India Sits Out the Cluster Munitions Agreement

On our 59th Republic Day, I thought I'd reflect, in my private capacity, on a disturbing trend concerning our country's refusal to participate or to curb its commitment to key humanitarian agreements. The latest example is the recently adopted international convention on cluster munitions. My friend, Priya Pillai, has written an excellent note for the American Society of International Law on the new agreement and she notes that India was among the notable absentees. It is unclear what the precise reasons for India's refusal are. I invite our readers, who may have insights or information, to comment on this development.

Research Paper: Achieving India’s Growth Potential

Just as the Indian economy reels from its double-digit inflation to the tune of approximately 11%, Goldman Sachs, the leading investment bank, has issued its latest research paper titled Ten Things for India to Achieve its 2050 Potential. This is part of a series of papers published over the last few years by Goldman Sachs covering the BRIC economies of Brazil, Russia, India and China.

The paper builds on Goldman Sachs’ Growth Environment Scores (GES), in which India scores below the other three nations. Further, it ranks 110 out of 181 countries, and for 7 of the 13 components India scores below the developing country average. The current report contains some prescriptions for India to achieve its potential by 2050, noting that “[h]aving the potential and actually achieving it are two different things”. This effectively boils down the lack of proper implementation of reforms that slow down economic progress.

The following are the key recommendations extracted from the paper:

“We highlight ten key areas where reform is needed. In all likelihood, they are
not the only ten, but we consider them to be the most crucial:

1. Improve governance. Without better governance, delivery systems and effective implementation, India will find it difficult to educate its citizens, build its infrastructure, increase agricultural productivity and ensure that the fruits of economic growth are well established.

2. Raise educational achievement. Among more micro factors, raising India’s educational achievement is a major requirement to help achieve the nation’s potential. According to our basic indicators, a vast number of India’s young people receive no (or only the most basic) education. A major effort to boost basic education is needed. A number of initiatives, such as a continued expansion of Pratham and the introduction of Teach First, for example, should be pursued.

3. Increase quality and quantity of universities. At the other end of the spectrum, India should also have a more defined plan to raise the number and the quality of top universities.

4. Control inflation. Although India has not suffered particularly from dramatic inflation, it is currently experiencing a rise in inflation similar to that seen in a number of emerging economies. We think a formal adoption of Inflation Targeting would be a very sensible move to help India persuade its huge population of the (permanent) benefits of price stability.

5. Introduce a credible fiscal policy. We also believe that India should introduce a more credible medium-term plan for fiscal policy. Targeting low and stable inflation is not easy if fiscal policy is poorly maintained. We think it would be helpful to develop some ‘rules’ for spending over cycles.

6. Liberalise financial markets. To improve further the macro variables within the GES framework, we believe further liberalisation of Indian financial markets is necessary.

7. Increase trade with neighbours. In terms of international trade, India continues to be much less ‘open’ than many of its other large emerging nation colleagues, especially China. Given the significant number of nations with large populations on its borders, we would recommend that India target a major increase in trade with China, Pakistan and Bangladesh.

8. Increase agricultural productivity. Agriculture, especially in these times of rising prices, should be a great opportunity for India. Better specific and defined plans for increasing productivity in agriculture are essential, and could allow India to benefit from the BRIC-related global thirst for better quality food.

9. Improve infrastructure. Focus on infrastructure in India is legendary, and tales of woe abound. Improvements are taking place, as any foreign business visitor will be aware, but the need for more is paramount. Without such improvement, development will be limited.

10. Improve Environmental Quality. The final area where greater reforms are needed is the environment. Achieving greater energy efficiencies and boosting the cleanliness of energy and water usage would increase the likelihood of a sustainable stronger growth path for India.

Perhaps not all these ‘action areas’ can be addressed at the same time, but we believe that, in coming years, progress will have to be made in all of them if India is to achieve its very exciting growth potential.

While the research report does well to identify key concerns relating to growth and the areas to be addressed, it does pose some fundamental issues at a macro level. One of the criticisms that may be levelled against the report is that it does not present any new findings or prescriptions, and all of those contained in the report are well-known and debated (with perhaps little concrete action being taken). But, this critique is more to do with the form and less with the substance of the matters covered.

