More stories

  • in

    It’s Time to Introduce a Universal Basic Income for India’s Farmers

    In September, India passed three bills that immediately led to protests by farmers demanding to repeal the legislation. The new laws seek to remove the government’s minimum support price for produce that shielded India’s farmers from free-market forces for decades. In allowing the farmers to set prices and sell directly to businesses, the reforms are …
    Continue Reading “It’s Time to Introduce a Universal Basic Income for India’s Farmers”
    The post It’s Time to Introduce a Universal Basic Income for India’s Farmers appeared first on Fair Observer. More

  • in

    Agriculture Is India’s Ray of Hope in Time of Crisis

    As India completes 73 years of independence, agriculture has emerged as a mainstay of the economy. Despite the COVID-19 crisis, Indian agriculture is poised to grow by an estimated 3% in 2020-21. Shaktikanta Das, the governor of the Reserve Bank of India (RBI), has acknowledged that agriculture remains a “beacon of hope” at a time the economy is shrinking.

    The government has announced a new agricultural policy that has drawn both supporters and detractors. Farmer protests have broken out in parts of the country. About 50,000 have marched to New Delhi from the agrarian state of Punjab, objecting to the loosening of price, storage and sales regulations that have traditionally shielded India’s farmers from the free market forces.

    Land Reform Can Transform India’s Economy

    READ MORE in this 360˚ Series

    As of August 25, the International Monetary Fund projected India’s real GDP growth to be 4.5% in 2020. This shrinking of the economy in a country with a growing population could lead to a major crisis. Already, jobs are scarce, industrial production has declined, services have suffered and demand has plummeted. Even after decades of independence, agriculture remains “the largest source of livelihoods in India.” As India gears up to celebrate Mahatma Gandhi’s 151st birthday, there is no better time than now to achieve the Gandhian vision of rural self-reliance.

    Blessing in Disguise

    COVID-19 has made rural areas more important than ever. On March 25, Indian Prime Minister Narendra Modi announced a nationwide lockdown. It took the country by surprise. Millions of urban migrant workers were left with little choice but to walk home to their villages. Carrying their meager household possessions and with their small children in tow, many walked hundreds of kilometers, suffering thirst, hunger and pain. Some died en route.

    Embed from Getty Images

    India’s Economic Survey 2016-17 estimated the “annual inter-state migration [to be] about 5-6.5 million between 2001 and 2011.” In 2020, this migration has been reversed. People who fled rural areas for urban jobs have returned home. Chinmay Tumbe, a professor of economics at the Indian Institute of Management Ahmedabad and an expert on migration, estimates that 30 million migrants might have returned to their villages since the lockdown began. The number could be as high as 70-80 million if reverse intrastate migration is accounted for.

    The reverse migration from urban to rural areas might be a blessing in disguise. Over the last few decades, urban migration has led to overcrowding of cities, the proliferation of slums and much misery for poor migrants. In cities, they have lacked community, cultural moorings and social safety nets. The massive migration to India’s cities was a result of failed economic policies that focused on megacities while neglecting villages. Several studies have found that at least 60% to 70% of the migrant workers who returned to their native places are unlikely to return back to the cities, at least not in the near future. The millions of migrant workers, whom I refer to as agricultural refugees, flocked to cities because the government’s economic policies kept them impoverished.

    A recent study by the Organisation for Economic Co-operation and Development in collaboration with ICRIER, a New Delhi-based think tank, concluded that Indian farmers suffered a cumulative loss of Rs. 45 lakh crore (over $600 billion) between 2000 and 2016-17 because of such policies. Subsequently, the NITI Aayog, a policy think tank of the government of India, admitted that, between 2011-12 and 2015-16, the growth in real farm incomes was less than 0.5% every year. It was 0.44% to be exact.

    Since then, the growth in real farm incomes has been near zero. With farm incomes growing painfully slowly and then stagnating, what else could be expected from the rural workforce but migration to cities where menial jobs as daily wage workers give many the only shot at survival?

    Despite the Hardships

    Despite these hardships, Indian farmers have toiled hard to produce a bumper harvest year after year. This has led to overflowing food stocks. Reports show that this abundance of food grains has come in handy. The government has been able to provide subsidized rations to over 720 million people during the four months of the post-COVID-19 lockdown. In addition, the government has been able to provide free rations to the needy.

    A buoyant agricultural output has hidden a severe agrarian crisis. Farmers get little money for their produce. With less money available in their hands, rural demand has dipped. This had led to a slowdown in the Indian economy even prior to the lockdown. In a country where the agricultural workforce accounts for nearly 50% of the population, the surest way to bolster the economy is to create more rural demand. This involves providing farmers with decent incomes.   

    The lockdown has increased downward pressure on farm incomes. It coincided with the rabi (winter crop) harvest season and resulted in a crash in demand for winter produce. Farmers suffered huge losses in the case of perishables such as vegetables, fruits, flowers, poultry, dairy and fish. Not all news is grim though. On May 15, the United States Department of Agriculture estimated that India is on course to produce “a record 295.7 million metric tons, with estimated record rice, wheat and corn production.”

    For the next kharif (monsoon crop) season, the sowing area coverage of summer crops has increased by 13.92% as compared to last year. With rains expected to be normal, and with a much higher area under cultivation, the kharif harvest will be bountiful just like the rabi one. It seems that in these times of crisis, agriculture alone provides a ray of hope in India.

    Aim for an Economic New Normal

    The coronavirus pandemic has come as a timely reminder of the limitations of dominant economic thinking. Its inherent bias and blind spots stand exposed. For the last two centuries and more, economics has sacrificed agriculture on the altar of industry. The dominant assumption is that industry drives productivity and growth.

    India has never quite managed to industrialize like, for example, the US or China. Still, it has kept farm incomes low and neglected public investment in agriculture for many decades. As per the RBI, this investment hovered around 0.4% of the GDP between 2011-12 and 2017-18. It is little surprise that agriculture has floundered in India.

    The time has come to change outdated economic thinking. Agriculture matters to India because it employs a majority of the country’s population. It provides food security to 1.3 billion people whose ancestors suffered repeated famines until a few decades ago. COVID-19 gives the country the opportunity to return not to normal, but to a new normal.

