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Pragati No 18 | Sep 2008

The Indian
National Interest

Kashmir concerns us

Contents Pragati
The Indian National Interest Review
No 18 | Sep 2008

Published by The Indian National Interest—an independent

PERSPECTIVE community of individuals committed to increasing public awareness
2 Don’t fall for crowd power and education on strategic affairs, economic policy and governance.
India has seen off secessionism before
K Subrahmanyam
Advisory Panel
4 No more partitions please, we’re Indians Mukul G Asher
A united India is the best hope for all its people Sameer Jain
Rohit Pradhan, Shashi Shekhar & Sushant K Singh Amey V Laud
V Anantha Nageswaran
Ram Narayanan
6 Liberal solutions Sameer Wagle
Adopting truly liberal solutions can save Kashmir—and
the concept of India itself
Harsh Gupta Editors
Nitin Pai
8 Dealing with the Taliban insurgency Ravikiran S Rao
Pakistan is yet to evolve a cohesive strategy for its tribal
Editorial Support
Ayesha Saeed Priya Kadam

10 Shaping the neighbourhood
A discussion on strategic affairs with C Raja Mohan Acknowledgements
Manoj Joshi
Nitin Pai Mail Today
IN PARLIAMENT Gautam Bastian
15 Reforming land acquisition Shantanu Mahajan (Cover Photo)
Frameworks for acquiring land and rehabilitating affected
M R Madhavan Subscription:

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Stealing private property is wrong, even when the state their employers.
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Don’t fall for crowd power
India has seen off secessionism before

A NUMBER of reputed commentators have started hold the capital to ransom.

urging that if the Kashmiris are so keen on seces- Mamata Banerjee can hold a massive gherao of
sion, as witnessed by the massive rallies mobilised tens of thousands of people around an industrial
by separatist Hurriyat leaders, why should not establishment in West Bengal. Chiranjeevi, a film
India allow them to secede. A section of Kashmir’s star, can collect half a million to launch his new
population led by separatist leaders whom demo- party.
cratic India has allowed to function freely wants to
secede from India on the basis of religion. It is not
that they are denied their religious freedom. But Large crowds, destruction of public property
they want to convert their territory into Darul Is- and casualties in police firings should not be
lam by merging it with Pakistan.
But we know that 60 percent of the population allowed to influence our long term percep-
of Kashmir Valley has taken part in the 1996 and tions at this stage of India’s political devel-
2002 elections, certified by international observers
as free and fair. opment and constitutional evolution.
The secessionists have refused to take part in
the elections and demonstrate their real strength A crowd can be collected in India at the drop of
among the Kashmiri people. One should not be a hat. Once that crowd goes beyond a critical size,
taken in by their capacity to collect a crowd. Gu- violence and destruction of public property are
jjars can be collected in tens of thousands not only routine happenings. There is a degree of permis-
to block the rail and road traffic between the siveness that has imbued our law enforcement cul-
national capital and western India but even to ture in respect of such defiance of public order. For



politicians of most parties, calling for bandhs and tions open for them to accept the Indian constitu-
rallies with inevitable violence has become an in- tion, join mainstream politics, fight elections and
herent part of their political culture. This is to wield power.
demonstrate their power to inflict loss of lives and After a few years of waging a futile war both
damage to public property. Naga and Mizo secessionists accepted the Indian
Such disruptions, from Parliament to the Constitution and joined mainstream politics.
streets, are projected as indications of the political Those who fought against the Indian Army be-
machismo of the parties. In that sense, India, as came chief ministers. When Laldenga, Vizol and
Gunnar Myrdal termed it fifty years ago, is a soft Jasokie, chief ministers of Mizoram and Nagaland,
state. Therefore large crowds, destruction of public died they received state funerals and their bodies
property and casualties in police firings should not were wrapped in Indian tricolour when taken to
be allowed to influence our long term perceptions the final resting place. So it happened in the cases
at this stage of the political development and con- of C N Annadurai, the DMK chief minister of Ta-
stitutional evolution of this country. mil Nadu, and M G Ramachandran, the AIADMK
Kashmir is not the only case where the Repub- chief minister. It happened to Sheikh Abdullah too,
lic of India has faced the issue of secessionism. who originally espoused Jammu & Kashmir’s ac-
Tamil Nadu displayed strong secessionist tenden- cession to India, subsequently opted for secession-
cies from 1947 to 1967. National flags were burnt ism, and then came back and accepted the Indian
and also copies of the Indian constitution. constitution.
Protest demonstrations were held in large Unlike in many other countries of the world
numbers though there was no violence. where militants and secessionists are invariably
hunted to their extermination the Indian republic
has succeeded in winning over secessionists to
accept the Indian constitution which provides for
Allowing secession to Kashmir separatists adequate autonomy for religious, ethnic and lin-
guistic minorities. More recently the Indian ex-
will be deemed as a victory for international periment has caught on in Aceh in Indonesia.
Islamic terrorism. Kashmir’s secessionist insurgency is not new. A
virulent insurgency supported by Pakistan was
waged in 1989- 1994. It was effectively countered
The depth of secessionist sentiment may be and the state was able to hold free and fair elec-
gauged from the fact that since 1967, when the tions in 1996. India is a secular democratic federal
former secessionists captured power through as- republic. Any secession based on religious identity
sembly elections, till today, the Congress Party has cannot happen without its having repercussions
not been able to make headway in the state. elsewhere in the country. In 1947 there was divi-
The state has been ruled alternately by the two sion of the country based on religious identity
Dravidian parties, Dravida Munnetra Kazhagam without calculating the costs of such division. The
(DMK) and All India Anna Dravida Munnetra result was one million dead and ethnic cleansing
Kazhagam (AIADMK) both of which branched off of 15 million.
from the original secessionist Dravida Kazhagam. The extremism in the country is not confined to
Tamil Nadu is one state which has rejected Islam only. There are extremists among Hindus
Hindi and does not teach Hindi in state schools or also as evidenced by the recent happenings in
allow its usage in the state. But today Tamil Nadu Orissa, and earlier ones in Gujarat. The Indian re-
has given up its secessionist stand, plays a signifi- public is therefore duty bound to keep such ex-
cant role in national politics and acknowledges tremist forces in check.
that its membership of the Indian Union has bene- The extremists in Kashmir have links with in-
fited the state immensely. The reason for this con- ternational Islamic terrorism and therefore allow-
version is the fact that the Dravidian parties have ing secession to Kashmir separatists will be
no anxiety about Delhi interfering in their elec- deemed as a victory for international Islamic ter-
tions or state administration. rorism.
The central government also dealt with seces- When India was established as a secular federal
sionism in Nagaland and Mizoram where organ- democratic republic there could have been no real-
ised militias of secessionists fought against the istic expectation that the population emerging
Indian Army for a few years. Even while trying to from feudalism, extreme poverty, illiteracy and
counter the military offensive of the secessionists deeply immersed in religious, communal and caste
the government of India held the door for negotia- prejudices would be able to rise up immediately to

3 No 18 | Sep 2008

the level of understanding of the noble concepts bent on the state to do everything in its power to
that underlie the Indian republic. bring such deviants back to the mainstream.
It should have been obvious that it would take If that proves not feasible then they should be
a long time to educate and condition our people to countered by use of force, if necessary. The repub-
the ideals underlying our constitution. It took 190 lic cannot evade its basic responsibility to sustain
years for the United States to enact the Civil Rights the fundamental ideals that go to make India what
Act empowering the black population. it was meant to be when the constitution was pro-
It is the duty of the republic to uphold the ide- claimed.
als and ensure that political parties operate within
the framework of the ideals enshrined in the Con-
If any party or section violates the basic ideals K Subrahmanyam is India’s leading commentators on
of the constitution, such as secularism, it is incum- strategic affairs. Courtesy: Mail Today


No more partitions please, we’re Indians
A united India is the best hope for all its people

IT IS perhaps the shock at the suddenness of the serve the Muslim majority character of the
outbreak of public demonstrations in Jammu & Kashmir valley. Add to it the usual mixture of ad-
Kashmir that led a number of people to succumb ministrative bungling, political brinkmanship and
to the notion that the only issue in Kashmir is In- competitive intolerance. In other words, just an-
dia’s ‘imperial’ design, and that if the state would other day in India.
abandon the idea of inviolability of India’s territo-
rial integrity, there would be peace all around.
It is an extraordinary turnaround because only
a few months ago the media’s coverage of
Kashmir was exceedingly positive: violence was If the demonstrations in Srinagar illustrate
down by almost 70 percent; tourists were return- Kashmiri angst, then, they are also an af-
ing in large numbers; ordinary Kashmiris were
tired of the culture of gun; there was a palpable firmation of the resilience and plurality of In-
yearning for peace and that Kashmir was march- dian democracy that permits people to
ing towards reclaiming its position as “paradise on
march against itself.
So what has changed in the last two months?
Actually, nothing. No rigged elections; no staged
encounters; no discovery of mass graves; and no This is not to say that Kashmir is not distinct
firing on public demonstrations. No doubt, the from other Indian states (though why is this so is a
crowd management could have been better but matter of a separate and important debate). Nor is
there has been no repeat of Gawakadal incident of it that India does not face an extraordinary chal-
1990 that fuelled massive anger against the Indian lenge in Kashmir. Indeed it does—as it has over
state. the last sixty years.
Instead, what has happened in Kashmir is a If the demonstrations in Srinagar illustrate
classic case of manufactured anger—surely, even Kashmiri angst, then, they are also an affirmation
the most ardent Kashmiri chauvinist cannot plau- of the resilience and plurality of Indian democracy
sibly argue that a transfer of mere 100 acres of land that permits people to march against itself.
in an uninhabitable area is attempt at demographic Marches against the state happen in India all the
transformation? Not least when the Indian state time—as they should in any vibrant and functional
policy has gone to an unprecedented extent to pre- democracy. India’s strength cannot be construed as



