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Pragati No 19 | Oct 2008

The Indian
National Interest

After the bailout

ISSN 0973-8460
The Indian National Interest Review
No 19 | Oct 2008

2 Asian growth in an American vaccuum Published by The Indian National Interest—an independent
A stronger rupee is the path ahead for India community of individuals committed to increasing public awareness
V Anantha Nageswaran and education on strategic affairs, economic policy and governance.

5 Frontline worry in the war on terror Advisory Panel

Washington must learn to do without a friendly Pakistani Mukul G Asher
general Sameer Jain
Nikolas Gvosdev Amey V Laud
V Anantha Nageswaran
8 Fewer laws, more efficient enforcement Ram Narayanan
There are no shortcuts in the battle against terrorists Sameer Wagle
Ravikiran S Rao
9 Towards a new anti-terrorism policy Nitin Pai
A seven-point programme Ravikiran S Rao
Nitin Pai

Editorial Support
IN DEPTH Priya Kadam
10 The Vajpayee-Manmohan doctrine
The moorings of contemporary Indian foreign policy
Dhruva Jaishankar
Thomson Reuters
FILTER Chaim Jaskoll (Cover Photo)
14 Washington’s Pakistan strategy; Pakistan’s westward drift;
The next chapter Contact:
Vijay Vikram
ROUNDUP Neither Pragati nor The Indian National Interest website are affiliated
15 A new millennium in science to any political party or platform. The views expressed in this publi-
India’s scientific output has risen sharply since 2000 cation are personal opinions of the contributors and not those of
Christopher King their employers.

19 An electric imperative © 2008 The Indian National Interest. Some rights reserved.
Bringing power sector reforms back onto the national
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India License. To view a copy of this license, visit
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24 American Indians
A review of Vinay Lal’s The Other Indians Pragati accepts letters and unsolicited manuscripts.
Chandrahas Choudhury


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Asian growth in an American vaccuum
A stronger rupee is the path ahead for India

THE US House of Representatives considered and it is both off and on the balance sheet.
voted on the Emergency Economic Stabilization In this environment, a well-conceived and fair
Act of 2008—‘Paulson plan’ for short—for the sec- legislation is essential not only to regain the trust
ond time in less than a week and approved it with of America but also to restore the trust of the
a comfortable majority. It was so keenly antici- world in America. Perhaps, that is still a task left to
pated by the financial markets that it was anti- the new administration and the new Congress.
climatic to see US stocks end in negative territory Even so, the road ahead is long and uncharted.
after the legislation was approved. In the larger America could conceivably spend a good part of a
scheme of things, the Congressional approval of decade trying to repair itself. What can Asian
the bill might yet turn out to be inconsequential. economies do, or what should they do, in such
The rejection by the House of Representatives circumstances, not only to sustain economic
of the legislation in the first vote was not so much growth but also to take advantage of the evolving
a testimony to their lack of understanding of the geopolitics? Here is a first and small attempt to
gravity of the situation as it was a reflection of the pose these questions and provide some pointers
poor credibility that the administration and Wall under two scenarios.
Street carried with the Congress and with the pub-
lic. Scenario 1: The bailout works and borrowing
In general, the reason why it has been so diffi- resumes in America
cult for a sovereign government to come to grips First, let us take the situation that the plan works
with it is that the extent of leverage involved is as intended. For lenders to lend, borrowers must
unprecedented. Also, the leverage is not transpar- borrow. American households are just now experi-
ent. It is in contingent liabilities, it is scattered and encing the devastating impact of excess debt on



the health of their personal finances. Hence, it ap- rency. In turn, that distorted domestic monetary
pears to be a tall order to expect them to continue policy. Interest rates had to be kept low and this
to borrow. But let us assume that they do so. This has resulted in excessive credit growth and poten-
would widen the US trade deficit, just as it has tial non-performing loans in banks’ balance-sheets.
begun to come down due to slowing economic If it is impossible to study and understand
growth in the economy. balance-sheets of American and European banks, it
Twice in the last 25 years—in 1989-91 and is not hard to appreciate the difficulties of inter-
2001—there has been a significant correction in the preting Chinese banks’ strengths and weaknesses.
trade deficit in America. On both occasions, the US They operate in an authoritarian system, they are
dollar strengthened. In 2001, the US dollar heavily state-owned and they have flourished in a
strengthened despite a crash in the stock market, period of low interest rates and excessive reserves
terrorist attacks on the United States and a 475 ba- accumulation. All these suggest a massive expan-
sis point reduction in the federal funds rate. sion of balance sheets. When quantitative expan-
Now, if the Paulson plan works and if the trade sion of the balance sheets happens, it is hard to
deficit begins to widen, pressure on the US dollar maintain quality especially in a non-transparent
to depreciate would rise. It is trickier to identify system.
the currencies that could appreciate against the US At the same time, China’s foreign currency re-
dollar. Eurozone fundamentals are getting bleaker serves face huge re-investment risks and exchange
by the day. Eurozone financials appear poised to rate losses since they are largely kept in US dollars.
follow in the footsteps of their American counter- However, without a substantial revaluation of the
parts by disclosing huge losses and seeking either Chinese yuan, it would not be possible to steer the
government assistance or merger into some other economy towards non-inflationary domestic
institution. demand-led growth, as monetary policy autonomy
would be severely restricted without freeing up
the exchange rate first.
If American households continue to borrow, Two legitimate questions remain unanswered.
One is whether China would revalue the currency
the US dollar has to weaken and the bulk of at all and second, whether the currency would still
the burden of its weakness has to be ab- be deemed undervalued if its financial system
sorbed by Asian currencies, notably China. were unstable and weak.
Given its experience with American financial
Their readiness, willingness and capacity are assets, is it even possible for China to continue to
open to question. grow its reserves when American assets do not
yield enough to compensate for their risk. That is
the reason why private investors are fleeing
American short-term and long-term securities. The
Is Asia ready to accept US dollar’s weakness? official investors—central banks and sovereign
The dollar has to weaken against Asian currencies. wealth funds—can only ignore popular disap-
After Europe, Canada and Mexico, America trades proval of their policy choices up to a point. And
heavily with Asia. Which of the currencies in Asia even if they ignore popular sentiment, they would
are in a position to absorb the potential weakness be inviting the scourge of inflation back with their
of the US dollar? policy of reserves accumulation and resistance to
At this time, the answer points to China, India US dollar weakness.
and Korea. The first two because they are big and Data on net foreign purchase of American
because they could potentially grow based on do- short-term and long-term securities provided by
mestic demand. The Korean won appears to be the US Treasury show that private foreign net
undershooting its fair value by a substantial de- flows are negative. In other words, private inves-
gree due to the short-term rollover problems faced tors are pulling out. Brad Setser, a fellow for
by its banks. geoeconomics at the Council on Foreign Relations,
China is now discovering the pitfalls of its thinks that the U.S. Treasury data understates offi-
growth model of the last seven years during which cial inflows. Put differently, inflows to the US are
its foreign currency reserves rose eleven times sustained only by sovereign investors intent on
from 165 billion at the end of 2000 to over 1.8 tril- exchange rate management.
lion by June 2008. Therefore, the conclusion is that if American
This has come about because of its reliance on households continue to borrow, the US dollar has
export-led growth that required a competitive cur- to weaken and the bulk of the burden of its weak-

3 No 19 | Oct 2008

ness has to be absorbed by Asian currencies, nota- Germany and Japan, or that of Italy is a political
bly China. Their readiness, willingness and capac- decision. The first two countries faced steady ap-
ity are open to question. preciation pressure on their currencies and yet
To be even blunter, the ongoing credit crisis in overcame the costs imposed by appreciating cur-
the US is as much a test of the American capitalism rencies. Italy faced high inflation and high costs
as it is of Chinese or East Asian mercantilism. How because the lira was always weak. India has to
China emerges out of this and in what economic make a choice and the choice it makes on the cur-
shape would determine if much of the claims rency regime would dictate and require choices on
made on its behalf by many commentators and productivity, technology, innovation and educa-
observers would come to pass in the 21st century. tion.

