Line of Control to the West, and the relentless tempo of counter terrorist operations in the Valley during this period smack of collusion and tell a tale which defence planners must take note of. Developing the desired capability will be predicated on guaranteed funding and fast track procedures. It is heartening to peruse reports in the Economic Times of 22 June that the Government has granted emergency financial powers up to Rs 500 crore per procurement project to each service for buying weapons and ammunition. Even if new projects cannot be initiated immediately because of fund constraints imposed by the Covid-19 pandemic and otherwise, it is time for stalled ones like the Mountain Strike Corps to be quickly completed. The example of the PLA which has almost completed its reorganisation for fighting wars of the future and tested the response of its field force during the Covid-19 pandemic, must be taken note of.
    Thanks to the Galwan episode, the vital aspect of border infrastructure has gained nationwide attention. There is perceptive increase in the pace of development over the last few years. The sequence and methodology however are dictated essentially by two factors – availability of resources (funds and specialist equipment) and the need for calibrating messages implicit in such actions to China. Despite Covid-19 constraints, the current crisis mandates that funds currently earmarked for infrastructure development continue to flow so that development progresses, albeit at a slower pace. As regards messaging to China, we have reached a watershed moment. As high level military talks continue and spell out the Indian position on the ground to the Chinese, creating an ‘all of nation approach’ for tackling China becomes necessary.
    Galwan incident has ensured that the negative perception of China worldwide is now shared by almost all sections of Indian society. This bitterness is fuelled by the sheer brutality of the Chinese military and duplicity of the Chinese government, bringing back memories of 1962 for many who have only heard of that era. It is driven further by a realisation of the scale of India’s dependence on China, be it in the import of manufactured goods of all hues, or technology, and the consequent harm to Indian interests and livelihoods. Awareness has spread amongst Indians that China’s constant working against India’s interests in world fora, be it in vetoing expansion of the permanent membership of the Security Council for ‘technical reasons’, blocking its membership in the Nuclear Suppliers Group or introducing discussions on Kashmir are all part of its plan to obstruct India’s progress to its rightful place in the comity of nations. In attempting to correct an unequal economic relationship, ensuring that India retains its position in the region and preventing erosion of its influence in South Asia and beyond, all elements of the Indian state have their tasks cut out. It becomes imperative now to prepare a different toolkit with a wider range of options (including those not envisaged earlier) to manage India-China relations. Such options now require to be coordinated at all levels of the government and intimated to stakeholders including industry and other influencers for implementation. This coordination is long overdue. Resetting the economic relationship will not be easy. However, announcement of a practical time bound and holistic road map which has been thought through with all stakeholders would be a beginning.
    Galwan incident has ensured that the negative perception of China worldwide is now shared by almost all sections of Indian society.
    To supplement the proposed policy outlined above, articulation of a holistic Strategic Narrative vis-a-vis China becomes necessary. Such a narrative would pertain to as many aspects as possible – bilateral issues (including border management), local and regional matters, so that consistent, coherent and long term views are voiced, keeping in mind the national interest. information operations would be a subset of such a narrative, and briefings organised as frequently as possible would be useful force multipliers. It might be necessary for the concerned sections in the newly formed Department of Military Affairs and the Department of Defence to coordinate these aspects. India must also actively consider the possibilities that other forms of conflict, including hybrid warfare, are necessary to exploit and invest in the same. Here too, employment of such methodologies by China is an example. China has been refining its doctrine of ‘Unrestricted Warfare’ since the early 90s. The effects are there to see in South China Sea and elsewhere. It is executing certain aspects of this strategy against India on the Northern borders.
    Managing relations with China is destined to remain the major preoccupation for Indian strategic thinkers in coming years. Tensions along the LAC are but one manifestation of this problem. Both nations are hostage to geography. China’s behaviour over the last decade has influenced Indian foreign and military policies like no other, causing India to take decisions that were not in the realms of possibility earlier. Articulating a holistic China strategy through an all of government approach within the overall ambit of a National Security Strategy to ensure that India achieves its rightful place, has never been so important.
    Image Credit: ASPI:The Strategist – Nathan Ruser

  • Covid 19: India uses Crisis to bring-in Economic Reforms as Package

    Covid 19: India uses Crisis to bring-in Economic Reforms as Package

    India’s four-phase lockdown of 68 days to deal with the Covid-19 threat has, while slowing the spread of the virus, come at huge economic costs. The lockdown for a vast majority of the people is, undoubtedly, the harshest in the world.

