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A close call to Modi

Pakistan Focus Analysis

           Aam Admi Party (Common Man’s Party) has won a landslide victory in Delhi State elections; out of a house of 70, it has bagged 67 seats, leaving three for the BJP, remaining parties are left high and dry. cartoon_650_101414111604In run up to these elections, this Party had released its humble manifesto on January 31, 2015. Salient points were: to devolve power directly to the people; use its moral and political authority to push for full statehood for Delhi; keep its promise of reducing electricity bills by half and comprehensively solve Delhi’s electricity problem in long run; conduct a comprehensive performance audit; give consumers right to choose between electricity providers; provide water as a right and access to clean drinking water to all of Delhi at an affordable price; ensure free lifeline water of up to 20 kilolitres (20,000 litres) to every household per month; provide universal access to potable water to all its citizens of Delhi at a sustainable and affordable price; committed to clamping down on Delhi’s powerful water mafia working under the patronage of political leaders etc. These issues gravitated the people toward this party. Following the footsteps of Kashmiris, people of Delhi flocked the polling booths on February 07, to register their anti-Modi sentiment.

Factors contributing to Modi’s victory have been several. The unstinted support given to him by India’s corporate; the fanatical zeal of the RSS; the false projection of the ‘Gujarat model of development’; the polarization of society along religious lines; and discrediting of the Congress government through the campaigns launched by the likes of Anna Hazare. Now gradually the cabinet system of governance is giving way to one man’s autocratic ways, with secretaries of Government departments reporting directly to Modi. Losers are the weaker sections of Indian society. The ‘labour reforms’ brought in by this government will do away with whatever little protective clauses are there for them. The land acquisition by industrialists is being made easy at the cost of those who own the lands. The other social welfare schemes for the poor are under the threat of being done away with too.

After having invested substantial political capital in these two elections, falling short of success would be quite a setback for Modi. Concurrently Washington has asked India to improve ties with neighbours, State Department has describes the US ties with Islamabad and Delhi as vital; and New York Time has slammed Modi over his silence on religious intolerance. May be Modi need a pause for self-reflection.

As regards regional matters, Pakistan has repeatedly stated that it seeks improved ties with India. However, Indian leadership’s aggressive language– with quite deliberate intent— has in many ways sabotaged these efforts. Modi’s reluctance to move in the direction of peace places the region in danger.

In the global context Modi’s Chanakyan mannerism during Obama’s recent visit to India was quite telling. He went out of his way to raise Obama to god’s status. It is interesting to contrast it with Saudi King’s behaviour; when American President reached to condole the passing-away of King Abdullah with the new monarch, King Suleiman left his guest(s) unattended when the call to prayer was made. Despite Modi’s beneath dignity behavior, nothing eye popping happened at the end of summit; mostly previously stalled matters were re-railed. Obama restated his 2010 articulation about American backing for India’s permanent seat at the UN Security Council. However, at the end of his visit Obama reminded India to care about others, of another religion, race or a region, or of another people, because without such harmony and inclusivity; India could barter all its advantages if it continues to be blinded by ambition to establish, racial, ethnic, religious or regional exclusivity.

One area of Indo-US converging interests relates to China’s containment in the Asia-Pacific region and the Indian Ocean. During Xi Jinping’s visit to India on September 2014, Modi hyped a benign border incident to humble the guest. Modi’s message to Xi (translated from the Hindi), was, “Even such small incidents can impact the biggest of relationships just as a little toothache can paralyze the entire body.” This was indeed a music to American ears.
No wonders India was mentioned in Obama dispatches as a global partner and was invited to play role in global geopolitics; especially in the South China Sea and in the Indian Ocean. Beijing downplayed the significance of Obama’s trip to New Delhi, but has surely noted that the joint statements released after Modi’s visit to Washington (shortly after receiving Xi in India) as well as after Obama’s trip, referenced maritime activities by China’s Navy. China has not liked American pampering of India for an anti-China role.

While he pours tea for Obama, Modi pushes Pakistan to conform to the demands of new India in leaving out Kashmir from the international agenda, or punish the Mumbai trial suspects before a dialogue can be granted to Pakistan. He generates sporadic pressures on Pakistan through frequent ceasefire violations. Jammu and Kashmir is an issue of right to self-determination of the Kashmiri people, enshrined in numerous UN resolutions. India continues to usurp this right with impunity, in violation of the UN Security Council Resolutions and the UN Charter. Unlike India, Pakistan’s position on the Jammu and Kashmir dispute is based on international humanitarian law, UN Security Council resolutions and underpinned by moral and political principles. The reality is that India with its illusions of grandeur, is obsessed with aggrandizement.

In its efforts to write a mythical history, India has forgotten the acknowledgement and commitments by its first Prime Minister on Jammu and Kashmir dispute. In his address to Indian parliament, on 1st August 1952, he declared: “I should like to say that the ultimate decision will be made in the minds and hearts of the men of Kashmir and not in this Parliament or in the UN…. First of all, let me say clearly that we accept the basic proposition that the future of Kashmir is going to be decided finally by the goodwill and pleasure of its people. The goodwill and the pleasure of this Parliament is of no importance in this matter… because any kind of imposition would be against the principle that this Parliament holds…..If, however, the people of Kashmir do not wish to remain with us, let them go by all means; we will not keep them against their will, however, painful it may be to us. We want no forced marriages, no forced unions”.

The intimidation of religious minorities has been stepped up. Christmas Day was declared as ‘Good Governance Day’ in a move to undermine this festival. Attacks on churches and mosques have been taking place frequently. The statements that we are Hindus and this is a Hindu State have become more and more assertive, and Modi maintains a purposeful silence, because all this is an integral part of the agenda of the BJP and its parent organization, the RSS. With the BJP now having a simple majority, their agenda unfolds in an uninhibited manner.