rejection of rule of law and

sets the stage for anarchy.
But shouldn’t India’s liberal
democracy permit the contes-
tation of the very idea of India
itself? Shouldn’t the right to
secede from the Indian repub-
lic be the right of the Indian
people? This question must be
seen in the context of the con-
sequences of the secession.
It is here the Indian propo-
nents of Kashmiri freedom fail
to make their case to the In-
dian people. If granted free-
dom, will Kashmir emerge as
the next Switzerland acting as
Photo: Rajesh/Himalayan Trails

a neutral buffer between In-

dian and Pakistan? Consider-
ing the unambiguously Isla-
mist and pro-Pakistan nature
of Kashmiri movement , it is
unlikely to be so. Giving up
on Kashmir would merely
signify a shifting of frontiers
a weakness. as far as India’s long-running battle against cross-
This is more than just about Jammu & Kashmir. border terrorism is concerned. Instead of training
It is about the model that we accept as the way to camps in Muzaffarabad, they would sprout in
reconcile the diverse interests of a diverse popula- Srinagar and Baramulla. Instead of bomb blasts in
tion. Mobs, general strikes and public demonstra- Srinagar and Sopore, we would witness the gory
tions might be legitimate means for citizens to ex- spectacle in Jammu and Pathankot. And what of
press their opinions. But this does not mean that military and administrative savings—the so-called
society—and certainly not the govern- peace dividend? If dividing India along religious
ment—should accept demands made in this man- lines has not obviated the need for military in-
ner. vestment, why should giving up Kashmir do so?
And what of the rights of Kashmiri Pan-
dits—victims of ethnic cleansing? Will the new
If dividing India along religious lines has not state of Kashmir grant them the right to return or
obviated the need for military investment, why reparations for their extraordinary trauma? And
what of the people of Jammu and Ladakh who
should giving up Kashmir do so? have clearly no affinity for Kashmiri separatists?
Has the memory of the one million killed at the
Here the media deserves a share of the blame: time of partition become so distant that another
the profusion of media outlets has encouraged population transfer is being visualised?
“camera-friendly” demonstrations, which in turn Over past six decades, the Indian state has won
are blown out of proportion by breathless on-scene over disaffected populations by employing a mix-
reporters and shouting anchors. ture of democratic flexibility and coercive power.
While India’s democratic core—never seriously India and all its people are unambiguously better
in doubt—has been reaffirmed in Kashmir, the off because the Indian state chose to sustain the
separatist leadership has repudiated democratic dream of a multi-cultural, multi-ethic and multi-
ideals. In a democracy, neither the election-phobic religious India. Kashmir is difficult but not irre-
Hurriyat nor the crowds they muster, can claim to trievable. Surrender is not the solution. Strength,
or be passed off as “the representatives of resolve and imagination are.
Kashmiri people.” Succumbing to them not only
insults those who have relied on the reconciliatory The authors are resident commentators at The Indian
processes of democracy, but encourages an active National Interest.

5 No 18 | Sep 2008


Liberal solutions
Adopting truly liberal policies can save Kashmir—and the concept of In-
dia itself

DESPITE THE continued existence of the term alism—that is something anarchism would be
"socialist" in India's constitution, liberal democ- sympathetic to. And to somehow consider India
racy is generally accepted to be India's governing as "imperialist" is simply disingenuous because
philosophy. In Europe, the word "liberal" still has Kashmir, despite cross-border terrorism and eth-
its classical meaning—support for private prop- nic cleansing of Pandits and Sikhs, has had gigan-
erty, free markets, strict separation of church and tic fiscal transfers from the centre. The state has
state, and a democratic government which guar- had free and fair elections, if only in the last few
antees individual and not group rights. But years. In any case, colonial India went only two
across the pond in America the leftists inverted ways—Islamic Pakistan or secular India; there is
the term (except the part about socio-religious no locus standi for an independent Kashmir valley
tolerance) and their pseud- any more than there is for an independent South
liberalism—collectivism, essentially—is similar to Kolkata. And we must not even contemplate the
that of the European social democrats. The genu- Kashmir valley's merger with Pakistan because
ine liberals in America and elsewhere would be
the modern day libertarians. In common usage in
India, there is a tendency to confuse the two. 
And then there is the issue of "autonomy", Fiscal autonomy and devolution of decision-
generally seen as the ultimate solution to the making would be great as we will have more
problems in Jammu & Kashmir. But what does it
mean? Does it mean fiscal autonomy and more
policy experimentation in the “laboratories
devolution of decision-making? That would be of democracy”. But dual sovereignty and re-
great for the people of the state, and indeed the
striction on movement and trade subtract
nation too as we will have more policy experi-
mentation in the "laboratories of democracy". Or from the autonomy of the individual.
does it mean dual sovereignty and restrictions on
movement and commerce with the rest of the na-
that would imply that Indian Muslims remain
tion—like Article 370 of the constitution that ac-
Indian just because they can't cobble a regional
cords a special status to Jammu & Kashmir—
majority somewhere near the borders with Paki-
which actually reduce the autonomy of individu-
stan or Bangladesh—a statement which is simply
als within that state and without?
not true.
But not many care to define such terms and
But more importantly, it is important to realise
they end up being used as just feel-good ones—
that real liberalism and genuine autonomy have
and rather liberally at that. This confusion is per-
never been given a chance in Jammu & Kashmir.
haps also symptomatic of the irrelevance of ide-
Article 370 takes away a Kashmiri's freedom to
ology vis-à-vis identity in our politics.
sell his land to an Indian from outside the state,
This was in full play when some pseudo-
as much as it prevents the latter from buying it.
liberals concluded that   we are "ruling" the
And this is sold as more autonomy for Kashmiris!
Kashmiris against their will, and it is high time
Similarly, the government first keeps to itself
that we start considering a plebiscite or at least
large parts of the state's land, and then allocates it
significantly enhanced "autonomy". Even some
for religious purposes—whether for Hindu
genuine liberals seemed okay with seces-
shrines or Islamic universities. Like elsewhere in
sion—perhaps out of a heady mixture of Kashmir
India, the government is involved in the man-
fatigue and some vague romantic idealism.
agement of religious institutions. So much for
Yet they are all wrong.
encouraging private property and separation of
Sanctioning on-demand secession is not liber-
religion and state. There is a common thread



running through all this—putting group rights which religion to patronise and when, competi-
above individual rights, and thereby always dis- tive intolerance is bound to take over.
appointing some momentary minority. Collectiv- To press the point further, when was the last
ism does not work in the most homogeneous of time you came across a national controversy
regions; in a religiously divided state that is also about how much beef or pork would be sold in
the playground of the neighbourhood's intelli- India? If rationed by the government, the issue
gence agencies, such an approach was certain to would become instantly politicised because of the
come to grief. sensitivities involved. But that is not so, and a
How could this storm have been prevented? free, private—and peaceful—market prevails.
Imagine that the land that was allocated to the The lesson is clear: except for strategic or very
Amarnath shrine board was the private property important ecological reasons, all land should be
of a Kashmiri Muslim. Now there is a growing privatised in Kashmir, and indeed throughout
market of hundreds of thousands of pilgrims an- India. Whether this land is given away free
nually, each of whom requires basic rest and re- through lotteries or auctioned away, whether it is
freshment services. What would the land owner given to the local residents, tribals or the poorest
do? In all likelihood, the profit motive would turn citizens—the key is to encourage private prop-
the land-owner into an entrepreneur providing erty.
accommodation and other services for the pil- For years, we have called Kashmir to be an
grims. What if the original owner is a religious integral part of India, and yet the highly illiberal
chauvinist who does not want to help the pil- Article 370 belies our own words. By making it a
grims? Well, there would be others who would political untouchable the political establishment
and he would most likely sell the valuable land to is being highly paternalistic to the minorities of
this country. The demographics of all states from
Maharashtra to West Bengal have changed, and
some locals have resented that, but that does not
Whether land is given away free via lotter- mean they should be granted such a parochial-
ies or auctioned away, whether it is given minded "autonomy". 
For lasting peace and prosperity, the focus
to the local residents, tribals or the poorest should be on the future, and not the dogmatic
citizens—the key is to encourage private legalities of the past. India must privatise gov-
ernment lands, convert government-run religious
property. institutions into completely independent fiduci-
ary trusts, replace religion-based funding of insti-
tutions with a broader secular funding, repeal
Article 370, reinstate private property as a fun-
damental right, remove the word "socialism"
Markets strip away bluster and reveal true
from our constitution, allow trade across the Line
priorities. In apartheid era South Africa, racists as
of Control with Pakistan, and yes seriously con-
they were, many whites broke the laws and
sider banning road-blockage as a legitimate form
risked imprisonment to hire the much cheaper
of protest.
black labour. In Kashmir, the Amarnath yatra has
The question is, do we really believe in liberal-
been going on more or less peacefully for dec-
ism, secularism and federalism or are they just
ades. Therefore it is not the yatra per se which the
homilies? We must realise that even today, the
Kashmiri Muslims opposed. It was perhaps not
moral advantage lies with the idea of India—we
even the demographic change which they
just need to get that idea working in full measure.
feared—for that was merely a ruse to ignite pas-
In the world of space exploration, spacecraft
sions. No, what really hurt the Kashmiris was the
convert the potentially lethal pull of an outer
brazen manner in which their representative gov-
planet's gravity into a speed-boosting slingshot
ernment just gave away land to a Hindu yatra.
by timing their approach carefully. In Kashmir
While politics is almost always a zero-sum
too, India has an opportunity masquerading as a
game, economics is not. Markets result in har-
problem.  Can our polity seize it?
mony even if the market participants do not like
each other. Voluntary transactions between indi-
viduals solve most human needs, from the mun-
dane to the mystical, and in the process augment Harsh Gupta is a resident commentator on The Indian
prosperity. But if an interventionist state decides National Interest (

