Friday, February 27, 2015

Exciting voyage - This budget is being projected as a landmark one

By Swapan Dasgupta

Like most politicians of the time, Atal Bihari Vajpayee wasn't entirely comfortable with economic issues. A leader whose judgments were forged by instinct and observation, Vajpayee was always a little ill at ease during the seasonal discussions on the Union budget. Indulgent Bharatiya Janata Party workers - themselves equally impatient with the intricacies of economic decision-making - used to smirk over their leader's predictable responses to the budget during the time he was in opposition. Vajpayee's standard responses were that the budget was either "inflationary" or "anti-people". In the times he preferred a more lyrical response, Vajpayee's response was equally predictable: sarkar garib ke pet me lath mara(the government has kicked poor people in the belly).

Over the years, and particularly after Manmohan Singh's landmark budget of 1991, the terms of the debate on the budget have shifted. The earlier bouts of hoarding of cigarettes and other "essential" items have given way to a measure of predictability. Arbitrary fluctuations in excise duties - dependent sometimes on the whims of the finance minister - have yielded to expectations of larger policy announcements. Yes, the middle class still looks to a few sops such as more relief for home mortgages and enhanced tax-free premiums for medical insurance, but the scale of expectations has lessened considerably over the years.

What, however, hasn't kept pace with the changes is the rhetoric of the political class. While an increasing number of active and semi-retired politicians are these days called upon to write instant but informed op-eds assessing the budget, the great majority of the members of parliament react to the finance bill in exactly the same way as they did in the 1970s and 1980s. Along with the "anti-poor" and even "pro-corporate" labels attached to the exercise by seemingly indignant MPs, the garib ke pet me lath expression can even be heard.

Among informed corporate organizations and the commentariat, the packaging of expectations has changed somewhat. With the election of a BJP-led government and a prime minister unequivocally committed to rapid economic development, the terms 'tectonic shift' and 'bid idea Budget' have also made an appearance. A perfunctory perusal of the pre-budget churning in the popular media suggests a spectacular level of hype. On Saturday, the finance minister, Arun Jaitley, is expected by both friends and foes to leave the distinctive mark of the Narendra Modi government on the way India thinks on economic issues. If Jaitley's dreary presentation of the July 2014 budget was treated as a rushed job by a government barely two months in office, this year's exercise is being projected as a landmark budget. One report by a major player in the financial markets has even gone to the extent of proclaiming it as the most important budget speech since 1991.

At one level, Jaitley should be tickled by the flattery and the hopes reposed in his wise judgment. However, he should have reasons to be concerned about the plethora of unreal expectations. Whereas the middle class, somewhat satisfied by the falling rate of inflation and the dip in petroleum prices, now looks for greater incentives to spend more money on themselves and their families, the corporate bodies and investors want the government to kick-start the process of enhanced capital expenditure.

None of these expectations are per se unreal or unduly ideological. However, the mental approach to Jaitley's second budget was crystallized before last Tuesday's government announcement of its acceptance of the 14th Finance Commission report on Centre-state revenue sharing.

The significance of the new terms of revenue sharing can hardly be underestimated. As opposed to the 13th Finance Commission that earmarked 32 per cent of the proceeds from the divisible tax pool for the states, the Y.V. Reddy-chaired 14th Commission has suggested a staggering 10 per cent hike. According to a report in Business Standard: "This means in 2015-16 states will receive Rs 5.79 lakh crore of the Centre's expected gross tax receipts of Rs 15.67 lakh crore. The share of states will rise 51.55 per cent compared to the 2014-15 estimate of Rs 3.82 lakh crore."

At a time when the overlordship of the Planning Commission has been consigned to history, the implications of the new federal arrangement are awesome. For a start, this marks the formal end of the Nehruvian vision of a federal arrangement with a decisive tilt in favour of the Centre. From 2015, it would be more accurate to see in India a near-equal partnership between the Centre and the states. In the economic context, the Centre is now the first among equals.

By implication, this means that the overriding importance hitherto attached to the Union budget will have to be significantly modified. At a time when capital expenditure in the private sector has been sluggish, the pressure on the Union budget to trigger the much-needed investments in infrastructure upgradation will, of course, remain. But the expectations have to be tempered with the realization that nearly half the revenues of the Centre will now belong to the states. In real terms, the scope for initiatives from Delhi has shrunk. Whether this will now lead to a corresponding shrinkage in the size of the Central government remains to be seen. There is a compelling case for despatching a large number of bureaucrats on deputation from their states to Delhi back to their parent cadre.

