Narendra Modi, persona non grata earlier, as Gujarat CM, would now be a diplomatic guest of honour at the White House. Can both, Prime Minister Modi and President Obama find amicable solutions for impending issues between India and the US?
Prime Minister Narendra Modi would be completing his 100 days in office by the first week of October this year. In this short space of time, he has taken the opportunity to meet a large number of world leaders, during his visit to attend the BRICS meeting in Brazil, and followed it up with visits to both China and Japan. In fact, only a week or ten days earlier, he would have had some serious discussions with the Chinese President Xi Jinping, not only in Beijing, but in India as well. Modi has had discussions with all his neighbours. Only, UK and Europe are to be covered in the next few months.
Both US and India are successfully operating democracies, and have a lot in common. But the relations have not been as one would have hoped. In fact, a few years ago, Narendra Damodardas Modi, as chief minister of Gujarat, was not even a welcome guest to the US and he was considered "ineligible" for a visit visa! This persona non grata then would now be a diplomatic guest of honour.
PM Modi is scheduled to visit the country and is expected to meet US President Barack Obama on 30th September in the White House. No doubt, they both have a long agenda to discuss and settle. It will be mutually beneficial in the long run.
India is Asia's third largest economy. India is a nuclear nation and a non-signatory to the NPT – Non Proliferation Treaty, which as many as 189 nations have signed. This has enabled a few lucky ones to be in the NSG - Nuclear Suppliers Group, which was set up in 1975 to ensure that civilian nuclear trade is not diverted for military aims. But when the US sealed a nuclear supply deal with India in 2008, China and some others in the group found the action questionable, as Delhi was outside the NSG. There were long and contentious negotiations before India could get a waiver. China has shown its reservations due to its proximity and close ties with its ally, Pakistan. This is one issue that Modi is likely to have discussed with President Xi in Brazil as well as in Beijing.
In the meantime, India has recently ratified an agreement that allows the IAEA - International Atomic Energy Agency - to oversea its nuclear programme. It can now be assumed that during the talks with President Obama, this matter will be again raised and ways and means found to make India a member of the NSG. This is vital for national development.
India and US have had several defence deals in the past. India's import of weapons from US since 2007-8 has amounted to over $10 billion. In the last three years, for instance, India has imported Rs83,458 crore worth of weapons, out of which Rs32,615 crore was from the US, while Russia supplied Rs25,364 crore, France Rs12,407 crore and Israel Rs3,389 crore. In a recent visit of Chuck Hagel, US Defence Secretary, decisions have been made to revive the Defence Trade and Technology Initiative (DTTI) and also work towards the extension of 10-year Indian-Defence frame work.
Hagel met Modi, who stressed the importance of "technology transfer" and said India was keen to make further progress in bilateral ties. This included defence manufacturing in India. Both agreed to go in for co-development and co-production of weapon systems. No doubt, these would be raised again in the discussions between President Obama and Prime Minister Modi. During the meeting that Hagel had with his counterpart Arun Jaitley, it was brought to his notice that FDI cap has been increased to 49% from 26%.
However, there is the fear that US is not a reliable long term and high end defence supplier, given its spur of the moment reactions for imposing sanctions and stringent export control laws. India would be glad to work with the US, if such points can be settled amicably. Prime Minister Modi is likely to raise the issue of bringing up ground realities in asking for US support in restructuring global institutions like the UN Security Council and the International Monetary Fund (UNSC and IMF). In the case of UN Security Council, there is no longer any justification for India to be kept out; in fact, now that European Union is a reality, it would be unfair for both UK and France to have the membership of this august body. European Union should have one and it is up to them to nominate any member of the Union to be the permanent member in the Security Council.
When UNSC is restructured, it may have a total of five or seven members and, in such an event, Brazil, Indonesia and South Africa could be other suitable candidates. No doubt, during his meeting with President Xi Jinping, Prime Minister Modi would have raised these issues. Doubtless, he will take up the matter with President Obama so that this matter can be resolved permanently.