    The coronavirus triggered lockdown and its ensuing series of extensions have disrupted more than 60 percent of economic activities in the country, posing a huge threat to the  economy. The crisis was underway when the global economy was slowing down and India, in particular, had to deal with a poor health care system and an economy already under distress. Unemployment rate is estimated to be around 27 percent post lockdown and has resulted in nearly 12.2 crore people losing their jobs. In addition, a  severe slump in consumer demand is expected to persist for the next few quarters. Almost 85 percent of India’s workforce is engaged in the informal sector – quite naturally the government is under stress to implement effective policy reforms to counter the downturn. 

    In response to the contraction in the economy, the Prime Minister has announced a second round of economic package that stands at roughly around 10 percent of the Gross Domestic Product. The USA and Japan have announced relief packages of 13 and 21 percent of their GDP respectively. In comparison, India has seemingly provided a substantial Rs 20 lakh crore stimulus- highlighting the concept of ‘self-reliance’ as a way forward to deal with the economy post the pandemic. The stimulus package includes previous steps taken by RBI such as moratorium on loan repayments, interest rate cut, etc. In the five tranches of the stimulus package, the Finance Minister has announced a slew of measures to address the structural issues of Indian economy. However, it is estimated that the immediate fiscal boost will be only around 1 percent of GDP and most of the fiscal and monetary policies will attract long term capital with medium run  stabilization of the economy.

     

    Micro Medium and Small Scale Enterprises 

    Focusing on reviving the small businesses and micro enterprises, under this tranche Rs 3 lakh crore is allocated for collateral free loans for business enterprises. This package is estimated to be around Rs 5.94 lakh crore including RBI measures to improve liquidity in the economy. However, the direct fiscal cost for the government is around Rs 16,500 crore. For the stressed MSME units, the central government is planning to facilitate Rs 20,000 crore as subordinate debt and Rs 50,000 crore through equity infusion. Non Banking Finance Companies (NBFC) that serve the MSMEs will receive Rs 30,000 crore under investment guarantee scheme. While the six broad measures look attractive, the MSME sector in India is dominated by micro enterprises that are largely unregistered. However, these measures will not immediately benefit the micro business units with necessary working capital. Most of the enterprises and small business units are cash strapped and are on the verge of disappearing. Ninety-nine percent of the sector comprises micro enterprises – businesses with less than 10 working employees.

    Most of the enterprises and small business units are cash strapped and are on the verge of disappearing. Ninety-nine percent of the sector comprises micro enterprises – businesses with less than 10 working employees. 

    While the government has taken supply side measures to incentivize businesses, two important challenges remain intact. One, the large number of unregistered micro businesses might not benefit from the credit line offered by the government. Two, if the demand recovers slowly, it is likely the business sector especially small enterprises will suffer despite credit being infused. It is important to note that the supply and demand side has to be revived at the same rate to ensure sustainability of the MSME business. 

     

     

    Migrant labourers and Farmers: 

    Second stimulus of the Finance minister’s announcement was focused on migrant labourers and farmers. Close to 150 million internal migrants are present in India according to the latest census report.  Rs 3500 crores is to be spent on migrant labourers not covered under the Public Distribution System (PDS). Rs 5000 crore is set aside to facilitate easy access to street vendors. Funds worth Rs 6000 crore is planned for enhancing employment among adivasis and tribal groups. For the next two months, around 8 crore migrant labourers not covered under PDS will be provided 5kgs of grains per person and 1 kg chana per family in a month. ‘One Nation One Ration Card’ is a welcome move given the leakages present in the PDS, but the national coverage of this scheme is expected only by March 2021.  Additionally, in the National Food Security Act, 2013 , based on the 2011 census data, it is estimated that around 100 million people do not fall under this safety net accounting for growth in population over the past decade. The initiative to record and track the data on unregistered labourers is important for fiscal stimulus response to a COVID hit economy. National portability of ration cards is important but the execution is time consuming and does not address the problem of people being excluded from the ration card system. Universalizing PDS and decentralizing decisions to achieve food security with an efficient supply chain should be an immediate intervention. States with higher migrant labourers and people with less access to PDS should be targeted to universalise food distribution.  Acknowledging the shortcomings of the PDS and food supply channel, an emergency plan to ensure food supply to people below poverty line for the next six months needs to be prioritised.

