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  • India must aid the US goal of transforming dysfunctional States

    THE BIGGER PICTURE: India must aid the US goal of
    transforming dysfunctional States

    THE UNITED States has bestridden world history in many forms --
    idealistic outsider coming to save the world for democracy in 1917,
    the world power-in-waiting that saved the world from fascism and
    Nazism in the Forties, the frontline State against the dark forces
    of communism in 1949-1989, and since then, the world's sole super,
    or to go by Hubert Vedrine, hyper-power. But now America, under the
    leadership of George W. Bush is shaping up to play an entirely new
    role as the world's first `nanny' State. Not only will it collar the
    bad guys around the world, but it will nurture transformation in
    societies and States whose internal conditions can give birth to
    violence and instability. After al-Qaeda's WTC attack, the US
    responded by destroying the Taliban and capturing Afghanistan. It
    followed this up by pulverising Iraq on suspicion that it harboured
    weapons of mass destruction. Yet, it has learnt that though it has
    military power that no one State or a combination of them can
    counter, it is still some way from being safe from threats from
    forces that the US, and indeed the world, barely understand. In the
    years since 2001, and particularly in the bitter aftermath of the
    Iraqi adventure, the US has realised that it needs a longer term
    strategy to make itself secure.

    This strategy has been spelt out in the Intelligence Reform and
    Terrorism Prevention Act passed by the US Congress last week. At one
    level, the act spells out the nuts and bolts solutions to the
    problem of obtaining, assessing and disseminating intelligence on
    time for preventive action. But there are entire sections that spell
    out new `nanny' provisions that will help a number of dysfunctional
    States to become `normal'.

    Among the more prominent of the States mentioned in the legislation
    are Pakistan and Afghanistan. The Americans, according to Section
    7103 of the act, will assist in promoting the security of Pakistan,
    establish its authority in the problem no-go tribal areas of the
    Afghan border, facilitate a solution of the Kashmir issue, encourage
    democracy, aid Pakistan's efforts to boost exports and modernise its
    economy and promote secular primary and secondary education. It is
    unclear whether this list is prioritised or whether it intends to
    move on all fronts together. Will the US promote democracy as
    vigorously as in securing Pakistan? Actually, success or failure on
    this front will depend on that decision, because at the heart of any
    effort must be the restoration and growth of civil society
    institutions in Pakistan.

    The plans for Afghanistan are even more detailed and include the
    improvement of security by taking on the war lords, boosting human
    rights and ending the endemic poverty of the State through a
    fiveyear plan the US president must formulate in the next six
    months. The recent elections, mooted as the first ever in the
    benighted country, is being seen as the hopeful sign that the Karzai
    government may have turned the corner.

    In its new `nanny' avatar, the US appears to have realised that
    there is a direct correlation between the system of government and
    the kind of threats it faces. A section relating to dictators has
    pointed out that while the US has made short-term gains by dealing
    with them, these have "often been outweighed by long-term setbacks".
    So, the US is clear that besides democracy, it will encourage
    governments of all countries "with predominantly Muslim
    populations", including allies of the US, to promote education,
    individual rights, democracy, as well as "tolerance for opposing
    points of view".

    Ever since the US decided to designate Pakistan Major Non
    NATO-Military Ally (MNNA), analysts in India have been trying to
    figure out just what is happening between Washington and Islamabad.
    The big question seems to be whether the new US policy is now being
    motivated by a desire to further US security interests, or to assist
    Pakistan. The Americans will, of course, say that the two are
    interlinked, and the creation of a modern, moderate and stable
    Pakistan is the best means of preventing the rise of a Talibanised
    State. A close reading of the present US policies seems to indicate
    that the US is indeed following a trajectory very different from the
    one they followed during the Fifties and Eighties.

    This is a consequence of the paradigm shift engendered by 9/11 and
    indeed confirmed by the Iraqi venture. The US would have been the
    happiest to keep its forces out of harm's way and reduce the enemy
    to rubble by precision long-range strikes. That was the inclination
    in 1998 when the cruise missile strikes were launched in
    Afghanistan, as well as the `shock and awe' strategy in Iraq.
    Unfortunately, for them, the US had to learn the hard way that the
    new threats could not be handled at stand-off range and required
    close-in commitment.

    One demonstration of this was the decision to attack Fallujah and
    take the casualties as they came. The more humane manifestation of
    this will be the US emergence as the `nanny' State, helping deformed
    and stunted actors on the world stage to set themselves right. The
    move has a special urgency since many of them are now armed with
    weapons of mass destruction. The US knows that its own role in the
    existence of such States is not insubstantial. But 9/11 has changed
    everything and the Americans are now looking at the world with very
    different eyes.

    India expects that the new US relationship with Pakistan is based on
    the proper lessons of the past -- essentially, that short-term
    compro mise can often lead to unanticipated long-term costs. In the
    Eighties and Nineties, Pakistan sent two crucial US benchmarks --
    State-sponsorship of terrorism and nuclear proliferation -- for a
    six. The US has since paid a price for the Great Jehad Machine that
    Islamabad created, while the costs of the A.Q. Khan nuclear
    super-mart are yet to be fully tabulated. Presumably, the US has
    realised that Pakistan's actions were not aberrations, but the
    psycho-pathology of a State that has been deformed from childhood.
    An outcome probably of the fantastic circumstances of its birth and
    the early demise of its founding fathers, Mohammed Ali Jinnah and
    Liaquat Ali Khan.

