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False hopes on economy

The Kashmir Monitor

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By Yogi Aggarwal

The GST was controversial because of the high and multiple rates imposed on the businesses and the consumers, but the hope was that it would make tax collection easier and evasion more difficult.

The GST was controversial because of the high and multiple rates imposed on the businesses and the consumers, but the hope was that it would make tax collection easier and evasion more difficult.

Many of the steps taken by the government to give the impression that it has stabilised the economy, in fact, show its desperation to conceal its weaknesses. Its implementation of GST is flawed and has led to an increase in cash transaction and fall in government income. The government has proposed that the LIC take over the IDBI bank, (having huge bad loans) to help keep the fiscal deficit down. The ONGC has bought government’s entire stake in oil refiner HPCL, to help meet disinvestment targets. A massive flow of money into the stock market by domestic mutual funds at the pressure of the administration to give an optimistic view of the economy has created a bubble that could crash at any time. How far these factors have led to the abrupt resignation of chief economic adviser Arvind Subramaniam will only be known later. The government’s actions are around creating a feel good tactic rather than a serious economic effort. It normally wins the approval of international aid agencies because it is pursuing their strategy of more privatisation of public resources.

The GST was controversial because of the high and multiple rates imposed on the businesses and the consumers, but the hope was that it would make tax collection easier and evasion more difficult.

British brokerage HSBC said in a recent report that the glitches in the tax have increased the demand for cash. “The GST regime was originally associated with formality. But so far, in our view, it has not been able to live up to that promise. It has not brought down the demand for cash which has, in fact, only gone up,” the report said.

The RBI, in its latest “money supply” data puts the “currency with the public” at over Rs 18.5 lakh crore as on May 25, 2018 — up 31 per cent from the year-ago level. The World Bank, which was earlier supportive of the GST, has been revising its stand. A recent report put out by the World Bank noted “India’s GST is among the most complex taxation systems in the world. India has the highest tax rates in Asia and also largest number of tax slabs”.

While the GST was an attempt to put into practice a major economic policy that would change the way the country would be administered and taxed, other recent measures have more limited goals. Take for instance the selling of the IDBI Bank to LIC. The IDBI is one of the worst performing banks in the country with bad debts or non-performing assets of Rs 55,000 crore.

Last year, the government had put on Rs 10,600 crore to reapitalise the bank but it clearly wasn’t enough. The LIC already has a 10.6 per cent share in the equity of the IDBI Bank like it does in many others and will have to put in another Rs 12,000 crore to get a majority stake as an investor.

This will put LIC policy holders at greater risk as the LIC is being made to take over a bank it cannot hope to turn around. The risk will increase manifold if they are made to open accounts there as has been suggested.

The government is clearly evading its responsibility in an effort to cut down its fiscal deficit by making a profitable enterprise like LIC take on a loss-making one. The price will, of course, be paid by the policy holders who will get lower returns, and will have to pay the for the government’s incompetence.

 

Another takeover, though not as shameful as the one involving LIC and IDBI Bank, is the proposed takeover of petroleum refiner HPCL by the oil exploration giant ONGC. This has been touted as the amalgamation of two companies to form a larger one. Earlier this year, the state-owned ONGC bought government’s entire majority stake in oil refiner HPCL for Rs 36,915 crore.

They are both profitable companies, and the sale does not have any financial bearing, other than help the government meet its disinvestment target without having to go through the political minefield of finding an external buyer. Yet the step can only be understood by seeing it as a ploy to meet its difficult disinvestment target by making an existing public sector company pay for it. The existing work cultures at the ONGC and the HPCL are different, much like Air India and Indian Airlines, which led to a disastrous merger. At the same time the merger will deplete funds available to the ONGC to increase production.

The government is also encouraging Indian mutual funds to push up the stock market to unsustainable levels. This is happening against a more realistic view of the Indian stocks by foreign funds. Since the beginning of the year, foreign investors have pulled out Rs 65,787 crore (roughly $10 billion) from the Indian stocks. At the same time, Indian mutual funds have put in Rs 659,267 crore (roughly $100billion) into the stock market causing it to go up 12.9 per cent in the past year with price/earnings ratio of over 24.

This points to a bubble in the stock market that could burst any time, once the mutual funds decide they can no longer bear the risk. It must be remembered that the stock market has been rising continuously for over four years, an unprecedented factor in financial history if not followed by a fall.

The government is building up a false sense of hope to show the economy is doing well. If one follows a sense of reality rather than believe in fables such as this government propagates, it is not difficult to see the mess we are in.