     

    ‘One Nation One Ration Card’ is a welcome move given the leakages present in the PDS, but the national coverage of this scheme is expected only by March 2021. 

     

    Agriculture and Allied activities:

    Under the third tranche of the economic stimulus package, the government has taken bold measures to invest in agriculture and allied activities. Total package announced was worth Rs 1.63 lakh crores – relatively less compared to earlier stimulus packages. The main focus was on enhancing agriculture infrastructure, financing farm gate produce and improving post harvest supply.  A series of other funds were allocated for disease control for animal husbandry, promotion of herbal products and fisheries. Rs 10,000 crore was unveiled to support 2 lakh Micro Food Enterprises on a cluster based approach. 

    Lack of cold storage and supply chain was identified by the government to create an Agriculture Infrastructure Fund of Rs 1 lakh crore. A big push for agriculture reforms was spelled out by the decision to deregulate six commodities including cereals, pulses, oil and vegetables by amending  the Essential Commodity Act, 1955.

    Many experts believe the reforms undertaken were long due for India to enhance productivity of the agriculture  sector. But deregulation of essential products during the time of lockdown with poor food supply chains might not be beneficial especially for marginal farmers.  Almost 92 percent of the Food Supply Chain is controlled by the private sector and most of the farmers are not informed about Minimum Support Price and adopt unscientific farming practices. With liquidity constraint in the economy, demand for essential food is substantial. Factoring the drawbacks of PDS in supplying food items to the bottom section – a high probability of market failure is underway potentially hurting both farmers and consumers. Except for concessional credit for farmers and agriculture loans, the package has  limited scope to reduce the distress faced by the agrarian sector in near future. As far as the reforms are concerned, there was a clear bias towards post harvest investment. However, the productivity and scale of production has been the biggest problem in India that requires effective land reforms. India’s agriculture sector also suffers without adequate investment in Technology and Research & Development. During an unprecedented crisis, Indian government is pushing for big reforms but the structural issues of marginal-land farming are largely ignored. Even as a reform package─it is evident that it is likely to benefit primarily large farmers in the medium term.

    Except for concessional credit for farmers and agriculture loans, the package has  limited scope to reduce the distress faced by the agrarian sector in near future.

     Infrastructure, Defence  & Aerospace 

    Under this package, eight key sectors: coal, minerals, defence production, aerospace management, airports, power distribution, space and atomic energy were in the spotlight. In an effort to boost employment, a proclamation of structural reforms was stated in the fourth  tranche. The coal and mining industry is expected to receive an infrastructure development fund – making the sector self-reliant in production. The Foreign Direct Investment limit in defence has been increased from 49 percent to 74 percent to encourage foreign investment in production. In the aviation industry, India decided to open up 6 airports for auction. Additionally, three airports are to be operated under the Public Private Partnership model. Optimization of air space, building a hub for aircraft maintenance and overhaul are some of the important measures covered under this package. 

    Privatization and Globalization (New Economic Policy, 1991)- COVID-19 crisis has offered a space for the government to initiate certain radical measures to privatise a few industries.

    Private partnerships in the areas of space exploration and atomic energy offers an immense potential for private companies to get incubated for research and development. Sharing an economic pressure similar to the 1991 Balance of Payment crisis that resulted in Liberalization, Privatization and Globalization (New Economic Policy, 1991)- COVID-19 crisis has offered a space for the government to initiate certain radical measures to privatise a few industries. The measures will undoubtedly help the business ecosystem in India to develop in the medium term.  Though there seems to be a claim about substantial job creation this is not likely to happen immediately. 

    Rural Employment & Public Health

    In the final announcement, Rs 40,000 crore was allotted to Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) to replace direct transfer from central government to migrant workers. Inadequate data about inter state informal labourers has placed limitations on policy formulation during the time of crisis. Under the Pradhan Mantri Garib Kalyan Yojna, Rs 50 lakh per person insurance cover will be applicable for health professionals. To ensure ease of doing business, non adherence to the Companies’ Act will be decriminalised. The government also committed to increasing health expenditure to face pandemics in the future. The finance minister also encouraged companies to entertain the idea of digital India to conduct meetings and businesses online. 

    The last two announcements together accounted for Rs 48,500 crore and experts criticize that most of them do not provide immediate relief for the people in distress. 

