Category Archives: Economics

Rashtriya Swadeshi Suraksha Abhiyan

राष्ट्रीय स्वदेशी सुरक्षा अभियान

While teaching history lessons, the teacher asked the pupils: “When did our Bharat get Independence?”

The students answered in chorus: 15th August 1947.

“At what time?”, asked the teacher…

“Exactly at 12 midnight”, replied the students at ease.

The teacher then asked: “Ok! Good. When did we lose Independence?”

This time, the children were perplexed by the question and none of them could answer!

What a pertinent question in today’s scenario! Truly, it is difficult for anyone of us to pin point a date on which we lost out independence.

The process of losing a country’s independence begins from the time when it starts losing its economic independence. Trade and commerce play a vital role in the economic wealth of every nation. History reminds us that these trade imbalances in the past had forced India to accept foreign rule.

De-Globalisation imperative: Self-reliance & economic Sovereignty

Today, the world is witnessing the rise of a new America, which is trying to protect its interests more vehemently and more systematically by way of local hire policies and visa restrictions, “Be American-Buy American” and “America First” sentiments.  It is walking out from international agreements, such as Paris Climate Change in keeping with the interests of its country.

There was sub-prime crisis; there were fears around disintegration of European economy post the “Brexit”, technology shifts, and the new developments after Donald Trump’s victory. The “JOBLESS GROWTH” due to automation and mechanization is evident in the fact that jobs are being displaced despite the expansion and integration of economies. The “de-globalisation” seems to be the new paradigm heading towards bilateral trade of pre-globalisation era.

Is “Protectionism” still a bad word?

Not anymore! The America’s new regime is the latest example with their overhaul of immigration policies and new visa restrictions on movement of skilled labour, import restrictions, etc. The disintegration of European Union and post “Brexit” economy, all’s not well in the so called ‘Developed’ liberal countries.  The world has woken up to the new international game of “SURVIVAL”.

Ironically, when the realization dawned upon the world community that the rules of the game are unjust, we still fail to wake up to see the new world order!

The rise of Bharat and other Asian economies is causing panic in the geographies where free trade was once preached and propagated. The West is worried about the “China price” which has become the biggest global threat to many countries including USA, Europe and India.

On 24th July, 1991, Dr.Manmohan Singh through his Union Budget declared the liberalization and free-trade policies and subsequently India joined the WTO in 1995 for full economic integration with the rest of the world. (China in WTO since 11 December 2001).

The process of Globalisation started in India in the year 1991. India has suddenly opened the macro-economic flood-gates to join un-calibrated Globalisation, without any debate in the Parliament or in the public discourse, after decades of Socialism slumber. The then Finance Minister in 1991, Dr.Manmohan Singh in P.V.Narasimha Rao Government was hailed as the architect of Free Market Economy or Globalised Economy in India. In 2016, the policy of Globalisation in India completed 25 years. It is a reasonably long time to evaluate India’s experiences with Globalisation. During this period of 25 years – 1991-2016, we have conducted and completed many years of planning under Planning Commission and also recently introduced a new system called NITI Aayog.

The broad Parameters for evaluation of economic growth over this 25 year Globalisation period are set by Dr.Manamohan Singh himself. In his first broadcast to the Nation as Prime Minister on 24th June 2004 (UPA Government) , Dr. Manamohan Singh told: “Growth is not an end in itself. It is a means to generate Employment, banish Poverty, hunger and homelessness and improve the standard of living of our people. It must also be environmentally sustainable.” The success or failure of the Globalisation Policy can be evaluated with reference to our achievement in the goals of,

a) Employment Generation,
b) Eradication of Poverty, (Hunger & Homelessness),
c) Improvement in the standard of living of people,
d) Environmental sustainability of Growth.

After completing 25 years of its economic integration and embracing the West, India is now witnessing a new world order of “de-Globalisation” and reinforced “protectionism” from the same countries who gave us wisdom on capitalism, preached and promoted Globalisation!

In the face of LPG transformation (Liberalization, Privatisation and Globalisation) that went on for the past 25 years, India has witnessed economic downfall w.r.t industry and manufacturing sectors.

Swadeshi Jagaran Manch (SJM) headed by Mananeeya Late Sri Dattopant Thengadi – “Rashtra Rishi”, as we revere him, had forewarned this global meltdown and the imminent threat from China’s economic invasion. He was one of the well-known exponents of Swadeshi movement, which has reappeared five decades after India attained freedom, in the face of a sudden onset of un-calibrated Globalisation.

Swadeshi Jagaran Manch is a “movement” and not an organization

Historically, India has been viewed as being far less vulnerable to global financial crises than other large economies because, it was much less integrated with the global economy than countries like, say, US or China. Today, the growing “Trade-GDP ratio” (indicator of Globalization) indicates the opposite as true. The World Bank data shows that this ratio was around 20% in 1995 and has increased to over 44% in 2015. This was higher than the trade to GDP ratio of the US, Japan or China. During the 1997 Asian financial crisis, India escaped relatively unscathed. However, this will become more complex and challenging in the days to come, if we do not increase the domestic demand and purchasing power locally.

On one side, we are witnessing the downfall of free trade economies that have impacted India and the rest of the world. On the other, India is economically challenged by China and also politically flexing its muscles w.r.t Arunachal Pradesh and North-East Bharat.

Indian Armed forces are on an eternal vigil safeguarding our borders and protecting us from China threat geographically, while economically, it is incumbent on every citizen to secure the internal security of the nation by exercising our duty at an individual level.

India has signed various international treaties since independence and bound to it’s moral and legal obligations. The decades of such treaties and agreements which are against country’s interests cannot be called off at one go. Hence, the recourse to working away with such difficult treaties is for the citizens of the country to join hands. Only questioning the government or delegating the responsibility of blocking the Chinese imports is not sufficient but we need to boycott/shun China’s products and reject their economic invasion and support our National interests at individual levels and organization levels. As the saying goes, Democracy is “by the people, for the people and of the people” and “People’s Jurisdiction” is the ultimate authority in accepting or rejecting the goods.

Hence, the only viable recourse to enable the government in policy formulations is to boycott en-mass all the Chinese products. This will indirectly help the government to take appropriate measures to safeguard our national interests in saving and creating millions of jobs.

History is replete with examples of revolutions being brought about by commoners. No task and service however small, is unimportant like the little squirrel and Vanaraas who helped Maryada Purushottam Sri Rama, Mavali tribal warriors specialized in guerrilla warfare helped Shivaji, Rana Pratap teaming up with Bhills to oust Mughal invaders, Chanakya raised Chandragupta from being a commoner into becoming emperor to protect Bharat Varsh and Dr.Hedgewar who built a gigantic organization like RSS only with few Swayamsevaks…!!

“A small number of people who are a ‘creative minority’ make values live in this world”- Arnold Toynbee.

Let us all come together and participate in this Swadeshi Suraksha against China’s economic aggression.

चीनी वस्तु बहिष्कार करो – बोलो वंदे मातरम

China is using its currency “Yuan” to combat risk of a market-meltdown. It has been using “currency manipulation” (daily currency fixing) as an insurance policy against a full-scale market meltdown. A sharp selloff in China’s stock market, a surprise currency devaluation and a persistent slowdown in economic activity have raised doubts about the ability of China to maintain the hyper-growth levels of the past two decades.

Strike when the iron is hot. The time has come for India to take on China, as China is now experiencing many economic and political challenges from within as well as neighboring countries while going through the crisis of market melt-down. This market melt-down was analysed by many Indian and foreign media. “India Today” magazine carried a special issue with cover page “China Meltdown” highlighting how India can take advantage of that situation.

We as Indians must support and purchase indigenous Indian-made products and boycott the products of China in particular. There was a similar movement sometime back on Social Media (through Twitter, Facebook, WhatsApp) during the festive season of “Deepavali”, to boycott “Chinese-made crackers” and purchase only Indian-made crackers (brands such as Sivakasi). There was overwhelming response that had forced China to withdraw its cheap crackers from the market, which were illegally dumped in Indian market. This movement has also enabled the present Indian government to ban Chinese crackers. China could not put any pressure on the Indian government against this successful campaign.

It is imperative for India to become “self-reliant” once again and strive for the economic sovereignty. Swadeshi Jagaran Manch therefore, calls upon all the citizens of Bharat to participate in “Rashtriya Swadeshi Suraksha Abhiyan”, an economic freedom movement paving the way for India’s economic independence and counter the economic invasion by China (“Vitteya Aakraman”).

This effort requires coming together of all nationalists – political parties, associations, trader communities, farmers, economists, academicians, students, labour organizations and all Swayamsevaks of social and voluntary organizations to work in this awareness campaign and counter China’s economic aggression. We can start the campaign by first educating each and every household, about the ill-effects of Chinese goods that have encroached stealthily into our daily life.

This Abhiyan is scheduled to begin from 6th – 20th, August 2017 and will be conducted at various forums, Schools, Colleges, Hostels, individual houses, apartments, Professional associations (CA, Doctor, Engineers, Lawyers, hoteliers, trader communities) to collaborate and spread the message of Swadeshi and Swavalamban with emphasis on boycotting / rejecting China goods at all levels (micro and macro).

India has trade deficit with 27 countries

India’s top trading partners: at a glance

Source: The Ministry of Commerce and Industry, Dept. of Commerce, Government of India; Wikipedia.

Balance of Trade with China:

If the countries’ exports are more than the imports, then that economic situation is called as “Favorable Trade Balance” (a.k.a “Trade Surplus”). On the other hand, if the countries’ imports are more than the exports, then it is called “Unfavorable Trade Balance” (a.k.a “Trade Deficit”).

There is a growing trade imbalance in terms of excess of imports over exports to China. As per the data available, there is a steady increase in India’s trade deficit with China. The trade volume has reached to almost 50% only with China compared to the whole of India’s international trade.

Import of Capital goods

Though, India’s economic relations with China dates back to ancient times, the bilateral trade with China in the globalised world has only started in 1991. In a short span of time, the trade between the two countries has grown to such an extent that China became India’s largest trading partner in 2008. This has picked up only since 2001, but how come China has turned out to be largest trading partner within just decades?

The capital goods imported from China alone amounted to USD 150 billion plus. India’s import from China is three times more than its exports to China. The UPA government had eased customs and excise tariff to facilitate their entry into India with the least fiscal resistance and consciously ran current account deficits of USD 339 billion. This means what? – To that extent India has lost its wealth to other nations. Who gained from India’s loss? Not America, nor England, Germany, France, Japan, or Russia – countries friendly to India. But it is China. From 2006, year after year, it has been the single biggest beneficiary of India’s import orders.

Bharat is very good market for capital goods. Infact, the whole of Europe put-together is less than the size of Bharat, the third largest economy. The import of capital goods raising such large bills of hundreds of billions, most of which Bharat could make in its own backyard, has drained out a third of India’s GDP under nose of the UPA Congress’s regime in just a decade. The UPA Congress was therefore the architect of the huge deficit syndrome with China!

Why China is our biggest threat?