Fundamentally stronger case for appreciation of Scenario 2: What if American households decide
the Indian rupee not to borrow and spend?
India is in a better position to absorb strength of Now, let us turn to the other scenario where
the rupee. Its currency has come under strain be- American households set about repairing their
cause of the rising trade and current account defi- balance sheets. Based on experience, that would be
cit, and withdrawal of foreign portfolio investors US dollar positive, at least for a while. However,
from the Indian stock market. First, while the port- economic growth would come to a standstill. The
folio outflows might continue as long as anxieties Federal Reserve would be forced to cut rates ag-
over global financial markets remain, the recent gressively. Further, it would be natural for policy-
drop in oil and fertilizer prices will substantially makers in the United States to turn to external
reduce India’s subsidy burden, its fiscal deficit and
consequently its current account deficit. Second,
India’s export sector, though vocal, is relatively
smaller. Third, the Reserve Bank of India (RBI) has
done an admirable job of ring-fencing the Indian The Reserve Bank of India has done an ad-
financial system from global troubles with its pru-
dential and proactive oversight and regulation. It
mirable job of ring-fencing the Indian finan-
would not be an exaggeration to say that it has set cial system from global troubles. It has set an
a perfect example for central banks all over the
example for central banks all over the world,
world to follow, including those in developed
countries. including those in developed countries.
RBI’s upward adjustment of risk weights as-
signed to bank assets; requirement that banks am-
ortise securitisation profits over the life of the se-
curitised asset (rather than at inception); and con- demand for growth. America played that role
servative accounting practices whereby banks when Asia grew its way out of the slump follow-
were required to recognize losses but not gains on ing Asian financial crisis of 1997-98. Asian exports
their assets held for trading or maturity, speak for led the recovery with America acting as the buyer
its intimate understanding of the perils of the so- of the first resort.
called financial innovation. It is fair to say that In- External demand is reasonably and relatively
dian banks have been shielded from global ills de- strong only in the developing world. Asia consti-
spite their best efforts to ape their international tutes a huge share of the developing world. There-
counterparts. fore, even from that angle, it is imperative that the
Further, given India’s slowly improving infra- US dollar weakens against Asian currencies. The
structure, rising savings rate and improving pro- US dollar has not weakened anywhere close to the
ductivity, its real exchange rate must appreciate magnitude that Asian currencies weakened by, in
over time. It is better for India’s policy-makers to the aftermath of their domestic credit contraction
accept that appreciation through the nominal ap- and economic slump in 1997-98.
preciation of the rupee than through inflation. For America to export its way out of trouble, it
The problem is that it is not even clear if India is neither necessary not sufficient for the US dollar
is thinking along these lines. There is no debate to appreciate against European currencies. Euro-
and it is arguably the most important question for pean nations are hurting equally badly and might
the next decade. Exchange rate policy is as much a also be looking to keep their currencies underval-
political decision as it is technical. Whether India ued. Asian currencies have to strengthen sharply
wishes to emulate the post-war experience of against major currencies.



In the last seven years, only two countri-

Asia’s ability to meet the challenge is not obvi- es—South Korea and Thailand—attempted to
ous boost domestic demand. Both attempts were
Barring a few Asian currencies at most and that clumsy and ended up in a debt crisis for house-
too with lot of caveats, the answer is unclear as to holds. Most of Asia is feudalistic in nature. Their
which currencies would bear the potential weak- vast political and institutional underdevelopment
ness of the US dollar. Like India, East Asian coun- supports the feudal structure and, in fact, helps to
tries have to make a political choice. For long, they keep the power balance that way.
are used to free-riding on external demand in the Thus far, in the last twenty-five years, Ameri-
rest of the world. The advent of China and its mas- can spending habits helped Asia maintain this
sive exchange rate depreciation in December 1993 political order and mercantilist economy. Now,
exposed their fragility and they experienced a ma- both will be challenged all for the fact that some
jor economic crisis in 1997-98. After that, they re- American borrowers aspired for homes that they
could not afford. Such is the nature of the inter-
connected world.
For India, this is an opportunity to show that it
has what it takes to realise its economic power as-
The rupee’s real exchange rate must appreci- pirations. India, unlike East Asia, depended not on
ate over time. It is better for India’s policy- American demand. Nor has it succumbed to
makers to accept through the nominal appre- American entreaties on financial capitalism. These
are its advantages. But, it has its own issues to
ciation of the rupee than through inflation. consider and at the top of that list is the limitless
readiness and willingness of the political class to
gorge on taxpayer money, much in America today.
Therefore, it is logical that if Wall Street is in crisis,
sumed their reliance on external demand even in so would India if it continued to walk down the
the presence of China as a big and cost-effective same path.
competitor. The rising tide of global growth lifted
all boats. Now the tide is receding and is unlikely
to re-appear for quite some time. That leaves East V Anantha Nageswaran is head, investment research,
Asian countries, including China, with an existen- Bank Julius Baer & Co Ltd in Singapore. These are his
tial question. For the smaller among them, the personal views and do not represent those of his em-
question is daunting and urgent. ployer.


Frontline worry in the war on terror

Washington must learn to do without a friendly Pakistani general

LAST YEAR, retired US General Anthony Zinni The former general wrote his essay at a time
posed two very tough questions to the American when there was rising frustration in Washington
foreign policy establishment when it came to rela- with the administration of General Pervez
tions with Pakistan. "Has US support for the Paki- Musharraf, who was being faulted on two counts:
stani military truly been enough to help it operate the first, for a perceived insufficient support of the
in the extremely difficult border environment US mission to combat the Taliban and al-Qaeda
where US politicians urge it to confront al-Qaeda? elements in Afghanistan and the tribal regions of
Has America's relationship with Pakistan yielded Pakistan; and for failing to democratise Pakistan
sufficient benefits to persuade the sceptical Paki- and return the country to civilian governance. The
stani public to support mutual efforts to counter solution that the Washington foreign policy estab-
Islamic extremists?" lishment seized upon, therefore, was to find a way

5 No 19 | Oct 2008

Art: Samad Jee

to peacefully remove General Musharraf from Musharraf appear no more willing to accommo-
power. If only the general left office, Americans date US concerns. A change in government has not
were told, Pakistan would not only be a "plus" in lead to a change in Pakistan’s calculus on the de-
the column of the freedom agenda (another victory gree to which it should aid or not aid American
for democracy) but a new civilian government efforts in the region.
would become a more reliable ally for the United Certainly, the Pakistani government is worried
States—able and willing to crack down on extrem- about extremist activity inside of Pakistan, particu-
ists and fully support the U.S. agenda for Afghani- larly the activities of the Tehrik-e-Taliban-e-
stan. After all, as the Washington Pakistan. And the military will work to prevent
Post had editorialised, Pakistan's secular politi- such groups from openly seizing power—and
cians stood for "co-operation with the United fight them when they threaten Pakistani interests.
States" and former Bush speechwriter Michael But eradication is only one strategy.
Gerson, in November 2007, extolled the "responsi- Another is to adopt what Daniel Byman, a
ble senior leaders of the army and well-known scholar at the Brookings Institution, has character-
democratic leaders" who would keep everything ised as the "bus station approach"—encouraging
on track if and when Musharraf stepped down. radical elements to leave the country and go else-
Indeed, many in Washington predicted that a fully where (See "Rogue Operators", The National Inter-
restored civilian democratic government would be est, July/August 2008). A democratic government
inclined to expand co-operation with the United in Pakistan finds that its main concern is removing
States in fighting al-Qaeda and the Taliban. extremists who attack and kill Pakistanis. Whether
All of this reflected what Anatol Lieven, a those extremists are physically eliminated or en-
scholar at the New America Foundation, described couraged to go to Afghanistan or other locales
as the "three interlocking illusions", with the pre- (where, incidentally, they may end up killing
mier one being that "Pakistan can be turned into a Americans) solves the problem, in the short term
fully co-operative and obedient ally in the 'war on at least, from the Pakistani perspective. But it does
terror' and the war in Afghanistan". The others are matter a great deal to the US which approach is
that the "return of 'democracy' would help to make taken. America's hope that Pakistan post-
Pakistan such an ally; that Pakistani society at pre- Musharraf would take a much harder line and
sent is capable of generating and supporting de- seek to eliminate extremism, rather than to negoti-
mocracy in the Western sense; and that in overall ate deals with them, appears to have been mis-
US strategy, it makes sense to subordinate Pakistan placed.
to the needs of the war in Afghanistan, rather than In addition, the military in a post-Musharraf
the other way round.” era seems much less willing to accommodate US
But General Zinni's questions have renewed concerns. General Ashfaq Parvez Kayani, the Paki-
salience today when a new civilian administration stan's army chief, is sending pretty clear signals
in Islamabad and the Pakistani military post- that, unlike his predecessor, he is not going to



