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    Why Are India’s Farmers Protesting?

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    Indian farmers have lately made international headlines. Popstar Rihanna, actor Susan Sarandon and activist Greta Thunberg have taken up their cause. Ozy, a glitzy Silicon Valley publication posed a provocative question: “Will the World Step In?”

    The story playing out in international media appears to be a simple one. Indian farmers are the noble David standing up to an evil Goliath-like government beholden to greedy billionaires. In an era of increasing inequality and decreasing social mobility, this narrative resonates. The fact that elite journalists in New Delhi or New York see the ruling Bharatiya Janata Party (BJP) as a Hindu fascist party adds to its appeal.

    Publications such as Ozy convey that Indian Prime Minister Narendra Modi has brought in agricultural reforms solely to benefit large corporations. As per this narrative, the government is in thrall to big business and against poor farmers. Is this narrative true, or is there something more complicated going on?

    The Burden of History

    Ever since the British Raj, Indian farmers have led tough lives. The colonial power imposed extortionate taxes on farmers, taking away at least 45% of harvests, often confiscating the whole yield. British imperialists took Niccolo Machiavelli’s advice to heart and patronized a new feudal class of landlords to act as their middlemen. They did the dirty work of squeezing farmers, enabling them to escape much of the blame. The British also created an extractive colonial bureaucracy to suck wealth out from India. Few realize that the primary job of the now-glamorous district collector — an elite civil servant who does the job elected mayors do in western democracies — was to collect taxes from poor Indian farmers.

    Writing in The World Financial Review last year, Kalim Siddiqui explained in some detail why famine stalked British India. Great Britain industrialized and became a great power partly through ruthless exploitation of farmers in what are now India, Pakistan and Bangladesh, which then comprised British India. As a result, millions died of starvation, and those who survived the famines suffered constant malnourishment.

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    The first priority for independent India was feeding its people. Indian farmers were dirt poor with no access to credit, reliable irrigation or modern agricultural tools and farming methods. They were often in the clutches of predatory moneylenders. Yet farmers had experience of mass movements. Mahatma Gandhi led his first satyagraha in Champaran against exploitation by British landlords, mobilizing thousands of poor farmers. In India’s new democracy, farmers might have been poor but, for the first time in centuries, they wielded real political power.

    That power has carried over to today. Even as India has urbanized, farmers disproportionately decide elections. A staggering 83.5% of seats in the Lok Sabha, India’s lower house of Parliament, still primarily comprise rural areas. The political power of farmers has given them many benefits. Since 1947, governments have formulated multiple economic policies to overcome India’s colonial-era rural poverty. India abolished zamindari, an indigenous form of landlordship, immediately after independence. It overturned centuries of tradition by abolishing income tax for farmers. A key purpose of the 1969 bank nationalization was to provide cash-starved farmers access to credit.

    The Green Revolution

    In the 1960s, India launched its famous Green Revolution, which subsidized farmers in India’s northwest region, comprising the states of Punjab, Haryana and western Uttar Pradesh. This part of the country is a flat fertile plain irrigated by Himalayan snow-fed perennial rivers and with relatively large landholdings. Inspired by the American agronomist Norman Borlaug, India’s government encouraged farmers in this region to grow high-yield varieties of wheat, rice and cotton. It also gave farmers massive subsidies for fertilizers, seeds and equipment, investing large sums of capital to build dams and a network of canals and giving farmers access to easy credit. As a result, the farmers of landholding communities in northwest India became the most prosperous in the country.

    The Green Revolution ended India’s ship-to-mouth existence. India’s population had exploded after independence in 1947. In a poor country, agriculture was inefficient and rain-fed. A bad monsoon meant poor harvests. Demand would outstrip supply and the specter of famine was never far off. Until production took off in India, the US supplied grains to Indian masses under the Agricultural Trade Development and Assistance Act of 1954, commonly known as PL–480 or Food for Peace. Lyndon B. Johnson limited even critical famine aid to India, demanding the country implement agricultural reforms and temper criticism of US intervention in Vietnam. The Green Revolution provided India with food security after two centuries of rapacious British rule.

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    Yet like any policy, the Green Revolution had unintended consequences. In 2009, Daniel Zwerdling chronicled how this fabled revolution was “heading for collapse.” With an emphasis on high-yield varieties, the traditional mix of crops grown in the region for centuries has been abandoned. Yields increased dramatically but only through an insatiable thirst for water. Groundwater levels have fallen by 75%-85% over the decade. In Punjab and Haryana, farmers are boring deeper and deeper for water. In 2018, 61% of wells were dug deeper than 10 meters. In a land crisscrossed by rivers fed by Himalayan snow, such water levels mark historic lows. India might have achieved food security at the cost of water security.

    Parts of India are not just running out of water. The soil itself is turning toxic. Intense use of fertilizers and pesticides over decades has pumped harmful chemicals into the soil. More than 10 years ago, astute journalists like Daniel Pepper were reporting on villagers who spoke about rising cases of cancer, renal failure, stillborn babies and birth defects. These health problems have increased since. Researchers attribute these conditions to the “overuse and misuse of pesticides and herbicides.” As Pepper reported in 2008, Punjab comprised 1.5% of India’s area but accounted for nearly 20% of the country’s pesticide consumption. Haryana and western Uttar Pradesh suffer similarly high soil pollution and consequent health problems.

    Another consequence of the Green Revolution has been the overproduction of cereals. So much wheat and rice are produced that a storage crisis has ensued. India now lacks the capacity to store grains, with millions of tons are stockpiled in poor conditions. In particular, India lacks cold storage facilities for fruits and vegetables because of restrictions on farmers, the stranglehold of Agricultural Produce Market Committees (APMCs) and a lack of incentives for the private sector to invest in the rural economy.

    A Soviet Procurement System

    After independence, India opted for the Soviet economic model. Five-year plans set out ambitious targets for a command-and-control economy. The so-called quota-permit-license raj emerged, with bureaucrats dictating “which company would produce what, but also the amount of production, as well as the price of commodities.” Agriculture was no different. In a top-down, command-and-control system, the government set targets that farmers had to meet.

    In an indigenous twist to the Soviet system, India created the institution of the Agricultural Produce Market Committee. Thousands of APMCs were to run local agricultural markets, known as mandis. Farmers could only sell to APMC-controlled mandis and only at fixed prices. Unlike their American or European counterparts, Indian farmers could not sell wheat or rice on the open market. This prohibition had two reasons. First, APMCs allowed the government to control both production and price in its planned economy model. Second, APMCs were meant to protect farmers from the vagaries of the free market and save them from exploitation.

    Over time, APMCs become the new oppressors. Local politicians and special interest groups came to control APMCs. Since they were the only buyers by law, APMC mandis began to set ceilings on what farmers received for their produce, offering precipitously low prices. Commission agents started taking greater cuts. APMCs delayed payments to farmers, forcing them to borrow from “[commission agents], local money lenders and savings for their daily expenses.” In addition, APMCs rarely gave receipts to farmers. This meant that they were denied the option of applying to banks for much cheaper credit. Instead, they were pushed into India’s infamous informal economy and became prey to exploitative lending. Tragically, inevitable and unbearable debt burdens have led to thousands of farmer suicides.

    Apart from the APMCs, the government instituted a minimum price support mechanism as part of its planned economy model. New Delhi wanted high and stable production of key crops. Farmers wanted, and still want, stable income. In a pure market system, too much production leads to falling prices. This is not ideal for farmers. Therefore, they are careful to avoid overproduction. So, India’s economic planners instituted a system that provided a floor below which prices would not fall, encouraging farmers to grow crops deemed essential for food security and economic interests.

    Embed from Getty Images

    Over time, powerful lobbies in northwestern India, the heartland of the Green Revolution, pressured the government to put the minimum support price well above the price the market would have otherwise set. What began as limited support to ensure price and production stability eventually morphed into a substantial taxpayer-funded direct subsidy.

