Today's Editorial 31 July 2014

            Helping hands

Source: By S. L. Rao: The Telegraph
The media were agog when a “secret" report of the Intelligence Bureau was leaked a few days after the swearingin of the Narendra Modi- led government.

It, particularly, pointed to Greenpeace, to the agitation against the Kudankulam nuclear power plant (picture) and coal- based thermal power projects as having been funded by foreign agencies to hold back India's development. The report, obviously, suits the suspicions about foreign funding in both the Congress, which initiated the report, and the Bharatiya Janata Party, which received it.

Within India, there is not much funding for the activities of nongovernmental organizations. It has grown since 1991, as companies have wanted information for a competitive economy. There is also the desire of some to " do good". The activities of NGOs could range from social science and scientific research to conscience- raising movements for women, adivasis and other communities, support for the disabled, for clean environment, protection of wild life, promotion of nutrition programmes, health and immunization programmes, education and so on, and for propagating religion. The Foreign Contribution Regulation Act requires all foreign funding to NGOs to be reported to the government, showing details of donors and the purposes for which the funds were used.

Propagating conversion from one religion to another is not encouraged under Indian laws and some states have stringent legislation to discourage it. Article 25 of the Indian Constitution guarantees every citizen the right to profess, practice and propagate his faith in a way that does not disrupt public order and does not affect public health and morality adversely.

Several Indian states have passed freedom of religion bills, primarily to prevent conversion: Arunachal in 1978, Gujarat in 2003, Madhya Pradesh in 2006, Chhattisgarh in 2006, and Himachal Pradesh in 2007. This has not stopped religious conversions, especially to Christianity. Various benefits to the poor, such as good education and health services, tempt them to convert, apart from others who might feel an affinity for the religion. Foreign funding for conversion and propagation of religions — mainly Christianity and Islam — are believed to be rampant.

The latter is said to be funded by hawala and does not feature in government statistics. Between 1993 and 2012, the number of registered associations (NGOs) rose from 15,039 to over 41,844, but through all these years only 54 per cent to 64 per cent filed details of foreign remittances received. In 2011- 12, 16,756 had not filed returns. Those that did had receipts climbing from Rs 1,865 crore to Rs 11,548 crore. The principal donors in 2011- 12 were from the United States of America, Germany, the United Kingdom, Italy, Spain and the Netherlands. There are reports that there are at least 40 charitable organizations in Saudi Arabia whose primary job is to raise money for funding terror in India. The government does not appear to use the information it gets (or does not get) effectively. There appears to be little monitoring and inspection of the activities of NGOs.

Foreign funding of NGOs is a complex subject. Many recipients carry out very useful activities that help the country. There are some with ulterior motives. For example, it was said that the agitation against the Kudankulam nuclear power plant was funded by American sources that wanted to discredit Russian nuclear power technology. In the 1960s, the Congress for Cultural Freedom was reported to be funded by the Central Intelligence Agency. It produced a magazine called Encounter, edited by the famous British poet, Stephen Spender. The Congress for Cultural Freedom arranged many conferences. The magazine was beautifully produced and I remember it as having been very informative and educative.

Mrs Indira Gandhi became paranoid about the influence of secret CIA funding of NGOs and visiting research scholars in India. She introduced rules that made it very difficult for American scholars to visit India for research and India was on the backburner of American research projects for over two decades. Was it in India's interest that many American scholars could not come to India for research? Many outstanding educational and research institutions were started and survived mainly with foreign funding. The National Council of Applied Economic Research, for example, was established in 1956 on the initiative of T. T. Krishnamachari ( a successful businessman who served Nehru in the cabinet as minister for commerce and finance). The NCAER received substantial Ford Foundation grants that helped set it up. I became director- general in 1990. Funding sources for social science research in India were very limited. Government departments would fund some research, depending on the fancy of a joint secretary in a ministry. It was more as charity to enable the institutions to survive. Neither the private nor the public sector in industry was much interested in research.

India was a closed economy and the trick for industry was to get industrial licenses, which then guaranteed them a market and practically no competition. Estimating market sizes, income distribution, asset holdings, consumer habits and preferences, consumption in rural households and so on called for meticulously chosen large samples ( to represent India), which could extract such information. It was expensive and unlikely to create profit for businesses. Yet such research was necessary for understanding how India was structured and how it was changing. The primary funding sources were the foreign foundations — Ford, Canadian agencies like CEDA and International Development Research Centre, USAID and others. The NCAER was, by no stretch of the imagination, an agency that gave away secret information about India or agitated against Indian government policies.

I recall that in the early years of liberalization, I got the USAID to fund a project for monitoring Indian reforms and their effects on different sectors. One of my board colleagues thought that American funding for studying reform was inappropriate and we gave it up. The paranoia about foreign influence through funding was very much visible.

Yet it was an important study and should have been done from the beginning of the liberalization in 1991. The issue is how to prevent foreign funding from subverting Indian policies. The FCRA is a useful legislation for the purpose. But information from it is not adequately monitored and used. Many NGOs seem to escape any action despite not giving complete or any information. The purposes for which the money is used are not always properly disclosed. Foreign money that funds NGOs who use it to protest against government policies need close scrutiny. For example, it is accepted policy in India that in the absence of other fuels, India must depend on coal. India must do everything possible to encourage other non- polluting power sources, but coal will remain the dominant source. Should foreign funded agitations against coal- based plants be permitted? This question also arises in case of nuclear power.

There is great hostility to it in Europe, where Germany, for example, has been dismantling its nuclear power plants. India is a small player in nuclear power and needs it to satisfy development needs. Externally- funded agitations, however well- intentioned, must not be permitted. At the same time, NGOs must not be hounded, and even those which receive foreign funds to run research, health services, education, training and so on, must be allowed a free hand. With corporate social responsibility featuring in the Companies Act, we can expect domestic funds, apart from funds from the government, to increase. The need for foreign funds could thus reduce.

Foreign funding will have to be more closely monitored so that its use can be channelled to desired areas. At the same time, there needs to be transparency in government actions with regard to them.

Today's Editorial 30 July 2014

       BRICS gains currency in Brazil

Source: By Biswajit Dhar: The Financial Express
The 6th Summit of the BRICS nations would be remembered as a watershed event in global economic governance because it marks the first time that emerging economies stepped out of the shadows of the big powers to establish two financial institutions, the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA). These institutions should be seen as counterparts of the Bretton Woods institutions—the World Bank and the International Monetary Fund (IMF)—not competitors, as some Western observers have likened them to. Another significant outcome of the Summit, one which was not as well highlighted as the establishment of the NDB and CRA, was the BRICS Multilateral Cooperation Agreement on Innovation (MCAI) within the BRICS Interbank Cooperation Mechanism, an arrangement between the development banks (India’s Exim Bank and its counterparts) that was formalised in 2010. The MCAI aims at supporting projects that foster investments in technological innovation, especially in infrastructure and sustainable energy, as well as innovation in industry, services and agribusiness. Further, it also seeks to expand cooperation between the development banks in the member countries for increasing trade of goods and services as well as intra-BRICS investments. Through the establishment of the NDB and CRA, and the MCAI, the BRICS have made a strong statement about their role in the management of the global economy.

That the BRICS were intent on playing an important part in altering the contours of global economic governance became clear in the aftermath of the recent economic downturn. One of the most important issues raised by the BRICS was the need to reform the Bretton Woods institutions to their reduce legitimacy deficits. An important first step, according to the BRICS, was to alter the governance structures of these institutions by increasing the voting shares of emerging market countries in keeping with their larger presence in the global economy.

The impact of the pressures brought by the BRICS nations—China and India, in particular—was immediately felt. In 2010, the IMF took a major decision to overhaul of the Fund’s quotas and governance structure, which was seen as a historic step towards strengthening the Fund’s legitimacy and effectiveness. The IMF Board also endorsed proposals that called for a more representative, all-elected Executive Board. These changes were expected to be in place by 2012, but the unwillingness of the US Congress to endorse the proposed changes have effectively blocked any move towards the reform of the governance structure of the IMF. Currently, the US has 17.67% of the vote share and is in a position to veto any major decision of the IMF, which requires a supermajority of 85%.

