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India a $5 trillion economy by 2025 unrealistic: Montek Singh Ahluwalia

He also cautions against “strong centralised governments”, a scenario that is now unfolding in India.

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Montek Singh Ahluwaia

New Delhi, Feb 15 : Prime Minister Narendra Modi’s dream of India rising to a $5 trillion economy by 2025 is unrealistic though it will happen at some time, says Montek Singh Ahluwalia, a former Deputy Chairman of the Planning Commission and whose document prepared in 1990 largely influenced the economic reforms unveiled the next year, in his book “Backstage – The Story Behind India’s High Growth Years”. He is also extremely harsh on “two major policy mistakes” of the present government — demonetisation and the hasty implementation of GST.

To become a $5 trillion economy “calls for an average growth rate of about 9 per cent in real terms over the six-year period from 2019-20 to 2024-25. With growth below 5 per cent in 2019-20, and only a slow recovery expected next year, achieving an average of 9 per cent for the period as a whole is simply not credible. We will certainly get to $5 trillion, but it will be a few years later,” Ahluwalia writes.

“A more realistic target would be to try to reach a growth rate of around 8 per cent per year as quickly as possible. This is certainly necessary if we want to continue to reduce poverty and generate the employment needed to satisfy our young and aspirational labour force. Is 8 per cent growth feasible? India did achieve GDP growth of 8.5 per cent in the first seven years of the UPA, but a return to that growth rate is easier said than done,” Ahluwalia warns.

India’s growth was at 6.8 per cent in 2018-19 and dropped to 5 per cent in 2019-20. It is expected to “strongly rebound” to 6-6.5 per cent in 2020-21 the Economic Survey tabled in Parliament on January 31 said.

Demonetisation, Ahluwalia writes, “came as a complete surprise when the government on 8 November 2016 announced that all currency notes of denominations Rs 1,000 and Rs 500, accounting for 86 per cent of the value of currency with the public, were no longer legal tender. Holders of these notes were given up to 31 December to take the notes to banks to convert them into new notes. The decision was originally presented as a decisive attack on black money and corruption, but as that particular justification seemed difficult to sustain, several other justifications were advanced.”

“Raghuram Rajan, who was then governor of the RBI, was consulted informally about a possible demonetization and he had advised that any long-term benefits would not be worth the short-term costs. In any case, he counselled that if the government was determined to demonetise, there should be careful planning to ensure adequate supply of new notes. In fact, demonetisation was hastily announced a couple of months after Raghu’s term as governor came to an end.”

Rajan’s fears were “amply vindicated. People rushed to banks to exchange their holdings of old notes for new notes, but as there was a shortage of new notes, amounts handed over to banks could only be credited to their bank accounts, from which cash withdrawals were permitted on a restricted basis until the supply of new notes could catch up with demand. The shortage of cash disrupted agricultural markets and operations in the informal sector, both of which are highly cash-dependent”, Ahluwalia writes.

Eight months later, “the economy received a second jolt when the GST was introduced in July 2017. Unlike demonetization, which had very little support from professional economists, the GST was universally regarded as a major reform of the indirect tax system. It was expected to generate larger revenues, and also simplify the system but it failed on both counts because of a flawed design and poor implementation.”

Also, “frequent changes in the rates added to the confusion, giving the signal that rates could be adjusted through lobbying, which goes completely contrary to the signal of stability that GST should normally convey”, Ahluwalia maintains.

He also cautions against “strong centralised governments”, a scenario that is now unfolding in India.

“Strong centralised governments have some advantages but they also have a major disadvantage: the failure to provide room for different views. This reduces the likelihood that policy mistakes will be acknowledged and corrected.

“Manmohan Singh recognised the importance of encouraging free expression of views and descent in a liberal democracy. We are now about to go through a different experience with a government enjoying a strong majority and also one which was expected to rely on much greater centralisation of power in the PMO,” Ahluwalia maintains.