    Support prices differed widely from one state to another. At the same time, restrictive laws compelled farmers to sell to designated APMCs within their districts. Crossing state and even district boundaries to get a better price for their produce was illegal and could land farmers in jail. For instance, Punjab’s support prices have been higher than those in Bihar. Therefore, Bihari farmers have been illegally selling paddy to markets in Punjab at a price lower than the minimum support price but higher than what they would get back home. A flourishing black market and widespread corruption emerged as a result.

    New Agricultural Reforms

    In December 2019, the parliamentary standing committee on agriculture published a major report. It concluded that APMC markets were not working in the interest of farmers. Instead, they were reducing competition, causing cartelization of traders and unduly deducting money due to farmers through market fees and commission charges. Corruption and malpractices in APMCs were rife. The committee observed that “there [was] urgent need for radical reform” and asked the government to inform parliament “about steps taken in this direction within three months.” It is noteworthy that the opposition and farmers’ unions agreed with the committee’s observations.

    Last year, the government finally instituted long overdue agricultural reforms. Several economists and policy wonks welcomed them, arguing that these reforms would “unshackle farmers from the restrictive marketing regime that has managed the marketing of agriculture produce for decades.” In their view, these reforms promised “to bring the entire world of farming technology, post-harvest management and marketing channels at the doorstep of the farmer.”

    The reforms have three key aspects. First, farmers will be able to sell their produce to anyone, including agricultural businesses, supermarket chains, online grocers or, as before, APMC mandis. The key difference from the status quo is that farmers are no longer required to sell only to APMC mandis. A Bihari farmer would now have the legal right to sell in Punjab and vice versa without fear of arrest.

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    Second, the reforms have created a framework for agricultural commercial agreements. When farmers engage directly with processors, agri-business firms and large retailers, their counterparties will have to guarantee a price and make timely payments. Third, regulations on farm produce have been simplified and eased. The command-and-control system that determined the crops or quantities farmers would grow is being dismantled. Only in extraordinary circumstances such as war, famine, a natural calamity or an extraordinary price rise will the government have the right to direct production of cereals, pulses, oilseeds, edible oils, onions, potatoes or any other crops.

    In 2020, agricultural reforms became inevitable because of the COVID-19 pandemic. A nationwide lockdown caused a massive migration of urban workers back to their villages. This increased pressure on already scarce land — something needed to be done. Restrictive laws on sale, pricing and storage of produce had to go. Therefore, after two decades of endless discussion, reforms finally transpired. They seek to increase investment in agriculture, boost farmer incomes and create a national agricultural market to emerge for the first time since India’s independence.

    Who Is Protesting and Why?

    From the outset, the reforms have proved controversial. In September, the BBC wondered whether they were a “death warrant” for farmers. Some farmers worry whether the reforms might lead to the end of wholesale markets and guaranteed prices. Currently, the government offers a minimum support price that acts as a safety net for farmers. Even though the government has promised to retain such a price, farmers fear its withdrawal over time.

    There is an added fear that big private players will offer good money to farmers in the beginning, kill off their competition and then pay little for agricultural produce. Farmers might go from the local monopsonies of the APMCs to the national oligopoly of Amazon-like behemoths. It is important to remember that the government offers price support only for the staple crops of the Green Revolution. Other crops do not qualify, nor do fruits and vegetables.

    Unsurprisingly, the overwhelming number of protesters are farmers from India’s northwest, the region that has benefited most from the old system. In particular, they belong to Punjab, Haryana and western Uttar Pradesh, the birthplace of the Green Revolution. In 2018-19, APMCs procured 73% and 80% of the total wheat production in Punjab and Haryana respectively at a minimum support price. This was higher than the market price, but a hefty chunk of the support price ends up in the hands of middlemen through various fees and charges. Unknown to most, price support does not necessarily mean income support in the current system.

    Farmers in the Himalayas, the Nilgiris or most other parts of India never benefited from the status quo. As a result, farmers in 25 of India’s 28 states and all eight union territories have not taken to the streets. The Shetkari Sanghatana, a Maharashtra-based farmers’ union founded by the economist-turned-farmer leader Sharad Joshi, and other unions support the government’s agricultural reforms.

    Embed from Getty Images

    The late Joshi was convinced that “the root cause of farmers’ problems lay in their limited access to the market.” As per this farmer leader, open and competitive markets, instead of a top-down command-and-control agricultural economy, served farmer interests better. Joshi opposed the APMCs, and his organization naturally supports recent reforms. In fact, it wants to go much further. It wants the government to remove the ban on the export of onions and threatened to pelt BJP MPs with onion bulbs if the government fails to do so.

    Journalists unfamiliar with rural India, including those working for the market-friendly Financial Times, have failed to capture this nuance. Not all farmers are protesting. Protests are largely confined to Punjab, Haryana and Jat strongholds in western Uttar Pradesh. This northwest region around Delhi comprises less than 8% of the Indian population. It elects 38 out of 543 MPs in the Lok Sabha, but its proximity to the capital gives it disproportionate power. Home to the Green Revolution, it has benefited from massive government spending for decades.

    As per the managing editor of the Financial Express, farming households in Punjab get an average of $2,385 per year in fertilizer and electricity subsidies alone. Irrigation subsidies account for another $190 per year. Households in Punjab, Haryana and western Uttar Pradesh benefit from other subsidies as well. To put these figures into context, in 2019, GDP per capita in India was less than $2,100, with most farmers earning a much lower figure.

    Many of those protesting are large farmers from northwestern India. Some of their family members are part of the Indian diaspora in Australia, Canada, the UK, the US and elsewhere. Some of them continue to be absentee landlords. They have petitioned their representatives to raise the issue with the Indian government, organized demonstrations and raised the matter with the press. As a result, a narrative has emerged in the English-speaking press that is not entirely unbiased.

    On January 26, India’s Republic Day, protesting farmers marched through New Delhi. Some attacked the police, destroyed public property and flew flags on the Mughal-built Red Fort from where prime ministers address the nation. This caused outrage and weakened the movement. However, Rakesh Tikait, a farmer leader, rallied his protesters with an emotive appeal. He broke down in tears and threatened to hang himself if the BJP government did not repeal its reforms. Tikait is the son of the late farmer leader Mahendra Singh Tikait who took over the nation’s capital with nearly 500,000 farmers in 1988. Per the Indian press, Rakesh Tikait is a former policeman with assets worth 80 crore rupees ($11 million), a significant sum for a farmer in India.

    It is clear that the likes of Tikait are not poor, helpless farmers crushed by debt, contemplating suicide. They form part of the almost feudal elite that has dominated the APMCs and the rural economy for decades. Many media outlets fail to realize that such farmers have enjoyed price support, subsidies on agricultural inputs, free electricity, waived water charges, cheap credit from the state-led banking sector and no tax on farm income. They are the winners of the old system and are desperate not to lose what they have.

    Small farmers in northwestern India have joined large farmers too. They fear the unknown. Since British rule, agrarian distress has been persistent in India. Well-meaning measures like APMCs have backfired. The Indian countryside faces the unique challenge of extreme overpopulation. Low productivity, fragmented landholdings, lack of storage infrastructure, high indebtedness, strangulating red tape and entrenched corruption have held rural India back and caused simmering discontent. Leaders like Tikait are tapping into this discontent much like Donald Trump harnessed the rage of those left behind.

    What Lies Ahead?

    The government has clearly been shaken by the duration and intensity of the protests. Sustained negative media coverage in the West has rattled New Delhi. For decades, the West in general and the US in particular criticized India’s agricultural subsidies. At the World Trade Organization (WTO), the US consistently argued that Indian subsidies distort trade. The WTO has been a hostile place for India. Over the last three years, Canada raised 65 questions against India’s farm policies. Australia has complained against India’s sugar subsidies. Yet reform has led to brickbats, not plaudits, in Western capitals.

    In fact, contrary to many press reports, the government has behaved with remarkable restraint. It did not act against protesters even when they blocked highways and hindered railway traffic. Swarajya, a center-right publication, called for the government to “demonstrate it [meant] business when it comes to law and order.” Yet it did nothing. When British coal miners challenged Prime Minister Margaret Thatcher’s authority, she used mounted police to crack down on them.