7 No 18 | Sep 2008

Dealing with the Taliban insurgency
Pakistan is yet to evolve a cohesive strategy for its tribal areas

IN THE middle of the political circus of Pakistan,

the war in the country’s backyard continues to be
ignored. No, Pakistan is still fighting the war on
terror and everyday newspaper headlines scream
of more clashes between the state and the mili-
tants. The war is being ignored in the practical
sense—Pakistan does not possess a comprehensive
strategy to deal with the Taliban insurgency.
Violence has been raging in the tribal areas and
Swat valley. Violence that is not just related to the
Photo: Talk Radio News

war on terror, but adding to the mix is renewed

sectarian strife in Kurram Agency. Stuck in the
middle of this clueless war are ordinary people,
who continue to suffer either as victims of fateful
suicide attacks or as refugees in their own country.
Recent military offensive in Bajaur created over
400,000 internally displaced persons. The state Flags, loudspeakers...and guns
moved in to provide relief and support to the dis-
possessed only as an afterthought. cially when the circumstances demand increased
The response of the Pakistani government to engagement for the socio-political and economic
the militancy has been marked with confusion, ad- development of the area. Furthermore, the failed
hocism and lack of foresight. To be fair, the facts of peace deal in Swat valley has shown that this ap-
the conflict do not allow a lot of leverage to Paki- proach does not bring peace.
stan and consequently, its options are limited. The second truth is that military action of the
The first truth of Pakistan’s Taliban quandary is nature adopted so far is not decisive. It causes too
that the ultimate demands made by the Taliban much collateral damage—in the form of innocent
and their ilk cannot be met by the state of Pakistan. deaths, internal displacements and destruction of
The Taliban make two major demands: removal of infrastructure—and it creates massive amount of
NATO and International Security Assistance Force ill will against the military and the state across the
(ISAF) troops from Afghanistan and end of any country. Complicating matters is the fact that this
active support by the Pakistan to the what is war is taking place in an area where tribal culture
viewed as an occupying force; and the enforce- makes honour and revenge essential codes of life.
ment of a regressive socio-political system under So when the state reneges on its promise not to
the guise of sharia. cause harm to the people of an area, it creates mor-
The state of Pakistan cannot concede the first tal enemies. Enemies who, driven by the primal
demand simply because it is outside its control. As desire to avenge loss of life and honour, feed into
long as the war on terror continues to be waged by militant propaganda and the destructive portal
America and its allies in Afghanistan, resistance by created by the war on terror. If anything, conven-
the Taliban will continue and it will constantly tional military action over the past five years has
spill over to Pakistan. Furthermore, Pakistan does only succeeded in creating greater space for the
not also have the option of withdrawing its sup- militants.
port from this war. The logical conclusion is that The third truth of the situation is that Pakistan
negotiating with the militants on this count is and has adopted a one-track policy towards the Taliban
will remain futile. The Pakistani state can, but insurgency. The options have been very limited:
would not want to yield on the second objective as military action or negotiations and neither have
it would amount to a de facto surrender of state succeeded in the treacherous environment of Paki-
sovereignty. This would be extremely fateful, espe- stan’s tribal areas. A cohesive policy that will seek



to eliminate the influence of the militants in the be co-opted against the militants and reduce the
area has been missing from the prescription. The operating space available to the militants. Surgical
key to understanding the situation is this: for the and targeted military strikes should be employed.
reasons stated already, the Pakistani state is not in Negotiations with the militants will succeed only if
a position to “win” this war in conventional terms. they are conducted from a position of advantage.
At best it can hope to limit militant influence in the Secondly, the resource base of the militants
area. This cannot be done by crushing the mili- (both materially and in terms of manpower) must
tants, but only by snuffing them out. The best op- be sucked dry. The flow of money and arsenal has
tion therefore is to neutralise the militants and to be curbed. Last month there were reports in the
mitigate the impact of militancy on the socio- media that the Taliban were using funds from sale
political fabric of the country. This calls for a com- of marble to finance the insurgency. In any pro-
prehensive approach that not only neutralises the tracted conflict, it is a given that a war economy
enemy but also finds allies for the state. sustaining the conflict will emerge. So a priority
The last truth of the situation is this: Pakistan for the state should be the crippling of that econ-
cannot address structural problems that drive men omy. Similarly, the state should clamp down on
into the arms of the militants as long as foreign the militant’s arsenal supply and disrupt their
troops are present across the border. While unem- means of communication.
Lastly, a successful policy will be look to stunt
the supply of recruits to the militants. This will be
tougher to achieve but it must be attempted. First
As long as the war on terror continues in off, the state can begin by shouldering those af-
Afghanistan, resistance by the Taliban will fected by military offensive—give them refuge and
means of sustenance and make it a hundred per-
continue and it will constantly spill over to cent certain that the militants don’t get to the dis-
Pakistan. But Pakistan does not also have traught first. Second and this is just as difficult,
Pakistan must makes NATO and ISAF understand
the option of withdrawing its support from the damage done by errant missile strikes from
this war. Afghanistan. Third, the state must make a con-
scious effort to negate the propaganda of the mili-
tants. Finally, it must begin to address the struc-
ployment, illiteracy, militant propaganda and re- tural causes of the conflict.
ligious extremism are contributing factors to the The Taliban insurgency cannot be wished away.
riddle of the Taliban, they are not the real catalysts Neither can Pakistan bomb them out. To win this
to the episodes of militancy we have been witness- battle, Pakistan needs to develop a comprehensive
ing. The real catalyst is the presence of foreign and intelligent strategy that isolates the militants
troops and the fallout from the clueless war on and not the state. For this to succeed, it is impera-
terror. As long as these facts are unchanged, ad- tive that the political leadership wake up and real-
dressing the structural problems in the area will ise that a conscious and planned effort is needed to
not have the desired outcome. The atmosphere deal with this threat and to protect the fragile
created by the global war on terror is too charged socio-political fabric of Pakistan.
and too susceptible to militant propaganda that it
masks the actual causes and objectives.
The above premises lead to a number of con-
clusions. Firstly, direct negotiations with the mili-
tants will yield little. But that should not stop the
state from engaging other actors. Over the past
week reports emerged that some local elders have
sought to ban militants from their areas—the gov-
ernment must capitalise on such initiatives and Ayesha Saeed is a graduate student at the University of
duplicate them across the tribal belt. At the same Notre Dame and blogs at Red, white and black
time, it must reach out to all such actors who can (

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9 No 18 | Sep 2008

Photo: Hamed Saber

Shaping the neighbourhood

A discussion on strategic affairs with C Raja Mohan

C RAJA MOHAN’s book, Crossing the Rubicon: The prochement between the two is in India’s interests. Do
Shaping of India’s Foreign Policy remains one of the you think that is possible and that India has the appetite
best introductions to the subject. In that, as well as for such a project?
his more recent Impossible Allies: Nuclear India, The complex internal dynamics in Washington
United States and the global order, Dr Raja Mohan’s and Tehran, I believe, are too forbidding for any
mission is to “educate the reader in realpolitik and third party effort at mediation, let alone by India.
the enlightened national interest” making a pow- We must remember that the US and Iran have had
erful case for a realist foreign policy. He served as a relationship that has gone through many phases.
a member of the National Security Advisory Board The day they make up, they might not have much
(1998-2000) but most people perhaps best know time for anyone else in the region. If you look back
him from his weekly newspaper columns, where to the Reagan-era of the 1980s, the United States
he helps shape the national public discourse on and Israel were reaching out to Iran directly. Now
India’s relations with the world. Barack Obama has stated that he would engage
Pragati spoke to Dr Raja Mohan on India and the Iranian leadership in a direct dialogue.
the emerging geopolitics of its neighbourhood. On our part, we should look beyond the
current posturing in both Washington and New
A few weeks ago K Subrahmanyam argued that India Delhi. Some in Washington believe the United
should use its good relationships with both Iran and the States and Iran are forever enemies. Some in New
United States to help them break the ice, because a rap- Delhi might claim that Iran has always been a