Ahluwalia concludes that India’s “transition to high growth was not a chance development. It was achieved by deliberate policy steps taken by those who had conviction and belief in the need for change. Changing policies in a country as complex as India has to go much beyond making declarations of intent. It needs an open society where businessmen and other stakeholders are free to criticize the government and draw attention to whatever is not working. It needs a team of technically skilled professionals with the ability to understand economic issues offering honest advice to the political class. It also needs a political class that can combine the unavoidable compulsions of adversarial politics with working towards building consensus on the broad direction of economic policy”.

“Good economics may not seem to be good politics in the short run, but wise political leaders will realise that it is almost always the best politics in the long run. How to marry the two is, in some sense, the real test of political leadership. I remain an unrelenting optimist that our political system can resolve this conflict and that the India story of high growth and development will therefore continue. India can and must return to its high growth years-our younger generation deserves nothing less.”

(Vishnu Makhijani can be reached at [email protected])

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Range-bound: Rupee caught between higher inflows, swelling reserves

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Mumbai, July 11 : The Indian rupee has been caught in a flux of higher FDI inflows and swelling foreign exchange reserves, thereby restricting its future movement around the Rs 75 per US dollar mark.

Analysts opined that the rupee is caught between higher foreign inflows and the Reserve Bank of India”s efforts to shore up reserves.

Even a lower import bill and stable exports do not seem enough for the rupee to break free from its current range.

“With the RBI continually increasing its forex reserves and investment in dollar via forward contracts, a floor seems to be place below Rs 75 levels on spot,” Anindya Banerjee, DVP, Currency and Rates, Kotak Securities, told IANS.

“The upside is also capped due to improving sentiments in the equity and bond markets. All in all, we are looking at a range of Rs 74.80 to Rs 75.80 over the next few weeks, with volatility remaining at a low.”

According to Sajal Gupta, Head, Forex and Rates, Edelweiss Securities: “The rupee appreciated swiftly to Rs 74.52 per dollar due to large FDI flows and rising equity markets and then weakened to Rs 75.20 on the back of the RBI”s efforts to mop up dollars to shore up reserves which stand at a record high of $513 billion dollars.”

“India is expected to see a Balance of Payment surplus of $60 billion this year due to lower crude price and falling imports. It is a big surprise that amid such strong FDI inflows, the rupee is still not strengthening as the RBI is mopping up all dollars to the reserves.”

Besides, he pointed out that imports have slowed down at a faster pace as domestic economy looks weaker compared with global markets.

Presently, India”s foreign exchange reserves increased by $6.416 billion during the week ended July 3.

The reserves grew to $513.254 billion from $506.838 billion reported for the week ended June 26.

Last month, official data showed India posted a marginal current account surplus in Q4FY20 on the back of a lower trade deficit, along with higher remittances, and an increase in investment flows.

The current account is the net difference between inflows and outflows of foreign currencies.

On the quarterly basis, the current account balance recorded a marginal surplus of $0.6 billion (0.1 per cent of GDP) in Q4 of 2019-20 as against a deficit of $4.6 billion (0.7 per cent of GDP) in Q4 of 2018-19 and $2.6 billion (0.4 per cent of GDP) in the preceding quarter of Q3 of FY20.

At present, India”s exports are steadily moving towards normalcy.

“Going ahead, we expect the caution surrounding the impact and duration of the novel coronavirus may keep all riskier assets on an edge, including the rupee. We see USD/INR trading between Rs 74.75-Rs 75.75,” said Rahul Gupta, Head of Research — Currency, Emkay Global Financial Services.

“Only heavy inflows may cap the upside in USD/INR spot. We recommend exporters to wait for better hedging levels as we expect the spot to appreciate; however, they can start hedging their receivables once USD/INR spot falls below Rs 75.”

(Rohit Vaid can be contacted at [email protected])

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Did Vikas Dubey reach Ujjain himself or was he brought there?