    Embed from Getty Images

    In contrast, the Modi government has been rather conciliatory, engaging in 11 rounds of talks with protesters. The government offered key concessions and proposed amendments to its reforms. In the final round, the government even offered to suspend the implementation of its reforms for 18 months. Protest leaders rejected this offer and demanded nothing less than a complete repeal of all reforms. No government was likely to accept such an intemperate demand, especially one that was reelected with a thumping majority in 2019.

    The Economist, a longtime critic of Modi and the BJP, takes the view that “agronomists and economists are in nearly uniform agreement” with India’s agricultural reforms. It attributes protests to the “trust deficit” of the BJP government. The publication sees large-scale cold storage as the most obvious benefit of the reforms. Such storage would involve removing limits on stockpiling commodities for future sale. Farmers fear that this could give large companies too much power and undue advantage. They could buy large quantities of produce from farmers within a few days of harvest, hoard this produce and sell it when the price was high.

    Such fears of change are only natural. No entrenched system changes without upheaval even when the status quo is untenable. The Indian agricultural system no longer works, economically, environmentally or ethically. Agriculture needs investment. Neither the government nor the farmers have the ability to provide this investment. In the post-1991 world, India’s private sector has been a success. It is the only player in the Indian economy with the ability to invest in the villages. Hence, Modi has called for a greater role for the private sector in an unexpectedly candid parliamentary speech.

    Despite the current sound and fury, India’s farmer protests will simmer down. Like the Green Revolution, India’s agricultural reforms will have intended and unintended consequences, both positive and negative. 

    Finally, it may be prudent to think about agriculture in the global context. Most countries subsidize agriculture in one way or another for reasons ranging from food security to cultural preservation. The country of Jean Jacques Rousseau has championed the Common Agricultural Policy. Even the free-market US is generous with its farm subsidies. If either France or the United States were to implement agricultural reforms, demonstrations would ensue, legislators would face pressure from electors and sections of the media would accuse them of one sin or another. India is doing something that both the EU and the US may need — but have not yet dared — to do.

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

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      Sovereign Wealth Funds Bet Big on India

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      Since the outbreak of COVID-19, bad news has dogged India on the economic front. By the end of the 2020-21 financial year, which begins on April 1 and ends on March 31, the country’s GDP is estimated to shrink by 7.7%, the biggest contraction since 1952. In the first quarter of the 2020-21 financial year, the economy contracted by a historic 23.9%.

      To put things in perspective, India has suffered its first contraction since the 1979-80 financial year. Then, India’s GDP shrunk by 5.2% because of a double whammy. First, the 1979 Iranian Revolution led to a doubling of crude oil prices, hurting an energy importer like India. Second, a severe drought led to crop failure, falling incomes and declining demand. The 2020-21 recession is worse than that of 1979-1980. In fact, India’s contraction is the second-worst in Asia after the Philippines, whose economy has contracted by 8.5%-9.5%.

      Green Shoots of Recovery

      In 2021, better news has trickled in. India’s manufacturing sector is rebounding. The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, rose to 56.4 in December 2020, up from 56.3 in the previous month. Any figure over 50 signals growth, and manufacturing has now been increasing for five months. More importantly, India’s agricultural sector is expanding strongly. In fact, it grew even during the peak of the COVID-19 pandemic. 

      Deloitte estimates that “India may have turned toward the road to recovery.” It bases its judgment on recent high-frequency data. India has been fortunate to have lower infection and fatality rates than countries like the US or the UK. It has also launched the world’s biggest coronavirus vaccine drive. This should improve consumer and business confidence and boost economic recovery.

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      The International Monetary Fund (IMF) is predicting a return to growth in 2021 as are investment banks and large funds. The Indian government is bullishly claiming that India can achieve double-digit growth through increased digital services and the expansion of its manufacturing base. This would be driven by growing demand in the rural sector, the youth and India’s aspirational middle class.

      Even if the government claims might be optimistic, many companies and investors have bought into the India growth story. In particular, sovereign wealth funds (SWFs) have been betting on India. In 2020, they invested a record $14.8 billion in the country. In the same period, they invested only $4.5 billion in China, meaning that SWF investment in India is three times that of China. What is going on?

      Dark Clouds in Sunny Skies

      To understand why SWFs are turning to India, we have to understand their incentives. These funds do not answer to investors who crave quarterly or yearly or even five-year returns. As custodians of a nation’s wealth, SWFs are long-term investors. In their view, India is operating from a lower base than China. So, India’s growth prospects are higher than China’s as it plays catch-up. 

      Furthermore, unlike venture capital or private equity players, SWFs place a high premium on the long cycle factors like political stability, social cohesion and geopolitical importance. As a robust democracy with many decades of experience in the peaceful transfer of power, India is increasingly attractive in a volatile, complex and ambiguous world. China’s actions in Hong Kong and Xinjiang have shaken up many SWFs that are choosing to park their money in India.

      There is another reason for SWFs to invest in India. They agree with IMF Managing Director Kristalina Georgieva, who praised India for taking “very decisive action, very decisive steps to deal with the pandemic and to deal with [its] economic consequences.” Like her, they are impressed by New Delhi’s appetite for structural reforms and the surprising competence India’s much-maligned government has demonstrated during the pandemic.

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      On December 31, India’s health ministry revealed that the country’s COVID-19 recovery rate was an astonishing 96.04%. This is one of the highest recovery rates in the world. Despite the economic contraction, the government has fed hundreds of millions, brought in much-needed economic reforms and kept the budget deficit down to reasonable levels. At a time when countries have sunk into unsustainable debt traps, India presents a relatively better investment opportunity for SWFs with strong prospects of sustainable, long-term growth.

      There are two dark clouds threatening this sunny economic scenario. First, India faces the twin external threat of China and Pakistan. Both these nuclear powers make territorial claims against India. They have been ratcheting up rhetoric, and tensions are running high. Even at the height of a bitterly cold winter, Indian and Chinese troops have clashed yet again on the border. Once the Himalayan snows start melting in late spring and early summer, troops could start clashing and a military conflict might ensue. This would inflict a tremendous economic setback in the short run. If India is able to defend its territory, then its economy would benefit in the long term. However, there is no guarantee how such a conflict might play out, and this remains a great risk to the economy.

      Second, India faces the threat of domestic unrest. The ruling Bharatiya Janata Party has had to deal with numerous protests since its reelection in 2019. The Citizenship Amendment Act triggered protests in many cities across the country. They died down as the pandemic spread. Currently, farmer protests are rocking New Delhi on Republic Day. In a country as large and diverse as India, threats of more protests and unrest are never far away. As long as the government can contain protests, they remain immaterial. However, a breakdown in social cohesion would damage India’s growth story.

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

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      Was It Wise for India to Reject the RCEP?

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      Last month, 15 Asia-Pacific countries formed the world’s largest trading bloc. The Regional Comprehensive Economic Partnership (RCEP) is China’s response to the US jettisoning the Trans-Pacific Partnership (TPP) under President Donald Trump. The deal excludes both India and the US. Though the RCEP is not as comprehensive as the TPP and does not cut tariffs to the same degree, its members comprise a third of the world’s population and of the global GDP. Given international attention on Xinjiang and Hong Kong, pulling off the RCEP is a major feather in China’s cap.

      Is India Missing the Boat?

      Many blame India for not joining the RCEP, suggesting it is missing out on access to a big market. Indian policymakers take a different view. They realize that countries like South Korea, Vietnam and China have terrific manufacturing capabilities. Opening markets to their goods could damage India’s industry. India could risk that blow if it could sell services to manufacturing powerhouses and earn a net benefit in the process. However, the RCEP focuses on goods, not services, giving India little incentive to sign on.

      In the past, free trade agreements with Asian economies have yielded limited benefits in terms of economic growth, increased investment or geopolitical heft. Instead, they have led to a surge of cheap imports that have decimated India’s inefficient domestic industry. India’s goal is to make its industry more efficient instead of deindustrializing prematurely.