carry Washington's water. In particular is his em- override the civilians—and even appeals to de-
brace of the need for democratic legitimacy in jus- mocracy as the justification for its own limits on
tifying any operations with the US, as well as his co-operation with the US mission?
statements that any solutions to try and stop Paki- All of the banal rhetoric about how democra-
stan's tribal areas from being used as safe havens cies share common interests didn't prepare the US
for Taliban fighters would need public support. for the simple reality that there are clear limits on
Indeed, General Kayani's strong position with what any government in Pakistan is prepared to
regard to safeguarding Pakistan's territorial integ- do to co-operate with the United States, given the
rity against any and all incursions—including feelings of the Pakistani population, their clear
those of US and NATO forces who cross into Paki- ambivalence about US objectives, and their belief
stani territory while engaging Taliban elements in that increased co-operation with America will not,
Afghanistan—has strongly resonated throughout to go back to General Zinni's initial observation,
the country. His position was amplified by Major yield sufficient benefits for Pakistan.
General Athar Abbas, the spokesman for the Paki- This is going to put real pressure on American
stani army, prior to the visit made to Pakistan by and allied planners. Should the US respect Paki-
US Admiral Michael Mullen, the Chairman of the stani sovereignty and put its forces in Afghanistan
Joint Chiefs of Staff: "We have repeatedly said we at risk, by not following militants across the border
will defend our territory and we reserve the right and not being able to strike targets inside Pakistan,
to retaliate in case of any aggression." at least not without clear and express Pakistani
General Abbas has also reiterated that the both permission? According to the statement released
the new government and the military must now by the US embassy in Islamabad (“Admiral Mul-
take public opinion into account when assessing len reiterated the US commitment to respect Paki-
stan's sovereignty and to develop further US-
Pakistani co-operation") this would appear to be
All of the banal rhetoric about how de- the case. Or is the United States prepared to offer
major concessions to Pakistan to secure their co-
mocracies share common interests didn't operation (for instance, a civilian nuclear deal and
prepare the US for the simple reality that support for Pakistan's position on Kashmir) that
would demonstrate Zinni-style "benefits" to ac-
there are clear limits on what any govern- commodating the United States? Or will Washing-
ment in Pakistan is prepared to do to co- ton, after a time, go back to carrying the fight
across the Afghan-Pakistan border if there is no
operate with the United States. substantial increase in Pakistan's co-operation? Of
course, such actions could well end up discredit-
ing the new democratic government in Islamabad.
the extent to which they can accommodate Wash-
What is not in the picture is another friendly
ington's preferences. The days where General
general who is going to defy either his government
Musharraf could, to some extent, insulate his co-
or Pakistani public opinion and facilitate US
operation with the US from public scrutiny are
needs. Only when that realisation has sunk in will
over. General Abbas told reporters, "please look at
Washington be able to craft a new strategy.
the public reaction to this kind of adventure or
incursion. The army is also an extension of the
public and you can only satisfy the public when
you match your words with your actions."
Nikolas Gvosdev, the former editor of The National
Washington is now faced with several grave
Interest, is a member of the faculty of the US Naval War
dilemmas. What happens when a democratic gov- College. The views expressed herein are entirely his
ernment won't endorse its policy objectives? own, and do not reflect those of the college, the US
Moreover, what happens when the military won't Navy or the U.S. government.

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7 No 19 | Oct 2008

Fewer laws, more efficient enforcement
There are no shortcuts in the battle against terrorists

THERE IS a simple and plausible way to model the law honest. The requirement that the case
the fight against terrorism. Combating terrorism against a terrorist be proved in court also will
is like turning a knob. If we turn it too little, we ensure that thorough investigations are carried
reduce the risk of harming innocent people, but out to ensure that the accused is really a terrorist.
end up letting free too many terrorists. If we turn It is puzzling how readily citizens, who deal with
it too much, we end up exterminating terrorism, corrupt politicians, civil servants and policemen
but at the cost of the lives and liberty of many every day of their lives, treat these functionaries
innocent people incorrectly identified as terror- as paragons of honesty the moment they think of
ists. How much one wishes to turn the knob is a them as fighting terrorists. 
function of one's own squeamishness about hurt- Perhaps, a mental change occurs as soon as
ing innocent people.  the thought of fighting terrorism strikes. In the
As it happens, the simple and plausible model minds of many people, the battle against terror-
also turns out to be incorrect. If  one turns the ism is being fought, not by the aforementioned
knob too much, the result is not only too many politicians, civil servants and policemen, but by
false negatives, but also too few true positives. military and paramilitary forces fighting in hos-
Combatants in the war on terrorism are human tile terrain against a difficult enemy. Forcing
beings, motivated by incentives. This model's those fine men to be solicitous of human rights is
lacuna is that it does not account for the distor- like sending them to battle with one hand tied
tions caused by misalignment of these incentives, behind their backs.
as will be clear if one examines the incident of the The first problem with this is that it does not
Sohrabuddin killing.  reflect reality. The bulk of the battle against ter-
Sohrabuddin Sheikh—who was allegedly shot rorism will be fought by the beat policeman and
in a fake encounter with police near Ahmedabad the investigating sub-inspector. It is important to
in November 2005—was almost certainly a mur- provide them with appropriate equipment and
derer, an extortionist, and a burden on society. support to do their jobs. It is equally important to
But it ought to be quite clear by now that he was put in place checks to ensure that the jobs are in
not a terrorist. There are those who defend killing fact done; the criminal justice system is a useful
Sohrabuddin on the grounds that he deserved to check. 
die one way or the other. They should pause and The second problem is that while there is a
reflect on what impact their unabashed cheering valid argument that the constraints of human
will have on Deputy Inspector General DG Van- rights and the checks imposed by the criminal
jara's incentives. Here was a person who did not justice system are too much of a burden in a
hesitate to kill one criminal and two innocent genuinely warlike situation, it is equally true that
people and claim it as a victory against terrorism. prolonged wars do nasty things to soldiers' mo-
In this he had, and continues to have, the full rale and discipline. A prolonged, debilitating war
backing of Narendra Modi, Gujarat’s chief minis- in hostile terrain will brutalise even the finest of
ter, because the latter knows that the road to elec- human beings, which is a good reason to keep
toral victory is paved with victories against ter- warlike situations short and rare, and soldiers in
rorism, whether imagined or real. If imagined the barracks most of the time. 
victories are easier to obtain than the real ones, Without doubt, these requirements place on-
why will anyone pursue real terrorists?    erous demands on policy and policy implementa-
The rules of evidence, the principle that tion. India's courts take decades to hand out ver-
judges and prosecutors ought to be separate, and dicts, India's police forces are ill-equipped and
the notion that everyone deserves a fair trial, all are long overdue for a skills upgrade. Worse still,
decrease the chances of consigning innocent peo- they are caught in a three-way conflict over
ple to jail. This is a useful function, valuable in whether to enforce the law, do the bidding of
itself. The rules also serve to keep the agents of their political masters or line their own pockets. It



is tempting to believe that just giving them a as progress in the investigation. But the unin-
mandate to shoot the terrorists dead is an easy tended consequence of this is an evasive and un-
solution to these problems. Sadly, there are no cooperative citizenry, which in turn will fuel the
easy solutions, and if these problems are to be police force's demand for stricter laws.  
fixed, citizens must demand them first.  A law-abiding citizenry that is generally on
Sadly, what we are seeing instead is a demand the side of the police is a vital weapon in the fight
for "stricter" laws. That is a bad idea for more or against terrorism. To construct this weapon, one
less the same reasons. Given the number of laws needs fewer laws, more effective and less arbi-
on the books already, most Indians are in viola- trary enforcement. It is difficult to see what the
tion of at least a few at any point in time. This is a alternatives are. 
happy situation for policemen who can throw
cordons after every outrage, apprehend motorcy-
clists for not wearing helmets or cybercafe own- Ravikiran S Rao is editor of Pragati and blogs at The
ers with insufficient documentation and claim it Examined Life (