China behaves like a friendly nation on the surface, while cunningly shows military and economic aggression all along. On the other hand, China shares deep friendly relations with Pakistan, which is another enemy country of India, which is perpetrating terrorism through “proxy-war” across the border day-in & day-out. Infact, China has always behaved as an enemy country since 1949 when they became a communist nation.  While China supports Pakistan directly, it is covertly attacking India through economic invasion (“Vitteya Aakramana”).

For the last 10 years, on many occasions China has opposed anti-terrorism laws on the proposition at United Nations. It has blocked India’s entry into NSG (Nuclear Suppliers Group) – a group of supplier countries of nuclear material such as Uranium. China has also obstructed the flow of Brahmaputra water flowing into India, and also aggressively pursuing infrastructural projects in Pak-occupied Kashmir with its expansionist attitude. Many a times, it has violated border agreements by trying to encroach through incursions and behaving like an enemy country. Hence, there is absolutely no doubt that China is India’s biggest enemy.

India’s border with China:

India had “zero Km” of border with China in 1947. Today, India’s border with China is 3,488 Km (with Tibet & Xinjiang) as per the Ministry of Home Affairs website.

The Line of Actual Control (LAC) is a demarcation line that separates Indian-controlled territory from Chinese controlled territory. Upon independence in 1947, the government of India used the Johnson Line as the basis for its official boundary in the west, encompassing “Aksai Chin”. However, India did not claim the northern areas for including in India’s territory. On 1st July 1954, Prime Minister Nehru wrote a memo directing that the maps of India be revised to show definite boundaries on all frontiers. Upto this point, the boundary in the “Aksai Chin” sector, based on the Johnson Line, had been described as “un-demarcated”).

As per the records of Ministry of Commerce, China’s export of goods to India is worth Rs. 4.25 Lac Crores approximately. However, everyone knows that some of the products that have been exported from China are unaccounted, which do not carry proper bills, and the goods that have been billed seems fake. It is estimated that the real exports from China to India amount to more than Rs. 6, 00,000 Crores, while our exports to China is a mere Rs. 60,000 Crores which is ten times less than our imports!

As of now, India’s import bill from China is so high that we do not have this scale of supply from any other country. Because of China’s cheap quality products being dumped at a low price, it has destroyed many Indian Small Scale Industries leading to more than one Crore unemployed.

By increasing consumption of China products, we are not only strengthening their economy but also decreasing our currency value. It is high time we wake up and realize that China which has always behaved as an enemy country, has to be boycotted, shunned and their products be restricted, else our economic and job creating sectors will be affected to an extent that they cannot be revived, which is a serious matter.

China’s Economic Invasion:

China’s military and strategic aggression against India is visible to the whole world and makes news instantly and frequently. However, its economic aggression is much more dangerous.

Until 1991 when India’s liberalization policies were started, India’s bilateral trade with China was minimal, bore no consequences and was insignificant. But in last the 25 years, our economic relationship with China has sky-rocketed so much so, that by 2011 China has become India’s largest trading partner and it continues to dominate our economy. The bilateral trade balance was a paltry USD 265 million in 1991 which has crossed USD 70.73 billion by 2016. India’s current bilateral trade with China is larger than its combined bilateral trade with Britain, Germany and Japan.

Increase in Trade Deficit

Importing in excess to one’s Exports is called “Trade Deficit”. A country facing the challenge of huge trade deficit will lose exchange powers in the international market. In this scenario, between China and India, China is immensely benefited, whereas India is in a frightening situation. India has been facing this challenge of trade deficit with China for quite some time now. The trade between India and China is drying up to India’s disadvantage. The trade deficit of such a magnitude is a matter of high concern for India.

In 2001-02, India’s trade deficit with China was a mere 100 Crore USD. In 2015-16, this has reached USD 5300 Crore. From the table below, we can see how the Trade Deficit with China has increased under the UPA regime.

As we can see from the table, under 10 years of UPA rule from 2004-05, what started as 9 hundred Crore USD deficit, has reached 3900 USD which is four times increase!

During this period, the total trade deficit was 204 hundred Crore USD. (If there is Trade Surplus (i.e, if Exports > Imports), then the country’s wealth is considered to be increased, which will reduce the trade deficit subsequently).

Since 2006-2014 under UPA government, India’s wealth has reduced by a total of 204 hundred Crores USD (i.e, 9+16+23+19+28+39+39+31). In other words, we have increased India’s principal enemy’s wealth by 204 hundred Crore USD.

Under NDA rule in the first year, in 2014-15, the trade deficit has touched 48 hundred Crore USD. Finally, it has reached 53 hundred Crore USD, a maximum until 2015-16!

Flood of Chinese goods into Indian Market:

In the last 10 years, China’s goods are being flooded into the Indian market in the name of low price, which is world famously known as “China price”. Knowingly or unknowingly, the Chinese goods have been creeping into our households in every aspect and product category, so much so that even “mosquito-racket” market is monopolized by China, which by the way is neither reliable nor eco-friendly. Because of the “China price”, the local vendors are unable to compete. Basic household items like battery torch, pen pencil, kitchen utensils, and plastic toys. Some of these products like Shirt buttons, belts, photo frames, knives, scissors, idols of Ganapathi, Budha, Kite threads are smuggled into India via Nepal.

As a consequence of all this, the enterprise of Sivakasi crackers in Tamilnadu, the enterprise of Aligarh Lock industry in Uttar Pradesh, the toys and idols industry in Channapattana of Karnataka and lacs of dependent families and skilled laborers of these industries have become homeless. Also, the enterprise of component manufactures of Electronics and Power industries, Silk industry (“Reshmi”) in Rama Nagara of Karnataka, have also reached the stage of closure. This is leading to cessation of small scale industries. Under the stringent directives of judiciary, Gujarat and many other state governments have notified the ban on use, sale and purchase of Chinese “Manja” for the kite-flying which is made of razor sharp nylon thread and plastic/synthetic material. The court has issued directions to take necessary steps to prohibit manufacture, use and sale of synthetic kite flying thread like ‘Chinese manja’.

The “Automobile Tyre Manufacture Association” (ATMA) has asked government of India to impose “anti-dumping” duty on Chinese made radial tyres, expressing the concern that India’s tyre industry may close down affecting the whole automobile industry. Kerala cultivates natural rubber; hence that industry will also be affected heavily because of Chinese tyres. Similarly, Steel pipes manufacturing sector has also been affected by China products.

“Unfair Trade Practices” and WTO

China is selling the products at subnormal and “predatory price”– in other words for losses! This is called “dumping” in the macroeconomics parlance which is also WTO terminology. If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product, which is considered as “unfair competition”.

Many governments take action against dumping inorder to defend their domestic industries and economic sovereignty. In India, the concept of Unfair Trade Practice draws a parallel from the previously applicable Monopoly Restrictive Trade Practice (MRTP) Act, 1969 which has been replaced by the Competition Act, 2002 and multiple times amended by the Competition (Amendment) Act in the years 2007, 2009, 2011 to discipline the Predatory pricing, Cartel, M & A (Merger & Acquisition), etc.

However, for the governments to challenge the companies against dumping with “anti-dumping” duty, the WTO legal procedure is very complex and tedious. The products being dumped have to be sent to laboratories for tests; the actual product price has to be evaluated by gathering data on production costs at source and the whole cost-benefit analysis worked out. The WTO agreement does not pass judgment. Its focus is on how governments can or cannot react to dumping — it disciplines anti-dumping actions, and it is often called the “Anti-Dumping Agreement”. The WTO agreements mandate to uphold the principles, and also allow exceptions in some circumstances. Three of the issues are:

  • actions taken against “dumping” (selling at an unfairly low price)
  • subsidies and special “countervailing” duties to offset the subsidies
  • emergency measures to limit imports temporarily, designed to “safeguard” domestic industries.

There are many different ways of calculating whether a particular product is being dumped heavily or only lightly. The agreement narrows down the range of possible options. It provides three methods to calculate a product’s “normal value”. The main one is based on the price in the exporter’s domestic market. When this cannot be used, two alternatives are available — the price charged by the exporter in another country, or a calculation based on the combination of the exporter’s production costs, other expenses and normal profit margins. And the agreement also specifies how a fair comparison can be made between the export price and what would be a normal price.

Calculating the extent of dumping on a product is not enough. Anti-dumping measures can only be applied if the dumping is hurting the industry in the importing country. Therefore, a detailed investigation has to be conducted according to specified rules first. The investigation must evaluate all relevant economic factors that have a bearing on the state of the industry in question. If the investigation shows dumping is taking place and domestic industry is being hurt, the exporting company can undertake to raise its price to an agreed level in order to avoid anti-dumping import duty.

Detailed procedures are set out on how anti-dumping cases are to be initiated, how the investigations are to be conducted, and the conditions for ensuring that all interested parties are given an opportunity to present evidence. (Source: Understanding WTO Agreements)

The government is bound to WTO and any action taken based on the above laws and procedures has limitation. In democracy, “People’s Jurisdiction” is the ultimate authority in accepting or rejecting the goods. The “consumer” plays a vital role in the nation’s economics discourse. If we as consumers are convinced, we can always reject the products. This will empower the government to reconsider its policies and convince the WTO of the same.

America: America too is facing the similar threat from China. China can produce many consumer goods for lower costs than other countries can. Americans ofcourse like any other country want these goods for the lowest prices. How does China keep prices so low? Most economists agree that China’s competitive pricing is a result of these factors:

  • Strategy of “Export at any cost” (in other words for losses!)
  • Low standard of living, which allows companies in China to pay lower wages to workers.
  • Exchange rate that is partially fixed to the dollar.

This means that many American companies cannot compete with China’s low costs. As a result, US-manufacturing jobs are lost. From time to time, legislators try to impose tariffs or other forms of trade protectionism against China to bring back the jobs.

There is a famous book titled “A Year Without Made In China: One Family’s True Life Adventure In The Global Economy” authored by Ms.Sana Bongiorni  – an American home maker. The book has become the best seller across the world.

China is selling its sub-standard goods at such low prices that people are attracted to buy them. This has led to large scale, medium-scale and small-scale industries to shut down. This inturn leads to China acquiring “monopoly” status in Indian market. Once China monopolizes the market, it can play with the “pricing” strategy to their advantage. Once the Indian industry closes completely sector by sector, then the Indian economy becomes weak, which is what Chinese want.

There is another reason why China is selling its goods at subnormal prices. China is a communist country where there is no democracy, no fundamental rights for people and “Free Press” unlike India, and the government forcibly buys land from the farmers by paying very less compensation and sells it to manufacturing industries. In China, Right to Land is a contractual management for limited period. Farmers are exploited; Agricultural laborers/workers have no rights and hence are paid minimal wage and made to work in double shifts as bonded laborers; even prisoners are made to work in the factories. By doing so, they are managing to keep the daily wages minimal thus saving labour costs. Along with his, they are providing electricity to the industries at a very low cost. They also make sure their currency “Yuan” stays at minimum all times – this is called as “Currency manipulation”.

These are the some of the short cuts that China’s communist government manages the pricing to be low compared to any other international market pricing. And that is how they are able to “dump” their goods into international markets aggressively.

