Pragati Issue15 Jun2008 Community Ed

8/14/2019 Pragati Issue15 Jun2008 Community Ed

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ISSN 0973-8460

iMuj

The New Jihadis


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Contents

PERSPECTIVE

2 The New Jihadis Local manifestations of a global pattern Nitin Pai3 Getting human rights right Are human rights activists playing into the hands of terrorists? Sandeep Balakrishna, Salil Tripathi & Rohit Pradhan6 Towards a cultural liberalism Governments must stop siding with intolerant mobs Jayakrishnan Nair

FILTER

8 A survey of think-tanks Feline counter-terrorism; Measuring up against international human rights standards; On what makes foreign policy tick; Assessing energy security policiesIN DEPTH

9 Look before you hop A discussion on strategic affairs with Stephen P Cohen Nitin Pai & Aruna UrsIN PARLIAMENT

13 A review of Budget Session 2008 Kaushiki SanyalROUNDUP

14 Where is the financial superhighway? Two reports later, there is still no movement on reforms Aadisht Khanna16 Improving economic literacy Effective delivery of public services requires sound public policy education Mukul G Asher & Amarendu Nandy18 A food credit card scheme How microfinance and the public distribution scheme can work together Ankit Rawal

BOOKS

21 History is in the writing The changing fashions of recording history Sunil Laxman

PragatiThe Indian National Interest Review

No 15 | Jun 2008

Published by The Indian National Interest - an independentcommunity of individuals committed to increasing public awareness

and education on strategic affairs, economic policy and governance.

Advisory PanelMukul G Asher

V Anantha NageswaranSameer WagleSameer Jain

Amey V Laud

EditorsNitin Pai

Ravikiran S Rao

Editorial SupportPriya Kadam

Chandrachoodan GopalakrishnanAruna Urs

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NATIONAL SECURITY

The New Jihadis

Local manifestations of a global patternNITIN PAI

IT IS hard to say, but it may well be that the Indianmedia prevented the Indian Mujahideen from set-ting off their tenth bomb in Jaipur. The earliest re-ports of the contents of their email message madethem appear merely dangerously confused. But aswe learn more about what exactly they said intheir email, it is clear that their message was notmerely incendiary. It is, as Praveen Swami put it, apolitical manifesto, for the "Indian MujahideensDeclaration of Open War Against India. "

Because that document has profound implica-tions for India's psychological preparation for thelong war ahead, it is incumbent on the media andthe government to make the entire document pub-lic.

It is abundantly clear that pattern of contempo-rary global 'jihad' has manifested itself in India.Now, terrorist attacks by Islamic groups are noth-

ing new for Indiabut in the past these werelinked to the secessionist movement, the proxywar in Jammu & Kashmir, or to any number ofPakistan's extended jihadi apparatus, includingthe Dawood Ibrahim's organised crime network.The difference between those attacks and the morerecent ones is that whereas the former involvedeither foreigners or "hardcore" locals, the latterinvolve individuals and cells from a broader sec-tion of the India's Muslim population.

Paradoxically, while many of the New Jihadisare home-grown, the reason for their energeticmobilisation is global. As the Indian Mujahideensaid in their email, they are motivated by the beliefthat "we Muslims are one across the globe." India,therefore, in the minds of the New Jihadis, is butone front in the global jihad. While they cite thedemolition of the Babri Masjid and the Godhrariots as the reasons for their attackswhich theirapologists are quick to unquestioningly in-gestthe fact that their violence is directed againstthe Indian people and the Indian state, includingagainst Muslims who disagree with their ideol-

ogysuggests that these grievances are either ex-cuses or propaganda slogans for their real agenda.

At this point, it is common for the Indian publicdebate to be hung up on whether injustice leads to

terrorism or vice versa. But because the New Ji-hadis see themselves as part of a global religiouswar, it is reasonable to conclude that no amount of justiceshort of the impossible goal of reorderingIndian society according to their demandswillconvince them to halt their struggle.

What this means is that the only course open toIndia is to fight the New Jihadis to the finish. Theyhave already declared war on India. Now, it is notthat the Indian government is not fightingit is,and it has notched some notable gains against theStudents Islamic Movement of India (SIMI) in re-cent years. But because the entire debate ofcounter-terrorism has been painted in the tired oldcolours of communalism, secularism and mi-norities, the Indian government, and the politicalestablishment, has failed to mobilise the nation forthis war.

There are two broad arenas where the war must be fought: on the ground and in the mind. First,there is near unanimity in the law-enforcementcommunity that the Indian Penal Code is inade-quate when it comes to fighting terrorism. If thewar against the New Jihadis has to be fought con-stitutionallyas it mustthe legal frameworkmust address the new challenges.

As Philip Bobbitt contends in Terror and Con-sent, a special anti-terrorism law is necessary. Thepolitical establishment must draw the right lessonsfrom the partisan debate over the erstwhile Terror-ism and Disruptive Activities Act (TADA) and

Prevention of Terrorism Act (POTA), drawing fromthe valid concerns of both sides of the debate. Anew act, with more stringent checks and balanceslies within reach of the political class.

PERSPECTIVE

PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 2

The New Jihadis have already

declared war on India. The only

course open is to fight them to

the finish.


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Perhaps in response to the stinging criticism ofhis governments incompetence in the area of in-ternal security, Prime Minister Manmohan Singh belatedly called for the formation of a newnational counter-terrorism agency. Now whetheror not there is a need for a new bureaucracy to

fight this war is a matter of technical efficiency. Isit cheaper to restructure and network existing law-enforcement and intelligence organisations, or to build an entirely new one? On the face of it, re-engineering and rejuvenating existing agencies isdesirable. Not only because creating a whole new bureaucracy is generally a bad idea. But also be-cause politicians would find it convenient to citethe creation of an anti-terrorism agency to conveyan impression of progress, even when there isnone.

The second theatre of this war is in the mind.For that, citizens must know that India has a warimposed on it, and that they are considered "le-gitimate targets" by the New Jihadis. Clearly thiswar is against some of its own Muslim citizens, but to cast this as a "communal" issueas is thecase todayis incorrect, dangerous and self-defeating.

For the contemporary global jihad has a com-ponent that involves a conflict among Muslims.Like in Britain and Pakistan, this involves a strug-

gle for primacy within the Muslim communi-tyfrom battles over control of mosques to thoseover control over political leadership. Those proneto view the Muslim community as a vote-bankare unlikely to want to notice this. That the IndianMujahideen, like their counterparts elsewhere,

condemn Muslims who oppose their world-viewas much as they condemn non-Muslims shoulderase doubts as to the nature of the problem.

For the same reason, the argument that a no-nonsense counter-terrorism policy will antagonisethe entire Muslim community is untrue. But it isoften pointed out that moderate Muslims do notmeaningfully oppose the extremists. To the extentthis is true, isn't it reasonable that they should beafraid of doing so when they do not see the Indianstate credibly committed to fighting the New Ji-

hadis? So too the oft-repeated concerns over com-munal harmony. If the government makes a cleanbreast of the situation, it would be downright pa-tronising to suggest that Indian people will beginlarge-scale rioting.

It remains to be seen whether an enlightenedpolitical and intellectual leadership will emerge totake India through this war. Unfortunately, the lastfew years have seen positions on several issues ofnational interestfrom geopolitical partnershipsto nuclear policy to counter-terrorismreduced todogmatic mantras of partisan politics. However,

given the likely intensification of attacks by theNew Jihadis, parties hoping to see themselves inpower next year would do well to start steppingout of the corners they have painted themselvesinto.

Nitin Pai is editor of Pragati and blogs at The Acorn(acorn.nationalinterest.in).

COUNTER-TERRORISM

Getting human rights right

Are human rights activists playing into the hands of terrorists?

SANDEEP BALAKRISHNA, SALIL TRIPATHI & ROHIT PRADHAN

Deadlier than the act

SANDEEP BALAKRISHNA: That the UPA gov-ernment has shown itself as being incompetent

checking and tackling terror is well known. How-ever, what escapes the public eye is a sustainedintellectual attack that is rapidly undermining the

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basic principles of democracy. It lies in the relent-less attempts to legitimise terrorism and politicalviolence, cloaked in several noble-soundinggarbsthe language of human rights being the

most notable of them.The last four years have seen numerous terror-

ist attacks across Indian cities. Almost invariably,these were followed by attempts to explain themawayas vengeance for past wrongs, from a lackof faith in the justice system, or from bitterness atnot benefiting from India's economic growth proc-ess.

In an email message claiming responsibility forthe serial explosions in Jaipur in May 2008, theIndian Mujahideen reiterated their declaration ofwar on India. Their message identifies Hindus astargets for terror and draws inspiration from his-torical Islamic kings who invaded India. It alsotargets Muslim scholars who reject their path ofviolence.