After Madhya Pradesh Home Minister Narottam Mishra announced his arrest, the Congress is raising questions.

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Vikas Dubey.

Ujjain/Bhopal, July 9 : After gangster Vikas Dubey, who had been on the run for the last seven days, was arrested in Madhya Pradesh’s Ujjain on Thursday morning, a controversy erupted over how he managed to reach the temple town. Questions have been raised whether he came on his own or was brought here, and also as to how he manage to cross many districts of Uttar Pradesh without being recognised.

Dubey, accused of killing eight police men in Bikaru village of Kanpur, was constantly changing his location for the past seven days. Though the Uttar Pradesh Police continued to raid various possible locations, he still reached Ujjain, dodging the police of several districts of UP and Madhya Pradesh.

Dubey, whose in-laws are also from Madhya Pradesh, has been coming to Ujjain every year. His mother Sarala Devi had admitted that he used to go to Ujjain every year to offer prayers at Mahakaal temple. It is being said that he reached Ujjain by road and also offered prayers at the temple on Thursday morning.

After Madhya Pradesh Home Minister Narottam Mishra announced his arrest, the Congress is raising questions.

Police sources said that Dubey came to Ujjain in a car from Uttar Pradesh and he also stopped at a residence of a person known to him in Nagjhiri area where he stayed for some time. He reached the temple for ”darshan” on Thursday morning. However, the security guards posted at the temple got suspicious and stopped him for questioning. He reportedly had a brief scuffle with the security guards who then informed the police post. Dubey was later arrested there.

But if Dubey did actually come to Ujjain by road, then he must have covered a distance of about 200 km in Madhya Pradesh seemingly without attracting police attention. Before entering Madhya Pradesh, he must have passed through several districts of Uttar Pradesh as well. Apprehension has been expressed that he reached Ujjain via Rajasthan”s Kota. The police is investigating this also.

Mishra said that Dubey came to Ujjain driving his own vehicle. “Two of his accomplices — Bittu and Suresh have also been arrested. The entire state police was on alert after the Kanpur incident. The surveillance was carried out and finally MP police succeeded in arresting him.”

However, questioning the government, Congress Rajya Sabha member and former Chief Minister Digvijaya Singh said: “It looks like a sponsored surrender to avoid an encounter by the Uttar Pradesh Police. My information is that this has been possible with the courtesy of a senior leader of Madhya Pradesh BJP.”

However, it was not immediately known whether Dubey reached Ujjain on Thursday morning itself or had come a day before.

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Xi Jinping: The Chinese Hitler leading PRC to disaster

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Chinese President Xi Jinping is unfairly using early recovery from pandemic for external encroachment and internal consolidation.Chinese aggression in all domains will be rebuffed globally, led by powers suffering the most.

Xi Jinping”s over ambition and lust for power has been emboldened by mute tolerance in CPC and PRC. His adventurism is leading China to disaster, unless the Chinese reins its leadership.Backdrop

History is full of examples whenever the ambition of any autocrat grew beyond global tolerance, he became responsible for collapse of his regime, resulting in disaster of the country and population, which emboldened him by mute tolerance. Today, despite facing unprecedented global anger for being the originator of novel coronavirus, the aggressiveness of Chinese leadership on multiple fronts to suppress internal and external dissent has pushed the world against itself. Xi Jinping”s unfair adventurism for incremental encroachment to all his ever increasing claim areas in continental and maritime domain, at a time when other countries are suffering from most dangerous pandemic of the century, with death toll rising every day, is amounting to inhuman aggression, junking all morals, international conventions, rules, treaties and forcing the world to reluctantly react against his regime.