    There is only one answer to the problem of a Pakistan or an
    Afghanistan -- their transformation into stable entities, governed
    by a leadership that is forward-looking and secular, and above all
    imbued with democratic ideas. There was a time when it was
    fashionable for liberals to argue that thrusting democracy down the
    throats of the unwilling was, well, undemocratic. Postponing
    democracy, no longer looks like a good idea to India where the
    far-sighted decision of its founding fathers repaid itself in the
    creation of a system whose resilience is a byword around the world.

    India, therefore, must aid the US goal of transforming Pakistan and
    other such States into democracies. Rolling Eyes Islamabad resents any
    implication of Indian hegemony, but fortunately, is unfazed at the
    manifestation of its American variety. By itself, India has not
    quite been able to deal with Pakistan and has been at its wits end
    in coping with its troublesome neighbour. It should be more than
    happy at the US intention of maintaining a neck-lock on Islamabad
    for the foreseeable future.

    There was a time when the international State system allowed
    countries to hide behind barriers of 19th century views of State
    sovereignty and wreak havoc on themselves and their neighbours. In
    today's interconnected world, this can no longer be permitted and
    all States need to conform to some minimum standards of
    international behaviour to ensure their common security. This,
    essentially, is the post-Soviet new world order that we have been
    waiting for.

    http://www.hindustantimes.com/news/623_0,0012.htm

    --
    An intersting viewpoint.


    "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

    I don't have to attend every argument I'm invited to.

    HAKUNA MATATA

  • #2
    Starting with India?

    India's got so many problems that its amazing it hasn't torn itself apart into a dozen dinky little countries by now. Folks who study democracy in comparative terms -- i.e. why it emerges, how long it lasts, and so on -- usually marvel at the continued existence of Indidan democracy. One, and I can give you the citation if you want, verges on calliing it statistically improbable. :-)

    Comment


    • #3
      Could you expand your views so that I could get at what you are meaning by 'many problems'.
      Indeed, she has, but so has all otther countries in the world.

      Therefore, the speccifics if identified, will indeed allow a good debate.

      Thanks for responding to the thread.


      "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

      I don't have to attend every argument I'm invited to.

      HAKUNA MATATA

      Comment


      • #4
        INDIAN POLITICS ENTERED a new era at the beginning of the 1990s. The period of political domination by the Congress (I) branch of the Indian National Congress came to an end with the party's defeat in the 1989 general elections, and India began a period of intense multiparty political competition. Even though the Congress (I) regained power as a minority government in 1991, its grasp on power was precarious. The Nehruvian socialist ideology that the party had used to fashion India's political agenda had lost much of its popular appeal. The Congress (I) political leadership had lost the mantle of moral integrity inherited from the Indian National Congress's role in the independence movement, and it was widely viewed as corrupt. Support among key social bases of the Congress (I) political coalition was seriously eroding. The main alternative to the Congress (I), the Bharatiya Janata Party (BJP--Indian People's Party), embarked on a campaign to reorganize the Indian electorate in an effort to create a Hindu nationalist majority coalition. Simultaneously, such parties as the Janata Dal (People's Party), the Samajwadi Party (Socialist Party), and the Bahujan Samaj Party (BSP--Party of Society's Majority) attempted to ascend to power on the crest of an alliance of interests uniting Dalits (see Glossary), Backward Classes, Scheduled Tribes (see Glossary), and religious minorities.

        The structure of India's federal--or union--system not only creates a strong central government but also has facilitated the concentration of power in the central government in general and in particular in the Office of the Prime Minister. This centralization of power has been a source of considerable controversy and political tension. It is likely to further exacerbate political conflict because of the increasing pluralism of the country's party system and the growing diversity of interest-group representation.

        Once viewed as a source of solutions for the country's economic and social problems, the Indian polity is increasingly seen by political observers as the problem. When populist political appeals stir the passions of the masses, government institutions appear less capable than ever before of accommodating conflicts in a society mobilized along competing ethnic and religious lines. In addition, law and order have become increasingly tenuous because of the growing inability of the police to curb criminal activities and quell communal disturbances. Indeed, many observers bemoan the "criminalization" of Indian politics at a time when politicians routinely hire "muscle power" to improve their electoral prospects, and criminals themselves successfully run for public office. These circumstances have led some observers to conclude that India has entered into a growing crisis of governability.

        Few analysts would deny the gravity of India's problems, but some contend they have occurred amidst the maturation of civil society and the emergence of new, more democratic political practices. Backward Classes, the Dalits, and tribal peoples increasingly have refused to rest content with the patronage and populism characteristic of the "Congress system." Mobilization of these groups has provided a viable base for the political opposition and unraveled the fabric of the Congress. Since the late 1970s, there has been a proliferation of nongovernmental organizations. These groups made new demands on the political system that required a substantial redistribution of political power, economic resources, and social status.

        Whether or not developments in Indian politics exacerbate the continuing problems or give birth to greater democracy broadly hinges on efforts to resolve three key issues. How will India's political system, now more than ever based on egalitarian democratic values, accommodate the changes taking place in its hierarchical social system? How will the state balance the need to recognize the interests of the country's remarkably heterogeneous society with the imperatives of national unity? And, in the face of the declining legitimacy of the Indian state and the continuing development of civil society, can the Indian state regenerate its legitimacy, and if it is to do so, how should it redefine the boundaries between state and society? India has confronted these issues throughout much of its history. These issues, with their intrinsic tensions, will continue to serve as sources of change in the continuing evolution of the Indian polity.
        The Indian constitution & The Constitutional Framework