    Conclusion

    India has evidently seized the opportunity during the crisis to introduce reforms to boost the economy in the long run. The reform package undoubtedly is impressive on paper but in terms of immediate support to various sectors in distress it offers little. For example, a large part of the package – Rs 8.04 lakh crore- is additional liquidity injected by monetary policy in the last three months.  An investment bank has predicted that India will face a deeper recession in the short term but the economic stimulus would help the economy after a few quarters. As a consequence the real growth rate is to drop down by 5 percent year-on-year in 2020. Even after a massive package, the situation of poor and middle-class people remains bleak. The reforms might bear fruits in future but deferring the policy response to address current challenges will manifest into huge burden on vulnerable sections of the people. Current economic crisis has undoubtedly offered the central government to take advantage of the weak bargaining power of the stakeholders to push reforms but low attention is paid to immediate distress.

    The author was supported by Ms S P Bharani, on summer internship at TPF.

    Image Credit: Adobe Stock

  • President Trump’s India Visit : Balancing Optics with Substance

    President Trump’s India Visit : Balancing Optics with Substance

    As President Donald Trump arrives in India today, 24 February 2020,on his maiden official visit to India,  there is significant level of discussions amongst the academics, strategists, and foreign policy experts about whether this visit is more about optics than substantive discussions on strategies and agreements to strengthen the US-India strategic partnership. On arrival the president’s first public engagement is a super spectacle, ‘Namaste Trump’ at the new Motera Stadium in Ahmedabad that will have more than 100,000 people, which is Prime Minister Modi’s way of reciprocating for ‘Howdy, Modi’ at Houston last year. Most opine that while Mr Trump’s visit will be packed with pageantry, it will be light on policy and therefore, unlike previous presidential visits this one may not yield many break-through agreements. There are, however, some important developments that are very unique to the Trump-Modi era when compared to the previous visits of American presidents. Both leaders excel in showmanship and also in projecting strong nationalistic orientation to each one’s domestic constituency. Trump, with his transactional and disruptive approach comes off as more unpredictable when it comes to foreign policy and strategic issues.

    Politics and Showmanship

    It has taken Mr Trump, more than three years since he assumed office to visit India. This could mean that India was not a high priority for the Trump regime in the initial years, or as it turned out India was not the target of Trump’s disruptive strategy that he employed against USA’s traditional allies, China, Russia, and others. The final year of a POTUS term is generally termed as the ‘lame duck year’, where very few presidents have had a good last year and many were hampered by major controversies. It is important to note that India is the first country that President Trump is traveling to after his impeachment trial. There is more to Mr Trump’s India relationship than just this visit. One must remember that he is a shrewd businessman, and even before he became the president, India was already home to the most Trump ventures outside of North-America.  While India’s strategic importance is well recognised by all presidents since Bill Clinton, President Trump’s approach is considerably different than the others. His daughter Ivanka Trump made headlines when she visited Hyderabad, as White House Advisor, for the Global Entrepreneurship Summit in Nov 2017 and the prime minister broke protocol to host a dinner in her honour.

    That the Trump administration has followed a calibrated strategy of recognising and enhancing PM Modi’s image for significant gains to the American defence industry in particular is evident. The current visit, therefore, focuses primarily on strengthening strategic partnership issues in areas such as defence trade, intelligence sharing, counter terrorism, and visa issues. American side may make a token mention about Trump’s offer to facilitate improvement of India-Pakistan talks, China and issues of religious freedom.  However, these will get swamped by the more visible spectacle that will be on display at Ahmedabad and Agra.

    Defence Relationship – the most substantive progress

    India – US defence partnership has progressed significantly over the last decade and a half. The two militaries are exercising together more frequently than ever, and the strategic interactions are moving more towards equitable approach to various aspects. The Trump administration has covered significant ground in nudging India, despite its reluctance, towards partnerships such as the ‘Quad’ and moving towards interoperability by concluding various agreements including the foundational agreements through Defence-Trade-Technology relationship mechanisms.

    Defence trade between the two countries has grown exponentially since 2007. Two major procurements are likely to be signed by the Indian government during this visit: acquisition of 24 Sea-Hawk naval multi-role helicopters (NMRH) from Lockheed Martin worth $ 2.6 billion for the Indian Navy and six AH-64E Apache attack helicopters from Boeing worth $ 930 million for the Indian Army. Both procurements will be through the FMS (Foreign Military Sales) route. Trump administration cleared the decks for enhanced defence cooperation with India by approving India as a major Non-NATO defence partner in 2019, thus smoothening the process for exporting or selling hi-tech weapon systems to India. This is often confused with India becoming a major Non-NATO ally, which is clearly not the case.