Modi’s electoral campaign had overtones and undercurrents of anti-China and anti-Pakistan rhetoric. On domestic side his articulations pointed towards Hindutva. There was a hope that after the elections he would mellow and get down with the business of statecraft as a prudent leader. So far it has not happened; and flimsy electoral slogans have gone to his head. There is no likelihood that he would replicate AB Vajpayee. He has not been able to outgrow his Tea-boy and Chief Minster shoes. While Pakistan should hope for the better, it is time that Modi be taken on his face value and reciprocated accordingly; it takes two to tango.


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What is bad: Pakistan’s economy or its management?

The outgoing caretaker of country’s Finance had only been viewing the matters from a banker’s “balance sheet perspective”—and, hence, portraying dooms day scenario. And the new Finance Minister has started showing signs of anxiety even before taking charge. New government has sufficient political capital to attract substantial Foreign Direct Investment (FDI). And some loans and grants have already started pouring in. Need of the hour is not to panic. Economy does face challenges needing immediate adjustments, but its permanent recovery lies in meaningful restructuring. Hopefully, Finance Minister would soon be able to distance himself from day to day fire-fighting, and focus on long awaited reforms in financial sector. With or without the IMF, new government should quickly assemble a core group of competent professionals and start implementing the reforms. Minster for Finance has already dropped hints as to what the new government intends to do. He thought “quick fix solutions were needed to tackle the situation” as country would “need $10 to 12 billion loans within six weeks”. Indeed it was a naïve approach and unnecessary alarm. Pakistan has a robust and progressive economy, incorporating essential features of a typical modern formal economy; but at the same time, it has deep rooted fault lines, at times making its behaviour unpredictable. Pakistan has often faced tumultuous financial conditions, yet it maintained an average growth rate of 6 percent. Economic affairs are generally run on day to day basis; hence an element of fragility has become perpetually embedded into country’s economic affairs. Real challenge is not arranging “$10 to 12 billion loans within six weeks”, but have a long term Vision so that such patterns don’t come back to haunt our economy every now and then. Solutions are available. What we need is political will to carry them through. Proposal of floating “Overseas Pakistanis’ Bond” is a viable option and should be fast tracked. Alongside one could think of “Debt Retiring Bond” open to inland and overseas Pakistanis. There is need to create a “Saving Culture” through an environment of austerity and meaningful return on savings. Government restructuring could reduce the governance cost by one third; and fixing “Public Procurement Policy” procedures could add hefty saving of around 40 percent. There is need to untangle our taxation maze of multiple direct and indirect taxes strangulating those who pay their taxes and letting those go scot free who do not wish to pay taxes. Our taxation system is cruelly pegged. For those who want to pay taxes everything other than breathing air is taxed. And those who do not wish to pay they are offered shamelessly low 2.5 percent tax for their ill-gotten wealth staked outside Pakistan. Most of them did not avail the offer as tax was “too high”. Country’s existing tax regimes do not provide even playing field for all sectors. Pakistan’s economy comprises of: Industrial Sector (20.91 percent of GDP); Agriculture Sector (18.86 percent of GDP); and a sparkling Services Sector (60.23 percent of GDP.; Agriculture Sector’s tax contribution is little over one percent of gross national tax; Industrial Sector accounts for around 17 percent of tax. Services are inordinately overtaxed. Recently Supreme Court had to intervene to reduce taxation on mobile telephone users and gasoline to provide much needed relief to hapless consumers. Due to inefficient Regulators, the quality of services is far below the acceptable standards. Pakistan’s economy faces some arduous challenges, which are almost perpetual, like: sustained high population growth rate (over 2 percent); mainly thermal fuel based high cost electricity; shortage of water and electricity; narrow tax base leading to low tax to GDP ratio (12.4 percent); inefficient revenue collection system; inadequacy of infrastructure; high inflation and interest rates etc. Regional and global market dynamic and inter play of American sanctions here and there often make unpredictable negative impact on country’s economy. Single commodity export (textiles) exposes it to vulnerability of price variations in international market; likewise, fluctuation in oil prices is another single factor making unpredictable impact on import bill without any prior warning. Pakistan’s society is inclined towards consumerism, as a result imports always exceed exports by huge margin (gap is US$37.7b in FY18; causing unsustainable Current Account Deficit (over 18 billion in FY17-18). Over borrowing is a national habit, and now external and domestic borrowing stands at over 72 percent of GDP. Public debt of Rs24.5 trillion includes domestic debt of Rs16.5 trillion and external debt of Rs8 trillion. The financing of the current account deficit by taking more loans is one of the reasons for high debt accumulation. Average maturity time of public debt had come down from 4.5 years in 2013 to 3.7 years in 2017. The indicator of debt maturing in one year also deteriorated in recent years and now 44.4 percent of the total debt is maturing within one year. Biggest challenge for the new government is enormous expectations of the people who are waiting for some sort of relief from the new government. And going back to the IMF would be a big disappointment. There is a strong public perception, though largely misplaced, that country’s most of economic difficulties are due to the preconditions that IMF has been attaching with its previous packages. Reality is that had we implemented IMF recommendations, we would have long been out of economic difficulties. Despite a razor thin parliamentary majority of his party, crafty coalition partners and a strong net of dynastic politician around Imran Khan, there is strong aroma of hope that he will be able to gather requisite critical mass to break the stranglehold of vicious factors bringing our economy to such a pass.

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