The proposed reform in the management of the IMF would have shifted more than 6% of quota shares to dynamic emerging market and developing countries, and more than 6% from the over-represented to under-represented countries, while protecting the quota shares and voting power of the poorest members. As a result of these changes, China voting share was expected to increase from 2.928% in 2008 to 6.071%, while India’s share would have increased from 1.916% to 2.629%. Importantly, the share of the US would have declined to 16.498%, thus preventing it from vetoing any major decision.

The steps taken by the BRICS to establish their own financial institutions in the face of the US intransigence that prevents democratisation of the IMF could have a far-reaching impact on global economic governance. Members of the grouping should, therefore, be cognisant of the significance of this process of change that they have triggered on the global stage, while deliberating on the further details of the institutions.

At least the initial signs have been very encouraging, for the NDB is being established on the principles of shared ownership and responsibility. As regards ownership, the members of the group have agreed that they will have equal stake in the NDB. Each country will contribute equally to initial subscribed capital of $50 billion. The authorised capital of the BRICS Bank would be $100 billion. The membership of the Bank would be open to members of the United Nations, who will be able to subscribe to the shares of the Bank. However, the BRICS members’ share in the total paid up capital of the Bank (also their voting share) cannot be less 55%, thus ensuring that the founding members retain control over the NDB at all times.

The BRICS countries have also ensured that all the partners will have a stake in the functioning of the NDB. It would be headquartered in Shanghai, and here it must be said that India would have gained a lot if it was headquartered in New Delhi instead. South Africa will be the home of the NDB’s Africa Regional Center while the management of the new institution has also been shared between India, Russia and Brazil. However, India would get a significant opportunity to guide the functioning of the bank in its formative years, since it would be appointing the first President of the NDB. Russia and Brazil will be appointing the first Chair of the Board of Governors and the Board of Directors.

The NDB would provide funding for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries. The founding members have appropriately pointed out that the Bank would complement the operations of existing multilateral and regional financial institutions.

At present, all the members of the group are engaged in development partnership projects in several parts of the world and, in several countries, more than one BRICS member is present. Whether the Bank provides the basis for the BRICS countries to undertake joint projects in partner countries, is something that would be watched with some interest.

The CRA is a very timely initiative by the BRICS to devise their own “banker of last resort”. IMF was the only agency that provided this facility, until ASEAN+3 (ASEAN together with Japan, China and the Republic of Korea) formed the Chiang Mai Initiative Multilateralism (CMIM) in 2010. CMIM began with commitment funds of $120 billion, which was increased to $240 billion in 2012. The stabilisation-fund of the BRICS looks similar to CMIM in terms its initial size. It would have an initial pool of $100 billion, with China contributing $41 billion. India, Brazil and Russia are having equal contribution of $18 billion, and South Africa contributing the remaining $5 billion. As regards accessing the resources, South Africa can draw twice its contribution, while China can draw one-half of its $41 billion contribution. India, Brazil and Russia can draw an amount equivalent to their share.

Having put themselves under the limelight, the BRICS would now have to development the operational principles for the NDB, in particular. In the past, the BRICS members have been critical of the operations of the donor community, especially the members of the Development Assistance Committee of the Organization of Economic Cooperation and Development, for the donor-driven agenda they have followed. India has always insisted that the financial support that it provides to other developing countries has its basis in development partnership rather than development assistance, the latter being driven by the asymmetrical donor-recipient relationship. As the first President of the NDB, India is favourably placed to have the development partnership philosophy written into the statute of the new institution. This will help in positioning the NDB as a credible financial institution in which the recipient countries can repose their trust.

Today's Editorial 29 July 2014

 Sharia courts & fatwa

Source: By Faizan Mustafa: The Statesman
In a landmark order on July, the Supreme Court held that sharia courts are not courts because the Indian legal system does not recognize a parallel judicial mechanism.  The fact is that neither the Muslim Personal Board nor the seminary at Deoband has ever asserted that sharia courts are ‘courts’ in the strict sense of the term. But then privatization of justice is a reality not only in India but in most developed countries. Does our law not recognize arbitration and other alternative methods of resolving disputes? Are not sharia courts and fatwas different and ought not to be clubbed together? What has been the performance of sharia courts in the last 94 years? Has not the latest decision given a new lease of life to the sharia courts? These are some of the pertinent issues that call for reflection.

It may be difficult for our television anchors to readily accept, but many jurists do question the idea that all law must necessarily emanate from the ‘State’. The divide between the socialists and liberals is clearly visible. Liberal scholars openly embrace markets and reject all government intervention. ‘Legal Pluralism’ and ‘Radical Libertarianism’ are well-recognized scholarly traditions. There is a consensus that the State is not the only source of law. In several primitive societies, law developed gradually from custom in the absence of any sort of government. History contains many instances of pluralistic legal systems in which multiple sources of law existed. Most commercial disputes in the world are today resolved informally. Most businesses consider a private arbitrator an attractive alternative to a government judge. A recent survey of 1,000 of the largest US corporations showed that 79 per cent used arbitration to resolve commercial disputes in the last three years. Thus one of the central functions of the State ~ dispute resolution ~ is largely escaping the State’s sphere of influence. We are witnessing a slow but gradual extinction of our civil justice system. The shift to private, largely unregulated and unscrutinised processes is the global trend.

The State attempts to portray its judicial system as one of speedy and impartial justice. But in reality, state courts have to countenance many problems. They are conduits for gross injustice. At a more fundamental level, there is no evidence to suggest that an adversarial system, which our judiciary follows, is the best way to resolve disputes. Whenever parties choose arbitration rather than governmental courts, it demonstrates that arbitration is benefiting both parties.

This is the context in which the latest decision of the apex court on sharia courts needs to be examined. Sharia courts reflect a similar trend. The Supreme Court refused to ban sharia courts and did accept that they are in the nature of arbitration proceedings. The Muslim Personal Law (Shariat) Application Act, 1937, specifies the issues on which personal law shall apply to Muslims. It is a short enactment of six sections which aims at restoring the Muslim law to all Muslims and does away with customs contrary to the sharia. There is little doubt that the ‘Muslim Personal Law’ is indeed law under our Constitution. Article 372 explicitly permits continuance of ‘all laws in force’ at the commencement of the Constitution. Entry 5 of the Concurrent List also recognizes ‘personal law’ as law in matters of marriage, divorce, adoption, will, succession and partition etc. and gives powers to Parliament and State Legislatures to legislate in respect of them. Even the High Courts and the Supreme Court follow the Muslim Personal Law in disputes concerning Muslims. In international commercial arbitration proceedings, parties are even free to follow any law or ignore the law of their country or even draw up their own law. What is accorded to top business houses cannot be denied to ordinary citizens. Thus if citizens want to use sharia courts, they are free to do so and these courts are free to follow sharia law as an integral part of the Indian legal system.

The sharia courts of Bihar are widely respected, and their decisions have been quoted in approval by the various High Courts in eastern India. There is no law governing Muslims that can compel them to use the forum of state civil courts to settle their disputes. Such a choice is not available in criminal matters. Thus no law prohibits the establishment of sharia courts.

The Supreme Court decision has now given a new lease of life to the sharia courts in respect of parties who volunteer to use this forum. There is an elaborate system of appeal and revision. Given the success of the Bihar model, sharia courts have been set up in several states. Neither the Government of India nor the Muslim Personal Law Board has denied the existence of such courts in the apex court.

Fatwas are nothing more than an opinion of an individual which is issued without following the elaborate procedure of sharia courts. Unfortunately, the distinction between the two has not come out clearly in the decision of the apex court. Indeed, several fatwas have been issued in the recent past, and the highest court has rightly held that such directives are not to be issued particularly when the interested party had not sought them or they relate to the country’s general criminal law.

The responses based on religious texts can never be progressive as religious scriptures and laws do not reflect modern ideas of individualism, liberty, equality and human rights. In fact fatwas do not deserve the space which our media gives to them. By discussing them during prime time, the media accords a measure of respectability. The overwhelming majority of Muslims in India hardly attach any significance to these fatwas. Let fellow citizens also ignore them.

Today's Editorial 28 July 2014

   The changing face of finance

Source: By Madan Sabnavis: The Financial Express
RBI has taken two clues from the Union Budget—banks should be allowed to raise long-term bonds with less regulatory encumbrance to enable them to lend to infrastructure, and differentiated banks need to be set up.