Towards a new national anti-terrorism policy
A seven-point programme

Start fighting the war of minds Cabinet Committee on Internal Security; a dedi-
1. Project the war for what it is—that the New cated internal security advisor should be ap-
Jihadis are against everything that India stands pointed to act as the point man covering all as-
for: freedom, openness, democracy and a tolerant pects of internal security.
way of life.
2. Assure the nation that we will fight—and Engage the nation (don’t merely ‘secure their
win—this war. This will bring fence-sitters onto approval’)
the side they think that will win. But the assur- 6. Mobilise the nation through a national saty-
ance must be credible. agraha against terrorism. Get the grassroots to be
uncompromising and unrelenting in the battle
Dominate the battle on the ground against terrorism. Pay special attention to recon-
3. Connect every thana, every chowki (and in ciliation and form national integration commit-
future every policeman) to a national database tees in sensitive areas.
and network. Neither a new anti-terror law nor a 7. Liberalise the economy. Terrorism and dis-
new anti-terrorism agency is crucial: connect ex- satisfaction are a direct result of the polices of
isting intelligence and law-enforcement agencies communal socialism, a form of social license-raj
through a common network. that stifles socio-economic mobility. Economic
4. Empower police by implementing police freedom will lead to economic growth that will
reforms. Use the Supreme Court of India’s undermine the jihadi base.
judgement in Prakash Singh & Others vs Union of
India & Others to generate momentum.
Strengthen police-public partnerships.
5. Move internal security to the Prime Minis- Nitin Pai is editor of Pragati and blogs at The Acorn
ter’s Office. The Prime Minister should chair a (

Do you read our blogs? The many strands of opinion on The Indian National Interest
Updated very frequently

9 No 19 | Oct 2008

Photo: Nikk (

The Vajpayee-Manmohan doctrine

The moorings of contemporary Indian foreign policy

CONVENTIONAL WISDOM has it that India careful analysis of India's foreign policy track
lacks a foreign policy strategy or doctrine; that is, record. 
some sort of overarching framework within which Extrapolating from the Indian government's
a set of prioritised foreign policy objectives, widely behaviour, rather than its statements, reveals a
accepted as being in the national interest, can be starkly different picture. Indian actions over the
accomplished. Several analysts have pointed to past decade are demonstrative of a new foreign
parliamentary bickering on issues such as the policy strategy, one that is remarkably resilient,
India-US nuclear agreement, competing visions of refreshingly free of ideological divisions, and
the national interest articulated by various political reflective of a clear understanding both of India's
parties, and conflicting statements by senior lead- national interests and the country's still-limited
ers as evidence of a fractured, disorganised and potential. 
inchoate foreign policy.  
However, many of these perceived Lessons Learnt
shortcomings can be attributed to other factors— It took a 1992 study by American George Tanham,
India's notorious bureaucratic blocks, widespread "Indian Strategic Thought: An Interpretive Essay",
political opportunism, and frequently to expose India's anaemic strategic culture. The
contradictory and ambiguous government rhetoric "lacunae in strategy and planning" in India, ac-
—rather than actual foreign policy schizophrenia. cording to Tanham, resulted largely from India's
Moreover, this argument is predicated upon a history of disunity and from uniquely Hindu con-
scarcity of information and derives from taking cepts of time and life. At that time of the study's
public statements at face value, rather than a publication, much of Tanham's analysis rang pain-



fully true, and several leading Indian strategic responsible for India’s Look East policy and its
thinkers, including General K Sundarji and K development of relations with the United States,
Subrahmanyam, more or less agreed with him. But Japan and the European Union.
in the decade following the publication of his Fourth, India’s overt nuclearisation following
study, India also began to experience a radical re- the Pokhran-II tests of 1998 minimised the
orientation of its foreign policy, a result of seven possibility of India being forced to give up
formative experiences between 1990 and 2002. territory by military means. With security vis-à-vis
First, the withdrawal of the Indian Peace Keep- other states largely guaranteed by the
ing Force (IPKF) from Sri Lanka in 1990 scarred development of a strategic deterrent, national
India’s security establishment, making it reluctant prosperity was also gradually pushed to the
to intervene directly in the internal affairs of other forefront as a foreign policy objective.
states, including its smaller neighbours. The inter- Fifth, Pakistani aggression at Kargil in 1999,
vention in Sri Lanka found little support within and the overwhelming support the Indian
India and many questioned its necessity. The effect government received domestically and externally,
proved so traumatic that over a decade later, when reinforced the political importance of maintaining
Nepal—perhaps the country most socially and Indian sovereignty. In addition, US backing led
economically integrated with India—was afflicted Indian policy-makers to believe that the American-
by revolution and violence targeting Indian na- led world order, previously something to be
tionals, there was very little, if any, public debate feared, could potentially be amenable to Indian
in favour of military intervention. interests and objectives.
Sixth, the rising spectre of religious extremism
and separatism, represented by large-scale terrorist
attacks and independence movements during the
1990s, caused India to include the defence of
Iran has to make up its own mind where it secularism and pluralism as a foreign policy
consideration. India has since taken steps to
wants to be. The potential of the relationship counter the spread of Islamic extremism, often in
with Iran can only be realised when when it conjunction with like-minded powers, in countries
such as Afghanistan. It has also been consistently
sets out on a positive internal and external wary of supporting ethnic-fuelled independence
course. movements, such as those in East Timor, Kosovo
and South Ossetia. From India’s perspective, these
movements represent potentially dangerous
Second, the end of the Cold War and the Finally, Operation Parakram—the border
dissolution of the Soviet Union in 1991 reinforced mobilisation against Pakistan in 2002—
in India a distrust of alliances, even informal ones. demonstrated the limited utility of military force
Today India frames its relationships in terms of in attaining national objectives, especially after the
"strategic partnerships", an empty term connoting introduction of nuclear weapons into the region.
serious engagement rather than any form of The peace overtures that succeeded Operation
alliance. According to the Ministry of External Parakram and the apparent unwillingness by the
Affairs' recent annual reports, India has strategic Indian security establishment to operationalise the
partnerships with countries as diverse as Japan, army's Cold Start doctrine are demonstrative of
Indonesia, Vietnam, Nigeria and Brazil. Yet those India's willing subordination of military means to
same reports make no mention of a strategic diplomatic endeavours.
partnership with Israel, arguably now India's It was not until the Pokhran-II tests, six years
closest defence collaborator, due primarily to after Tanham's study, that India witnessed a
perceived domestic constraints. serious and wide-ranging debate on a
Third, economic reforms beginning in 1991 led comprehensive national strategy for the country.
to India reaping the benefits of a strong economy, By the time the Communist-backed United
and added growth as a vital factor in India's Progressive Alliance (UPA) government came into
foreign policy. Within a decade, economic power and attempted to continue where the
development evolved into a significant motivating National Democratic Alliance (NDA) left off in its
factor in India's engagement with both Pakistan dealings with other states, India’s foreign policy
and China, despite continuing disputes over had taken on firm direction, and an awkward
territory. Economic imperatives were also largely period of transition had come to an end.

11 No 19 | Oct 2008

Competing Visions The circumstances in India have always been

The experiences of the last two decades have dis- favourable to the development of a foreign policy
tilled a set of foreign policy means and objectives doctrine. Most of India's foreign policy is crafted
which can be gleaned from almost all Indian for- by a few small, overlapping agencies, led by the
eign policy actions, although not always from its Prime Minister's Office, the Cabinet Committee on
rhetoric. These include a prioritisation of the coun- Security and the Ministry of External Affairs.
try's economic development, an emphasis on di- Consisting of career bureaucrats, with politicians
plomacy, a strict maintenance of Indian sover- forming only the topmost layer, India's foreign
eignty, a distrust of alliances, a consideration of policy structure is also relatively devoid of
balances of power, an abstention from direct inter- partisanship and prone to continuity. Of course, as
ference in the internal affairs of other states, and a can be expected in a healthy democracy such as
willingness to bilaterally engage all states, includ- India's, there are competing visions of India's
ing those with competing interests.  priorities and objectives.
The result is in essence a realist foreign policy, On the one hand, you have hawkish
although adapted for the realities of the 21st nationalistic realists who place an emphasis on
century and India's particular geopolitical India's military development and are dismissive of
environment. India's policy of minimum credible diplomatic and commercial engagement with
deterrence, for example, flows directly out of these other states. They frequently ignore economic
tenets, as does its military development and its considerations, the effects of globalisation and the
omnidirectional commercial and diplomatic
engagement. Undertakings such as the India-US
nuclear agreement, the defence relationship with
Israel and the composite dialogue with Pakistan
are all key aspects of this foreign policy. Several
scholars have attempted to describe and label it,
using terms such as pragmatism, realism,
modernism and neo-liberalism. The dominant
framework for India's global interactions since at
least 2002 (and arguably since 1998), it can be
Photo: Maruthu Pandian

thought of as the Vajpayee-Manmohan Doctrine.