great partner for India. Neither is true. Quite often in trade and economic co-operation? Iran’s
in the past Iran has been closer to Pakistan than to domestic policies today are not trade friendly. It is
India. The history of our bilateral ties is pretty a long way from any serious industrialisation. You
mixed. The only period when we had a measure of can have an Islamic authoritarian system but also
collaboration with Iran was when the Taliban was have an open economic policy that is favourable
ruling Afghanistan, during 1996-2001. In that for trade and investment. In the Arab Gulf,
period we worked with Iran, Russia and the whatever the nature of the regime, they are
Central Asian Republics to bolster the opponents business-friendly.
of the Taliban. So Iran has to make up its own mind where it
Looking at India’s interests in the Middle East wants to be. The real potential for India’s
as a whole, India’s stakes and interests are far relationship with Iran can only be realised when
higher with the Gulf Arabs rather than with the Iran sets out on a positive internal and external
Persians. The Arabian peninsula is the principal course.
source of imported energy for India, not Iran.
India has close to 5 million workers on the Arab How is the projection of Chinese power in South East
side of the Persian Gulf. How many Indians are Asia, Central Asia and the Indian Ocean region affect-
there in Iran? Less than 10,000 perhaps. The scale ing India's interests? What should India do about this?
of engagement is vastly different. What is India doing about this?
If you consider trade, the UAE is one of India’s We have to first start with the projection of
largest trading partners. Much like Singapore in Chinese power in India’s own neighbourhood. In
the east, Dubai has emerged as a major entrepôt the last few years, the Indian discourse has been so
completely focused on the United States that it has
missed the single most important feature of the
Iran has to make up its own mind where it geopolitics of this half of the 21st century—the rise
of China, and its impact on India’s neighbourhood.
wants to be. The potential of the relationship It is only natural that China’s economic growth
with Iran can only be realised when when it has caused it to make inroads into India’s
neighbouring countries. China is extending its
sets out on a positive internal and external Tibet railway to Nepal, modernising the
course.  Karakoram highway that connects it to Pakistan,
investing in infrastructure in Bangladesh and
Burma and has mining interests in Afghanistan. In
for India in the west. In recent years India has also the early years of Chinese economic reform
begun to significantly expand security co- launched in 1978, China’s growth was entirely
operation. Where is that kind of relationship with concentrated in its coastal provinces. The
Iran? relatively less populated provinces—Xinjiang and
Yet, Iran has emerged at the centre of the Tibet—that bordered the India, Pakistan and
debate on India-US relations, thanks to the Afghanistan remained outside the growth
domestic posturing in both Washington and New dynamic. Hence this region was not affected by the
Delhi. Many Americans say “prove it to me that rise of China’s economic power in the same way as
you are against Iran”. Many Indians in turn have East and Southeast Asia. But once China decided
argued Iran is the test case of India’s ‘independent’ to develop its inland provinces it was inevitable
foreign policy. that South Asia too would be affected by China’s
I believe, India has no reason to wantonly rise.
cultivate hostility towards Iran or having to take a India’s response should not be so much as to
US ‘loyalty test’ on Iran. At the same time New resent this intrusion but re-imagine its relationship
Delhi has no reason to pretend that the ties with with its neighbours. There is no way India can
Iran are more significant than what they actually stop the steady rise of Chinese influence in various
are. sub-regions of Asia. The only thing India can do is
As a pivotal state in our neighbourhood, Iran, to emulate China in expanding its own strategic
in normal circumstances, should have figured very profile in these regions. India’s stated position that
high in India’s strategic priorities. But these are not “there is room for both India and China to rise in
normal times in Iran. Given its deep internal Asia”. The problem, however, is that China’s rise is
conflict, Iran has not been a credible partner for taking place a lot faster than that of India. As we
any major power. The real questions are about the look to the future, it is inevitable that India will
future of Iran. Where will Iran go? Is it interested constantly rub against China in different parts of

11 No 18 | Sep 2008

Asia and beyond. There will be many elements of

competition and some opportunities for co-
operation with China. Managing this immensely
dynamic relationship with China will be the single
most important challenge for India’s security
policy in the coming years.

With respect to Prachanda’s trip to Beijing, his first as

the new prime minister of Nepal, you wrote “India
must not be surprised that Prachanda’s rhetoric on Ne-
pal’s sovereignty so pointedly directed against New
Delhi is conspicuous by its absence in his engagement
with Beijing”. Is the conspicuous absence limited to

Photo: Preetam Rai

rhetoric only, or will it be reflected in Nepal’s policies?
In other words, will the Maoist-led government balance,
tilt or swing?
The Nepali political elite has always been
zealous about their sovereignty vis-à-vis India,
because of cultural similarities, geography and
being in the shadow of a giant neighbour. We must
accept that the bilateral relationship has been an India’s stated position that “there is room for
unequal one—stemming from Nepal seeking both India and China to rise in Asia”. The
India’s support to protect itself from a perceived
Chinese communist threat in the 1950s. Since the problem, however, is that China’s rise is tak-
early 1960s, every regime in Nepal, which sees ing place a lot faster than that of India.
itself as a “yam between two rocks” has played
balance of power politics between New Delhi and
Beijing. The only problem, however, is that Nepal these months. In dealing with Nepal, India should
is too deeply linked to India—ethnically, culturally be confident that history and geography bind it in
and historically. Hence the resentment of India too a special relationship. What it needs, however, is to
became more pronounced. The India-Nepal treaty modernise this special relationship to suit the
of 1950, in turn, became the lighting rod for these changed circumstances. That in turn calls for a
deeply held resentments. . more imaginative policy towards Kathmandu.
China, therefore, has an easy hand to play in
Kathmandu—promising ‘sovereign equality’, What are the prospects for continued western military
offering generous economic assistance, and staying involvement in Afghanistan? Do you see a possibility of
neutral in the internal conflicts of Nepal. India on a US & NATO withdrawal in the next few years, leav-
the other hand is burdened by a sense of security ing the ground to the Taliban? 
responsibility for Nepal and is constantly drawn There are two separate aspects to the current
into the internal political dynamics in Kathmandu. western involvement in Afghanistan. The
China makes much of its readiness to deal with Europeans may well pull out of Afghanistan, as
whoever is in power in Kathmandu—they were they don’t have the stomach for the fight nor a
beside King Gyanendra before the monarchy fell, political consensus at home that this war is worth
and they are with the new government now. It fighting. They got into Afghanistan because it was
looks like the Maoists are persisting with the long- the “good war”—in contrast to the ‘bad’ one in
held tradition of leveraging the China card in New Iraq. European involvement in Afghanistan was
Delhi. about showing political solidarity with the US, but
In order to transform its relationship with it was never translated into a real commitment in
Nepal, India must put its relations with terms of troop levels, or effective aid to rapidly
Kathmandu on a more equal footing. New Delhi reconstruct Afghanistan.
should offer to scrap the 1950 treaty and negotiate With the United States, however, the story is
a new one that Kathmandu can live comfortably entirely different. So long as Washington faces the
with. India has successfully re-negotiated a similar al-Qaeda threat from the Pakistan-Afghanistan
1949 treaty with Bhutan in 2006. India should put border, the United States has no option but to stay
the treaty re-negotiation at the top of the agenda and fight. The Bush administration as well as the
when Prachanda shows up in New Delhi one of presidential candidates from both parties have



declared their commitment to stabilising be on these less ambitious and less risky security
Afghanistan. US Defence Secretary Robert Gates options in Afghanistan.
recently announced a US$20 billion plan for a new
strategy in Afghanistan. And as the war in Iraq Earlier this year you argued that the profound changes
winds down, the United States will have along Pakistan's North-west frontier “could redefine
additional military resources to devote to the the security politics of the subcontinent”. Can you
Afghan theatre. elaborate? 
While the Europeans and NATO might wind Since the time Alexander the Great showed up
down their military presence, the United States at India in 4th century BCE, the land between the
can only expand its mission in Afghanistan. Indus river and the Hindu Kush mountains has
been the principal theatre shaping the security
In last month’s issue we debated the need for India to dynamic of the subcontinent. All great empires in
send troops to Afghanistan. Do you think necessary for India had constantly struggled to maintain control
India to increase its military presence in Afghanistan? over the region and prevent other powers from
Under what conditions might this become necessary? penetrating into the subcontinent. The Great Game
To put it simply, there is no invitation from any of the 19th Century—between Britain and Russia
one to send troops to Afghanistan. In the past the —was part of the same pattern. The Soviet
United States was cold to the idea of Indian troops occupation of Afghanistan during the 1980s and
joining the battle because it did not want to offend the US intervention in Afghanistan since 2001 too
Pakistan’s sensitivities. The US welcomes India’s are similar in terms of their impact on the security
of South Asia.
Yet since Partition and independence, India has
tended to lose its inherited sense of geopolitics in
the north-western parts of the subcontinent. Our
Since Partition and independence, India has perennial confrontation with Pakistan and the
tended to lose its inherited sense of geopoli- dispute over Kashmir has prevented us from
taking a more strategic view of the borderlands
tics in the north-western parts of the subconti- between Pakistan and Afghanistan. To be sure, we
nent. Our perennial confrontation with Paki- have had good relations with Afghanistan, our
neighbour’s neighbour; but they have tended to
stan and the dispute over Kashmir has pre- stop short of becoming strategic.
vented us from taking a more strategic view Today, as the principal challenge to Pakistan
comes from its deteriorating security condition on
of the borderlands between Pakistan and Af- its western borderlands, India must begin to take
ghanistan. an integrated view of the dynamic in Afghanistan
and Pakistan. That India has more strategic
resources today makes it a potential player in
shaping the future of the north-western parts of
economic presence in Afghanistan but has tended the subcontinent.
to discourage a military dimension to New Delhi’s
growing role there. Things may change if NATO What can India do to shape the politics and security of
exits and the United States finds itself incapable of the region? And what is India most likely to do.
securing Afghanistan on its own. But we are not There are three options. One, India could do
yet there. Nor is it clear, if New Delhi will be nothing to influence the outcomes on the Durand
prepared to send troops to Afghanistan, with all its line that separates Pakistan and Afghanistan. The
attendant risks, if it were to receive such an emphasis of such a policy will simply be on
invitation. managing the consequences of the developments
In the interim, though, there is considerable on the Durand Line.
room for India to strengthen the hand of the Two, India could partner with the Pakistani
Afghan government in Kabul. Short of sending military establishment to ensure that Pakistan’s
combat troops, New Delhi has a whole range of survival and territorial integrity is not damaged.
credible options. After all, Pakistan buffers India from threats from
India can expand the training programme of this historically unstable region. India could
the Afghan National Army and the police. It can reduce tensions along Pakistan’s eastern
supply equipment and provide technical boundaries—especially in Jammu & Kashmir—so
assistance. At this stage India’s emphasis should as to enable the Pakistani army to concentrate on