While there is a strong case for the former—it is being linked to financing of infrastructure and affordable housing—the latter seems a bit odd as there are several sectors that may qualify for such treatment. There are two issues that are raised here—whether this will be a game-changer for banks and the infra sector, and whether it is prudent to make such exceptions, somewhat an ideological consideration.

Banks have been allowed in the past to raise bonds that go beyond the Tier II capital. Yet, it has not been resorted to in a big way. As banks see it, it is useful to pursue the issuance of such bonds, with a maturity of over 7 years, through public issues or private placement as per RBI’s directive. The prospect of regulatory benefits is quite inviting though RBI has already warned banks in its Financial Stability Report that infrastructure was a problem area when it comes to stressed assets. Each bank has to draw a trade-off here.

On the demand side, there can be problems. Banks cannot have cross-holdings, which means that one side of demand has been blocked. Long-term investors like insurance and pension funds would find them attractive but will have to revisit their own investment guidelines as these bonds are unsecured.

Retail interest has multiple issues. First, the returns have to be good. If a tax benefit is not provided, then a household may not be interested as there are tax-free bonds providing an 8% return. If banks offer a 12% nominal return to match this 8%, the advantage of SLR and CRR exemption may get diminished. Further, there are to be no call and put options which imply that exit can be a problem. Making them marketable is a way out; but for such bonds, there may be less liquidity, given the tenure.

Even if retail interest is there, there could be substitution with deposits. Today, one does not have the option of investing in a 7-year deposit. With a 7-year bond providing acceptable yields, funds may move from long-term deposits to these bonds. Given that overall financial savings in the country have stagnated in the last couple of years, this possibility cannot be ruled out.

At the ideological level, the question is whether it is prudent to make such exceptions or not. Today, all priority-sector loans are vulnerable and have a higher probability of default. Using the logic of such loans being very important, should funds earmarked for this purpose be freed from CRR and SLR? Where is one to draw the line? Also, banks are already maintaining excess SLR, of 3-5%, which indicates that such concessions may not really work when the quality of assets are under pressure.

The payments bank concept is interesting because it will be a new initiative where banks take deposits and are not allowed to lend. They take zero risk and invest in government paper only. They are to harness technology but may also set up physical branches in remote areas. While risk has been reduced by not lending, they would closely resemble post offices which take in deposits and certificates which are passed on to the government with the latter paying for it. In case of the payments bank, the bank would carry the cost.

This is the classic concept of narrow-banking, where banks only invest in government paper and hence avoid the pitfalls of NPAs or capital adequacy. Being driven by only technology, however, will not be feasible given the state of digital infrastructure and computer literacy in the country.

In FY13, the average cost of funds was 6.12% for all banks, with the cost of deposits being 6.57% while the return on assets was 10.33% and return on investment was 7.57%. The payments banks will be holding their investments till maturity and would not have to do MTM. To that extent, there are no investment losses. Any entity going in for such an enterprise will face similar ratios. These banks will not be borrowing and hence will have only a cost of deposits. The spread between return on investment and cost of deposit would be around 100 bps which has to be managed by a bank to remain above the ground.

Now, the cost of intermediation was 1.75% for the banking system, which would be lower for these banks as they would have lower expenses on most overheads given that they would be operating mostly in rural areas. Therefore, the focus has to be on cost control and this will be the challenge.

Both these concepts are assuredly interesting and may be viewed as fairly innovative experiments that will be tested by the market. The success of bank bonds will provide a distinct fillip to the corporate debt market while that of a payments bank will work in furthering financial inclusion.

Today's Editorial 27 July 2014

           Popularising RuPay

Source: By Ashwani Mahajan: Deccan Herald
In India, 90 per cent of credit card transactions are domestic; however, the cost of transactions is high due to monopoly of foreign gateways like Visa and Master cards. If this process of transactions is made India-centric, cost can come down drastically. In the last 3-4 decades, the usage of credit and debit cards -- what we call the plastic money -- has increased manifold. Their usage has actually multiplied in the past one decade due to emergence of e-commerce. We can not only make purchases of our needs from a big store by swapping our credit or debit card, we can even purchase air, train, bus ticket; or any commodity from e-commerce websites using this plastic money.

Though banking is no new business in India and credit and debit cards have been issued since long ago; however, these credit and debit cards had essentially been issued in partnership with international gateways like Visa and Master card. It is notable that Visa and Master cards make huge bucks from this business.

According to world Line India, a leading agency providing services in the field of electronic transactions, there are nearly 20 million credit cards in the country; and HDFC Bank, State Bank of India, ICICI Bank and Axis Bank are the main banks issuing most of the credit cards. Apart from this, there were 389 million debit cards in the country in March 2014.

During the last one year (2013-14) 58 million new debit cards were issued. It is notable that after the ATM machines were started being used, all banks have been issuing debit cum ATM cards to their customers, which can be used not only for withdrawing money, but also for making transactions at stores and e-commerce websites.

Foreign gateways like Master and Visa cards charge fee in lieu of their services and huge sum of foreign exchange gets transferred abroad by these companies. Due to monopoly of Master and Visa cards, a hefty fee is charged by them. Their business in India has been increasing leaps and bounds in the last 10 years. According to RBI, credit cards transactions were Rs 1.56 lakh crore and debit cards transactions Rs 20.22 lakh crore during the year 2013-14.

Foreseeing the importance of an Indian Card, Reserve Bank of India, desired to start an Indian card and National Payment Corporation of India (NPCI), realised this desire and an Indian card in the name of RuPay was started on March 26, 2012. Today in creasingly the transactions of a majority of Indian banks and financial institutions are being facilitated by RuPay and it is giving a tough competition to Visa and Master card. NPCI has also tied up with Discover Financial to give RuPay an international acceptance.

International acceptance
RuPay global card is now accepted at ‘Discover Global Payment Network’ internationally. RuPay was dedicated to the nation on May 8, 2014 by the President of India, Pranab Mukherjee. RuPay card is accepted on all ATM machines under national financial switch of NPCI. According to the NPCI data there are 1,45,270 ATMs and 8,75,00 points of sale which come under RuPay platform. In addition to this RuPay is accepted on nearly 10,000 e-commerce websites. Banks recognised by NPCI for this purpose can issue RuPay credit and debit cards which are accepted in ATMs, Points of Sale (PoS) and e-commerce websites. As of now about 240 banks have been issuing RuPay cards. Along with this 200 cooperative and rural banks are also issuing RuPay cards, giving a boost to financial inclusion.

Kotak Mahindra Bank has started a new initiative on financial inclusion; whereby farmers of 75 cooperative societies can get payment for their milk directly to their bank account. This model is destined to be implemented in Gujarat, where 3 lakh farmers of 1,200 societies will benefit.

It is notable for domestic sector that RuPay fee is merely one third of Master and Visa cards. Though RuPay is cost effective private banks are still not cooperating in adopting RuPay. Around 150 lakh RuPay cards in circulation now have so far been mostly issued by public sector banks. Argument of private banks is that since they have long period tie-ups with Master and Visa Cards, they cannot adopt RuPay till these agreements expire. Though private Indian and foreign banks know that in the long run RuPay would prove to be beneficial, they are not ready to adopt new card looking at their short term interests.

The State Bank of India, the largest public sector bank has started issuing RuPay card only three months back and has realised the benefits of the same. According to SBI officials, though it has long term agreement with Master and Visa cards, still it would be good for the bank to pay money to them and switch over completely to RuPay. Experts believe that if only SBI adopts RuPay fully, the scheme would be a success. Although for international operations, fee of RuPay is yet to be decided, the NPCI says that it would be better to keep it low to maintain it attractiveness in international business also.

In the first week of July 2014, the secretary, department of financial services of the Union ministry of finance has written to CEOs of all the public sector banks urging them to issue RuPay cards to all new customers and the existing customers who have not been issued debit cards so far.

Banks have also been asked to install RuPay card terminals in commercial establishments. So far there is a system of issuing only one type of debit card; however if one desires to get Master and Visa card, he/she can be issued the same along with RuPay card. Those who are used to Master or Visa card need to be lured gradually towards using RuPay as it will prove to be a winwin situation for all, as it would not only reduce cost of transactions significantly, but also increase the card penetration in the country, especially rural areas .The State Bank of India, the largest public sector bank started issuing RuPay cards three months back and has realised the benefits of it.