        The constitution of India draws extensively from Western legal traditions in its outline of the principles of liberal democracy. It is distinguished from many Western constitutions, however, in its elaboration of principles reflecting the aspirations to end the inequities of traditional social relations and enhance the social welfare of the population. According to constitutional scholar Granville Austin, probably no other nation's constitution "has provided so much impetus toward changing and rebuilding society for the common good." Since its enactment, the constitution has fostered a steady concentration of power in the central government--especially the Office of the Prime Minister. This centralization has occurred in the face of the increasing assertiveness of an array of ethnic and caste groups across Indian society. Increasingly, the government has responded to the resulting tensions by resorting to the formidable array of authoritarian powers provided by the constitution. Together with the public's perception of pervasive corruption among India's politicians, the state's centralization of authority and increasing resort to coercive power have eroded its legitimacy. However, a new assertiveness shown by the Supreme Court and the Election Commission suggests that the remaining checks and balances among the country's political institutions continue to support the resilience of Indian democracy.

        Adopted after some two and one-half years of deliberation by the Constituent Assembly that also acted as India's first legislature, the Indian constitution was put into effect on January 26, 1950. Bhimrao Ramji (B.R.) Ambedkar, a Dalit who earned a law degree from Columbia University, chaired the drafting committee of the constitution and shepherded it through Constituent Assembly debates. Supporters of independent India's founding father, Mohandas Karamchand (Mahatma) Gandhi, backed measures that would form a decentralized polity with strong local administration--known as panchayat --in a system known as panchayati raj , that is rule by panchayats . However, the support of more modernist leaders, such as Jawaharlal Nehru, ultimately led to a parliamentary government and a federal system with a strong central government . Following a British parliamentary pattern, the constitution embodies the Fundamental Rights, which are similar to the United States Bill of Rights, and a Supreme Court similar to that of the United States. It creates a "sovereign democratic republic" called India, or Bharat (after the legendary king of the Mahabharata ), which "shall be a Union of States." India is a federal system in which residual powers of legislation remain with the central government, similar to that in Canada. The constitution of India provides detailed lists dividing up powers between central and state governments as in Australia, and it elaborates a set of Directive Principles of State Policy as does the Irish constitution.

        The 395 articles and ten appendixes, known as schedules, in the constitution make it one of the longest and most detailed in the world. Schedules can be added to the constitution by amendment. The ten schedules in force cover the designations of the states and union territories; the emoluments for high-level officials; forms of oaths; allocation of the number of seats in the Rajya Sabha (Council of States--the upper house of Parliament) per state or territory; provisions for the administration and control of Scheduled Areas (see Glossary) and Scheduled Tribes; provisions for the administration of tribal areas in Assam; the union (meaning central government), state, and concurrent (dual) lists of responsibilities; the official languages; land and tenure reforms; and the association of Sikkim with India.

        The Indian constitution is also one of the most frequently amended constitutions in the world. The first amendment came only a year after the adoption of the constitution and instituted numerous minor changes. Many more amendments followed, and through June 1995 the constitution had been amended seventy-seven times, a rate of almost two amendments per year since 1950. Most of the constitution can be amended after a quorum of more than half of the members of each house in Parliament passes an amendment with a two-thirds majority vote. Articles pertaining to the distribution of legislative authority between the central and state governments must also be approved by 50 percent of the state legislatures.


        "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

        I don't have to attend every argument I'm invited to.

        HAKUNA MATATA

        Comment


        • #5
          On one of the problems, this is what the US Ambassador has to say about Kashmir Elections .

          Remarkable voter turnout, says Blackwill

          By Our Diplomatic Correspondent

          NEW DELHI Sept. 19. The United States Ambassador to India, Robert Blackwill, said today that the first phase of elections in Jammu and Kashmir had been ``very positive'' and the 48 per cent turnout was ``remarkable''.

          He was quoted as telling television channels that infiltration across the Line of Control had ``gone up'' since the end of July and that he condemned the acts of violence, which impacted the results of the Assembly elections. ``Infiltration across the LoC was down in June and July but since the end of July it has gone up and has been up in August and in September,'' Mr. Blackwill said. ``This (the voter turnout in Kashmir) is remarkable. We hope it (the trend) continues. If there is less violence, there will be more turnout,'' he said describing press reports about rigging as ``exaggerated''.

          ``It will be an exaggeration to say there was a lot of hue and cry (about rigging). There may have been isolated incidents,'' he said. ``I would like to salute the individual voters in J&K who came out to exercise their democratic rights despite threat from terrorists,'' he was quoted as saying. Asked about Pakistan's claims that the elections were a ``sham'', Mr. Blackwill took the view that the polls were not a sham. ``We think India is committed to holding free, fair and inclusive elections in J&K without violence. This is exactly right.'' He was hopeful that the elections would lead to the resumption of a dialogue between India and Pakistan.

          Asked whether the U.S. had given any deadline to put an end to cross-border terrorism from Pakistan, Mr. Blackwill said diplomacy was a matter of urging, persuading, enticing and giving incentives. ``It is outrageous that India has to suffer from terrorism from outside,'' he said, adding that infiltration should end.
          http://www.hinduonnet.com/thehindu/2...2003170100.htm

          Hindu is th papers name and has no connection to the religion.


          "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

          I don't have to attend every argument I'm invited to.

          HAKUNA MATATA

          Comment


          • #6
            The security problems India has are:

            1. Indo pak
            2. Bangaldesh Illegal Immigrant and their changing the demography.
            3. Naxalite (Extreme Communist Movement in tribal areas)
            4. ULFA (Assam Movement that started since they protested against the steady influx of Bangladeshi in to Assam, which the Central govt did not bother about).
            5. Naga Movement (now discussions are on and both the leaders who were in Thailand have come to India and gone to Imphal. They ahve stated that insurgency is not the answer).
            6. Manipur problem.