More fundamental is the approach towards some of the solutions to the problems. Here, one finds that most prescriptions turn towards market-based models of economic policy and liberalisation—for instance the recommendations for removal of capital controls, for liberalisation of the financial markets and so on. It is important to note, however, that all of those solutions may not directly apply in the Indian scenario. There is a need to contextualise the prescriptions for reforms so that they appropriately fit into the Indian macroeconomic framework as well as with its past experience. Some of the ideas (and materials) that support this thinking are as follows:

(a) Commentators have argued that some level of restrictions and governmental regulation on economic and financial activity may be necessary in the context of developing economies. Joseph Stiglitz is a leading proponent of this view, as he strenuously makes his arguments in his book “Globalization and Its Discontents”.

(b) Similarly, as far as India is concerned, arguments have been made that it is India’s partially restrictive policies that have helped weather the recent global credit crisis or even the Asian financial crisis that swept the region over a decade ago (see this column by T. N. Ninan in the Business Standard).

(c) It is also useful in this context to review Dr. Shankar Acharya’s critique of the Draft Report of the High Level Committee on Financial Sector Reforms headed by Dr. Raghuram Rajan, where the point has been made about the need for taking into accounting the realities in India while examining the nature of reforms.

India, Burma and History's Judgment

While the world press keeps its focus on the situation in Burma, the print media in India seems to have moved on. Over the last fortnight, there were a few pieces which focused attention on India’s growing closeness to the Burmese military regime over the last two decades, and what India should do at the present time (more on that later). Yet, when compared to the attention that media elsewhere is focusing on the Burmese crisis, this seems inadequate. It would be a pity if the current India-Australia cricket series garnered more news-space than Burma in the days to come, because this could well be a critical time in Burma’s history. Developments in that tragic nation need the attention of “the world’s largest democracy” and one of Burma’s most crucial neighbours.

Perhaps the media’s behaviour only reflects the ominous silence of the Indian government on the issue, which has so far offered only a few wishy-washy statements on the developing crisis. C. Raja Mohan had an excellent column in the Indian Express (dated Sep 28) where he outlined the strategic considerations and calculations involved in the stance that India can adopt towards the current crisis. In it, he makes a passing reference to the fact that India’s Petroleum minister, Murli Deora, was in fact in Yangon on September 23 inking an energy deal with the junta just as the protests were gathering momentum outside in the streets (details of this meeting are available in an India Today story by Saurabh Shukla titled “Supping with the Junta” in the issue dated October 8). After making several telling points about foreign policy decisions made by India in the past, Raja Mohan argues as follows:

“In dealing with its neighbours, India had to constantly juggle between the occasional necessity of intervention to protect its own interests and the persistent temptation to deal with whoever is in power. High moralpolitik has not been the defining feature of India’s neighbourhood policy; it was always about the difficulty of managing competing imperatives and coping with the consequences of political change within the region.

The real policy question for India in Burma is not whether it should intervene in favour of the pro-democracy movement, but how and on what terms. Ending the long silence on Burma, then, should be the first step towards a more vigorous approach towards promoting political change in Burma.

India had confronted a similar challenge in Nepal last year when people poured out on to the streets demanding an end to monarchy’s autocratic rule. India was deeply conflicted between two divergent policy options: preserving equities in the ancien regime or aligning itself with the forces of change in Nepal. Despite deep divisions within the government on the appropriate approach to Kathmandu, India eventually called it right and intervened decisively in favour of a democratic transformation in Nepal.

The policy change towards Kathmandu involved major risks; but the political will to change course had also generated enduring rewards. India must now embark on a similar policy of nudging the military rulers of Burma towards political reform. The risks of such a policy will be balanced by two important factors. One, the old order in Burma is no longer sustainable. As dictatorships go, the Burmese one has been utterly incompetent in either buying legitimacy by co-opting critical sections of the population or bringing about reasonable economic progress that might have encouraged the popular tolerance of political repression. The Burmese military has just managed to impoverish one of Asia’s richest nations. As the Buddhist clergy take away whatever shred of legitimacy that Burmese rulers could claim, it makes sense for India to be on the right side of impending political change.

