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Depressed Indian economy
All-out effort to accelerate growth required
by Charan Singh
IN the RBI's first quarter report for 2013-14 the worst expected has materialised as many argumentative economists, visiting and resident in India, would amicably agree. The growth projection for 2013-14 has been revised downward as domestic economic activity weakened during April-June 1013. Industrial production is muted and consumer durables have declined mainly due to a fall in passenger cars and motorbikes. The capital account deficit (CAD) is expected to deteriorate as the jaws of trade deficit have widened, on account of contraction in exports and a sharp rise in gold imports. The risks to CAD have increased as unwinding of the unconventional policy in the US begins, as was evident by the trailer that had caused global bond sell-off and capital outflows from the emerging markets. Worst still, external sector vulnerability indicators have deteriorated, especially short-term debt rising to 44 per cent of the total debt at the end of March, 2013. So, very worrisome is the fact that the services sector has recorded the lowest growth in 11 long years. The asset quality of the banking sector has deteriorated which has kept the credit growth below the indicative trajectory. Despite such a tight monetary policy, CPI inflation has hovered around double digits and food inflation has not eased up either, though WPI inflation has been lower than 5 percent. In a nutshell, everything except inflation, house prices and subsidies, is down and so also are business expectations. As would be anticipated, having taken strong monetary measures in the last fortnight, monetary policy has not initiated any change in interest rates, which have already been high for some time now. The Indian economic situation continues to be rather grim but then every failure is an opportunity in disguise. June 1991 was a turning point in India's economic history. But should India always wait to be at the brink to realise the consequent abyss? To arrest the slide some concerted efforts would have to be made and innovative measures undertaken as traditional methods have failed to yield results. A herculean battle seems to be on the horizon for policy-makers in India. There are available opportunities and windows that can help the economy recover. In addition to the standard stalled reforms, and projects which the government would hopefully clear soon, there are specific projects which the government can consider. First, the housing sector suffers from a shortage of nearly 18 million units, especially for the low and economically weaker sections of society. As housing has linkages with nearly 300 industries, the housing sector, can be incentivised. Secondly, in view of the general slowdown, government revenue is expected to be lower than budgeted. In this context, expenditure saved is income earned, and the government rather than resorting to traditional curtailing of capital expenditure could reconsider the implementation of the Food Security Bill 2013 until the economic
situation improves. Further, if rising imports of gold are any indication, then it implies that there are available financial resources in the economy, and nearly three-fourth of gold demand comes from the rural sector in a quest to address uncertainty in the market. The demand for gold is expected to continue to be high as the price of gold, based on various international estimates, is expected to be benign for the next few years as also due to a large proportion of the young population below 25 years in India, implying an increase in marriages, and rapidly rising rural incomes. Therefore, instead of simply imposing controls on gold imports, to curtail the demand for gold, the government should offer an alternative financial instrument to the public, especially in the rural areas. One such avenue to consider could be inflation-indexed small saving instruments to be sold through the network of more than 1,55,000 post offices, and
bank branches. To tap resources from the rural sector, the government could consider unconventional means like floating local and specific-project related infrastructure bonds. These specific infrastructure projects, which also hava links with many industries, should be physically visible so as to interest the rural population like the construction of a local bus station, a trading-cum-shopping centre and a local road connecting to the nearest urban centre. In view of the fact that the project is located in the local area would appeal to local sensitivities, attract local financing and ensure
local subscription. Still better would be to make the local authority responsible and accountable for the completion and operations of such infrastructure projects. Also, given the crowded shopping malls, swelling numbers of cell phones and crowded airports/luxury hotels/dance bars, it may be time to tap the resources swirling in black markets and raise resources through special bearer bonds once again. The global economic environment is not very encouraging for India's exports. In addition, the exchange rate had been depreciating rather rapidly for which many in the markets were not prepared and hence had sought the RBI's intervention to restore the rupee to a range of Rs.54-56 with the US dollar. And the RBI intervened rather strongly. This level is difficult to justify by economic logic. In the determination of exchange rates, inflation differential between the two countries is an important factor in the long run. Illustratively, the average annual inflation rate in India has been 6.0 percent during 1993-94 to 2011-12 compared with 2.4 percent in the US over the similar period. The average exchange rate of the rupee with the US dollar was Rs 31.4 in 1994 and adjusting for the inflation differential of 3.6 percent per annum would justify an adjustment of the rupee, which
should continue. Finally, the RBI would help the economy recover by lowering interest rates. The government could consider lower interest rates, at least for loans to the housing sector and infrastructure to spur growth. Finally, to ensure recovery, special concessions could be considered for auto industry as were granted by President Obama in the USA. The need is to revive growth and all-out effort to achieve growth should be made by the
policy-makers. The writer is a Professor of Economics, RBI Chair, IIM, Bangalore. The views expressed are personal.