            Economic Overview (a trifle dated). It has improved immensely since then.



            Macroeconomic Overview

            According to data for 2001-02, released by the Central Statistical Organisation (CSO) on January 31, 2003, Gross Domestic Product (GDP) at factor cost at constant 1993-94 prices grew at 5.6 percent in 2001-02, as against 5.4 percent projected in February 2002. The higher growth estimate for 2001-02 is particularly significant as it comes against the backdrop of a revised estimate of a more moderate growth deceleration for 2000-01 than originally apprehended. In 2000-01, GDP at factor cost at constant 1993-94 prices grew at 4.4 percent, as against the previous estimate of 4.0 percent. The trends of key macro economic parameters are given in Table 1.1 and Figure 1.1.

            1.2 The pick-up in growth of the Indian economy observed in 2001-02 was stronger than what had been initially anticipated. Data on quarterly GDP at factor cost at constant 1993-94 prices, available only for the first half of 2002-03, indicated that in the first and second quarters of the current year, year on year, GDP grew by 6 percent and 5.8 percent - rates that are markedly higher than 3.5 percent and 5.3 percent respectively, registered in the corresponding periods of the previous year. The monsoon failure, however, affected agriculture severely, with agriculture and allied GDP declining by 3.1 percent, as per the advance estimates released by the CSO on February 7, 2003. Overall GDP growth in the current year is likely to be only 4.4 percent. This agriculture-pulled deceleration in growth, in 2002-03, clouds an across-the-board improvement in the growth performance of industry and services from 3.3 percent to 6.1 percent, and from 6.8 percent to 7.1 percent, respectively, between 2001-02 and 2002-03. Indications are that, inspite of a severe monsoon deficiency, the rebound in growth observed since 2001-02 gained momentum in industry and services sectors in the current year.

            1.3 The continued growth recovery in the first half of the current year is significant in view of the several downside risks prevailing in the international and domestic economy. The outlook of recovery in global economic activity and world trade has remained subdued. International financial flows have been affected by the unsettled conditions in Latin America and Turkey. Geo-political conditions have been highly volatile with the stand-off in Iraq. Moreover, the country has been affected by a most telling monsoon deficiency in two decades.

            1.4 The growth recovery was accompanied by continued macroeconomic stability in terms of low inflation, orderly currency market conditions and comfortable reserves. In the past, droughts, with their impact on price and availability of foodgrains, have been particularly harsh on the poor. In the current year, notwithstanding the deficient monsoon, there were no shortages in availability of essential commodities, or flare-ups in their prices. The 52-week average inflation rate based on the Wholesale Price Index (WPI) was only 2.6 percent in mid January 2003. Prices of primary products remained below 4 percent for the larger part of the year, while inflation in manufactured products was around 3 percent. The transition to a market-based pricing regime for petroleum products was also devoid of disruptions, with fuel group inflation barely touching 5 percent for much of the year. However, the latest Gulf-related uncertainty has caused fuel price inflation to touch 6.4 percent in mid-January, 2003. Inflation, as measured by the Consumer Price Index for industrial workers (CPI-IW) declined from 4.7 percent at the beginning of 2002-03 to 3.2 percent in December 2002. The abundant stocks of wheat (28.8 million tonnes on January 1, 2003) and rice (19.4 million tonnes on January 1, 2003) held by the Food Corporation of India (FCI), while complicating the task of agricultural diversification and fiscal consolidation, did however, help to quell inflationary pulls.

            1.5 In spite of volatility in global currency markets following the events of September 11, 2001, appropriate and timely policy interventions moderated the volatility in the exchange rate of the rupee, which moved in a range of Rs.46.56-48.85 per US dollar during 2001-02, with average depreciation against the US dollar amounting to 4.0 percent. During the current financial year, after reaching an all time high of Rs.49.06 per US dollar in May 2002, the rupee strengthened against the dollar and stood at Rs.47.80 per US dollar at the end of December 2002, thereby appreciating by 2.1 percent over the end-March 2002 level. The rupee, however, has depreciated against pound sterling, euro, and yen by 8.9 percent, 14.9 percent and 7.4 percent respectively between April 2002-January 2003, reflecting in part the weakening of the US dollar against these currencies.

            1.6 Foreign currency assets at end-March 2002 amounted to US $51.05 billion, up by US $11.5 billion over US $39.5 billion at end-March 2001. Out of this increase, a large part (US $9.10 billion) was realized during the second half of 2001-02. Reserve accretion accelerated in the first three quarters of the current financial year, with foreign exchange reserves reaching a record high of US $73.58 billion at the end of January 2003, with an increase of US $19.47 billion over the level of end-March 2002. A recent Reserve Bank of India (RBI) study shows that the major sources of reserve accretion in the current fiscal till end-November 2002 have been a surplus in the current account, non-debt creating capital flows and valuation gains. In spite of the interest rate differential of 3-4 percent between the rates abroad and in India, there is no evidence to suggest that arbitrage through debt capital was substantial. Thus, at least upto November 2002, arbitrage may not have played a major role in accumulation of reserves. It is estimated that as much as two-thirds of the reserve accretion was on account of non-debt capital flows. Growth in foreign exchange reserves has facilitated a further relaxation of foreign exchange restrictions and a gradual move towards greater capital account convertibility.