    The return of migrant labor to villages gives India the opportunity to reinvigorate its rural economy. The country must tap the socioeconomic wealth of rural enterprise, its diversity, and the traditional knowledge base. Prime Minister Narendra Modi’s vision of Atmanirbhar Bharat — a self-reliant India — can only be achieved through a focus on agriculture. A sharp focus, sensible policies and public investment can unleash growth not only in the sector but also in the country.

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

  • in

    The Road Leading to the India-China Standoff

    The reason for the China-India standoff in the Galwan Valley may not be the oft-mentioned construction of the Darbuk-Shyok-Daulat Beg Oldie (DSDBO) road. The new thoroughfare improved Indian logistics in the Ladakh area, meaning that supplies and troops can be deployed with far greater speed. While the DSDBO might have irked China, Beijing has deeper …
    Continue Reading “The Road Leading to the India-China Standoff”
    The post The Road Leading to the India-China Standoff appeared first on Fair Observer. More

  • in

    Why Is Foreign Investment Flooding Into India?

    For years, India suffered from what came to be called the “Hindu rate of growth” — a result of Jawaharlal Nehru’s policy choices. India’s first prime minister had a fascination for the Soviet Union and championed socialism. In India, this socialist economic model was incongruously implemented by a colonial bureaucracy with a penchant for red tape.

    Consequently, the license, quota and permit raj, a system in which bureaucrats commanded and controlled the Indian economy through byzantine regulations, throttled growth for decades. Once the Soviet model started collapsing in 1989, the Indian economy came under increasing pressure. A balance-of-payments crisis led to the 1991 economic reforms. Thereafter, India consistently grew at a rate of more than 5% per year until 2019.

    What Ails Corporate Governance in India?

    READ MORE

    During the COVID-19 pandemic, that growth has stalled. In the first quarter of India’s financial year that begins on April 1, the economy shrunk by a record 24%. Forecasts estimate that it will shrink further, although the rate of the contraction will decelerate considerably over the next two quarters. This contraction has left little elbow room for a government fixated on redistributive policies and fiscal restraint. This fixation is a hangover from the past.

    Historically, the Bharatiya Janata Party (BJP) has been more market-friendly than other political parties. In fact, the BJP broke new ground in the early 2000s by targeting and achieving a growth rate in excess of 8% when Atal Bihari Vajpayee was prime minister. Despite such high growth, the BJP lost the 2004 election. 

    Foreign Investment Hits Record Figures

    The BJP has not forgotten Vajpayee’s defeat. In particular, Prime Minister Narendra Modi has drawn a key lesson and focused on providing services to the masses. As a result, the government has focused on redistribution and taxation. It has put growth on a backburner. In 2018, the Modi government embarked upon what these authors termed Sanatan socialism, a policy that courts the poor with financial transfers and private provision of services. This strategy was vindicated by a resounding electoral victory in 2019.

    Today, COVID-19 is posing fresh challenges to the economy and to the Sanatan socialism policy. The growth slowdown in India is greater than in other emerging economies. The opposition has upped the ante and is blaming the government. Some business leaders are questioning the government’s lockdown strategy. This puts the BJP on the defensive regarding the economy.

    Yet even during such a growth shock, foreign direct investment (FDI) and foreign portfolio investment (FPI) have been pouring into India. Surprisingly, the FDI has hit record figures. In the first five months of this financial year, $35.7 billion has come into India. The FPI figures are also at an all-time high. In November, foreign investors plowed $6 billion into Indian capital markets, beating figures for Taiwan and South Korea. What is going on?

    .custom-post-from {float:right; margin: 0 10px 10px; max-width: 50%; width: 100%; text-align: center; background: #000000; color: #ffffff; padding: 15px 0 30px; }
    .custom-post-from img { max-width: 85% !important; margin: 15px auto; filter: brightness(0) invert(1); }
    .custom-post-from .cpf-h4 { font-size: 18px; margin-bottom: 15px; }
    .custom-post-from .cpf-h5 { font-size: 14px; letter-spacing: 1px; line-height: 22px; margin-bottom: 15px; }
    .custom-post-from input[type=”email”] { font-size: 14px; color: #000 !important; width: 240px; margin: auto; height: 30px; box-shadow:none; border: none; padding: 0 10px; background-image: url(“https://www.fairobserver.com/wp-content/plugins/moosend_form/cpf-pen-icon.svg”); background-repeat: no-repeat; background-position: center right 14px; background-size:14px;}
    .custom-post-from input[type=”submit”] { font-weight: normal; margin: 15px auto; height: 30px; box-shadow: none; border: none; padding: 0 10px 0 35px; background-color: #1878f3; color: #ffffff; border-radius: 4px; display: inline-block; background-image: url(“https://www.fairobserver.com/wp-content/plugins/moosend_form/cpf-email-icon.svg”); background-repeat: no-repeat; background-position: 14px center; background-size: 14px; }

    .custom-post-from .cpf-checkbox { width: 90%; margin: auto; position: relative; display: flex; flex-wrap: wrap;}
    .custom-post-from .cpf-checkbox label { text-align: left; display: block; padding-left: 32px; margin-bottom: 0; cursor: pointer; font-size: 11px; line-height: 18px;
    -webkit-user-select: none;
    -moz-user-select: none;
    -ms-user-select: none;
    user-select: none;
    order: 1;
    color: #ffffff;
    font-weight: normal;}
    .custom-post-from .cpf-checkbox label a { color: #ffffff; text-decoration: underline; }
    .custom-post-from .cpf-checkbox input { position: absolute; opacity: 0; cursor: pointer; height: 100%; width: 24%; left: 0;
    right: 0; margin: 0; z-index: 3; order: 2;}
    .custom-post-from .cpf-checkbox input ~ label:before { content: “f0c8”; font-family: Font Awesome 5 Free; color: #eee; font-size: 24px; position: absolute; left: 0; top: 0; line-height: 28px; color: #ffffff; width: 20px; height: 20px; margin-top: 5px; z-index: 2; }
    .custom-post-from .cpf-checkbox input:checked ~ label:before { content: “f14a”; font-weight: 600; color: #2196F3; }
    .custom-post-from .cpf-checkbox input:checked ~ label:after { content: “”; }
    .custom-post-from .cpf-checkbox input ~ label:after { position: absolute; left: 2px; width: 18px; height: 18px; margin-top: 10px; background: #ffffff; top: 10px; margin: auto; z-index: 1; }
    .custom-post-from .error{ display: block; color: #ff6461; order: 3 !important;}

    Three key facts explain this inflow. First, corporations from the US and the Gulf have bought big stakes in Reliance Industries, India’s biggest conglomerate. They are also buying shares in Indian companies. In effect, they are betting on future growth.