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A grandmother called ‘Baby’
by V.S. Chaudhri
WHAT is in a name?/That which we call a rose/By any other name would smell as sweet." Thus said Shakespeare in Romeo and Juliet. Is it so simple and easy to change a name? Maybe so in the West but not in our country. A name in our society does not just mean an identity to a person. It also gives him a qualitative semblance. As there is some distinct aroma associated with each flower so there is always something special, something sacrosanct and something
emotional in a name. We had a senior ICS Officer in the 1950s. His name was Nawab Singh. He had retired when I joined service and I did not have the opportunity to work under him or meet him but people say that from his dress, style, manners and etiquette he was every inch a Nawab. There was a young woman officer with me. We were both under training at one station. One day she barged into my room. She appeared to be quite perturbed. I asked her to sit down and have a cup of tea. After a couple of minutes, when she settled down she spoke thus, "Chaudhri Sahib, I am fed up with my peon. How should I call him? Being a woman, I cannot call him by his name". I could understand her difficulty. The peon's name was Pritam (loved one). I laughed and suggested that she might start calling him by a different name, say Pritpal. She said that he might not like it and people in the office might also come to know of the reason behind it. I said then she might call him by his designation. She cried and said, "Oh no, this will be all the more embarrassing. The official translation of peon in Punjabi is Saathi. Saathi also means a companion". Looking at her predicament, I said "This was not so big a problem. She may go to the Estt. Officer and request him to interchange her peon with mine, to which I will have no objection". Now she heaved a sigh of relief and left, as if she had won a war. Once, I had an orderly whose name was Dukhi Ram. One day I asked him as to who had given him this name. He said, ''Sir, it must be my parents". I told him, "Look, everybody is dukhi (unhappy) in this world. Nanak dukhiya sab sansar. What is special about you? From now onwards, everybody in the office will call you Sukhi Ram". So Dukhi Ram became Sukhi Ram from next day although I know he did not like the change. Chhotu (Ram) is a popular name in Haryana. There was an official 6ft tall with this name. Some of his friends called him "Lamboo" but he always insisted that he be called Chhotu only. And on top of all, I know a lady who is past 70 and who is a grandmother. She is still called 'Baby' by her kith and kin. She would not like to be called by any other name, howsoever
sweet.
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Moving towards demilitarising Siachen
The Siachen imbroglio continues to fester. India needs a cost-benefit analysis to determine whether Pakistan would move into occupied positions should India, in the event of demilitarisation of the area, vacate positions of advantage that it now holds
P.R. Chari
Speaking
on the last Foundation Day function of the Institute for Defence Studies and Analyses, the Defence Minister, A.K. Antony, ruled out any possibility of de-militarising the Siachen Glacier, and re-stated India's inflexible position that it will only consider pulling back its troops after a joint India-Pakistan authentication is undertaken of the 109-km Actual Ground Position Line. Pakistan has opposed any such "authentication" as a pre-requisite to demilitarization. The factual position is that India has gained physical possession of the Siachen Glacier. But the Line of Control, earlier called Ceasefire Line, ends at grid reference NJ9842 and beyond that point there is no legal boundary to demarcate the territory between India and Pakistan. Somewhat earlier, General Bikram Singh, India’s Chief of the Army Staff, had voiced his opposition to Indian troops being withdrawn from this “strategically important” region. He had said that India “possesses positions of strategic importance and we have expressed our concern to the government. It's now for the government to decide.” That was the surest way of ensuring that the jittery government would get paralyzed into inaction.

Indian Army personnel train at the Siachen Battle School prior to their induction into the world’s highest theater of conflict. Tribune photo: Manoj Mahajan
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The history of the three-decade long India-Pakistan confrontation in this “highest theatre of conflict in the world” is only too well known. Briefly, the Ceasefire Line that was demarcated after the Karachi Agreement in 1948 and the Line of Control that resulted after the Simla Agreement in 1972 terminates in its northern extremity at map coordinate NJ9842. Neither of these agreements mention who has possession or title to the land north of NJ9842, apart from vaguely noting that the boundary would proceed "north to the glaciers". Probably, the assumption was that no dispute could possibly arise over such a barren and inhospitable region, and that it would remain a neutral undisputed No-Man's Land.
Historical perspectiveOver to Saadat Hasan Manto. The tributes to Manto have flooded the liberal press in India and Pakistan as they celebrate his birth centenary. In truth, Manto belonged to neither India, where he was born on May 11, 1912, nor to Pakistan, where he died on August 18, 1954. He belonged to both countries. His conviction in the essential unity of the subcontinent is an essential aspect of his oeuvre that comes through in his haunting short stories that are truly vignettes of the violent times in which he lived his tragically brief life. Manto excelled in a natural talent for structure and economy of words, racing ahead in his short stories to reach their final conclusion - denouement or surprise ending. A wry sense of humor led him to conclude his own epitaph with the words, “Under tons of earth he lies, still wondering who among the two is the greater short-story writer. God or he, Saadat Hasan Manto.”