This formulation of India’s foreign policy will
likely prove contentious. Some will argue that the
UPA leadership deserves all the credit for
accelerating India’s movement forward despite
significant political constraints. Others will
contend that the UPA government simply built
changing nature of power in the international
upon changes effected by the NDA leadership. In
system. At the other end of the spectrum are
fact, several senior officials of both governments—
idealists who prioritise multilateral policies,
such as Brajesh Mishra, JN Dixit and Shyam Saran
favour economic autarky, and are desirous of
—provided significant contributions to the
altering the world order rather than working
development of this foreign policy doctrine. While
within it. They overlook the benefits of economic
there were indeed occasional differences between
development, downplay the difficulties of
the two governments in enacting various foreign
working against the prevailing world order, and
policies, these were essentially questions of degree.
view the world in Manichean blacks and whites.
Both the NDA and the UPA coalitions
By neglecting increasingly important economic
embraced nuclear minimalism, closer co-operation
imperatives, setting unrealistic objectives and
with the United States, engagement with Pakistan,
regarding the world as essentially hostile, both
defence collaboration with Israel and Russia, the
world-views are ill-equipped for the challenges
Look East policy and South-South co-operation.
and opportunities of the 21st century. Moreover,
India's track record compares favourably with
both fringes have little to boast of in terms of
most other large democracies in the past decade,
political bases, and have even less cachet with the
including the United States, Germany, France,
largely self-selecting upper reaches of the
Australia and Japan, where differences over
bureaucratic hierarchy. While their voices may
definitions of the national interest have been
continue to resonate loudly, and may continue to
significantly deeper in terms of substance as well
be used for domestic political purposes, they are
as rhetoric.



unlikely to significantly influence key policy it provides India with a little-appreciated ability to
decisions by governments in power.   rise “under the radar”. Other than perhaps
Pakistan and China, India’s neighbours cannot be
Dismantling the Black Box said to be hedging against its rise. Contrast this to
The development of a foreign policy doctrine is China, which has states hedging against it all
both an ambitious and an accidental process, a along its periphery. Moreover, several regional
slave as much to circumstance as to strategic actors—particularly in South-East Asia—appear
acumen. The United States, for example, eager to accommodate India and foster its
developed the doctrine of containment at the advancement. 
dawn of the Cold War, when its global objectives Despite these advantages, South Block's
were clearly defined. After 1991, the United States approach to articulating and defending its foreign
found itself lacking a single global threat and the policy remains sadly antiquated. A black box of
Clinton administration's ‘enlargement and bureaucrats topped by cagey politicians, India's
engagement’ and George Bush's ‘global war on foreign policy apparatus is a throwback to a time
terror’ both failed to adequately replace when the bureaucracy and political classes
containment as a doctrine. Today, American corresponded with India's intellectual elite. It was
strategists are still struggling to craft a workable a time when India could have afforded to craft its
paradigm for the 21st century. foreign policy in a black box, with little outside
Conservatives have been attempting interest, analysis or criticism. 
unsuccessfully to merge aspects of realism with Today, India is home to a range of extra-
liberal-democratic idealism. American liberals, governmental actors—journalists, academics,
meanwhile, are desperately attempting to breathe NGOs, advocates and consultants—who have yet
to be comfortably incorporated into its policy-
making structure. The National Security Advisory
India’s foreign policy doctrine enables a fluid- Board represents one half-hearted attempt, which
ity that is not always compatible with formal while imbued with much capability is also
deliberately granted no formal decision-making
alliance structures, such as those favoured by power. The lack of quality in the Indian academic
the United States. system is also partly responsible, with scholars
rarely able to shape foreign policy in a manner
new life into failing international institutions, comparable to their Western counterparts.
often too rigid and ill-equipped to deal with many While there are certainly benefits to not
global problems. Both attempt to cling to old revealing one’s intentions, the genesis of the
alliance structures which are unable to function as Internet and 24-hour television news channels
they did during the Cold War. have exponentially increased the need for the
India's first foreign policy strategy was Nehru's government to articulate and explain policy both
non-alignment, which proved suitable for a large to domestic constituents and to the international
but poor country in the context of the early Cold community. The inarticulateness of official
War. Non-alignment gradually gave way after the government spokesmen on foreign policy issues,
1962 war with China to the Indira Doctrine, which the absence of white papers and the opacity of the
emphasised Indian primacy in South Asia through government enable a gross misreading of India's
more aggressive bilateral dealings with regional intentions and desires. For external actors and
states. The current Vajpayee-Manmohan Doctrine analysts, deciphering Indian foreign policy
draws upon contributions made by predecessors remains a difficult task. Forced conjectures, often
including PV Narasimha Rao and IK Gujral, but deeply misleading, are extracted from bland
has altered priorities, broadened some tenets, and government statements, annual reports and
adapted others for changing circumstances. speeches by senior officials, often meant to assuage
The Vajpayee-Manmohan Doctrine is likely to critical domestic audiences. India's foreign and
serve India well in the coming decades, enabling a security policy structure, despite its successes, has
fluidity that is not always compatible with formal mostly itself to blame for being an easy target for
alliance structures, such as those favoured by the criticism.
United States. It is unilateral, premised upon the
realities of the rapidly-evolving international
system, and calculated to yield long-term benefits.
It can be easily defended as beneficial both to Dhruva Jaishankar is Research Assistant in Foreign
India's citizenry and to the world at large. Finally, Policy Studies at the Brookings Institution.

13 No 19 | Oct 2008
Essential readings of the month

Washington’s Pakistan structures and emphasis- identity for an Arab- Arabia, General Zia estab-
strategy ing civilian aid over mili- Muslim in order to better lished a network of over
ASHLEY TELLIS under- tary aid. define itself in contrast to 22,000 madrassas across
lines Washington’s Paki- Significantly though, India. For example, the length and breadth of
stan policy dilemma in a Dr Tellis argues that the prayers in government Pakistan. It is these ma-
recent article in the Inter- US must assist the Paki- departments were deemed drassas that provided the
national Herald Tribune. stani military in making a compulsory and floggings US-Saudi alliance with
He argues that for Amer- conceptual leap in recog- were carried out publicly. willing recruits for the
ica’s war against al-Qaeda nising that Pakistan’s real In the 21st century how- anti-Soviet jihad.
to be successful, the next enemies lie within and not ever, there is no need for In the end, Pakistan’s
administration needs to across the border in India. the state to impose strict future will be determined
simultaneously engage But, this mindset trans- Islam, as there is a spon- by the ideological and
with the civilian leader- formation is a long-term taneous groundswell of political battle between
ship to bolster Pakistan’s strategy and it is impera- religious zeal in contem- citizens who want a theo-
democratic institutions tive that Washington porary Pakistan. The no- cratic state and those who
whilst maintaining a co- channels the tired and tion of an Islamic state is want a modern Islamic
operative relationship overextended Pakistani more popular than ever, republic.
with the military estab- military machine into as people turn to Islam to
lishment to prosecute the fighting al-Qaeda now. rescue a failing state. The next chapter
war. Dr Tellis concludes Moreover, the Paki- In a recent report titled
However, Washington that a patient and long- stani village has under- ‘The Next Chapter: The
cannot risk focusing ex- term American engage- gone a transformation, United States and Paki-
clusively on either ap- ment with Pakistan is thanks in part to the re- stan’, an independent
proach. The war on terror called for. Pakistan is turn of Pakistani labourers group of experts on US-
necessitates that the US plagued by massive infla- from Arab countries. Vil- Pakistan relations state
continue to consolidate its tion of food and fuel lage mosques are now that Pakistan “may be the
relationship with the prices and a worsening “giant madrassas that single greatest challenge
Pakistani military. But if fiscal deficit. America propagate hard-line Salafi facing the next American
this relationship is not needs to play a construc- and Deobandi beliefs President”, and argue that
conducted appropriately it tive role in the region by through oversized loud- the United States “cannot
could risk undermining pressing for gradual speakers.” In fact, Punja- afford to see Pakistan fail,
Pakistan’s fledgling de- political reform and pri- bis who tended to be rela- nor can it ignore the ex-
mocracy and strengthen vate sector economic tively liberal on gender tremists operating” in the
the national security state growth. It is up to the next issues are increasingly tribal areas. Among others
in Pakistan, which has American President to taking a Talibanesque they recommend the fol-
historically been at the convince Pakistan that the view on the matter. lowing in terms of US
root of the country’s prob- United States will not ne- However, it is school assistance:
lems. glect them if they are will- militarism that emerges as - Support the perform-
On the other hand, a ing to do their part. the most significant issue. ance based, rigourously
strategy of emphasising Dr Hoodbhoy argues that audited US$1.5 billion
Pakistani civilian suprem- Pakistan’s westward drift the militancy that bedevils per year in non-military
acy could be counterpro- PERVEZ HOODBHOY, a Pakistan’s tribal areas as assistance
ductive as America’s plans nuclear physicist at Paki- well as its cities as well is - Open US markets to
of wiping out al-Qaeda stan’s Quaid-e-Azam a result of an education Pakistani textiles
can only come to fruition University writes about system that propagates - Focus the majority of
with the aid of Pakistan’s the growing arabization of Islam as a complete code US economic aid on pro-
military establishment. Pakistan in Himal Southa- of life and is designed to jects in basic education,
Moreover, if President sian. He argues that this engender a siege mental- health care, water re-
Zardari fails to govern westward drift is not geo- ity in the mind of the source management, law
properly, the democratisa- physical but cultural with child. In fact, a enforcement, and justice
tion approach would Wahhabism—an austere, government-approved programs
backfire spectacularly on unyielding version of Is- social studies textbook for - Redirect military
the Americans. lam replacing Sufism the Class V students pre- assistance to bolster
Hence, Washington is distinctly gentler variety scribes that the child counter-insurgency ca-
left with a delicate balanc- practised on the subconti- should “Understand pacity
ing act that requires it to nent for centuries. Hindu-Muslim differences
juggle contradictory Dr Hoodbhoy goes on and the resultant need for
strategies of broad-based to argue that this was a Pakistan”.
co-operation with an en- deliberate policy adopted Dr Hoodbhoy attrib-
tity that has consistently twenty five years ago by utes Pakistan’s Arabiza-
undermined Pakistan’s the Pakistani government tion or “Saudisation” to Vijay Vikram is a student at
democracy whilst work- and is driven by a belief the Zia regime and the the School of International
ing on dismantling Paki- that Pakistan must ex- Afghan jihad. With active Relations, University of St
stan’s atavistic feudal change its South Asian assistance from Saudi Andrews.