      In Asia, a New Kid on the Trade Bloc

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      While many experts and much of the media predict doom and gloom in a post-RCEP world, both foreign direct investment (FDI) and foreign portfolio investment (FPI) are flooding into India. The country received a record-high FDI of $35.37 billion in the first five months of India’s fiscal year starting on April 1. The November FPI of $8.5 billion exceeds FPI inflows of the past two years combined. Clearly, investors envisage a different reality than the pessimists.

      The pessimistic outlook on India in the post-RCEP world comes from the fact that India missed the free-trade boat earlier and stagnated in the 1970s. Starting in 1969, India lurched to hard-line socialism under Indira Gandhi, the daughter of India’s first prime minister, Jawaharlal Nehru. She began by nationalizing 14 of the largest private banks in the country. After her reelection in 1971, Gandhi nationalized the coal, steel, copper, refining, cotton textiles and insurance industries.

      Apart from going on a nationalization spree, Gandhi gave unbridled power to bureaucrats, who strangled businesses with red tape. She championed public sector behemoths that turned out to be corrupt, inefficient and uncompetitive. Arguably, she did more to destroy private industry than 190 years of British rule.

      Silver Linings to Staying Out

      There are key differences between the 1970s and today. Indian conglomerates such as Reliance Industries and Adani Enterprises have their flaws, but they are not as inefficient as the public sector. In the services sector, India has managed to provide for American and even European markets. Doing business is much easier than in the 1970s because the political elite and the colonial bureaucracy are not as capricious, arbitrary and toxic to private enterprise. So, staying out of RCEP is unlikely to lead to a 1970s-style stagnation.

      There is another tiny little matter. Many economists are blinded by the dogma of free trade. As one of the authors has argued in the past, trade invariably produces winners and losers. Recent press reports reveal that Hershey used financial instruments called futures to squeeze cocoa farmers in West Africa. This is part of a centuries-long pattern. Trade has not necessarily proven to be good to countries exporting commodities from Ghana to Bolivia. On the other hand, countries such as South Korea, Vietnam and, above all, China, that have industrialized, developed technologies and moved up the value chain have done quite well out of trade.

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      The US itself became a major industrial power through a policy of protectionism. Alexander Hamilton took the view that economic independence was as essential as political independence. The US Congress’s first piece of legislation was the Tariff Act of July 4, 1789, which protected American infant industries from ruinous British competition. Many others, including East Asian tigers, emulated American industrial policy.

      There is a strong argument to be made that India’s economic failure came not from protectionism but socialism. By giving colonial bureaucrats the commanding heights of the economy, Nehru and his daughter cut India off at its knees. Economic liberalization in 1991 unleashed growth, but competition from East Asia prematurely deindustrialized India, robbing it of productivity growth. 

      Badly burnt, Indian policymakers are trying something different. Like South Korea in the past, India is favoring its own version of chaebols. The country is embarking on an indigenous form of protectionism, so the RCEP is not on the cards. Furthermore, thanks to fear of both China and Pakistan, India has thrown in its lot with the US. Just as the country once traded preferentially with the Soviet Union, India now aims to do so with its new ally. Already, India exports services and people to the US and gets revenue and capital in return.

      The RCEP, as it stands, has little upside for India. Besides, some of its members like China and Australia have increasingly fraught relations with each other. Key details of the RCEP are yet to be worked out, and reality might turn out to be very different from the hype. Doomsayers damning India might not quite be right. Staying out of the RCEP could well turn out to be wise.

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

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      in World Politics

      India’s League of Internationalists

      by

      Shivshankar Menon, India’s famous former national security adviser, has stirred much controversy recently. His recent article for Foreign Affairs, titled “League of Nationalists,” argues that India’s illiberal drift and new transactional foreign policy has weakened relations with the US. Coming at a time when relations between India and the US have grown closer than ever, Menon’s comments are troubling and untrue.

      India-US Relationship Is Now Official

      READ MORE

      Menon’s case has been helped by others expressing misgivings about India. Analyst Ashley Tellis has said that the West will be a less willing partner if India becomes illiberal. Writer William Dalrymple, an Indophile who has made the country his home, is “imagining a future where [he] might not die” in India. Rising illiberalism makes him uncomfortable. Thanks to a colonial hangover, thin-skinned Indians have been rattled by what Tellis and Dalrymple have to say. These Indians are still fixated on the West’s views of their nation. In turn, many in the West take a great interest in India.

      Mistaken Assumptions

      There is a good reason for this interest. In 1947, independent India began as an internationalist power. Jawaharlal Nehru, its first prime minister, was a Fabian socialist. Along with Ghana’s Kwame Nkrumah, Indonesia’s Sukarno, Egypt’s Gamal Abdel Nasser and Yugoslavia’s Josip Broz Tito, he started the Non-Aligned Movement. It was a group of newly independent nations that rejected the two power blocs led by the US and the Soviet Union. To this day, this movement retains an element of romance, and many intellectuals view it through rose-tinted lenses.

      After seven decades, India is finally moving away from Nehru’s legacy. This is causing heartburn among many, both at home and abroad. Yet Nehruvian internationalism runs deep. Until 2014, his dynasty was in power. It shaped the country’s institutions and patronized its intellectuals. Its legacy still runs strong. Many anglicized Indians see themselves as members of a global leftist movement. They view the Labour Party in the UK and the Democratic Party in the US as natural allies. This metropolitan elite venerates the BBC, The Washington Post and The New York Times. Since Indians now comprise a significant percentage of their readership, these publications offer much advice to India. So do friends of the country like Tellis and Dalrymple.

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      The fundamental argument internationalists make about the dangerous drift of India is based on two assumptions: first, that illiberalism is on the rise in India and, second, that the West must act to stem the tide. Both assumptions are questionable. While US President Donald Trump wins votes from working-class men, Indian Prime Minister Narendra Modi’s most loyal supporters are rural women. There may be illiberal aspects to the current government, but the reality is more nuanced than the simplistic liberal-illiberal juxtaposition at which many hastily arrive.

      Furthermore, the idea that the West can stem illiberalism in India lacks historical and political understanding. For the last 500 years, the Western record has not been reassuring. Genocide in the Americas, the colonization of India, the scramble for Africa, the Opium Wars against China and the divvying up of the Middle East reveal a hegemonic bent of mind. In more recent years, the 1953 coup in Iran, the Vietnam War and the 2003 Iraq War reveal that the West may pay lip service to liberal causes, but it functions as per the blood-and-iron laws of realpolitik.

      Anglicized Indians often forget that the West favored Pakistan over India for decades. The former was a military dictatorship and the latter was a democracy, but such inconvenient details did not matter. Indeed, the West favored China over India once Richard Nixon and Henry Kissinger decided to seduce Zhongnanhai from the arms of the Kremlin. Thanks to the past patronage of the West, India faces a formidable threat on its border by two hostile nuclear powers.

      Getting Key Facts Wrong

      India’s internationalists fail to pay adequate attention to this threat. To be fair, Menon admits that in “many ways US-India relations are in better shape than ever.” The US has overtaken China to become India’s largest trading partner. In 2019, India-China trade declined to $84 billion while India-US trade grew to $143 billion. The US and India are cooperating on defense and security as well. Yet all is not well because the US and India are “now conceiving of the relationship in transactional, rather than principled, terms.” Given the history of US-India relations, where interests have always trumped principles, this is a rather naive assertion.

      Menon also paints a rather simplistic picture of India for his American friends. He claims that “India has excluded Muslim immigrants from the path to citizenship.” Menon is wrong. A cold read of India’s 2019 citizenship legislation reveals that India expedites the path to citizenship for non-Muslims. It does not bar Muslims from getting citizenship. The act was brought in because of persistent persecution and ethnic cleansing of non-Muslim minorities in Pakistan, Afghanistan and Bangladesh. On September 27, the Associated Press reported how the last embattled Sikhs and Hindus fled Afghanistan after threats from a local Islamic State affiliate. These refugees have arrived in India and have a path to citizenship thanks to the 2019 legislation.