Today's Editorial 26 July 2014

                It’s Elementary

Source: By Manoj Kumar Pal: The Statesman
The concept of free and compulsory primary education (classes’ I-IV/V) in India has its genesis in the Sargent plan of 1944. Thereafter at the time of framing the Constitution, the Fundamental Rights Subcommittee made a provision for free and compulsory elementary education as a right of all children up to the age of 14 (up to Class VIII) and assigned its implementation to the State as its “very duty” in a “time-span of ten years”.  However, while adopting the Constitution, this unequivocal clause was relegated from the list of fundamental rights and placed as a “non-justiciable” right in Article 45 of the Directive Principles. Its implementation was also diluted; the State was required “only to endeavour” and that too “without a time-frame”. This allowed the Central and State Government, concurrently in charge of people’s education in free India, to go into hibernation on this issue for many years.

The stupor was broken by two successive verdicts of the Supreme Court in 1992 declaring that the right to education up to 14 years is indeed a fundamental right. Thereupon after some further procrastination, Article 21A was added to the constitution by adopting the 86th Amendment Bill. The Article reads: “The State shall provide free and compulsory education to all children of the age of 6 to 14 years in such a manner as the State may, by law, determine”. For the first time an age limit was thus introduced on the lower side and the State’s role in the education of children up to six years of age has been left in an amended Art. 21A as something for which the State shall still only endeavour.

After the circulation and revision of several drafts, the final  one  entitled  ‘The  Right  of  Free  Compulsory  Education Bill, 2008’ went through regular parliamentary procedures and the ‘Right to Education Act (RTE)’ has been made effective from 1 April 2010 during the second UPA government.

The RTE act lays down comprehensively the guidelines, rules and legal obligations of all stakeholders and provides for free and compulsory elementary education for all children in the age group of 6 to14 years, in their respective ‘neighbourhood’ schools all over the country. Depending on whether the schools are government aided, unaided or fully private, they have been divided into three categories; one more category is restricted only to Sainik Schools, Kendriya and Navodaya Vidyalayas and similar schools with a distinctive character, officially recognised as such by the government. For each category the regulatory cum funding authorities have been specified. In the vast rural areas, panchayats and municipal Authorities will discharge this function.

In every state, a State Council will take care of the overall responsibility and further legislation, rules, regulations etc. The jurisdiction of each ‘neighbourhood’ is to be specified and the existence of at least one school in each ‘neighbourhood’ is to be guaranteed. The expenses for setting up new schools, appointing teachers, ensuring teachers’ training and the annual recurring expenses under all heads are to be covered by funds allocated by the Central and the respective State Governments in an agreed ratio. The Act lays down 55:45 as the ratio, but a majority of the states have asked for a raise ~ from 75 to even 90 per cent in the Centre’s contribution. A budgetary provision of Rs 1,71,000 crore for the Central Government for the first five years has been specified, although the actual allocation in the first year was only Rs 25000 crore and the actual utilisation during the year much less. Most, if not all, the States are yet to set up the prescribed administrative structure, and begin the procedure for defining ‘neighbourhoods’ and creating the required data-bank of children in the appropriate age-group in each area. No significant steps have been taken to introduce appropriate training courses for teachers and orient them to the vision behind the new dispensation.

The common curriculum has not been circulated yet. The Act specifies that there shall be no examination and no detention in any class; the student shall be entitled to be admitted to the class appropriate for his/her age. The progress of the student will be monitored by well-trained class teachers and deficiencies of individual students are to be made up by special attention. The existing aided and partially aided schools are required to admit at least 25 per cent of the number of students in each class from the respective ‘neighbourhood’ and give them free education. The unaided private schools also have to obey the quota, but they are supposed to be reimbursed at a per student rate determined by the government... leaving the doors wide open for a higher claim and consequent legal disputes at least in the initial years of implementation. Classes I to VIII in existing schools will have to obey the rules and relations laid down in the RTE Act and the existing teachers in these schools have to acquire the prescribed training within a specified period.

The Act has presumably been formulated with the advice and participation of ‘post modern’ experts on education in keeping with the model of children’s education that has evolved over many years  “through a natural process” in the economically and educationally advanced countries.

The success of such a liberal idealistic system depends on the availability of the home environment of a child where the parents have some background to work hand-in-hand with the teacher in analysing and understanding the strong and weak points in the mental development of their child. In India most parents, qualified in this sense, also have the means to send their children to the ‘glossy’ private schools (usually English medium) and most of them will continue to do so despite the advent of the free RTE schools.
The new-breed schools and the 25 per cent quota in the existing schools will almost entirely draw the children of parents belonging to the lower middle class down to the BPL category. On a rough guess, nearly 80 per cent of such parents either do not have the proper educational background or are so preoccupied with the daily drudgery of earning a livelihood that they can hardly give any assistance or guidance to their children at home. Even in an economically advanced country like the USA with near cent per cent literacy, educationists worry about the difficulties children from such homes (about 10-15 per cent of the total) face in their schools because of the lack of substantive feedback from their parents.

Today's Editorial 25 July 2014

     Why this apathy?

Source: By Devinder Sharma: Deccan Herald
It is difficult to understand why Indian farmers continue to be ignored. With a meager outlay every year, Indian farmers have been producing a bountiful harvest.

If only agriculture was to be injected with the much need economic stimulus package, I am sure the Indian farmers can flood the country with food, fruits and vegetables. India can certainly emerge as one of the biggest exporters of agricultural commodities.

In 2013-14, farmers produced a record harvest of 264.4 million tonnes of foodgrains. Production of oilseeds reached a record high of 34.5 million tonnes, a jump of 4.8 per cent. Maize production increased by 8.52 per cent to reach a level of 24.2 million tones. Pulses production reached an all-time high of 19.6 million tones, an increase of 7.10 per cent over the previous year. Cotton production too touched a record high.

With such record production, the nation remains indebted to the virile and hardworking farmers. But last year, in 2013-14, when farm production recorded a quantum jump, agriculture received Rs 19,307-crore from the annual budget kitty, which is less than 1 per cent of the total budget outlay. This year, finance minister Arun Jaitley provided only Rs 22,652-crore to agriculture and cooperation departments. Clearly, the apathy towards agriculture continues.

The neglect of agriculture has become more pronounced since economic liberalisation was introduced in 1991. I recall the then finance minister Manmohan Singh famous budget speech when he showered all the bounties on industry and in the next paragraph said that agriculture remains the mainstay of the economy.  But since agriculture is a state subject, he left it to the state governments to provide the much need impetus to farming.

But what he forgot to say was that industry too is a state subject and should have been left to the state governments. The bias therefore was clearly visible. Although agriculture grew at an impressive rate of 4.1 per cent in the Eleventh Plan period (2007-8 and 2011-12) it received a dismal financial support of Rs 1 lakh crore. For a sector which directly and indirectly employs 60-crore people, Rs 1 lakh crore outlay for five years is simply peanuts. In the 12th Plan period (2012-13 to 2017-18) agriculture is projected to receive Rs 1.5 lakh crore.

Compare this with the Rs 5.73 lakh crore tax exemptions showered on the industry in 2014-15 alone. It’s therefore a matter of priorities. In fact, as I have been saying for long, farmers have disappeared from the economic radar screen.

No immediate respite

Despite such low budgetary allocations for agriculture and knowing that the public sector investments have been drastically falling in the rural areas, there is no visible intention of resurrecting the farm sector reeling under a terrible economic distress.

As if this is not enough, all the noise in TV studios is to cut down on subsidies meant for the poor – food, fertilizer, diesel, gas and MGNREGA. But there is not even a whimper on the desperate need to remove the tax exemptions for the Indian industry.

Since 2004-05, corporate India has been showered with Rs 31-lakh crore tax exemption. This was expected to boost industrial output and create jobs. But while only 1.5 crore jobs were added in the past 10 years, industrial production has not shown any significant jump. On top of it, corporate India is sitting over a cash surplus exceeding Rs 10-lakh crore, and has also defaulted the banks (termed as non-performing assets) by another Rs 10-lakh crore or so. It clearly shows how the poor are being denied their legitimate economic support and the resources are being very conveniently diverted to the rich elite.