    Second, the Performance Linked Incentive (PLI) scheme has gained some traction. The purpose of the PLI is to boost electronic manufacturing in the country. So far, India has been too dependent on China. Current tensions along the border have led India to change tack and give financial incentives to companies who manufacture in-house. Players like Samsung, Pegatron, Foxconn, Wistron and AT&S have responded well to the PLI.

    Third, global corporations might be diversifying their supply chains to mitigate the risk of manufacturing exclusively or mainly in China. This strategy to tap alternative supply chains to China is widely known as China Plus One, and India might be benefiting from it.

    Modi has doubled down on an advantageous situation. Sovereign wealth funds, pension funds and organizations with over $6 trillion of assets under management attended a summit organized by the prime minister in the first week of November. In addition to Modi, India’s business leaders such as Mukesh Ambani of Reliance Industries Limited, Ratan Tata of the Tata Group and Deepak Parekh of Housing Development Finance Corporation pitched to these investors. More foreign investment might follow soon.

    What Lies Ahead?

    If investment is flowing in, what are its implications for the Indian economy? First, India will experience a growth spurt within three to four quarters from now. In recent years, private investment has been weak because of a banking crisis. Indian banks lent large sums to big borrowers who had no intention or ability to pay back their debts. This meant that they had no money or appetite to lend to bona fide businesses. A credit crunch ensued, investment suffered and so did growth. Increased FDI will reverse this trend and fuel growth by restoring investment.

    Second, India will experience job growth thanks to higher FDI. The entrance of new players and the revitalization of older ones will increase employment. The government has already instituted major labor market reforms to encourage manufacturing and other labor-intensive activities. 

    Third, increased employment could boost domestic demand, raising growth rates. These might materialize by the 2022-23 financial year, just in time for the next general election. The FDI flowing in right now might be boosting the BJP’s 2024 reelection chances.

    Finally, the record FDI is giving the Modi administration a leeway to achieve geopolitical goals. With cash coming in from friendly economies, the government is limiting economic engagement with nations hostile to India, especially in core sectors such as power, telecommunications and roads. Aimed largely at Chinese and probably Turkish entities, the move could benefit European, American and East Asian companies from Japan, South Korea and Taiwan.

    India’s new economic direction reflects the seismic shift in the global economy. The post-1991 era is over. As during the Cold War, countries are now mixing politics and business again.

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

  • in

    What Ails Corporate Governance in India?

    Most businesses perish not because of strong competition or adverse macroeconomic conditions but because of cracks within. One such failing is weak corporate governance. For publicly listed companies, this often translates to controlling shareholders or “promoters” pursuing policies and practices in their own interests at the expense of minority shareholders. It turns out that companies with such promoters are at greater risk of crises and near-death moments in bad economic cycles. Those companies with better governance, where promoters act responsibly in the interests of shareholders, tend to do better during adversity. In fact, savvy investors now treat good corporate governance as an intangible asset.

    This can be best seen in India’s banking sector. In general, private sector banks have practiced better governance than state-owned ones. Consequently, their financial and operating metrics also tell a story of profitable growth with less asset quality issues than their public sector peers. No wonder that private sector banks trade at a higher valuation than public sector ones.

    360˚ Context: The State of the Indian Republic

    READ MORE

    Higher valuation puts these banks into a virtuous growth cycle. They are able to raise capital cheaply with less dilution. This reinforces their already high return ratios, which in turn continue to support a higher valuation. This self-perpetuating cycle has led to long-term compounding of shareholder returns. State-owned peers have fared much worse.

    Despite a large number of state-owned banks, the majority of credit growth in India is led by private sector banks. In fact, state-owned banks are struggling and the government is forced to merge them to ensure their survival. The success of well-run private banks demonstrates how good governance can lower a company’s cost of capital. That is not all. The resulting higher valuation also gives such companies immense pricing power in corporate transactions and talent management, widening their economic moat. 

    Multiple Issues

    India boasts of the oldest stock exchange in Asia, which is also the region’s largest. However, corporate governance in India still lags behind many other places like Singapore or Taiwan. India must understand that good corporate governance is the foundation of a lasting business. It builds investor confidence and has other benefits. India is short of capital and needs to earn investors’ trust. Without an infusion of capital, the Indian economy will fail to thrive. 

    Embed from Getty Images

    There are multiple issues that plague corporate governance in India. First is the lack of accountability among controlling shareholders. For example, promoters get away with appointing their friends, ex-employees and business-school classmates as independent directors with no one raising an eyebrow. Often, statutory auditors are given only one-year extensions to pressurize them to “comply” with management demands. Compliant auditors tend to persist for too long, developing far-too-cozy relationships with the very people they are supposed to keep an eye on. With no strong checks and balances, promoters are in effect incentivized to take advantage of minority shareholders. 

    Second is the slow and selective enforcement by the Securities and Exchange Board of India (SEBI), the country’s market regulator. Cases against the management’s missteps take years to resolve. SEBI generally hands out warnings or mild punishments. This could be because SEBI does not have enough resources to deal with a large number of cases, or it could be a lack of authority or competence. In certain cases, promoters are extremely powerful and politically connected. Given that regulators are political appointees, it is far from easy for them to ignore pressure from politicians, remain impartial, punish the powerful and deliver justice.

    Third is the fact that markets do not punish poorly managed companies for their misdeeds. India needs deeper markets with broader participation for true price discovery. Stock markets must be treated as marketplaces, not as forums for votes of confidence on the government’s economic policies. Because governments place too much importance on market performance, they have an incentive to keep them inflated. Indian corporate bond markets are even worse than stock markets in terms of participation. They are really accessible to only a handful of companies. 

    Fourth is the lack of transparency and weak disclosure requirements. This further perpetuates weak governance. The most detailed yearly disclosures by Indian companies are annual reports, which are often colorful marketing decks instead of detailed, factful and insightful documents, like the 10-Ks in the US. The quarterly earnings report for many companies is just a one-pager. This discloses summary items only without any breakdown of details.