According to the projections by the Finance Commission, the total grants to the states will nearly double from the next fiscal year. The most spectacular gainers will be Andhra Pradesh, Assam, Jammu and Kashmir, Himachal Pradesh, Maharashtra, Mizoram, Nagaland and West Bengal; the states of Gujarat, Rajasthan and Uttar Pradesh won't do too badly either. Coupled with enhanced royalty payments for mining that will mainly accrue to Odisha, Chhattisgarh and Jharkhand, we are likely to witness a significant shift in the economic centre of gravity.

First, state budgets will acquire an unprecedented degree of importance. Second, the term 'competitive federalism' is certain to acquire a real meaning as states compete with each other to be more competitive. Third, flushed with funds, the quality of governance will become a new urgency for the states. How the bonanza in resources is utilized will become the stuff of politics. This is more so because the determination of local priorities, the architecture of local programmes and their implementation has been left almost entirely to the states, without any diktat from Yojana Bhavan. Whether a state government spends resources on building infrastructure or doles and the upkeep of local clubs will be a matter for the state entirely. Along with additional resources, the state governments have been additionally empowered politically. Hopefully this will, in the long term, shift the focus from victimhood and identity to delivery. Finally, it is more than likely that the onus of creating and financing India's creaking welfare net will also devolve on the states. Apart from ending the one-size-fits-all culture that the Sonia Gandhi-led national advisory council imposed on India, it could contribute to greater transparency - although the chances of greater profligacy in the short term cannot be ruled out.

It is unlikely that the full impact of the shifts created by the new federal arrangement will be felt in this week's budget. It may be Jaitley's misfortune that his finance bill will be judged within old parameters at a time when many of the earlier assumptions have become totally invalid. However, that may be a small price to pay for the initiation of a new and exciting voyage that the country is about to embark on.

The Telegraph, February 27, 2015

Thursday, February 19, 2015

The bandwagon effect

By Swapan Dasgupta

In the 2004 general election, the Bharatiya Janata Party-led National Democratic Alliance started out as the clear favourite and ended up confronted with an unexpected loss. One of the comic features of that campaign were the queues of celebrities that lined up to join the BJP in anticipation of another term for the venerable Atal Behari Vajpayee. Almost every second day, the BJP central office would witness a press conference where a clutch of celebrities usually filmstars or retired sports stars would be flaunted before the cameras. It got to such a stage that the then BJP president M. Venkaiah Naidu held a special meeting in Mumbai to familiarise the new celebrity members with the rudiments of the BJP ideology and programme. I recall many senior ministers of the Vajpayee government being pestered with text messages or phone calls from the celebs telling them to keep their contributions such as they were in mind after the anticipated V-Day. 

Whether the bulk of these celebrities kept up their connections with the party after the results were announced and a Congress-led government was sworn in, is a matter of conjecture. I certainly didn’t hear of them in BJP circles for the next 10 years when another lot of celebrities jumped on to the Narendra Modi bandwagon. Of those that decided to pursue the achche din goal, at least two had signed up earlier in 2004. Maybe they were renewing their dormant membership!

The anticipated smell of success in politics inevitably has a bandwagon effect. The celluloid and sporting personalities that rush to get their 15 minutes of political fame are only the comic dimension of a larger phenomenon though, to be fair, a few do manage to make a successful second career as serious politicians. Even within the political class there are the small parties, representing sectional interests, which are mindful of the need to associate with a larger force to be on the winning side. For them coalition politics is inseparable from continuing political relevance. This is as true for the ideological and the non-ideological. In the United Front experiment that the rising Communist Party India (Marxist) undertook between 1967 and 1970 in West Bengal, the participating parties included the Workers Party of India, RCPI and even a Bolshevik Party!

The issue of disparate individuals and groups rushing to be identified with the BJP has, however, acquired a serious dimension after Narendra Modi assumed power in May 2014. The process acquired further momentum with the BJP’s successes in the Assembly polls in Maharashtra, Haryana, Jharkhand and Jammu. Although the Delhi results have been a setback, it is unlikely that the trend will be reversed. As the Congress drifts into the margins, the BJP will invariably fill much but not the whole vacuum as the emerging national player. 