            1.7 The rapid growth in reserves was partly the result of a strong current account. After twenty-three years, the current account of India's balance of payments recorded a surplus _ equivalent to 0.3 percent of GDP _ in 2001-02. Stagnant exports and falling imports brought down the trade deficit by 0.5 percentage points in 2001-02. The current account showed a surplus mainly because of buoyant net invisible inflows equivalent to 2.9 percent of GDP, which, at US $14.05 billion, were the highest in the last decade. Invisibles are doing well in the current year too, primarily on account of heavy inflow of remittances. This, coupled with a sharp rise in exports, considerably enhances the possibility of recording a surplus in the current account for the second successive year. According to DGCI&S data, exports in dollar terms are currently (April-December, 2002) growing at 20.4 percent. Year-on-year exports in dollar terms grew by 34.3 percent in December, 2002. The surge in exports has occurred in spite of the sluggish pace of global economic recovery, and the slight appreciation of the rupee vis-à-vis the dollar, and has contributed to domestic industrial growth.

            1.8 While merchandise exports have grown well in 2002-03, services exports have also been an important area of success reflected in net invisible inflows of US $14 billion in 2001-02. India's share in world commercial services trade is larger than India's share in world merchandise trade. While software exports is a well-known success story, India is now an important venue for many tasks in services such as financial accounting, call centres, processing insurance claims, and medical transcription. The future potential for growth in these areas appears to be considerable.

            1.9 The strengthening of the balance of payments has impacted on the monetary sector, with net foreign exchange assets (NFA) of RBI emerging as an important source of reserve money. From 9.1 percent as at end-March 1991, the share of net foreign exchange assets in reserve money, which had reached 78.1 percent by the end of 2001-02, became 100.7 percent on January 24, 2003, which is close to a currency board situation. Similarly, the NFA to currency ratio increased gradually from 14.4 percent as at end-March 1991, to 105.2 percent as on March 31, 2002, and further to 127.7 percent on January 24, 2003. For liquidity management, the substantial increase in foreign exchange assets was partly neutralised by the decline in RBI's net domestic credit. In the current financial year, RBI credit to the government remained negative, and reserve money grew by 2.9 percent up to January 24, 2003, as compared with 4.7 percent in the corresponding period of last year.

            1.10 The money multiplier - the ratio of broad money (M3) to reserve money - which had increased from 4.3 to 4.4 in the previous year, increased further to 4.8 as on January 10, 2003. In the current financial year up to January 10, 2003, broad money grew at 9.8 percent (net of merger of ICICI and ICICI Bank) as compared with 11.2 percent in the corresponding period of last year. The year-on-year growth in M3, as on January 10, 2003, amounted to 12.8 percent (net of mergers) compared with 14.5 percent last year.

            1.11 Inspite of the slower growth of money supply, the current year has been characterised by easy liquidity conditions. There are signs of a pick-up in non-food credit and a fall in interest rates, including in the yields on government securities. Upto January 10, 2003, non-food credit (net of mergers) increased by 11.4 percent, as compared with 9.1 percent in the corresponding period of last year. A revival in industrial activity may lead to a further increase in the off-take of non-food credit. Food credit declined by 7.1 percent in the current financial year as compared to an increase of 33.0 percent in the corresponding period of last year, mainly on account of the drought, and higher off-take of food-grains in the current year. Priority sector advances of public sector banks formed 43.1 percent of net bank credit at the end of March, 2002. The corresponding percentage for private banks was 40.9 percent, higher than the prescribed target of 40 percent. However, there were shortfalls under priority sector sub-targets set for the agricultural sector. A declining trend in sanctions and disbursements by All-India Financial Institutions was observed mainly on account of a reduction in the number of project proposals seeking financial assistance, the weak financial position of IDBI and IFCI, and the spread of universal banking.

            1.12 Facilitated by relatively lower inflation, interest rates continued to soften during the year. The RBI reduced the bank rate by 25 basis points to 6.25 percent in October 2002. At its present level, the bank rate is the lowest since 1973. The cash reserve ratio (CRR) was reduced by 50 basis points to 5.0 percent from June 1, 2002, and further to 4.75 percent from the fortnight beginning November 16, 2002. The PLR of five major commercial banks declined from 11.00-12.00 percent to 10.75-11.50 percent in the current year. A noticeable development in the current year is sub-PLR lending by commercial banks. Yields on government securities continued to maintain their downward trend. The yield on 7.4 percent 12-year government paper reached a low of 6.13 percent on December 31, 2002.

            1.13 Gross non-performing assets (NPAs) of scheduled commercial banks increased by Rs. 7,164 crore to Rs. 70,905 crore, while net NPAs increased by Rs. 3,084 crore to Rs. 35,546 crore in 2000-01. The incremental gross NPAs in 2001-02, which is more than double the amount in 2000-01, is mainly on account of the inclusion of an amount of Rs.4,512 crore in gross NPAs consequent on the merger of ICICI with ICICI Bank. There was an increase in NPAs of public sector banks, despite significant progress in recoveries. In the case of foreign banks, recoveries exceeded net accretion to NPAs. The ratios of gross and net NPAs of commercial banks to advances and total assets have been declining across all bank groups. Gross NPAs of public sector banks, at 11.1 percent of gross advances, and 4.9 percent of total assets, are higher than those of private sector and foreign banks. Advances to non-priority sectors accounted for the bulk of the outstanding NPAs in the case of both public sector banks (53.5 percent) and private banks (77.9 percent). At the end of March 2002, 25 out of 27 public sector banks (PSBs) had capital to risk-weighted asset ratio (CRAR) above the prescribed minimum level of 9 percent. Of these, as many as 23 banks had CRAR exceeding 10 percent. Two PSBs, two private sector banks, and one foreign bank, did not fulfill the minimum CRAR. The CRAR of scheduled commercial banks, as a whole, increased from 11.2 percent at end-March, 2001 to 11.8 percent at end-March, 2002.