As I said earlier, agriculture employs 60-crore people. Nearly 82.2 per cent of those employed in agriculture are small and marginal farmers. With a meager land holding, and with virtually no financial support, this majority population has somehow managed to survive. Studies show that nearly 60 per cent farmers themselves go to bed hungry. With agriculture deliberately being turned economically unviable, more than 42 per cent farmers want to quit farming if given a choice.

Mainline economists are keen to finish agriculture and move the farming population into the urban centres. But considering that temples are the biggest employer in the country, followed by security guards and the lift boys, I wonder if that is what constitutes economic growth. Nevertheless since the World Bank has prescribed rural-urban migration as the ultimate indicator of economic growth, Indian economists have been parroting the same prescription.

Economic Survey 2013-14 points to the same direction. Raghuram Rajan, the Reserve Bank governor echoes the same argument. Rising food inflation comes in handy to up the ante against Minimum Support Price (MSP) being paid to farmers. APMC mandis are to be dismantled. Farmers are being pushed to accept the market doctrine, which means that distress sale will now become a norm.



In Bihar, which has no APMC since 2007, markets have failed to infuse any confidence by way of economic prosperity. But that’s what the markets like.  They should be able to source cheaper farm commodities thereby adding on to their profits. What happens to farmers has never been their concern. Nor will it ever be.

Today's Editorial 24 July 2014

           Pakistan hits back

Source: By Salman Haidar: The Statesman
A major operation by the Pakistan army has recently been conducted in the frontier areas bordering Afghanistan to try to control the militant groups that have so strongly established them there. The frontier region has long been a haven for numerous groups of local and imported armed militants; they have been there for ages, seemingly a law to themselves outside the reach of the regular administration, but recently they have become bold and confident enough to challenge the Pakistani state and have been prepared even to take on the army, which regards itself as the chief prop and defender of the state. The differences between militants and state having become unbridgeable, the Pakistan army resorted to armed action and used its array of modern weapons to destroy militant strongholds. Official communiqués reported the deaths of many rebels and the destruction of their bases, which are concealed deep within the rugged mountains. In the drive against its foe, the army claims to have achieved what it set out to do but it is not certain at this stage that the power of the militants has been adequately curbed.

Nor should one ignore the deep ambiguity in the relations between the terrorists and the Pakistani establishment. Over the years the jihadi groups have been able to find support from within Pakistan, both open and covert, that has enabled them to thrive even when they have spread terror and attacked civilian targets. Despite repeated efforts at control, they have received support from important political elements more ready to conciliate than to oppose them, to try to bring them round through dialogue, not confrontation. More damaging, many jihadi groups have been promoted and supported by hidden forces from within the security establishment, including the army, and have enjoyed immunity from interdiction.

To the mounting frustration of its friends and allies, the USA prominent among them, the Pakistani state and its armed forces have been unwilling to make a decisive intervention against the ever-strengthening jihadists, even though there has been the occasional crackdown when rebel defiance has become totally unconscionable, as in the storming of the Lal Masjid in Islamabad and the clearing out of openly defiant mullahs in Swat.  Until now, for a variety of reasons these interventions have not been pressed to a final conclusion; once an operation is concluded, rebel groups have been able to re-establish themselves and even regain a measure of public support, while official agencies have remained divided and obscure in their purposes and political leaders have been chary of pressing for confrontation with extremist groups that claim to be acting with religious authority. It is only after the recent attacks on Pakistani airports that have threatened to totally disrupt air links with the world that the establishment in that country has felt compelled to act, urged on by public demand. Even some of the inveterate critics of Pakistan’s overweening military establishment have on this occasion supported the army crackdown in view of the seriousness of the challenge and have remained supportive despite the vast exodus of civilians fleeing from the military ingress into their towns and villages. The army seems to have prevailed in its immediate purpose but the operation may not be finally concluded and it remains to be seen how much of a blow has been administered to the militants. Some reports suggest that they scattered as the army advanced, maybe had been tipped off, and can return to the fray before long, so questions about the efficacy of the operation still remain.

These extremist groups that have caused such mayhem in Pakistan have been active too in neighbouring countries, especially India, and, to a lesser extent, Afghanistan. India has been the special target and was the initial raison d’etre for the creation and setting up of many such groups so as to incite and promote militancy in Kashmir; only subsequently did they turn their attention to their own country. For India, the threat from such groups is a major security consideration and a constant preoccupation, requiring great vigilance and alertness. Diplomatic effort to improve relations between the two countries has been hostage to the shadowy doings of terrorists and their hidden backers. Pakistan has come to acquire what it must consider an unwanted reputation as not so much a victim but a source of terrorism and a safe haven for violent groups from many lands, far and near.

As yet it is not possible to say whether the military incursion into Pakistan’s border areas represents what could become a sustained change of policy towards disruptive bodies like the Taliban and other similarly motivated groups. Not much information has trickled out about the features of the operation, and what is available comes from official sources. Casualty figures are recounted, suggesting high rebel losses and light damage to the military. Present claims will no doubt be re-assessed in time as fuller information from other sources becomes available. But it has been a major effort by the armed forces, which for the first time have entered the territory of North Waziristan district, where many armed groups have based themselves, the Haqqani group prominent among them and hitherto treated more as a useful cats paw for an active policy in Afghanistan by Pak security agencies than as a target for the Pak security forces. Nor has the establishment flinched at the large civilian displacement caused by the military operation though it would be unpopular and invite demands to cease and desist from the political opposition. So there could be indications that this time the attempt to come down on the militant groups trying to re-shape the border region, and extend their influence within the country as a whole, may be more determined than in the past.

If there is indeed such a development in Pakistan’s handling of the militant groups within its territory, it could have a significant effect on the bilateral relationship with India. In the last few years many ways of improving relations have been discussed, between leaders and diplomats, and many positive ideas have been more or less agreed. The security issue, however, has kept them apart and prevented easing of ties even on matters like enlarged trade that offer significant benefit to both sides. Should Pakistan now carry its campaign against its home-based terrorists to a conclusion, it would encourage better bilateral cooperation in many fields. The two Prime Ministers have given positive indications about the future after their meeting at Mr. Modi’s inauguration. Restraining the terrorists that have become Pakistan’s plague could be an important step in taking matters forward.

Today's Editorial 23 July 2014

 Capitalism and inequality going  with the flow

Source: By Prabhat Patnaik: The Telegraph
There is a growing concern among several economists in the advanced countries — of which Thomas Piketty's recent book, Capital in the Twenty- First Century , is an expression — with the rapid increase in wealth and income inequality occurring in their societies, which, they fear, is fundamentally inimical to democracy. An interesting debate has broken out among them in this context over the roots of this increase in inequality.

Some see it as an imminent tendency under capitalism that had been held in check in the exceptional situation of the post- war period, marked by two specific features: a militant working class that had emerged from the war having made great sacrifices; and a looming threat of socialism. They see this tendency now expressing itself freely. Others, notably Joseph Stieglitz, attribute growing inequality not to any “economic laws of capitalism", whose very existence they are not prepared to accept, but to government policies driven by politics.

Growing inequality, they hold, is not inevitable under capitalism. However, even the latter group does not see politics as being unrelated to economics; it sees growing wealth and income inequality causing growing inequality in political power, which, in turn, promotes a further increase in wealth and income inequality. It visualizes, much like the former group, an interlinked process of growing economic and political inequality. The difference among them on this question relates to what sets off this process. The former sees it as being immanent to capitalism (when it is not restrained by exceptional circumstances), while the latter attributes its emergence to contingent political factors, among which Stiglitz emphasizes the collapse of the Soviet Union. This collapse made it possible to portray State intervention in a poor light, and set the stage for rolling back regulatory measures on big capital. (This debunking of State intervention was always a disingenuous argument: when the intervention was in favour of finance capital, as in the wake of the 2008 crisis, it was considered perfectly acceptable).

The problem with this latter position, however, lies elsewhere: it does not appreciate sufficiently the importance of the institutional barriers against the growth of income and wealth inequality that come up under capitalism, despite its hostility, and that did come up under postwar capitalism. The most important of these institutional barriers was the trade union movement.