Xi Jinping”s Overambition

Xi started his term by dream-selling to pull China out of poverty line by 2020. Internationally he projected himself as the crusader for world peace and climate change(despite junking the ruling of PCA and violating UNCLOS), with a resolve to push through Belt and Road Initiative (BRI) to fulfil Chinese dream of rejuvenation, after century of humiliation. As ”Chairman of Everything” he indirectly declared himself as the tallest leader on the planet, got himself re-elected for second term and did everything to make himself great, under the banner of ”Making China Great”. He assumed that the world will accept him as tallest autocratic leader, as Chinese people accepted him, without worthwhile checks and balances. His anti-corruption drive systematically eliminated the entire dissenting elements and all his possible competitors.

China: Boiling Pressure Cooker with no Safety Valve

Xi took over in 2012 as President with 7.9 per cent GDP growth and led China to economic downslide thereafter. With failing BRI, mishandling of COVID-19, there is no worthwhile achievement to his credit except that he managed to eliminate dissenting elements. His critiques in the CPC feel that his real achievements do not match his elevation to the status of MaoZedang, which has created some disgruntled elements/lobbies, who are still under check due to his comprehensive surveillance, because disagreeing with Xi ”The Core” is anti-national and leads to jail.

It is quite clear to Xi Jinping and CPC, that if he fails economically, and the educated people of China don”t get a decent life, they may not tolerate his autocracy, having no worthwhile grievance redressal mechanism and the democratic winds will start flowing from Hong Kong and Taiwan. The legal system stands hostage to party leadership justifies the boiling pot theory; hence the biggest threat to China comes from within. Some of his actions like laying restrictions on religious practices on Uyghurs” and their forced abortions in Xinjiang, use of force in implementing draconian National Security Law in Hongkong are too risky. The strict censorship of media and internet, electronic isolation, social engineering to bring societal changes are unpopular steps to minimize unrests.

Why over-ambitious Xi Opening Multiple Fronts?

The viability of ”Implosion theory” is feared to be a reality by a totalitarian regime; hence a dose of nationalism nurtured through external aggression, suits Xi Jinping”s hold on power, besides making best use of early recovery from COVID-19 in comparison to his competitors. China has unfairly used it as an opportunity to assert itself on multiple fronts, including India-China land borders to scrumptiously encroach some area not supposed to be held, as per the mutually agreed CBMs, where both sides were free to patrol. This is a sequel to the Chinese adventurism in Indo-Pacific at multiple places in South and East China sea with greater assertion against other claimants like Vietnam, Indonesia and Philippines. The rationale of China being over assertive at the time of pandemic comes from Sun Tzu”s thoughts of ”Strike adversary when it”s weak and preserve yourself when it is strong”. China is therefore speeding up its Incremental Encroachment Strategy in South China Sea as well as LAC.

The strategic calculations seem to be ambitious, as in authoritarian state, the sycophancy prevents leaders getting objective advices from subordinate strategists. When Hitler launched offensive in Russia in World War II, beyond its logistics limit for sustaining in winters, he overruled advices of subordinates and brought Germany to disaster.

In case of China, Xi emboldened by modernised arsenal and extensive exercises and propaganda is planning to take on some of the most experienced troops, despite not having a single pilot in the PLA with any operational experience. While its density of arsenal in South China Sea and Eastern Sea board looks impressive, but its vulnerability of long Sea lanes of Communications in Malacca strait and the Indian Ocean, coupled with blockading of its naval bases by hostile navies can draw out PLA out of its comfort zone, where it is no match to combined navies of hostile countries, including the US spending four to five times of China on defence over so many decades. The strong military posturing by navies from the US, Australia, Japan, and regional claimants of South China Sea enough for deterrence and accidental engagement, because an all-out war is recipe for mutually assured destruction (MAD), which even Beijing cannot afford given the fact that it faces potent nuclear and space power.

Contours of Undeclared Third World War

The forced occupation of landmass by China in terms of features in South China Sea claimed by others junking PCA ruling, has graduated to skirmishes. The dimensions of warfare to include economic war, cyber and information war, biological war by asymmetrical impact of COVID-19, resulting many more deaths than all world wars put together, large scale military posturing in Indo-Pacific and physical land grab offensive by China in Ladakh, using pandemic as a weapon.

