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Pragati No 15 | Jun 2008

The Indian
National Interest
Review

 iMuj
The New Jihadis

ALSO
STEPHEN COHEN ON INDIA-US RELATIONS
www.nationalinterest.in
TERRORISM AND HUMAN RIGHTS
ISSN 0973-8460 REFORMING THE FINANCIAL SECTOR
A FOOD CREDIT CARD
WHEN DID HISTORY (BOOKS) START?
Contents Pragati
The Indian National Interest Review
PERSPECTIVE No 15 | Jun 2008

2 The New Jihadis


Local manifestations of a global pattern Published by The Indian National Interest - an independent
Nitin Pai community of individuals committed to increasing public awareness
and education on strategic affairs, economic policy and governance.
3 Getting human rights right
Are human rights activists playing into the hands of
terrorists? Advisory Panel
Sandeep Balakrishna, Salil Tripathi & Rohit Pradhan Mukul G Asher
V Anantha Nageswaran
6 Towards a cultural liberalism Sameer Wagle
Governments must stop siding with intolerant mobs Sameer Jain
Jayakrishnan Nair Amey V Laud

FILTER
Editors
Nitin Pai
8 A survey of think-tanks Ravikiran S Rao
Feline counter-terrorism; Measuring up against international
human rights standards; On what makes foreign policy tick;
Assessing energy security policies Editorial Support
Priya Kadam
Chandrachoodan Gopalakrishnan
IN DEPTH Aruna Urs

9 Look before you hop


A discussion on strategic affairs with Stephen P Cohen
Nitin Pai & Aruna Urs

IN PARLIAMENT Contact: pragati@nationalinterest.in

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PERSPECTIVE

NATIONAL SECURITY

The New Jihadis


Local manifestations of a global pattern
NITIN PAI

IT IS hard to say, but it may well be that the Indian terrorism or vice versa. But because the New Ji-
media prevented the Indian Mujahideen from set- hadis see themselves as part of a global religious
ting off their tenth bomb in Jaipur. The earliest re- war, it is reasonable to conclude that no amount of
ports of the contents of their email message made justice—short of the impossible goal of reordering
them appear merely dangerously confused. But as Indian society according to their demands—will
we learn more about what exactly they said in convince them to halt their struggle.
their email, it is clear that their message was not What this means is that the only course open to
merely incendiary. It is, as Praveen Swami put it, a India is to fight the New Jihadis to the finish. They
political manifesto, for the "Indian Mujahideen’s have already declared war on India. Now, it is not
Declaration of Open War Against India. " that the Indian government is not fighting—it is,
Because that document has profound implica- and it has notched some notable gains against the
tions for India's psychological preparation for the Student’s Islamic Movement of India (SIMI) in re-
long war ahead, it is incumbent on the media and cent years. But because the entire debate of
the government to make the entire document pub- counter-terrorism has been painted in the tired old
lic. colours of ‘communalism’, ‘secularism’ and ‘mi-
It is abundantly clear that pattern of contempo- norities’, the Indian government, and the political
rary global 'jihad' has manifested itself in India. establishment, has failed to mobilise the nation for
Now, terrorist attacks by Islamic groups are noth- this war.
ing new for India—but in the past these were
linked to the secessionist movement, the proxy
war in Jammu & Kashmir, or to any number of The New Jihadis have already
Pakistan's extended jihadi apparatus, including
the Dawood Ibrahim's organised crime network. declared war on India. The only
The difference between those attacks and the more
recent ones is that whereas the former involved course open is to fight them to
either foreigners or "hardcore" locals, the latter the finish.
involve individuals and cells from a broader sec-
tion of the India's Muslim population.
Paradoxically, while many of the New Jihadis There are two broad arenas where the war must
are home-grown, the reason for their energetic be fought: on the ground and in the mind. First,
mobilisation is global. As the Indian Mujahideen there is near unanimity in the law-enforcement
said in their email, they are motivated by the belief community that the Indian Penal Code is inade-
that "we Muslims are one across the globe." India, quate when it comes to fighting terrorism. If the
therefore, in the minds of the New Jihadis, is but war against the New Jihadis has to be fought con-
one front in the global jihad. While they cite the stitutionally—as it must—the legal framework
demolition of the Babri Masjid and the Godhra must address the new challenges.
riots as the reasons for their attacks—which their As Philip Bobbitt contends in Terror and Con-
apologists are quick to unquestioningly in- sent, a special anti-terrorism law is necessary. The
gest—the fact that their violence is directed against political establishment must draw the right lessons
the Indian people and the Indian state, including from the partisan debate over the erstwhile Terror-
against Muslims who disagree with their ideol- ism and Disruptive Activities Act (TADA) and
ogy—suggests that these grievances are either ex- Prevention of Terrorism Act (POTA), drawing from
cuses or propaganda slogans for their real agenda. the valid concerns of both sides of the debate. A
At this point, it is common for the Indian public new act, with more stringent checks and balances
debate to be hung up on whether injustice leads to lies within reach of the political class.

PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 2


PERSPECTIVE

gle for primacy within the Muslim communi-


ty—from battles over control of mosques to those
over control over political leadership. Those prone
to view the Muslim community as a ‘vote-bank’
are unlikely to want to notice this. That the Indian
Mujahideen, like their counterparts elsewhere,
condemn Muslims who oppose their world-view
Photo: Kashif

as much as they condemn non-Muslims should


erase doubts as to the nature of the problem.
For the same reason, the argument that a no-
nonsense counter-terrorism policy will antagonise
the entire Muslim community is untrue. But it is
Perhaps in response to the stinging criticism of often pointed out that moderate Muslims do not
his government’s incompetence in the area of in- meaningfully oppose the extremists. To the extent
ternal security, Prime Minister Manmohan Singh this is true, isn't it reasonable that they should be
belatedly called for the formation of a new afraid of doing so when they do not see the Indian
national counter-terrorism agency. Now whether state credibly committed to fighting the New Ji-
or not there is a need for a new bureaucracy to hadis? So too the oft-repeated concerns over com-
fight this war is a matter of technical efficiency. Is munal harmony. If the government makes a clean
it cheaper to restructure and network existing law- breast of the situation, it would be downright pa-
enforcement and intelligence organisations, or to tronising to suggest that Indian people will begin
build an entirely new one? On the face of it, re- large-scale rioting.
engineering and rejuvenating existing agencies is It remains to be seen whether an enlightened
desirable. Not only because creating a whole new political and intellectual leadership will emerge to
bureaucracy is generally a bad idea. But also be- take India through this war. Unfortunately, the last
cause politicians would find it convenient to cite few years have seen positions on several issues of
the creation of an anti-terrorism agency to convey national interest—from geopolitical partnerships
an impression of progress, even when there is to nuclear policy to counter-terrorism—reduced to
none. dogmatic mantras of partisan politics. However,
The second theatre of this war is in the mind. given the likely intensification of attacks by the
For that, citizens must know that India has a war New Jihadis, parties hoping to see themselves in
imposed on it, and that they are considered "le- power next year would do well to start stepping
gitimate targets" by the New Jihadis. Clearly this out of the corners they have painted themselves
war is against some of its own Muslim citizens, into.
but to cast this as a "communal" issue—as is the
case today—is incorrect, dangerous and self-
defeating.
For the contemporary global jihad has a com-
ponent that involves a conflict among Muslims. Nitin Pai is editor of Pragati and blogs at The Acorn
Like in Britain and Pakistan, this involves a strug- (acorn.nationalinterest.in).

COUNTER-TERRORISM

Getting human rights right

Are human rights activists playing into the hands of terrorists?


SANDEEP BALAKRISHNA, SALIL TRIPATHI & ROHIT PRADHAN

Deadlier than the act checking and tackling terror is well known. How-
SANDEEP BALAKRISHNA: That the UPA gov- ever, what escapes the public eye is a sustained
ernment has shown itself as being incompetent intellectual attack that is rapidly undermining the

3 No 15 | Jun 2008
PERSPECTIVE
Photo: Sun Pictures/Lakshman

basic principles of democracy. It lies in the relent- vestigating agencies, the alleged angle of 'Hindu
less attempts to legitimise terrorism and political terrorists' and an incredible theory that this was
violence, cloaked in several noble-sounding the terrorists' method of venting their rage against
garbs—the language of human rights being the America's lust for oil. They single out the BJP as
most notable of them. being the only communal party, and go on to al-
The last four years have seen numerous terror- lege that "communal violence is being substituted
ist attacks across Indian cities. Almost invariably, by the acts of terror to consolidate (its) electoral
these were followed by attempts to explain them base."
away—as vengeance for past wrongs, from a lack However, the most dangerous part is their
of faith in the justice system, or from bitterness at whitewashing of the actual message of the perpe-
not benefiting from India's economic growth proc- trators. What is an unambiguous religious war cry,
ess. in the hands of the 'concerned citizens', becomes
In an email message claiming responsibility for an expression of hidden angst and a matter of hu-
the serial explosions in Jaipur in May 2008, the man rights.
Indian Mujahideen reiterated their declaration of It takes a tremendous amount of effrontery to
war on India. Their message identifies Hindus as make such sweeping demands based on outright
targets for terror and draws inspiration from his- falsehood and in face of contrary evidence. There
torical Islamic kings who invaded India. It also is absolutely no suggestion on how to tackle terror.
targets Muslim scholars who reject their path of One suspects whether these intellectuals even ac-
violence. knowledge such incidents as terrorism.  
Close on its heels, another email message, this Apart from the obvious immediate impact of
time from a group of self-styled "concerned citi- derailing the public discourse, this perverse ap-
zens" was circulated to the International Human proach hampers investigations. Activists claiming
Rights Organisation under the aegis of National to champion 'human rights' have shown that they
Association of People’s Movements. Implicitly de- can drum up enough media and intellectual sup-
claring its contempt for the judicial system, it calls port to stall and mislead investigations. The case of
for the creation of an extra-constitutional authority Mohammed Afzal Guru and Zaheera Shaikh are
which can "in an unbiased way can go to the truth prominent examples of media and intellectual ac-
of these acts." tivism gone awry.
The message has little to condemn the terror- Given the frequency and boldness of attacks on
ists; instead it delves more on the evils of the in- Indian territory, it is time to rethink priorities. In-

PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 4


PERSPECTIVE

tellectual defence of terrorism is deadlier than the unreasonable. They may even be selective - noth-
actual act. ing prevents from others to pick up cases and
Why human rights activists must be unreason- causes these individuals do not. Let the think
able tankers and policy-makers become practical. Be-
SALIL TRIPATHI: There have been several calls on cause otherwise, everyone will support the idea of
human rights organisations to provide "solutions" safety-over-liberty, and we would all be losers.
to the problems societies face. When they refuse, Think Benjamin Franklin—societies that place
when they condemn human rights abuses (even if safety over liberty deserve neither safety, nor lib-
selectively), critics complain—in some cases right- erty.
ly—that human rights groups have "lost the plot" This is, again, not to defend or condemn the
and do not care for the victims of terrorism, and human rights community, but to explain why they
are, therefore, being unreasonable. are the way they are. In some ways, they are like
Human rights folks will be unreasonable, eve- evangelists, which makes them suspect for some,
rywhere, to restrain the state. This is not to defend saviours, for others.
them, but to explain where they come from. The However, in the context of Mr Sandeep's point
moment they become “solution providers” they above, there is some awareness growing among
have to begin modifying the message and make it human rights folks, that they should not forget
more context-specific. Once they do that, the moral victims of terror. If you see Amnesty International,
sharpness of their message—that the victim is they issued a statement after Jaipur blasts in which
most important (and they sometimes exalt victims they condemned those who committed the acts.
to a holy status)—is lost. This is not to judge vic- They called 9/11 “a crime against humanity”. At a
tims or human rights groups. recent human rights seminar in London, two im-
Whether it is the American Civil Liberties’ Un- portant things came out: one, that if human rights
ion or the Center for Constitutional Rights defend- lawyers don’t need to explain why torture is bad
ing the indefendable folks in Guantanamo Bay (because it is, period), why can’t they also argue
cases, or Liberty supporting some committed ji- that terrorism is bad, period? Why do rights advo-
hadis in Belmarsh jail in London, they see their cates contextualise terrorism? Why do they call it
role as defending the indefensible, so that the rest “the weapon of the powerless” when those who
of us won’t suffer at the hands of a government perpetrate terror are extremely powerful, often
with authoritarian tendencies. If they were to be- woman-hating Neanderthals? Why do victims of
gin appearing reasonable, they’d lose resonance. torture get elevated when they are themselves
More important, nobody will be speaking out for human rights abusers, to the status of human
the innocent who will otherwise go to jail. rights defenders and get honoured? Yes, they are
Guantanamo prison, like Abu Ghraib, has victims when they are tortured or detained with-
many bad people. But it also has some innocent out due process of law, and they should get legal
people. The state should not be allowed to get access and not get tortured. But they need not be
away with that. on a pedestal. Merely because you were in Gitmo
I remember reading about Wei Jingsheng, the does not make you qualify for the Nobel Peace
Chinese dissident, who had to leave China - after Prize.
several years in jails. In “Bad Elements” Ian Bu-
ruma paints a very gripping and vivid picture of Strengthening terrorists cannot improve human
him—of Wei driving through red lights in Amer- rights
ica, ignoring traffic discipline; smoking in places ROHIT PRADHAN: Human rights are impor-
where smoking is banned. He is stubborn, because tant—the state’s moral authority rests on its ability
the only way he can deal with authority that he to distinguish its methods from those of the terror-
has known—China—is by being uncompromising. ists. Remove that distinction and the state’s pres-
It does make him look “uncouth” in civilised com- ervation becomes a matter of convenience rather
pany. than a moral imperative. Therefore, it is entirely
And yet, unpleasant though he might be, Wei appropriate to judge the state from a different
matters. Just as Solzhenitsyn matters even though yardstick vis-à-vis the non-state actors it confronts.
when he came out of the Gulag, and once he Mr Tripathi’s analysis fails, however, on two
started talking about Mother Russia, he sounded counts. First, it ignores the nature of modern con-
like an embarrassment. flict: It is no longer a case of ”evil” Russia fighting
The point about human rights activists in India the democratic West with battle-lines clearly de-
is that like Teesta Setalvad, Sandeep Pandey, marcated and theatre essentially pan-national. Ter-
Aruna Roy, Binayak Sen and others, should remain rorism exists as a series of localised conflicts where

5 No 15 | Jun 2008
PERSPECTIVE

the enemy—as seen most clearly in cases of urban terests of organisations they seek to reform or seen
terrorism—is shadowy and elusive. as a handicap in the state’s battle with terror, they
The explosion of new mediums of information are likely to be denied the means to make a differ-
dissemination—the internet for example—has en- ence. What is its eventual goal? Scoring brownie
sured that information is no longer the exclusive points or improving human rights?
preserve of the state. Indeed, in almost every Ji- The letter ‘concerned citizens’ wrote in the
hadi video, Guantanamo Bay detention camp and wake of the Jaipur blasts illustrates the dangers of
its alleged horrors play an important role. In India, viewing human rights in a vacuum. Even before
Gujarat riots have become the primary focus of the dust had settled on the Jaipur blasts; even be-
jihadi indoctrination. Therefore, it is important for fore the police had properly begun investigating
human rights warriors not to unwittingly act as a the attacks (let alone made arrests), ‘concerned
propaganda tool for terrorists. Criticise Gujarat citizens’ released a letter designed, it appears, ex-
administration by all means but be careful about pressly to obstruct investigations and demoralise
the figures your furnish or the labels you give. the police. It is not being argued that the letter
Horrifying as the Gujarat riots were, and complicit writers don’t want the perpetrators of the Jaipur
as Modi administration was, they were by no blasts to be punished, but advancing wild conspir-
means of imagination, a state-sponsored genocide acy theories and demanding the appointment of
or a holocaust. Is the truth not ”good” enough? extra-constitutional authorities is hardly condu-
Then why the constant embellishments? cive to a full and fair police investigation.
Mr Tripathi may well be within his rights to It is conceded that human rights organisations
argue that ensuring the failure of terrorists is not cannot function as part of the state; their inde-
the job of human rights folks. But surely, strength- pendence is essential to their credibility. However,
ening the hands of terrorists and augmenting their it is equally true that they cannot function or make
numbers cannot improve human rights either. a positive impact if they pretend to operate as
Second, the success of human rights organisa- Alice-in-wonderland disconnected from the wider
tions depends upon the preservation of the nation society. Indiscriminately targeting the state is easy;
state, democracy, the rule of law, a free press, it may result in newspaper headlines and instant
among others. The human rights organisations television stardom but it will not advance the
implicitly recognise this by focusing on the trans- cause of human rights.
gressions of the state for they know that terrorists
are unlikely to be moved by their criticism.
A single minded focus on human rights even if
Sandeep Balakrishna blogs at Seriously Sandeep
it damages the very institutions which guarantee (sandeepweb.com), Salil Tripathi is a writer based in
its preservation cannot be a prudent course. London and Rohit Pradhan is a resident commentator
Worse, if they are perceived as inimical to the in- at the Indian National Interest.