 

 

 

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Opinion

Reconsidering democracy

The Kashmir Monitor

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By Tahir Kamran

Critics of democracy in the Muslim South Asian ethos often invoke Allama Iqbal’s famous verses as an example of how it is a Western system imposed on the East (read Muslim society) by Western colonisers. The lines in rough translation are: “democracy is a system of government in which the subjects are counted, not weighed.”
I am not sure about how much scholars of political theory have investigated the role that regional context plays in the nurturing of democracy in general. Such questions of extraordinary import fall within the purview of political theory, which hardly fascinates Pakistani academics, particularly those dealing in Social Sciences. Thus, profound queries like mal-adjustment of democracy with our (read Asian in general) socio-cultural milieu should be addressed in a systematic manner with scholarly intent and rigour.
Democracy’s widely pervasive connotation designates it as a Western phenomenon, having been imposed on the countries and terrains of the Afro-Asian hemisphere by former colonisers. Many analysts, particularly the ones on the liberal side of the academic spectrum, tend to rubbish such a perception as clichéd, and contend that democracy as a Western construct was an argument propagated by dictators like Ayub Khan and ZiaulHaq to legitimise their rule. Both these military rulers contended that democracy is a Western system of governance which, as Ayub Khan once put it, is not consistent with the “genius of Pakistani people”.
To my understanding, pleading the universality of the Western version of democracy is a perception that is far too simplistic. Such Eurocentric notions skirt around the fundamental issue of the impact that socio-cultural imperatives cast on political realities. Underlining the fact that democracy was conceived, nurtured and evolved in the West and introduced in much of Asia and Africa through colonial regimes — and therefore is not congruent with the political traditions of the indigenous polities — may ring true but not entirely. The political elite engineered during the modern era, and unleashed by colonial rulers, was well-conversant with Western democratic norms and ideals. Leaders like M.A. Jinnah and Jawaharlal Nehru did not subscribe to the political tradition that had a monarch as the fountainhead of government.
Thus, the indigenous leadership was confronted by a duality: these leaders represented modernity in a socio-cultural milieu that had its roots in centuries-old indigeneity.
Most of the nation-states in Asia won their independence because of political action orchestrated and steered by such leaders, anchored in modernity, but with a very strong cultural reference. Nehru’s Discovery of India is a case in point. Similarly, Jinnah invoked a tradition steeped in religious episteme to achieve his goal, the nation-state of Pakistan, which was obviously a modernist project.
Both of these leaders reposed a firm belief in democratic order. But so far as its functioning was concerned, democracy in these countries reconfigured itself. It was markedly different from the Western prototype. The personal charisma of a leader, dynastic politics, and political patronage are the cardinal features of democratic politics in Asia.
Because of these reasons, democratic institutions have not evolved in the region. Institutional development is inimical to the sort of perpetuation that leaders tend to seek in Asian countries. Be it India, Pakistan or Bangladesh, the pattern is almost the same. Political parties, their agenda and objectives revolve around the whims of the parties’ charismatic leaders. With a strong leader at the head, political parties fail to practice democracy among their own ranks. Thus, the political parties in Asian polities are devoid of evolutionary dynamism. It is primarily the reason for the phenomenon which, according to Saeed Shafqat, is represented in economic development coupled with political underdevelopment. China, Singapore, and even Malaysia and Vietnam are living examples of that pattern.
More so, in Asian polities, development — whether social or physical — is not contingent on the democratic system per se. Even if democracy is practised in these countries, social and cultural development hardly corresponds with the democratic system. Generally, arbitrary and autocratic decision-making determines the direction of the social movement there. Lee Kuan Yew in Singapore or even Jawaharlal Nehru in India exerted their personal will to galvanise the social collective self of their respective countries in the direction they had determined to follow.
One may argue here with a measure of certainty that all the feats of development advocated by those countries could not have been achieved had Lee Kuan and Nehru opted for democratic means for the realisation of social advancement. It was the personalised rule of Mao Zedong, Ho Chi Minh and Mahathir Muhammad that helped their respective polities to enter in the league of developed nations. One may add Tayyip Erdogan from Turkey in this list too. Erdogan is fast moving from democracy to an autocratic order. One must not lose sight of Kemal Ataturk’s autocratic rule disguised in a democratic garb.
Japan, despite having embraced a democratic system for many decades, has not been able to come to terms with its socio-cultural imperatives. Japan’s phenomenal development in the 1970s and ’80s can be attributed to the innovative instinct of the Japanese people, which had been consistently articulated since the days of the Meiji revolution. More importantly, Japan was absolved of its responsibility towards its own defence and was overseen by the United States after the Second World War. Those imperatives allowed Japan to invest all its energy and resources in technological advancement, and its technological progress stunned the world in the 1970s.
This growth did not happen due to democracy. The same holds for India. Despite having a leader of immense stature like Nehru at the helm for no less than 17 years, the democratic experience was slightly more than a cosmetic one. It boasts of being the largest democracy in the world, but supposedly liberal values have failed to unhinge the caste system that ensures Brahman supremacy in Indian society. Now the curse of Hindutva has overtaken the country. How democracy and Hindutva can be reconciled, and how they can allow each other to exist are phenomena yet to be seen.
While it might seem that this article is building a case against democracy as a system incongruent with the political make-up of the Asian people, I vehemently believe in democracy as the best system. What I am pleading here is that we must review the democratic norms being practised in Asian polities, so that we may come up with a new political synthesis whereby the socio-cultural tradition and democratic ethos are conjoined and made into a workable proposition.
I leave it to my readers to ponder over this question, which I think is integral to any future course that democracy in Pakistan must take.