To its credit, the BJP has not been slow to capitalise on the opportunities. Although it is principally an activist or karyakarta-based organisation, the party has recognised the importance of enlarging its social and geographical base if it is to maintain its majority in the Lok Sabha in the next election. The ambitious membership drive through missed calls may, of course, have its pitfalls and could lead to the party over-estimating the extent of political support, the larger thrust for political inclusiveness cannot be faulted. Although the Kiran Bedi experiment came a cropper, there is much to commend the BJP’s larger endeavour to rope in public-spirited individuals and give them priority over professional politicians. 

However, the transition from a karyakarta-based organisation to an everyone-is-welcome party does produce hiccups. For a start, there is understandable resentment of the old-timers at the importance showered on paratroopers. Secondly, there is concern that the political instincts — note that I am deliberately avoiding the term ideology of the party will get blunted and become indistinguishable from that of the Congress. This isn’t an unreal concern because it takes very little to transform a party of change into a party of the status quo. 

Some of these apprehensions are being manifest in the entry of a very large number of Congress leaders into the party. The decision to give former Congress minister Krishna Tirath a BJP ticket within 24 hours of her joining the BJP may have been explained by the dalit factor. But there is no doubt that it was widely resented by a chunk of the BJP’s traditional voters. The Congress to the BJP as symbolising undesirable continuity, thereby blunting Mr Modi’s pro-change credentials. 

The temptation to reduce politics to machinations invariably leads to adverse consequences. In Bihar, there was an inclination on the part of a few to fish in the troubled waters of the Janata Dal (United) and prop up the eccentric Jitan Ram Manjhi. This was understandable but the important political call lay in knowing when to stop. Had the BJP thrown in its lot with Mr Manjhi, it would have given Nitish Kumar and Lalu Prasad Yadav a sharp talking point. The electorate doesn’t generally like palace coups witness the ignominy attached to N. Bhaskara Rao in Andhra Pradesh in the late-1980s and it is heartening that the Bihar BJP knew when to step back. 

Attempting short-cuts can rarely be rewarding. In West Bengal, the BJP would be foolish to blunt the sharp edge of its anti-Mamata Banerjee campaign by banking excessively on internal dissensions in the Trinamul Congress. Mukul Roy may have organisational skills, as Pyari Mohan Mohapatra had in the Biju Janata Dal dispensation in Orissa, but the mass appeal is that of Ms Banerjee. 

Any close association with discredited Trinamul Congress dissidents will inevitably cast the BJP as a manipulative party rather than a force committed to something fresh. In West Bengal at least the BJP needs to maintain a distinctive thrust. It has to pose as a better option than both the Trinamul Congress and the CPI(M). 

Political growth generates its own unique set of challenges. The BJP is only just beginning to confront some of them. There is no template response to all situations but, as a rule, it is best to be upfront and resist both conspiracies and glamourised shortcuts to instant success. Parading stars, starlets and defectors pay little or no dividends. They are the icing on the cake, not its body.

Deccan Chronicle/ Asian Age, February 19, 2015

Saturday, February 14, 2015

Beyond the new normal - The evolution of China will continue to baffle outsiders

By Swapan Dasgupta

There is a lovely story, perhaps apocryphal, that was narrated to me during a brief visit to China last week. It seems that a competition was organized for school students around the time President Xi Jinping assumed charge for the most telling and pithy description of the "Chinese dream". The winner turned to be the wise guy who summed up this national philosophy in just two words: "Black Audi."

To the uninitiated (like me), the Black Audi in China was the ultimate symbol of power and success. It was the car of the powerful apparatchiks, the successful entrepreneurs and, I suspect, even the spoilt brats who have collectively been dubbed the princelings. But all that was in the past. In recent months, according to a diplomat who guided me through the haze of China, many tens of thousands of Black Audis have been recalled by the government as part of the austerity drive following the economic slowdown and are being auctioned in lots. Many tens of thousands of mid-level apparatchiks who basked in the glory of the boom years are now compelled to take public transport to work, with the Black Audis now reserved for the truly important.

To the prophets of doom, the journey of the Black Audi from the foyer of the Diaoyutai Hotel - the rough Beijing equivalent of New Delhi's Hyderabad House - to the auction house may be a tell-tale illustration of the inherent unsustainability of China's mad rush to the top of the economic pile. However, this assessment may be an overstatement. The "new normal", as the economic downturn is officially described, may signal the end of China's irrational exuberance, but to an outsider, this appears as a seasonal self-correction, a phenomenon that was recurrent (albeit in less wholesome ways) even in the days of the Great Helmsman.