14 No 12 | Mar 2008

A new millennium in science
India’s scientific output has risen sharply since 2000

AFTER SEVERAL consecutive years of minimal

increase through the 1980s and 90s, India's output
of scientific papers has risen sharply since 2000.
Concurrently, the citation impact of the nation's
published research in main fields has been trend-
ing upward in recent years.
To assess India-based science, Science Watch
turned to the Thomson Reuters database National
Science Indicators and its collection of publication
and citation statistics. The adjoining chart (top-
right) records the number of papers indexed by
Thomson Reuters for each year between 1985 and
2007 that listed at least one India-based institution
among the author addresses. In 1985, the number per-paper average compared against the world
was approximately 12,500, and for the next 15 average in each respective field) in 14 main fields
years the total never much exceeded 14,000. in a series of overlapping periods from 1985
Around the year 2000, however, the number began through 2007.
to tick upwards, rising to nearly 17,000 in 2001, In the second chart (see overleaf), which covers
reaching 20,000-plus in 2003, and winding up at the physical sciences, India's upward trend in
more than 27,000 in 2007. Physics is clearly discernible. For the latest five-
Currently, India's largest percent share of any year period, ending in 2007, India's relative-impact
main field indexed by Thomson Reuters is in the score stands at 80 percent of the field average (3.13
Multidisciplinary category (comprising papers cites per paper, versus the world mark of 3.96)—a
published in the multidisciplinary journals such as substantial improvement over the 1985-89 period,
Science, Nature and PNAS), with 5.47 percent of when India's relative impact in Physics was at 40
papers in that field indexed in the cumulative five- percent, less than half the world average. In the
year period between 2003 and 2007. Close behind same graph, India's impact in Engineering and in
is Materials Science, in which India's 9,212 papers Chemistry are also trending upward and ap-
in the last five years constitute 5.45 percent of the proaching parity with the world mark.
field. The story is similar in biological, medical and
Materials Science, in fact, is the field in which earth sciences: although the impact of India-based
India displays the steepest growth in representa- research lags the world average in the fields
tion during the period covered by National Science shown, the nation has been on a discernible up-
Indicators. In 1981, only 432 Thomson Reuters- swing since roughly the year 2000, with notable
indexed materials papers included an India insti- gains in, for example, Geosciences, Neurosciences,
tutional address—3.68 percent of the field. In 2007, and Biology & Biochemistry.
nearly 2,300 papers with India-based authors were For another snapshot of India's current concen-
indexed, a share of 6.13 percent. tration in science, Science Watch consulted Thom-
India's share of world papers, in the latest five- son Reuters' Essential Science Indicators web re-
year period, was also comparatively high in Agri- source and its unique database of Research
cultural Sciences (5.17 percent of the database), Fronts—speciality areas defined by a "core" of
Chemistry (5.04 percent), and Physics (3.88 per- foundational papers that have been frequently
cent). Physics, as it happens, features prominently cited together by a group of subsequent reports.
in the next set of charts, which plot the nation's Science Watch identified upwards of 250 re-
relative citation impact (that is, India's citations- search fronts in which India-based institutions fig-

15 No 19 | Oct 2008

ured among the core literature. The majority of

these fronts, conforming to the trends noted above,
fall within the physical sciences. As it happens, the
research front displaying the highest proportion of
Indian institutions among its core papers is de-
voted to black holes and related aspects involving
entropy, supersymmetry, and string theory. An
author whose name recurs among the core papers
is Ashoke Sen of the Harish-Chandra Research
Institute in Allahabad. Dr Sen's name also figures
among the core authors in another of the most
India-centric fronts—this one devoted to tachyon
cosmology. than 95 percent of Thomson Reuters-indexed pa-
In sum, all but three of the top ten research pers from India featured authors exclusively at
fronts with the highest representation of India in- India-based institutions, with no other nations
stitutions concern high-energy or theoretical phys- listed. By 2007, the percentage of "India only" pa-
ics. The exceptions are one front dealing with the pers had fallen to 80 percent, indicating that, albeit
adsorptive removal of dyes and other hazardous gradually thus far, the nation is moving toward
materials from aqueous solutions, another devoted greater participation in world science.
to the study of stress caused by water deficit and
salinity in Catharanthus roseus and other plants,
and a third involving conducting polymers and
their use in biosensors.
Still another aspect of India's progression since Christopher King is editor of Science Watch. Reprinted
the early 1980s involves the nation's increasing from Science Watch ( by permission
presence in international science. In 1981, more of Thomson Reuters, Philadelphia, PA, USA.


An electric imperative
Bringing power sector reforms back onto the national agenda

ENERGY SECURITY will be the fundamental de- quirement in power sector for the Eleventh Plan is
terminant of both our economic growth and projected at a massive $170 billion.
national security in the days ahead. The Planning The first generation of power sector reforms
Commission envisions power shortage as poised involved unbundling of the integrated State Elec-
to become the single most important infrastructure tricity Boards (SEBs) and their corporatisation, the
bottleneck facing India. Acute power shortages setting up of regulatory commissions, and the re-
and peak-time load reliefs in many states poses a visal of policy framework for private participation.
serious threat to achieving the double digit growth It is now time for the next generation of reforms:
rates we aspire to. Securing access to assured oil, to increase capacity, make transmission efficient
gas, thermal and nuclear fuel supplies would be a and increase service quality and consumer choice.
primary goal of our foreign policy.
The power ministry has set a target of "power Power generation
for all" by 2012, the achievement of which would Rapidly growing energy demands require massive
entail enhancing power generation from 144 GW expansion of generation capacity. This calls for
to at least 250 GW. The Eleventh Plan power gen- greater clarity in generation policies, removal of
eration target of 78.5 GW is nearly quadrupling the bureaucratic delays, security in fuel and equip-
Tenth Plan achievement. The total investment re- ment supplies, and expedition of land acquisition