POLITICS AND CULTURE

Towards a cultural liberalism


Governments must stop siding with intolerant mobs
JAYAKRISHNAN NAIR

RECENTLY THE Delhi High Court quashed place was in his home in India.
criminal proceedings against M F Hussain and As competitive intolerance stays as our national
noted, "India’s new Puritanism, practised by a sport, Mr Hussain's offensive paintings are re-
largely ignorant crowd in the name of Indian spiri- placed in the next news cycle of a few people led
tual purity, is threatening to throw the nation back by the "Nawab of Arcot" disrupting an exhibition
into the Pre-Renaissance era." Fearing harm, the on Aurangzeb's atrocities. As mobs indulge in tyr-
artist had been living in self-imposed exile in Du- anny, forcing their morality on the rest, it is neces-
bai and London and the court noted that his right sary to step back and analyse the repercussions of

PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 6


PERSPECTIVE

such  intolerance. To move to an era of cultural must oppose such bans and question the judge-
tolerance, it is necessary to identify the culprits, ment behind maintaining such lists.
understand the patterns and evaluate the options   When various governments competitively
for facilitating a society that respects freedom of banned art, books and movies and vigilante
speech. groups enforced their morality creating insuper-
While it is distressing that mobs can restrict able problems, it has been the judiciary, as in Mr
cultural freedom, liberals should be concerned that Hussain’s case, which came to the rescue. When
our governments too act mala fide with élan. In The Da Vinci Code was banned,  the high courts of
2006, The Da Vinci Code, based on a best selling Andhra Pradesh and Tamil Nadu delivered land-
novel of the same name by Dan Brown, was re- mark verdicts vituperating the governments. The
leased in India. This controversial novel and movie Andhra High Court told the government that, "the
propagated Donovan Joyce's 1973 theory that Jesus constitution does not confer or tolerate such indi-
married Mary Magdalene and their bloodline  vidualised hyper-sensitive private censor intrusion
survives to this day. While it was not banned in into and regulation of guaranteed freedom of oth-
Christian majority countries, this movie, which ers."
was cleared by the Central Board of Film Certifica- The Madras High court, on similar lines, wrote,
tion, was either banned or suspended in Tamil "artistic expressions may be asphyxiated by law if
Nadu, Andhra Pradesh, Nagaland, Meghalaya and a petulant group of self-appointed `censors' pre-
Punjab. scribes the paradigms for suspending the screen-
Governments usually ban books and movies  ing of a film." The courts also noted that citing a
when they think that it has or can upset religious possible break down in law and order couldn't be
sentiments resulting  in a break down in law and a reason for a ban. According to Justice Prabha
order. While that may be the official reason, the Sridevan of Madras High Court, "the inability of
ground reality is that it is connected to politics. the state to maintain law and order or to avert a
Thus by banning The Da Vinci Code and The Satanic violation of breach of peace can never be a ground
Verses, the governments made it clear that they can to throttle the fundamental rights." In an ideal lib-
sacrifice liberalism. On finding that James Laine's  eral democracy, the judiciary would not have to
Shivaji: Hindu King in Muslim India had remarks step in, but right now we should be glad that we at
that were deemed derogatory to the Maratha hero, least have a judiciary to step in.
the Maharashtra state government banned the By being a cultural liberal, you don't have to
book, showing that it is not just minority ap- cotton to Mr Hussain's work. He can be called a
peasement at work. Maharashtra’s ban also hypocrite but our constitution gives them the same
showed that laws made by local authorities might rights that each one of us has. If Shivaji: Hindu King
not be an obvious cure, but opportunities for cus- in Muslim India is offensive, the best response
tomised pandering. would be a book which contests James Laine's the-
This asphyxiation of artistic expression is not ory; the Nawab of Arcot should have organised a
new. As India turned sixty, the Indian Express pub- counter-exhibition extolling Aurangzeb's virtues.
lished a list of books that have been banned. The The battle for cultural liberalism is not over, for
list includes Hindu Heaven by Max Wylie (banned there are many upcoming events to test it. Paul
in 1934)   to Who Killed Gandhi by Lourenco De Verhoeven is coming up with a new book, Jesus of
Sadvandor, with the most famous ones being Nine Nazareth: A Realistic Portrait in which he claims that
Hours to Rama, a fictionalised account of Mahatma Mary was a rape victim and Jesus was not be-
Gandhi's assassination by Stanley Wolpert and The trayed by Judas. Kamal Haasan's much awaited
Satanic Verses by Salman Rushdie. Movies like movie Dasavathaaram, apparently (since no one has
Kissa Kursi Ka, Indiana Jones and the Temple of Doom, seen it), has some scenes of idols being destroyed
and Kama Sutra were banned but some were re- in the clash between Shaivaites and Vaishnavites.
leased after court orders. A Vishwa Hindu Parishad (VHP) leader has said
Our constitution writers were clear that democ- that such scenes hurt the sentiments of Hindus all
racy is meaningless without freedom of speech, around the world and should be removed, failing
and that people should live in a social environ- which they would resort to public protests.
ment that permits maximum personal and cultural As usual there will be mob violence and selec-
freedom. tive outrage, but let not the Iranian Ayatollahs and
Our politicians though, play petty politics with Bangladeshi fundamentalists be our role models.
this right. Our governments, independent of their
ideology,   have indulged in communal and re- Jayakrishnan Nair writes about history and current
gional politics to satisfy vocal groups. Liberals affairs at varnam.org/blog.

7 No 15 | Jun 2008
FILTER
A survey of think tanks

Feline counter-terrorism punish lethargy. Gener- should fall within the am- power longer than it
PREM MAHADEVAN has ally, those ‘cats’, who were bit of racial discrimina- would take if the political
an interesting paper in heavily compromised by tion. And finally, to sub- parties had an overarch-
Faultlines, a quarterly pub- involvement in murders mit itself to international ing and non-partisan con-
lication from New Delhi’s and threatened into co- scrutiny by the UN’s spe- ception of the national
Institute for Conflict Man- operating rather than be- cial rapporteurs. interest.
agement, on the system- ing simply bought off, Mr Lahiri’s analysis,
atic use of “cats” as a seem to have been the unfortunately, fails to dis- Energy and India’s foreign
counter-terrorism tool in most reliable. tinguish between interna- policy
Punjab from the mid- This might have been tional norms and those of STANFORD UNIVER-
1980s to the mid-1990s. because the handling offi- the UN’s human rights SITY’S Jeremy Carl, Varun
“The ‘cat’ system was cer could always brandish bodies. The latter leave a Rai and David Victor have
the use of pseudo-terrorist the stick of punishment lot to be desired. published a working pa-
techniques to infiltrate for past activity if the ‘cat’ per that studies the “wide
terrorist groups. It in- faltered, and offered car- On what makes Indian gap between India’s need
volved the use of specially rots in the form of bo- foreign policy tick for a strategic energy pol-
recruited infiltrators and nuses only sparingly. The THE CENTRE for Euro- icy and the government of
systematically turned cap- more desperate the ‘cat’ to pean Policy Studies India’s inability to put
tured terrorists as intelli- buy his peace with the (CEPS) has published a such a policy into practice.
gence assets for tracking Police, the more he could working paper by Radha As a stark departure from
down listed terrorists. be pressured to run risks Kumar on “India as a for- the idealised vision, In-
These ‘cats’ on making while gathering informa- eign policy actor - norma- dia’s energy supply chains
contact with active terror- tion.” tive redux”. that have grown increas-
ists, provided actionable The paper “analyses ingly creaky and unreli-
intelligence which helped India’s behaviour as a able.
the security forces engage How does India measure foreign policy actor by Only halting progress
otherwise elusive targets.” up on international human looking at India’s chang- has been made towards
Mr Mahadevan’s pa- rights standards? ing relations over the past reform and, without fun-
per shows that “the ‘cat’ IN AN issue brief pub- decade with the EU, US, damental reform, it is
system, when standard- lished by New Delhi’s China, Japan, Myanmar, likely that India’s global
ized into a key attritional Observer Research Foun- Pakistan, Nepal and, in a energy strategy will con-
weapon for counter- dation Dilip Lahiri as- historical departure, the tinue to be a failure.”
terrorism, dealt heavy, sesses how India’s human former princely state of The study argues that
though not crippling, rights standards stack up Sikkim. reforming India’s domes-
blows to the Punjab ter- against international It argues that though tic energy sector is a nec-
rorists’ morale as well as norms. India has almost always essary condition before
operational capability.” While he concedes that been a normative actor, energy security can be
The paper points out India’s record, “warts and Indian foreign policy is meaningfully pursued as
“the comprehensive loss all, is certainly no worse today transiting from ab- a foreign policy goal.
of local medium-rung than that of the majority stract, and frequently ‘un- India’s energy security
cadres amongst the terror- of UN members, and realpolitik,’ views of what initiatives have had little
ists that crushed the Khal- would probably be ranked constitutes normative impact because firstly,
istani movement. The among the top third”, its behaviour. they are “framed in a
capture or killing of a ter- “Achilles’ heel has always India’s ‘Look East’ political environment that
rorist group leader was a been implementation and policy has been the cor- is highly fragmented and
bonus, but essentially not what has been described nerstone of this transition, unstable,” with power
one to be relied on at the as a ‘culture of impunity’ indicating that economic shared between the centre
tactical planning when faced with routine growth, maritime capabil- and the states, and be-
level...When local leaders violations of laws and ity and peace and stability tween coalition partners;
shared the risks and tra- regulations.” in its neighbourhood are and secondly, because the
vails of the terrorist rank He argues that being key goals of India’s pre- government’s administra-
and file, their loss had a seen as unmindful of in- sent behaviour as a nor- tive capacity in the energy
stronger demoralising ternational human rights mative foreign policy ac- sector is extremely weak.
effect than that of a leader obligation imposes costs tor.” The author points out
who was too high up and on India in terms of influ- that the domestic opposi-
distant for the rank and ence. He proposes four tion to a normative behav-
file to feel personally af- measures to address this. ior as a rising power
fected.” First, to attack the culture “casts doubts on whether
The role of money of impunity. Second, to there is internal consensus
Do you have anything for FILTER?
power was important. To ratify the convention or even clarity on what
the extent that “the ‘cat’ against torture. Third, to constitutes the national Alert us to interesting studies, workshops
system was only as effec- get out of the stalemate interest”. As a result, India and analysis coming out of think tanks.
tive as its capability to with the UN on whether might remain a “rising” Email us at pragati@nationalinterest.in
purchase loyalty and to or not caste discrimination rather than an established