In the past 35 years, since the Chinese Communist Party turned its back on the austere revolutionary legacy of its founder, China's growth has been so rapid and far-reaching that a modest exercise in belt-tightening is likely to cause few tremors and certainly not produce any upheavals. Unlike the democracies where politicians generally try to brush not-so-good news under the carpet, at least till after the next electoral cycle, China's political system allows the leadership the luxury to take pre-emptive moves to secure a mental readjustment of expectations. Deftly handled, the "new normal" can, in fact, lead China into exciting, less-travelled directions.

Throughout the West and, indeed, in societies where global market economics sets the tone, nationalism is often perceived as a relic that is best discarded. In China, national pride is celebrated with gusto. The term, "Chinese characteristics", often added as a suffix to various worthwhile goals, is code for a celebration of nationalism that occasionally has a habit of acquiring xenophobic overtones. This is particularly so when viewing the national ambitions of Japan - a country that has not been forgiven for its pre-1945 militarism. In today's China, there is unconcealed pride at the enormous respect the country commands in the world for its economic success. The 2012 Olympics was definitely a landmark in this explosion of national pride and today there is a distinct feeling among the well-off middle classes that, for China, the sky is the limit. "If we don't have it, we can always buy it," a Chinese academic told me, only half in jest. It is entirely possible that some of this gung-ho mood may have to be tempered with the "new normal", but there is also a possibility it could be steered in other, positive directions.

Traditionally, China has been very inward looking. In part, this is a consequence of the "Middle Kingdom" mentality that perceived China as the centre of the world, surrounded by barbarians and tributary states. The revolution of 1949, ostensibly based on the principles of socialist internationalism, was supposed to have launched a new chapter. However, until Deng Xiaoping turned China upside down after vanquishing the Gang of Four, the traditional distaste for the outsider was, in fact, reinforced by the proverbial bamboo curtain. Even after 35 years of globalization, China lives in a world that is outwardly replete with international brands - it's difficult to find a shop selling traditional Chinese crafts in Shaghai's main Nanjing Road - but is inwardly self-sufficient. No doubt economics has forced a change: Chinese companies need to engage with overseas entities, Chinese students are visible in most universities of the West, and tens of thousands of Chinese travel overseas as tourists. However, the knowledge capacity building that most successful economic powers have undertaken has so far been quite uneven. With domestic consumption now reaching a possible plateau, it is more than likely that China will now have to aggressively seek new opportunities and markets overseas.

It is still an open question whether the restrictions on information flows into China and the widespread hesitation in addressing seemingly contentious issues can persist in this environment is still an open question. Certainly, the authorities in China seem particularly concerned over the possible dissemination of what it terms "malicious content" - the Cyberspace Administration of China has identified these as "promotion of cults and the dissemination of pornography or extremism". However, just as the need for a healthy moral order has been totally unsuccessful in curbing the rampant prostitution racket that stares every tourist in the face in Shanghai and Beijing - a colleague even came across a Bengali pimp - it will need greater resilience if the campaign to "reorder the online expression system and strengthen Chinese people's sense of responsibility in cyberspace" becomes an additional "new normal". For an otherwise resilient society, China appears to have demonstrated an exaggerated sense of vulnerability in dealing with unstructured rebelliousness.

In other areas, for example, China has demonstrated its willingness to accord its younger citizens in urban areas a great deal of social licence. Most of the restaurants and bars that dot the perimeter of the lakes in Beijing have live bands featuring young Chinese, many from the universities. And the Chinese clientele in the glitzy shopping malls of Shanghai are willing spenders on clothes made by the High Street brands of the West. Many of these young people may be slightly impatient with the fuddy-duddy ways of the apparatchiks but neither their fashion consciousness nor their permissive lifestyles are potentially "counter-revolutionary". On the contrary, their flamboyance - such a contrast from the shoddy drabness of Mao's China - has made China far more globally integrated, but not completely deracinated.