The possible alliances also seem to be on the horizon seemingly China, Pakistan and North Korea taking on competitors of China and everyone else in the world not agreeing to Chinese narrative. The current global situation has every element of a World War, except that the dimension, instruments and modalities have changed from conventional war, and the war has not been ”Formally Declared”; hence it may well be called as ”Undeclared Third World War with Changed Instruments and dimensions”. The world has already entered in preparatory phase of it, without recognising it to be so.

Pattern of Global Reaction

In continental domain its land grab efforts in Ladakh have been rebutted by India, which honoured its 20 fallen soldiers with state honours, whereas the PLA chose to hide its fallen soldiers much more in number, creating another wave of anger amongst the PLA veterans. The mutual disengagement is being viewed with suspicion as PLA demonstrated its unprofessionalism to the world by using barbaric tools for attacking Indian soldiers, junking the CBMs and yet bought heavy casualties. India is certainly not going to take mini disengagement gestures for granted, unless PLA withdraws to pre-standoff positions; hence will be ready to respond with all options on the table.

In maritime front, the US has already demonstrated strong military posturing. The ASEAN, which was muted by China so far, by consolation of draft Code of Conduct and purse diplomacy, combined with coercion due to large power asymmetry, seems emboldened to talk about UNCLOS, demanding fair share of EEZ of affected countries. Taiwan, emboldened by national sentiments, leadership, the US support through Taiwan Relation Act and NDAA has started identifying itself as a nation, junking ”One country Two systems”, ready to defend itself should a situation arise, besides granting asylum to willing people from Hong Kong. Japan is looking for strengthening its defence capabilities. Some more adventurism by North Korea may see Japan going nuclear in future. Xi Jinping”s ambition has costed global loss of trust and some important markets for China. Russia and Iran have a forced marriage with China, due to sanctions from the West, but given the geo-strategic situation, playing neutral, along with sale of weaponry/oil may be the best option for them.

China may be able to implement the draconian National Security Act in Hong Kong, but global reaction is unavoidable. China has to bear the cost of demise of its financial hub, with many countries inclined for economic distancing, shifting FDI, banning concessions granted to Hong Kong, granting citizenship to those willing to exit, thus creating ideal conditions for urban insurgency in times to come, besides the rural insurgency of Xinjiang. Suddenly the voices in support of Uighurs and Tibetans and questions on ”One China Policy” have started becoming active, notwithstanding the threats of Chinese wolf warrior diplomats.

Future of China under over-ambitious Xi

Xi Jinping”s Chinese dream of ”Rejuvenation” and his aim of ”Prosperous Developed Society” with a ”War Winning Modern PLA” by 2050 was achievable, had he not harboured dictatorial over ambition to achieve these aims and dislodge the US as a superpower, making unfair use of pandemic. In fact, the first major conversion of features in South China Sea to military bases took place during the last US elections, with no big bang action from the US. This emboldened Xi to use pandemic unfairly to fulfil all his aims before time, without having capacity to protect its global shipping outside its eastern seaboard. With the kind of global anger he has generated against his regime, the lesson of diversification of global factory for the world, along with need of economic distancing from China has become evident. Xi has thus pushed his country on a path to disaster unless Chinese people wake up and shake up the CCP and rein their leadership to protect their dreams.

Takeaway for India

From the Indian perspective, this is the time when Beijing is under maximum external and internal pressure since last five decades. If Beijing continues with its high headedness, it will invite further pressure. This may well be the time to push through border settlement or demarcation of LAC as the political cost of resolving the border/LAC may be lesser than an active front with India. India should not settle down with token disengagement because unless the LAC is demarcated the standoffs will continue. For the time being India should not blink at the borders.

(Major General S. B. Asthana, SM, VSM Veteran is the Chief Instructor, United Service Institution of India. The views expressed here are his personal views.)

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