Look at the China’s share in various manufacturing goods across the sectors:

Value vs. Volume:

India’s imports from China include Power generating machines, Telecommunication towers, Solar-power panels and equipment for a high “Capital goods” in high Volumes. Whereas, India exports low capital goods such as raw leather, raw cotton, iron ore and other such metals. On the subject of Buffalo meat, out of the total of India’s exports of Buffalo meat, 45% share goes to China alone.

In this way, by importing high capital goods and exporting low capital (low Value) goods, we are witnessing Trade Imbalance and Deficit. India is not only importing raw materials from China, but also importing finished goods which are taking a toll on the trade balance and domestic market.

Look at the below figures of our imports and exports for the recent years:

In the year 2012-13, we have been able to export only 25% compared to imports. In 2013-14, we have been able to export only 35% compared to imports. In the 2014-15, we have been able to export only 25% compared to imports.  This indicates that our exports w.r.t imports are dwindling rapidly.

‘Formal’ and ‘Informal’ sectors:

The informal sector, is neither taxed, nor monitored by any form of government. Unlike the formal economy, activities of the informal economy are not included in the calculation of gross national product (GNP) and gross domestic product (GDP) of a country.

This terminology is a colonial construct, explains Prof.R.Vaidyanathan in his column hereThe informal sector consists of all economic activities that remain outside the official institutional framework (statutory control and implications and governmental regulation). Consequently, the government has little control over the quality of employment. Generally, agricultural activity does not come under the purview of the informal set. This usage has come from Latin-American countries, where US experts have identified a large number of economic activities not regulated by government and many of them “underground” in nature – hence the term `informal.’

China’s attack is happening on both formal and informal sectors. Whereas 90% of the employment is provided by these faceless people, the informal sector is not given more importance and incentive. Informal sector plays a vital role in Bharat. China is not allowing import of Indian goods using unfavorable trade practices.

To reduce this trade deficit with China, the then Prime Minister of India, Dr.Manmohan Singh had once persuaded the authorities of China to purchase more & more Pharmaceuticals, Information technology products and buffalo meat, etc from India during his visit to China. However, that effort did not yield any positive outcome. Since then onwards even after 2014, all the government’s efforts have not been able to yield any result.

In the month of September’ 2014, when China’s President Mr.Xi Jinping visited India, there were 16 agreements made with the new NDA government under Prime Minster Narendra Modi. Among those agreements, there were these investment plans China has pledged to invest in India:

  • Modernization of India’s ageing railway system with high-speed links and upgrade.
  • Set up industrial parks in Gujarat and Maharashtra. To this effect, the government of Gujarat has identified 400 acres of land & the Maharashtra government has identified 1250 acres land.
  • Give more market access to India to products, including pharmaceuticals and farm products.
  • 20 hundred Crore USD worth Investment opportunity for China

To correct the “trade imbalance” between India and China, the new Indian government thought of extending a huge investment opportunity to China as compensatory. However, this remedy seems to be more harmful than the disease! Once the investment opportunity is given to enemy nation China, they will transfer the entire profits (double/more the profits than they currently extract from India) in large scale with absolutely no barriers. There will be collateral damage that will destroy the India industry forever and survival itself becomes difficult. Indian economy will then be at the mercy of China!

Inspite of opening up so many sectors for investments and liberalization, in return, China did not give any such opportunities for Indian industries to flourish in China.

Mobile/telecom manufacturing sector dependent on China imports

Telecom subscriber base in India has grown substantially in the recent decades. India is currently the second-largest telecommunication market and has the third highest number of internet users in the world. India’s telephone subscriber base expanded at a CAGR of 19.96 per cent., reaching 1058 million during FY07–16. In March 2016, total telephone subscription stood at 1058 million, while tele-density was at 83.36 percent, which will contribute substantially to India’s GDP, according to report prepared by GSM Association (Source: IBEF).

The Mobile manufacturing industry has also picked up keeping up pace with the speed of technology. Many local phone-maker companies have also sprung up giving tough competition to the international players.  However, this has become more of a ‘screw-driver technology’, meaning assembling units for multi-national companies than indigenous in reality, as most of the manufacturing is still being done overseas.

Why? The mobile manufacturers have taken advantage of importing phones as “semi-knocked down” kits (SKD)” with most components already soldered to the main circuit-board (PCB) of the handset. These kits are brought in as components at “zero duty” and then simply assembled into devices with value addition of just 1-2 per cent.

On the other hand, if the phone companies were to import “completely knocked down” (CKD) kits, it would push up the local value addition to 7-10 per cent as the assembling requires more labour and a proper assembly line. But due to “zero duty” on SKDs, most brands prefer to do just a screwdriver job.

With components largely imported from China, local value-add remains low. The ‘Make-in-India’ programme for mobile phones is perhaps helping China more!

Industry experts say, policies encouraging CKDs will kick-start the overall mobile phone manufacturing industry in India. In the last two years, 40 new handset manufacturing units and 30 mobile components/accessory units started operations in India. Indigenous production of handsets has gone up from 11 crore units valued at ₹ 54,000 crore in 2015-16 to 17.5 crore units at ₹90,000 crore in 2016-17. (Source: Hindu Business Line article May 12, 2017, Phones ‘Made in India’, cash registers ringing in China).

Pitching for duty

Formal representations to the government were made by mobile industry bodies (such as MAIT – Manufacturers Association for Information Technology), requesting the government to impose a 12 per cent duty on the import of SKD kits. In 2014, 260 million mobile handsets, valued at close to $18 billion, were sold in India. Keeping aside the distribution margins, taxes and duties, the annual import bill amounts to $12 billion. (Source: The Hindu Business Line, Dec’ 10, 2015)

Local value-addition

The numbers are big, but the total local value-addition done is small — less than 6 per cent at as at end 2016. The total value of mobile phones sold in India in 2016 was about $12 billion (cost to manufacturer) on a retail value of $16 billion. Of this, only $650 million worth of value-addition was done locally. That comes to 5.6 per cent. Essentially, Indian companies continue to run screwdriver shops. To increase value-addition in India, last year the government has enforced 12.5 per cent duty on imported batteries, chargers and headphones, pushing most manufacturers to source these components locally.

The latest reports suggest that the Government is set to levy a customs duty of at least 10 per cent on imported mobile phones (and accessories) under GST to safeguard (and retain) benefits passed on to local manufacturing, but, it is yet to make an official announcement on the same. Imported phones and parts are still expected to cost more or less the same, but, the move would surely encourage players to rather Make in India than elsewhere.

1st’ July 2017, Update: Government of India imposes 10% Basic Customs Duty (BCD) on imported mobile equipment:
(In a notification late night on 30th June 2017, the department of revenue said that the government took the decision “on being satisfied that it is necessary in the public interest so to do.” The government in a press release issued on July 1st added that 10 per cent BCD had been imposed on “Cellular mobile phones and specified parts of cellular mobile phones like charger, battery, wire headset, Microphone and Receiver, Key Pad, USB Cable“. India’s telecom trade promotion organizations, TEMA (Telecom Equipment Manufacturers Association of India), CMAI (Communication Multimedia and Infrastructure), Indian Cellular Association and domestic telecom manufacturers have welcomed the government’s move to impose 10 per cent basic custom duty (BCD) on charger, battery, wired headset, microphone receiver, key pad, USB cable. They mentioned that the decision to impose BCD would also clear any roadblocks in the way of a long-term manufacturing roadmap that offers tax benefits to those making mobile phone components within the country. It would also increase local value addition to 35-40% from the current 6%).

13 July’17, Update: SJM demands termination of Chinese Metro coach contract:

Press Release: The Swadeshi Jagran Manch has demanded termination of contracts to Chinese manufacturers for Metro coaches. SJM in a letter to the Prime Minister on 13th July, 2017 stated that the claim of “Make in India” is a farce since the Chinese resort to assemble the parts in place of manufacturing. “Two recent announcements are worrying us, which include Chinese company SAIC Motor Corporation Ltd, the joint venture partner of General Motors, taking over its India manufacturing plant at Halol in Gujarat and state owned China Railway Rolling Stock Corporation (CRRC) – getting a go ahead to set up metro rolling stock manufacturing unit in Multi-Modal International Cargo Hub and Airport in Nagpur” the SJM convenor Ashwani Mahajan has stated in a letter to the Prime Minister.

China as sympathizer of Pakistan’s sponsored Terrorism against India

India was the most affected nation by terrorists like Maulana Masood Azhar, Zaki-ur-Rehman, Syed Salahuddin, etal., from Jaish-e-Mohammed of Pakistan on 26/11 terror attacks in Mumbai and also recently in Pathankot Airforce station in Punjab state of India.

Whenever India adopted a resolution against these terrorists at United Nations to declare them as terrorists, China has opposed it and used its veto power at UN to show its hatred towards India.

China has blocked a similar move by USA’s resolution to designate Pakistan-based militant group chief Maulana Masood Azhar as a terrorist by the United Nations (UN), barely weeks after India’s similar efforts were blocked by China.

In all such cases where strong action was sought from China against terrorist organizations Lashkar-E-Taiba, Jamaat-Ud-Dawa, etc, China had either ignored or acted against all such moves to declare them as terrorists, thus proving its dislike against Indian state.

China’s military exercise at Pakistan-Occupied Jammu-Kashmir (PoK) & Infrastructure Development

China has occupied about 38,000 Sq.Km of India’s territory during the 1962 war. Pakistan has also occupied illegally 5,183 Sq.Km land belonging to India which is now with China. More so, Pakistan has occupied 68,000 Sq.Km in Jammu Kashmir Gilgit-Baltistan area, where China and Pakistan in MoU have started Economic Corridor, despite India’s opposition. China along with Pakistan has been continuously interfering with India’s border.

Economic Corridor (CPEC, OBOR, SEZ): China–Pakistan Economic Corridor (CPEC) is a collection of infrastructure projects that are currently under construction throughout Pakistan. China claims, CPEC is intended to modernize Pakistani infrastructure and strengthen its economy by the construction of modern transportation networks, numerous energy projects and special economic zones.

Recent Chinese reports claim that following the launch of CPEC in Pakistan, the country has received investments worth more than the originally valued at USD 46 billion; which is is now worth USD 62 billion!

Another new deal called One Belt One Road (OBOR) with China, an ambitious project which was signed in Kathmandu (Nepal), would allow development of cross-border connectivity and more with China by the countries – Pakistan, Sri Lanka, Maldives and Myanmar, Bangladesh and Nepal. With the exception of Bhutan, which has no diplomatic ties with China, every other South Asian country has signed into OBOR.

As per China, the “One Belt One Road” initiative was meant to focus on improving connectivity and cooperation among Asian countries, Africa, China and Europe, with emphasis on enhancing land as well as maritime routes. The policy aims to boost domestic growth in the country as per China claims. Experts have noted that OBOR is also a part of China’s strategy for economic aggressive diplomacy.

India has not only boycotted Xi’s OBOR summit but has also portrayed OBOR as an opaque, neo-colonial enterprise seeking to ensnare smaller, cash-strapped states in a debt trap. India has raised objections and refused to join the OBOR initiative because of the China-Pakistan Economic Corridor (CPEC), which is a part of OBOR and it passes through India’s territory and in Pakistan-occupied Kashmir (PoK) affecting India’s sovereignty.