Close on its heels, another email message, thistime from a group of self-styled "concerned citi-zens" was circulated to the International HumanRights Organisation under the aegis of NationalAssociation of Peoples Movements. Implicitly de-claring its contempt for the judicial system, it callsfor the creation of an extra-constitutional authority

which can "in an unbiased way can go to the truthof these acts."

The message has little to condemn the terror-ists; instead it delves more on the evils of the in-

vestigating agencies, the alleged angle of 'Hinduterrorists' and an incredible theory that this wasthe terrorists' method of venting their rage againstAmerica's lust for oil. They single out the BJP as

being the only communal party, and go on to al-lege that "communal violence is being substituted by the acts of terror to consolidate (its) electoralbase."

However, the most dangerous part is theirwhitewashing of the actual message of the perpe-trators. What is an unambiguous religious war cry,in the hands of the 'concerned citizens', becomesan expression of hidden angst and a matter of hu-man rights.

It takes a tremendous amount of effrontery tomake such sweeping demands based on outrightfalsehood and in face of contrary evidence. Thereis absolutely no suggestion on how to tackle terror.One suspects whether these intellectuals even ac-knowledge such incidents as terrorism.

Apart from the obvious immediate impact ofderailing the public discourse, this perverse ap-proach hampers investigations. Activists claimingto champion 'human rights' have shown that theycan drum up enough media and intellectual sup-port to stall and mislead investigations. The case ofMohammed Afzal Guru and Zaheera Shaikh are

prominent examples of media and intellectual ac-tivism gone awry.

Given the frequency and boldness of attacks onIndian territory, it is time to rethink priorities. In-

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tellectual defence of terrorism is deadlier than theactual act.Why human rights activists must be unreason-

able

SALIL TRIPATHI: There have been several calls onhuman rights organisations to provide "solutions"

to the problems societies face. When they refuse,when they condemn human rights abuses (even ifselectively), critics complainin some cases right-lythat human rights groups have "lost the plot"and do not care for the victims of terrorism, andare, therefore, being unreasonable.

Human rights folks will be unreasonable, eve-rywhere, to restrain the state. This is not to defendthem, but to explain where they come from. Themoment they become solution providers theyhave to begin modifying the message and make it

more context-specific. Once they do that, the moralsharpness of their messagethat the victim ismost important (and they sometimes exalt victimsto a holy status)is lost. This is not to judge vic-tims or human rights groups.

Whether it is the American Civil Liberties Un-ion or the Center for Constitutional Rights defend-ing the indefendable folks in Guantanamo Baycases, or Liberty supporting some committed ji-hadis in Belmarsh jail in London, they see theirrole as defending the indefensible, so that the restof us wont suffer at the hands of a government

with authoritarian tendencies. If they were to be-gin appearing reasonable, theyd lose resonance.More important, nobody will be speaking out forthe innocent who will otherwise go to jail.

Guantanamo prison, like Abu Ghraib, hasmany bad people. But it also has some innocentpeople. The state should not be allowed to getaway with that.

I remember reading about Wei Jingsheng, theChinese dissident, who had to leave China - afterseveral years in jails. In Bad Elements Ian Bu-

ruma paints a very gripping and vivid picture ofhimof Wei driving through red lights in Amer-ica, ignoring traffic discipline; smoking in placeswhere smoking is banned. He is stubborn, becausethe only way he can deal with authority that hehas knownChinais by being uncompromising.It does make him look uncouth in civilised com-pany.

And yet, unpleasant though he might be, Weimatters. Just as Solzhenitsyn matters even thoughwhen he came out of the Gulag, and once hestarted talking about Mother Russia, he sounded

like an embarrassment.The point about human rights activists in India

is that like Teesta Setalvad, Sandeep Pandey,Aruna Roy, Binayak Sen and others, should remain

unreasonable. They may even be selective - noth-ing prevents from others to pick up cases andcauses these individuals do not. Let the thinktankers and policy-makers become practical. Be-cause otherwise, everyone will support the idea ofsafety-over-liberty, and we would all be losers.

Think Benjamin Franklinsocieties that placesafety over liberty deserve neither safety, nor lib-erty.

This is, again, not to defend or condemn thehuman rights community, but to explain why theyare the way they are. In some ways, they are likeevangelists, which makes them suspect for some,saviours, for others.

However, in the context of Mr Sandeep's pointabove, there is some awareness growing amonghuman rights folks, that they should not forget

victims of terror. If you see Amnesty International,they issued a statement after Jaipur blasts in whichthey condemned those who committed the acts.They called 9/11 a crime against humanity. At arecent human rights seminar in London, two im-portant things came out: one, that if human rightslawyers dont need to explain why torture is bad(because it is, period), why cant they also arguethat terrorism is bad, period? Why do rights advo-cates contextualise terrorism? Why do they call itthe weapon of the powerless when those whoperpetrate terror are extremely powerful, often

woman-hating Neanderthals? Why do victims oftorture get elevated when they are themselveshuman rights abusers, to the status of humanrights defenders and get honoured? Yes, they arevictims when they are tortured or detained with-out due process of law, and they should get legalaccess and not get tortured. But they need not beon a pedestal. Merely because you were in Gitmodoes not make you qualify for the Nobel PeacePrize.

Strengthening terrorists cannot improve humanrights

ROHIT PRADHAN: Human rights are impor-tantthe states moral authority rests on its abilityto distinguish its methods from those of the terror-ists. Remove that distinction and the states pres-ervation becomes a matter of convenience ratherthan a moral imperative. Therefore, it is entirelyappropriate to judge the state from a differentyardstick vis--vis the non-state actors it confronts.

Mr Tripathis analysis fails, however, on twocounts. First, it ignores the nature of modern con-

flict: It is no longer a case of evil Russia fightingthe democratic West with battle-lines clearly de-marcated and theatre essentially pan-national. Ter-rorism exists as a series of localised conflicts where

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the enemyas seen most clearly in cases of urbanterrorismis shadowy and elusive.

The explosion of new mediums of informationdisseminationthe internet for examplehas en-sured that information is no longer the exclusivepreserve of the state. Indeed, in almost every Ji-

hadi video, Guantanamo Bay detention camp andits alleged horrors play an important role. In India,Gujarat riots have become the primary focus ofjihadi indoctrination. Therefore, it is important forhuman rights warriors not to unwittingly act as apropaganda tool for terrorists. Criticise Gujaratadministration by all means but be careful aboutthe figures your furnish or the labels you give.Horrifying as the Gujarat riots were, and complicitas Modi administration was, they were by nomeans of imagination, a state-sponsored genocide

or a holocaust. Is the truth not good enough?Then why the constant embellishments?Mr Tripathi may well be within his rights to

argue that ensuring the failure of terrorists is notthe job of human rights folks. But surely, strength-ening the hands of terrorists and augmenting theirnumbers cannot improve human rights either.

Second, the success of human rights organisa-tions depends upon the preservation of the nationstate, democracy, the rule of law, a free press,among others. The human rights organisationsimplicitly recognise this by focusing on the trans-

gressions of the state for they know that terroristsare unlikely to be moved by their criticism.

A single minded focus on human rights even ifit damages the very institutions which guaranteeits preservation cannot be a prudent course.Worse, if they are perceived as inimical to the in-

terests of organisations they seek to reform or seenas a handicap in the states battle with terror, theyare likely to be denied the means to make a differ-ence. What is its eventual goal? Scoring browniepoints or improving human rights?

The letter concerned citizens wrote in the

wake of the Jaipur blasts illustrates the dangers ofviewing human rights in a vacuum. Even beforethe dust had settled on the Jaipur blasts; even be-fore the police had properly begun investigatingthe attacks (let alone made arrests), concernedcitizens released a letter designed, it appears, ex-pressly to obstruct investigations and demoralisethe police. It is not being argued that the letterwriters dont want the perpetrators of the Jaipurblasts to be punished, but advancing wild conspir-acy theories and demanding the appointment of

extra-constitutional authorities is hardly condu-cive to a full and fair police investigation.It is conceded that human rights organisations

cannot function as part of the state; their inde-pendence is essential to their credibility. However,it is equally true that they cannot function or makea positive impact if they pretend to operate asAlice-in-wonderland disconnected from the widersociety. Indiscriminately targeting the state is easy;it may result in newspaper headlines and instanttelevision stardom but it will not advance thecause of human rights.

Sandeep Balakrishna blogs at Seriously Sandeep(sandeepweb.com), Salil Tripathi is a writer based inLondon and Rohit Pradhan is a resident commentatorat the Indian National Interest.

POLITICS AND CULTURE

Towards a cultural liberalismGovernments must stop siding with intolerant mobs

JAYAKRISHNAN NAIR

RECENTLY THE Delhi High Court quashedcriminal proceedings against M F Hussain andnoted, "Indias new Puritanism, practised by a

largely ignorant crowd in the name of Indian spiri-tual purity, is threatening to throw the nation backinto the Pre-Renaissance era." Fearing harm, theartist had been living in self-imposed exile in Du-bai and London and the court noted that his right

place was in his home in India.As competitive intolerance stays as our national

sport, Mr Hussain's offensive paintings are re-

placed in the next news cycle of a few people ledby the "Nawab of Arcot" disrupting an exhibitionon Aurangzeb's atrocities. As mobs indulge in tyr-anny, forcing their morality on the rest, it is neces-sary to step back and analyse the repercussions of

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such intolerance. To move to an era of culturaltolerance, it is necessary to identify the culprits,understand the patterns and evaluate the optionsfor facilitating a society that respects freedom ofspeech.