The tragedy that gripped both newly born nations in 1947 finds an unforgettable reflection in one of his works, Toba Tek Singh. Readers would recollect the outlines of this inspired short story. It seems India and Pakistan decided to exchange the inmates of their lunatic asylums after they had exchanged the prisoners in their jails. In terms of these arrangements, Bishen Singh, re-named Toba Tek Singh after his village, was to be transferred to India from Lahore. Much tumult and confusion resulted in his mind as he could not understand how one country could become two, and why he should go away after having lived his life as Toba Tek Singh. The situation of India and Pakistan in Siachen is no different. However, the subsequent narratives of the two countries on the Siachen dispute are strikingly dissimilar. Briefly, India's case is that, Pakistan began encouraging Western countries to send mountaineering expeditions to this ill-defined Saltoro-Kangri-Siachen region. Significantly, official U.S. maps at this time also began showing the boundary beyond NJ9842 as extending north-eastwards to the Karakoram Pass. To counter these developments India initiated its counter-moves with an Army mountaineering expedition being dispatched to this area in 1978. The news and photographs of this expedition were published in 'The Illustrated Weekly of India', to gain wide publicity for the effort. A new word "oropolitics" entered the vocabulary of politics, meaning the use of mountaineering for political objectives.
The operational paradigmThe nightmare scenario conjured up by the Indian Army was that China and Pakistan, already in occupation of some parts of the former princely state of Kashmir, could link up, and surround the Indian territory in Ladakh on three sides. The resulting loss of control over the Shyok Valley would then permit Leh to be threatened. The rest is history. India launched a swift attack in April 1984 to capture the Siachen glacier and gain control over the commanding Saltoro Ridge, and two strategic northern passes - Sia La and Bilafond La. Pakistan's desperate attempts thereafter to dislodge the Indian forces have not succeeded, and a state of no-war-no-peace has continued thereafter in this inhospitable area. Moving on, a ceasefire was negotiated in end-2003 along the India-Pakistan Line of Control, which was extended thereafter to the Siachen area. No shot has since been fired in anger. But, that has not stopped the steady loss of soldier's lives due to accidents - falling into crevasses or being buried alive under avalanches - and developing pulmonary edema. Last year, some 150 personnel of Pakistan's Northern Light Infantry died in Gyari, south of the Saltoro Ridge due to an avalanche. Shaken by the disaster Pakistan's army chief, General Parvez Kayani had introspected: “We want this issue to be resolved and it should happen. It is a tough mission for us and them, which has its costs.” India, too, supports demilitarising the Siachen area but only after pre-conditions are met. There is moreover the huge drain of resources computed at around Rs 1,000 crore annually on the Indian side, and Rs 300 crore for Pakistan, which has significant opportunity costs for both countries. Still, the Siachen imbroglio continues to fester. The most debilitating question asked in New Delhi is why it should show enthusiasm to reach a solution when it has the advantage of the high ground in Siachen and a larger economy to sustain this confrontation. Whenever, consequently, slight hope arises of sanity allowing some agreement to be reached, the holy cow of national security is invoked. The angst is then promoted that, if present positions are vacated, Pakistan would immediately grab this territory, and that it would be impossible thereafter to wrest the region back without a huge loss of lives. This frightens the politicians no end.
Towards demilitarisationPerhaps, the time has come for the counter-factual aspects of the Siachen dispute to be set forth. Appreciating the north-west-to-south-east configuration of the series of mountain ranges in this region, how easy would it be for Pakistan to occupy the Siachen region if India vacates it? That, too, undetected by Indian aerial/ satellite reconnaissance to enable ground and air attacks? What would be the economic and human costs for Pakistan to remain in occupation of the Siachen and Saltoro region that are currently being borne by India? Pakistan would also become vulnerable to Indian attacks that could include the air dimension? Taking all these factors into account how would a cost-benefit analysis in this regard by Rawalpindi stack up? Has any such war-gaming exercise been undertaken in Indian military training institutions? Probably not. In any case, the results are unlikely to be shared with anyone outside the military establishment. So, is there a solution to stop the continuing hemorrhaging of soldier's lives in Siachen? Attention might be drawn here to a book titled Realities of War, written by a journalist Sidney Gibbs and published just after the First World War. After describing the horrors of trench warfare and the appalling loss of lives in that war, Gibbs suggested that peace would have prevailed if half a dozen military and political leaders from each of the two sides had been sent to spend a week in the trenches. A similar solution will definitely work if India and Pakistan wish to solve the Siachen riddle. Coming back to Toba Tek Singh, his tale ends badly. The fateful day for the transfer of lunatics arrives. Hindu and Sikh inmates are sent off to the Wagah border for being exchanged with the Muslim inmates from India. When his turn comes Toba Tek Singh refuses to move. He stands immobile in no-man's land, but is left undisturbed since he is a harmless old man, while the other transfers continue. Sometime during the night, he collapses. Barbed wire now separates India and Pakistan, but Toba Tek Singh lies in between them, on a bit of earth, that has no name. That image would be the most fitting epitaph for the many lives lost and that are still to be lost in
Siachen.
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