13 No 18 | Sep 2008

its western front that is currently up in flames. But important new aspect however stands in bold
this assumes that the Pakistani army will want to relief. In the past, India was at odds with the
go along. Unfortunately, while Pakistan’s new international community on issues relating to
civilian leadership has signalled a desire to Pakistan and Afghanistan. Today, it is possible to
improve relations with India, the Pakistani army conceive greater co-operation between India and
has ratcheted up tensions in Kashmir, even while it the international community in redefining the
faces down its own insurgency in Federally future of the north-western part of the
Administered Tribal Areas (FATA) and the North subcontinent. Taking advantage of this must be an
West Frontier Province (NWFP). urgent priority for New Delhi.
This leads to the third option—India could
choose to raise the temperature on Pakistan’s
eastern borders, accentuate its two-front problem
with the aim of engineering a structural change in
Pakistan. That strategy is, of course, constrained
by the nuclear dimension of the balance between
India and Pakistan.
What India might eventually do in this
situation could be a combination of all three. One Nitin Pai is editor of Pragati.

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Reforming land acquisition
Frameworks for acquiring land and rehabilitating affected people

THE ISSUE of land acquisition for industrial pro- ers through the free market. Infrastructure is de-
jects and Special Economic Zones, providing com- fined as projects relating to electricity, roads,
pensation, and relief and rehabilitation has been in highways, bridges, airports, rail, mining activities,
the news for the last couple of years. Protests water supply, irrigation, sanitation and sewage,
against the acquisition in Singur, West Bengal may and any other notified public facility. It is impor-
lead to a postponement of the launch of the Tata tant to note that under the proposed law, any
Nano, and possibly the relocation of the project to company (such as Tata Motors at Singur) would
another state. Land acquisition for industrialisa- have to purchase at least 70 percent of the land
tion and other projects such as the Narmada dams required, and the compulsory acquisition may be
highlight the issues of adequate compensation and used for the remaining requirement. Incidentally,
protecting the living standards of the displaced in the Singur case, the plots belonging to farmers
people. who have accepted compensation is 69.4 percent of
Two Bills currently pending in Parliament ad- the area identified.
dress several aspects of these issues. The Land Ac- A second significant change is in the method
quisition (Amendment) Bill, 2007 proposes changes for assessing the value of the land for compensa-
in the conditions under which land may be ac- tion. Currently, the District Collector has to deter-
quired, the process of acquisition, as well as modi- mine the current price value of the land. The
fications in computing the compensation for the Amendment Bill requires the Collector to take the
land. The Rehabilitation and Resettlement Bill, 2007 highest value of (i) the minimum land value for
provides for benefits and compensation for all per- the area specified in the Indian Stamp Act, 1899;
sons displaced due to land acquisition. (ii) the average sale price of at least 50 percent of
higher priced sales of similar land in the village or
Land Acquisition (Amendment) Bill, 2007 its vicinity; and (iii) the average sale price of at
Land ‘acquisition’ refers to forcibly acquiring land least 50 percent of higher priced land purchased
without consent of the land owner. Currently, land for the project.
is acquired by the government under the Land Ac- Another significant change is that the Collector
quisition Act, 1894. This Act permits acquisition if must factor in the intended use of the land and the
the land is to be used for a ‘public purpose’ pro- value of such land while determining compensa-
ject. Public purpose currently includes village tion. These changes would lead to gains to the ac-
sites, town and rural planning, residential projects quiree due to any change in the land use. So a
for the poor or those displaced by natural calami- farmer selling agricultural land which would be
ties, planned development (education, housing, used for commercial purposes would get commer-
health, slum clearance) and projects of a state cor- cial rates. Also, the clause ensures that the compul-
poration. Private land may also be acquired for the sory acquisition is done at rates linked to those at
use of a company for a ‘public purpose’ project or which voluntary sale took place, while meeting the
for any work that is ‘likely to prove useful to the contiguity requirement of projects.
public’. If the acquisition is for the use of a company,
The Amendment Bill modifies the conditions 20-50 percent of the compensation amount must be
under which land may be acquired. It defines offered as shares or debentures of the company.
‘public purpose’ in a much narrower manner. The receiver may either accept this offer or ask for
Land acquisition may be done only for strategic a full cash settlement. This clause does not distin-
naval, military or air force works; infrastructure guish between shares and debentures. By accept-
projects of the government; or any purpose useful ing shares, the land owner may be able to partici-
to the general public where 70 percent of the re- pate in any significant benefit to the company from
quired land has been purchased from willing sell- the project. However, if the land owner accepts



debentures, he receives only a fixed return; he is The Bill differentiates between the process for
effectively lending money to the company to pur- large-scale displacement (more than 400 families
chase his own land. en masse in the plains or 200 families en masse in the
The Amendment Bill also has a few provisions hills or tribal areas), and when fewer families are
related to resale of land. Land acquired may be displaced. For large-scale displacement, the gov-
transferred only for a public purpose and with ernment shall conduct a social impact assessment
prior approval from the government. If the land is study, notify the affected area, and create a reha-
not used for five years from the date of possession, bilitation and resettlement plan. The Bill also lists
it shall be returned to the government. Whenever various entitlements (See table below). In other
acquired land is transferred to another entity, 80 cases, basic infrastructure facilities have to be pro-
percent of the difference between the consideration vided at the resettlement area. It is not clear
received and the original acquisition costs—the whether these families are entitled to the benefits
capital gain, in other words—shall be shared listed in the table.
among the original land owners and their heirs. When land is acquired on behalf of a company,
These clauses are designed to prevent using the rehabilitation benefits include: preference for em-
land acquisition route as a means of speculating in ployment and construction labour if available;
land. preference for contracts, shops, or other economic
However, the 80 percent clause could have im- opportunities; skills training; training facilities for
plementation issues in three different ways. First, entrepreneurial development; and scholarships
the Bill does not set a specific time limit for the and other opportunities.
application of this clause after the original acquisi- There are several concerns about this Bill. The
tion. Therefore, the acquirer must keep track of the entitled benefits are different between those dis-
original owners and their heirs in perpetuity so placed by larger projects (greater than 400 families)
that they can be paid in case of a future sale. Sec- and those by smaller ones. Land acquirers for lin-
ond, the new sale price of the land may be difficult ear projects such as highways may be able to break
to calculate if it is part of a larger deal. For exam- up the projects to avoid some requirements.
ple, if the original purchase was for a project un- The Bill uses non-binding language in several
dertaken by a corporate entity and this entire cor- instances while listing benefits. Examples include
porate is taken over by new owners, it may not be “wherever possible”, “if Government land is
feasible to calculate the price paid for this particu- available”, “subject to availability and suitability”.
lar piece of land. Third, in cases in which the com- The Bill appears to be written primarily for
pany has invested in developing the land, it is not displacement from rural areas. In case of loss of
clear whether the original acquisition price would land or house, the Bill requires compensation as
be adjusted upwards for the cost of development. agricultural land or house (which may be in rural
or urban areas). The Bill does not require the re-
Rehabilitation and Resettlement Bill, 2007 placement of an urban house with another urban
A second Bill was introduced at the same time to house or plot.
provide for rehabilitation and resettlement of peo- Regardless of the amount of land acquired, an
ple displaced by land acquisition or any other in- individual whose land has been acquired, lost, or
voluntary displacement. This would include not reduced is entitled to receive a maximum of one
only those whose land was acquired but also those hectare of irrigated land or two hectares of un-
such as landless labourers, local artisans, traders irrigated land.
etc. whose livelihoods or markets may be affected. For receiving benefits, the unit is a “family”.
Until 2003, India did not have a national level re- The Bill is gender-biased. The definition of family
habilitation policy. The National Rehabilitation includes ‘unmarried daughters’ and ‘minor sons.’
and Resettlement Policy was framed in 2003 and If a family has a son and a daughter, both above
revised in 2007. the age of 18, the unmarried son would qualify for
The proposed Bill provides legislative backing benefits as a separate family, whereas the daughter
for the policy. The Bill sets up a system for imple- would not.
menting and monitoring rehabilitation and reset-
tlement, with monitoring at the district, state and Consequences of these changes
national levels. It lists the benefits—monetary, What would have happened, to take the Singur
housing/land, employment—that a displaced fam- case as an example, if these Bills had been passed?
ily would be entitled to. All rehabilitation costs are The land would be valued at industrial rates and
to be borne by the requiring body (which needs not at agricultural rates. Also, the Tatas would
the land for the project). have had to purchase 70 percent of the land