While it is distressing that mobs can restrict

cultural freedom,liberals should be concerned thatour governments too act mala fide with lan. In2006, The Da Vinci Code , based on a best sellingnovel of the same name by Dan Brown, was re-leased in India. This controversial novel and moviepropagated Donovan Joyce's 1973 theory that Jesusmarried Mary Magdalene and their bloodlinesurvives to this day. While it was not banned inChristian majority countries, this movie, whichwas cleared by the Central Board of Film Certifica-tion, was either banned or suspended in Tamil

Nadu, Andhra Pradesh, Nagaland, Meghalaya andPunjab.Governments usually ban books and movies

when they think that it has or can upset religioussentiments resulting in a break down in law andorder. While that may be the official reason, theground reality is that it is connected to politics.Thus by banning The Da Vinci Code and TheSatanicVerses, the governments made it clear that they cansacrifice liberalism. On finding that James Laine'sShivaji: Hindu King in Muslim India had remarksthat were deemed derogatory to the Maratha hero,

the Maharashtra state government banned the book, showing that it is not just minority ap-peasement at work. Maharashtras ban alsoshowed that laws made by local authorities mightnot be an obvious cure, but opportunities for cus-tomised pandering.

This asphyxiation of artistic expression is notnew. As India turned sixty, the Indian Express pub-lished a list of books that have been banned. Thelist includes Hindu Heaven by Max Wylie (bannedin 1934) to Who Killed Gandhi by Lourenco DeSadvandor, with the most famous ones being NineHours to Rama, a fictionalised account of MahatmaGandhi's assassination by Stanley Wolpert and TheSatanic Verses by Salman Rushdie. Movies likeKissa Kursi Ka, Indiana Jones and the Temple of Doom,and Kama Sutra were banned but some were re-leased after court orders.

Our constitution writers were clear that democ-racy is meaningless without freedom of speech,and that people should live in a social environ-ment that permits maximum personal and culturalfreedom.

Our politicians though, play petty politics withthis right. Our governments, independent of theirideology, have indulged in communal and re-gional politics to satisfy vocal groups. Liberals

must oppose such bans and question the judge-ment behind maintaining such lists. When various governments competitively banned art, books and movies and vigilantegroups enforced their morality creating insuper-able problems, it has been the judiciary, as in Mr

Hussains case, which came to the rescue. WhenThe Da Vinci Code was banned, the high courts ofAndhra Pradesh and Tamil Nadu delivered land-mark verdicts vituperating the governments. TheAndhra High Court told the government that, "theconstitution does not confer or tolerate such indi-vidualised hyper-sensitive private censor intrusioninto and regulation of guaranteed freedom of oth-ers."

The Madras High court, on similar lines, wrote,"artistic expressions may be asphyxiated by law if

a petulant group of self-appointed `censors' pre-scribes the paradigms for suspending the screen-ing of a film." The courts also noted that citing apossible break down in law and order couldn't bea reason for a ban. According to Justice PrabhaSridevan of Madras High Court, "the inability ofthe state to maintain law and order or to avert aviolation of breach of peace can never be a groundto throttle the fundamental rights." In an ideal lib-eral democracy, the judiciary would not have tostep in, but right now we should be glad that we atleast have a judiciary to step in.

By being a cultural liberal, you don't have tocotton to Mr Hussain's work. He can be called ahypocrite but our constitution gives them the samerights that each one of us has. IfShivaji: Hindu Kingin Muslim India is offensive, the best responsewould be a book which contests James Laine's the-ory; the Nawab of Arcot should have organised acounter-exhibition extolling Aurangzeb's virtues.

The battle for cultural liberalism is not over, forthere are many upcoming events to test it. PaulVerhoeven is coming up with a new book, Jesus of

Nazareth: A Realistic Portrait in which he claims thatMary was a rape victim and Jesus was not be-trayed by Judas. Kamal Haasan's much awaitedmovie Dasavathaaram, apparently (since no one hasseen it), has some scenes of idols being destroyedin the clash between Shaivaites and Vaishnavites.A Vishwa Hindu Parishad (VHP) leader has saidthat such scenes hurt the sentiments of Hindus allaround the world and should be removed, failingwhich they would resort to public protests.

As usual there will be mob violence and selec-tive outrage, but let not the Iranian Ayatollahs and

Bangladeshi fundamentalists be our role models.

Jayakrishnan Nair writes about history and currentaffairs at varnam.org/blog.

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Feline counter-terrorismPREM MAHADEVAN hasan interesting paper inFaultlines, a quarterly pub-lication from New DelhisInstitute for Conflict Man-agement, on the system-atic use of cats as acounter-terrorism tool inPunjab from the mid-1980s to the mid-1990s.

The cat system wasthe use of pseudo-terroristtechniques to infiltrateterrorist groups. It in-volved the use of speciallyrecruited infiltrators andsystematically turned cap-

tured terrorists as intelli-gence assets for trackingdown listed terrorists.These cats on makingcontact with active terror-ists, provided actionableintelligence which helpedthe security forces engageotherwise elusive targets.

Mr Mahadevans pa-per shows that the catsystem, when standard-ized into a key attritionalweapon for counter-terrorism, dealt heavy,though not crippling,blows to the Punjab ter-rorists morale as well asoperational capability.

The paper points outthe comprehensive lossof local medium-rungcadres amongst the terror-ists that crushed the Khal-istani movement. Thecapture or killing of a ter-rorist group leader was a

bonus, but essentially notone to be relied on at thetactical planninglevel...When local leadersshared the risks and tra-vails of the terrorist rankand file, their loss had astronger demoralisingeffect than that of a leaderwho was too high up anddistant for the rank andfile to feel personally af-fected.

The role of moneypower was important. Tothe extent that the catsystem was only as effec-tive as its capability topurchase loyalty and to

punish lethargy. Gener-ally, those cats, who wereheavily compromised byinvolvement in murdersand threatened into co-operating rather than be-ing simply bought off,seem to have been themost reliable.

This might have beenbecause the handling offi-cer could always brandishthe stick of punishmentfor past activity if the catfaltered, and offered car-rots in the form of bo-nuses only sparingly. Themore desperate the cat to

buy his peace with thePolice, the more he couldbe pressured to run riskswhile gathering informa-tion.

How does India measureup on international humanrights standards?IN AN issue brief pub-lished by New DelhisObserver Research Foun-dation Dilip Lahiri as-

sesses how Indias humanrights standards stack upagainst internationalnorms.

While he concedes thatIndias record, warts andall, is certainly no worsethan that of the majorityof UN members, andwould probably be rankedamong the top third, itsAchilles heel has alwaysbeen implementation and

what has been describedas a culture of impunitywhen faced with routineviolations of laws andregulations.

He argues that beingseen as unmindful of in-ternational human rightsobligation imposes costson India in terms of influ-ence. He proposes fourmeasures to address this.First, to attack the cultureof impunity. Second, to

ratify the conventionagainst torture. Third, toget out of the stalematewith the UN on whetheror not caste discrimination

should fall within the am-bit of racial discrimina-tion. And finally, to sub-mit itself to internationalscrutiny by the UNs spe-cial rapporteurs.

Mr Lahiris analysis,unfortunately, fails to dis-tinguish between interna-tional norms and those ofthe UNs human rightsbodies. The latter leave alot to be desired.

On what makes Indianforeign policy tickTHE CENTRE for Euro-pean Policy Studies

(CEPS) has published aworking paper by RadhaKumar on India as a for-eign policy actor - norma-tive redux.

The paper analysesIndias behaviour as aforeign policy actor bylooking at Indias chang-ing relations over the pastdecade with the EU, US,China, Japan, Myanmar,Pakistan, Nepal and, in ahistorical departure, the

former princely state ofSikkim.

It argues that thoughIndia has almost alwaysbeen a normative actor,Indian foreign policy istoday transiting from ab-stract, and frequently un-realpolitik, views of whatconstitutes normativebehaviour.

Indias Look Eastpolicy has been the cor-

nerstone of this transition,indicating that economicgrowth, maritime capabil-ity and peace and stabilityin its neighbourhood arekey goals of Indias pre-sent behaviour as a nor-mative foreign policy ac-tor. The author points outthat the domestic opposi-tion to a normative behav-ior as a rising powercasts doubts on whetherthere is internal consensus

or even clarity on whatconstitutes the nationalinterest. As a result, Indiamight remain a risingrather than an established

power longer than itwould take if the politicalparties had an overarch-ing and non-partisan con-ception of the nationalinterest.