            1.14 Capital markets continued to be subdued. The NSE-50 index, which was at 1,087 in January 2002, was at 1,073 in January 2003, showing no significant change. This weakness in the secondary market led to a small volume of issuance on the primary market. However, the drop in the Indian equity market in the period after December 2001 is smaller than that in many other countries. Unlike the heavy inflows in the preceding years, there was a small outflow of foreign portfolio investment from India between April to November 2002.

            1.15 The subdued conditions in domestic capital markets, however, conceal important structural reforms. The equity market has absorbed a new market design, with rolling settlement and equity derivatives trading. Liquidity, which was adversely affected in July 2001, has bounced back to strong levels from March 2002 onwards. In 2001, two Indian exchanges, National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), ranked third and sixth among exchanges all over the world, sorted by the number of transactions.

            1.16 Risk management functions performed by the Clearing Corporation of India Limited (CCIL) for bonds and foreign exchange transacted by telephone, has imparted a new level of safety with regard to settlement risk. In January 2003, government bonds started trading on stock exchanges, ushering in a new level of transparency and market access for the government bond market. This is a welcome move away from bilateral negotiation towards anonymous screen-based order matching.

            1.17 Recent legislative amendments to the SEBI Act have put SEBI on a better footing in terms of enforcement of proper market conduct. This should help reduce the extent of market malpractice and improve market efficiency. The UTI Act was repealed to break UTI into UTI-1 and UTI-2, with UTI-2 handed over to a new set of owners.

            1.18 Public finances, both at the Centre as well as the States, which have been under pressure since 1997-98 after the implementation of the Fifth Central Pay Commission's recommendations, deterio-rated further in 2001-02. The fiscal deficit of the Central Government, as a proportion of GDP, which had increased continuously from 4.1 percent in 1996-97 to 5.6 percent in 2000-01, rose further to an estimated 5.9 percent in 2001-02. The primary deficit of the Central Government (excluding loans to States against small savings collections), after turning into a small surplus in 1996-97, started deteriorating thereafter, reaching a level of 1.4 percent of GDP in 2001-02. The lack of fiscal consolidation at the State level is revealed by a similar deterioration of their combined fiscal deficit, again as a proportion of GDP, from 2.7 percent in 1996-97 to 4.3 percent in 2000-01, and further to a revised estimate of 4.6 percent in 2001-02. The consolidated fiscal deficit of the Centre and the States was 10.0 percent of GDP, according to the revised estimates for 2001-02.

            1.19 During the first nine months of the current year, central finances displayed considerable improvement with the fiscal deficit at Rs. 86,269 crore, slightly lower than the figure of Rs. 89,014 crore observed in April-December 2001. However, the remaining part of the year could see some pressures on both revenue and expenditure. Unanticipated weakening of the growth momentum may affect revenue collections. Expenditure management would also pose larger challenges because of enhanced food subsidies on account of higher farm support prices, higher fertilizer subsidy from augmented retention prices, larger subsidies resulting from distribution of liquefied petroleum gas (LPG) and kerosene at below market prices, and unanticipated expenditure on drought relief. The disinvestment programme is running behind schedule, and there is likely to be a shortfall in capital receipts under this head. During the year, the Central Government also had to provide Rs. 938 crore of budgetary resources for rehabilitation of the UTI.

            1.20 At the level of the States, while a large number of initiatives like Fiscal Responsibility legislations, and medium-term fiscal reform programmes, have been undertaken, pressure on the fiscal front continues. While the expenditure composition, both for the Centre and the States continues to reflect a preponderance of wages, salaries, interest payments, and subsidies, there has been some welcome relief on the interest payments front with the softening of interest rates in recent months. The high fiscal deficit continues to complicate the task of conducting counter-cyclical fiscal policies and augmenting outlays on the much needed social and physical infrastructure, and poverty alleviation programmes.

            1.21 A significant reform in the current year was the dismantling of the administered price mechanism for petroleum products from April 1, 2002, exactly as per the schedule announced in 1997. Reforms picked up speed in the third quarter of the current year. The winter session of Parliament saw the passage of several important Bills, including Securitisation and Reconstruction of Financial Assets and Securities Bill, 2002, the Securities and Exchange Board of India (Amendment) Bill, 2002, the Unit Trust Of India (Transfer of Undertaking and Repeal) Bill, 2002, Prevention of Money Laundering Bill, 2002, the Companies (Amendment) Bill, 2002, the Companies (Second Amendment) Bill, 2002 and the Competition Bill, 2001. The announcement about the disinvestment strategy for Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL), in December 2002, cleared the uncertainty over privatisation.


            The very point that India has NOT TAKEN world assistance for the tsunami disaster and INSTEAD SENT ASSISTANCE TO SRI LANKA, MALDIVES AND INDONESIA in the form of medicine , food, hospital facilities and naval ship, is an indicator that it is self sufficient. The initial estimates pegs India's losses due to the tsunami is Rs 3,000 0000,000.

            Estimates of human losses approx: 14,000 and more to go.

            India expects to give relief, rehab and reconstruction on its own.

            Compare this with other nations of the region and even beyond.


            "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

            I don't have to attend every argument I'm invited to.

            HAKUNA MATATA

            Comment


            • #7
              Necessity as virtue? You bet. And what's wrong with that?