China blocks Brahmaputra tributary – impact on water flow in India

The Brahmaputra is one of the major rivers of Asia, a trans-boundary river which flows through China, India and Bangladesh. China’s had threatened to block Brahmaputra tributary “Yarlung Zangbo” from flowing into India thus exposing its cunningness. China is diverting Brahmaputra river water by building up five huge tunnels for power generation and thereby causing decrease in the amount of water flow to India.  The state of Assam is constantly under threat of being flooded because of the dam built across the Brahmaputra tributary by China. The Zangmu Dam is a gravity dam on the Yarlung Zangbo/Brahmaputra River 9 km (5.6 mi) northwest of Gyaca in the Tibet Autonomous Region of China.

China’s opposition to India’s entry into NSG (Nuclear Suppliers Group)

India has so far has not been able to become member of NSG (Nuclear Suppliers Group) only because of China’s opposition, while most of the countries are supporting India.

China opposes India’s permanent membership in UNSC

India is the only country that had supported China in the late 1950’s to get permanent membership of United Nations Security Council. Ironically, China is now opposing India’s permanent membership of UNSC.

China’s constant incursions into India’s territory

China with its expansionist attitude is transgressing India’s territory about 300-450 times a year thereby politically and economically weakening Bharat.

China claims about 90,000 Sq.Km land along with the state of Arunachal Pradesh as their territory, and constantly obstructing India’s developmental plans that have been taking place in that area.

China shares a border of about 4057 Km length territory with India, where it has built roads and rail connectivity in the entire stretch, supplies electricity and also has good infrastructure and has established nuclear plant very close the India’s border. In addition to all these, China allocates about five times India’s Defense budget and further expanding.

China is expanding its Defense base in Pakistan, Nepal, Myanmar, Bangladesh and Sri Lanka, who are India’s neighbours., while these countries (Sri Lanka & Bangladesh) have out-sourced their Ports maintenance to China.

China claims Arunachal Pradesh as part of their territory representing Arunachal Pradesh in their official maps, and so much so that they have ‘relaxed’ visa norms to the extent that China invites the residents of Arunachal Pradesh through “stapled visas” (in other words no visa is required to cross over and thus asserting Arunachal Pradesh their part of the country).

When China came to know that when ex-Prime Minister of India, Dr.Manmohan Singh was visiting Arunachal Pradesh, the state of India called as “सूरज की धरती” or “the land of rising sun”, China has rushed to wake up India’s Ambassador to China (Nirupama Rao) in the wee hours at 2:00 AM on 21st, March, 2008 and staged its protest and threatened India of its consequences. The then PM Manmohan Singh was forced to return from Tawang district of Arunachal Pradesh and discontinued his visit to other places.

Chinese troops have stopped KAILASH MANASAROVAR Yatra:

Kailash Manasarovar Yatra (KMY) is known for its religious value, cultural significance. It is undertaken by hundreds of people every year. Holding significance for Hindus as the abode of Lord Shiva, it holds religious importance also for the Jains and the Buddhists.  It is open to eligible Indian citizens,holding valid Indian passports, who wish to proceed to Kailash-Manasarovar for religious purposes. Ministry of External Affairs does not provide any subsidy or financial assistance to Yatris. (Source: http://kmy.gov.in/kmy/noticeboard.do?lang=en_US)

China has refused entry to the first batch of some 50 pilgrims, who were supposed to travel to Kailash Mansarovar, via Nathu La in Sikkim. Chinese troops have also stopped the batch of pilgrims that was proceeding for Kailash Mansovar yatra. Ministry of External Affairs organizes this Yatra during June to September each year through two different routes – Lipulekh Pass (Uttarakhand),and Nathu La Pass (Sikkim).

Chinese troops transgress Sikkim sector in Doka La in Sikkim

Very recently in this month of June’2017, our brave jawans of Indian Army formed hard stop in the form of “human wall” along the Line of Actual Control (LAC) to stop Chinese PLA incursions and transgresses Doka La in Sikkim state of India. In the name of PLA wanting to build a road at Sikkim-Bhutan-Tibet tri-junction, China is using all its nefarious tactics to transgress into India’s territory.

These incursions have become a trend whenever India makes global news. China is nervous and adopting cheap tactics of intimidating diplomacy across the border states of North East. The bunkers have been destroyed in Lalten area of the Doka La area.

It is not the first time that such a transgression has happened at the Doka La, a place at the Sikkim-Bhutan-Tibet tri-junction. The Chinese forces had in November 2008 destroyed some makeshift Indian army bunkers at the same place.

It’s time India used its most powerful weapon against China: Trade”– says the Geo-strategist and defense expert Sri Brahma Chellaney in his column in HT, 30 June 2017.

He writes: “by importing $5 worth of goods from China for every $1 worth of exports to it, India not only rewards Chinese belligerence but also foots the bill for Beijing’s encirclement strategy.

He has also cautioned thatChina is waging a psy-war through media… Make no mistake: Despite the cozy ties with Washington, India, essentially, is on its own against China. It needs to bolster its border defenses and boost its nuclear and missile deterrent capabilities”.

Our Responsibility at Individual & Societal level:

The questions that were raised against un-calibrated globalization remain un-answered.

  • Is it possible in near future for a Single World Currency?
  • “Perfect Competition” vs. Monopoly, Oligopoly (Unfair competition).
  • IPR issues and technology denials– Growing issues on Intellectual Property rights & court cases under WTO arbitration.
  • Multi-lateral free-trade agreements turning out to be impractical?
  • Basic construct of Globalisation and free trade was built on “Cooperation” rather than “Competition“. Is this truly working that way?
  • Restrictions on free movement of Skilled labour across continents.
  • Are we heading towards De-Globalization?

Obviously, there are geo-political factors that cannot be ignored. How can the world then talk of ideas and innovations and interplay of ideas, but yet fight for IPR and patents?

Every nation has to do its own SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). Likewise, Bharat also needs to have “its” own model of sustainable development based on Agriculture & Employment-centric manufacturing, which is truly a Swadeshi model of “production by masses” and not “mass production“.

The government must also strive to negotiate the international agreements of trade and commerce on our own terms & conditions.

To attain economic sovereignty, the nation has to become self-reliant. We can only achieve this goal through our individual and social responsibility.

Swadeshi Jagaran Manch therefore appeals to,

  • Completely boycott China products and services
  • Create awareness in our localities to boycott China products and services
  • Traders to shun the China products from selling
  • Create awareness about China’s cheap / low quality products and fake food products. (Eg: Plastic rice, cheap quality and low grade Cancer causing toys, etc).
  • Spread the awareness through Social Media
  • Join the Swadeshi-Suraksha campaign meetings, seminars, rallies.

Let us all join hands in large numbers and participate in Rashtriya Swadeshi-Surakhsa Abhiyan and make it a grand success, starting on 6th August’ 2017. #BOYCOTTCHINA

(Courtesy: Based on the seminar talks and inputs from Sri.B.M.Kumaraswamy, renowned Economist, Retired Professor in Economics and Clean environment expert, Akhil Bharatiya Sah-Samyojak, Swadeshi Jagaran Manch).

References:

  1. The Ministry of Commerce & Industry, Department of Commerce, Government of India.
  2. The Ministry of Home Affairs, Government of India.
  3. The WTO Organisation Website.
  4. Kailash Manasarovar Yatra website, The Ministry of External Affairs, Government of india.
  5. Swadeshi Jagaran Manch
  6. Various business news paper reports and magazines referred in the article.
  7. Wikipedia.

Remedy for Monumental mismanagement of the economy by Dr.Manmohan Singh

S.Gurumurthy

In his article (“Making of a mammoth tragedy”, The Hindu, December 9), Dr. Manmohan Singh attacked the demonetisation of high denomination notes (HDNs) by the National Democratic Alliance (NDA) government as the “making of a mammoth tragedy”. In his prose, Dr. Singh speaks less as an economist in which capacity he is respected more than as the former Prime Minister, the role which has actually dented his image. Yet it is best to respond to him on economic issues which he has kept away from, not to his political verses. Undisputed facts, not alluring rhetoric, should decide whether demonetisation is a tragedy or a remedy. Is it a monumental mismanagement of the economy as Dr. Singh charges? Or is it a remedy for the accumulated filth as Prime Minister Narendra Modi claims? To know the answer, the story of the Indian economy from 1999 to 2004 under the NDA and from 2004 to 2014 under the United Progressive Alliance (UPA) needs to be recalled.

Real versus statistic

During the NDA rule (1999-2004), real GDP grew by 27.8 per cent, annually 5.5 percentage points. Annual money supply, that fuels inflation, by 15.3 per cent. Prices by 23 per cent, annually 4.6 per cent. Asset prices rose only moderately in those five years. Stocks rose by 32 per cent; gold by 38 per cent. Taking Chennai as an illustration, land prices by 32 per cent. Jobs rose phenomenally, by almost 60 million. The NDA also turned in a surplus of $20 billion in 2002-04 in the external sector, after decades of unending deficits, save in two years in the late 1970s.

Now come to the UPA rule under Dr. Singh, the economist Prime Minister. In the first and best six years of the UPA (2004-05 to 2009-10), before it was hit by scams, real GDP grew by 50.8 per cent, annually 8.4 percentage points — one-and-a-half times NDA’s. The world celebrated Dr. Singh. The UPA was intoxicated by the “high growth” story. But how many jobs did UPA’s high growth produce? Believe it or not, just 27 lakhs against 600 lakhs during NDA’s five years, according to NSSO data. UPA achieved one-and-a-half times NDA’s GDP growth, but just 5 per cent of its job growth. Dr. Singh now bemoans that Mr. Modi’s demonetisation will stifle jobs!

Move on. In the six years, prices rose by 6.5 per cent (4.6 per cent under NDA). The external sector deficit was $100 billion (against NDA’s $20 billion surplus). Did high petroleum prices force it? No. Zero-rated customs duty-led capital goods imports which topped petroleum imports was the culprit.

 Asset inflation

Why was the UPA’s high growth jobless? The well-kept secret is that huge asset price inflation, not production, passed off as high growth. In the first six years of the UPA, stock and gold prices jumped by three times — annually by 60 per cent. Property prices doubled every two-three years. In Gurgaon, not on the property map in 1999, land prices rose by 10-20 times. Asset inflation in six years was three times the annual nominal GDP growth. The asset inflation not the result but the cause of the UPA’s “high growth”! How? Modern economics deducts the non-asset price inflation from nominal growth to know the real growth. But it sees asset price rise as wealth and prosperity and adds it to GDP. See how this economics worked for the UPA.