Criteria for eligibility of benefits Benefits

Any affected family whose house has been Land for a house (without payment) of up to 250 square metres of land in rural
acquired or lost areas or up to 150 square metres of land or a house of up to 100 metres carpeted
area in urban areas
Affected family owning agricultural land If available in the resettlement area, agricultural land or cultivable wasteland equiva-
whose land has been acquired or lost or lent to the land lost up to one hectare of irrigated land or two hectares of un-
has been reduced to marginal farmer irrigated or cultivable wasteland; shall be in the name of each person included on
the record of rights
BPL affected family without land and has A house with at least 50 square metre carpet area in rural areas or 25 square me-
continuously lived in an area for 5 years tre in urban areas; or the family can opt for a one-time financial assistance for
before declaration house construction
Family with land lost for an irrigation or Preference for land-for-land in the command area of the project; if land is not avail-
hydel project able or family opts not to take the land, they shall receive monetary compensation;
fishing rights in the reservoirs
Allotment of agricultural land instead of One-time compensation of at least Rs 10,000 to each person on the records of
acquired land rights

Allotment of wasteland instead of acquired One-time compensation of at least Rs 15,000 per hectare to each person on the
land records of rights

Displaced affected family with a cattle shed Minimum of Rs 15,000 for construction of a cattle shed

Affected artisan, small trader, or self- Minimum of Rs 25,000 for construction of a shop or shed
employed person

All affected families One-time compensation for moving and transportation costs of at least Rs 10,000

All vulnerable affected persons Minimum of Rs 500 per month for lifetime pension

For land development projects instead of Developed land or build-up space within the development project in proportion to
land-for-land or employment the land acquired, subject to some limits

Linear acquisitions for railway lines, high- Minimum of Rs 20,000 in addition to other benefits under the scheme through
ways, transmissions lines, laying of pipelines, which land is acquired to each person on the records of rights. Benefits listed in
and other projects requiring a narrow par- this Bill shall also be given if the person becomes landless or is reduced to a small
cel of land or marginal farmer
Family affected by land acquisition on behalf Monthly subsistence allowance of 25 days minimum agricultural wages* per month
of a requiring body for one year; allotted houses or land shall be free of encumbrances and may be in
joint names of wife and husband
Land acquisition on behalf of a requiring Rehabilitation grant of 750 days minimum agricultural wages; If requiring body is a
body: Affected family not provided agricul- company, it is required to give the option of taking 20-50% of this rehabilitation
tural land or employment grant as shares or debentures

Proposed rehabilitation and resettlement benefits

through negotiations. These factors would likely smoother and seen a lower level of resentment and
have resulted in a market value that the sellers resistance.
would perceive as being fair. All the displaced per-
sons would also be entitled to various rehabilita-
tion and resettlement benefits.
Perhaps these compensation and resettlement M R Madhavan is head of research at PRS Legislative
packages would have made the acquisition process Research, New Delhi.

17 No 5 | AUG 2007

Pope Gregory VII, Singur and morality
Stealing private property is wrong, even when the state does it

WITH RATAN Tata threatening to leave, and

Mamata Banerjee holding ground, the Commu-
nist Party of India (Marxist) is in the mood to buy
peace. A couple weeks back Sabyasachi Sen, prin-
cipal secretary of West Bengal’s commerce and
industries department, said the government is
willing to pay some more compensation to the
evicted farmers of Singur but “We will not make
an offer on our own. Let them propose....we'll see
what we could do.” He might as well have said
“fair is foul, and foul is fair” (Shakespeare’s Mac-
The government of West Bengal seized farm-
ers’ lands in December 2006 on the pretext of
Photo: Seaview99

eminent domain—the right of the government to

take away private property of citizens (with com-
pensation) for public purposes. The provision ex-
ists in most civil law and common law countries,
known as ‘eminent domain’ in the United States,
‘compulsory purchase’ in Britain, ‘resumption’ in Enrico Colombatto, a professor at the Univer-
Australia, and ‘expropriation’ in South Africa. sity of Turin says the “Gregorian revolution intro-
So when policemen armed with guns and lathis duced the rule of law in the west and created nec-
came to exercise the government’s rights, naturally essary (but not sufficient) conditions for growth to
the farmers of Singur cried “What about my take off.” In latter centuries private property rights
rights”. Pope Gregory VII would have certainly were considered the founding stone of a free and
sided with the farmers. Before the 11th century wealthy society, especially through the Scottish
flagrant expropriation of private property by mon- enlightenment and classical liberalism. In fact the
archs was a common and accepted practice in right to bear arms in the American constitution
Europe, but it was all to change with the anoint- was a measure to restrict government coercion on
ment of Pope Gregory VII on April 22, 1073. Till the private lives of citizens.
then monarchs derived legitimacy from ‘tradition’, A moral view of private property can be found
the claim that their fathers and forefathers were in Hinduism and Islam too. According to the Shiv
rulers; and their powers were unlimited. Pope Purana Lord Ganesha had two sons Ksema (pros-
Gregory VII told the Holy Roman Emperor Henry perity) and Labha (profit). Profits emerge from
IV in unambiguous words that “the legitimacy to trade—the voluntary exchange of property rights.
throne lies in the rulers ability to administer natu- Shubha Labha (auspicious profits), revered and
ral law, not in tradition.” celebrated by Hindu traders for centuries, is a
Natural law was thought to be a part of the Di- moral principle in defence of private property. Is-
vine Order in which all men are equal in the eyes lam stresses on the “legitimate acquisition of prop-
of God, and should live free of coercion. In other erty”, and Prophet Mohammed conferred upon
words, all men have the right to own themselves, women the right to own property.
and the right to own the produce of their labour, in The farmers of Singur and everyone else in In-
other words, private property. Moreover, if the dia evicted on grounds of eminent domain have
ruler disobeyed natural law then a revolt was le- been cheated by a self-contradictory theory. All
gitimate. rights derive from the individual’s right to own



herself, and therefore rights are always individual the Communist government acquired land for Tata
never collective, governments have no ‘rights’. Motors and that it was legal. The role of the judge
Two objections may be raised at this juncture. in the common law tradition is to administer the
One, do we need eminent domain for the provi- rule of law without consideration for who the par-
sion of public goods like roads, railways and infra- ties involved are. The very idea of rule of law be-
structure? No, we don’t. Public goods can and are comes meaningless if theft by a rowdy pickpocket
provided by free markets through non-profit and is treated differently from theft by the state gov-
for-profit organisations that bundle public goods ernment of West Bengal. In the classical liberal tra-
with private goods. Lighthouses, railways, roads, dition the rule of law is above the citizens and the
common swimming pools (Kollams in Kerala), ruler. Criminality of an act has to do with its con-
computer software (Linux), television and radio tent, not by the social position of the one who
channels are examples of ‘public’ goods that are commits it.
successfully supplied privately. We today live in what Alexis de Tocqueville,
Two, is government acquisition of land unjust if the 19th century French political thinker and histo-
owners are duly compensated? Yes it is! Costs and rian, called ‘tyrannie de la majorite’—tyranny of the
benefits are entirely subjective and there is no way majority. And the tyranny was constitutionalised
an external observer can evaluate them. A social in 1978 with the abolishing of right to private
cost-benefit analysis is meaningless for it is impos- property from fundamental rights. Abraham Lin-
sible to compare the subjective happiness or pain coln’s father Thomas Lincoln moved from Ken-
of two individuals. Only trade ensures that all par- tucky to Indianapolis 200 years ago after two farm
ties are better off. Moreover, if people are truly failures following property infringements. Unfor-
compensated for subjective costs and pain then tunately, the farmers of Singur have nowhere to
there is no logical reason for government interven- go, socialist laws rule the country, paving the road
tion as individuals would have voluntarily sold to serfdom!
their property to begin with.
On 19th January 2008 the Calcutta High Court Vipin Veetil is staff writer (views page) at Mint, the Hin-
ruled that there was nothing wrong with the way dustan Times-Wall Street Journal business daily.


Retail in doldrums
A veritable job-machine is being prevented from starting

THERE ARE signs that India's retail revolution is gobbling small retailers has completely paralysed
in danger of fizzling out.  Many retailers in Mum- the government on the policy formulation front;
bai and New Delhi region are abandoning the not because of any real concern for small retailers
malls and some developers are converting the  but more out of their perceived political clout. This
space earmarked for retail to office space in many lack of policy initiatives for boosting and regulat-
upcoming malls. Leftists, the swadeshi brigade and ing organised retail  is unfortunately based on the
sundry others with vested interests can gloat over fallacy that modern retail and unorganised retail
the woes now faced by the organised retail, but the are necessarily antagonistic.
impending slowdown is a result of the govern-
ment ignoring the potential of retail industry: in Traditional or Unorganised Retail
employment generation and numerous economic The total retail sector in India, estimated at around
spin-offs for the society. US$325 billion, occupies a significant share of the
The debate over retail in India has been fixated Indian economy. Food and grocery is the largest
on the growth of organised retail, entry of interna- segment with around 60 percent share in the total
tional retailers and concomitant demise of the tra- retail, followed by apparel and footwear with nine
ditional retailer. The spectre of ogres like Wal-Mart percent with other sectors trailing far behind.