Photo: Harini Calamur

with settlement of related encumbrances. leveraged to get foreign firms to transfer technol-
Awarding of projects should be hastened ogy and set up domestic production facilities, and
through standardised bid process management thereby expand the depth and breadth of the do-
using model bid and contract principles. Environ- mestic market.
mental and other mandatory clearances can be
issued through single window clearance mecha- Fuel supplies and financing
nisms. A land acquisition process similar to that The acute coal and natural gas scarcity, espe-
being followed by the National Highways Author- cially for the smaller generators, and the inability
ity of India (NHAI) could be adopted. Project dis- of state agencies to import adequate quantities of
placement concerns can be mitigated effectively if these fuels carries a strong forewarning. Coal
the rehabilitation and re-settlement of the affected powered plants form 53 percent of India’s genera-
people are done quickly in a fair and transparent tion capacity and will continue to remain the
manner, minimising the pain associated with dis- mainstay of our power generation program for the
location. (See “Reforming land acquisition”, by M foreseeable future. The situation is even worse in
R Madhavan, Pragati Issue 18 - Sep 2008) the supply of natural gas, with only 50 percent of
Similarly, the process of obtaining commit- the demand being met and valuable capacity lying
ments and clearances from transmission and dis- idle.
tribution companies on Power Purchase Agree- The process of identification and handing over
ments (PPAs) should be fast tracked. All clearances of coal blocks to private companies for captive use
should preferably be sorted through before initiat- will have to be expedited. These blocks should be
ing bidding. This would bring in transparency to allocated in a transparent manner, following a
the process and create a competitive environment tariff-based international competitive bidding, in-
in power generation. stead of the usual screening committee route. Sun-
An active power trading market with an open set provisions to revert back the mines will pro-
access framework can increase the commercial vi- vide incentives for immediate development and
ability of generation projects. Power purchase prevent hoarding. Given the inevitability of large
commitments from distribution utilities will re- fuel imports, substantial investments will be nec-
duce the cost of capital for investors. essary in additional port, rail and handling infra-
Standardisation of boiler, turbine, and other structure.
equipment designs and specifications would en- Besides ramping up domestic coal and gas
able suppliers to swiftly execute bulk purchase production, there should be an aggressive policy
orders and expedite their delivery. The massive of acquiring mines and gas fields overseas. Instead
expected demand for this equipment should be of direct purchases from the market, global bilat-

17 No 19 | Oct 2008

eral commercial fuel supply agreements, which would be enough to attract global majors like
assure long-term supplies, should become the General Electric, Areva, Hitachi and Westing-
norm. house. Collaborating with them will enable tech-
The huge peak load deficit can be addressed by nology transfer and facilitate the development of
adoption of an appropriate mix of base-load and domestic expertise in the private sector, which
peaking load plants. With the overwhelming ma- would be critical to lowering costs and sustaining
jority of new generation capacity coming in base- the program.
load plants, it may be economically efficient to The biggest challenge facing the development
make small investments to convert the existing of our nuclear power generation program is that of
hydro-electric power plants to peaking load sourcing uranium fuel. With scarce domestic
plants. The large peak deficit also gives impetus to sources and access denied by major producers like
the role of natural gas driven peaking load plants. Australia, even the existing nuclear power plants
India has an estimated hydro-electric power are running at barely half their capacities. All
generation capacity of 150 GW, especially from the equipment supplies should be linked with assured
Himalayan fringes, of which only 35 GW has been fuel supply for the entire plant life or access to cap-
realised and another 15 GW are under various tive uranium mines across the globe.
stages of development. At least another 100 GW The commercial and political influence of such
can be generated by tapping water resources in large companies would facilitate the tie-up of ura-
neighbouring countries like Nepal and Bhutan. nium supplies. Given the plentiful domestic tho-
This can contribute to a major share of future rium reserves, efforts to expedite the development
peaking load requirements.
Except for the limited success by a few genera-
tion companies in accessing the debt market,
transmission and distribution (T&D) utilities have Massive investments are required in the up-
not managed to raise debt successfully from the grading and expansion of transmission net-
open market. The availability of easily accessible
debt from government backed financial institu- works to evacuate electricity from the upcom-
tions like the Power Finance Corporation (PFC) ing plants as well as from surplus to deficit re-
and the Rural Electrification Corporation (REC)
has had the effect of "crowding out" the develop- gions.
ment of a private debt market. It is therefore im-
portant that these institutions confine their activity
to financing the smaller and weaker utilities. of the thorium-based fuel cycle should be
Given the excellent commercial potential of strengthened. A strong regulatory regime, with
merchant power plants, raising funds in the equity specific focus on safety and nuclear waste dis-
markets is an attractive option. However, the eq- posal, will have to be put in place to reassure the
uity and especially debt markets alone, with their significant public safety concerns about nuclear
limited depth and breadth, cannot meet the huge power.
investment needs. It is therefore imperative to Renewable energy sources like wind, biomass,
have policies tailored to attract foreign direct in- and solar have enormous potential in India and
vestment. will become attractive propositions in the coming
years as the cost of production declines and as
Nuclear and alternate sources other fuels become expensive.
Nuclear power forms just over 2 percent of our The government will need to encourage its de-
total power generation and the proposals on the velopment with appropriate output-based fiscal
pipeline are expected to add a meagre 3 GW. The incentives (See “The new Manhattan Project”, by
India-US nuclear deal and the subsequent removal Atanu Dey, Pragati Issue 9 - Dec 2007). With most
of restrictions on trade in civilian nuclear compo- of the solar and wind power potential areas being
nents by the Nuclear Suppliers' Group (NSG), located away from load centres, there will have to
comes as a shot in the arm for nuclear power gen- be substantial investments in transmission capac-
eration. Globally too, faced with high commodity ity to evacuate the power generated.
prices and environmental concerns, nuclear power
plants, with their low operating costs, have be- Transmission and Distribution reforms
come financially viable. Massive investments are required in the upgrading
The huge business opportunity in nuclear ca- and expansion of transmission networks to evacu-
pacity addition, estimated at over US$40 billion, ate electricity from the upcoming plants as well as



from surplus to deficit regions. A modern and ket can be deepened by trading a part of the cen-
seamlessly integrated national grid, is critical to tral pool reserves through the exchanges, encour-
the functioning of active power trading markets aging more distribution and generation companies
that can ensure optimal utilisation of scarce re- to participate, and by promoting the setting up of
sources. Allowing for the relative difficulty of merchant power plants.
managing private ownership of transmission net-
works, government entities will have to make the Tariff reforms
bulk of investments, at least for the foreseeable India has one of the highest industrial and com-
future. mercial power tariffs, which adversely affect their
Distribution captures the last mile in the elec- global competitiveness. Further, the present tariff
tricity value-chain, and its efficiency is critical to arrangement, which does not differentiate between
ensure cost recovery and profitability of the entire peak and off-peak uses, distorts the incentives for
sector. Unfortunately, it remains the Achilles’ heel efficient utilisation of power. Given the average
of India’s power sector, with nation-wide Aggre- national peak load deficit of 16 percent, distribu-
gate Technical and Commercial (AT&C) losses at tion utilities are forced to purchase power at exor-
an unacceptably high 34 percent. Rampant power bitantly high rates, thereby placing unsustainable
theft, inadequate metering, run-down networks, burdens on their already weak finances.
poor maintenance, accumulating dues, lack of The present arrangement also distorts the in-
prudent financial management, and government centives for independent power producers who
subsidies all contribute to these high losses. can profit from the high peak-time demand and
The Accelerated Power Development and Re- make handsome profits at the expense of the state
form Programme (APDRP), with policies promot- utilities and consumers. With the peak hour defi-
ing loss reduction, have brought to focus the need cits likely to continue for the foreseeable future,
to reduce AT&C losses to 15 percent by 2012. A merchant power plants become commercially at-
judicious mixture of information technology inter- tractive even with low tariff PPAs.
ventions, energy audit, awareness creation, ag- A floating availability-based tariff regime and a
gressive theft detection and monitoring, coupled merit order based load dispatch system will go a
with investments in basic repairs and maintenance long way in efficiently allocating power consump-
can contribute significantly towards bringing tion across different categories of consumers. It
down these losses. will help lower tariffs, especially for bulk consum-
Distribution offers the full spectrum of oppor- ers, and create incentives for reduction in peak
tunities for private participation, from selective power consumption. An active power trading plat-
distribution franchising to outright privatisation. form, supported by a robust transmission grid and
Given the large legacy systems and political oppo- deployment of real-time consumption monitoring
sition to privatisation, the most prudent way to technologies will help facilitate implementation of
involve private partners in distribution is the fran- this regime.
chisee model. Under this, the state utility transfers Ultimately, all these reforms will become un-
the rights to operate and maintain network, sup- sustainable and come to naught without political
ply power, and to bill and collect tariffs in certain commitment. The wave of free-power induced
circles to private players. This arrangement should competitive populism sweeping through many
be initiated in urban circles initially, since their states is the most pernicious manifestation of this
consumption is high and the benefits of improve- danger. States will need to eschew policies that
ment much larger. promote moral hazard and prevent cost recovery,
The Electricity Act of 2003 took the radical step and the central government must ensure that they
of providing "open access" to distribution and tailor policies accordingly.
transmission networks in addition to recognising There is an urgent need to reform the power
power trading. However, open access has been sector; as the successful deregulation of telecom-
constrained by transmission capacity limitations munications has shown, tremendous change is
and high surcharges, besides the lack of adequate possible if given even half-a-decent chance.
depth in power trading and competition in distri-
bution. In the initial stages, open access to distri-
bution should be used to expand choice for bulk
A robust trading regime will require adequate
depth of market through increased numbers of
sellers and buyers, and quantity traded. The mar- Gulzar Natarajan is a civil servant.