 Unmonitored Rs.500/1,000 notes

Economics says money, growth, prices and jobs are inter-related. Apply this rule to the NDA and UPA periods. During 2004-10, average money supply grew annually 18 per cent (15.3 per cent under the NDA). But asset prices rose by several multiples of it. The moderate rise in money supply over the NDA’s number does not explain the huge asset inflation. The clue hides in the rising unmonitored HDN cash stock with the public which made black money deals easy. In 1999, the cash with the public was 9.4 per cent of nominal GDP. By 2007-08, instead of falling due to rising bank and digital payments, it jumped to 13 per cent of nominal GDP. Later it began hovering around 12 per cent. More critically, the HDNs with the public more than doubled from 34 per cent in 2004 to 79 per cent in 2010. On November 8, 2016, it was 87 per cent. The average annual rise in HDNs was 51 per cent between 2004 and 2010 and the annual rise was 63 per cent by 2013-14. The Reserve Bank of India noted that two-thirds of the Rs.1,000 notes and one-third of the Rs.500 notes — that is over Rs. 6 lakh crore now — never returned to banks after they were issued. The unmonitored HDNs roaming outside banks began driving up the gold and land prices by black cash and the stock prices through Participatory Notes (PNs) — which are largely hawala transfers out of India — that came back pretending as foreign investment in stocks. The PNs rose from Rs.68,000 crore in 2004 to Rs.3.81 lakh crore in 2007.

How did the asset inflation lead to the UPA’s “high growth”? Inflated asset prices to the extent realised by sale got accounted as part of income and included in GDP. Large part of the gains on stock sale got added to GDP with very little tax under Securities Transaction Tax. The spurious wealth effect also led to high-end consumption. The annual private consumption growth averaged 18 per cent till six years to 2009-10 — 80 per cent over the NDA average. The fake wealth effect, powered by HDN cash, scripted the UPA’s “high growth” story. HDNs outside banks took refuge in stocks, gold and land, produced capital gains-led growth and consumption. Had the HDNs circulated through the banking system, it would have multiplied through the fractional reserve model, reduced the inflation and interest, and funded the small-and-medium enterprises starved of organised funding.

 Catch-22 situation

The curse — asset inflation inspired jobless growth — seems irreversible till unmonitored HDNs roam and fuel fake growth. Dr. Singh had had enough wake-up calls when the share of HDN cash was escalating year after year from 2004. He could have de-escalated the hugely growing cash economy had he remonetised the HDNs by lesser denominations without demonetisation — sparing the people of discomfort and economy of short-term damage. Of course, he would have lost the “high growth” brand that made UPA rule an economic success. To unmask this deception and revive job productive growth, the unmonitored HDNs needed to be brought to account forcibly. By his inaction, undeniably, Dr. Singh had landed the economy in a Catch-22 situation. The Modi government could either opt to continue the status quo of jobless growth or force temporary decline in growth to reinstate real growth and jobs. It opted for the latter. Even an undergraduate student in economics will tell you that it will cause hardship and hit growth in the short run. A Cambridge economist is not needed to write a column on that. It is already late. If the status quo of unmonitored HDNs were to last for another five-six years, the size of HDNs would have become so huge that no government may have been able to act against it — inevitably inviting a huge crisis, both internal and external. Prime Minister Modi has rightly called the demonetisation as “kadak chai” (bitter pill). That HDNs promoted high bribery and helped terror funding through fake HDNs cannot be disputed at all. Far from doing a monumental misappropriation or making a “mammoth tragedy”, Mr. Modi is correcting the monumental mismanagement of the economy by the economist Dr. Singh.

 Courtesy – The Hindu

भारतीय आर्थिक चिंतन (Philosophy of Hindu Economics)

(The article is a Reader’s Contribution on Philosophy of Hindu Economics)

– By Suhas Vaidya

भारतीय अर्थव्यवस्था करवट बदल रही है| हम भारतीय  “मेड इन इंडिया” (Made in India ) से गर्व का भाव महसूस कर रहे है | हर घर में स्वदेशी प्रोडक्ट्स को पसदं किया जा रहा है और प्राथमिकता भी मिल रही है|कई  भारतीय ब्रांड्स तथा कंपनी मल्टीनेशनल है …ऐसे में  कुछ साल पहले जो चर्चा होती थी की क्या स्वदेशी प्रासंगिक (Relevant)  है ? यह सवाल ही अब irrelevant  हो गया है  ! जो थोडासा द्वंद्व मन में है वो शायद ये की  पहुंच (approach)  क्या हो ? पूर्ण ग्लोबल (Global) ? पूर्ण लोकल ? या Global + Local ?  यानि  ‘Glocal’ ?

1.हमारा हिन्दू वैश्विक दर्शन क्या है ?

विश्व की व्यवस्था को  समझ ने की सोच, व्यक्ति और समाज का नाता (संबंध या connection), व्यक्ति के सुख की कल्पना  और  सुख प्राप्ति का साधन कैसा हो, क्या हो, इसकी मान्यता क्या हो? हमारा हिन्दू वैश्विक दर्शन कैसा भिन्न है?स्वाभविक रूप से अर्थ शास्त्र के सिद्धांत (Economics Philosophy), दृध्टिकोन (Perspective) और  मार्ग (means) कैसे भिन्न है |

हिन्दू वैश्विक दर्शन कहता है की “संपूर्ण विश्व एक तत्त्व है” | सर्व खल्विदं ब्रह्मअर्थात “ALL IS ONE” and Not ‘ALL ARE ONE’. पाश्चिमात्य  विचार अनेकत्व के आधार पर है | इसलिए समग्रता का अभाव दिखता है |

2. व्यक्ति और समाज

व्यक्ति समाज का अंगीभूत घटक |  भारतीय (वैज्ञानिक) ऋषियो ने  व्यक्ति और समाज के बारें में गहरा चिंतन किया|  उनके चिंतन के अनुसार मानवता  या समाज एक शरीर रूप है तथा व्यक्ति उसका एक अंग है |

अर्थात इस अंगांगी भाव के कारण व्यक्ति और समाज में कोई द्वंद्व नहीं (no dichotomy or duality), व्यक्ति समाज का अविभाज्य (inseparable) घटक है (component) |

पाश्चिमात्य चिंतको की सोच में व्यक्ति केंद्र है| व्यक्ति और समाज का रिश्ता  क्लब (Club) और क्लब मेंबर की तरह है | समाज एक क्लब है और व्यक्ति एक मेंबर इसलिए “Social Contract Theory” के अनुसार व्यक्ति के अधिकार है (समाज के खिलाफ?), व्यक्ति को प्राथमिकता है |

3.समाज के सुख में व्यक्ति का सुख है

भारतीय चिंतको ने इस बात पर जोर दिया की समाज के सुख में व्यक्ति का सुख निहित (vested) है | सभी   मिलके  एक   दूसरे  के सुख का विचार करें | ” सब ” की परिभाषा में समस्त प्राणी और  पर्यावरण  (environment) भी शामिल है | इसी कारण “दोहन” (milking) को अनुमति है परन्तु “शोषण” (exploitation) मंजूर नहीं |  Nature should be milked and not exploited.

क्या शरीर का कोई अंग दूसरे अंग का शोषण कर सकता है? हाथ पैर का कभी शोषण नहीं  करता  बल्कि पैर  में  कांटा (thorn) घुसे तो हाथ  आगे बढ़ कर काटा निकलता  और आँखों  में  आँसू होते  है यह अंगांगी भाव है |

पाश्चिमात्य विचार मानव केंद्रित होने के कारण  सुख की परिभाषा  भिन्न है|  ये सृष्टि  मेरे लिए , मेरे आनंद के लिए  अर्थात  उपभोग (pleasure / desire) लिए है | उपभोग में ही सुख है और मैं अपने सुख के लिए औरों  का शोषण  (exploit) कर सकता हूँ |

4.साध्य और साधन शुचिता 

भारतीय अर्थ विचार के अनुसार साध्य और साधन शुचिता का महत्व है | अपने परिवार तथा समाज के भलाई के लिए अर्थार्जन आवश्यक है| लेकिन वह धन अच्छे कर्म से, मेहनत से कमाना अपेक्षित है | कर्म भगवान की  पूजा के समान है और पूजा की सामुग्री भी पवित्र हो | सेवा में सुख है  इसलिए  समाज की सेवा के लिए  अर्थार्जन  ये  प्रेरणा (motive) है |

पाश्चिमात्य आर्थिक  विचार में  अधिकाधिक लाभ (profit) ये प्रेरणा है| उपभोग में सुख है और ज्यादा उपभोग के लिए साधन (पैसा या दौलत) चाहिए| ज्यादा पैसा प्राप्त करने हेतू ज्यादा प्रॉफिट (profit) कमाना चाहिए (come what may meet your target margin!) मतलब ज्यादा प्रॉफिट के लिए कृत्रिम अभाव (contrived scarcity) हो तो भी ठीक है, सप्लाई (supply) कम है तो ही ज्यादा कीमत मिलेगी (Law of Demand Vs Supply) |

5.समृद्धि और विपुलता (Economy of abundance & Declining prices): समृद्धि और विपुलता के लिए, कीमत कम होती है तो सभी लोगों को वस्तू  प्राप्त होती है और हम आनंदित होते है | यह भारतीय विचार है |

पाश्चिमात्य विचार में कीमते कम हो तो इसका मतलब आर्थिक मंदी का दौर है |
ये विचार “Economy of rising prices” तत्त्व पर आधारित है |

6.संपत्ति की परिभाषा भी भिन्न है : हमारे विचार में संपत्ति सब वस्तू और सेवा  को जोड़कर  बनती है | पाश्चिमात्य विचार में बाजार मूल्य को अधिक महत्व है |उदाहरण (Illustrative Example on Wealth):

भारतीय विचार                                                                      पाश्चिमात्य विचार
Year 1   100 kg Sugar production                               100 kg x INR 5/Kg = 500 INR
Year 2   200 Kg Sugar Production                              200 kg x INR 2/Kg = 400 INR
(Wealth increased)                                                        (Wealth decreased)

Year 3   50 Kg Sugar Production                                  50 Kg X INR 12/Kg = 600 INR
(Wealth decreased)                                                         (Wealth Increased)

***

अर्थ एक पुरुषार्थ (wealth is one of the four human pursuits) – धर्म, अर्थ, काम तथा मोक्ष ये चार पुरुषार्थ है |

(The four purushārthas are Dharma (righteousness), Artha (prosperity with values), Kama (pleasure without violating dharma) and Moksha (self-realization / emancipation / spiritual liberation)).

हिन्दू विचार में अर्थ ये प्रमुख पुरुषार्थ है | किन्तु धर्म (कर्त्तव्य) के आधार पर अर्थ का पुरुषार्थ अपेक्षित है | व्यक्ति का अपने परिवार के प्रति समाज के प्रति क्या उत्तरदायित्व (accountable) है  इसका विचार हर व्यक्ति को करना है | समय पर और उचित कर देना, सही कर्म से अपना और परिवार का भाग्य बदलना अपेक्षित है| श्रम को प्रतिष्ठा प्राप्त हो, समाज  के हित का  कोई भी  काम  हल्क़े दर्जे का नहीं | वाइट कलर  जॉब (white collar job) और ब्लू कलर जॉब (blue collar job) नहीं … सभी श्रमिक है | धर्म आसरा लिए मोक्ष काम अर्थ हो |

7.उपभोक्तावाद अपने संस्कृति से मेल नहीं रखता

Socialism, Capitalism और Communism का गोत्र एक ही है और वो है उपभोक्तावाद (Materialism)|

हिन्दू संस्कृति में दूसरे का विचार (“मैं” नहीं “तू” ) प्रथम है, कर्त्तव्य प्रधान है  और  पर्यावरण के प्रति कृतज्ञता भाव रखती है |  भारतीय जीवन दृष्टि “अधिकाधिक” (greed) नहीं  आवश्यकता (need) के अनुसार (केवल उतनाही) संयमित उपभोग का दृषिटकोण रखती है |

ईशा वास्यमिदँ सर्वं यत्किञ्च जगत्यां जगत् ।
तेन त्यक्तेन भुञ्जीथा मा गृधः कस्यस्विद्धनम् ।। – ईशोपनिषद् (From Isha Upanishad)

IsA vAsyam idam sarvam yat kincha jagatyAm jagat |
tena tyaktEna bhunjIthA mA grudhah kasya svid dhanam ||

(tena tyaktena = by renunciation; bhunjIthAh = support (yourself)

By the Lord Hari is enveloped all that moves in the moving world.
By renouncing this, find your fulfilments.
Do not covet the possessions of others.