      Similarly, Menon makes another glib allegation. He critiques the Modi administration for limiting “the autonomy of the Muslim-majority Jammu and Kashmir region.” He forgets that this former princely state comprised of Buddhist Ladakh, Hindu Jammu and Muslim Kashmir. For years, Ladakhis suffered discrimination from Kashmiris and did not want to be under their yoke. Ladakhi autonomy does not seem to be of concern to Menon. He would be well advised to read an article this author co-wrote with Fair Observer’s editor-in-chief Atul Singh on Kashmir that examines the tortured history of the conflict and its geopolitical complexity. The thorny issue of Kashmir is a little more complicated than Menon’s disingenuous throwaway line would have us believe.

      Power, Not Principles         

      Menon’s glibness raises a key question: Is he genuinely standing up for liberal principles or is there more than meets the eye? Menon’s grandfather served Nehru as India’s first foreign secretary, and his father was the ambassador to Yugoslavia. Menon himself is a blue-blooded member of the Indian establishment that was dethroned in 2014. Modi’s victory meant that Menon had to leave his colonial bungalow in Lutyens’ Delhi and play bridge with other out-of-work patricians instead.

      Embed from Getty Images

      One line in particular has angered many, including those who do not have much admiration for Modi: “Uninterested in human rights and democracy, Trump has given the Modi government a free pass on its controversial domestic agenda.” The idea that Trump or any other American president should have the right to give a free pass to a government that won a thumping parliamentary majority at home is neocolonial and deeply problematic.

      Menon notes how it has been left to Democrats like Pramila Jayapal of Washington state and Ro Khanna of California to express “public disquiet” over Modi’s domestic policies. The idea that Democrats should intervene for liberalism in India is similarly flawed and problematic. Menon, Jayapal and Khanna come from the upper caste anglicized Indian elite that has been defenestrated. There is a sneaking suspicion that it is not liberal values but loss of power that drives them. 

      Menon’s grandfather was an internationalist who loyally served Nehru. Ironically, Menon is attempting to enlist American support in stark contrast to his grandfather who opposed the US and wooed the USSR. More importantly, the former diplomat’s diatribes reflect the beliefs of a significant section of India’s bureaucratic firmament that views the world differently from its own citizenry. For them, India’s politicians are a bunch of uncouth upstarts. They are untrained in grand vision, strategic perspective and humanitarian ideals. In 2007, India’s ambassador to the US at the time called Indian MPs “headless chickens” with “vegetable brains” for opposing some clauses of the India-US nuclear deal.

      This blue-blooded elite league of internationalists disdains India’s democratically-elected politicians. They take the view that these politicians should focus on fighting elections and leave matters of state policy to elite bureaucrats. They resent their loss of control over foreign policy and national security under Modi. This league of internationalists, whose children study at Harvard and Yale, want to take back control from the league of nationalists who speak languages like Gujarati, Hindi and Tamil.

      Nehruvian Princelings Have Failed India

      Menon and his ilk take their cue from Nehru. India’s first prime minister fervently believed in international anticolonial cooperation. He despised the military, distrusted the intelligence community and, as a good Brahmin and a committed socialist, looked down on business and entrepreneurship. Nehru molded the nation in his image. He imposed Soviet-style planning through a colonial bureaucracy. The result was the infamous Hindu rate of growth.

      Unlike other leaders who fought for India’s independence such as Mahatma Gandhi, Sardar Patel and Maulana Azad, Nehru promoted his family and established a dynasty. Inner party democracy went out of the window. Social mobility vanished. His daughter Indira Gandhi brought in the idea of a “committed bureaucracy.” In the words of Sir Mark Tully, the legendary former BBC South Asia bureau chief, this ushered in an era of the neta-babu raj — domination by a politician-bureaucrat nexus — which kept “India in slow motion.” Menon’s father loyally served Indira Gandhi and was part of this nexus.

      Rajiv Gandhi, Indira’s son and Nehru’s grandson, was not as dictatorial as his mother but not quite democratic either. David Goodall, the then-British high commissioner to New Delhi, observed that Rajiv’s cabinet was like an “oriental court” where he was “king among courtiers.” Menon was a favored page boy in this court. After all, he came from good stock. He was a third-generation Nehru family loyalist. The patrician elite Menon belongs to merrily forgets that India was neither liberal nor democratic when they were in charge.

      In the heydays of the Nehru family, India huffed and puffed as a socialist economy. Victory in the 1971 India-Pakistan War was squandered by poor diplomacy in the 1972 Shimla Agreement. India’s anglicized diplomats snatched defeat from the jaws of victory much to the chagrin of the Indian military. These diplomats also shied away from formulating a clear policy on Tibet or Afghanistan. They threw open Indian markets to Chinese goods, getting little in return.

      Embed from Getty Images

      These heaven-born officials failed to safeguard the rights of Tamils in Sri Lanka or champion the rights of minorities in Pakistan or highlight ethnic cleansing of the Hindu Pandits in the Kashmir Valley. They also took their eyes off Nepal. As a result, Chinese-backed communists took over the country.

      In 2008, India’s financial capital Mumbai was attacked by Pakistani terrorists. Hundreds were killed or maimed. Menon was foreign secretary then. Bomb blasts in major cities had already been a regular occurrence. Yet Menon and his underlings failed to mount a vigorous diplomatic effort against Pakistan for using terror as an instrument of state policy. Worse, the establishment Menon belonged to kept arguing for an “uninterrupted and uninterruptible dialogue” with Pakistan. Menon’s strategy led India nowhere, yet he rose to be national security adviser.

      Dancing in the Shadows

      Today, Menon is dancing in the shadows. His patrons have lost two consecutive elections. Under Modi, Ajit Doval is now national security adviser. He is a former intelligence operative who argues for a muscular foreign policy. Unlike Menon, Doval believes in punishing Pakistan for terrorism through military strikes. He has thrown Menon’s Pakistan policy into the same dustbin where he has deposited Menon’s China policy. This makes Menon and his ilk uncomfortable.

      The likes of Menon, who have run India’s foreign and security policy for decades, have been Nehruvian pacifists and internationalists. They decreed that India occupy the commanding heights of international morality. Some aspects of this policy were commendable, such as India’s support for independence of colonized nations and its sustained opposition to apartheid in South Africa. However, this policy largely failed to further India’s national interests in terms of boosting economic growth or achieving national security.

      Today, this policy has lost credibility for another reason. Like all elites, the Nehruvian one became corrupted by power. Over time, it earned notoriety for nepotism. Menon became foreign secretary by superseding 14 officers senior to him. There is a possibility that he was indeed so brilliant that he deserved to jump the queue. However, the fact that Menon came from a family of Nehru dynasty loyalists might have helped his meteoric ascent.

      There is another tiny little matter. ShivshankarMenon was national security adviser to a government that noted journalist Chaitanya Kalbag damned as “the most corrupt in [India’s] history.” When princelings damn peasants for being unprincipled and transactional, they could do well to remember Bob Dylan’s words that “The Times They Are a-Changin’.”

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

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      India-US Relationship Is Now Official

      by

      After decades of dithering, India has finally opted for American-led security architecture in Asia. In the latest US-India 2+2 meeting of foreign and defense ministers, the two countries concluded a fourth foundational agreement. The four key agreements between the United States and India to date include the Communications Compatibility and Security Agreement (COMCASA, 2018), Logistics Exchange Memorandum of Agreement (LEMOA, 2016), General Security of Military Information Agreement (GSOMIA, 2002) and, as of October this year, the Basic Exchange and Cooperation Agreement (BECA). This alphabet soup of little-known pacts has created the basis of a US-India entente. 

      India Must Modernize Its Inefficient Defense Production System

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      The seeds of a new architecture have been germinating in the form of the Quad, a grouping of India, Australia, Japan and the United States. Indian scientists have gone on a missile testing spree, and the political leadership in New Delhi is not softening its stand on the India-China border. India is also boosting its defense ties with Southeast Asian nations threatened by China. It has offered the BrahMos supersonic cruise missile to the Philippines. BrahMos can be used against both land and sea targets. As an anti-ship missile, it has few peers. This missile effectively denies area entry to enemy surface combatants.