    Earlier, manufacturing companies were mandated to disclose operational details pertaining to capacity, production and inventory. A few years ago, this disclosure requirement was done away with. Now, the only time companies make adequate disclosures only during their initial public offerings, which is a mere one-time event instead of an annual exercise.

    Bringing Sense to the Madness

    The only way to bring some sense to the madness in India’s public markets is to give more independence, power and resources to SEBI. At the same time, India must seriously penalize auditors and boards of companies for overlooking management follies. In addition, the authorities must incentivize and protect whistleblowers in a similar manner to developed economies.

    Some argue that complying with higher disclosure requirements might be too costly for smaller companies. That is not true. Furthermore, even the top 100 Indian companies default frequently on mandatory disclosures. Instead of reducing requirements for disclosures, India should lower costs of disclosures and compliance by using more technology.

    Another way to improve the health of India’s public markets is to increase market participation and trading volumes. Then good corporate governance would be rewarded while poor corporate governance would be penalized. Making short-selling a smoother affair might make the market deeper and more liquid. To increase depth in corporate bond markets, India must make lasting banking reforms. This involves privatization and granting more powers to the banking regulator.

    An unintended consequence of banking reform might be the improvement of India’s infrastructure. Currently, many state-owned enterprises in infrastructure sectors such as power are mismanaged because their bosses are able to buy time by restructuring their bank loans. Banking reforms will make that impossible and will transform this sector too.

    A combination of disclosure, regulation and enforcement can improve corporate governance. Reforms can also reduce conflicts of interests as well as create the right incentives and disincentives for Indian companies. These would inevitably lead to some short-term backlash, but the substantial long-term benefits are too significant to be ignored.

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

  • in

    12 Years After Mumbai, the Fight Against Terrorism Continues

    The 12th anniversary of the November 26, 2008, Pakistan-sponsored terror attacks in Mumbai is an apt occasion to evaluate not only India’s struggle against terrorism but also how other major countries have dealt with this menace.

    Nine gunmen traveled from Karachi to Mumbai by boat to unleash mayhem over the course of three days. They attacked multiple locations, killing 164 people and wounding more than 300. Iconic locations such as the Taj Mahal Palace Hotel next to the Gateway of India, the Chhatrapati Shivaji Terminus (earlier known as Victoria Terminus) and the Leopold Cafe were hit. The attacks paralyzed the city, triggered mass panic and caused the collapse of India’s booming stock market.

    Cat-and-Mouse Game

    India absorbed the monstrous nature of the Mumbai attacks and resumed direct political dialogue with Pakistan in July 2009. India even agreed to make a major political concession: It delinked the dialogue from the issue of terrorism in the hope that the two countries could have a free, frank and uninterrupted conversation. Pakistan treated this as a political victory at India’s expense. Instead of initiating a process of normalizing ties with India, Pakistan continued with its policy of supporting jihadi groups dedicated to launching terror attacks in neighboring countries.

    India’s policy was based on the assumption that Pakistan would realize the internal cost of nurturing jihadi groups on its soil. Like Frankenstein, terrorists have turned on Pakistan itself. In 2013, an explosion killed at least 45 people in a Shia district of Karachi, and the 2014 Peshawar school massacre led to 150 deaths, of which at least 134 were students. These are just two of the many such incidents that have been taking place in Pakistan over the past decade.

    Embed from Getty Images

    Yet Pakistani support for terror as an instrument of state policy has continued. India has thus reverted to its position of putting terrorism at the center of any India-Pakistan dialogue. Pakistan refuses to accept India’s position. Instead, it wants dialogue on Kashmir and uses terror as a tactic to wage war against India for this territory.

    Pakistan-sponsored attacks against India have continued unabated. Most recently, on November 20, four suspected terrorists belonging to Jaish-e-Mohammad, a jihadist group headquartered in Pakistan, waged a three-hour-long gun battle with the police on the Jammu-Srinagar national highway. They had entered India to disrupt local elections in Kashmir. Reportedly, they were planning a spectacular attack to commemorate the 2008 Mumbai attacks.

    India-Pakistan relations continue to be in a stalemate on the issue of terrorism. In a cat-and-mouse game, Pakistan promotes terrorist attacks while India prevents them. Since 2019, one thing has changed. After the 2019 Pulwama attack that killed 40 paramilitary personnel, India conducted airstrikes on Pakistani territory. For the first time since the 1971 war, India crossed the line of control, the de facto India-Pakistan border in Jammu and Kashmir. The airstrikes demonstrated that India is no longer deterred by Pakistan’s nuclear capability. If Pakistan instigates a major terrorist attack on Indian soil, New Delhi has shown to be willing to take limited military action in retaliation.

    An Increasingly Extremist Society

    Even as Pakistan continues to promote terrorism across the border, its society has become increasingly extremist. In 2012, the German news agency Deutsche Welle analyzed the rise in extremism in Pakistani society. Many see cultural plurality as un-Islamic. Arabization is on the rise. Numerous jihadist and terrorist organizations operate freely in the country. This trend taking place in a nuclear state is and should be a matter of great international concern.

    Pakistan now exports terror not only to India and Afghanistan, but also to other countries. As per the European Foundation for South Asian Studies, there is an “unholy alliance” between Pakistan’s army and terrorism. Islamic extremists from Pakistan or of Pakistani origin have been involved in many terrorist attacks in other countries. In September, the main suspect for a knife attack outside the former Paris offices of the satirical magazine Charlie Hebdo was of Pakistani origin.

    Most recently, street protests have erupted in Pakistan against French President Emmanuel Macron after he claimed that Islam is in crisis following the beheading of schoolteacher Samuel Paty, killed by a Chechen refugee disgruntled over Paty’s discussion of the controversial Charlie Hebdo cartoons during a civic education class. Protesters burned a defaced image of Macron and the French flag outside the French consulate in Karachi. Many sought the expulsion of the French ambassador and demanded that Pakistan break off diplomatic ties with France.

    Pakistan has taken great umbrage at Macron’s actions to curb Islamic extremism. Pakistani leaders object to France’s insistence that Muslim leaders agree to a “charter of republican values,” reject political Islam and foreign interference. Shireen Mazari, Pakistan’s human rights minister, tweeted: “Macron is doing to Muslims what the Nazis did to the Jews — Muslim children will get ID numbers (other children won’t) just as Jews were forced to wear the yellow star on their clothing for identification.” After French protestations, she withdrew her comments, but the damage was done.