***

8.स्वदेशी का युगानुकूल अविष्कार

लोकमान्य तिलक ने  राष्ट्रीय शिक्षण को प्राथमिकता  देकर  भारतीय शिक्षण पद्धति के विकास में योगदान दिया | (Nationalistic Education based on Bharatiya Values and Sanskar) उन्होंने विदेशी कपड़ों का बहिष्कार का आवाहन किया था | महात्मा गांधीजी ने  स्वदेशी को बढ़ावा देने हेतु  खादी का पर्याय दिया|

१९९० (1990) के दशक में “स्वदेशी जागरण मंच” ने  सिर्फ भारतीय  वस्तु (products) खरीदने का  आवाहन किया था |

  • C-DAC द्वारा परम कंप्यूटर की निर्मिति, ISRO द्वारा भारतीय बनावटी से उपग्रह का निर्माण और भारतीय क्रायोजेनिक इंजन  का निर्माण  इन उपलब्धियों से सभी भारतीय गौरवान्वित महसूस करने लगे |
  • बाबा रामदेव जी  और पतंजलि के माध्यम से  योग, आयुर्वेद और  उत्तम दर्जे के स्वदेशी वस्तु का अभूतपूर्व  मिलाप हुआ  है |
  • श्रीश्री  रविशंकर और बाबा रामदेवजी साथ जोड़कर हिन्दू  जीवन पद्धति को समस्त दुनिया के सामने एक पर्याय के रूप में प्रस्तुत किया है | हिन्दू जीवन पध्दति के बारें में पूरी दुनिया में आकर्षण है और लोग इसे अपना रहे है |

धर्में नैव प्रजा सर्वे रक्षन्ति स्म परस्परं | (धर्म के आधार पर लोग एक दूसरे के हितों की (आर्थिक हितों की भी ) रक्षा करें | रामराज्य की कल्पना यही थी | स्वदेशी यानि आर्थिक स्वावलंबन (Economic Sovereignty/ Self-reliance), स्वदेशी यानि परस्परावलंबन (Economic Interdependence)| स्वदेशी यानि व्यवस्था का, जीवन शैली का युगानुकूल अविष्कार …यही हमारा आर्थिक चिंतन है |

यतो धर्म ततो जय – जहाँ लोग धर्म के साथ है (धर्मानुकूल जीवन जीते है), वहॉं विजय निश्चित है |

सुहास वैद्य 

बंगळुरू , १३ November २०१६

Demonetization and the Indian Economy (An Interview by Doordarshan with Sri S.Gurumurthy)

Sri Swaminathan Gurumurthy, well-known Chartered Accountant, Economics Thinker, Philosopher and political commentator, has been a long time crusader against black money. He spoke to Doordarshan TV channel (DD News) about the need for Demonetization and how it affects the Indian economy.

sg

Interview Excerpts:
1. Demonetization Is Long Overdue & Inevitable

* Demonetization is long overdue and is inevitable for longevity of economy and sustained growth. This is a huge investment by Government as well as the Economy, as a preparation to reach higher levels of economic growth.

* This move could not have been made more comfortable and there cannot be adequate preparation for Demonetization of this scale. Secrecy is necessary for such a massive operation or else everyone would have guessed as to why new notes are coming into market. Only a strong Prime Minister could have taken such bold decision.

* We must congratulate the people of the country for showing extra ordinary patience by standing in the long queues (with no slogans or protests). The counterfeit currency must go.

* Out of the total circulation of 16.6 lac crores currency, 14.5 lac crores currency (about 87 per cent of 500, 1000 notes) is with the public. How much of it finances genuine economy and how much of it finances illicit economy is not clear. Over and above that is the fake currency in circulation that is not counted in the overall figure of 16.6 lac Crores that directly affects security of India. For instance, 3 per cent of the total amount deposited in the banking system since the Demonetization began, was in Jammu Kashmir bank. The extremists had given a threat not to go and deposit the money – they have queued up to deposit the money! And there has been sudden drop in the unrest in Jammu Kashmir.

2. Reasons that led to excessive “Cash Economy”:

* “Wealth effect” and “Real Estate” have led to Cash economy

* As the banking habits pick up, the “Cash economy” should have gone down, but has increased. The growth of cash economy in proportion to the gross domestic product (GDP) – was less than 10 per percent until 2001, now it is almost 12 per cent of GDP. This has also been facilitated by the rise in the proportion of high denomination currency (as high as 87 per cent) and that has led to illicit money.

* Studies show that 50% of Indian economy is Cash-economy. Cash-economy does not mean it is illicit economy. It is actually genuine Cash-economy. 90% of the employment is attributed to economy driven by largely cash or ‘unorganized‘ sector which is largely funded by cash. It is very complex situation. This has resulted in huge cash hoardings and transactions between cash and gold, transaction between property and gold, which has resulted in unusual amount of hoarding of gold, investment in land and land prices beyond reach of the common man.

* This has led to distortions in the economy, especially in Real Estate, Gold prices, usurious lending to small and micro businesses. This is also partly a failure of the banking system. So, it had distorted the economy in the last 10-12 years, because of what is called the “Wealth effect”. The high rise of the stock market also contributed to all this. This situation had to be handled. Only a strong prime minister could have taken this decision.

* Cash economy has moved deep into Indian economy. Cash does not create illicit opportunity – Illicit opportunity creates Cash.

3. On Terror Funding

* Terror funding by normal currency is one and Terror funding by counterfeit currency is another. For example, Naxalite funding is through normal currency in the form of ‘hafta‘ collections. About Rs 50,000 to Rs 60,000 crores of the extremist funding is in the Naxal-affected area in the cash form, mostly in 500 and 1000 denominations. Naxal funding is designed for Cash economy and not for bank economy. Left extremism will receive a very, very serious setback because of Demonetization.

4. Positive Economic Consequences

* According to an estimate by State Bank of India, out of Rs 12 lac crores in the cash economy, Rs 3 lac crores may never come back into the system (owing to large scale bribes, kickbacks) and will never reach the banking coffers at all. So, there will be the monetary surplus in the Reserve Bank of India (RBI).

* Out of the Rs 12 lac crores that comes in, the government should get substantial tax revenue of about Rs 2 lac crores. This should have far-reaching consequences on the Indian growth story.

* Government should get an estimate of 5 lac Crores as revenue surplus. When it comes into the banking system, this 5 lac Crores may become 20 lac Crores because of the “fractional reserves basis”, this Rs 5 lac crores can become Rs 20 lac crores. (Reserve + Investment of 25 per cent; the rest 75 per cent given as loans that goes back into the system, say a year from now). Thus banking system transforms into multiple of 3 or 4.

Illustrative Example: Let us assume Rs 100 is deposited in a bank. About one quarter of the amount will be invested in government bonds and reserves. The remaining 75 per cent will be available for lending. This 75 per cent gets into the banking system. My estimate is that at a minimum, the banking system multiplies the money in the system by three or four times. This money creation by banks will increase prosperity. The black or the cash economy therefore is inefficient in using money this way.

* Reduction in Interest rates: There will be genuine rise in Demand (due to increased consumer spending) leading to genuine rise in GDP numbers. There will be all round reduction in interest rates for business and moderation of interest rates (necessary for our growth in the economy). The lower interest rate is advantage to SME (Small, Medium Enterprises), who may not have sources from abroad unlike big industries or MNCs (who have access to foreign funds at a very lower interest rates / international rates). The reduction in interest rates will be very good for our economy.

* Positive impact on Fiscal situation: Government’s Tax collections may increase, which leads to strengthening of Fiscal situation (due to Rs. 2.5 lac “soft landing rule” – a boon for middle class having savings in the name of family members; had it not been there, they would have had to pay tax on their savings for last 10 years).

Land prices expected to moderate: Because of the withdrawal of Cash from the Real-Estate economy, the land prices are expected to moderate and can see a drop of around 30-40 per cent in the land prices, particularly in urban areas. This will increase the affordability of housing; most people are not able to afford houses because of high land prices. Housing is important economic activity that will pick up.
* Construction prices are dependent on commodities; land prices are dependent on the amount of money that chases land (as land supply is limited). Commodities have Supply-Demand adjustments.

5. The Challenges Ahead:

* Gold & Cash exchangeability is very important of promoting both. Now Cash being cut, Gold-economy will receive a serious setback. Government need to go for some Gold Reforms. Government should have persuasive policy towards Gold spend and not the way it happens in other parts of the world (of fighting against Gold consumption).

* Generation of “illicit cash” will come down rapidly and it will take long time to generate Cash of this kind again, added to Government’s special efforts to curb such cash. Now, such economy has to be replaced with proportionate genuine cash. As per Economic Census 2014 (58 million “non-farming enterprises” have capital of 12 lac Crore which provide employment to 128 million people, was intended to be financed by MUDRA scheme, “Micro Units Development and Refinance Agency Bank under “Pradhan Mantri Mudra Bank Loan Scheme”).

* The Government has to take special measures to fund Cash-led sectors (Agriculture, SMEs and small traders. MUDRA Law should be passed immediately and this sector must be funded through non-banking institutions and private financiers. They should be registered through banking system and their receivables and advances must be refinanced by the banking system. This Dr.Manmohan Singh did in 1993 when commercial vehicles sector was being funded by the banking and non-banking system for the new vehicles. Non-banking system was financing only the second hand or third hand vehicles. So, Manmohan Singh said, some Rs.300 crores must be given for non-banking finance companies so that they can finance even second and third hand vehicles that saw a huge growth in the commercial vehicles sector. The same move can be adopted for all businesses which are being funded by non-banking financial companies and private financiers and the local bank’s branches can register the local non-banking finance companies and the local financiers and advance money’s is their receivables this is the Indian way of helicopter dropping money, which is very necessary in the next one month. This will have a huge impact on providing liquidity, which otherwise banking sector cannot provide directly.

* After calming and correcting the Demand side, the challenge is, how to infuse liquidity on the Production sector (Supply side) : by refinancing/ by putting money into the Production sector through non-banking financial institutions and asking Public Sector, Government and BSE 500 companies to pay salaries in cash (atleast 30 per cent in cash).