One other important issue that Prime Minister Modi is bound to raise relates to the US Immigration Bill. During his recent visit, John Kerry indicated that changes can be made. This will facilitate Indians.
President Obama may also seek India’s assistance in resolving some issues in the Middle East, relating to Iran, for instance, or even support in that area. It is in the interest of both the countries that efforts are made to support each other in ensuring peace and democratic traditions all over the globe.
Finally, Prime Minister Modi should take this opportunity to extend his personal invitation to President Obama to be the Chief Guest of Honour on the Republic Day celebrations on 26th January 2015. So far, Indian governments of the past have not bothered to do so, which is a shame. The US is the oldest democracy in operation and it should be a great privilege to have the President of that country to be the chief guest on such an important occasion. Modi should wipe out this black mark in our past governments' behaviour and correct the same.
In summing up, Prime Minister Modi needs to secure President Obama's support in:
(a) obtaining the permanent membership of the UN Security Council
(b) becoming a member of Nuclear Suppliers Group
(c) bringing changes in Immigration Bill in the US
(d) establishing transfer of technology and defence manufacturing in India
(e) encouraging educational institutions to set up their branches in India
No doubt, this will be a historic trip that will bring great advantage and progress to both nations.
Market economy is not something the government can “impose” overnight. It requires social recognition, re-drawing of social contracts, probity in public life and ethics in relationship-based transactions
Three societies, namely China, Russia and India are struggling to become market-oriented economies from having been in different shades of socialist practices. Of course, China and Russia were hard core socialist economies with the state controlling most aspects of the economic sphere. India adopted the “socialistic pattern of society” wherein the commanding heights of the economy were controlled through state ownership.
Major companies in heavy and light industry, banking and insurance were all State-owned. State ownership has in practice the following characteristics
• Major expansion/location decisions are taken based on political consideration
• All major decisions regarding lending or waiving of loans are based on political considerations
The State begins to occupy a dis-proportionately large role in different aspects, not only of economic activity but also other areas like art, literature and films. It distributes favours and it also gives out awards. Over a period of time a state dependent “Culture” gets created, wherein the answer to every problem is assumed to lie with the Government.
State acceptance is confused with 'social acceptance' and State awards or rewards are equated with excellence in the corresponding field.
Obviously, this creates huge corruption in the system, where greasing palms slowly begins to fuel the engine of any business decision. Substantial amount of time in doing business is spent in dealing with Government minions and worrying about regulatory compliance. Huge departments are created to satisfy compliance needs; business men have a major pre-occupation –namely managing Government. It starts as an art and ends up as science.
Knowing a minister or a bureaucrat connected with your business is more important than knowing your business. In such an atmosphere, innovation, customer care and service excellence take a back seat. Even sectors, like information technology (IT) in India shines due to its off-shore activities. Good numbers of capable youngsters vote with their feet and migrate abroad.
Bank lending decisions are suspect and no serious system of punishing defaulters or chairman for wrong or sometimes mala fide decisions. See an excellent write up that recently came out in this magazine --
In such an atmosphere, when you “open up” the economy, it means entry to large amount of foreign capital and encouragement is given to the same old group of business tycoons to expand their activities. Again, access to power centres is more important. Clamour for reforms ultimately ends up as clamour for foreign capital since that is the easy option to many business tycoons and Government.
Market economy is not something the government can “impose” on the society overnight. It requires phenomenal amount of social recognition, re-drawing of social contracts, probity in public life and ethics in relationship based transactions.
Moving away from socialistic pattern of society to market mechanism is not accomplished with a magic wand. Also, market mechanism need not be only the Anglo-Saxon model. It can be different one, based on specific cultural habits and traditions. Fortunately, in a country like India, in spite of all efforts by the Nehruvian socialistic pattern of society, except some 20% of the GDP, all others were generated by private initiative. But regulations and license permit raj have created a humongous corrupt bureaucracy and to come out of it is not easy.