    Embed from Getty Images

    In October, the Financial Action Task Force (FATF), the global terror financing watchdog, put Pakistan on its grey list for its failure to “effectively crackdown on means of financing terror activities.” The FATF found “strategic deficiencies in [Pakistan’s] regimes to counter money laundering, terrorist financing, and proliferation financing.”

    To improve its international image, Pakistan has taken some judicial action against the masterminds of the 2008 Mumbai attacks. Hafiz Saeed, one of the founders of Lashkar-e-Taiba and the leader of Jamaat-ud-Dawa, two notorious jihadist organizations, has been convicted on charges of terror financing. As Pakistan’s leading English newspaper Dawn observed, the conviction came “as Pakistan tries to avoid punitive blacklisting” by FATF. Given Pakistan’s incestuous relationship with the likes of Saeed, he might get off lightly after an appeal once Pakistan has escaped censure from the FATF.

    The big international concern is that the Pakistani establishment continues to aid and abet terrorism. There has been no fundamental change in either policy or actions. In fact, Islamabad’s ratcheting up of its rhetoric on Macron is alarming because it is accompanied by “rising religious intolerance at home.”

    Nelson’s Eye

    Despite the fact that six Americans were killed in the 2008 Mumbai attacks, the US has been relatively soft on Pakistan. For decades, Islamabad was a Cold War ally. The US and Saudi Arabia funded the Afghan mujahedeen against the Soviet Union through Pakistan. These led to close ties between the American and Pakistani establishments. Of late, these ties have been weakening and Washington has been inching closer to New Delhi.

    In the most recent joint statement, India and the US have called “for concerted action against all terrorist networks, including al-Qaeda, ISIS/Daesh, Lashkar-e-Tayyiba (LeT), Jaish-e-Mohammad (JeM) and Hizb-ul-Mujahideen.” They have also asked “Pakistan to take immediate, sustained and irreversible action to ensure that no territory under its control is used for terrorist attacks, and to expeditiously bring to justice the perpetrators and planners of all such attacks, including 26/11 Mumbai, Uri, and Pathankot.”

    While this statement might give diplomatic satisfaction to India, it is important to remember that Saeed was able to freely address public rallies in Pakistan despite the US putting a bounty of $10 million on his head. The US could not, or did not, put Pakistan on the mat for failure to act against the Haqqani Network, responsible for inflicting casualties on US soldiers in Afghanistan.

    The US has imposed the most draconian sanctions on Iran and has not spared a powerful nuclear state like Russia. Yet it has hesitated to impose serious sanctions on Pakistan, giving, unconvincingly, its nuclear status as one of the excuses. The limited military and economic sanctions the US has imposed on Pakistan are neutralized by Islamabad’s ever-increasing economic and military links with China. In any case, despite the FATF proceedings against Pakistan, the country has obtained yet another bailout from the International Monetary Fund.

    The US has turned Nelson’s eye on Pakistan’s promotion of terror because it needs the country’s assistance to retreat from Afghanistan. The war on terror has not quite succeeded. Like the UK and the Soviet Union, the US is worn out after nearly two decades on the ground in Afghanistan. It needs to save face and avoid the impression of total defeat. It is willing to negotiate with the Taliban even as the armed group continues to commit horrific acts of terror against innocent Afghans. A report by the US Special Inspector General for Afghanistan Reconstruction showed a 50% increase in attacks over the past three months alone, with the UN estimating that some 6,000 civilians have died in the violence in the first nine months of 2020.

    India’s Unique Vulnerability to Terror

    As the US makes peace with the Taliban, India’s problems with Pakistan-sponsored terror are likely to grow. Even Russia has opened a “channel to the Taliban,” a historic sworn enemy. The Taliban leadership is demonstrating diplomatic savvy by negotiating their way back to power. This leadership might appear relatively urbane, but the Taliban rank and file continue to be fanatics. They now believe they have defeated two superpowers thanks to their faith in Islam.

    Once the Taliban win power, they will impose their obscurantist ideology. This will embolden extremists in Pakistan. Lest we forget, an Indian plane hijacked by terrorists landed in Kandahar in 1999. India released terrorists to bring back hostages. One of the terrorists was Masood Azhar. He went on to start Jaish-e-Muhammad, responsible for the deaths of hundreds over the years. Azhar is to India what Osama bin Laden was to the US. He got his initial training in Afghanistan, and many more like him are likely to receive similar training once the Taliban are firmly back in the saddle.

    While the Taliban might not engage in direct terrorism against the US, India would be fair game. Pakistan would promote Taliban efforts, and China would ignore, if not abet, them. For a decade, China opposed resolutions in the United Nations Security Council to designate Azhar as an international terrorist, leading Michael Kugelman, a noted South Asia analyst, to call him “China’s favorite terrorist.” China has become a loyal ally of Pakistan and lauds Islamabad’s fight against international terrorism even as its junior ally stays deafeningly silent on the treatment of the Uighur Muslims in Xinjiang. As India and China clash, an increase in terror attacks on Indian soil would serve Chinese interests. Pakistan and the Taliban are likely to oblige.

    Attacks across Europe and elsewhere demonstrate that India is not alone in facing the scourge of terrorism. As we mark the 12th anniversary of the Mumbai attacks, India’s 1996 proposal for a Comprehensive Convention on International Terrorism is more relevant than ever. The world needs to increase security, boost peace and safeguard the lives of innocents.

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

  • in

    Land Reform Can Transform India’s Economy

    According to the Centre for Monitoring Indian Economy, India faces a serious decline in employment due to the COVID-19 crisis. An estimated 122 million people lost their jobs during the first quarter of 2020. Streams of migrant workers returned to their villages — often the only fallback option for the millions working in urban informal sectors. Regardless of their vows to never come back to the cities, the majority of them will likely have to return in order to earn their livelihood. In the present state of affairs, agriculture, the mainstay of rural India, cannot offer them incomes comparable to industries and construction firms in cities.

    360˚ Context: The State of the Indian Republic

    READ MORE

    Despite its falling share in the economy, agriculture is India’s most important sector. Its contribution to the country’s GDP has decreased from 51.81% in 1950-51 to 15.87% in 2018-19, but it still employs about 42% of the country’s workforce. While increasing shares of secondary and tertiary sectors is a natural phenomenon of economic growth, in India, this has happened without maximizing the potential for growth in agriculture. Per-acre yields of rice and wheat in India are drastically lower than those of other BRICS nations.

