BRICS 'development bank' must aim effectively to end Bretton Woods Institutions' disparities

The move to establish BRICS bank is meant to provide patient money and risk capital to long term projects and not aimed at challenging the existing multilateral financial institutions like the IMF and the World Bank, the RBI Governor Raghuram Rajan has said in a speech at an event organised in Chicago on Friday by the Chicago Council on Global Affairs.

In verbatim, his views came as: "I don't think it was primarily meant to challenge the existing multilateral institutions but it certainly is saying look we have plenty of money ourselves, why don't we put some of this money to use in a way that benefits us rather than necessarily depending on the multilateral institutions to change which is taking much more time than anybody thought of".

This is quite surprising from him, seeing he is heading India’s Central Bank and India is going to get the first Presidency of the new bank, would be headquartered at Shanghai. Rajan’s remarks certainly have potential to start a serious debate, about the future course of old mammoth discriminatory financial institutions, which have underwent almost no practical changes (mildly he admitted this time too) towards the need of the developing countries since their inception and on wake of sea of changes in the fundamental orders in the world.

As in collective reckoning, the consensus among the BRICS countries (Brazil, Russia, India, China and South Africa) to establish a New Development Bank (NDB) and a Contingent Reserve Arrangement (CRA), finally emerged out of their dissatisfaction with the ultra conservative Bretton Woods Institutions, such as the World Bank, International Monetary Fund (IMF) and the unflinching extremes of west-centric dollar dominating global monetary system.

The US has been ruling the multilateral institutions – and the BRICS that include five super-performing economies with over 20 per cent contribution in the global economic activity, posses just 11 per cent of the votes in IMF.

Adding more jerks to the adversities, the IMF's precautionary credit lines found reluctant receivers in underrepresented countries – that made central banks of these sides desperate for dollars to obtain the credit from the Federal Reserve only. The Fed played a proactive role during the height of global economic crisis in 2008, but not necessarily the similar policy will be replicated ahead too.

The BRICS countries’ inhibition in such scenario is forthcoming but rational – and their beliefs in NDB and CRA have sufficient logical traction. The NDB aims to meet with the credit requirements of heavy infrastructural projects – although the demand for credit will not be equal from these five countries, as they are into different development stages. But for meeting additional needs of infrastructure creation, the NDB has a balanced approach in terms of activating the prospective creditors and borrowers at same platform.

So, the business proposition of NDB is free from contention. However, the Bretton Woods institutions and the flocks of economists nurtured through their legacy have reservation on it, as this new development bank will promote regional co-operation unlike the already existing Inter-American Development Bank, Asian Development Bank and African Development Bank. That apprehension is totally misplaced, as the NDB with seed capital of just $100 billion or even with an incremental outlay will be not able to challenge the might of an established and mighty, IMF or World Bank – but it would be surely a beginning for BRICS to chart a new course for them in meeting with the bundled challenges of long-term finance.

Intently, the CRA intended to lessen the BRICS dependence on the Fed and dollars, showcases something different than the NDB. It is allocated $100bn – for swap lines, accessible to all five-nation members. With no permanency of lending and borrowing structure, the idea of CRA may not work as expected. But it would be naïve to reject it too early, as the potential of closer co-operation among the BRICS can unleash conducive impacts on its functioning.

Remarkably, these arrangements by the BRICS were made to counter the persisting discriminatory policies of the giant financial lenders – as in the case of IMF, it has changed everything but not its conservative structure, aligned in favour of the western countries. There is enough merit lies in the BRICS claim that the international financial system has worked against their interest. Rajan and others must heed to this truth.

Policymakers from the BRICS have been vociferously airing their views about the partial policy stances of the rich countries’ institutions, disguised as ‘multilateral agencies’. Earlier, Raghuram Rajan, was one among them, who aptly identified rich countries for pursuing selfish policies with no thought of their negative impact on emerging economies. Will he recall it now?

And the economic bubbles, their temptation of falling and making the global financial system on toe is something never amiss the scene. The Bretton Woods institutions in their present shape will be keeping such threats alive, so the notion of getting adrift from the crisis would be rather too simplistic at this point of time.