To say that China is at the crossroads may be a dreary cliché. Yet, there is a sense that China will sooner or later have to exercise some hard options if the type of simmering unrest that has surfaced in Hong Kong is not to be replicated. To the Western observer, all this points to the triumph of democracy going hand in hand with market economics. But the awkward truth is that China has not known democracy in the way we understand it. The Confucian ethic, as some of my Chinese guides were at pains to point out, still prevails in terms of hierarchical obedience. That isn't going to end soon, despite the unending search for personal fulfilment - witness the growing popularity of spiritualism and, particularly, yoga. The direction in which China's society evolves, it is my guess, is likely to baffle outsiders. There are no pre-determined paths of social and political evolution, and it is unreasonable to believe that China will walk down a well-travelled road.

The Telegraph, February 13, 2015

Tuesday, February 10, 2015

Is India ready to join China's coming-out party?

By Swapan Dasgupta

Official publications have an uncanny tendency to be both weighty and dreary. “The Shanghai: Our Stories 1978-2008” that the Shanghai Municipality presented to a visiting Indian delegation last week was neither. Through a series of archival and contemporary photographs and individual stories of ordinary people, it captured the magnitude of the change that has engulfed the city. In 1978, Shanghai was not very dissimilar to Kolkata — overwhelmed by overcrowding, waterlogging, traffic chaos and endless waiting at railway stations; today’s Shanghai is marked by world-class roads, skyscrapers, bullet trains, an elaborate metro network, a vibrant night life and lots of greenery. China has every reason to be immensely proud of its achievement. In less than four decades, it has capsuled more growth than experienced in five centuries. Such tectonic shifts in so small a time are bound to produce the odd hiccup. The country may often appear an inscrutable monolith to foreigners but it is not. A ride in the superfast Beijing-Shanghai train is a delightful experience; but a copassenger dubbed the Delhi-Beijing flight on the state-owned China Air the “coolie flight”. In Beijing, the burly men offering to take the tourist to a “girlie bar” go away when rebuffed; in Shanghai they are not only omnipresent all along the Nanjing Road but also painfully persistent and menacing. A prominent Chinese think-tanker told me that even the stiff, follow-theline approach of the Beijing press is in sharp contrast to the push-the-envelope approach of the Shanghai media.

These examples may well be trivial and but they underline the importance of the diversity that co-exists with the one-party, one-language uniformity that often shapes perceptions of China. The average Chinese person in a position of some importance is disinclined to wash the country’s dirty linen before an outsider. At an interaction in Shanghai International Studies University, a new media pioneer was distinctly embarrassed when asked about the quantum of political freedom —“It’s too sensitive a subject,” he replied. But then China-watching since 1949 has essentially been an exercise in deciphering codes, with Sinophiles jostling with Sinophobes.

Yet, the odd note of scepticism does not take away from the fact that today’s China, including a young generation that seeks new (but not always political) areas of self-fulfilment, is genuinely proud of the immense respect that China commands in the world today. The successful conduct of the 2008 Beijing Olympics was a coming-out party. The question naturally arises: will this bout of national selfconfidence be transformed into a variant of the old Middle Kingdom mentality where arrogance and insularity kept pace with each other?

No categorical answer is ever possible but certain trends are instructive. First, the post-1978 reforms propelled the Chinese authorities to look outwards and create a critical mass of functionaries capable of dealing with the world, and particularly the West, with a combination of both domain expertise and social skills. Initially this meant despatching large numbers of Chinese students to universities overseas. Today, this is combined with the establishment of specialist institutions devoted to nurturing expertise on different parts of the world, including India. Like the 19th century Victorians who used knowledge as an arm of economic expansion, China is developing an indigenous capacity to comprehend the world better but from a Chinese perspective. Secondly, in the first three decades, China focussed on becoming a hub for the world’s manufacturers. This was combined with the overhaul of domestic infrastructure, at a pace democratic countries will find impossible to match. However, in today’s “new normal” of more modest growth, there is a thrust towards finding avenues of overseas investment and, in the process, creating new markets for China’s expertise. For Beijing, the new energy generated in Delhi after May 2014 is fortuitous and suggests opportunities that must be grabbed enthusiastically.

For India too, China’s economic predicament provides new openings. It can either welcome China unhesitatingly without any ifs and buts or temper its welcome with a corresponding insistence that the loose ends of history also be tied up. Like China, India too has multiple options it can exercise. China has an evolved strategic culture. Prime Minister Modi’s visit to China later this year may be a good occasion to determine whether or not India has finally developed one.

Sunday Times of India, February 8, 2015

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