              "There is only one answer to the problem of a Pakistan or an
              Afghanistan -- their transformation into stable entities, governed
              by a leadership that is forward-looking and secular, and above all
              imbued with democratic ideas"

              Well, we can all agree with that.

              One wonders if Prodigal will ever respond to the request for clarification and elaboration
              _____________________

              Comment


              • #8
                Problems?

                Let's see....

                Unbelievable poverty that hasn't really changed much for most folks in the 50 years or so since Indian independence.

                A multitude of ethnic and religious divisions.

                Several ongoing insurgencies.

                Rigid class sytem (institutionalized in the caste system)

                Periodic episodes of communal violence that kill 1,000s.

                Rampant corruption.

                Economic policies for most of the period of Indian independence that has produced slow economic growth.

                Things like this are big positives in the "what makes democracy die" equation. Most countries that have characteristics like this in the developing world have either fallen apart or fallen into dictatorship. Indeed, India had a brief period of "emergency" rule in the late 1970s due to, I believe, problems with the Sikhs.

                Personally, I think the reason India has survived as a democracy is, paradoxically, the wars it has fought with Pakistan and China. If states are to survive in war they require strong states with the ability to muster up enough resources to ward off external enemies. Strong states allow countries that have them the ability to deal with other problems -- like, say, an ethnic insurgency or bout of communal violence.

                Comment


                • #9
                  Please see:

                  Przeworski, Adam, Michael E. Alvarez, Jose Antonio Cheibub, and Fernandoa Limongi. Democracy and Development: Political Institutions and Well-Being in the World, 1950-1990. Cambridge University Press, 2000.

                  They note on pages 83 - 87 in Chapter two that in a probit regression model that predicted with 81.4% accucracy which type of regime (democracy or dictatorship) that a country would have in a given year that India was a country that consistently defied their model's prediction. India was always predicted as being a dictatorship and that "the ods against democracy in India were extremely high."

                  So, in statistical terms the survival of Indian democracy is something of a minor miracle.

                  Comment


                  • #10
                    Lets take it one by one.

                    Our poverty rates are 26% last census and are falling.They are the most active participants in the elections.90% of these 26% people , register their votes.It is the upper middle class, and the rich folks who do not vote.

                    Well , we have something in common between us and have had a sense of brotherhood since the times of Indus Valley Civilisations.Brothers fight b/w themselves tho. ;)

                    The insurgencies lack public support and hence are doomed to fail
                    The US fought a civil war , we just have a few insurgencies and except Kashmir , it looks all others can be handled and handled well they will be.

                    The supposedly lowest caste people are the ones who vote the most.Some have more than one vote.

                    Yeah , we have'em. Not only them we have periodic calamities too.
                    First we had the Orissa Supercyclone , the Gujrat quake , now the Tsunami.
                    The violence normally ends in a month , and things go back to normal.

                    Dont think you can point out two violences in the last five years where more than a 1000 were killed.Can you ? But for Gujrat , we wouldnt have one even in the last ten or so years.

                    India is too big for all these to disturb its existence.


                    And Corruption is there, yes .But on policy issues and grave national security issues our babus do put their heads together and figure a way out. The BD immigrants threat being an exception.And Surprise , they people are again the most active participants in the elections !

                    Comment


                    • #11
                      Unbelievable poverty that hasn't really changed much for most folks in the 50 years or so since Indian independence.
                      Which century do you live in?

                      Next you will say that India is a jungle infested areas with monkeys, elephants, tigers and Rajahs and snake charmers! :)

                      An application of mind by anyone without bias and apathy would indicate that a country that has its own satellites would not be so poverty stricken as to not change over 50 years

                      A multitude of ethnic and religious divisions.
                      What is the answer? Genocide and Talibanisation? Is it a problem? I think it is a matter of strength as it is in the USA.

                      Several ongoing insurgencies.
                      Sure.

                      Remember no insurgency can last without foreign assistance. It requires money, training areas and instructors.

                      The Mizo insurgency is over,. The Nagas are about to call it quits since the two leaders are in nagaland and have said militancy does not work. Kashmir is on the mend. Naxalites? The Communists are a dead force. But still it survives, but is a pin prick actually.

                      Rigid class sytem (institutionalized in the caste system)
                      It is vanishing. My parents married out of caste. I have too and so have my children. Caste is no longer a big deal. Yet, I will admit that amongst the lower caste there is a battle as to who is more lower than lower. This will also go since there is much awakening. Even the Moslems have come to grips with reality in India that a small family is better for them. Archaic stuff like the triple talaq is soon to be on its way out. Mnay ahve been booked under the Anti Schedule Caste Act.

                      Periodic episodes of communal violence that kill 1,000s.
                      One swallow does not make a summer.

                      Rampant corruption.
                      True. They do it crudely.

                      Sophisticated methods done with panache and elan of the Enron variety is yet to be leant ;)

                      Exchange of dollar bills in western countries can also get you hotel rooms when the hotels are supposed to be totally booked. Not rampant corruption? Even the Halliburton case of hiking up charges in the Iraq War and milking the US Treasury in the time of crisis to my mind is not only corruption but high treason. Making hay at the govt's and the soldiers' expense while your soldiers die! That money milked for beyond legitimate cost and profits could have bought body armour etc and not open the govt to criticism.

                      The Mafia has bankrolled Senators. Vested interests still do. That is corruption. The Police are also corrupt. What is Lobbying? A sophisticated form of corruption.

                      So corruption is not a phenomenon of the third world alone. I will concede that it is done crudely and it does not have the legitimacy of institutionisation.