* More measures such as “Jan Dhan Yojana” have to be used for increasing greater awareness, especially in rural India.

* Cashless economy is a dream; Minimum Cash economy is practical.

Demonetization as the foundation, Government has to address “jobless growth” for a better Job creation and rapid growth for next 10 years.

6. On Election Funding:

* Consensus required by all the political parties on Election funding; this cannot be done merely by ruling party. Political funding has to become transparent through “State funding of elections” has to be pursed vigorously. The private funding of elections has to stop. There has to be an “Election Tax” at the State level, Central level and Municipal level. Classification of National and Regional parties has to change depending on the capacity of the parties. Center and State elections have to align.

Watch the full interview below:

Bharat’s NSG Pursuit, a Diplomatic Masterstroke

At the outset, the subject attempted here is complex and requires context, as it deals with interwoven topics of geo-politics, trade, energy-commerce, climate change, climate justice, diplomacy, ‘international export control regimes’ and multiple others to be precise!

The aim is to simplify this broad subject and understand the recent efforts of Bharat in seeking the membership of the elite Nuclear club (Nuclear Suppliers Group, #NSG). It is important to understand the timeline and the sequence of events that unfolded in the past and how Bharat has now reached the strategic position into becoming the member state among the NSG states.

(This write up draws heavily from various articles that have been published in the media in the past few days).

Introduction

In order to understand NSG (est.1974), first we need to understand the history of ‘NPT (est.1968-70) as a ‘pre-condition‘ to secure the nuclear energy reserves and become part of nuclear club among Developed nations.

The recent development such as “Climate Change agreement” undertaken at Paris (2015) is another important milestone in the pursuit of clean energy, where the rules and controls were framed among the member states as well as for the rest of the world. (The Paris Agreement is an agreement within the framework of the United Nations Framework Convention on Climate Change (UNFCCC) dealing with greenhouse gases emissions mitigation, adaptation and finance starting in the year 2020. An agreement on the language of the treaty was negotiated by representatives of 195 countries at the 21st Conference of the Parties of the UNFCCC in Paris and adopted by consensus on 12 December 2015. It was opened for signature on 22 April 2016 (Earth Day) and 178 UNFCCC members signed the treaty, 19 of which ratified it. It has not entered into force.)

India has been hard-bargaining with respect to Climate Change agreements, as it affects the economic growth considering we as a ‘Developing’ state. Prime Minister Narendra Modi in his speech during the opening session of the World Climate Change Conference 2015 (COP21) in Paris, said,“Climate change is a major global challenge. But it is not of our making. It is the result of global warming that came from prosperity and progress of an industrial age powered by fossil fuel – toughening his stand in the face of US criticism of India. The PM said,But we in India face consequences. We see the risk to our farmers. We are concerned about rising oceans that threaten our 7,500 km of coastline and 1,300 islands. We worry about the glaciers that feed our rivers and nurture our civilisation. India’s progress is our destiny and right of our people. But we must also lead in combating climate change”. “We need a genuine global partnership. Democratic India must grow rapidly to meet energy needs of everyone”. In an article that the Prime Minister wrote for the Financial Times, Modi ji asked countries to “assume more responsibilities” and provide “affordable cleaner technologies” to the developing world.

History of Nuclear Disarmament & NPT

On August 6, 1945, the United States, with the consent of the United Kingdom (the Quebec Agreement) dropped a Uranium gun-type atomic bomb (nuclear weapon, Little Boy) on the cities of Hiroshima and Nagasaki of Japan, during the final stage of World War II. That was the most tragic event in the history of human race. On August 15, six days after the bombing of Nagasaki and the Soviet Union’s declaration of war, Japan announced its surrender to the Allies. On September 2, it signed the instrument of surrender, effectively ending World War II. The role of “bombings” in Japan’s surrender and their ethical justification are still debated.

These events of history coupled with the ‘cold war’ era led to non-proliferation treaty (NPT). NPT’s objective is to prevent the spread of nuclear weapons and weapons technology, to promote cooperation in the peaceful uses of nuclear energy, and to further the goal of achieving nuclear disarmament and complete disarmament.

The impetus behind the NPT was, with respect to the concern for the safety of a world with many nuclear weapon states. It was recognized that the cold war deterrent relationship between just the United States and Soviet Union was fragile. Having more nuclear-weapon states would reduce security for all, multiplying the risks of miscalculation, accidents, unauthorized use of weapons, or from escalation in tensions and nuclear conflict.

In 1992, China and France acceded to the NPT, the last of the five nuclear powers recognized by the treaty to do so. In 1995 the treaty was extended indefinitely. After Brazil acceded to the NPT in 1998 the only remaining non-nuclear-weapons state which had not signed was Cuba, which joined NPT in 2002. The treaty recognizes five states as nuclear-weapon states: the United States, Russia, the United Kingdom, France, and China (also the five permanent members of the United Nations Security Council). Four other states are known or believed to possess nuclear weapons: India, Pakistan and North Korea have openly tested and declared that they possess nuclear weapons, while Israel (Policy of deliberate ambiguity) has had a policy of opacity regarding its nuclear weapons program.

Opened for signature in 1968, the Treaty (NPT) entered into force in 1970. On 11 May 1995, the Treaty was extended indefinitely. More countries have adhered to the NPT than any other arms limitation and disarmament agreement, a testament to the Treaty’s significance. A total of 191 states have joined the Treaty, though North Korea, which acceded to the NPT in 1985 but never came into compliance, announced its withdrawal in 2003. Four UN member states have never joined the NPT: India, Israel, Pakistan and South Sudan.

Nuclear Energy:

Fossil fuel disadvantages include pollution. When a fossil fuel material such as coal is burned to create energy, Carbon Dioxide (CO2) is released. This CO2 pollutes the atmosphere and contributes to the “greenhouse effect”. The history of fossil fuels is that these materials were created over millions of years from deposits made up of the remains of prehistoric plants, animals, and micro-organisms. Non fossil fuels, on the other hand, don’t rely on limited resources.

Nonfossil fuels do not have this disadvantage. Non-fossil fuels are alternative sources of energy that do not rely on burning up limited supplies of coal, oil, or natural gas. Examples of these fuels include: Nuclear energy, wind or water generated energy, and solar power. These tend to be renewable energy sources, or means of generating power that can be utilized indefinitely.

There are arguments of “economics and “safety by both sides of the debate:

Proponents of nuclear energy contend that nuclear power is a sustainable energy source that reduces carbon emissions and increases energy security by decreasing dependence on imported energy sources. Proponents claim that nuclear power produces virtually no conventional air pollution, such as greenhouse gases and smog, in contrast to the chief viable alternative of fossil fuel.

Opponents believe that nuclear power poses many threats to people and the environment. These threats include the problems of processing, transport and storage of radioactive nuclear waste, the risk of nuclear weapons proliferation and terrorism, as well as health risks and environmental damage from Uranium mining.

The Nuclear Suppliers Group (NSG) was founded in response to the Indian nuclear test in May 1974 and the group first met in November 1975 (Source). NSG is a group of nuclear supplier countries that seek to prevent nuclear proliferation by controlling the export of materials, equipment and technology that can be used to manufacture nuclear weapons.

NSG-logo

India has detonated nuclear devices, first in 1974 and again in 1998.  India is estimated to have enough nuclear fissile material for more than 150 warheads. India was among the few countries to have a no first use policy moratorium, a pledge not to use nuclear weapons unless first attacked by an adversary using nuclear weapons, however India’s former NSA Shivshankar Menon signaled a significant shift from “no first use” to “no first use against non-nuclear weapon states” in a speech on the occasion of Golden Jubilee celebrations of the National Defence College in New Delhi on 21 October 2010, a doctrine Menon said reflected India’s “strategic culture, with its emphasis on minimal deterrence“.

Pokhran Pokhran2

Pokhran-I

Smiling Buddha” was the assigned code name for Pokhran-I of India’s first successful nuclear bomb test on 18th  May 1974. The bomb was detonated on the army base, Pokhran Test Range (PTR) in Rajasthan. After the test, the Indian government declared that it did not intend to manufacture nuclear weapons – although it had the means to do so – but rather make India self-reliant in nuclear technology and harness nuclear energy for peaceful purposes.

Pokhran-II

This was led by Prime Minister Atal Behari Vajpayee and Dr. A.P.J Abdul Kalam. On 11th and 13th May 1998, twenty-four years after Pokhran-I, the Indian Defence Research and Development Organisation (DRDO) and Atomic Energy Commission (AEC) conducted five further nuclear tests (Pokhran-II), code named as “Operation Shakti”. India has since declared a moratorium on testing. The Pokhran-II blasts in 1998 put India on the global strategic map. The sanctions were imposed. The then all-powerful West has dis-engaged India for a certain period, which could not last long. India was taken as a serious Nation just as China was always since 1978. India got tough in its negotiations and has grown in self-confidence. This is the ‘sine qua non’ for negotiating global economic deals (India was invited for engagements as it has become absolutely necessary for global partnership).

India argued that the NPT creates a club of “nuclear haves” and a larger group of “nuclear have-nots” by restricting the legal possession of nuclear weapons to those states that tested them before 1967, but the treaty never explains on what ethical grounds such a distinction is valid. India’s then External Affairs Minister Pranab Mukherjee (currently the President of India) said during a visit to Tokyo in 2007: “If India did not sign the NPT, it is not because of its lack of commitment for non-proliferation, but because we consider NPT as a flawed treaty and it did not recognize the need for universal, non-discriminatory verification and treatment.”

In March 2006, India and the United States finalized an agreement, in the face of criticism in both countries, to restart cooperation on civilian nuclear technology. Under the deal India has committed to classify 14 of its 22 nuclear power plants as being for civilian use and to place them under IAEA safeguards. Mohamed ElBaradei, the then Director General of the IAEA   (International Atomic Energy Agency) welcomed the deal by calling India as “an important partner in the non-proliferation regime.

In December 2006, United States Congress approved the “United States-India Peaceful Atomic Energy Cooperation Act, endorsing a deal that was forged during the then Prime Minister Manmohan Singh’s visit to the United States in July 2005 and cemented during President Bush’s visit to India earlier in 2006. The legislation allows for the transfer of civilian nuclear material to India. Despite its status outside the Nuclear Non-Proliferation Treaty, nuclear cooperation with India was permitted on the basis of its clean non-proliferation record, and India’s need for energy fueled by its rapid industrialization for a billion-plus population.

In a meeting on September 6, 2008, the NSG participating governments agreed to grant India a “clean waiver” from its existing rules, which forbid nuclear trade with a country which has not signed the nuclear Non-Proliferation Treaty (NPT). The NSG’s decision came after three days of intense U.S. diplomacy. At an extraordinary NSG Plenary in Vienna, convened by the 2008 NSG Chair (Germany), PGs adopted a policy statement on civil nuclear cooperation with the IAEA-safeguarded Indian civil nuclear program. (Sourcehttp://www.iaea.org)

The approval was based on a formal pledge by India stating that it would not share sensitive nuclear technology or material with others and would uphold its voluntary moratorium on testing nuclear weapons. The pledge was contained in a crucial statement issued during the NSG meeting by India outlining the country’s disarmament and nonproliferation policies.