    What is clear is that the US has secured major business deals with India to its great advantage, without India gaining much in terms of technology access or industrial production of hi-tech weaponry. The US objective is clearly to wean India away from its heavy dependence on Russian weaponry and secure much broader business relationship with American arms industry. The MIC (military industrial complex) of the USA is clearly focused on India now as its major avenue of business in the 21st century. The Americans were clearly unhappy that India went ahead with S-400 purchase from Russia despite the threat of CAATSA. That India has decided to buy an air defence missile system from the US, again through FMS route, worth $ 1.9 billion seems to be a compensation for such a decision.

    The US-India defence deal will scale $ 20 billion this year after the Trump visit. Many of these weapon system procurements, in terms of numbers, are not of a scale sufficient to create major industrial partnerships for manufacturing. India, however, will need to look at ways and means of acquiring significant technologies from the US through joint ventures, co-design and co-development. Otherwise, there lurks the danger of India being trapped in an all too familiar pattern of buyer-seller relationship rather than as strategic partners.

    Strategic gains?

    The visit’s focus is in areas of trade, defence, counter-terrorism, energy, and co-ordination on regional and global issues. These are areas in which considerable ground has been covered and is a continuing process. The agreement on trade deal, which was keenly expected, has been deferred. With President Trump accusing India of high tariffs and dashing all hopes of a deal before the visit, it is clear that the USA intends to push hard for favourable access to Indian markets for American companies. There are some positives that are emerging. The prospects for increased collaboration in space between ISRO and NASA looks bright.

    The focus of the American side is primarily on Defence trade.  Increase in investments in defence production may become a possibility with major projects in the pipeline. Both Boeing and Lockheed Martin are pushing hard for IAF’s 114 aircraft order, which will be processed under the strategic partnership model of ‘Make in India’ program. This could expand the production run to over 200 aircraft. Similarly, the naval  helicopter (NMRH) procurement has a possibility  of expanding into ‘Make in India’ project for over 100 helicopters. Boeing’s S-76D is a contender for Navy’s utility helicopter procurement under ‘make in India’ program.

    The spectacle of this visit will certainly contribute to both leaders’ constituencies, for President Trump’s re-election campaign and for PM Modi it may divert people’s attention from current issues of flagging economy, Delhi electoral reverses, the Kashmir issue and ongoing protests on CAA and NRC. India however, will need to negotiate hard and leverage the expanding defence business to address technology access and  strengthen Indian industry by enabling them into global supply chain. For this the Indian establishment will need to see well beyond the optics to assess real gains.

    Air Marshal M Matheswaran AVSM VM PhD (retd) is the President of TPF and a former Deputy Chief of the Integrated Defence Staff.

     

  • India’s impending Fighter Aircraft Choices: Finding the Elusive Solution?

    India’s impending Fighter Aircraft Choices: Finding the Elusive Solution?

    Category : Defence & Aerospace/India

    Title : India’s impending Fighter Aircraft Choices: Finding the Elusive Solution?

    Author : M Matheswaran 02.02.2020

    The Indian Air Force has been afflicted with decreasing force strength due to phasing out of old aircraft and increasing obsolescence of its fleets. Despite the induction of Rafale and Tejas, the IAF will continue to face challenges of reducing numbers and a large chunk of old platforms in its inventory. The IAF is facing serious shortages in its fighter aircraft strength. Air Marshal M Matheswaran examines the possible strategy that can best address IAF’s choice of fighter aircraft for its future.

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  • India’s Illegal Immigration and Citizenship Issues: Tussle between Politics and Policy

    India’s Illegal Immigration and Citizenship Issues: Tussle between Politics and Policy

    It is indeed difficult to comprehend this Government’s precipitous push for the Citizen Amendment Act (CAA), in the manner that it has, at a time when the economy is on the edge of a precipice and it has yet to satisfactorily resolve serious issues like Kashmir that it has on its plate. True, illegal immigration is of huge concern around the world, and even more so in our case as the issue has been further complicated by the deleterious effects of Partition. However much the young today may wish away the past, we are still bound by it. Regardless of whether one subscribes to the “Two Nation Theory” or not, Pakistan emerged as the homeland for Muslims of the Sub Continent while India came to be regarded as the home for those dispossessed because of their religious affiliations from those areas. 