Energy and Indias foreignpolicySTANFORD UNIVER-SITYS Jeremy Carl, VarunRai and David Victor havepublished a working pa-per that studies the widegap between Indias needfor a strategic energy pol-icy and the government ofIndias inability to put

such a policy into practice.As a stark departure fromthe idealised vision, In-dias energy supply chainsthat have grown increas-ingly creaky and unreli-able.

Only halting progresshas been made towardsreform and, without fun-damental reform, it islikely that Indias globalenergy strategy will con-tinue to be a failure.

The study argues thatreforming Indias domes-tic energy sector is a nec-essary condition beforeenergy security can bemeaningfully pursued asa foreign policy goal.

Indias energy securityinitiatives have had littleimpact because firstly,they are framed in apolitical environment thatis highly fragmented and

unstable, with powershared between the centreand the states, and be-tween coalition partners;and secondly, because thegovernments administra-tive capacity in the energysector is extremely weak.

FILTER

8 No 15 | Jun 2008

A survey of think tanks

Do you have anything for FILTER?

Alert us to interesting studies, workshopsand analysis coming out of think tanks.Email us at [email protected]


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INTERVIEW

Look before you hop

A discussion on strategic affairs with Stephen P CohenNITIN PAI & ARUNA URS

In 1979, Stephen P Cohen wrote a book titled India:Emergent Power? In 2001, he wrote a new book, thistime without the question mark. Shekhar Gupta,editor-in-chief of the Indian Express once wrote thatmany Indians see him as being overly friendly tothe Pakistanis. Many Pakistanis similarly say hehas flipped to India's side. Cohen, however, has

written landmark books on both armies and lovesthem.

Pragati spoke to Dr Cohen, who is currently asenior fellow at the Brookings Institution, on sev-eral issues centred around India-US relations.

Perspectives on India as a rising power

You wrote your book about India being an emerging

power in 2001, seven years ago. Do you have a different

view today?

Yes, Id say that the military side of that emer-gence is less likely than I thought it was then. Ithink that the Indian strategic community is hope-lessly unstrategic. As long as Pakistan was theonly threat it was easy, policy was on auto-pilot.When you have multiple threats (China, Pakistan),

when you have opportunities, when you haveAmerica as a potential partner, potential rival,when you have a domestic security problem muchlarger than Pakistan or China, then it requiresmore careful thinking. I dont see that emerging.

The Indian political community is too domesti-cally focused and I can see it becoming more so.

When coalition governments come to power theycant care about strategic and military policy.

So India is going to continue to expand muchfaster economically than I thought it would, but itwill be a limited military partner for the UnitedStates.

It will be even more crippled by the self-inflicted wound of its dysfunctional educationalsystem. Thats something that nobody imposed onIndia, thats Indias choice.

Indias cultural power is going to grow. Indiahas always been a cultural superpower. The bhan-gra is now in American high schools. And theresIndian films. That aspect of Indias influence isgoing to continue to grow. And its very impres-sive.

IN DEPTH

9 No 15 | Jun 2008


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How do you see the geopolitical structure of the world

shaping up in the next 15 years and the next 30 years?

Im not sure if Id be willing to guess at thatkind of future. You may have periods when somecountries are very influential and some when theyare not. The US would be powerful across the

board, but in terms of cultural power, other coun-tries could gain influence. Now China not going to become a cultural superpower the way India is,especially in the non-Western world, but Chinawill certainly be an economic superpower. Japancould have a revival. Its a world in which you aregoing to have one larger power, several mediumpowers, India will be among the medium powers.Maybe Indias net influence will be equivalent tothat of Japan. Japan is a country of great economiccapabilities but limited cultural and military influ-

ence.

Is the current situation similar to the 60s where the US

wants India to act as a counterweight to China but In-

dia is inclined not to be aligned with the US against its

neighbour.

I think we have always exaggerated the degreeto which India is willing or capable of playing thatkind of game. Ive changed my views on thisI just dont think the Indians can do this. Therearent enough Indians who can think strategically.For years Indias foreign policy was on automatic

pilot. It was to do the opposite of whatever Paki-stan did. Pakistan was the main enemy. For awhile China briefly became the main threat butthat disappeared very quickly. India has accom-modated China in various ways, and is now inawe of Chinas economic growth.

The Bush administration saw India in strategicterms but except for four or five of your friends, Idont think the Indians see themselves in strategicterms: thats it. The Indian military would like tobalance China, but they cant do it unless the poli-

ticians and bureaucrats think in terms of balancingChina.There may well be a good outcome because if

you have nuclear weapons and a nuclear deter-rence relationship you cant talk in terms of classi-cal strategic balances. You can talk about economiccompetition, cultural rivalries, but in terms of us-ing military force being a nuclear power compli-cates matters, as India and Pakistan found outfrom Kargil.

Is the US-India-Australia-Japan quadrilateral likely to

happen?

I think the coming together for a period of two-four months for humanitarian purposesthatswhere the world is moving. There is a lot more

capability in working with other countries in In-dia. In that regard, India is going to be one of themajor players. Anything that involves the oceanand naval power, India is going to be a real power,no two ways about it.

India has a second rate fleet that can do a first

rate job. It has a first rate army but the army is tieddown in conflicts all around the place, and cantspare anybody. The air force is going to disappear,its losing airplanes, it cant seem to buy more or build any, and above all it has some doctrinalschizophreniaespecially regarding air supportfor the army.

Naval co-operation, which involves disasterrelief is a big area. India is going to get its moneysworth out of its navy.

Naval co-operationSome Indian commentators have complained that in the

naval relationship, the United States wants to limit

India to the Bay of Bengal, and in a sense, keep it out of

the Arabian Sea and ocean to India's West.

I dont see why India could not be the memberof [the US-led naval task force in the Arabian Sea/Persian Gulf]. It has legitimate Persian Gulf inter-ests and a capable navy. The US navy will behappy to co-operate with Indian navy, but theremight be third-party objections in the Persian Gulf.

The Pakistanis are deeply involved there. Theyhave twice commanded the joint task force. I lookforward to the day when India and Pakistan couldcollaborate militarily, probably first at sea. We livein a world where natural and man-made disasterswill only increase and it is important that majorpowers work together.

Richard Haass metaphor of Sheriff and Posseis a good example of co-operation that might beneeded. A sheriff will round up a posse of likelycharacters and then they go and get the bad guys.In this scenario, the bad guy could be natural dis-

aster or an insurrection or a state out of control.India might or might not join the coalition but it isimportant to work with Indians now to developand standardise operating procedures.

IN DEPTH


India has a second rate fleet that

can do a first rate job. The air force

is going to disappear, its losing

airplanes, it cant seem to buy

more or build any, all be losers.


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Isnt inter-operability a problem that can create hurdles

to such co-operation?

The Indians are among the best in the world inintegrating systems from different countries. In1987, I went on board of an Indian frigate visitingWashington, DC. The frigate had Dutch, French,

British, Israeli and Russian systems and it allseemed to work very well. Our navy people regardthe Indian navy as being up to NATO standards. Anaval ship deals with another ship as a singlepoint of command unlike the air force where aplane has to co-ordinate with multiple aircraft. Sointer-operability is not a major issue for the navy. Ihope we will sell more ships to India like the USSTrenton/INS Jalashwa.

Without restrictive end-user terms & condi-

tions[Note: Indias Comptroller and Auditor Generalhas noted restrictions on the offensive deployment of

the ship and permission to the foreign government to

conduct an inspection and inventory of all articles

transferred under the End-Use monitoring clause]

That applies to the sale of ships to any country.It is just boilerplate.

But wouldnt that be a spoiler, if other competing sup-

pliers dont have the same clauses?

India can buy from the French or anyone else. Idont think American government will have a

problem with it. India has trouble buying equip-ment as it is. The armed forces cannot figure outon how to make acquisitions, especially airplanes.This is a real problem for India. But in terms ofrestrictions on use, I dont see any hindrance at all.

The United States in Indias neighbourhood

How do you see US policies towards India changing

over the coming decade? And what might be the key

differences in the foreign policy approaches of the main

candidates.

I cannot go 10 years down the line. If Demo-crats win the next election, as it looks like theymight, and if the nuclear deal is not completed bythen, the deal will be a dead duck. Democratsmight want to re-negotiate it. I am not sure if In-

dian government could re-negotiate even if theywanted to.

I do foresee coalition governments in India wellinto the future. When there is a coalition govern-ment that is unsure of its own political power base,it is difficult to have strategic dialogue with any

country, let alone the United States. If the BJPcomes back to power, its coalition partners mightdo what Communists did to the Congress. TheCommunists got involved in foreign policy as away of putting leverage on Congress for domesticissues.

I dont think future American governments willhave much inclination to learn about which minis-ter belongs to which regional party and what hisleanings are. India is simply too complicated a sys-tem to deal with, and there is not much of India-

related expertise in America. I fear that the futuresenior government officials might simply say:"Thats the Indians, it is simply not worth the ef-fort to do any kind of deal with them".