On 1 August 2008, IAEA approved the India Safeguards Agreement and on 6 September 2008, India was granted the “waiver” at the Nuclear Suppliers Group (NSG) meeting held in Vienna, Austria. The consensus was arrived after overcoming misgivings expressed by Austria, Ireland and New Zealand and is an unprecedented step in giving exemption to a country, which has not signed the NPT and the Comprehensive Test Ban Treaty (CTBT), while India could commence nuclear trade with other willing countries. The U.S. Congress approved this agreement and President Bush signed it on 8 October 2008.

NSG-Seoul-2016

The 26th annual plenary session of the Nuclear Suppliers Group ended on Friday, 24th June 2016, without taking any decision on India’s application for NSG membership. While the 48-member grouping held two lengthy closed-door sessions on the subject of new memberships, several countries expressed concerns over the entry of members who aren’t signatories to the Non-Proliferation Treaty (NPT), that India has refused to sign. Through the session, a team led by India’s Foreign Secretary S. Jaishankar monitored developments in Seoul, meeting with various countries to try and effect a favourable outcome.

Suhasini Haidar, the foreign affairs columnist writes – “it was this sagacity that the Modi government seemed to be channeling as it carefully worked through speaking to members of the 48-nation nuclear club and tackled the issue of China, which seemed to be openly challenging India’s efforts”. The writings of Chinese strategist Sun Tzu (The Art of War) and India’s Chanakya (Arthashastra) hold several remarkable similarities, especially when it comes to their advice on war and diplomacy. Both spoke of the need for ‘strategy’ rather than ‘tactics’, for quiet diplomacy over the need to pick one’s battles carefully, and to fight them only when one is sure of winning. “The welfare of a state depends on an active foreign policy,” counselled Chanakya in the Arthashastra, “If the end can be achieved by not fighting, I would not advocate conflict.” In the same vein, said Sun Tzu, “To fight and win all your battles is not supreme excellence; supreme excellence consists of breaking the enemy’s resistance without fighting.” Diplomacy, both wise men would agree, not protracted dispute, is the order of the day.

Undeterred by Chinese opposition in Seoul (2016), India has made it’s point loud and clear, urging for a special session for NSG countries to meet later this year, and consider India’s membership  (before December 2016).

C.Raja Mohan, Director, Carnegie India and the contributing editor on foreign affairs at ‘The Indian Express’ wrote: “If something is worth doing, it deserves a second try — after absorbing the lessons from the complex manoeuvre in Seoul last week at the 48-member club that was set up in 1974 to curb India’s nuclear program following its first atomic test. India’s quest for the membership of the NSG is neither whimsical nor desperate. It is the last step in a bold and sustained effort that began after the 1998 tests to make India a part of the global nuclear management. Until then, the world insisted India either give up its nuclear weapons or face an ever-tightening regime of high-technology sanctions. In 1998, Delhi declared itself a nuclear weapon power and demanded an end to the sanctions.” Call it what you will, Indian diplomacy is shaking off its traditional risk aversion, trading potential favours, exercising leverages and bargaining for productive outcomes. Whether it wins in Seoul or not, Delhi demonstrated that it has the political will to play hard ball on issues of high national interest….

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What happened at the Nuclear Suppliers Group (NSG) plenary in Seoul (June, 2016) ?

There were deliberate attempts by both China as well as vested interests in Indian media, to confuse Indians back at home, to interpret and misinterpret the outcome from Seoul and on the proceedings within the four walls.

To clear the air that was filled with confusion, misinformation and false propaganda against India’s diplomatic efforts, a noted columnist Ashok Malik wrote in Time of India “The real Seoul story” – “At the NSG plenary, China behaved not as an enlightened power but as a strategic small-timer”. He quoted three reasons for this misinformation campaign:

First, the issues are complex and require context, which many may not have.

Second, the political opposition to BJP is understandably using the occasion to target the Narendra Modi government and making partial assessments.

Third, the Chinese propaganda mechanism has turned much more sophisticated in an intelligent and selective briefing of Indian media. This presents a challenge for India.

AM

The thread begins in 2008, with India winning the “waiver” from the NSG to undertake nuclear commerce despite being a nuclear power outside the ambit of the Non-Proliferation Treaty (NPT). The next logical step was for India to apply for membership to four high-tech export-control regimes:

  1. the NSG,
  2. the Missile Technology Control Regime (MTCR),
  3. the Wassenaar Arrangement (conventional arms, dual-use technology)
  4. the Australia Group (chemical-biological weapons).

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If India was in the Group it could veto any change that would harm India, Teflon-coat the 2008 “waiver” and additionally contribute to the global nuclear regime.

Astonishingly, the UPA government did not apply. It made a noise, but nothing more. Its nuclear liability law, which had problems that were eventually sorted out by the Modi government in 2015, may have deterred it. The liability law had made the 2008 waiver infructuous and nuclear commerce with India near impossible.

India applied to the MTCR in 2015. After a setback it got in, on the second attempt, in 2016. In May 2016, it applied for NSG membership for the first time. By June most of the countries (about 40 of 48) were willing to take it in straightaway, no questions asked. This was a significant diplomatic achievement over two months.

What next? The application is before the NSG. There is a renewed effort to have a special plenary decide on it in 2016 itself. That may or may not happen, but the NSG cannot defer the decision indefinitely. More critically, China has shown its hand. Unlike 2008 much of the diplomatic legwork was done by India, and not the US.

In or Out of NSG, New Delhi’s Carried Out a Diplomatic Masterstroke, says Harsh V. Pant from http://www.thediplomat.com.  (Harsh is professor of international relations in the Defence Studies Department and the India Institute at King’s College London. He is also an adjunct fellow with the Wadhwani Chair in U.S.-India Policy Studies at the Center for Strategic and International Studies, Washington, DC).

He writes, “India’s diplomacy in pursuit of membership of the Nuclear Suppliers Group shows the country at its bestIndian diplomats, meanwhile, can claim credit for setting the contours of great powers politics today even as they pursue Indian interests with a singular clarity. This is a tribute to the Modi government’s deft handling of foreign affairs. It has managed to energize a risk-averse and ossified bureaucracy—a bureaucracy that goes into spasms of hyperventilation just hearing the term “lateral entry.” India’s foreign policy bureaucracy is today realizing that a new form of “lateral entry” has forced it to shape up and that’s the entry of Modi and his foreign policy team. Modi’s style of foreign policy has been so disruptive that a new paradigm of foreign policy is being created that will have long term implications for the country. Those who criticize Modi for only bringing in a new style of Indian diplomacy with no substantive change should now recognize that stylistic changes in foreign policy have their own logic, eventually leading to new conceptualizations of state power.”

Despite the sanctions in the past and the continued technology denials, India is marching ahead. Bharat as a democratic nation is at the cusp of becoming global leader with it’s strong political leadership, young demography and a robust economy. The strong diplomacy with hard bargains are necessary to keep up the momentum and cannot afford to simply sit back.

Advantages for India joining NSG group:

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Clean Energy: India is a growing nation whose need for energy is massive. India has set goal for itself about sourcing 40% of power from non- fossil sources. Now in order to fulfil this goal, Nuclear energy can play very important role as India now wants latest technology in this field and membership of NSG means access to all these technologies.

MakeInIndia: ‘Make in India’ is a stated objective of the Modi government and developing an efficient and secure nuclear-based manufacturing and research ecosystem will go a long way in establishing innovation in advanced technologies. NSG membership will allow for sharing and joint research in advanced technologies that can then be exported to other member states.The moment India gets a place in the NSG group, it is definitely going to help indigenous Indian companies which have always worked in isolation as every-time India conducts nuclear tests, it is slapped with international sanctions. Make in India will help in indigenization of nuclear technology from the various deals under which nuclear reactors are going to be built in India to be used in India as well as for selling to other countries. Once India enters into NSG, this initiative will be implemented better, creating not only employment but technology development as well.

Getting State of Art Technology: The NSG membership will help India to gain access to technology for a range of uses from medicine to building nuclear power plants for India, which is essentially a nuclear ‘traders’ cartel. India has its own indigenously developed technology but to get its hands on state of the art technology that countries within the NSG possess, it has to become part of the group.

  • India will have its say in matters concerning nuclear energy.
  • Indian companies like L&T, Walchandnagar (experienced in making nuclear power plants), will find new markets overseas.
  • Member nations will assist India in disposal of its nuclear wastes.
  • It will pave the way for India’s entry into other establishments like “The Australia Group” and “The Wassenaar Arrangement”
  • It will also help India to make a stronger bid for UNSC seat.

If the NSG was able to grant a “waiver” to India in 2008 on the basis of its past performance, it should have no objection to admitting the country as a member this time as well because of its clean track record in adhering to all its commitments.

References:

  1. NSG History & Timeline:
  2. Column by C. Raja Mohan (Director, Carnegie India and contributing editor on foreign affairs at ‘The Indian Express’) : http://carnegieendowment.org/
  3. Column by C. Raja Mohan
  4. Press Meet by Smt.Sushma Swaraj (MEA)
  5. The Real Seoul Story at NSG by Ashok Malik 
  6. Why India rightfully deserves NSG membership? -column by Siddharth Singh
  7. PM Modi’s address at Paris COP21 Plenary (30th Nov, 2015).
  8. India – US Civil Nuclear Cooperation (Ministry of External Affairs)
  9. PM Modi’s address at COP21 Plenary: “Prosperous have strong carbon footprint, world’s billions at the bottom of development ladder seek space to grow”
  10. PM’s article Financial Times (The rich countries must take more responsibility for climate change)
  11. In or Out of NSG, New Delhi’s Carried Out a Diplomatic Masterstroke – column by Harsh.V.Pant
  12. Wikipedia

 Additional Reading:

Could India have been an NSG member already? 

NehruK

Nehru rejected US offer of help, says a new book authored by Maharajakrishna Rasgotra, who served as India’s Foreign Secretary under Indira Gandhi and Rajiv Gandhi and retired in 1990.

“Kennedy’s hand-written letter was accompanied by a technical note from the chairman of the US Atomic Energy Commission, setting out the assistance his organisation would provide to Indian atomic scientists to detonate an American device from atop a tower in Rajasthan desert. In the letter Kennedy had said that he and the American establishment were aware of Nehru’s strong views against nuclear tests and nuclear weapons, but emphasised the political and security threat China’s test would spell for Nehru’s government and India’s security.

“Nothing is more important than national security”, Kennedy’s letter had emphasized. However, after discussions with Dr Homi Bhabha and G.P. Parthasarathy, Nehru finally turned down the letter, though he was not disinclined to the offer initially and had instructed Dr Bhabha to “work out a plan of action on most urgent basis, should we finally accept Kennedy’s offer”.

The book tells the story of India’s foreign policy formulation from the initial years till towards almost the end of the 20th century.

Book Title: “A Life in Diplomacy

Author: Foreign Secretary Maharajakrishna Rasgotra

  1. Defence News Column-I
  2. Defence News Column-II

Interesting read from an editorial in China’s state-run “Global Times” on 28th June 2016.

China tried to ‘upset‘ India, but rattled by Indian Social Media 🙂

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