    One tends to forget that the Preamble to the Constitution, when first adopted, described India as a “Sovereign Democratic Republic” in which “liberty of thought, expression, belief, faith and worship” were guaranteed. Socialism and secularism were only added to our preamble as an afterthought by the Congress Government of Mrs. Gandhi in 1976 through the 42nd Amendment, obviously to gain political advantage and protect her own minority vote bank. In a sense that has now come to haunt us as the BJP proceeds to curry benefit for its Hindutva plank, as the CAA clearly attempts to do, though ostensibly it is aimed at correcting an old wrong.   

    Religious minorities in both countries were given a semblance of relief with the signing of the Nehru-Liaquat Agreement of 1950 that required both countries to protect minorities. While Indian Muslims, among others, continued to enjoy the fruits of democracy in a secular republic, the same could not be said for Pakistan, and subsequently Bangladesh, after its formation. Minorities there continued to be discriminated and persecuted against on religious grounds, forcing lakhs of Hindus and Sikhs to flee across the border. The Government of India’s subsequent refusal to grant citizenship to the fleeing Hindus and Sikhs, as had been publicly promised by both Mahatma Gandhi and the Congress Government in 1947, left them stateless and in penury and was certainly a dark chapter in our history. 

    Subsequently, after 1971, the issue was further complicated as Bangladeshi Muslims too crossed over in an attempt to improve their own economic prospects. It is also an undisputable fact that much of this flow of illegal migrants was aided by Governments then in power in Assam and Bengal that were shortsighted enough to believe that this flood of  illegal immigrants would increase their vote banks and allow them to subvert elections. It is ironical that the very parties involved in this immoral and criminal act are today at the forefront of the Anti CAA protests. While the Nellie Massacre and the Assam Student Agitation brought a halt to this farce in Assam in the early Eighties, it has allegedly continued unabated in Bengal even to this day.

    Politicians, activists and media persons who today question the extent of illegal immigration, especially from Bangladesh, would do well to study the extremely balanced and insightful “Report on Illegal Migration into Assam Submitted to The President” by Lt Gen S K Sinha (Retd), then Governor of Assam, on 8 Nov 1998. As most readers would be aware while the extent of actual illegal immigration into Bengal and other states is not available, anecdotal evidence suggests that it has been extensive and has impacted the social fabric of these States. Indeed, most of those who question attempts to curb or quantify the extent of illegal immigration are being deliberately obtuse and intent on promoting a false narrative motivated more by their bias against the current Government and their need to hide their own involvement in promoting this flood of immigrants. 

    The Assam Accord signed by the Congress under Mr. Rajiv Gandhi in 1985 required a process to be initiated for the “detection and deletion of foreigners.” In this context under the aegis of the Supreme Court action was initiated in Assam to update the National Register of Citizens (NRC) that had been prepared in 1951 by recording particulars of all the persons enumerated during that Census. This update was to include the names of those persons (or their descendants) who appear in the NRC, 1951, or in any of the Electoral Rolls up to the midnight of 24th March, 1971, or in any one of the other admissible documents issued up to then, which would prove their presence in Assam or in any part of India on or before 24th March, 1971. As per Prateek Hajela, State Coordinator of the NRC Project, “A total of 3.1 Crore persons have been found eligible for inclusion in the final NRC list, leaving out 19.,06 Lakh persons including those who did not submit their claims.” They now have the right to file an appeal before Foreigners Tribunals.

    This implies that once the process of appeals is complete, those declared as illegal immigrants, as defined by the Citizenship Act of 1955, will have to be either imprisoned or deported under the Foreigners Act, 1946 or the Passport Act, 1920. However, this has placed the Central Government and the Assam Government on the horns of a dilemma because the vast majority of those who are presently ineligible for inclusion in the NRC are Hindus. Logically speaking, deporting these people would be a gross miscarriage of justice given that they fled their country of origin due to religious persecution. In anticipation of this problem the Government amended the latter two Acts in 2015, thereby exempting Hindus, Sikhs, Buddhists, Jains, Parsis and Christians from Afghanistan, Bangladesh and Pakistan, who had fled to  India before 31 Dec 2014 because of religious persecution, from being deported. A natural corollary to this action would have been to amend the Citizenship Act 1955 to grant citizenship to these groups in an earlier timeframe, rather than the eleven years that the Act otherwise requires. This is exactly what the Government has done with the CAA, 2019. That such an action will also help further its own political agenda is undeniable, but that is exactly how all politicians in power work.