No American government official is likely toagain invest the kind of energy and dedication thatNicholas Burns put into the nuclear deal; he spenthalf of his life negotiating the deal and it is almostdead now. Still, I hope the deal goes through.

And what if the Republicans win?

A Republican administration might be more

sympathetic to India. They would not have to livewith their legacy of being anti-India. The Bushadministration has changed that. Indian officials Imeet are very pro-Bush.

However, I dont think India will be a high pri-ority if Iran becomes the real issue. Unless some-body stops Iran from developing nuclear weapons,we might soon see an Iranian nuclear test. Thisleads to new problem that might make India lessrelevant. Pakistanis might help the Saudis balancethe Iranians. Or Saudi Arabia might become nerv-

ous and there might be a Saudi bomb probablymade in Pakistan or China.What will India do? Do they stick with Iranians

as their best friend in Middle East or try some typeof mediating role? It is quite difficult to predict.They might try to stay out of the whole issue, asthe Israelis are involved. India would not want toanger Israel, a major arms supplier, by becomingtoo close to Iran.

Do you think it is possible for India to play a bridging

role between the United States and Iran, much like the

role played by Pakistan in bringing China and the

United States together in 1971?

I dont think so. It is largely our problem, apsychological one to be more specific, that goes

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11 No 15 | Jun 2008

Future senior US government offi-

cials might simply say: "Thats the

Indians, it is simply not worth the ef-

fort to do any kind of deal with

them".


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back to 70s and the hostage crisis. Too manyAmericans are still wrapped up in that. We havean obsession and we cannot get rid of it. So it ishard for India to play that kind of role. By the way,there are other countries that want to play that rolealso.

Indian is caught between all kinds of contestingpowers. I am not sure if India wants to play anyrole at all. I know one Indian diplomat who hassaid that India is better off not being a permanentmember in UN Security Council. If it were a per-manent member, then it would have to take a posi-tion on every issue. Historically, India is best off bynot taking positions, given its fragile domesticpolitics and the loss of a foreign policy consensus.

There is room for creative Indian diplomacy onIran, but [it has] to take Pakistan along. I think In-

dia ought to go with Pakistan to the US and saylook we understand your concerns about Iran butpipeline is more important to us.

Tell us something about your upcoming book

I am writing a book with Sunil Dasgupta. Thebook is about the prospects for an India-US strate-gic (military) relationship. We are not that enthusi-astic about the prospect. My own policy advice toAmericans would be: look before you hop. It isnot a leap but a hopas people do in a potato sackrace. The nuclear weapons make a long term and

intense relationship inconceivable vis--vis China.We also cannot imagine a balancing of Chineseland power by the Indians. The army is not readyfor that. They can barely do what they are doingnow. The notion of Indians crossing the Himalayasand defeating the Chinese in Tibet or even in Ne-pal is simply inconceivable.

Agriculture and Education

While military co-operation might not workout, I am very optimistic about economic co-

operation, which is booming in both directions.However the big problem areas are education andagriculture. The Indians appear to be unwilling toaccept the transfer of foreign educational systems,except for a small sector. I am also bothered byIndian agriculture. Without good education andmodern agriculture, India will just struggle along.I got my job at the University of Illinois because itwas one of the dozen or so American universitiesthat fostered the green revolution in India. Illinoiscontributed to the soya bean revolution, KansasState university was part of the white (milk) revo-

lution. The growth of Indian agriculture 40 years

ago was unprecedented, but now it is growing at1%!

I have spent 45 years studying India, but thesetwo areas are enormously disappointing. If youhave a billion people with a bad education system,there might some bright people coming out of that

system but that is not good enough. That is nothow liberal democracies work.

Indians are very comfortable with complexities.The more screwed up it is, the better Indians func-tion. That is the reason why they do so well inAmerica. For Indians, America is a pretty simplecountry. Indians need better education to thrive but the universities, including the best ones, areawfully messed up. When I first arrived in India,the universities at Allahabad, Bombay and Cal-cutta were great places to study. They still had

some world class faculties, who have long sincegone. The good Indian ones ended up in America.

The government refuses to lift its stranglehold on edu-

cation

Yes, but you can learn from American systemwhere both public and private universities com-pete vigourously. This is one area where the Britishmodel was ineffective, and ours, which accommo-dates a multi-ethnic, federal, complex societywould fit better.

Yet, I remain amazed at India: my wife says

that 100 metres of India is more interesting than 10kilometres of most other countries. A few monthsago I was on Parliament Street: under three differ-ent trees there were three different businessesflourishing. One guy was repairing bicycle tyres, asecond was a cobbler and a woman was hawkinglottery tickets. Each had a different life story. Thatwas an amazing display of Indias complexity anddiversity.

Nitin Pai is editor of Pragati. Aruna Urs works for a

risk consultancy.

IN DEPTH


Without good education and mod-

ern agriculture, India will just

struggle along. I have spent 45 years

studying India, but these two areas

are enormously disappointing.

Want to listen to this interview? Visit pragati.nationalinterest.in/podcast to download the audio edition


14/24

A COMPARISON of theBudget Session 2008 withthe last three Budget ses-sions of the 14th Lok Sabhashow that in 2008 Parlia-ment worked the leastnumber of days andtransacted the leastamount of non-financiallegislative business.

However, it workedthe maximum number ofhours per day, workingextra hours to make up forthe lost time due to inter-ruptions.

Legislative Activity

The Budget Sessiontransacted financial busi-ness related to Railways,General Budgets andBudget related to Karna-taka for 2008-09. It alsodiscussed important is-sues such as price rise andrecent incidents of attackon North Indians in Ma-harashtra. Most of theplanned legislative busi-ness could not be con-cluded during the Session.Only 12 out of the 30 non-financial Bills planned forintroduction could be in-troduced and 9 of the 29listed for passing wereactually passed.

Many important Billslisted for considerationand passing were nottaken up. They includethe Seeds Bill, 2004; theInformation Technology(Amendment) Bill, 2006;

the Code of Criminal Pro-cedure (Amendment) Bill,2006; and the UnorganisedSector Workers SocialSecurity Bill, 2007. Also,significant Bills such asthe Companies Bill, 2008and the Right to Educa-tion Bill, 2008, listed forintroduction, were notintroduced.

Bills passedTwo Bills, The Delimi-

tation (Amendment) Bill,2008andTheRepresenta-tion of the People(Amendment) Bill, 2008enable the redrawing of

constituencies for LokSabha and state Legisla-tive Assemblies. The lastsuch exercise was carriedout based on the 1971 cen-sus, and the next delimita-tion will not be carried outtill the first census after2026. The number of seatsin Lok Sabha allocated toeach state as well as theseats in state assemblieshave been kept un-changed. However,within each state, the con-stituencies have been re-drawn so each constitu-ency contains the same

number of persons (basedon the 2001 census). Thenumber of seats reservedfor scheduled castes andscheduled tribes have alsobeen revised based ontheir population share.

The Railways(Amendment) Bill, 2008allows the central gov-ernment to acquire landfor any special railwayproject which can be clas-sified as public purpose.It however allows theowner or user of the landto object to such acquisi-tion. It also provides forvarious categories ofcompensation to theowner and the user of theland.

The Sugar Develop-ment Fund (Amendment)Bill, 2008amends the ten-

ure of the Chairman ofPrasar Bharati to threeyears or until he attainsthe age of 70. After theAct comes into force, if thetenure of any Chairmandoes not conform to theseconditions, he shall beremoved from office with-out any compensation.This effectively meant thatthe incumbent chairmanM V Kamath had to resignfrom office.

The Food Safety andStandards Act, 2006 re-quires full-time membersto be appointed to the

Food Safety and Stan-dards Authority. Thegovernment has faceddifficulty in selecting emi-nent persons who do nothold any other post. TheFood Safety and Stan-dards (Amendment) Bill,2008permitspart-timemembers in the Authority,who may hold other posi-tions.

The Central Universi-ties Laws (Amendment)Bill, 2008amends fiveActs to make provision forlaying down audited ac-

counts and annual reportsof five central universitiesbefore parliament.

The Jawaharlal Insti-tute of Post-GraduateMedical Education,Puducherry Bill, 2007empowers the institute todevelop its own curricu-lum and award its owndegrees.

The Maternity Benefit(Amendment) Bill, 2007increases the medical bo-nus to Rs 1,000 from Rs250, and authorises thecentral government torevise this up to Rs 20,000.

The Carriage by Air(Amendment) Bill, 2007was passed by the LokSabha and is pending inthe Rajya Sabha. The Billupdates the Act to include

the Montreal Conventionsigned on May 28, 1999.This convention increasesthe compensation payableto air passengers in case ofaccidents or loss of bag-gage.