    The shift in GDP share is the result of high growth rates in secondary and tertiary sectors despite relative stagnation in agriculture. The agricultural sector still has a massive scope to generate greater income and employment. However, this can be done only with the spirit of liberalization, similar to what other sectors of the economy have received since the 1990s.

    Overregulation and Underutilization

    Soon after independence, land reform laws were enacted throughout the country with the objective of distributing land equitably and increasing the efficiency of farm operations. This produced only partial success due to a variety of reasons. The ownership of only 4% of operated land could be transferred to cultivators, 97% of which lies in just seven states — Assam, Gujarat, Himachal Pradesh, Karnataka, Kerala, Maharashtra and West Bengal. Notwithstanding this uninspiring outcome, land reform laws foisted excessive restrictions on the tenancy of agricultural land.

    This has adversely affected the growth of agriculture in the country. Landowners are reluctant to lease out their land under formal tenancy due to their fear of losing it permanently. According to National Sample Survey Reports, about 15 million tenants cultivate 10 million hectares of land on an informal basis; 92% of these tenants are landless laborers or marginal farmers. They have no security of tenure or access to institutional credit, crop insurance and other benefits offered to farmers under government schemes. Due to legal restrictions on tenancy, many landowners who cannot cultivate themselves prefer to leave their land fallow. In 2015-16, 26.72 million hectares of land were left fallow across India.

    .custom-post-from {float:left; margin: 0 10px 10px; max-width: 50%; width: 100%; text-align: center; background: #000000; color: #ffffff; padding: 15px 0 30px; }
    .custom-post-from img { max-width: 85% !important; margin: 15px auto; filter: brightness(0) invert(1); }
    .custom-post-from .cpf-h4 { font-size: 18px; margin-bottom: 15px; }
    .custom-post-from .cpf-h5 { font-size: 14px; letter-spacing: 1px; line-height: 22px; margin-bottom: 15px; }
    .custom-post-from input[type=”email”] { font-size: 14px; color: #000 !important; width: 240px; margin: auto; height: 30px; box-shadow:none; border: none; padding: 0 10px; background-image: url(“https://www.fairobserver.com/wp-content/plugins/moosend_form/cpf-pen-icon.svg”); background-repeat: no-repeat; background-position: center right 14px; background-size:14px;}
    .custom-post-from input[type=”submit”] { font-weight: normal; margin: 15px auto; height: 30px; box-shadow: none; border: none; padding: 0 10px 0 35px; background-color: #1878f3; color: #ffffff; border-radius: 4px; display: inline-block; background-image: url(“https://www.fairobserver.com/wp-content/plugins/moosend_form/cpf-email-icon.svg”); background-repeat: no-repeat; background-position: 14px center; background-size: 14px; }

    .custom-post-from .cpf-checkbox { width: 90%; margin: auto; position: relative; display: flex; flex-wrap: wrap;}
    .custom-post-from .cpf-checkbox label { text-align: left; display: block; padding-left: 32px; margin-bottom: 0; cursor: pointer; font-size: 11px; line-height: 18px;
    -webkit-user-select: none;
    -moz-user-select: none;
    -ms-user-select: none;
    user-select: none;
    order: 1;
    color: #ffffff;
    font-weight: normal;}
    .custom-post-from .cpf-checkbox label a { color: #ffffff; text-decoration: underline; }
    .custom-post-from .cpf-checkbox input { position: absolute; opacity: 0; cursor: pointer; height: 100%; width: 24%; left: 0;
    right: 0; margin: 0; z-index: 3; order: 2;}
    .custom-post-from .cpf-checkbox input ~ label:before { content: “f0c8”; font-family: Font Awesome 5 Free; color: #eee; font-size: 24px; position: absolute; left: 0; top: 0; line-height: 28px; color: #ffffff; width: 20px; height: 20px; margin-top: 5px; z-index: 2; }
    .custom-post-from .cpf-checkbox input:checked ~ label:before { content: “f14a”; font-weight: 600; color: #2196F3; }
    .custom-post-from .cpf-checkbox input:checked ~ label:after { content: “”; }
    .custom-post-from .cpf-checkbox input ~ label:after { position: absolute; left: 2px; width: 18px; height: 18px; margin-top: 10px; background: #ffffff; top: 10px; margin: auto; z-index: 1; }
    .custom-post-from .error{ display: block; color: #ff6461; order: 3 !important;}

    These restrictions on access to cultivable land not only deprive poor people in rural areas of opportunities to enhance their incomes, but also have a detrimental effect on the growth of the entire agriculture sector. Simply formalizing tenancy and cultivating millions hectares of fallow land can be a game-changer for agriculture in India. Once tenants get security of tenure and access to institutional credit, they will have requisite incentives and funds to make long-term investments on their land.

    This can be achieved only with immediate and effective policy interventions by state governments. The National Institution for Transforming India, the premier policy think tank of the government of India, has set the ball rolling by publishing the Model Agricultural Land Leasing Act, 2016, to help the states enact new laws or make required changes to their existing laws on the tenancy. The Model Act seeks to formalize tenancy agreements, circumventing the restrictions imposed by the land-reform laws of the state. It aims to integrate the security of tenure along with the protection of ownership. However, until now, only a few states have gone ahead in this direction.

    Uttar Pradesh, Uttarakhand and Madhya Pradesh have amended their existing laws to allow the renting of agricultural land on liberal terms. The Maharashtra Agricultural Land Leasing Bill, 2017, now awaits the assent of the president of India. The Andhra Pradesh Land Licensed Cultivators Act, 2011, was enacted even before the Model Act of 2016 was framed. This special law has recently been replaced with the Andhra Pradesh Crop Cultivator Rights Act, 2019. The other states also need to implement this vital reform to transform agriculture in their states.

    Alternate Solutions

    The enactment or amendment of laws is only a first step in improving the access of the rural poor to the land. Even in states where these laws have been enacted, very few landowners and tenants have come forward to enter formal agreements. Landowners are still apprehensive of losing their land, and tenants are still afraid of getting ousted if they insist on formal agreements. Therefore, state governments also need to effectively communicate with tenants and landowners to allay their fears and convey the benefits of formal agreements to them.