8 No 15 | Jun 2008
IN DEPTH

INTERVIEW
Photo: SMikeB

Look before you hop


A discussion on strategic affairs with Stephen P Cohen
NITIN PAI & ARUNA URS

In 1979, Stephen P Cohen wrote a book titled India: when you have opportunities, when you have
Emergent Power? In 2001, he wrote a new book, this America as a potential partner, potential rival,
time without the question mark. Shekhar Gupta, when you have a domestic security problem much
editor-in-chief of the Indian Express once wrote that larger than Pakistan or China, then it requires
“many Indians see him as being overly friendly to more careful thinking. I don’t see that emerging.
the Pakistanis. Many Pakistanis similarly say he The Indian political community is too domesti-
has flipped to India's side. Cohen, however, has cally focused and I can see it becoming more so.
written landmark books on both armies and loves When coalition governments come to power they
them.” can’t care about strategic and military policy.
Pragati spoke to Dr Cohen, who is currently a So India is going to continue to expand much
senior fellow at the Brookings Institution, on sev- faster economically than I thought it would, but it
eral issues centred around India-US relations. will be a limited military partner for the United
States.
Perspectives on India as a rising power It will be even more crippled by the self-
You wrote your book about India being an emerging inflicted wound of its dysfunctional educational
power in 2001, seven years ago. Do you have a different system. That’s something that nobody imposed on
view today? India, that’s India’s choice.
Yes, I’d say that the military side of that emer- India’s cultural power is going to grow. India
gence is less likely than I thought it was then. I has always been a cultural superpower. The bhan-
think that the Indian strategic community is hope- gra is now in American high schools. And there’s
lessly unstrategic. As long as Pakistan was the Indian films. That aspect of India’s influence is
only threat it was easy, policy was on auto-pilot. going to continue to grow. And its very impres-
When you have multiple threats (China, Pakistan), sive.

9 No 15 | Jun 2008
IN DEPTH

How do you see the geopolitical structure of the world capability in working with other countries in In-
shaping up in the next 15 years and the next 30 years? dia. In that regard, India is going to be one of the
I’m not sure if I’d be willing to guess at that major players. Anything that involves the ocean
kind of future. You may have periods when some and naval power, India is going to be a real power,
countries are very influential and some when they no two ways about it.
are not. The US would be powerful across the India has a second rate fleet that can do a first
board, but in terms of cultural power, other coun- rate job. It has a first rate army but the army is tied
tries could gain influence. Now China not going to down in conflicts all around the place, and can’t
become a cultural superpower the way India is, spare anybody. The air force is going to disappear,
especially in the non-Western world, but China it’s losing airplanes, it can’t seem to buy more or
will certainly be an economic superpower. Japan build any, and above all it has some doctrinal
could have a revival. It’s a world in which you are schizophrenia—especially regarding air support
going to have one larger power, several medium for the army.
powers, India will be among the medium powers. Naval co-operation, which involves disaster
Maybe India’s net influence will be equivalent to relief is a big area. India is going to get its money’s
that of Japan. Japan is a country of great economic worth out of its navy.
capabilities but limited cultural and military influ-
ence.

Is the current situation similar to the 60s where the US India has a second rate fleet that
wants India to act as a counterweight to China but In-
dia is inclined not to be aligned with the US against its can do a first rate job. The air force
neighbour.
I think we have always exaggerated the degree is going to disappear, it’s losing
to which India is willing or capable of playing that airplanes, it can’t seem to buy
kind of game. I’ve changed my views on this—I
just don’t think the Indians can do this. There more or build any, all be losers.
aren’t enough Indians who can think strategically.
For years India’s foreign policy was on automatic
pilot. It was to do the opposite of whatever Paki- Naval co-operation
stan did. Pakistan was the main enemy. For a Some Indian commentators have complained that in the
while China briefly became the main threat but naval relationship, the United States wants to limit
that disappeared very quickly. India has accom- India to the Bay of Bengal, and in a sense, keep it out of
modated China in various ways, and is now in the Arabian Sea and ocean to India's West.
awe of China’s economic growth. I don’t see why India could not be the member
The Bush administration saw India in strategic of [the US-led naval task force in the Arabian Sea/
terms but except for four or five of your friends, I Persian Gulf]. It has legitimate Persian Gulf inter-
don’t think the Indians see themselves in strategic ests and a capable navy. The US navy will be
terms: that’s it. The Indian military would like to happy to co-operate with Indian navy, but there
balance China, but they can’t do it unless the poli- might be third-party objections in the Persian Gulf.
ticians and bureaucrats think in terms of balancing The Pakistanis are deeply involved there. They
China. have twice commanded the joint task force. I look
There may well be a good outcome because if forward to the day when India and Pakistan could
you have nuclear weapons and a nuclear deter- collaborate militarily, probably first at sea. We live
rence relationship you can’t talk in terms of classi- in a world where natural and man-made disasters
cal strategic balances. You can talk about economic will only increase and it is important that major
competition, cultural rivalries, but in terms of us- powers work together.
ing military force being a nuclear power compli- Richard Haas’s metaphor of ‘Sheriff and Posse’
cates matters, as India and Pakistan found out is a good example of co-operation that might be
from Kargil. needed. A sheriff will round up a posse of likely
characters and then they go and get the bad guys.
Is the US-India-Australia-Japan quadrilateral likely to In this scenario, the bad guy could be natural dis-
happen? aster or an insurrection or a state out of control.
I think the coming together for a period of two- India might or might not join the coalition but it is
four months for humanitarian purposes—that’s important to work with Indians now to develop
where the world is moving. There is a lot more and standardise operating procedures.

PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 10


IN DEPTH

Isn’t inter-operability a problem that can create hurdles dian government could re-negotiate even if they
to such co-operation? wanted to.
The Indians are among the best in the world in I do foresee coalition governments in India well
integrating systems from different countries. In into the future. When there is a coalition govern-
1987, I went on board of an Indian frigate visiting ment that is unsure of its own political power base,
Washington, DC. The frigate had Dutch, French, it is difficult to have strategic dialogue with any
British, Israeli and Russian systems and it all country, let alone the United States. If the BJP
seemed to work very well. Our navy people regard comes back to power, its coalition partners might
the Indian navy as being up to NATO standards. A do what Communists did to the Congress. The
naval ship deals with another ship as a single Communists got involved in foreign policy as a
point of command unlike the air force where a way of putting leverage on Congress for domestic
plane has to co-ordinate with multiple aircraft. So issues.
inter-operability is not a major issue for the navy. I I don’t think future American governments will
hope we will sell more ships to India like the USS have much inclination to learn about which minis-
Trenton/INS Jalashwa. ter belongs to which regional party and what his
leanings are. India is simply too complicated a sys-
Without restrictive end-user terms & condi- tem to deal with, and there is not much of India-
tions…[Note: India’s Comptroller and Auditor General related expertise in America. I fear that the future
has noted “restrictions on the offensive deployment of senior government officials might simply say:
the ship and permission to the foreign government to "That’s the Indians, it is simply not worth the ef-
conduct an inspection and inventory of all articles fort to do any kind of deal with them".
transferred under the End-Use monitoring clause”] No American government official is likely to
That applies to the sale of ships to any country. again invest the kind of energy and dedication that
It is just boilerplate. Nicholas Burns put into the nuclear deal; he spent
half of his life negotiating the deal and it is almost
dead now. Still, I hope the deal goes through.
Future senior US government offi-
And what if the Republicans win?
cials might simply say: "That’s the A Republican administration might be more
Indians, it is simply not worth the ef- sympathetic to India. They would not have to live
with their legacy of being ‘anti-India’. The Bush
fort to do any kind of deal with administration has changed that. Indian officials I
meet are very pro-Bush.
them". However, I don’t think India will be a high pri-
ority if Iran becomes the real issue. Unless some-
body stops Iran from developing nuclear weapons,
But wouldn’t that be a spoiler, if other competing sup- we might soon see an Iranian nuclear test. This
pliers don’t have the same clauses? leads to new problem that might make India less
India can buy from the French or anyone else. I relevant. Pakistanis might help the Saudis balance
don’t think American government will have a the Iranians. Or Saudi Arabia might become nerv-
problem with it. India has trouble buying equip- ous and there might be a ‘Saudi bomb’ probably
ment as it is. The armed forces cannot figure out made in Pakistan or China.
on how to make acquisitions, especially airplanes. What will India do? Do they stick with Iranians
This is a real problem for India. But in terms of as their best friend in Middle East or try some type
restrictions on use, I don’t see any hindrance at all. of mediating role? It is quite difficult to predict.
They might try to stay out of the whole issue, as
The United States in India’s neighbourhood the Israelis are involved. India would not want to
How do you see US policies towards India changing anger Israel, a major arms supplier, by becoming
over the coming decade? And what might be the key too close to Iran.
differences in the foreign policy approaches of the main
candidates. Do you think it is possible for India to play a bridging
I cannot go 10 years down the line. If Demo- role between the United States and Iran, much like the
crats win the next election, as it looks like they role played by Pakistan in bringing China and the
might, and if the nuclear deal is not completed by United States together in 1971?
then, the deal will be a dead duck. Democrats I don’t think so. It is largely our problem, a
might want to re-negotiate it. I am not sure if In- psychological one to be more specific, that goes