    All of this goes against the interests of the Assamese who view the issue in purely ethnic terms. Their protests, therefore, are against inclusion of Bengalis as citizens regardless of their religious affiliations as they believe that they are being swamped numerically, culturally and linguistically. One fails to understand why the Central Government, which has the benefit of its own party in power in the State, was unable to anticipate the likely consequences of its actions. Obviously, either both the central and state leadership ignored or misunderstood the signs, but whatever be the case the Party has certainly harmed its own cause and faces an uphill battle in regaining popular support. In the context of the rest of the country however, the adverse reaction that this step has drawn is clearly political in nature, initiated by those who fear they will lose out at the hustings because of this.

    The opposition narrative that has been propagated is along two thrust lines. Firstly, it appeals to the liberal secular mindset, which already sees this government as autocratic and fascist in nature, that the CAA is discriminatory, as it leaves out Muslims from those countries, thereby eroding our secular identity, and is therefore unconstitutional. Secondly, it creates a fear psychosis among the minority Muslim population by linking it to the NRC and suggesting that it will be used by this Government to harm their community. The Police by their highhanded behaviour and excessive use of force in dealing with the protests have only reinforced this narrative.

    While it is for the Courts to decide on its constitutionality, prima facie the argument seems to lack substance because the Act is only applicable to non- citizens who are not covered by the provisions of our Constitution and in effect corrects an earlier wrong. Moreover, if legislation is to be treated as unconstitutional purely on the basis that it is discriminatory in nature, then how does one justify existing laws on the subject and is it not time for the uniform civil code to replace all our other such Acts in place? Clearly, for those who ignore these arguments, Bertrand Russell’s belief that “Men are born ignorant not stupid. Education makes them stupid,” appears to have some relevance. 

    With regard to the fears that have brought many of our Muslim brethren to take to the streets, the issues involved appear to be more complex. There can be no two views that the updating of the NRC is a legitimate exercise that every State undertakes to protect its sovereignty. No State can let its ethnic, religious or linguistic profile be overturned by illegal immigration as that will adversely impact society. However, the NRC can also not be used by any government as a tool for harassment. This is unfortunately where this Government loses out because over a period of time its actions have come to be viewed with suspicion by the public at large and specifically by our minority population. There is a huge trust deficit and people tend to be extremely suspicious of its motives. Moreover, now that the Ram Temple issue has been more or less settled, there is the fleeting suspicion that this Government now intends to use NRC to further its Hindutva agenda.  That apart, there have also been numerous occasions on which this community has faced unprovoked attacks, with little being done to assuage their feelings, especially as perpetrators have rarely been brought to justice. It is also a telling comment on their treatment that violence during these ongoing protests has primarily been restricted to states that are run by the BJP. 

    This has allowed the opposition parties to cynically peddle a blatantly false narrative and spin it in a manner that gives it enough credence to coalesce not just minority groups in their favour, but also others who have been distrustful of the way this government functions, with little regard for transparency, dialogue or rule of law. In the meantime the Modi Government has now decided to change tack, put the NRC on the backburner and proceed forward with the updating of the National Population Register (NPR) that only records the list of people in the country, instead. However, this move is also unlikely to be taken kindly since for all intents and purposes, it is a precursor to the NRC and provides relevant data that it can use. 

    The way forward in resolving this contentious situation can hardly be the one that results in further confrontation or adds to the distrust quotient. Mr. Modi would be well advised to take a step back and invite political parties and civil society for a fresh dialogue on all touchy issues. In addition they must look at including appropriate provisions to the guidelines for conduct of NPR/NRC that statutorily ensure that minorities and the poor are not harassed during the process. In any case the Assam NRC process and its final results show that despite our best efforts, deportation of illegals is a very distant possibility. It may therefore be a far better alternative to adopt a more practical and less contentious approach. One such option could be that those identified as foreigners continue to be permitted to remain and work here, without probably being given the right to vote or acquire property. However, their children born here should automatically be made citizens as per existing laws.      

    The author, a military veteran, is Senior Visiting Fellow at The Peninsula Foundation, Chennai and a Consultant at ORF, New Delhi. Views expressed are the author’s own.