Two, New Delhi’s passive policy has ceded the high ground to Beijing, which has positioned itself as the agent of influence as well as the principal interlocutor between the international community and Burma. By simply tailing China on engaging the dictators in Burma, India has abandoned its own strong and unique leverages. If India is serious about its regional role and wants to stay in competition with China for influence in Burma, New Delhi must differentiate itself from Beijing, and reestablish itself as an empathetic supporter of the Burmese aspirations for political change.”

Four days later, in the Express issue dated Oct 02, Shishir Gupta wrote a column which appears to be a direct response to Rajamohan’s argument as evident in its title: “Rangoon isn’t Kathmandu.” Arguing that India’s strategic interests in curbing militancy in the North-east should factor in India’s support of the military junta in Burma, Gupta asserted:

"Although the EU-US wants India to repeat its Nepal performance in Burma, India knows that the two situations are very different. The fact is that the strategic levers at India’s command in Nepal are missing in Burma. Indo-Nepal trade stands at $ 2 billion with Kathmandu relying totally on New Delhi for fuel supplies and 70 per cent of its exports and 65 per cent of its imports. India may share a 1338 km border with Burma, but bilateral trade is a sluggish $ 569 million, with Burma having direct sea access and strategic lines of infrastructure and communication to Kunming in China.

… … … The UPA political leadership, in particular the Congress leaders, may privately be supportive of Aung San Suu Kyi and the monks now on Rangoon’s streets, but overtly it will have to deal with whosoever is in power; such is the security calculus. New Delhi also knows that with the Burmese army controlling every part of society, transfer of power in that country will have to come through negotiations and not through revolution or isolation of the military regime. New Delhi has not forgotten that two years after Suu Kyi was awarded the Jawaharlal Nehru Award for International Understanding in 1993, the Burmese army suddenly withdrew in the midst of Operation Goldenbird and the surrounded militants escaped from the Indian dragnet. It does not want to visit that nightmare again.”

An Express editorial dated Sep 24 (which urged proactive action not for reasons of morality but because not doing so will give China an advantage over India) identified the following three factors as the basis for India’s reticence to pull up the military regime in Burma:

“the need for Burmese Army’s cooperation in dealing with the insurgencies in the Northeast, Burma’s natural role as a land-bridge to Southeast Asia, and the importance of preventing Burma’s total dependence on China for external support.”

One should probably add India’s oil and energy interests to this list.

Looking at the arguments which focus on short and medium term strategic interests, I for one am reminded of the arguments offered by governments which supported the apartheid regime in South Africa right until the early 90s. I do not want to force the comparison (for there are many important differences), but in some ways, the military junta in Burma and Aung San Suu Kyi have the same symbolism and resonance for the current generation, that the apartheid regime and Nelson Mandela had for those of us who grew up in the 80s and 90s. India was on the right side of that issue, and gained moral standing across the world and especially in South Africa for its stance. Over time, this has resulted in economic gains for India (I cringe a bit as I set this out, but I know that for a disproportionate number of people today, such arguments are often more compelling than those based on doing what is right).

To end, I want to recall a particularly evocative statement from PM Manmohan Singh’s Aug 13 speech in Parliament on the Indo-US nuclear deal. This is what he said:

“Finally, Sir, let me end by saying that we have achieved an Agreement that is good for India, and good for the world. I am neither given to exaggeration nor am I known to be self-congratulatory. I will let history judge; I will let posterity judge the value of what we have done through this Agreement. In days to come it will be seen that it is not just the United States but nations across the world that wish to arrive at a new equilibrium in their relations with India. This agreement with the United States will open new doors in capitals across the world. It is another step in our journey to regain our due place in global councils. When future generations look back, they will come to acknowledge the significance of this historic deal.”

I do not quote this to reopen the debate over the Indo-US nuclear deal. I do so to make the point that if PM Singh’s government is genuinely concerned about the judgment of history and posterity, and if it wants to regain India’s “due place in global councils,” it will have to show that when called upon to do so, India can cast aside narrow short term gains, and indeed act against them to take on a leadership role on the great moral issues of our time. History usually remembers those actions where crucial figures act against their own interests to do the right thing.