Trade unions are usually presented as serving the interests of only a privileged segment of the working class; as undermining any work ethic ( the " I am all right Jack" syndrome famously depicted in a Peter Sellers film of the same name); and as generally being in cahoots with the " bosses" with very little concern for the working poor. This portrayal, however, is a travesty. Not only is it the case that a rise in real wages relative to labour productivity, if it actually materializes for unionized workers through trade union action, boosts the level of aggregate demand, and hence employment, in the entire economy, benefiting non- unionized workers as well; but trade unions also constitute a powerful force restricting an increase in the share of wealth and income accruing to the big capitalists — that is, the top decile or percentile of the population. Indeed, Margaret Thatcher would not have earned such loud applause from big capitalists for smashing trade unions, if the unions had not been a thorn in their flesh.

Even elementary arithmetic disproves the claim that trade unions represented only the privileged segment of workers before they were smashed. At their peak in 1980, the membership of trade unions in Britain had reached 12.2 million, nearly half of the total work- force. Taking Thomas Piketty's rough categorization of the population into the top 10 percent (" rich"), the next 40 percent (" middle class") and the next 50 percent who own very little wealth ( the " propertyless), if we assume that the " rich" did not join unions at all and an equal proportion of the " middle class" and the " propertyless" did, then the proportion of trade union members belonging to the " propertyless" would have been as high as 56 percent.

No doubt one can assume other numbers, but given the high proportion of unionized workers in the total work- force, the idea of trade union members belonging only to the privileged segment of the workforce simply cannot stand scrutiny. The smashing of trade unions all over the advanced capitalist world in short removed a major bulwark against widening wealth and income inequality ( in the sense of the top decile or percentile of the population appropriating an ever growing share for itself).

There were at least three weapons that were used against the trade union movement. One was the decline in the importance of the public sector (for which the collapse of the Soviet Union might have provided ideological ammunition). The degree of unionization is always higher in the public than in the private sector: in the United States today only 7 per cent of the workers in the private sector are unionized compared to 33 per cent in the public sector (this includes teachers); in the United Kingdom only 14 per cent of the private sector workers today are unionized compared to 56 per cent in the public sector; and this comparative picture has always prevailed.

The increase in the weight of the private vis- à- vis the public sector, therefore, was a debilitating factor for the trade union movement. The second weapon was the emergence of "austerity" economics, which meant, on average, higher levels of unemployment since the 1980s, with occasional interludes of massive unemployment when union membership dropped sharply.

In short, the end of the so- called "Golden Age of Capitalism", buttressed by Keynesian demand management, weakened trade unions greatly. The third weapon was globalization of capital, which made advanced country workers compete against those from the third world, and hence become subject to the baneful consequences of the huge third world labour reserves. Real wages of the advanced country workers may not have actually gone down in absolute terms owing to such competition, but they certainly were prevented from going up; and trade unions lost much of their bargaining strength as their members became exposed to the huge reserve army of labour existing in the third world.

The question, here, is not the actual magnitude of capital flows from the advanced countries to the third world for setting up export units in the latter ( including export units in the service sector); the question is the possibility of such flows, and hence the threats they posed to workers' livelihoods in the advanced countries.

The weakening of the trade union movement in the advanced capitalist world was thus associated with the emergence of an international finance capital, which enforced a roll- back of Keynesian demand management and of State ownership, and a freer flow of goods and capital across national boundaries. However, the emergence of such an international finance capital — whose baneful consequences for demand management by nation- States for achieving near- full employment within national economies, were underscored by Keynes himself in an article for The Yale Review in 1933 — is an outcome of a spontaneous tendency under capitalism towards centralization of capital, that is, the formation of larger and larger blocks of capital.

Hence, the trigger for the growing inequality in wealth and income, on the one hand, and the growing inequality of political power, on the other — that both reinforces the former and is reinforced by it, which appears to be provided by contingent political developments at first sight — lies in certain tendencies immanent in capitalism itself.

To say this is not to suggest that the demand for rolling back the growing inequality in income and wealth should be abandoned and emphasis laid only on an overthrow of the system of which there are no discernible prospects; it is only to underscore two points. First, if concern with growing wealth and income inequality is detached from an appreciation of the importance of working class institutions — that is, if the issue of inequality is detached from a class perspective — then the struggle against it will be a fruitless one. And second, the difficulty of rolling back growing inequality within the system must never be underestimated.

There is an important difference here between the US and the European Union ( especially Germany, France and the UK), on the one hand, and, say, the Scandinavian countries on the other, which have continued with proactive State policies for curbing growing inequality even in the era of globalization. The US or the German State pursuing equality against the predilections of international finance capital would cause a break- down of the system in a way that the Scandinavian or the Venezuelan nation- state doing so would not. This does not mean that international finance capital will be indifferent to the latter nationstates' unresponsiveness to its predilections; but it can afford to live with it. With the former nationstates, it cannot do so.

Today's Editorial 22 July 2014

 What the Brics bank must achieve

Source: By Prodipto Ghosh: The Financial Express
Prime minister Narendra Modi, during his forthcoming visit to Brazil, on July 15 and16, is expected, along with other BRICS leaders, to close the accord on the new BRICS development bank (BDB) and the BRICS contingent reserve agreement (BCRA). What made the BRICS members set up the BDB (and the BCRA), which is an apparent challenge to the current global financial architecture led by the World Bank and IMF? What is it that the BDB (and BCRA) could do differently from the Bretton Woods institutions, and why?

The Bretton Woods multilateral financial institutions were set up towards the end of World War II, initially to help rebuild war-devastated Europe, and later, from the 1960s, to provide development finance to newly independent, formerly colonised countries as well as to provide liquidity to countries during macroeconomic crises. Their governance arrangements (voting shares) reflected relative economic and political power among the initial members and was overwhelmingly in favour of the US and the UK. Even after several cycles of reform, since 2010, the developed countries hold about 65%, middle-income countries, which include the BRICs, about 35%, and low-income countries, just 4.46%. Thus, at present China holds 5.26%, India 3.06%, and the US 15.04% voting shares, against GDP at PPP shares in 2011 of 14.89%, 6.35%, and 17.13%, respectively. The majority coalitions of voting shares at these institutions determine all funding decisions as well as attendant conditionalities and are clearly dominated by developed countries. Thus, which programs are funded, how much, on what terms, who receives the money, how it may be spent, are all determined by the relative voting strengths. This is despite the fact that, at present, the major part of resources lent are not derived from the paid up capital reflected in voting shares, but are actually accumulations of surplus from loan repayments, principally from developing countries. Also, it must be remembered that the multilateral financial institutions are not commercial institutions, interested in maximising shareholder financial returns, but are essentially vehicles for pursuing the economic and strategic interests of the main shareholders (“donors”). In the past, these institutions have been the principal instrument for pushing the “Washington consensus” (fiscal discipline, elimination of subsidies, tax reform, market-determined interest and exchange rates, trade and investment liberalisation but not free movement of labour, privatisation of public enterprises, deregulation, and secure private property rights), besides imposition of labour, social and environmental standards, with mixed results for borrowers.

In a sense, the BDB (and BCRA) represent the frustration of BRICS members—whose voting shares lag well behind their current economic strength and future potential—at the slow pace of governance reform at the multilateral institutions, and their intention to ensure continued funding for infrastructure projects for themselves and for developing countries generally that would be impossible currently from the World Bank and its affiliates under their “strategic priorities”. Alternatively, through the BCRA, the goal is to ease short-term foreign exchange constraints arising, for example, from policy actions by large developed countries, such as tapering off of the quantitative expansion by the US.

The BDB would have an authorised capital of $100 billion, of which $50 billion would be paid up, and the rest provided as guarantee by the members. It is reported that the shares would be held equally by BRICS members, who would collectively at any time have at least 55% of the shares, i.e., a clear majority. Other countries, both developing and developed, may also join the BDB, subject to shareholding limits. The size of the BCRA would also be $100 billion, with China contributing $41 billion, Brazil, India, and Russia $18 billion each, and South Africa, $5 billion.