11 No 15 | Jun 2008
IN DEPTH

back to 70s and the hostage crisis. Too many ago was unprecedented, but now it is growing at
Americans are still wrapped up in that. We have 1%!
an obsession and we cannot get rid of it. So it is I have spent 45 years studying India, but these
hard for India to play that kind of role. By the way, two areas are enormously disappointing. If you
there are other countries that want to play that role have a billion people with a bad education system,
also. there might some bright people coming out of that
Indian is caught between all kinds of contesting system but that is not good enough. That is not
powers. I am not sure if India wants to play any how liberal democracies work.
role at all. I know one Indian diplomat who has Indians are very comfortable with complexities.
said that India is better off not being a permanent The more screwed up it is, the better Indians func-
member in UN Security Council. If it were a per- tion. That is the reason why they do so well in
manent member, then it would have to take a posi- America. For Indians, America is a pretty simple
tion on every issue. Historically, India is best off by country. Indians need better education to thrive
not taking positions, given its fragile domestic but the universities, including the best ones, are
politics and the loss of a foreign policy consensus. awfully messed up. When I first arrived in India,
There is room for creative Indian diplomacy on the universities at Allahabad, Bombay and Cal-
Iran, but [it has] to take Pakistan along. I think In- cutta were great places to study. They still had
dia ought to go with Pakistan to the US and say some world class faculties, who have long since
‘look we understand your concerns about Iran but gone. The good Indian ones ended up in America.
pipeline is more important to us’.

Tell us something about your upcoming book Without good education and mod-
I am writing a book with Sunil Dasgupta. The
book is about the prospects for an India-US strate- ern agriculture, India will just
gic (military) relationship. We are not that enthusi-
astic about the prospect. My own policy advice to
struggle along. I have spent 45 years
Americans would be: ‘look before you hop’. It is studying India, but these two areas
not a leap but a hop—as people do in a potato sack
race. The nuclear weapons make a long term and are enormously disappointing.
intense relationship inconceivable vis-à-vis China.
We also cannot imagine a balancing of Chinese
land power by the Indians. The army is not ready The government refuses to lift its stranglehold on edu-
for that. They can barely do what they are doing cation
now. The notion of Indians crossing the Himalayas Yes, but you can learn from American system
and defeating the Chinese in Tibet or even in Ne- where both public and private universities com-
pal is simply inconceivable. pete vigourously. This is one area where the British
model was ineffective, and ours, which accommo-
Agriculture and Education dates a multi-ethnic, federal, complex society
While military co-operation might not work would fit better.
out, I am very optimistic about economic co- Yet, I remain amazed at India: my wife says
operation, which is booming in both directions. that 100 metres of India is more interesting than 10
However the big problem areas are education and kilometres of most other countries. A few months
agriculture. The Indians appear to be unwilling to ago I was on Parliament Street: under three differ-
accept the transfer of foreign educational systems, ent trees there were three different businesses
except for a small sector. I am also bothered by flourishing. One guy was repairing bicycle tyres, a
Indian agriculture. Without good education and second was a cobbler and a woman was hawking
modern agriculture, India will just struggle along. lottery tickets. Each had a different life story. That
I got my job at the University of Illinois because it was an amazing display of India’s complexity and
was one of the dozen or so American universities diversity.
that fostered the green revolution in India. Illinois
contributed to the soya bean revolution, Kansas
State university was part of the white (milk) revo- Nitin Pai is editor of Pragati. Aruna Urs works for a
lution. The growth of Indian agriculture 40 years risk consultancy.

Want to listen to this interview? Visit pragati.nationalinterest.in/podcast to download the audio edition

PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 12


IN PARLIAMENT
PRS Legislative Research: Budget Session 2008

A COMPARISON of the constituencies for Lok Food Safety and Stan- quently, the January ordi-
Budget Session 2008 with Sabha and state Legisla- dards Authority. The nance has lapsed. [An
the last three Budget ses- tive Assemblies. The last government has faced ordinance has to be
sions of the 14th Lok Sabha such exercise was carried difficulty in selecting emi- passed as an Act within
show that in 2008 Parlia- out based on the 1971 cen- nent persons who do not six weeks of the beginning
ment worked the least sus, and the next delimita- hold any other post. The of the following session of
number of days and tion will not be carried out Food Safety and Stan- Parliament.]
transacted the least till the first census after dards (Amendment) Bill,
amount of non-financial 2026. The number of seats 2008 permits part-time Bills introduced
legislative business. in Lok Sabha allocated to members in the Authority, Three Bills that were
However, it worked each state as well as the who may hold other posi- introduced during the
the maximum number of seats in state assemblies tions. session are pending in
hours per day, working have been kept un- Parliament. In view of the
extra hours to make up for changed. However, The Central Universi- pendency of cases in the
the lost time due to inter- within each state, the con- ties Laws (Amendment) Supreme Court, the Su-
ruptions. stituencies have been re- Bill, 2008 amends five preme Court (Number of
drawn so each constitu- Acts to make provision for Judges) Amendment Bill,
Legislative Activity ency contains the same laying down audited ac- 2008 seeks to increase the
The Budget Session number of persons (based counts and annual reports number of judges in the
transacted financial busi- on the 2001 census). The of five central universities Supreme Court from 25 to
ness related to Railways, number of seats reserved before parliament. 30 (excluding the Chief
General Budgets and for scheduled castes and Justice of India).
Budget related to Karna- scheduled tribes have also The Jawaharlal Insti- The Compensatory
taka for 2008-09. It also been revised based on tute of Post-Graduate Afforestation Fund Bill,
discussed important is- their population share. Medical Education, 2008 was introduced to
sues such as price rise and Puducherry Bill, 2007 give effect to the order of
recent incidents of attack The Railways empowers the institute to the Supreme Court to es-
on North Indians in Ma- (Amendment) Bill, 2008 develop its own curricu- tablish a Compensatory
harashtra. Most of the allows the central gov- lum and award its own Afforestation Fund to un-
planned legislative busi- ernment to acquire land degrees. dertake artificial regenera-
ness could not be con- for any special railway tion, protection of forests,
cluded during the Session. project which can be clas- The Maternity Benefit infrastructure develop-
Only 12 out of the 30 non- sified as public purpose. (Amendment) Bill, 2007 ment, Green India Pro-
financial Bills planned for It however allows the increases the medical bo- gramme, wildlife protec-
introduction could be in- owner or user of the land nus to Rs 1,000 from Rs tion and other related ac-
troduced and 9 of the 29 to object to such acquisi- 250, and authorises the tivities. The Fund is to
listed for passing were tion. It also provides for central government to managed by Compensa-
actually passed. various categories of revise this up to Rs 20,000. tory Afforestation Fund
Many important Bills compensation to the Management and Plan-
listed for consideration owner and the user of the The Carriage by Air ning Authority.
and passing were not land. (Amendment) Bill, 2007
taken up. They include was passed by the Lok The Constitution
the Seeds Bill, 2004; the The Sugar Develop- Sabha and is pending in (One Hundred and
Information Technology ment Fund (Amendment) the Rajya Sabha. The Bill Eighth Amendment) Bill,
(Amendment) Bill, 2006; Bill, 2008 amends the ten- updates the Act to include 2008. Commonly known
the Code of Criminal Pro- ure of the Chairman of the Montreal Convention as the Women’s Reserva-
cedure (Amendment) Bill, Prasar Bharati to three signed on May 28, 1999. tion Bill, allows reserva-
2006; and the Unorganised years or until he attains This convention increases tion of one-third of seats
Sector Workers’ Social the age of 70. After the the compensation payable (on a rotation basis) for
Security Bill, 2007. Also, Act comes into force, if the to air passengers in case of women in the Lok Sabha
significant Bills such as tenure of any Chairman accidents or loss of bag- and the Legislative As-
the Companies Bill, 2008 does not conform to these gage. semblies of the states. The
and the Right to Educa- conditions, he shall be Bill adds that reservation
tion Bill, 2008, listed for removed from office with- Ordinance Lapsed of seats for women in the
introduction, were not out any compensation. The Forward Con- Lok Sabha and state as-
introduced. This effectively meant that tracts (Regulation) semblies shall cease to
  the incumbent chairman Amendment Bill, 2008 to exist 15 years after the
Bills passed M V Kamath had to resign upgrade the legal and commencement of the Act.
Two Bills, The Delimi- from office. regulatory system in the
tation (Amendment) Bill, commodity futures mar-
2008 and The Representa- The Food Safety and ket was introduced to
tion of the People Standards Act, 2006 re- replace an ordinance, but Compiled by Kaushiki Sanyal,
(Amendment) Bill, 2008 quires full-time members it was not considered dur- senior analyst, PRS Legisla-
enable the redrawing of to be appointed to the ing the session. Conse- tive Research (prsindia.org)