Ordinance LapsedThe Forward Con-

tracts (Regulation)Amendment Bill, 2008 toupgrade the legal andregulatory system in thecommodity futures mar-ket was introduced toreplace an ordinance, butit was not considered dur-ing the session. Conse-

quently, the January ordi-nance has lapsed. [Anordinance has to bepassed as an Act withinsix weeks of the beginningof the following session ofParliament.]

Bills introducedThree Bills that were

introduced during thesession are pending inParliament. In view of thependency of cases in theSupreme Court, the Su-preme Court (Number ofJudges) Amendment Bill,2008seeks to increase the

number of judges in theSupreme Court from 25 to30 (excluding the ChiefJustice of India).

The CompensatoryAfforestation Fund Bill,2008was introduced togive effect to the order ofthe Supreme Court to es-tablish a CompensatoryAfforestation Fund to un-dertake artificial regenera-tion, protection of forests,infrastructure develop-ment, Green India Pro-gramme, wildlife protec-tion and other related ac-tivities. The Fund is tomanaged by Compensa-tory Afforestation FundManagement and Plan-ning Authority.

The Constitution(One Hundred andEighth Amendment) Bill,2008. Commonly known

as theWomens Reserva-tion Bill, allows reserva-tion of one-third of seats(on a rotation basis) forwomen in the Lok Sabhaand the Legislative As-semblies of the states. TheBill adds that reservationof seats for women in theLok Sabha and state as-semblies shall cease toexist 15 years after thecommencement of the Act.

Compiled by Kaushiki Sanyal,senior analyst, PRS Legisla-tive Research (prsindia.org)

IN PARLIAMENT

13 No 15 | May 2008

PRS Legislative Research: Budget Session 2008


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ECONOMY

Where is the financial superhighway?

Two reports later, there is still no movement on reformsAADISHT KHANNA

A COUNTRY has started a massive highway con-struction project. The decision makers in the coun-trys government and key influencers in its mediahave all agreed that it is important to build world-class highways. Tragically, the countrys govern-ment has made it illegal to manufacture or importhigh-grade asphalt. Transport engineers use in-adequate substitutes. The roads wear out faster,driving up maintenance costs, increasing conges-tion, and making driving unpleasant.

If a government which sabotaged its country'sinfrastructure development in this way actuallyexisted, it would be mocked by the world andthrown out by its citizens. Yet, the government ofIndia, which has repeatedly failed to allow its fi-nancial infrastructure to develop, has not inspiredany outrage.

Two prescriptions for reformIn the past two years, the Indian government

has asked for advice on reforming the financialsystem from two sources. The finance ministryasked the Percy Mistry committee how Mumbaicould be made an International Financial Cen-tre, while the Planning Commission asked theRaghuram Rajan committee to list the reformsneeded for the evolution ofthe financial sector. ThePercy Mistry report was

submitted sixteen monthsago; few if any of its rec-ommendations have beenimplemented. The Rajancommittee has submitted adraft report and the finalreport will be submittedsoon.

The Mistry report is atour-de-force. Asked whatit would take to create aninternational financial cen-

tre in India, the committeenot only identified themissing pieces, but pre-pared a comprehensive

plan to fill them inin the process, pointing out anumber of required reforms. In the metaphor ofthe highway, financial products corporate andsovereign debt, foreign exchange, and currencyand interest rate derivativesform the high gradeasphalt that the government disallows manufac-ture or import of. The markets for each of theseproducts depend onthe others existence to func-tion vibrantly. The Mistry report calls these mar-kets the Bond-Currency-Derivative (BCD) nexusand lays outthe roadmap for creating it.

In contrast, the Rajan report looks at the entirefinancial sector, picks the easiest and most obviouscandidates for reform, and advocates going aheadwith them as soon as possible, with the aim of in-cremental reform.If the Mistry report is a plan toestablish asphalt plants locally, the Rajan re-portisthat of an efficiency expert who surveyedthe highways and discovered not only missinghigh-grade asphalt, but also that the work teamsare too unwieldy, that the concrete is not beingpoured properly, and that modern equipment isnot being used, and points out the improvementswhich can be made in each of these areas.

The two reports have a large overlap, espe-cially on the problems of governance in state-

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PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 14Extending the line


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owned banks, and the need to create the missingBCD markets. The Rajan report focuses on someareas in much greater detail than the Mistry reportpension fund development, financial inclusion,alternative banking models, while the Mistryreport is almost monomaniacal in its focus on theBCD nexus and the tax- and legal policies neededto enable this. Both reports also run up against acomplex questionthe ideal nature of financialsector regulation in India.

Rebalancing the governments role

There is a fundamental problem of Indian stateinvolvement in financeit is unbalanced. There istoo much of it in some areas and non-existent inothers. The excess of state control is particularlyprominent in banking.The government ownsmostof the

the banking sector. The Reserve Bank of In-dia (RBI) micromanages banking. This microman-

agement acts as a drag on productivity and inno-

vation and creates unnecessary compliance costsfor banks. In extreme cases, RBI regulations can actagainst its own objectivesas with strict knowyour customer norms that prevent the poor fromopening bank accounts.

Conversely,the lack of a common rule-bookfor the corporate debt market has meant that it isimpossible for corporatebonds to be freely traded.Lack of liquidity makes corporate debt an expen-sive source of capital and forcescompanies to relyon bank debt or internal funding, slowing theirgrowth.

The Mistry and Rajan reports have bothpointed out that financial regulation in India hasbeen excessively procedure-oriented and containstoo many cooks fighting over too little broth.Where the two committees have differed is in theirprescriptions for regulations. The Mistry report

has advocated a unified financial regulator alongthe lines of the United Kingdoms Financial Serv-ices Authority (FSA) and the adoption of light-touch, principles-based regulation. The Rajan

Committee has also endorsed principles-basedregulation, but has not gone to the radical extent ofa unified financial regulator, instead suggesting astrict definition of jurisdictions of different regula-tors, and a hierarchy of regulators in case of excep-tions. It has suggested that regulatory reform beincremental and seek the optimum, rather thanspecifying an ideal regulatory end-state.

Principles-based regulation is more conducivetoinnovation in product design, customer servicemethodologies and in broadening the customerbase. Butthe challenge is that the regulated haveto rely on the judgement of a regulator ratherthan on written down procedures, which meansthat regulators have to be consistent and protectedfrom influence. There is a strong case for minimising top-down control and regulation in existing

markets,but there is also a strong case for creating organisa-

tional structures which are capable of creating newmarkets. Creating markets requires co-ordinatingand optimising multiple elementsrules of entry, base assumptions in contracts, building trust inproducers and customers, creating an educated,well-trained workforce, and so forth. In the ab-sence of a central body, it is difficult and slowfor participants to co-ordinate among themselvesand develop these institutions. The ideal frame-work for financial sector regulation may be one

where a regulator tasked with creating a market isnot the same one which regulates the players inthat market.

The aam aadmi is waiting

A tragedy of the discourse on financial sectorreforms is that it is limited to professionals infinance.Though the Mistry and Rajan reports arewell-written and comprehensive, they are meant to be read by experts.A lay reader can go throughthem and be enlightened on how the financial sec-

tor can be reformed, but will still not know why itshould. The financial system is as important to aneconomy as the transport or electricity systemis.Good roads not onlyenable existing traderstoreach the market, they create access for new ones.Similarly, a better bond market not onlymakes borrowing cheaper for existing compani-es,it also frees up bank funds for new ones.

The people clamouring forreformlarge cor-porates and existing financial institutionsare notthe only beneficiaries. The financial sector pro-vides infrastructure for the real economy, security

and wealth creation to savers, and capital and riskmanagementtoentrepreneurs.

In the post-Independence era, finance for themasses involved expanding credit access. Indias

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15 No 15 | Jun 2008

In the absence of a good financial

system capital remains with those

who own it or have enough influence

to obtain it. A well-functioning fi-

nancial system promotes inclusionand provides the poor with access to

capital.


17/24

agricultural system has been flooded with subsi-dised credit, leading to high indebtedness andloan waivers that enable politicians to buy votes.However, products which would truly benefitfarmerscrop insurance and commodity fu-tureseither do not exist, or have been banned by

alarmist governments.The penetration of bankaccounts is alarmingly

lowless than 20 percent of agricultural labourershave a bank account. Reform targeted at improv-ing financial inclusion could improve the access ofthe poorest of the poor to secure savings, but is yetto take place. The penetration of superior savingsinstruments such as insurance, mutual funds andpension funds is worse. In the absence of a finan-cial system capital remains with those who own itor have enough influence to obtain it. A well-

functioning financial system promotes inclusionand provides the poor with access to capital.Traditionally, Indias politicians have had little

interest in infrastructure and public goods be-yond grand but low-impactprojects such as theBhakra-Nangal dam and the Indian Institutes ofTechnology. Voter desires were couched as roti-kapda-makaan (food, clothing, and shelter)allprivate goods. It has only been in the past fifteen

years that voters have begun to demand bijli-sadak-paani (electricity, roads, and water)publicgoods and infrastructure from the government.