19 No 19 | Oct 2008


Photo: Wingluke Asian Museum

American Indians
A review of Vinay Lal’s The Other Indians

IN THE early pages of Patrick journey to America. This

French’s recent biography of migration has a kind of
VS Naipaul, there is a de- The Other Indians: A political and double reality: it as much a
tailed portrait of the first rep- cultural history of South Asians in dream for millions of what
resentatives of the modern America Mr Lal calls Resident Non-
Indian diaspora in the mid- Indians (RNIs) as it is a
nineteenth century. These by Vinay Lal proud fact for actual NRIs.
Harper Collins India, 176 pages, 2008
were unwilling travellers: For a long time, before our
luckless, impoverished inden- current period of reverse
tured labourers, mostly drawn from regions in migration in modest proportions, America was
north India suffering drought or famine, tossed on thought to be the natural destination for our best
board ship like chickens in a coop for an arduous and brightest, the site where they might break free
journey across the seas to plantations in the West of the sloth and stasis and crab mentality of be-
Indies. nighted Indian life and grow wings.
From these early beginnings, fraught with But one of the tricks of the human brain—it the
dread and uncertainty and beset with dangers to reason we need history—is that it all too easily
both body and self, the Indian diaspora has come a extends a present reality back into the past. One of
long way to become “an incontestable fact of the aims of Mr Lal’s book is to show us the stages
world culture”, as Vinay Lal puts it in The Other of negotiation, attrition, and doubt through which
Indians, his new history of South Asians in Amer- Indian life in America has passed in order to reach
ica. its present bullish phase. For instance, although
Notwithstanding several other significant nar- educational attainment among Americans of In-
ratives of movement and resettlement, the great dian origin is now famously high (63.9 percent
Indian narrative of migration of our age, and now have a bachelor’s degree compared to 24.4
surely for many decades to come, has been the percent in the general population), Indians had the



lowest educational standards of any ethnic group I am tempted to say after Bruce Chatwin, drew
as recently as 1940. Even as India made the transi- their own songlines across the oceans, and every-
where provided assurance to Indians that Indian-
tion from colony to independent republic, Asians
ness was, in some fashion, theirs to claim.
in America were fighting for the most basic Just before the ascent of the Ghadr party an
political rights (often allying with the African- attractive picture of Indian civilisation had already
American movement). Mr Lal’s book meticulously been imprinted on America by the discourses of
charts the progress of Indian life in America from Swami Vivekananda, whose electrifying address to
trickle to flood, stammer to swagger. delegates of the World Parliament of Religions at
Indians first began to arrive in America in sig- Chicago in 1893 catapulted him into the con-
nificant numbers around the close of the nine- sciousness of the American public. And as the cen-
teenth century. Almost all were male. Some were tury rolled on India slowly became synonymous in
peasants from Punjab who had been drawn by the American imagination with the thought and
reports of American prosperity and who found work of Mahatma Gandhi, who acquired a consid-
work as farm labourers, others were students. Per- erable following among the intelligentsia and
haps the most interesting of these groups was the members of the press. At the same time Indians in
one with explicit political aims: a set of nationalists America were fighting a long battle over their
and revolutionaries trying to unshackle the British right to citizenship that would not be resolved un-
Empire from without by force of both words and til the passing of the National Origins Act in 1965,
militant action. As Lal explains, which set in place systems and quotas for immi-
By the second decade of the twentieth century, a
gration which are still largely in place today.
sufficiently large coterie of cosmopolitan Indian
rebels, whose ranks would be swelled and compli- Mr Lal has many interesting things to say on a
cated by peasants and workers who had experi- wealth of subjects, from the growth of Hinduism
enced the piercing effects of racial discrimination, in America to the take-over of the motel business
felt emboldened enough to initiate a political party by the Patel community, and from contributions by
to press for Indian independence from British rule.
Indians to American literature to the changing dy-
The “Hindi Association of the Pacific Coast” took
root in 1913, founded in Oregon, but it is by the namics of the relationship between adopted land
name of Ghadr (also Ghadar) that it is commonly and motherland. He notes the pervasive anxiety
known. This “Ghadar Conspiracy” as the British about cultural loss and contamination among In-
termed it, lasted a mere five years[...] but it is the dian Americans, which has spawned an aggressive
Ghadr’s party newspaper [which had the words and rancourous form of Hinduism that is broadly
“the enemy of the British Raj” emblazoned on its
sympathetic to, and often lavishly funds, the ac-
masthead] which most of all suggests why the
romance with the Ghadr movement among Indian tivities of the Bharatiya Janata Party in India and
progressives endures. sees nothing wrong in calling itself Hindu nation-
...Published at first in Urdu, the predominant lan- alist. It is not surprising, observes Mr Lal,
guage (alongside Hindustani) of north India, and ...that, as India slowly begins to emerge as an
Gurmukhi, the language of Punjabi peasants, Asian power, the Hindu community in the United
Ghadr had within months also commenced publi- States, which contributes substantially more to
cation in Gujarati and Hindi. A contemporary Brit- direct foreign investment in India than Hindus
ish intelligence report confirmed that some 3,000 elsewhere, should begin to feel emboldened,
copies of the paper at this time were mailed to the mindful of its “rights” and prerogatives; nor is it
Federated Malay States, Siam, and elsewhere in surprising that these Hindus should view them-
Asia [...]. selves in the vanguard of what I would character-
When one contemplates that nearly 100 years ago ize as revolutionary internet Hinduism. The inter-
an Indian newspaper was being published from net is not merely the medium through which de-
the United States in at least four bates on Hinduness and Hinduism are being con-
marvels at the ecumenism, grit, ambition, and vi- ducted, it is the vehicle, nowhere more so than
sion of the movement’s advocates. among Indian Americans, for advancing a new
One might argue that it was only at a great re- conception of Hinduism as a global faith. If inter-
move from India that the Ghadrites could net Hindutva’s proponents had their way, Hindu-
entertain...the utopian notion of a mother India ism, or more precisely Hindutva, would have
that would be freed by militant action. The soci- something of an ummah, a worldwide community
ologist Mark Juergensmeyer coined the phrase that would also assist in bringing pliant Hindus,
“Gadar syndrome” to describe the phenomenon of both in India and in older Indian diasporas of the
a “militant nationalist movement” created “abroad nineteenth century, to a awareness of the global
by expatriates” embodying “the fusion of ethnic strengths of a “modern” Hindu community. [...]
anger and nationalist pride”...Useful as are these Though nationalist Hindus in the United States
ideas, they do not entirely capture the globalizing take recourse to arguments about multicultural-
energy of Ghadr, much less the magisterial manner ism, they have not at all been hospitable to multi-
in which the Ghadr movement anticipated the culturalism or even Indian variants of pluralism in
notion of a global Indian diaspora. The Ghadrites, India itself.

21 No 19 | Oct 2008

Indeed, there is material for an entire book in cialised literature, such as ethnographies of par-
Mr Lal’s observation that “Indian culture is per- ticular migrant communities (such as the Punjabi-
haps more stable in the US than it is in India”. Mexican community in California) and academic
Himself a resident of America for almost three monographs. Many Indians at home will savour
decades (he teaches History at the University of this book about Indians abroad.
California), Mr Lal has the advantage of being able
to draw upon both scholarship and personal expe-
rience in this work, and speaks as both observer Chandrahas Choudhury is a freelance writer based in
and participant. He elegantly summarises and Mumbai and blogs at The Middle State
brings into the mainstream a wealth of more spe- (

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