13 No 15 | May 2008
ROUNDUP

ECONOMY
Where is the financial superhighway?
Two reports later, there is still no movement on reforms
AADISHT KHANNA

A COUNTRY has started a massive highway con- plan to fill them in—in the process, pointing out a
struction project. The decision makers in the coun- number of required reforms. In the metaphor of
try’s government and key influencers in its media the highway,  financial products— corporate and
have all agreed that it is important to build world- sovereign debt, foreign exchange, and currency
class highways. Tragically, the country’s govern- and interest rate derivatives—form the high grade
ment has made it illegal to manufacture or import asphalt that the government disallows manufac-
high-grade asphalt. Transport engineers use in- ture or import of. The markets for each of these
adequate substitutes. The roads wear out faster, products depend on the others’ existence to func-
driving up maintenance costs, increasing conges- tion vibrantly. The Mistry report calls these mar-
tion, and making driving unpleasant. kets the Bond-Currency-Derivative (BCD) nexus
If a government which sabotaged its country's and  lays out the roadmap for creating it.
infrastructure development in this way actually In contrast, the Rajan report looks at the entire
existed, it would be mocked by the world and financial sector, picks the easiest and most obvious
thrown out by its citizens. Yet, the government of candidates for reform, and advocates going ahead
India, which has repeatedly failed to allow its fi- with them as soon as possible, with the aim of in-
nancial infrastructure to develop, has not inspired cremental reform. If the Mistry report is a plan to
any outrage. establish asphalt plants locally, the Rajan re-
port is that of an efficiency expert who surveyed
Two prescriptions for reform the highways and discovered not only missing
In the past two years, the Indian government high-grade asphalt, but also that the work teams
has asked for advice on reforming the financial are too unwieldy, that the concrete is not being
system from two sources. The finance ministry poured properly, and that modern equipment is
asked the Percy Mistry committee how Mumbai not being used, and points out the improvements
could be made an International Financial Cen- which can be made in each of these areas.
tre,   while the Planning Commission asked the   The two reports have a large overlap, espe-
Raghuram Rajan committee to list the reforms cially on the problems of governance in state-
needed for the evolution of
the financial sector. The
Percy Mistry report was
submitted sixteen months
ago; few if any of its rec-
ommendations have been
implemented. The Rajan
committee has submitted a
draft report and the final
report will be submitted
soon.
  The Mistry report is a
tour-de-force. Asked what
Photo: Akshay Mahajan

it would take to create an


international financial cen-
tre in India, the committee
not only identified the
missing pieces, but pre-
pared a comprehensive Extending the line

PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 14


ROUNDUP

owned banks, and the need to create the missing Committee has also endorsed principles-based
BCD markets. The Rajan report focuses on some regulation, but has not gone to the radical extent of
areas in much greater detail than the Mistry report a unified financial regulator, instead suggesting a
—pension fund development, financial inclusion, strict definition of jurisdictions of different regula-
alternative banking models—, while the Mistry tors, and a hierarchy of regulators in case of excep-
report is almost monomaniacal in its focus on the tions. It has suggested that regulatory reform be
BCD nexus and the tax- and legal policies needed incremental   and seek the optimum, rather than
to enable this. Both reports also run up against a specifying an ideal regulatory end-state.
complex question—the ideal nature of financial   Principles-based regulation is more conducive
sector regulation in India. to innovation in product design, customer service
methodologies and in broadening the customer
Rebalancing the government’s role base. But the challenge is that the regulated have
There is a fundamental problem of Indian state to rely on the judgement of a regulator rather
involvement in finance—it is unbalanced. There is than   on written down   procedures, which means
too much of it in some areas and non-existent in that regulators have to be consistent and protected
others. The excess of state control is particularly from influence.
prominent in banking. The government owns most   There is a strong case for minimising top-
of the the banking sector. The Reserve Bank of In- down control and regulation in existing markets,
dia (RBI) micromanages banking. This microman- but there is also a strong case for creating organisa-
agement acts as a drag on productivity and inno- tional structures which are capable of creating new
markets. Creating markets requires co-ordinating
and optimising multiple elements—rules of entry,
In the absence of a good financial base assumptions in contracts, building trust in
producers and customers, creating an educated,
system capital remains with those well-trained workforce, and so forth. In the ab-
who own it or have enough influence sence of a central body, it   is difficult and slow
for participants to co-ordinate among themselves
to obtain it. A well-functioning fi- and develop these institutions. The ideal frame-
work for financial sector regulation may be one
nancial system promotes inclusion where a regulator tasked with creating a market is
and provides the poor with access to not the same one which regulates the players in
that market.
capital.
The aam aadmi is waiting
vation and   creates unnecessary compliance costs A tragedy of the discourse on financial sector
for banks. In extreme cases, RBI regulations can act reforms is that it is limited to professionals in
against its own objectives—as with strict know finance. Though the Mistry and Rajan reports are
your customer norms that prevent the poor from well-written and comprehensive, they are meant to
opening bank accounts. be read by experts. A lay reader can go through
  Conversely, the lack of a common rule-book them and be enlightened on how the financial sec-
for the corporate debt market has meant that it is tor can be reformed, but will still not know why it
impossible for corporate bonds to be freely traded. should. The financial system is as important to an
Lack of liquidity makes corporate debt an expen- economy as the transport or electricity system
sive source of capital and forces companies to rely is. Good roads not only enable existing traders to
on bank debt or internal funding, slowing their reach the market, they create access for new ones.
growth. Similarly, a better bond market   not only
  The Mistry and Rajan reports have both makes   borrowing cheaper for existing compani-
pointed out that financial regulation in India has es, it also frees up bank funds for new ones.
been excessively procedure-oriented and contains The people  clamouring for reform—large cor-
too many cooks fighting over too little broth. porates and existing financial institutions—are not
Where the two committees have differed is in their the only beneficiaries.   The financial sector pro-
prescriptions for regulations. The Mistry report vides  infrastructure for the real economy, security
has advocated a unified financial regulator along and wealth creation to savers, and capital and risk
the lines of the United Kingdom’s Financial Serv- management to entrepreneurs.
ices Authority (FSA) and the adoption of light- In the post-Independence era, finance for the
touch, principles-based regulation. The Rajan masses involved expanding credit access. India’s

15 No 15 | Jun 2008
ROUNDUP

agricultural system has been flooded with subsi- years that voters have begun to demand ‘bijli-
dised credit, leading to high indebtedness and sadak-paani’ (electricity, roads, and water)—public
loan waivers that enable politicians to buy votes. goods and infrastructure from the government. 
However,   products which would truly benefit   Infrastructure reform has taken place in tele-
farmers—crop insurance and commodity fu- com, electricity and highways. Financial sector
tures—either do not exist, or have been banned by reform has taken place too—the command econ-
alarmist governments. omy’s Comptroller of Capital Issues has been re-
The penetration of bank accounts is alarmingly placed by the Securities and Exchange Board of
low—less than 20 percent of agricultural labourers India. India now has some of the best functioning
have a bank account. Reform targeted at improv- stock markets in the world. The private sector has
ing financial inclusion could improve the access of set up successful commodity exchanges and pri-
the poorest of the poor to secure savings, but is yet vate sector entrants into banking now have an im-
to take place. The penetration of superior savings pressive market share. 
instruments such as insurance, mutual funds and   These successes should not distract us from
pension funds is worse. In the absence of a finan- the fact that India’s financial system is still quarter-
cial system capital remains with those who own it baked, and that substantial financial sector reform
or have enough influence to obtain it. A well- is still needed. Every delay in pressing forward
functioning financial system promotes inclusion with this is therefore a lost   opportunity   to turn
and provides the poor with access to capital. India’s small entrepreneurs into stable busi-
  Traditionally, India’s politicians have had little nesspeople, its savers into investors, and to protect
interest in infrastructure and public goods be- its consumers from price fluctuations and infla-
yond   grand but   low-impact   projects such as the tion.
Bhakra-Nangal dam and the Indian Institutes of
Technology.   Voter desires were   couched as ‘roti-
kapda-makaan’ (food, clothing, and shelter)—all Aadisht Khanna is a former banker who now works at
private goods.  It has only been in the past fifteen a brokerage. His blog is at www.aadisht.net

PUBLIC POLICY

Improving economic literacy


Effective delivery of public services requires sound public policy education
MUKUL G ASHER & AMARENDU NANDY

THE ASSOCIATED Chambers of Commerce and that most of the case studies and examples dis-
Industry of India (ASSOCHAM) recently surveyed cussed in the class were outdated, and so were the
“faculty awareness” of 258 faculty members of recommended books and other references.
various institutions granting Master in Business If this is the state of affairs for the faculty teach-
Administration (MBA) degrees across the country. ing MBA students, it is reasonable to infer that for
The survey excluded the top-30 business schools. undergraduate economics and business faculty
The survey found that the vast majority of the across the country, the situation is unlikely to be
faculty members were not aware of basic facts better. More broadly, the wide gap between India’s
about the national and global economy. Nine out top engineering and business schools which are
of ten faculty members were unaware of India’s internationally recognised, and the remaining
GDP growth rate, and saving and investment rates thousands of these institutions with low educa-
for the latest year. Nearly all the survey partici- tional quality is disconcerting, requiring urgent
pants could not state that India’s current external remedial actions.
trade is over US$500 billion. Nine-tenths of the The survey’s findings are consistent with per-
respondents were unaware about possible reces- sonal experiences involving extensive interactions
sion in the United States, let alone its implications in the past several years with university faculty
for the Indian economy. The survey also found and students of economics and business in India;

PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 16


ROUNDUP

with government officials from various all-India livelihood from agricultural activities alone. De-
services; and with business and civic groups across signing appropriate policies and their implementa-
the country. tion to manage this change would require higher
Inadequate awareness of basic facts and figures level of economic literacy and skills than is evident
is a symptom of a more endemic dearth of finan- currently.
cial and economic literacy among wider sections of Such literacy and reasoning skills are also es-
the society, including intellectuals, media-persons, sential for effective delivery of public services, and
politicians, policy-makers, and the bureaucracy. It for obtaining better results or outcomes from
is therefore not surprising that they do not exhibit budgetary outlays. These skills need to be empha-
an appropriate mental picture of India’s economic sised in recruitment and subsequent training of
structure, its sources of growth and competitive- civil servants at all levels. India must establish in-
ness, its vulnerabilities and challenges, and a nu- ternationally benchmarked public policy schools
anced understanding of the ways to advance In- which are accessible to not only the civil servants
dia’s economic interests. at all levels of government, but also to members of
In terms of immediate public policy priorities, political parties, and others who are interested in
incorporation of sound financial and economic public policy such as those in the media and the
reasoning is essential for increasing employability non-profit sector.
of the graduates, for managing social change Public policy education initiatives could also
help reduce wilful neglect of basic economic rea-
soning by the policy-makers, who currently are
not sufficiently held accountable for the resulting
Inadequate awareness of basic facts harm to the country. Many current policies, for
instance, ignore the vital concepts of opportunity
is a symptom of a more endemic costs (that which is foregone as a result of under-
taking a particular course of action) and moral
dearth of financial and economic lit- hazard (the incentive for individuals to behave in
an inefficient manner due to poorly designed pro-
eracy among the wider sections of grams and implementing rules). This in turn con-
the society: in the media, among in- tributes to the budgetary outlays not being com-
mensurately translated into budgetary outcomes.
tellectuals and policy-makers. This is evident in the extension of National Ru-
ral Employment Guarantee Scheme (NREGS)
nation-wide without addressing faulty design and
without too much disruption, and for more effec- implementation problems; and the farm loan
tive design and delivery of public services. waiver of over Rs 700 billion which is degrading
With regards to employability, India is facing a the loan portfolios of the banks undermining fu-
paradoxical situation. Due to its current favourable ture rational credit allocation in the country. Ab-
demographic phase, between 2005-2020, India sence of rational decision making concerning oil
needs to create 142 million jobs, 30 percent of the pricing and fertiliser subsidies also represent in-
world’s total. At the same time, India is experienc- stances of wilful neglect, which is jeopardising
ing a shortage of talent at all levels, and in all sec- India’s future energy and food security.
tors. As V N Dhoot, ASSOCHAM’s president, has Another glaring example of the wilful neglect is
rightly put it, if teachers are ill-informed, how can the Employees Provident Fund Organisation
they impart relevant knowledge and skills to the (EPFO), India’s national provident fund with
students? This worsens the talent shortage, and nearly Rs 2000 billion in assets, which refuses to
results in India being unable to take advantage of utilise modern technology and financial manage-
its current, non-recurring unique demographic ment practices, endangering the future economic
dividend. security of its 40 million members.
Financial and economic literacy is also essential A significant contributory factor to the low
for understanding forces that are driving social level of financial and economic literacy found in
change in India, and globally. In little over two ASSOCHAM’s business barometer survey is a re-
decades, majority of Indian population will be liv- flection of poor leadership and misplaced priori-
ing in urban areas. This portends momentous ties of the education ministers, and education es-
change in where India works and lives. India sim- tablishment, at both the centre and in the states.
ply cannot sustain the romantic idea that three- If India is to become a major knowledge-
fifths of its 1.1 billion population must derive its driven economy, with its share in world GDP ris-

17 No 15 | Jun 2008
ROUNDUP

ing from 2 per cent to 16 per cent (same as India’s ing high quality educational institutions is a
share in world population), it must strengthen its medium-term process requiring considerable re-
education system. Besides improving the quality sources and leadership. And as in other areas, it
and reach of primary, secondary, and vocational takes a long time to build quality, but only few
schools, this will require universities to be in step misguided measures to destroy it.
with the needs of the twenty-first century global The failure of those in charge of the education
and cosmopolitan India. The higher education sec- sector, particularly Arjun Singh, the current human
tor must be freed from the straitjacket of govern- resource development minister, to focus on the
mental monopoly and anti-competitive regula- supply-side of the education sector has severely
tions. damaged prospects for India’s future for which
The supply-side of education—involving they should be judged extremely harshly. Those in
physical infrastructure, establishment of first-rate positions of power, clamouring for special treat-
public and university libraries, and increasing the ment for a few from their communities in the
number of faculty and researchers—should be the name of social justice, have done precious little to
priority. empower the aam aadmi.
The education establishment would be well India’s electorate must demand competence
advised to keep these aspects in mind if they are and accountability from those in position of public
serious about greater access to quality higher edu- trust.
cation. Simply labelling an institution as a central
university, or Indian Institute of Management Mukul G Asher is professor and Amarendu Nandy is a
(IIM) or Indian Institute of Technology (IIT) does doctoral candidate at the National University of Singa-
not automatically bestow it with quality. Develop- pore.

FOOD SECURITY

A food credit card scheme


How microfinance and the public distribution scheme can work together
ANKIT RAWAL

INDIAN GOVERNMENTS have experimented


Commodity Quan- Price at Price in Expendi- Expendi-
with a number of poverty alleviation programmes
tity fair price the open ture at ture in
but their success has been limited. Of these, the shop market fair price the open
Public Distribution System (PDS)—a quantity shop market
(Rs/kg) (Rs/kg)
rationing-cum-food subsidy programme—is   one (Rs) (Rs)
of   the oldest and most far-reaching in terms of
coverage. But in spite of its existence for decades it Rice 35 kg 4 17 140 595
has not been effective in poverty alleviation due to
gross inefficiencies in procurement and distribu- Sugar 3 kg 15 20 45 60
tion. Can civil society do something here? NGOs, Kerosene 4l 10 25 40 100
especially those engaged in microfinance have to
take the lead in this area support government ini- Wheat flour 4 kg 12 18 48 72
tiatives to make them more effective to the needs
Total 273 827
of the poor.
The PDS provides rationed amounts of basic Monthly expenditure on essential commodities (author’s estimates)
food items and other non-food products (kero-
sene, coal, standard cloth) to people at below-
mainly as an instrument of price stabilisation as
market prices through a network of fair price
well as an alternative to private trade. It was
shops. More than a quarter of India's population is
widely believed that private traders   indulge in
below the poverty line and unable to afford the
speculative activities, artificially inflating food
market price. The PDS was initially conceived of

PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 18


ROUNDUP

prices. But gradually the PDS became the main Thus, due to lack of immediate cash at the time
safety net to protect the poor. The "ration card", of arrival of rations at the fair price shops, a poor
which defines and tracks eligibility, has become household has to pay an extra amount of Rs 554
the most ubiquitous symbol of the PDS. per month or Rs 6,648 per year to procure the same
  The PDS chain broadly consists of the Food amount from the private shops, frustrating the
Corporation of India (FCI), the co-operative soci- entire rationale of the PDS scheme. If microfinance
ety at each district, fair price shops & the final institutions can step in solve the cash flow prob-
beneficiary. Though the PDS has been in operation lem among the poor households, the situation can
for four decades now, the access of the poor to it is be rectified. Not only will this alleviate the prob-
still very limited. There are several reasons for this, lem of food security for these families but also in-
mainly involving leakage and pilferage in the dis- crease their purchasing power.
tribution chain, gross inefficiencies, diversion of Microfinance institutions and NGOs can initi-
supplies to open market, limited window of distri- ate a pilot project in particular districts test this
bution of supplies—all at exorbitant cost to the concept. Such a project would involve identifying
exchequer. One rupee of income transfer costs Rs poor households from their existing client list.
6.35 to the government. They would then be required to identify the fair
Apart from the supply side inefficiencies, one price shops in the area from which they procure
problem plaguing fair price shop owners is that their rations. Loans would be distributed to the
they do not have sufficient funds to purchase suf- selected list of families. One way of disbursing
these funds is by introducing a "credit card".
Households could buy their rations from the fair
Due to cash flow issues a poor price shop on credit while the NGO pays the
household could end up having to amount directly to the shop using this card. This
loan will then be returned by these poor house-
purchase essential commodities holds—in daily, weekly or monthly instal-
ments—over the period of the month from their
from the open market, frustrating income. If the NGO charges interest to cover
transaction costs, the households are likely to en-
the entire rationale of the public joy substantial savings.
distribution scheme. To make the project successful such a scheme
just needs to be integrated with already existing
microfinance schemes. It needs active involvement
ficient stocks from FCI warehouses to meet the from fair price shop owners and the community at
requirements of the poor families in their locality. large. It could well prove to be a model that can be
Thus they end up selling little or nothing to card- scaled up over the entire state and integrated with
holders. The low sales volumes reduce profitabil- other microfinance and micro-insurance schemes
ity and drive shop owners to black marketing. An- already in place.
other problem is the irregular cash flows of the It will help in plugging the loopholes in the
poor households, which means that they may not PDS and prevent leakage in the food distribution
have enough cash in hand to make purchases at system. In these times of rising food prices, where
the time that the stock arrives at shop. The selling the poor are hit the hardest, this may well be a
window is open only for a period of 2-3 days on an simple and effective way to shield them from infla-
average and if the cardholders do not buy during tion and improve their food security.
that period, the shopkeeper has the liberty to di-
vert it to the open market.
This is where NGOs already engaged in micro-
finance can plug the gap. They can provide funds
to the poor families to buy their allocated rations
from the fair price shops.  As the adjoining table
shows the commodity wise break-up of procure-
Ankit Rawal is a student at SP Jain Institute of Manage-
ment from a fair price shop and the open market ment and Research, Mumbai and has worked on a simi-
of a typical poor household of four members with lar project at Rashtriya Gramin Vikas Nidhi, an NGO, in
a monthly income range of Rs 1500 to Rs 3000. Assam.