Hence, the space is for an alternative financing arrangement – first at regional, and next on the international level. This new bank is capable of bringing that, although initially with limited impact. China has been lending in Africa and that made good effects but it also violated many basic procedures – the BRICS bank has to move cautiously on this, as carrying forward the legacy of any one country out of those five would be against its collective foundational spirit. So, the mode of operation must be carried forward with a standard set of norms, never to be tempered with any one member’s discretion.

The BRICS bank has immense potential to bank with the huge number of roads, power plants and sewerage systems, as those all need large-scale funding. With the long-term capital base of the bank and meeting with the financing demands of these projects, the purpose of its establishment would be justified.

However, the new bank is not completely free from the challenges. Among the shortcomings it has, is its relatively small size, seeing it will have to work on international level. Also as Ben Steil and Dinah Walker of the US-based Council on Foreign Relations note that, China, India and Brazil have borrowed $66bn from the World Bank alone – more than the entire subscribed capital of the BRICS bank. That indebtedness may hamper these countries to go too agile in promoting policies in favour of their new bank and finally to counter the influence of the World Bank – possibly, there may be temporary ambiguity in loyalty.

Moreover, the BRICS bank will be facing adjustment related issues with the different political systems of the five member countries – as the differences between the systems in India and China are far too wide to be adjusted so easily. The new bank will have to look on the ethical concerns, include that related to the handling of natural resources by the projects, it would be financing. Its articles, which ensure that the founders will never see their voting rights drop below 55 per cent, must be scrapped or made more democratic. As this particular clauses make the idea of BRICS bank, less democratic than claimed.

Beyond even an iota of doubt, the Bretton Woods institutions are symbolising the spent time of empire, which are on verge of ruining after a painfully long saturation phase. The rest world, including former colonies have changed in the recent decades – so, the experiments like BRICS bank outlines positively where the future is – apparently, its on the side of emerging economies. Rajan should see the turning point of history little more cautiously, wishfully like he once saw the spectre of global financial crisis as early as in 2005– and delivered memorable Jackson Hole lecture.
-Atul K Thakur
Email: summertickets@gmail.com
(Published in INCLUSION)

Kathmandu is now Closer Post Modi's Visit

In the official establishment of Nepal, and among its masses, there has been a lingering sense of dissatisfaction over improper diplomatic reciprocity from India. This was understandable, as no Indian Prime Minister thought it essential to visit Kathmandu for seventeen long years. Hence, Modi's invitation to SAARC leaders for his swearing-in ceremony was seen as an indication of a strong neighbourhood policy, and that was welcomed by Nepal.

Further, Nepalese Premiere Sushil Koirala's visit to New Delhi in May helped establish fine working terms with the new government, which became evident when India’s external affairs minister Sushma Swaraj made a visit to Kathmandu and won the hearts of the Nepalese people.

India has always played a crucial role during the political transitions in Nepal. This goes back to the time in Monarchy, where India thoroughly enjoyed a non-competing role.

Thus, Modi’s long and nuanced extempore speech in Nepali Parliament wherein he touched upon certain long-pending issues, was very well received in the country. He also spoke a few sentences in Nepalese, which was a humbling gesture. Apparently, even radicals like Prachanda and Baburam Bhattarai hailed his efforts and came to agreement.

Modi not only offered Nepal soft credit to the tune of Rs (Nep) 10,000 crore for various development projects, he even simplified the terms of diplomacy in his precise remarks that “India is an elder brother, not a big brother”. In the past, anti-India sentiments over the interventionist approach of the Indian mission in Kathmandu persisted, and there was no parity in political negotiations.

So, under this backdrop – Modi's simple yet sensitive approach to the issues at hand made his time in Kathmandu highly productive, not only on a political level but also in terms of improving trade relations between the two countries. He also spoke for rationalising the telecom arrangements and enhancing cooperation on security related matters.

Although the open border has been a unique feature of Indo-Nepalese relations, it has also been a major cause of concern for India apropos to its potential misuse by unscrupulous elements posing security threats to either side.

It was agreed that neither India nor Nepal would allow their respective territories to be used against each other. Both sides agreed to finalize the texts of Extradition Treaty and MLAT on an early date.

Crucial projects such as the Pancheshwar Development Authority (PDA) received the nod for approval. The Karnali hydro-power project– besides other power projects like Arun III, Upper Marsyangdi and Tamakoshi III - has also seen significant development. The development of projects of this magnanimous size will be a major catalyst for the development of Nepal’s enormous hydro-power potential.