    Until the time when requisite laws are enacted effectively, group loans can provide relief to informal tenants. In Kerala, where tenancy is illegal, about 250,000 informal tenants have organized themselves into joint liability groups. These groups receive crop loans from banks without requiring formal tenancy agreements. The guidelines of the Reserve Bank of India and the National Bank for Agriculture and Rural Development allow such agreements without requiring formal tenancy. Alternatively, Odisha has recently launched the Balaram scheme to provide agricultural credit to groups of landless laborers. Other states should also liaise with banks to provide credit to informal tenants until the time when legal provisions for allowing tenancy are put in place.

    Such reforms have enormous potential to revamp and develop Indian agriculture, especially during the ongoing economic turmoil. At the national level, the central government has shown the way forward by deregulating agricultural markets. Now it is time for states to act decisively.

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

  • in

    India’s Police: An Instrument of Injustice

    When Alexander the Great marched into Phrygian, the capital of Gordinium, in 333 BC, he was told that an oracle had declared that any man who could unravel the Gordian knot — deemed impossible to untangle — would rule over Asia. After wrestling with the knot for a time with no success, Alexander drew his sword and cut the knot into half with a single stroke. To paraphrase the Bard of Avon, police reforms in India await a similar creative solution to a seemingly insurmountable problem.

    360˚ Context: The State of the Indian Republic

    READ MORE

    It is ironic that, more than seven decades after independence, the police in India are still governed by the Indian Police Act of 1861. The British introduced this act immediately after what they called the 1857 Sepoy Mutiny. As per the Commonwealth Human Rights Initiative, the 1861 legislation was enacted with “the purpose of crushing dissent and any movement for self government.” After the 1857 uprising, the British monarchy took over from the East India Company, creating a colonial administrative architecture that would become the jewel in its crown. Along with the 1861 act, the 1860 Indian Penal Code was a major pillar of the new criminal justice system that served London well until India’s independence in 1947.

    The Legacy of the Raj

    Independent India adopted a new constitution that gave states jurisdiction over the police. Henceforth, it was not New Delhi but state capitals that controlled policing. However, those who drafted the constitution failed to craft legislation to create a new police force in tune with the new demands of democracy. The police force retained its colonial character, carrying the will of its new political masters. Order ordained by these masters had to be maintained. The rule of law and due process were to play second fiddle.

    .custom-post-from {float:left; margin: 0 10px 10px; max-width: 50%; width: 100%; text-align: center; background: #000000; color: #ffffff; padding: 15px 0 30px; }
    .custom-post-from img { max-width: 85% !important; margin: 15px auto; filter: brightness(0) invert(1); }
    .custom-post-from .cpf-h4 { font-size: 18px; margin-bottom: 15px; }
    .custom-post-from .cpf-h5 { font-size: 14px; letter-spacing: 1px; line-height: 22px; margin-bottom: 15px; }
    .custom-post-from input[type=”email”] { font-size: 14px; color: #000 !important; width: 240px; margin: auto; height: 30px; box-shadow:none; border: none; padding: 0 10px; background-image: url(“https://www.fairobserver.com/wp-content/plugins/moosend_form/cpf-pen-icon.svg”); background-repeat: no-repeat; background-position: center right 14px; background-size:14px;}
    .custom-post-from input[type=”submit”] { font-weight: normal; margin: 15px auto; height: 30px; box-shadow: none; border: none; padding: 0 10px 0 35px; background-color: #1878f3; color: #ffffff; border-radius: 4px; display: inline-block; background-image: url(“https://www.fairobserver.com/wp-content/plugins/moosend_form/cpf-email-icon.svg”); background-repeat: no-repeat; background-position: 14px center; background-size: 14px; }

    .custom-post-from .cpf-checkbox { width: 90%; margin: auto; position: relative; display: flex; flex-wrap: wrap;}
    .custom-post-from .cpf-checkbox label { text-align: left; display: block; padding-left: 32px; margin-bottom: 0; cursor: pointer; font-size: 11px; line-height: 18px;
    -webkit-user-select: none;
    -moz-user-select: none;
    -ms-user-select: none;
    user-select: none;
    order: 1;
    color: #ffffff;
    font-weight: normal;}
    .custom-post-from .cpf-checkbox label a { color: #ffffff; text-decoration: underline; }
    .custom-post-from .cpf-checkbox input { position: absolute; opacity: 0; cursor: pointer; height: 100%; width: 24%; left: 0;
    right: 0; margin: 0; z-index: 3; order: 2;}
    .custom-post-from .cpf-checkbox input ~ label:before { content: “f0c8”; font-family: Font Awesome 5 Free; color: #eee; font-size: 24px; position: absolute; left: 0; top: 0; line-height: 28px; color: #ffffff; width: 20px; height: 20px; margin-top: 5px; z-index: 2; }
    .custom-post-from .cpf-checkbox input:checked ~ label:before { content: “f14a”; font-weight: 600; color: #2196F3; }
    .custom-post-from .cpf-checkbox input:checked ~ label:after { content: “”; }
    .custom-post-from .cpf-checkbox input ~ label:after { position: absolute; left: 2px; width: 18px; height: 18px; margin-top: 10px; background: #ffffff; top: 10px; margin: auto; z-index: 1; }
    .custom-post-from .error{ display: block; color: #ff6461; order: 3 !important;}

    Like many former colonies, India became a democracy in form while its police force remained colonial in spirit. In the first few decades after independence, the combination of enlightened leaders, ignorant public opinion, some outstanding officers and the broad hegemony of one political party papered over the incongruity of the arrangement. That could not, and did not, last.

    From the 1960s, Indian politics became increasingly fractious. By the mid-1970s, the pulls and pressures on police departments, thanks to political interference, increased dramatically. Inadequate organizational structure, exploitative ethos and brutal behavior came to typify the police force. In 1975, then-Prime Minister Indira Gandhi, the daughter of Jawaharlal Nehru, used the police to impose a state of emergency on the country. As in colonial times, the police suppressed civil liberties, foisted false cases on the ruling party’s political opponents and even enforced sterilization on unwilling young men under a draconian family planning plan.