                      BTW, we are passing a Ombudsman bill where the Prime Minister to the Peon will be accountable for corruption and jailed.

                      Economic policies for most of the period of Indian independence that has produced slow economic growth.
                      True but not in real terms.

                      The industrial infrastructure made by Nehru and his socialistic approach is holding us in good stead today. We are doing rather well in the steel production, defence production, gas, oil and natural gas, strategic minerals, etc etc.

                      Based on that the liberalisation that has started a few years back the economy is soaring India to greater heights. Today, the economy is booming. The growth rate is high.

                      Things like this are big positives in the "what makes democracy die" equation.
                      Yes, but India survives. Land of magicians, snake charmers and Indian rope trick! :)
                      Shows how theories are humbug. ;)


                      Indeed, India had a brief period of "emergency" rule in the late 1970s due to, I believe, problems with the Sikhs.
                      No, it was not because of any Sikh problem. It was because of nationwide strike called that paralysed the economy and general life as also because Indira Gandhi had a dictatorial streak. However, she called an election and she lost. First time the Congress Party lost.

                      Personally, I think the reason India has survived as a democracy is, paradoxically, the wars it has fought with Pakistan and China. If states are to survive in war they require strong states with the ability to muster up enough resources to ward off external enemies. Strong states allow countries that have them the ability to deal with other problems -- like, say, an ethnic insurgency or bout of communal violence.
                      What has the wars with Pakistan and China to do with India surviving as a democracy? India survives because inspite of all its infirmities, it remains a DEMOCRACY. Democracy is a form of govt that irons out things. Dictatorship is like Nelson's Eye. Blind.

                      India was always predicted as being a dictatorship and that "the ods against democracy in India were extremely high."
                      I don't grudge the guy who made this model.

                      Sensationalism sells books and makes one a hero so that he earns his bread as a visiting lecturer or a guest speaker.

                      in statistical terms the survival of Indian democracy is something of a minor miracle
                      India's surviving as a democracy is no miracle. It is the culture of tolerance that India has been steeped in through its history that is her backbone and disproves high brow academic theories. India is too steeped in its philosophy and that allows it to take the rough with the smooth. That is why benign religions like Hindusim and Buddhism took birth on this continent. Both are Pacifist religions. Pray if you want, don't pray if you don't want. Go to the temple or don't go. Very fatalistic. That is why anyone came and conquered. They too got assiimilated into Indian culture.

                      As far as statistics go - remeber the definition for statistics? - It is like a miniskirt. It reveals everything except the vital parts!
                      Last edited by Ray; 10 Jan 05,, 08:59.


                      "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

                      I don't have to attend every argument I'm invited to.

                      HAKUNA MATATA

                      Comment


                      • #12
                        Originally posted by Prodigal Son
                        Please see:

                        So, in statistical terms the survival of Indian democracy is something of a minor miracle.
                        That to my mind is the best reason why India should be on board.

                        Perhaps some of that magic might rub off the dysfunctional countries not to mention that India seems to know something that the political pundits, or at least 4 of them don't, who presumably may be invited for the task.

                        That off course is presuming the theory is right.

                        An 18.6% error factor is large. With around 190 countries that's a fair bit of countries.

                        Just curious, which were the countries, both on the democracy and dictatorship side that was got wrong.

                        Comment


                        • #13
                          Prodigal Son,

                          Since you have the time and inclination towards academic pursuit, may I recommend that you read

                          http://www.people.fas.harvard.edu/~d...es/dk_role.pdf

                          It is 44 pages PDF and it will assist in explaining THE ROLE OF INDIA’S INSTITUTIONS IN EXPLAINING DEMOCRATIC DURABILITY.

                          It might also help in clearing the thought that scientifically the dice is loaded for India to become a dictatorship.

                          No chance.

                          Science sometimes can throw up a lot of humbug. ;)


                          "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

                          I don't have to attend every argument I'm invited to.

                          HAKUNA MATATA

                          Comment


                          • #14
                            Ray,

                            An interesting paper you posted there by Dr. Kapur of Harvard.

                            An elegant case of India maximizing what little she has resulting in demonstrated success in maintaining Democracy in the face of the scepticism of various Cassandra’s.

                            Strengthens my view that India has something to offer. particularly as India presents solutions that can be done cost effectively.

                            It might interest you to know this Institutional solidity of the Election Commission of India has been recognized by the UN’s Electoral Assistance division and India has been asked to play a role in at least two “dysfunctional” states, Afghanistan and Sudan ( also Iraq, though I am not sure it is a dysfunctional state ).

                            Just hope the “NIH” (Not Invented Here) factor which Werner Von Braun touched upon with President Kalam, does not raise its ugly head.

                            And the link to the UN bit I talked about is here :

                            Afghanistan, Iraq polls: India to help

                            Comment


                            • #15
                              Hari Om,

                              An in depth study does clear a lot of cobwebs.

                              I remember my Commanding officer telling us that when our radio communition went on a blink and a chap sarcastically said that we should try jungle tomtom of Africa or the Red Indian smoke signals. He said, the jungle tomtom messages may miss out. After all, the tomtom man may miss a beat and give a wrong message, likewise to beleive Red Indian smoke signals would also be wrong since a waft of wind can change the smoke's form and a different message can emanate.

                              Thus, as you want told me, categorical statements can lead to problems lest one is an expert on the subject.

                              True, true.


                              "Some have learnt many Tricks of sly Evasion, Instead of Truth they use Equivocation, And eke it out with mental Reservation, Which is to good Men an Abomination."

                              I don't have to attend every argument I'm invited to.

                              HAKUNA MATATA

                              Comment

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