Our innate ability to respect private initiatives has to be brought back. For that the following needs to be done...
1. Dismantle half the ministries at the Centre, which are mirror images of ministries at the State level
2. Dismantle more than half the ministries at the State level, which are mostly money making activities for the babu class
3. Strengthen municipal and corporation level activities by banning construction contractors and real estate barons occupying elected posts
4. Abolish most local regulations on shops and establishment Acts, food and adulteration act and introduce swift and severe punishments for wrong doing
5. All courts to function in two shifts with enhanced pay for participants. At least criminal cases should be concluded within three years
6. Courts should be discouraged from giving adjournments
The central Government should basically focus on defense, foreign affairs and central taxes and state governments on law and order.
The initiative to do things should be left to individuals and the state should only be a regulator stepping in when things go wrong. It is not an easy task to build a proper market-based economy when most businesses are unfamiliar with it.
Crime will lead to punishment is the only mantra, which can make systems function with probity. Last, but not the least, political leadership must show maturity and probity and a willingness to accept that networking and Sifarsu-based system is no good.
Are we ready?
P.S. Intriguingly, an e mail-released today by Jet Air says that it plans to merge its Konnect type services with main airlines, which -among other things- means providing meals to all passengers. The note says subject to Government approval
(Views expressed in this article are personal)
(Prof R Vaidyanathan , Professor of Finance and Control, has taught at IIM Bangalore for over three decades and is consistently rated as one of its most popular teachers. Prof Vaidyanathan has coined the term 'India UnInc' for the largest component of the Indian economy comprising small entrepreneurs, households. Prof Vaidyanathan sits on the advisory boards of SEBI and the RBI.)
Women normally leave financial decisions to men – often at their cost. They can easily take charge of their finance. It’s not difficult, as this workshop showed
Moneylife Foundation recently conducted a workshop titled “What All Women Need To Know about Money”. This workshop was presented in association with the “Womentoring” programme at the National Human Resources Development Network (NHRD Network).
Sucheta Dalal, founder-trustee of Moneylife Foundation and managing editor of Moneylife, began the workshop with her session on the aspect of safety. According to her, women leave all financial decisions to their husband/father, without realising that these decisions can play havoc with their lives. “They are often made co-applicants in loans, and beneficiaries in investments and insurance, without their knowledge. They may then outlive their husbands, end up losing out on their own savings as well as the inheritance, only because of a lack of awareness,” she said.
What should they do? Ms Dalal suggested that women should use nationalised and large banks, and avoid dealing with cooperative banks. In terms of navigating the financial marketplace, she said, “Be careful while dealing with relationship mangers. You are targets for them and they will push harmful products because they know that women are soft targets. No matter what commitments they make, their targets are to sell you their products.” She also added that, if you knew financial products well, “You could use relationship managers to get your work done, but do not trust their investment advice.”
She covered topics from investment traps (such as chain-money schemes and guaranteed-return schemes), credit issues (such as credit cards, credit scores and loans) and also Will, nominations, etc.
During the second session, Debashis Basu, editor and publisher of Moneylife, spelt out various ways in which women can manage their money. Mr Basu emphasised the importance of saving regularly to deal with big expenses (such as children’s education) and, more importantly, ways of saving for retirement. His suggested a financial toolkit: just two to three mutual fund equity schemes, a few fixed-income products, a term life insurance, a health insurance plan and tax-saving instruments. “This should take care of 90% of your financial needs for a safe financial life. Tune out the rest and you will do much better,” explained Mr Basu.
Mr Basu explained which products to avoid and the products to invest in, with an idea of what is the right asset allocation. He went on to debunk myths about risk and explained that gold is a speculative product, not an investment product. He ended the session by saying, “What works in life also works with investments—simplicity, patience and a long-term view.”