      In addition to BrahMos, India might soon start selling Akash air defense missiles to its Southeast Asian friends. New Delhi is now clearly making moves to counter Beijing, and closer cooperation with the US seems to be part of India’s new grand strategy.

      The Ghosts of 1962

      In the war of 1962 over a disputed border, India lost disastrously to China, yet it did not establish closer relations with the anti-communist US for largely ideological reasons. The then-prime minister, Jawaharlal Nehru, was a socialist. Deeply influenced by the Soviet Union, he was one of the founders of the Non-Aligned Movement. Poor at realpolitik, Nehru tried to cultivate the US after 1962 even as he continued to remain close to the Soviet Union. The effort did not lead to much, and Beijing concluded that an Indo-US entente was improbable.

      Since 1962, the Chinese People’s Liberation Army (PLA) has adopted an aggressive stance against the Indian Army. In contrast, India was chastened by the loss of territory and prestige. Therefore, successive Indian governments have adopted a diffident stance vis-à-vis Beijing. In 2020, this has changed. The brutal killing of an Indian colonel by the PLA triggered a ferocious response from Indian troops. A surge of patriotism followed. The Modi-led nationalist Bharatiya Janata Party (BJP) government drew a line in the Himalayas and has stood up to its northern neighbor.

      Many in the English-speaking Indian and Anglo-Saxon media expected and predicted Indian capitulation, defeat and disgrace. The turn of events has proved them wrong. India has conducted its quickest Himalayan mobilization. It has used creative tactics, nibbled some territory hitherto held by the Chinese and put all three of its armed forces — Army, Navy and Air Force — in a state of high operational readiness. India has also conducted special operations inside Chinese territory and openly used Tibetan troops for the first time in its history. 

      New Entente

      In October, Modi’s government has shed India’s traditional Nehruvian diffidence and embraced the US wholeheartedly. Secretary of State Michael Pompeo and Secretary of Defense Mark Esper joined Indian Defense Minister Rajnath Singh and Foreign Minister S. Jaishankar for the third annual US-India 2+2 Ministerial Dialogue in New Delhi.

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      By signing BECA, India has gained access to valuable geospatial data, improving situational awareness for military operations and increasing the accuracy of its missile systems. COMCASA enabled Indian and US military platforms to network with each other. LEMOA allowed Indian and US militaries access to each other’s refueling facilities and military material. GSOMIA started the sharing of sensitive military intelligence data.

      These four agreements enable logistics, communication and geospatial data sharing are in place, making India a de facto US ally. India has turned decisively to the US in part because it has lost faith in Russia’s ability to contain China. Since the collapse of the Soviet Union in 1991, India and the US have steadily moved closer. However, relations have been greatly influenced by the chemistry of those in power in Washington and New Delhi. Successive governments have blown hot and cold. When there has been a change of power in either democracy, their relations have suffered in the transition.

      Now, the 2+2 dialogue has moved decisively toward operationalizing the Quad. Previously, the Quad had not quite taken off. Australia and Japan have all shied away from closer engagement. This year, Australian sailors are joining the navies of Japan, India and the US for the Malabar naval exercise. This is a major change in political and military alliances in the region.

      The latest meeting marks a watershed in US-India relations. No longer will American policy change if a new administration enters the White House. Even as Donald Trump leaves and Joe Biden takes over, the trajectory of US-India relations is likely to remain the same. Many in New Delhi fear that Biden is likely to initiate a rapprochement with China and pressure India to kick-start talks with Pakistan. Even if that turns out to be true, ties between India and the United States have now been institutionalized, and the countries have entered an entente, if not an alliance.

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

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      The Indian Government Is Not Letting a Pandemic Go to Waste

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      Indian culture venerates tools of trade. Indeed, a special day in the festival calendar is dedicated to worshiping them. In this context, tractors and farm implements are considered almost sacred. Burning a tractor is one of the most symbolic forms of protest. Members of the main opposition party decided to engage in precisely this act. They recently burned a tractor in the high-security zone of India Gate in New Delhi.

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      As per the World Bank, 41.5% of Indians are employed in agriculture. Another 20% are dependent on it. This has implications for Indian politics. Support of farmers is critical to winning elections. Agriculture is to India what the military-industrial complex is to the US. Politicians promise goodies and operate elaborate patronage systems in rural India to secure votes.

      The chaos, unruliness and terrible state of Indian cities can partly be explained by the disproportionate doling out of subsidies to rural areas. This leaves little money for urban infrastructure, which is almost invariably ramshackle across the country. Most state governments in India are headed by rural politicians. Even Karnataka, which is home to Bengaluru, the information technology capital of the country, is no exception.

      The Biggest Reform Since 1991

      With such powerful vested interests, hinting at reform is a tall proposition. The Bharatiya Janata Party (BJP) government led by Prime Minister Narendra Modi has done the unthinkable. It has dismantled state control over agricultural markets. Opposition parties are protesting because they represent rural power brokers who are deeply upset. By freeing farmers from such power brokers, the Modi government has ushered in a brave new era both for Indian politics and the economy. 

      A little bit of context is essential to understand the true implications of this move. Until now, farmers were forced to sell their produce to agricultural produce market committees (APMCs). They are dominated by rural politicians and local bigwigs who exploit farmers. For decades, farmers got pitiably low amounts while consumers paid ridiculously high prices. The middlemen who run APMCs pocketed the difference.

      At a time when GDP has been shrinking and COVID-19 has been barely tackled, the Modi-led government has introduced the most significant economic reforms since 1991. In that historic year when the US fought Iraq in the Gulf War and the Soviet Union fell, India liberalized its economy and ushered in an era of high growth. The liberalization of agricultural markets will boost farm incomes significantly. With about 60% of India’s population reliant on agriculture and allied activities, this move will increase domestic demand and bolster Modi’s political base. In addition to this, Modi is also pioneering a scheme inspired by Peruvian economist Hernando De Soto’s work that seeks to better define the property rights of the farmers.

      Other Major Measures

      Apart from agricultural liberalization, the Modi government has instituted other far-reaching reforms. It has simplified longstanding labor laws that held back manufacturing. The Modi government has also curbed the flow of foreign funding into India’s nonprofits. Many of them have been opponents of the Modi government and its policies. Now, these nonprofits stand weakened, leaving the BJP in a stronger position.

      Another development has strengthened the BJP. For decades, Bollywood has been a bastion for opponents of the ruling party. Recently, the film industry has been in trouble. The death of a small-town actor has put the spotlight on nepotism and corruption in Bollywood. Some key figures are now under investigation. As a result, Bollywood’s criticism of the BJP has become muted in some quarters but more strident in others. Bollywood’s target is a section of the media that it deems to be sympathetic to the BJP’s brand of politics.

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      Such is the BJP’s domination that its ambitious legislative agenda has escaped public scrutiny and effective opposition. In June, these authors sent out a brief that explained how the ruling party needed just seven more members of parliament to control the 245-member Rajya Sabha, the upper house of the parliament. Now, the BJP has achieved that control and its MPs are ramming through reforms their party deems fit.

      Foreign correspondents working for big media outlets in New Delhi who frequent the Khan Market have failed to understand the major implications of recent moves. The Modi-led government has embarked on a new chapter. The legislative reforms it is pushing through are ambitious, far-reaching and potentially transformative. While COVID-19 is ravaging the country and China is making threatening moves on its border, India has bet boldly on big reforms. The BJP might reap a rich political harvest as a result.

      Yet even as it seems all smooth sailing for the BJP, the ruling party faces a big risk. Voters expect it to govern well. So far, several key reforms and policy initiatives have failed miserably. India’s colonial-era bureaucracy has built toilets and opened bank accounts because these did not threaten its power. In contrast, measures that threatened bureaucratic privilege, such as manufacturing reforms or indirect tax reforms, have been quietly scuttled.

      If India’s powerful bureaucracy tries similar tricks with the latest set of reforms, the ambitious Modi government might finally turn on the purveyors of red tape themselves.