However, whether or not the BDB can realise its promise of being a significant alternative source of finance to developing countries—and thus, also nudge the existing multilateral financial institutions towards faster reform in both governance and operations—depends upon the extent to which it addresses the stress which developing member countries (DMCs) have long faced in their dealings with these institutions. What exactly are these? First, subjecting national investment priorities to the filters of the “strategic priorities” of the World Bank and its affiliates, e.g., funding for storage hydropower and irrigation projects which may be a priority for some DMCs would currently be precluded from financing. Second, the imposition of lending conditionalities that are unrelated to addressing actual project-related risks and viability, e.g., easing FDI limits in the relevant sector. Third, a distrust of project documentation prepared by the borrowing institution, and instead relying on costly foreign consultants to prepare them afresh for the multilateral institutions’ consideration. Fourth, disregard for national regulatory standards, processes and institutions, e.g., environmental regulation, social protection, and instead substituting these with the institutions’ own requirements, to be met only through documentation prepared by international consultants. Fifth, the subtle direction of procurement of services and capital equipment financed by the loan, to providers from “donor” countries, through prescription of standards and bidding norms which assign disproportionately higher weight prior to engagements. Finally, and this is key, relying almost exclusively on developed country-based researchers (who tend to project their own experience and conceptual frameworks into the vastly different environments of developing countries) for policy analysis and advice, which clothe the donors’ political objectives with intellectual respectability.

The BDB’s role should, thus, be to emerge not simply as yet another project finance institution which replicates existing practices, but as one which is far more responsive to the national development choices of its borrowing members. Moreover, it should consciously strive to be an institution which enhances its developing country members’ capacities for conceptualisation, preparation, appraisal, implementation, and monitoring of impacts of development projects, through directly involving their institutions and professionals in its operations, in a “learning by doing” mode. It may also, as its operations scale up sufficiently, by designating its funding in currencies of the BRICs members to start with, but gradually extending to other members, facilitate the greater acceptance of these currencies in the global financial markets.

Today's Editorial 15 July 2014

              Advent of Islamic Caliphate

Source: By S Nihal Singh: The Tribune
While the political stalemate in Iraq continues, the propaganda coup of the Islamic State of Iraq and Syria (Isis) by declaring the chunks of territory in Syria and Iraq it controls as the Islamic Caliphate is not lost upon the principal actors inside and outside the region.

The truth is that the three-year-old civil war in Syria and the rapid advances the Isis has made in Iraq by a former al-Qaida associate more fundamentalist and brutal than the traditional extremist forces have resulted in a frightening scenario. For one thing, it represents a failure of American policy, the adventurism of Iraqi Prime Minister Nouri al-Maliki in asserting the newly empowered Shia power at the cost of Sunnis and Kurds and the space these developments have given for a force such as the Isis to flex its muscles.

There is no doubt that the Isis has overreached itself and will ultimately lose. But the costs Iraqis, Syrians and regional and outside actors will have to pay are immense. Although the Iraqi army that turned tail and took flight, instead of fighting the Isis, has been bought back to the battlefield with a stiffening of Shia militias, the loss of face of an American-trained and equipped force will be difficult to live down.

Even while battles rage and the propaganda war on both sides of the Syrian equation intensifies, the political stalemate is far from resolution. Mr Maliki refuses to step aside while elements inside the Shia community, apart from Sunnis and Kurds and much of the rest of the world would like him to go before a more inclusive government can be formed.

Second, a reluctant US President Barack Obama seems to be going down the slippery slope of a military re-engagement in Iraq by adding more American military advisers, apart from seeking half a billion dollars to arm the moderate Syrian opposition, thus far receiving limited clandestine support from Washington.

President Obama, after all, was elected and re-elected on his promise to end the unpopular wars in Iraq and Afghanistan. He has followed a cautious policy in Syria, despite the continuing carnage and the flight of millions of Syrians to neighbouring countries. But with the advent of the Isis and the declaration of the Caliphate, the first after the Ottoman Empire bit dust, has changed the geopolitical picture.

Thus far, the US has been keeping back military supplies promised to Iraq such as F-16 planes to exert pressure on Mr Maliki to form a more inclusive government, without much success. Iraq has sought to fill in its deficiencies by going to Moscow. Whether the US will succeed in removing Mr Maliki remains to be seen, but the American strategic community is sufficiently concerned over recent developments to reformulate their plans.

Iran is an important regional player in Iraq and Syria because it is a supporter of Syrian President Bashar al-Assad as well as of the newly empowered Shias in Iraq, thanks to the 2003 US invasion. Iran and the US are negotiating an agreement on capping Tehran's nuclear programme while seeking to co-ordinate their merging interest in keeping the Isis at bay. Iran is assisting the Maliki regime to fight off the Isis even as it has been supplying military equipment and giving support to President Assad.

The question on everyone's mind is the extent of US military involvement in Iraq and Syria because Washington now believes that its core interests are on the line, given the nature of the Isis's advances. Every US official is aware of how American involvement in South Vietnam began with the sending of military "advisers".

Much will depend upon how soon the Iraqi political crisis is resolved, with a break-up of the country into Shia, Sunni and Kurd entities staring the domestic actors in the face. Sections of Sunnis and ex-Baathist officers are supporting the Isis in the North-west to get even with Mr Maliki for marginalising them. The Kurds have benefited the most by capturing the oil town of Kirkuk after Baghdad's troops abandoned their posts there. Tellingly, Iraqis have been fleeing the Isis advance to take refuge in the Kurdish-administered areas,

In political terms, Mr Maliki has become toxic and is a main hurdle to a resolution of the crisis by digging his heels in. Although the advance of the Isis has been halted short of the capital Baghdad, Baghdad troops have not been very successful in taking back territory it has lost. Is Washington now prepared to use strong measures to seek Mr Maliki's exit? The Sunnis are demanding it in exchange for not supporting the Isis, and Kurds are against the Prime Minister too.

The Gulf monarchies, which have been playing a crucial role in the regional crises, are also sufficiently alarmed by the advance of the Isis in trimming their monetary support to the extreme Sunni opponents in Syria. But they remain wary of the political rapprochement between the US and Iran over checkmating the Isis.

The new US resolve to support the moderate Syrian opposition by fresh military supplies, once approved by the Congress, will take time to make a difference on the ground. Perhaps the weight of a regrouped Iraqi army and the military support being extended by Iran and US "advisers" will make a difference.

In any event, the US administration is sufficiently alarmed by the Isis phenomenon to take a more activist role in Iraq and Syria. Significantly, it did not leave any troops behind when it left Iraq. And President Obama's great aversion to get involved in the Syrian tragedy, despite the catastrophic loss of lives and the misery inflicted on millions of Syrians. Indeed, President Obama has been emphasising his more limited view of American military interventions in the world.

Even as the Isis has won its propaganda war and is tempting fate by its hyperbolic rhetoric, the geopolitical scenario has changed. How far the US takes its new military intervention in Iraq and Syria is an open question.

Today's Editorial 16 July 2014

            Urbanising India

Source: By MG Devasahayam: The Statesman
Prime Minister Narendra Modi’s government is fast-tracking policy decisions. In the sphere of urban development, “the government will build 100 cities focussed on specialised domains and equipped with world-class amenities. Integrated infrastructure will be rolled out in model towns to focus on cleanliness and sanitation. By the time the nation completes 75 years of its Independence, every family will have a pucca house with water connection, toilet facilities, 24x7 electricity supply and access.”

Very ambitious indeed! Urban Development Minister Venkaiah Naidu is working on a road map to take this agenda forward. Sensing big business opportunity, the global networking solutions company, Cisco Systems, wants to partner India in setting up smart cities and industrial corridors.

With the country fast heading towards a 50:50 rural-urban distribution of population slated for the middle of the present century, this ambition cannot be faulted. The question is whether there is required philosophical underpinning because cities are not mere buildings and amenities but meant for people with flesh and blood. With India’s urban population in a few decades exceeding the total of the USA and the European Union, this becomes critical.

Chandigarh was India’s first experience in planed urbanisation and I was the city’s administrator and estate director in the mid-Seventies. The ethos of the city was outlined by Prime Minister Jawaharlal Nehru when he visited the site in 1952 to dedicate the city to the people of India: “Let this be a new town, symbolic of the freedom of India, unfettered by the traditions of the past, an expression of the nation’s faith in the future.”