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Opinion

Is Congress pro-Muslim?

The Kashmir Monitor

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By Zakia Soman

We are witnessing manoeuvres by different political parties in the run-up to the 2019 general election. Congress president Rahul Gandhi’s recent meeting with eminent Muslims is one such measure. The Congress needs to rethink its politics not for the sake of Muslims but to salvage its own image as a party committed to constitutional principles of pluralism, secularism and social justice. By doing this, it would be reminding all Indians about the original Indian National Congress’s commitment to ideals of justice, equality and democracy. It will have to do a lot more if it is serious about enabling genuine participation of Muslims.
The Congress responded to the BJP’s criticism by clarifying that it is not a pro-Muslim party. Political point-scoring apart, Muslims themselves are under no such illusion. This is made evident by Muslim voters’ increasing preference for regional parties such as the SP, BSP, TMC, RJD and others in different states. It would not be an exaggeration to say that Indian Muslims have consistently become poor and marginalised socially and politically under Congress rule. They were already in a miserable condition when the BJP came to power in 2014. The Hindutva onslaught has aggravated their plight.
The Census figures suggest that Muslims have consistently slided into backwardness and poverty since independence. In recent times, the Sachar Committee (constituted by the UPA government in 2005) found that Muslims live in poverty, with low education levels, without formal jobs, without access to government facilities on credit and without healthcare provisions in ghettos. It found that only four in 100 Muslims are graduates and merely 13 per cent of Muslims hold salaried jobs. The report highlighted that Muslims live with a sense of alienation under a perception of fear and insecurity from communal riots. The Congress was prompt in constituting the Sachar Committee to assess the condition of Muslims soon after forming the government at the Centre in 2004. But it totally reneged on implementing the recommendations for alleviating the condition of Muslims. A number of reports suggest that there were no efforts during the UPA’s 10-year rule towards the inclusion of Muslims in educational, economic, health and housing programmes. It is an irony that the Gopal Singh Committee, constituted in 1983 by then Prime Minister Indira Gandhi, had found much the same problems that Sachar panel identified as pulling down the community. There seems to be a pattern here — the focus is on the optics and not genuine inclusion.
It is ironical that some of the Congress actions have given rise to the bogey of Muslim appeasement, whereas in reality Muslims have come to be amongst the poorest and most marginalised socio-religious communities. Besides, India has witnessed communal riots with an alarming consistency. Large sections of Muslims have borne the brunt of communal riots through the 1980s and 1990s — Aligarh, Moradabad, Meerut, Bhagalpur, Nellie, Ahmedabad, Bhiwandi, Surat, Bombay, the list is long. Reports by various inquiry commissions indicate how Muslims suffered huge loss of lives and property during these riots. Besides, there was no legal justice in most cases.
Demonisation of Muslims as terrorists began globally in the wake of the war on terror following the 9/11 attacks. It arrived in India when several Muslims were falsely picked up and incarcerated as terrorists following bomb blasts in Ajmer, Malegaon, Ahmedabad, Hyderabad. Most of them have been acquitted by various high courts and the Supreme Court as they were found innocent. These wrongful arrests happened under the watch of the Congress. This can hardly be called appeasement.
On the one hand, the Congress gave no special attention to the participation of Muslims in various government schemes for the poor. On the other hand, it provided leverage to the BJP by allying with the conservative patriarchal elements during the Shah Bano controversy in 1986. This classical Congress behaviour continues till date over the issue of triple talaq. Nobody knows what its stand on triple talaq is. Like Muslim conservatives, it has failed to see the writing on the wall about the changing aspirations of the community. The Congress has totally overlooked the Muslim women’s movement for gender justice. It is of no consequence to the party that its politics undermines the efforts of those engaged in reform within the community. The Congress doesn’t care that its politics reinforces the regressive patriarchal stranglehold over ordinary Muslims. Several Muslims feel that it suits the Congress to keep Muslims in wretched conditions. But its so-called Muslim faces continue to be persons with no ground-level perspective. Even under its new president, the party has failed to see the tremendous support received by Muslim women from the Indian public. Or perhaps, the party president will begin supporting the Muslim women’s movement after a decade or so, just as it has taken so many years now for him to visit temples. One wonders why the Congress has failed to understand that like all Indians, Muslims too are changing. Why does it fail to understand that like all Indians, Muslims too have aspirations for a better life?
The Congress does not have to be pro-Muslim to regain its lost ground. Nor does it have to be a B-team of the BJP. Its policies towards Muslims or Dalits or the poor should be guided by the democratic principles of inclusion laid down in the Constitution. It needs to adhere to its founding principles with honesty, courage of conviction and consistency.