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

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      China-India Clash Wakes Up Tibet’s Ghost of Independence

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      Wildfires have been burning in California, Brazil and Siberia. Brexit is causing unending headaches in both Europe and the UK. The American election campaign has kicked off in high gear. Deaths from COVID-19 have crossed one million. US President Donald Trump’s taxes were the talk of the town, before he landed in hospital with COVID-19 himself. In such a milieu, it is easy to overlook a tempest in Asia. On October 5, China threatened to make India’s latest strategic tunnel unserviceable even as Indian engineers race against time and tough conditions to bolster their country’s border infrastructure.

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      For the last few months, India and China have been clashing over icy heights on the roof of the world. Their undefined border and contesting claims are causing increasing unease in the world’s largest and most populous continent. They are also leading to new moves on the geopolitical chessboard that might have historic consequences.

      Tibetan Troops, Article 370 and Ladakh

      Tenzin Nyima, a company leader in India’s shadowy Special Frontier Force (SFF) and a stateless Tibetan refugee, died on the contested Line of Actual Control that separates territories controlled by India and China. Hundreds of thousands of Tibetan refugees have lived in India since the Dalai Lama’s flight to the country in 1959. A select few serve in the SFF, an extremely tough outfit that excels in high-altitude operations.

      The Tibetan Kashag was the de facto independent government of Tibet before the invasion by China’s People’s Liberation Army (PLA) in 1950, which was condemned by the United Nations General Assembly. The SFF fights under the snow lion flag of the Tibetan Kashag. The Central Tibetan Administration, known as the Tibetan Government in Exile, also uses the same flag. Understandably, the PLA, the Communist Party of China (CCP) and Chinese nationalists are not too fond of this symbol.

      Nyima’s funeral in Ladakh occurred with much honor. Importantly, Ram Madhav, then the general secretary of India’s ruling Bharatiya Janata Party (BJP), was present at the funeral. His admirers refer to him as the “Kissinger of India.” More pertinently, Madhav is one of the most influential political figures in India and a key ideologue on strategic matters. He was a key architect of the BJP’s Kashmir policy and was instrumental in removing Article 370 last year, which ended Jammu and Kashmir’s autonomy. By honoring Nyima, Madhav is making a symbolic but profound point: He is signaling support for the Tibetan cause.

      As most Indians and India hands know, the BJP had been vowing to remove Article 370 for decades. Once Prime Minister Narendra Modi won historic reelection last year, the BJP made a bold bet and removed this article from the constitution. It carved out Ladakh from the state of Jammu and Kashmir as a separate union territory. The people of this land practice Tibetan Buddhism, share ethnic kinship with Tibetans and follow the Dalai Lama. By removing Article 370 and giving Ladakhis their own territory, India has upset not only Pakistan but also China.

      Salami Tactics

      Historically, India’s stand on Tibet has been ineffectual. Despite domestic opposition, Jawaharlal Nehru acquiesced to the Chinese conquest of Tibet. Even after the disastrous defeat of 1962, India’s first prime minister did not come down on the side of the Tibetans. The Dalai Lama has lived in India for decades, but Delhi has never openly supported Tibetan independence or autonomy. In contrast, China has allied with Pakistan and opposed India’s interests in Jammu, Kashmir and Ladakh.

      Since Modi came to power in 2014, he has met Chinese President Xi Jinping 18 times. He has been conciliatory and accommodating to Xi. Even before Modi, India opened its markets to Chinese products. This economic engagement was for a strategic reason: India wanted peace with its larger neighbor and aimed to wean it away from Pakistan. Instead, China has consistently followed salami tactics, and, this year, it cut off a larger slice of Indian territory.

      Chinese actions led to Modi losing face earlier this year. The Indian National Congress (INC) party tried to paint him as the new Nehru. For the Nehru dynasty that still leads the INC, a debacle for Modi would wash off Nehru’s sins and damage the BJP. In the brutal battle for national dominance, an embarrassment for Modi would boost the INC. Hence, it is no surprise that Modi and Madhav are pushing back so strongly against China.

      In recent years, India has been preparing for a two-front war. In 2018, India’s Air Force conducted its largest exercise to counter a joint China-Pakistan invasion. The junior minister in charge of border roads is General V.K. Singh, the former army chief. More than most, he understands the key need for border infrastructure and has been pushing hard for it. This has caused the Chinese grief because Indian infrastructure upgradation of its Central Asian tracts chips away at the PLA’s strategic advantage.

      Public Sympathy

      In recent weeks, Modi has gained public sympathy. The Indian public blames Xi for backstabbing him and the Indian intelligentsia for being too naive, if not deluded, about China. This public support has allowed Modi to take a stronger stance against Beijing. The PLA and Xi have been caught off guard. At high altitudes, Chinese troops have been weighed, measured and found wanting. Indian troops have not rolled over as in 1962. In fact, they have given the PLA a bloody nose. This is deeply embarrassing for a country with superpower pretensions. China is setting itself up as a counterpart to the US. Anything short of a conclusive victory against a country China deems to be its inferior would be nothing short of a national disaster.

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      As two of the authors explained in a historical analysis of the India-China conflict, Beijing has become more aggressive since Xi came to power. The PLA has consistently and constantly claimed territory India considers its own. As a result, confrontations have been on the rise. There is a real risk that Xi might be overplaying his hand.

      What Xi fails to appreciate is that 2020 is not 1962. Over the last few months, China has lost the element of surprise. Indian troops are mobilized all along the border and have more experience of high altitudes. Furthermore, Tibetans and other mountain troops fighting for India are local lads with old scores to settle with the PLA. They come from communities who practice Tibetan Buddhism. Hence, they resent Beijing for cultural genocide in Tibet and do not want to live under its yoke. These troops are fighting for their freedom and are in a do-or-die mood. The next clash could easily spill over into an all-out war.

      Xi forgets that India has less to lose in case of war. A decisive defeat would merely confirm its underdog status and win international sympathy. Even if India loses but its troops acquit themselves well, China would be humbled. However, if China loses, Xi himself and his CCP might find themselves in trouble. On a simple cost-benefit calculus, a Xi-led China has no rational reason to go to war against a Modi-led India.

      There is another key reason for China to wind down tensions. After decades of licking their wounds, Tibetans have now openly entered the fray under their fabled snow lion flag and with the blessing of India’s political leadership. It is no longer two militaries clashing for icy crags but two ideas colliding head-on. A military clash might be about to turn into a political, religious and cultural conflict. The Tibetan snow lion of independence threatens Beijing’s holy cow of Greater China.

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

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      Why Is India’s Opposition Congress Party in Crisis?

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      Allan Octavian Hume, a sidelined official of the British Raj, founded the Indian National Congress (INC) in 1885. Born in Kent, UK, Hume was the quintessential gora sahib (white master) who had gone native. He took the initiative to create a modern political platform in a newly colonized and deeply divided land. The INC went …
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      Why Are the Indian and Chinese Economies Decoupling?

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      Many experts argue India is the weaker power unable to take on China. In an article in Foreign Policy, James Crabtree argues that a trade war with China would be a bad idea for India. In his view, India’s “military is inefficient, underequipped, and dogged by procurement corruption scandals.” To develop its military strength, India needs a dynamic economy, and an “inward economic direction” would only benefit China in the long run. Therefore, an India–China decoupling is a terrible idea.

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      These analysts are wrong. Their argument against decoupling is based on three implicit assumptions. First, India is a deeply-divided country unable to act or respond decisively. Second, India is dependent on the Chinese economy for its growth. Third, China’s rise is inexorable and India has no option but to come to terms with it. These assumptions are true, but it is an error of judgment to treat them as unqualified truths.

      A Trip Down Memory Lane

      For Indians with longer historical memories than many of these experts, these arguments sound familiar. Anglo-Saxon publications have long hectored, advised and moralized on Indian issues. On July 5, 2014, the editorial board of The New York Times made a case against India’s membership of the Nuclear Suppliers Group. To be admitted, India needed “to sign the treaty that prohibits nuclear testing, stop producing fissile material, and begin talks with its rivals on nuclear weapons containment.”