The ‘philosophy’ of Chandigarh was spelt out in 1959 by the expatriate architect Le Corbusier ~ “When the following operation has been started in the city; obtaining the money, buying of the necessary land, framing of the first by-laws permitting the beginning of construction, selling of the first plot, arriving of the first inhabitant, etc., etc., a phenomenon is born: it is the appreciation in the value of the piece of land. A game, a play, has begun. One can sell cheaply or at a high price; it depends on the kind of tactics and the strategy employed in the operation. One phrase must be affirmed: good urbanism makes money; bad urbanism loses money”.

Corbusier mixed up ‘urbanism’ with ‘real estate’ development for self-financing purposes. Pursuit of this ‘philosophy’ has made Chandigarh an elitist and exclusive habitat despite mid-course correction done in the mid-Seventies. A similar trend has been seen in the rest of India during the last few decades.

Urbanisation is basically the movement of population from rural to urban areas and the resulting increasing proportion of a population that resides in urban places. Urbanisation is a two-way process because it involves not only movement from village to cities and change from agricultural occupation to business, trade, service and profession but also change in the migrant’s attitudes, beliefs, values and behaviour patterns. Facilities like education, healthcare, employment avenues, civic facilities and social welfare are the reasons that are attracting people to urban areas.

Despite the looming tectonic shift towards urban habitat, this nation does not have an inclusive urban philosophy and political thought. Since urbanisation concerns people, their lives and livelihood, it should have a distinct character, culture and ethos. It was author Jeb Brugmann (2009) who truly defined ‘urbanism’ as “a way that builders, users and residents co-design, co-build, co-govern and combine their activities to support ways of production and living that develops their shared advantage.” India being a low-income economy, ‘urbanism’ should be the guiding philosophy.

‘Urban shared advantages’ are the three basic elements that make cities ‘magnets of productivity and prosperity’ ~ economies of density, scale and association. Density is the concentration of people and their activities that enhances the sheer efficiency by which an economic activity could be pursued. ‘Scale’ is the increase in the volume of any particular opportunity, producing what we call ‘economies of scale’ that makes activities attractive or services profitable. The scale and density of interactions among people with different interests, expertise and objectives then combine to create the third basic element ~ economy of association that exponentially increase the variety of ways and efficiency with which people can organise, work together, invent solutions and launch joint strategies for urban advantage.

Urbanisation in India does not get the leverage of these urban advantages to the full because it does not practise urbanism of inclusive and shared development. When communities self-organise ways of designing buildings, organising space, arranging urban functions, and governing development in wards and zones to make specific kinds of production very efficient, and specific kinds of living very affordable and productive, this is called “community-based urbanism.”

In urbanism, the focus shifts from opportunistic development of individual plots, buildings and gated-settlements to community-disciplined development of wards and zones with specialised strategies to secure social and economic advantage in the city. The informal sector, that contributes over 75/80 per cent of urban employment, which is now in the periphery of urban planning, would be mainstreamed and be at the core of such forms of urbanism.

The advantage of this approach is that its production of many micro and small-scale units and the mixing of units of different sizes to co-locate residential, commercial, and small manufacturing functions makes it accessible to low-income populations, and it creates efficient, productive, and governable units of the growing city. The disadvantage is that the approach tends to be based on incremental, cash-flow based building, and is therefore investment-poor. But this is not irresolvable.

As cities grow, inclusive urbanism gets abandoned giving place to commercial commodification ~ producing, selling and purchasing generic built-units (square-foot) adopting industrial batch production approach. This is the hallmark of today’s technology/globalisation-driven urbanisation which is both exclusive and expansionist, keeping majority of citizens away from the ‘development-stream’ and allocating scarce economic and environmental resources to the select few. This has become a common phenomenon in urban India under UPA rule and it appears that the NDA government is also moving in that direction, only faster.

Urbanisation sans urbanism makes cities ‘brick & mortar real estate’ entities rather than vibrant human settlements. Hence the present disjointed and disoriented urban governance system that has been the bane of sustainable and equitable spatial planning and development. Cities and urban habitats being ‘engines of economic growth’ need vibrancy if democratic and participatory decision-making is to take place. For this to happen, the philosophy of urbanism should be accompanied by political thought that is democratic, decentralised and participatory.

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Today's Editorial 17 July 2014

                         Time to crush it

Source: By Arun Bajpai: Deccan Herald
They say, history never repeats itself. Maybe the jehadi group ‘Islamic State of Iraq and Levant ‘(ISIS) has either not read it or they are so excited after their recent spectacular success in North West Iraq and North East Syria, where they have captured large swathes of territory that they feel they can achieve this impossible feat. On June 30 they have renamed themselves as ‘The Islamic State’ and named their head Abu Bakar al Baghdadi as ‘Caliph of The Muslim World.’

This move is bound to bring lot of churning and infighting in the Muslim world globally. ISIS which came into being in 2003 in Iraq as an opposition to the American and British offensive against Saddam Hussain, is basically an off shoot of Iraqi Al Qaeda. Now of course Al Qaeda has disassociated itself from ISIS as it sees ISIS a threat to its leadership of Muslim world. ISIS is composed of Sunni jehadis of Iraq and the former soldiers of the Sunni army of Saddam Hussain. They are more than 30,000 strong. They are well trained and well armed. Despite their ruthlessness they are well disciplined and are media savvy. Their leader Al Bagdadi is an operational man who leads from the front and avoids media glare.

Starting January 2013, ISIS captured Aleppo and Roqca, the two major towns of NE Syria on the river Euphrates. It then continued its march eastwards and as of now has captured Mosul the second largest town of Iraq as also the towns of Tirkit, Fallujah and Ramdi. ISIS is now closing on to Bagdad. American trained and equipped Iraqi army has totally failed against this onslaught and has run away leaving behind large cache of arms and ammunition. With more than two billion dollars looted from the lockers of Mosul Central Bank and other places today ISIS is the richest jehadi organisation in the world.

ISIS has been joined by the former army soldiers of Pakistani army, jehadis of Pakistan sponsored terror organisation Lashkar-e-Toiba and other Sunni jehadis of all kinds from various parts of the world. The first Caliphate came into being after Prophet Muhammad’s death in 632. Caliph is regarded by their followers as successor to the Prophet Muhammad and leader of all Muslims. This is what Osama Bin Laden was wanting for himself. He was influenced by the writings of Egyptian Islamic writer Sayyid Qutub who propagated that to bring about a caliphate at least one state must revive Islamic Rule. That is why he chose to align with the Taliban then ruling Afghanistan. The concept of Caliphate in Muslim world was abolished in 1924 by the Turkish leader Kemal Ataturk after the collapse of Ottoman Empire.

IT impact

Having declared its leader Abu Bakar al Bagdadi as Caliph the ISIS has demanded that all Muslims worldwide must pledge allegiance to their chief. This is where the catch lies. In the 21st century, everyone, including the Muslim world has marched on. Thanks to the information technology the world has now become a global village. Muslims world over are now getting highly educated and are aspiring for better ways of life than what their religion permits when it came into being 1000 years ago. This is very reason why jehadis want to re introduce Caliphate because they feel there is decline in religious observance and the coherence among the Muslims and Caliphate system will be able to stem this tide.

Sooner than later the two oil rich states of Saudi Arabia and Qatar who have till now been supporting the ISIS are bound to realise that they have created a Frankenstein in ISIS and that the supremacy of Sunni Muslim world till now held by Saudi Arabia is under threat. Progressive and comparatively liberal Gulf Muslim states and even Pakistan will be forced to rejig their views on this new type of jehad. As it is, Syria and Palestine are the next declared targets of this new caliphate. Israel will be a highly worried country and America will now be forced to take sides and maybe use its air force to dislodge this new caliphate with ground troops coming from progressive minded Muslim countries.

The biggest confrontation will come from the Shia dominant countries of Syria, Iraq and Lebanon under the leadership of Iran. Already two battalions of Iran’s revolutionary guards have reached Iraq. Iran’s secret service is now effective in Iraq and senior Iranian military officers are directing counter terror campaign of Iraq army. What is really surprising is the silence of the UN and the western powers on this developing confrontation between Shia Iran and Sunni Saudi Arabia. Al Qaeda will also challenge this new regime of ISIS.

It is time now that Sunni countries under the leadership of Saudi Arabia stop this new caliphate to take roots. The UN must immediately pass a strong resolution against this and if necessary put troops on the ground against it.