Infrastructure reform has taken place in tele-com, electricity and highways. Financial sectorreform has taken place toothe command econ-

omys Comptroller of Capital Issues has been re-placed by the Securities and Exchange Board ofIndia. India now has some of the best functioningstock markets in the world. The private sector hasset up successful commodity exchanges and pri-vate sector entrants intobanking now have an im-pressive market share.

These successes should not distract us fromthe fact that Indias financial system is still quarter-baked, and that substantial financial sector reformis still needed. Every delay in pressing forward

with this is therefore a lostopportunity

to turnIndias small entrepreneurs into stable busi-

nesspeople, its savers into investors, and to protectits consumers from price fluctuations and infla-tion.

Aadisht Khanna is a former banker who now works ata brokerage. His blog is at www.aadisht.net

PUBLIC POLICY

Improving economic literacy

Effective delivery of public services requires sound public policy education

MUKUL G ASHER & AMARENDU NANDY

THE ASSOCIATED Chambers of Commerce and

Industry of India (ASSOCHAM) recently surveyedfaculty awareness of 258 faculty members ofvarious institutions granting Master in BusinessAdministration (MBA) degrees across the country.The survey excluded the top-30 business schools.

The survey found that the vast majority of thefaculty members were not aware of basic factsabout the national and global economy. Nine outof ten faculty members were unaware of IndiasGDP growth rate, and saving and investment ratesfor the latest year. Nearly all the survey partici-

pants could not state that Indias current externaltrade is over US$500 billion. Nine-tenths of therespondents were unaware about possible reces-sion in the United States, let alone its implicationsfor the Indian economy. The survey also found

that most of the case studies and examples dis-

cussed in the class were outdated, and so were therecommended books and other references.

If this is the state of affairs for the faculty teach-ing MBA students, it is reasonable to infer that forundergraduate economics and business facultyacross the country, the situation is unlikely to bebetter. More broadly, the wide gap between Indiastop engineering and business schools which areinternationally recognised, and the remainingthousands of these institutions with low educa-tional quality is disconcerting, requiring urgent

remedial actions.The surveys findings are consistent with per-sonal experiences involving extensive interactionsin the past several years with university facultyand students of economics and business in India;

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http://www.aadisht.net/http://www.aadisht.net/


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with government officials from various all-Indiaservices; and with business and civic groups acrossthe country.

Inadequate awareness of basic facts and figuresis a symptom of a more endemic dearth of finan-cial and economic literacy among wider sections of

the society, including intellectuals, media-persons,politicians, policy-makers, and the bureaucracy. Itis therefore not surprising that they do not exhibitan appropriate mental picture of Indias economicstructure, its sources of growth and competitive-ness, its vulnerabilities and challenges, and a nu-anced understanding of the ways to advance In-dias economic interests.

In terms of immediate public policy priorities,incorporation of sound financial and economicreasoning is essential for increasing employability

of the graduates, for managing social change

without too much disruption, and for more effec-tive design and delivery of public services.

With regards to employability, India is facing aparadoxical situation. Due to its current favourabledemographic phase, between 2005-2020, Indianeeds to create 142 million jobs, 30 percent of theworlds total. At the same time, India is experienc-

ing a shortage of talent at all levels, and in all sec-tors. As V N Dhoot, ASSOCHAMs president, hasrightly put it, if teachers are ill-informed, how canthey impart relevant knowledge and skills to thestudents? This worsens the talent shortage, andresults in India being unable to take advantage ofits current, non-recurring unique demographicdividend.

Financial and economic literacy is also essentialfor understanding forces that are driving socialchange in India, and globally. In little over twodecades, majority of Indian population will be liv-ing in urban areas. This portends momentouschange in where India works and lives. India sim-ply cannot sustain the romantic idea that three-fifths of its 1.1 billion population must derive its

livelihood from agricultural activities alone. De-signing appropriate policies and their implementa-tion to manage this change would require higherlevel of economic literacy and skills than is evidentcurrently.

Such literacy and reasoning skills are also es-

sential for effective delivery of public services, andfor obtaining better results or outcomes frombudgetary outlays. These skills need to be empha-sised in recruitment and subsequent training ofcivil servants at all levels. India must establish in-ternationally benchmarked public policy schoolswhich are accessible to not only the civil servantsat all levels of government, but also to members ofpolitical parties, and others who are interested inpublic policy such as those in the media and thenon-profit sector.

Public policy education initiatives could alsohelp reduce wilful neglect of basic economic rea-soning by the policy-makers, who currently arenot sufficiently held accountable for the resultingharm to the country. Many current policies, forinstance, ignore the vital concepts of opportunitycosts (that which is foregone as a result of under-taking a particular course of action) and moralhazard (the incentive for individuals to behave inan inefficient manner due to poorly designed pro-grams and implementing rules). This in turn con-tributes to the budgetary outlays not being com-

mensurately translated into budgetary outcomes.This is evident in the extension of National Ru-

ral Employment Guarantee Scheme (NREGS)nation-wide without addressing faulty design andimplementation problems; and the farm loanwaiver of over Rs 700 billion which is degradingthe loan portfolios of the banks undermining fu-ture rational credit allocation in the country. Ab-sence of rational decision making concerning oilpricing and fertiliser subsidies also represent in-stances of wilful neglect, which is jeopardising

Indias future energy and food security.Another glaring example of the wilful neglect isthe Employees Provident Fund Organisation(EPFO), Indias national provident fund withnearly Rs 2000 billion in assets, which refuses toutilise modern technology and financial manage-ment practices, endangering the future economicsecurity of its 40 million members.

A significant contributory factor to the lowlevel of financial and economic literacy found inASSOCHAMs business barometer survey is a re-flection of poor leadership and misplaced priori-

ties of the education ministers, and education es-tablishment, at both the centre and in the states.

If India is to become a major knowledge-driven economy, with its share in world GDP ris-

ROUNDUP

17 No 15 | Jun 2008

Inadequate awareness of basic facts

is a symptom of a more endemic

dearth of financial and economic lit-

eracy among the wider sections of

the society: in the media, among in-

tellectuals and policy-makers.


19/24

ing from 2 per cent to 16 per cent (same as Indiasshare in world population), it must strengthen itseducation system. Besides improving the qualityand reach of primary, secondary, and vocationalschools, this will require universities to be in stepwith the needs of the twenty-first century global

and cosmopolitan India. The higher education sec-tor must be freed from the straitjacket of govern-mental monopoly and anti-competitive regula-tions.

The supply-side of educationinvolvingphysical infrastructure, establishment of first-ratepublic and university libraries, and increasing thenumber of faculty and researchersshould be thepriority.

The education establishment would be welladvised to keep these aspects in mind if they are

serious about greater access to quality higher edu-cation. Simply labelling an institution as a centraluniversity, or Indian Institute of Management(IIM) or Indian Institute of Technology (IIT) doesnot automatically bestow it with quality. Develop-

ing high quality educational institutions is amedium-term process requiring considerable re-sources and leadership. And as in other areas, ittakes a long time to build quality, but only fewmisguided measures to destroy it.

The failure of those in charge of the education

sector, particularly Arjun Singh, the current humanresource development minister, to focus on thesupply-side of the education sector has severelydamaged prospects for Indias future for whichthey should be judged extremely harshly. Those inpositions of power, clamouring for special treat-ment for a few from their communities in thename of social justice, have done precious little toempower the aam aadmi.

Indias electorate must demand competenceand accountability from those in position of public

trust.

Mukul G Asher is professor and Amarendu Nandy is adoctoral candidate at the National University of Singa-pore.

FOOD SECURITY

A food credit card scheme

How microfinance and the public distribution scheme can work togetherANKIT RAWAL

INDIAN GOVERNMENTS have experimentedwith a number of poverty alleviation programmes but their success has been limited. Of these, thePublic Distribution System (PDS)a quantityrationing-cum-food subsidy programmeis oneof the oldest and most far-reaching in terms ofcoverage. But in spite of its existence for decadesithas not been effective in poverty alleviation due togross inefficiencies in procurement and distribu-tion. Can civil society do something here? NGOs,especially those engaged in microfinance have totake the lead in this area support government ini-tiatives to make them more effective to the needsof the poor.

The PDS provides rationed amounts of basicfood items and other non-food products (kero-

sene, coal, standard cloth) to people at below-market prices through a network of fair priceshops. More than a quarter of India's population is below the poverty line and unable to afford themarket price. The PDS was initially conceived of

mainly as an instrument of price stabilisation aswell as an alternative to private trade. It waswidely believed that private traders indulge inspeculative activities, artificially inflating food

ROUNDUP


Commodity Quan-tity

Price atfair price

shop

(Rs/kg)

Price inthe openmarket

(Rs/kg)

Expendi-ture at

fair priceshop

(Rs)

Expendi-ture in

the openmarket

(Rs)

Rice 35 kg 4 17 140 595

Sugar 3 kg 15 20 45 60

Kerosene 4 l 10 25 40 100

Wheat flour 4 kg 12 18 48 72

Total 273 827

Monthly expenditure on essential commodities (authors estimates)


20/24

prices. But gradually the PDS became the mainsafety net to protect the poor. The "ration card",which defines and tracks eligibility, has becomethe most ubiquitous symbol of the PDS.