      In response, Gurmeet Kanwal, a retired Indian brigadier-turned-defense analyst, called the editorial “partisan and condescending.” Some even saw it as neocolonial. He pointed to “the existential threat posed by two nuclear-armed states on India’s borders” that led India to develop its nuclear weapons capability. Kanwal argued that India had been a “responsible nuclear power” with a “positive record on non-proliferation” and had “consistently supported total nuclear disarmament.” In typical Sikh humor, he advised nuclear ayatollahs to focus on real proliferators and let go of the cap, roll-back and eliminate (CRE) stance they had adopted against India since the 1990s.

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      Just as India stood up to the US on the nuclear issue in the 1990s, it is capable of standing up to China in 2020. An India–China conflict is highly undesirable. Ideally, New Delhi and Beijing should be able to work something out over endless cups of tea. However, sanctimonious advice from foreign experts about dire consequences of an India–China decoupling has to be taken with a bucket, not a pinch, of salt.

      In 1998, India went nuclear despite dire predictions for its economy. Many in Washington assumed that India depended on the West for its economy. Barely seven years prior, India had experienced a serious financial crisis. The Gulf War and slowing exports to the US crippled an economy by rising deficits and increasing debt. The precipitous decline of the Soviet Union meant India no longer had a godfather to bail it out. So severe was India’s 1991 currency crisis that it had to pledge its gold reserves and liberalize its economy to get a bailout from the International Monetary Fund. In 1998, India was better off than in 1991 but certainly not in a strong position. Nuclear tests put it under immense pressure.

      At the UN, the Conference on Disarmament condemned Indian nuclear tests. In the preceding years, India had watched the West ignore the 1989 Tiananmen Square crackdown and fete China for its economic reforms. Condemnation for nuclear tests strengthened, not weakened, India’s response. It stood up to the West, ignored experts and upended nuclear apartheid. Today, India is again in a mood to defy experts and stand up to China.

      Like Love, Trade Is Complicated

      As troops amass on the India–China border, a full-scale economic war has broken out. It is leading to a structural break in the Indian economy. Both public opinion and political leadership is now committed to decoupling from China. In India, there is a ban on 59 Chinese apps by government authorities. Major trade bodies have formally announced boycotts of Chinese products. For instance, the Confederation of All India Traders (CAIT) has listed 3,000 such products. CAIT is a national umbrella organization with 40,000 smaller trade bodies and 70 million traders as members. The government has tightened country of origin rules for e-retailers and other sellers.

      Demand for Chinese products is declining. Xiaomi is no longer India’s top-selling phone. Samsung has replaced it. Increasingly, selling Chinese goods using Southeast Asian free trade agreements is becoming difficult. The existing business model of buying in China and selling in India is under pressure.

      In an additional twist, Indian tax authorities have conducted raids on Chinese companies and individuals for money laundering. It led to the arrest of a Chinese national. Apparently, he was married to a woman from India’s northeast border state of Mizoram, had spuriously obtained an Indian passport and been arrested earlier for espionage. It seems trade is not as simple as experts imagine it to be. Intelligence, influence and geopolitics are inextricably intertwined with trade, business and investment. In the India–China economic relationship, three largely forgotten factors are noteworthy.

      First, India enhanced trade ties with China not only for economic reasons but also geopolitical ones. Becoming a key market and investment destination for China was supposed to reduce the risk of conflict and wean Beijing off Islamabad. Aggressive Chinese actions have made India reconsider this strategy and change tack.

      Second, India’s manufacturing sector is reasonably well developed but has suffered from Chinese competition since China joined the World Trade Organization (WTO) in 2001. A 2018 parliamentary report concluded that Chinese imports were playing “a negative role for [India’s] domestic industry.” The report warned about the loss of jobs, an increase in bad debts for banks, a decline in tax revenues and a worrying dependence on China for critical products. It concluded that China does not play by WTO rules and “the problem of Chinese dumping is a matter of concern across the globe.”

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      India is not alone in having concerns about China’s abuse of WTO rules. A 2018 report to the US Congress expressed concern at “China’s continued embrace of a state-led, mercantilist approach to the economy and trade.” It detailed “substantial costs borne by WTO members as a result of China’s problematic trade regime” and  the challenges presented by its “non-market economic system.” Given China’s track record, there is a case to be made for India taking a more protectionist path.

      There is another tiny little matter. Protectionism has played a key role in industrialization for any latecomer. Furthermore, industrialization has been the key driver of economic growth. In a 2019 article, one of these authors observed that the first major act passed by Congress was the Tariff Act of July 4, 1789. Without protecting its infant industry, the US would not have emerged as an industrial power.

      Since 1978, China has followed the American playbook on steroids. It has powered through the largest and fastest industrialization in history. Its companies enjoy the advantages of infrastructure, cheap financing and political support. Therefore, they have been able to achieve economies of scale. As a result, Indian companies have been blown away. An India-China decoupling might give sectors from aerospace components to advanced pharmaceuticals a second chance.

      Third, Chinese imports into India are nice-to-have, not must-have, goods. Demand for them is elastic unlike the inelastic demand for energy from the Middle East and the US. An India-China trade war that leads to a decoupling of the two economies could lead to short-term pain but has a strong rationale for the longer term.

      The Shape of Things to Come

      In any case, experts forget that India is unlikely to turn entirely inward as it did after independence in 1947. Recently, billions of dollars have poured into India from the US. Reliance Jio, an Indian mobile internet company, raked in $15 billion in 10 weeks. This is indicative of a deeper trend. Given new geopolitical imperatives, India is now looking to boost economic ties with friendly powers. It wants Korean, Japanese, European and American firms to set up shop in the country. Foreign market players who can act nimbly would be in a good position to grab some of the approximately $60 billion China’s trade surplus with India. There are new investment, manufacturing and trading opportunities emerging as the status quo changes and a new order emerges.

      Many economists predict a short-term price shock as Chinese goods stop coming into the country. They forget that India has struggled with jobless growth even during the best of times. Decoupling with China could boost domestic manufacturing not only for large but also for medium and small industries. This would increase employment, tax revenues and even demand thanks to a multiplier effect. Improved job figures further increase political support for decoupling and decrease India’s need to subsidize agriculture so heavily. For decades, agricultural subsidies have put pressure on public finances. If a lower amount is spent on subsidies, pressure on the fiscal deficit would abate.

      To sum up, India has strong reasons to decouple and no longer consider WTO rules sacrosanct. A tectonic shift is underway. After World War II, a new rules-based order emerged. The end of the Cold War strengthened this order and led to visions that Western democracy was the final destination for all societies. With polarization and partisanship at home, Western democracies themselves are in peril. The order that emerged in 1991 is crumbling and a new one is about to emerge. History offers us lessons as to what to expect.

      In the past, India and China focused on their spheres of influence with the Himalayas keeping them apart. Both prospered. In this age of trade, peace and prosperity, a Chola empire based in the modern-day southeastern state of Tamil Nadu ruled Malaysia (Putrajaya), Indonesia (Srivijaya), Sri Lanka and the Maldives. The Middle Kingdom held sway over Mongolia, Korea and Japan. Both India and China could go back to sticking to their historic spheres and to trading with each other.

      At the moment, China has followed salami tactics and encroached on territory India claims as its own. China has also been meddling in Nepal, Myanmar and Sri Lanka, India’s key neighbors. Since  1963, China has been in a close alliance with Pakistan. Yet China has never played a role in the Indian subcontinent and cannot suddenly turn into an overlord here. Therefore, close India-China economic ties no longer make strategic sense.

      Additionally, China disingenuously claims to meet India halfway while insisting that the onus to improve the border situation lies entirely with its neighbor. This is a one-way, not halfway, diplomacy that suggests aggressive intent. The Chinese also seem determined to win the war of narratives and are enlisting the support of free market ayatollahs to do so. It is only natural that the Indian narrative is bound to be different. It is in sync with the new realities of the day, which drive India’s decision to decouple its economy from China. Trade, investment and deep economic ties are a jolly good thing with allies and friends, not with rivals and foes.

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