    In 1977, the opposition won a historic victory. Immediately after taking power, the new government instituted the National Police Commission (NPC) to review India’s system of policing and suggest reforms. It produced eight reports, including a Model Police Act, between 1979 and 1981. It also appointed a commission of inquiry under a retired chief justice of India, J.C. Shah. Its 1978 report chronicled the excesses, malpractices and misdeeds of the government during the emergency. It found that the police had obediently and brutally carried out instructions of its political masters, cowing the country into submission.

    To date, these reports have been gathering dust. Governments have come and gone since 1981. They have implemented peripheral recommendations but ignored substantive ones that relate to accountability and autonomy.

    Echoes Across the Country

    In 2020, the police are still bound by diktats of the political bosses. The Delhi riots earlier this year prompted allegations of political interference, a repeat of what happened in the 1984 unrest. It moved Julio Ribeiro, one of the country’s most respected police officers, to write a letter to the police chief of Delhi. He asked for a fair probe into the riots and questioned why the police did not investigate members of the ruling party for delivering hate speeches.

    Ribeiro’s question can be echoed across the country. The chief ministers of India’s 28 states control the police just as British governors once did. Politicians pay lip service to police reforms but are unable to let go of the power they wield. At its essence, there is a fundamental asymmetry of power between the police and the citizens: The former are not accountable to the latter. The police answer only to their political and bureaucratic bosses.

    The failure of politicians to reform the police has led to citizens and retired senior police officers appealing to the judiciary for change. In 2006, the Supreme Court of India passed a landmark judgment and gave seven clear directives. The government of India and its federal counterparts in state capitals were supposed to implement these directives. Instead, most have been ignored or implemented half-heartedly. As a result, many a chief justice had lamented that not a single state government is willing to cooperate: What’s to be done?

    Embed from Getty Images

    The power politicians wield in various state capitals comes from Section 3 of the 1861 Police Act, which states: “The superintendence of the police throughout a general police-district shall vest in and shall be exercised by the State Government to which such district is subordinate, and except as authorized under the provisions of this Act, no person, officer of Court shall be empowered by the State Government to supersede or control any police functionary.”

    Simply put, chief ministers and their consiglieres, the senior officers of the elite Indian Administrative Service and Indian Police Service (IPS), control every district in their states. The Model Police Act drafted by the NPC more than four decades ago recommended a tempering of this unfettered power of state governments. Its Section 39 provides for the state government to “exercise its superintendence … in such manner … as to promote the professional efficiency of the police.”

    The Second Administrative Reforms Commission (ARC) set up by the Indian government concluded that the proposed Section 39 was insufficient to provide police autonomy. Informal and often illegal instructions to the police are pervasive. It recommended that an amendment to the Model Police Act that expressly forbade illegal or mala fide demands from the police. It also recommended that obstruction of justice be categorized as an offense. Needless to say, the government of India is yet to accept the ARC’s recommendations, let aside implement them.

    Crime Pays

    This politics-police equation is completely lopsided, with India’s law enforcement the handmaiden of the politicians in power. This has been supported by numerous committees such as the one headed by Justice K.T. Thomas and scholars like Milan Vaishav. In fact, Indian voters have been increasingly electing politicians who face criminal proceedings against them. Money and muscle play a growing role in Indian politics. The result is decline, if not collapse, of the policing and criminal justice system.

    After 73 years of independence, the formal institutions left behind by the British Raj are weakening. For ambitious politicians, controlling the police is an important way to secure benefits for themselves, consolidate electoral gains and distribute benefits to their supporters. If politicians control the police, they can avoid criminal investigations into their activities. They can hobble opponents with false or frivolous charges. They can also dispense patronage to their core supporters who are often members of their community. This partisan use of the police furthers identity politics in an increasingly divided land. As a result, the rule of law suffers and the Indian state weakens.

    The police force itself has become politicized in many if not all states. Caste, community or religious affinity is often more important than professionalism, diligence or excellence. Many politicians try to recruit members of their own group into the police. Since police officers have job security, this social engineering of the police can institutionalize the coercive power of a group long after their politician is voted out. 

    The Indian police have been weighed, measured and found wanting on numerous occasions. In 1992, the police stood by as a mob demolished the Babri Masjid mosque and, 10 years later, they did the same during the 2002 Gujarat riots. The rise in extrajudicial killings demonstrates the failure of due process of law. In 2005, the BBC reported that India’s “fake encounters” — staged confrontations between criminals and the police, where the criminals mostly end up dead — were shockingly common. During the emergency in the 1970s and in recent years, the police have stifled dissent by slapping colonial-era sedition charges.

    The police continue to wield repression on the streets. Beating people arbitrarily is common. In recent years, marginalized groups such as Dalits, minorities, tribesmen and women who protest peacefully have faced increased police brutality. Paul Brass has found that governments have used “curfews as means of control, victimization, and outright violence against targeted groups rather than as devices to bring peace during violent times for the benefit of all.”

    Embed from Getty Images

    Instrument of Injustice

    In India, the police no longer have a reputation for probity or for being an instrument of justice. In fact, the insensitive, illegal, inhuman and indefensible handling of the September murder and gang rape of a Dalit girl in Hathras, a district in India’s most populous state of Uttar Pradesh, laid bare the utterly unprofessional work culture of the Indian police. Such conduct occurs with numbing regularity because the political elite is deeply invested in the status quo.

    Prospects for reform seem dim. In 2003, R.K. Raghavan, a former director of the Central Bureau of Investigation, observed that the police would continue to do the politicians’ bidding unless certain basic reforms were enacted. The judiciary cannot enact these reforms — it is the politicians’ duty. Until “they look upon the police as a tool to settle political scores with their adversaries, nothing will improve.” Raghavan went on to argue that prospects for police reform were bleak “because the corruption that cuts across party lines, brings with it unanimity that the status quo should remain.”

    In September 2020, Indian Prime Minister Narendra Modi gave a speech to graduating IPS officers and called for a trust-based policing system. He argued that those who believe that instilling fear among the populace is the most effective policing strategy are out of sync with the march of the nation and its vibrant democracy. Modi’s actions have not matched his rhetoric.

    India does not need another report or judgment. It awaits a statesman who can rise above the temptations of short-term electoral gains and work for long-term national benefits and who will not hesitate to wield the sword to cut the Gordian knot that keeps the politician and the police bound together. Only then will India have rule of law, not mere order, and justice for all instead of for a privileged few.

    The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More