19 No 18 | Sep 2008

bridge the gap. Despite having

highest number of retail outlets
in the world, at two square feet
per person, India also has the
lowest per capita retail space. In
India, the share of organised
retail in the total retail sales is
one of the lowest in the world
at around 4 percent, just above
1 percent in Pakistan. The com-
parable figures for countries
like Britain, France and Ger-
many are 80 percent, while
Southeast Asian countries have
Photo: Prakhar Amba

a share ranging from 30 percent

to 55 percent. Indian organised
retail sector, with its current
size of US$12.8 billion is a small
fraction of the global figure of
Within the sub-segment of  fresh produce sellers in US$6000 billion.
the wet market, the unorganised sector has a 99
percent share. On the other hand, in the apparel Organised Retail
and footwear sector, the share of unorganised re- The growth in Indian organised retail coincided
tail is relatively smaller, at 81.5 percent. with and was spurred mainly by growth in urban
Available data provides sufficient evidence that concentrations and rise in disposable income lev-
traditional retail is under no immediate threat els of the middle class. The cornerstone of modern
from organised retail. With the present rate of retail management is operations driven by razor
growth of organised retail of 45 percent per an- thin margins, which is achieved by economies of
num, any structural changes brought about by scale and tight operating costs. However, the ad-
gradual policy shifts will take at least a decade vantage has been denied by a plethora of problems
before unorganised retail feels the heat. This as- vexing the organised retailers—in acquiring real
sessment is not to condone continued government estate, inflexible labour laws, shortage of skilled
stupor towards the unorganised sector on the is- personnel, lack of modern infrastructure and logis-
sues of credit availability, access to distribution tics facilities, and a complex tax structure.
channels, and realisation of fair price for the pro- The retail sector in India today is, in many
duce. It is, instead, meant to spur the government ways, akin to the IT sector in its fledgling stages. It
to initiate concrete measures to support the tradi- is a labour intensive sector and organised retail, by
tional retailers.  its very nature, creates employment across the en-
The government must demonstrate its serious- tire spectrum of value chain. Unlike the IT sector,
ness by implementing mechanisms for ensuring the majority of these jobs are low-skilled jobs.
better access to credit through banks and micro- However, it is the large unskilled and semiskilled
finance institutions, facilitating “cash and carry” population which needs employment in India. In
outlets for sale to unorganised retail, enabling times to come, the Indian retail industry has the
formation of farmers’ co-operatives to warehouse potential to be the biggest employer. There are
and sell agricultural produce and by upgrading
the infrastructure. The obvious example is of wet
markets and wholesale markets. Measures need to Governments the world over should allow
be put in place for better comfort and ambience to
form clusters, relieving traffic congestion, enforc- growth momentum to slow. Central banks should
ing hygiene and health standards. This will go a be given untrammelled freedom to manage
long way in accepting traditional retailers, hawk-
ers and wet markets as an intrinsic part of the re- short-run demand while governments work on
tailing landscape. augmenting long-term supply in sustainable
Notwithstanding this, the unorganised sector
will be in no position to meet the growing demand ways.
for retail and formal retailers need to step in to



other positive externalities related to the growth in been either through the circuitous route of whole-
organised retail, mainly in logistics, infrastructure sale “cash and carry” business and export trading,
and IT sectors. where 100 percent FDI is permitted, or up to 51
percent in single brand joint ventures. Others like
FDI in Retail Marks and Spencer have opted for the franchise
Given the  benefits of organised retail, the role of model to get a foothold in the Indian market.
foreign direct investment (FDI) needs to be ana- Notwithstanding the protests, it is a matter of
lysed. It is fallacious to prescribe FDI as the pana- time before the government increases FDI in multi-
cea for all the ills plaguing organised retail. The brand ventures to 100 percent. The only concession
eagerness of international giants to enter Indian to opponents may be a phased manner of intro-
markets can be attributed to saturation of the de- duction. Of prime importance, however is a reform
veloped markets and low penetration of formal of labour laws, framing of competition laws
retail in India. The entry of FDI in retail will tilt the against collusion, predatory pricing, and legisla-
balance between suppliers and retailers, force tion for dealing with small suppliers. An inde-
smaller players to adapt and differentiate, and pendent regulator to govern the retail sector from
bring consolidation in the sector. its inception is required to shape the contours of
The accompanying direct benefits are substan- organised retail.
tial: increase in exports due to high level of The continued inaction on the part of the gov-
sourcing from India, incorporation of global best ernment will not help  consumers, retailers or pro-
practices, investments in the complete supply ducers. The much celebrated  Indian entrepreneu-
chain--especially in technologies relating to cold rial spirit should encourage the government to
chain, food processing and IT, increase in product approve FDI in retail at the earliest. The govern-
variety and categories, increase in employment, ment cannot renounce its responsibility to create
and secondary benefits of modern agriculture and economic incentives by providing an appropriate
shopping tourism. Moreover, this FDI in retail will architecture supported by relevant laws, to facili-
arrive without any sops and tax breaks from the tate an interdependent and symbiotic relationship
government, unlike IT and auto-manufacturing between the various constituents. The ecosystem
sectors, where state governments have been bend- of the retail industry in India will then adapt itself
ing backwards to attract investments. to accommodate the two seemingly divergent
However, the governmental policies regulating strands of retailing, evolving into an indigenous
entry of FDI have been convoluted over the last Indian retail model.
decade. Some foreign retailers have been present
in India before 1997, like the German wholesaler
Metro, when no prohibition on FDI existed; while
others, like Wal-Mart, have entered after January Prashant Kumar Singh is a supply chain management
2006. These foreign investments, after 1997, have professional.


More to microfinance than moneylending

A sceptic’s defence of microfinance

Two years ago, Bangladesh's Grameen Bank and hundreds of individual micro-lenders, and hedge
its founder Muhammad Yunus received the Nobel funds and universal banks have set up microfi-
Peace Prize for their pioneering use of extending nance funds to finance microfinance institutions
small loans to the poor as a poverty-reduction (MFIs). The discussion of microfinance has moved
strategy. The Nobel Prize sparked mainstream from economics and policy journals to business
public interest in micro-lending as a concept. Since newspapers to general-interest newspapers and
then, the micro-lending website Kiva has attracted magazines. As interest in microfinance has risen,

21 No 18 | Sep 2008

so have the number of sceptics, who have raised an earning member of the household falling sick, a
questions on the morality as well as the effective- natural disaster or drought wiping out a crop, or
ness of microfinance. expenses incurred on a wedding.
Consumption smoothing does not have the ro-
New usurers, inadequate philanthropists mantic appeal of micro-credit driven entrepre-
The moral challenge to microfinance comes neurship, but is equally important. Borrowing can
from those who see the high interest rates being enable households to feed their children properly,
charged by micro-lenders, and see it as usury with prevent malnutrition, and keep them in school. At
a more acceptable name. Interest rates charged by the very least, it can lower incidences of morbidity
microfinance lenders run as high as 30 percent in and disease.
India and Africa. In Mexico, Compartamos Banco However, of the three legs of finance—credit,
charges rates as high as 100 percent. savings, and insurance—credit is the worst way to
Compartamos is a special case. It has a virtual smooth consumption, as it comes with interest
monopoly on micro-lending within Mexico, which costs attached, and should be used as a last resort.
is severely under-banked. It also treats microfi- However, the absence of formal savings and insur-
nance as a business enterprise, raises capital from ance programs targeted at the poor means that
market investors rather than from philanthropic they are forced to use micro-loans to smooth their
institutions, and functions as a full-fledged bank. It consumption and deal with shocks.
also lends to individuals instead of only to groups The poor often do not have a smooth income.
of women, and does not conduct vocational train- For example, farmers and agricultural labourers'
ing or hold social meetings. incomes rise after a harvest, or the poor may be
Dr Yunus has criticised Compartamos for being employed in other seasonal industries such as fish-
a commercial moneylender and not a development ing or animal husbandry. In the absence of a bank-
institution, but his own Grameen Bank and other ing or para-banking system, the surplus income
MFIs set up on the Grameen model have been generated will either be used for immediate con-
criticised for charging interest rates above 25 per- sumption, used to buy illiquid assets that can later
cent. A major cause of this is structural: the opera- be sold or pawned; or saved as cash, which is vul-
tional overheads associated with underwriting and nerable to theft. Raising funds under the first sce-
collecting a huge number of small loans is signifi- nario would involve borrowing and having to pay
cant. Defenders of microfinance use the excellent interest, while the second scenario would involve
repayment track record of microfinance borrowers selling assets at a discount. If MFIs accepted de-
to claim that even these high rates are not usuri- posits from the poor as well as gave them credit,
ous, and also point out that even a high interest the poor would not need to pay as much interest,
rate is beneficial if it is lower than the usurious and MFIs too would benefit from increased liquid-
rates being charged by traditional moneylenders. ity.
The other common criticism of microfinance is In India, MFIs are actually prevented from ac-
that even as charity, it is ineffective. Despite Gra- cepting deposits by RBI regulations which limit
meen Bank's many years of operation in Bangla- deposit taking to licensed banks and chit funds.
desh and its large-scale coverage of the poor, Bang- Vijay Mahajan, chief executive officer of Basix, a
ladesh remains desperately poor. Sceptics have Hyderabad-based MFI, has pointed out that this
questioned if microfinance can function as a pov- only drives the poor to place their surplus funds
erty reduction strategy in the absence of the basic with fly-by-night finance companies and chit
requirements for wealth creation: property rights, funds.
social capital, a well-functioning financial system The failure of organised savings institutions for
and free markets in goods and labour. A sceptical the poor was also commented upon by the Rajan
examination of microfinance starting at its very Committee on Financial Sector Reforms, which
basics is called for. offered some solutions. However, it remains to be
seen if these will be implemented.
An unhealthy focus on credit Similarly, few MFIs offer insurance. The reviled
MFIs promote the work they are doing with stories Compartamos is an exception, as it provides a life
of how their borrowers have used their loans to cover of 30,000 pesos for a premium of 56 pesos.
invest in business assets such as livestock or food- However, the poor also urgently require health
stalls and moved from unemployment to entre- insurance, crop and weather insurance, and insur-
preneurship. While these success stories are laud- ance for small assets such as livestock and light
able, they are not universal. Micro-loans are also machinery. The Yeshaswini health insurance
taken to smooth consumption after events such as scheme for the poor has been running successfully