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19 No 15 | Jun 2008
BOOKS

REVIEW
Photo: Chandrachoodan Gopalakrishnan

History is in the writing


The changing fashions of recording history
SUNIL LAXMAN

HISTORY IN India is said to Historians Velcheru Naray-


Review
be a heady cocktail of fact, ana Rao, David Shulman
legend, myth and fable, Textures of time: Writing history in and Sanjay Subrahmanyam
with no tradition of chroni- South India 1600-1800 investigate this assertion in
cling and preserving history. their book Textures of time:
The tenth century Arab po- Writing history in South India
lymath, Al Biruni, observed by Velcheru N Rao, David Shulman, Sanjay 1600-1800. While research-
Subrahmanyam
that “the Hindus did not Other Press, 312 pages, 2003 ing this question, they also
pay much attention to the try to bridge the somewhat
historical order of things.” artificial, modern divide
Most historians suggest that a historiographical between “Hindu” and “Muslim” (as opposed to
tradition only came to India with the arrival of the “Indian”) writing, by digging into a vast collection
Europeans and their dry, “factual” style of record- of resources from the 16th to the 18th centuries.
ing history. Upon close inspection, this assertion They draw primarily on Telugu sources, as well
crumbles under the volumes of carefully recorded as existing Tamil, Sanskrit, Marathi, Kannada,
historiographical literature the Delhi sultans and Farsi and other sources of the time. Combining
the Mughals left behind. But two questions imme- story-telling (of events from those times) with a
diately raise themselves. Were Indian historiog- systematic and rigorous analysis of those works,
raphical traditions borrowed from well developed the authors steadily set about shattering the belief
Persian and Turkish systems of recording history? that there was no indigenous historiographical
And what about South India? Did the literary tra- tradition in South India.
ditions of South India, less influenced by Muslim Their primary source material are the records of
rule, not have a historiographical tradition at all, scribes in the courts of various native rulers, the
but only had fables of fact and fiction? songs and fables of ballads and poets, folk epics, as

PRAGATI - THE INDIAN NATIONAL INTEREST REVIEW 20


BOOKS

well as prose narratives of the time. Early in the Yet, 300 years ago, these tales were well known (at
book, the authors point out that the choice of style least in South India). The major incidents explored
for writing history is not constant, but continu- in this book were recorded by numerous writers of
ously changes over time, as the society changes its the time (or even a little later) in what the authors
preferred literary style. So, over time, any histori- call the karanam style. Karanams were accountants
cal work ends up becoming a “literary work”. or court scribes of the time, and the authors de-
In the book the authors explore four significant scribe their collective style of writing as the kar-
historical incidents between the 16th and 18th cen- anam style. Karanam scribes had been well estab-
tury, in what is today Andhra Pradesh and North- lished all across Telugu lands for centuries. There
ern Tamil Nadu. Through these, the authors ele- exists substantial volumes of their recordings,
gantly point out that history is invariantly written from before the time of the Vijayanagar empire,
in the dominant literary genre of a region at that and their traditions continued to evolve and de-
particular time. For example, if puraana is the velop after that empire had fallen.
dominant literary form of the time, history would The authors start with the battle of Bobbili
be written in puraana style or in kaavya when (which took place in 1757), of which numerous
kaavya is the dominant literary style. records and folk ballads were composed in Telugu.
Obviously, this means that in any style of writ- This was a minor battle between two small warrior
ing, you will find both history and literature, and chiefs (both technically under the rule of the Ni-
the trick is in distinguishing the two. But how do zam of Hyderabad). One of them decided to usurp
you distinguish fact from fiction? In order to do the lands of the other (the “valiant” ruler of Bob-
this, it is essential to first identify distinct textual bili, Pedda Bobbili Raju), and did so using the help
of a French general, Bussey, who was quite clueless
about the local dynamics, traditions and laws.
From a historian’s perspective, the beauty of this
tale is that it had distinct chronicles written by
One intention of this book is to show various sides—the admirers of the defeated Bob-
a well developed indigenous histori- bili Raju, or scribes of the rival treacherous king of
Vijayanagaram (later Vizianagaram, not to be con-
ographical tradition in South India fused with the earlier Vijayanagar empire), as well
as French, their rivals the English, or the Nizam’s
that was thriving before European men.
colonialism in India. In all these chronicles, the characters of the
story are described in different hues, and the val-
our or cowardice or honour of each character is
often exaggerated or diminished depending on
markers, syntax and expression styles, metrical who was writing the story. However, the major
devices and other indicators that distinguish the facts of the story, the key incidents, and the overall
literary aspects of the work from historical record- events of the battle remain remarkably consistent.
ings. It is these that the authors try to distinguish What’s more, the “dry, historical” recordings of the
and point out through the book. English of French sources match exquisitely with
The authors say that the answer lies in adopt- the poetic prose in the Telugu sources. Similarly,
ing a new way of reading the text. The “texture” of the authors explore another story, of the Desingu
historical writing is substantially different from raja, in Senji, in the Arcot region of (present) Tamil
literature, though the style used may be the same. Nadu. This minor chief rebelled against his over-
Part of the reason that this difference has been lost lord, the Nawab of Arcot. Here too diverse
is because, to modern historians, the context of the sources, from karanams to folk singers, to Munshi
story has often been lost. In any story, the relation Jaswant Rai, have remarkably consistent details
between the teller of the tale and the audience is of within seemingly diverse narratives. Jaswant Rai
paramount importance. But if this connection is was a munshi, the north Indian equivalent of a kar-
displaced, confusion is inevitable. Literary tradi- anam, who chronicled the life of the Mughal influ-
tions are easily broken, particularly when the enced Nawab of Arcot. As the authors take us
audience for that text is “fragile”. Modern histori- through these (in themselves fascinating) tales,
ans (even Indian ones) do not have a connection they consistently point out sections within the nar-
with the author of the historical work. ratives that shift between fact, fiction, eulogy and
As examples in this book, the authors explore condemnation. The distinctions are subtle, but
stories which most of us would consider obscure. clearly consistent and significant.

21 No 15 | Jun 2008
BOOKS

By the end of the book, you realize that the his- karanam tradition). How much did each influence
toriographical tradition even in South India was the other’s style? Did writers of each style remain
long and mature long before the establishment of true to their chosen literary styles, or did the styles
European presence in India. However, numerous co-evolve? After all, by the 16th century, at least
questions arise from reading this book. One inten- the northern parts of South India were strongly
tion of this book was to show a well developed under the influence of the Mughals or the Dakkani
indigenous historiographical tradition in South sultans and nawabs.
India that was thriving before European colonial- Of course, as the old saying goes, “history is
ism in India. So, would not the literary and histori- written by the victors.” The authors set out to cor-
cal traditions of older South Indian empires (Vijay- rect that. Their engaging writing styles and an
anagar, the Kakatiyas, Pallavas, Cholas and Cha- admirable choice of ballads and stories with which
lukyas) be a better choice of material to show this? to make their points make the book an enjoyable
Those sources significantly preceded the arrival of and highly informative read. Through their sys-
the Europeans, and were possibly less influenced tematic and nuanced analysis the authors go a
by Mughal, Persian or Turkish historiographical long way in demolishing the idea that the tradition
traditions as well. of recording history in South India was non-
On a related note, could Al Biruni have been existent before European arrival in the subconti-
right? Did even the earlier Indian historiographi- nent.
cal styles develop only after the Turks or Mughals
came to India? How different were the styles of
recording history in South India in the 8th and the
16th centuries? And were similarities in the style of
writing of Indian Muslim writers (did they go be- Sunil Laxman is a scientist and writes the blog Balancing
yond the traditional Persian style of historiogra- life (balancinglife.blogspot.com), a diverse science blog
phy?) and other south Indian Hindu writers (of the discussing science, history, books, movies and society.

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