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Opinion

Pak army has picked the wrong fight

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By MIHIR SHARMA

Nawaz Sharif – dodgy businessman, convicted criminal, and thrice Prime Minister of Pakistan – showed Friday, in his triumphant return to Pakistan, that he remains by far the country’s most popular politician. Infuriatingly, he also represents Pakistan’s best chance at becoming a “normal” country anytime soon. As he fights what looks very much like an attempt by the military to decide the next election, the rest of us should hope he succeeds.
True, neither Sharif nor the army are actually running. The generals don’t need to get directly involved in the vote, to be held in under a fortnight. Their long history of using proxies in Afghanistan and in India seems to have convinced them they can simply do the same in domestic politics – in this case, through ex-cricketer Imran Khan, whose 20-year quest to become prime minister may be within days of being fulfilled.
As for Sharif, he’s not allowed to take part. The military dictator Mohammad Zia Ul-Haq, who ruled Pakistan in the 1980s, had as part of his Islamization process inserted a clause into the constitution demanding that all legislators be “honest and righteous.” In April, five judges of the Supreme Court decided that a three-time prime minister on the brink of reelection was, in fact, the only person in history worth disqualifying for life under the clause.
In addition, a court recently sentenced Sharif – from a family of wealthy industrialists – to 10 years in jail for not convincingly explaining his purchase, decades ago, of some expensive apartments in London. (The Pakistani establishment, when it decides to get rid of someone, doesn’t hold back.) Sharif was, in fact, in London at the time, visiting his ailing wife; many expected that he would stay in exile. Instead, he decided to fly back. He landed in Lahore on Friday as demonstrators loyal to his party were tear-gassed in the city. Sharif and his daughter were sent straight to jail near Rawalpindi, the seat of army headquarters.
Sharif – who served his political apprenticeship under Zia – is an unlikely vehicle for liberals’ aspirations, and not just because his party killed a white tiger during its campaign in 2013. For one, his Pakistan Muslim League has had a history of coddling religious fundamentalists. And not all accusations of corruption against his family are part of the military’s attempt to discredit Sharif, although many are.
Still, we must hope that he wins his battle with the army and the intelligence agencies seeking to control Pakistan. Sharif will never trust a military establishment that has never allowed him to complete a term in office. As for the military, they see Sharif’s attempts to foster a private sector-led economy as a genuine threat to their vast, entrenched interests. The military needs Pakistan to stay poor, stay dependent and stay angry. Sharif threatens that vision.
Many will argue that Sharif’s personal popularity is irrelevant; the rule of law and respect for institutions requires that he be shunted quietly into prison. Frankly, though, that’s a laughable argument in the Pakistani context. If anything, recent Pakistani history shows how easy it is to turn democratic institutions – the media, the courts, anti-corruption agencies – against true liberal democracy.
Elections aren’t free if they aren’t fair. And Pakistan’s election has been anything but fair. Shahbaz Sharif, brother to Nawaz and the chief minister of Pakistan’s largest province, described the military-backed caretaker government’s conduct of elections as “naked rigging.” League workers have been arrested en masse. Twitter is filled with testimony from those who claim to have seen the authorities tear down the party’s campaign material while leaving Khan’s in place. Candidates have been intimidated. Khan’s opponents are denied permission for rallies.
The media environment is also anything but free. Pakistan’s most respected newspaper has had its circulation informally curtailed, leading its owner to write in the Washington Post of an “unprecedented assault” on the freedom of the press. Military officials have openly identified individual journalists as threats to national security; others have been kidnapped and assaulted.
Self-censorship, out of fear, is now the norm. The country’s most watched cable network, Geo, was forced off air after cable operators received calls telling them to cut off the station. When asked by whom, one operator told Reuters: “I can’t say the name, you know, Big Brother, the boots.” Geo stayed off air till it promised to change its political coverage. In a deal with the military, Geo reportedly agreed to be more supportive of the “establishment” and the Supreme Court, and to attack Sharif.
If, after all this, Khan wins the election, it’s hard to imagine his government will be seen as legitimate. Another administration suffering a crisis of credibility is the last thing Pakistan needs. The army may still be Pakistan’s most respected institution. But I suspect that, in years to come, the generals will rue their decision to take on Sharif. – Bloomberg Opinion

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