in Karnataka, but scaling it up poses a challenge. vocational skills, or about contraception, family
However, successful implementation and prompt planning, and basic healthcare.
claims processing will mean that the poor will not SHGs are remarkable for two reasons: First,
have to incur debt to deal with illness; and that they create social capital, especially in areas of In-
debt is more likely to be used for purposes that dia where women are traditionally isolated due to
will generate immediate returns. This in turn will the purdah system. Secondly, they form a ready-
drive up repayment capacities and drive down made organisation, which can then be used to
interest rates, setting off a virtuous cycle. conduct social and entrepreneurial activities. SHGs
The '-finance' is not the important part in peninsular India have carried out watershed
While MFIs' failure to provide comprehensive sav- development, and Hindustan Unilever is planning
ings and insurance services to the poor is disheart- to employ SHGs as a distribution channel for rural
ening, it should not be taken as evidence of their India under its Project Shakti initiative. While the
failure. Microfinance is a new concept, and the financial capital being provided to the underprivi-
years ahead will see a lot of experimentation and leged by MFIs is certainly important, the social
innovation which can address these gaps. Mean- and institutional capital that they are creating on
while, MFIs are making a difference not only their own may have a far greater impact in the
through finance, but even more through institu- long term. Combined with a micro-finance system
tional support. that goes beyond instalment loans, SHGs can cre-
Micro-finance, especially in India, is delivered ate wealth, boost skills and knowledge, and be-
through a 'Self-Help Group' (SHG) of ten to thirty come the machine which transmits growth in the
women. The financial activities of the SHG extend organised economy to the bottom of the pyramid.
to maintaining the savings of the members (usu-
ally without interest), borrowing from MFIs, dis-
bursing credit to the members, and maintaining
accounts and enforcing collections. The SHG also Aadisht Khanna works in the retail finance sector. His
carries out a number of non-financial activities, writing portfolio can be find at and he blogs
usually related to the members teaching each other at

23 No 18 | Sep 2008

Photo: Subramanyan Guhan/Painting: Parikrama

A very brief Kalam

The insubstantial memoirs of a presidential secretary

THE KALAM EFFECT, a one of the most intricate

new memoir by the former Review political systems found
Presidential secretary P M The Kalam Effect: My Years With anywhere, that is unfortu-
Nair, is a difficult book to The President nate. The reason for this is
review, because it is so slight not immediately obvious,
not only in substance but in and we can only hazard that
intent. Any spirited attempt by P M Nair it simply has to do with the
Harper Collins India, 180 pages, 2008
at criticism stands the dan- fact that our politicians are
ger of taking the book more done with being politicians
seriously than the author himself intended. only when they are resting in peace. (And perhaps
The book is, as Mr Nair says in his preface, “by not even then. Indian politicians never die; they
no means an attempt at a biography, nor a chroni- merely storm the well of a greater House.) Mem-
cle of Dr Kalam’s scientific pursuits.” It is also “not oirs thus turn into manifestos for future action, or
an attempt at either defining or deifying him. It is defences of mistakes made, or propaganda for
only a narration of what I saw and experienced in achievements. Sensitive, highly placed toes are
that time.” That is a modest ambition at best, and carefully side-stepped, backs are protected, and
Mr Nair fulfills even that ambition modestly. potentially serious revelations are avoided. Insight
This is only too familiar with the majority of and analysis—even subjective insight and analysis,
Indian political memoirs, and for a country with because we’ll take anything we can get—are in-



variably the first casualties of memoir writing. as unconstitutional was the presidential order,” Mr
John Updike once urged book reviewers to re- Nair writes, in baffling defence.
frain from blaming authors for not achieving what Instead of laying out the case on either side, he
they did not set out to attempt. To fault Mr Nair lambasts “journalistic moghuls” and other critics.
for producing a superficial, unmemorable memoir Then he well nigh admits that Dr Kalam, in Mos-
would therefore be unfair; superficial and un- cow at the time, was working only with three re-
memorable were exactly what he was aiming for. ports faxed to him by the Prime Minister’s Office,
But we can still bemoan the opportunity that has and that the President’s office sought no further
been lost. Like the Roman emperor Cincinnatus, information before giving its assent. In an asser-
Dr Kalam came from a non-political background, tion that echoes in other sections of The Kalam Ef-
and he returned to that background at the end of fect, Mr Nair insists that the president followed the
his presidency; like Cincinnatus, he also presided letter of the Indian constitution in every one of his
over his country during interesting times. If there decisions, but it remains just that—a statement to
was ever a chance to tell truths about the inner that effect, rather than any sort of explanation or
workings of Rashtrapati Bhavan without jeopard- analysis.
ising a former President’s future chances at judge- The Kalam Effect could have been salvaged by a
ships, ambassadorships, or other politically influ- genuine personal portrait of the man, even if a par-
enced sinecures, this was it. Mr Nair has chosen to tial one. But Mr Nair falls short here too. We learn
voluntarily give up that privilege. some details of little consequence—that Dr. Kalam
Dr. Kalam appointed Mr Nair his secretary in has a sharp memory; that he is not the most punc-
2002, when he was elected president; the appoint- tual of men; that he eats at odd times—but these
ment was predicated on an earlier relationship build themselves into nothing. Finishing The Kalam
between the scientist and the bureaucrat, when Mr Effect is to be left with nothing more than the
Nair was Controller at the Vikram Sarabhai Space broad, shallow character sketch that the media has
Centre (VSCC) in the early 1980s. Dr Kalam was, already given us over the years.
Mr Nair writes, “the darling of the 4,000-strong That’s a shame, because Dr. Kalam deserves
workforce,” but he knew that some of his peers balanced, knowledgeable scrutiny. He was, in his
celebrated when SLV-3 failed in its first flight. “For presidency, a polarising figure, ridiculed just as
decency’s sake, I shall not dwell upon it any fur- much for his poetry and his prescriptive speeches
ther,” Mr Nair writes. Strike 1: Why not dwell? as he was loved for his simplicity and his intelli-
Why not tell us the reason that this supposedly gence. (His poetry was, I think, as genuinely terri-
universally liked person made some enemies at ble as it was genuine.) The most critical, though,
VSCC? tended to treat him as a daft old man with abso-
An astonishingly significant portion of The lutely no grasp of presidential politics, and that
Kalam Effect seems to be dedicated to the idea that was a streak of such bitter and virulent cynicism
Dr Kalam was “God’s own man,” and to describ- that I had to disagree. I would have loved for a
ing how various natural phenomena seemed to be book to prove me right, or at least to set the record
benevolently disposed towards his day’s schedule. straight one way or another. Mr Nair could have
In one instance, the heavy rain over New Delhi written that book; instead, he has written The
stopped just long enough for a party on the Rash- Kalam Effect, which says nothing about anything at
trapati Bhavan lawns to go ahead as planned; in all.
another, a cyclone desisted from smothering
Orissa so that Dr Kalam could embark on a multi-
city air tour of the region. Mr Nair concludes,
weakly: “It could only be the innate goodness of
the man that could be the reason for whatever had
happened, we marvelled.” Strike 2: Out of a five-
year presidency, were a couple of days of meteoro-
logical aberrations really notable enough to de-
serve individual chapters all to themselves?
The few really notable events in that period, Mr
Nair elides gently over. In 2005, Dr Kalam dis-
solved the legislative assembly in Bihar, a move
that the Supreme Court judged to be unconstitu-
tional. “The Court did not make any remark about
Samanth Subramanian is a staff writer with Mint, the
the President by name or office; what was judged Hindustan Times-Wall Street Journal business daily.

25 No 18 | Sep 2008
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