The PDS chain broadly consists of the FoodCorporation of India (FCI), the co-operative soci-

ety at each district, fair price shops & the finalbeneficiary. Though the PDS has been in operationfor four decades now, the access of the poor to it isstill very limited. There are several reasons for this,mainly involving leakage and pilferage in the dis-tribution chain, gross inefficiencies, diversion ofsupplies to open market, limited window of distribution of suppliesall at exorbitant cost to theexchequer. One rupee of income transfer costs Rs6.35 to the government.

Apart from the supply side inefficiencies, one

problem plaguing fair price shop owners is thatthey do not have sufficient funds to purchase suf-

ficient stocks from FCI warehouses to meet therequirements of the poor families in their locality.Thus they end up selling little or nothing to card-holders. The low sales volumes reduce profitabil-ity and drive shop owners to black marketing. An-other problem is the irregular cash flows of thepoor households, which means that they may nothave enough cash in hand to make purchases atthe time that the stock arrives at shop. The sellingwindow is open only for a period of 2-3 days on anaverage and if the cardholders do not buy duringthat period, the shopkeeper has the liberty to di-vert it to the open market.

This is where NGOs already engaged in micro-finance can plug the gap. They can provide fundsto the poor families to buy their allocated rationsfrom the fair price shops. As the adjoining tableshows the commodity wise break-up of procure-ment from a fair price shop and the open marketof a typical poor household of four members with

a monthly income range of Rs 1500 to Rs 3000.

Thus, due to lack of immediate cash at the timeof arrival of rations at the fair price shops, a poorhousehold has to pay an extra amount of Rs 554per month or Rs 6,648 per year to procure the sameamount from the private shops, frustrating theentire rationale of the PDS scheme. If microfinance

institutions can step in solve the cash flow prob-lem among the poor households, the situation canbe rectified. Not only will this alleviate the prob-lem of food security for these families but also in-crease their purchasing power.

Microfinance institutions and NGOs can initi-ate a pilot project in particular districts test thisconcept. Such a project would involve identifyingpoor households from their existing client list.They would then be required to identify the fairprice shops in the area from which they procure

their rations. Loans would be distributed to theselected list of families. One way of disbursingthese funds is by introducing a "credit card".Households could buy their rations from the fairprice shop on credit while the NGO pays theamount directly to the shop using this card. Thisloan will then be returned by these poor house-holdsin daily, weekly or monthly instal-mentsover the period of the month from theirincome. If the NGO charges interest to covertransaction costs, the households are likely to en-joy substantial savings.

To make the project successful such a scheme just needs to be integrated with already existingmicrofinance schemes. It needs active involvementfrom fair price shop owners and the community atlarge. It could well prove to be a model that can bescaled up over the entire state and integrated withother microfinance and micro-insurance schemesalready in place.

It will help in plugging the loopholes in thePDS and prevent leakage in the food distributionsystem. In these times of rising food prices, where

the poor are hit the hardest, this may well be asimple and effective way to shield them from infla-tion and improve their food security.

Ankit Rawal is a student at SP Jain Institute of Manage-ment and Research, Mumbai and has worked on a simi-lar project at Rashtriya Gramin Vikas Nidhi, an NGO, in

Assam.

ROUNDUP

19 No 15 | Jun 2008

Due to cash flow issues a poor

household could end up having to

purchase essential commodities

from the open market, frustrating

the entire rationale of the public

distribution scheme.

Would you like to read our past issues? Get them from our website

http://pragati.nationalinterest.in


21/24

REVIEW

History is in the writing

The changing fashions of recording history

SUNIL LAXMAN

HISTORY IN India is said to be a heady cocktail of fact,legend, myth and fable,with no tradition of chroni-cling and preserving history.The tenth century Arab po-lymath, Al Biruni, observedthat the Hindus did not

pay much attention to thehistorical order of things.

Most historians suggest that a historiographicaltradition only came to India with the arrival of theEuropeans and their dry, factual style of record-ing history. Upon close inspection, this assertioncrumbles under the volumes of carefully recordedhistoriographical literature the Delhi sultans andthe Mughals left behind. But two questions imme-diately raise themselves. Were Indian historiog-raphical traditions borrowed from well developedPersian and Turkish systems of recording history?And what about South India? Did the literary tra-ditions of South India, less influenced by Muslimrule, not have a historiographical tradition at all,but only had fables of fact and fiction?

Historians Velcheru Naray-ana Rao, David Shulmanand Sanjay Subrahmanyaminvestigate this assertion intheir book Textures of time:Writing history in South India

1600-1800. While research-ing this question, they also

try to bridge the somewhatartificial, modern divide

between Hindu and Muslim (as opposed toIndian) writing, by digging into a vast collectionof resources from the 16th to the 18th centuries.

They draw primarily on Telugu sources, as wellas existing Tamil, Sanskrit, Marathi, Kannada,Farsi and other sources of the time. Combiningstory-telling (of events from those times) with asystematic and rigorous analysis of those works,the authors steadily set about shattering the beliefthat there was no indigenous historiographicaltradition in South India.

Their primary source material are the records ofscribes in the courts of various native rulers, thesongs and fables of ballads and poets, folk epics, as

BOOKS


Review

Textures of time: Writing history inSouth India 1600-1800

by Velcheru N Rao, David Shulman, SanjaySubrahmanyamOther Press, 312 pages, 2003


22/24

well as prose narratives of the time. Early in thebook, the authors point out that the choice of stylefor writing history is not constant, but continu-ously changes over time, as the society changes itspreferred literary style. So, over time, any histori-cal work ends up becoming a literary work.

In the book the authors explore four significanthistorical incidents between the 16th and 18th cen-tury, in what is today Andhra Pradesh and North-ern Tamil Nadu. Through these, the authors ele-gantly point out that history is invariantly writtenin the dominant literary genre of a region at thatparticular time. For example, if puraana is thedominant literary form of the time, history would be written in puraana style or in kaavya whenkaavya is the dominant literary style.

Obviously, this means that in any style of writ-

ing, you will find both history and literature, andthe trick is in distinguishing the two. But how doyou distinguish fact from fiction? In order to dothis, it is essential to first identify distinct textual

markers, syntax and expression styles, metricaldevices and other indicators that distinguish theliterary aspects of the work from historical record-ings. It is these that the authors try to distinguishand point out through the book.

The authors say that the answer lies in adopt-ing a new way of reading the text. The texture ofhistorical writing is substantially different fromliterature, though the style used may be the same.Part of the reason that this difference has been lostis because, to modern historians, the context of thestory has often been lost. In any story, the relationbetween the teller of the tale and the audience is ofparamount importance. But if this connection isdisplaced, confusion is inevitable. Literary tradi-tions are easily broken, particularly when theaudience for that text is fragile. Modern histori-ans (even Indian ones) do not have a connectionwith the author of the historical work.

As examples in this book, the authors explorestories which most of us would consider obscure.

Yet, 300 years ago, these tales were well known (atleast in South India). The major incidents exploredin this book were recorded by numerous writers ofthe time (or even a little later) in what the authorscall the karanam style. Karanams were accountantsor court scribes of the time, and the authors de-

scribe their collective style of writing as the kar-anam style. Karanam scribes had been well estab-lished all across Telugu lands for centuries. Thereexists substantial volumes of their recordings,from before the time of the Vijayanagar empire,and their traditions continued to evolve and de-velop after that empire had fallen.

The authors start with the battle of Bobbili(which took place in 1757), of which numerousrecords and folk ballads were composed in Telugu.This was a minor battle between two small warrior

chiefs (both technically under the rule of the Ni-zam of Hyderabad). One of them decided to usurpthe lands of the other (the valiant ruler of Bob-bili, Pedda Bobbili Raju), and did so using the helpof a French general, Bussey, who was quite cluelessabout the local dynamics, traditions and laws.From a historians perspective, the beauty of thistale is that it had distinct chronicles written byvarious sidesthe admirers of the defeated Bob-bili Raju, or scribes of the rival treacherous king ofVijayanagaram (later Vizianagaram, not to be con-fused with the earlier Vijayanagar empire), as well

as French, their rivals the English, or the Nizamsmen.

In all these chronicles, the characters of thestory are described in different hues, and the val-our or cowardice or honour of each character isoften exaggerated or diminished depending onwho was writing the story. However, the majorfacts of the story, the key incidents, and the overallevents of the battle remain remarkably consistent.Whats more, the dry, historical recordings of theEnglish of French sources match exquisitely with

the poetic prose in the Telugu sources. Similarly,the authors explore another story, of the Desinguraja,

Pragati Issue15 Jun2008 Community Ed

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