The Nepalese side highlighted the trade deficit it is facing viz. its trade with India, and suggested measures to address this deficit through increased Indian FDI, relaxation of non-tariff restrictions including SPS standards for agro products, increased support in product development, relaxation of Rules of Origin requirement for duty free access to Nepalese products, and mutual recognition of standards, conformity assessment and accreditation.

The Nepalese side also requested the removal of Quantitative Restrictions (QRs) on the four core Nepalese export products namely vegetable fat, copper products, acrylic yarn and zinc oxide. The Indian side assured it would consider these requests – however it reminded them that the trade deficit could best be bridged by the development of hydro-power in Nepal and the export of surplus power to India.

The talks also included deliberations over three additional air entry points at Janakpur, Bhairahawa and Nepalgunj, and cross border routes to facilitate direct flights between regional airports (Pokhara-Bhirahawa-Lucknow), in order to save time, cut costs and improve air connectivity.

The two Prime Ministers directed relevant authorities to expedite all work related to the development of cross border transmission lines as was agreed by the Joint Commission. At the request of the Nepalese side, the Government of India agreed to consider undertaking the rehabilitation of Koshi Pump Canal, Koshi Western Canal System, and West Gandak Canal System with a Lift System to irrigate additional land in Nepal.

Modi’s visit to Nepal has brought about decisive and visible changes. It has reset the game with China now batting from a weaker pitch.

In the last two decades, China has been spending billions of dollars to categorically diminish India’s traditional stronghold in Nepal – but with new synergies in Indo-Nepal relations, China's propagandist interventions into the Himalayan nation will be in vain.

In the 1970s King Birendra proposed that Nepal be a ‘zone of peace’ between India and China and in the 1980s, Nepal began importing Chinese weaponry, which to India was clearly against the spirit of India-Nepal 1950 treaty.

With no Monarchy and the Maoists in mainstream, those arms export struggle between Indian and China is almost over in Nepal – however India’s concern stays about the seized Chinese advanced arms from the Maoists, which all are not under state control.

Nepal is a country landlocked between two Asian giants (India and China), along with a disputed Tibet – this complex geographical and political reality has been a key influence on ties among these three countries.

Modi’s is scheduled to visit Nepal again for the SAARC Summit in October, with which the South Asian Free Trade Area (SAFTA) may see a new lease of life. For now, Nepal no longer sees India as ‘Swayambhu’ – this is an achievement.
-Atul K Thakur
Email: summertickets@gmail.com
(Published in INCLUSION)

Himalayan face-off is inevitable

India and China are competing everywhere on earth, from nearby Pakistan to faraway Africa, for natural resources and diplomatic edge. The situation is no different in the rugged terrains of neighbouring Nepal

India and China have a long history of love-hate relations that can be traced to the pre-civilisational era. Colonisation, of course, changed the conventional terms of engagement — especially the Boxer Rebellion in which the Indians fought, along with British forces, against the Chinese revolutionaries. Since then, the Chinese have never really trusted the Indians.

A part of the Henderson-Brooks-Bhagat report on the 1962 India-China War clearly establishes the effects of this old Chinese complex. It also details the blunders done by the Indian Armed Forces and the defence establishment.

Prime Minister Jawaharlal Nehru’s heightened sentimentalism, rather his show of statesmanship that caused for the war, have also been exposed. The report is only partially in the public domain; nonetheless, it has given much insight into India-China relations.

Tibet and Kashmir and China’s irritating stand on boundary issues are the focus in journalist Shishir Gupta’s book, The Himalayan Face-off: Chinese Assertion and the Indian Riposte, which says, “Even if bilateral trade between India and China goes beyond $100 billion in the coming years, China’s posture towards India is adversarial and will perhaps remain so in the future, with Beijing viewing New Delhi through the prism of the Dalai Lama and the Tibetan Government-in-exile… A rising China, inflexible on boundary dispute resolution and with strong tentacles across South Asia and beyond, could encroach on India’s strategic space and lead to a potential crisis this decade.”

However, the book doesn’t look into the India-China ‘face-off’ in Nepal. China has turned overtly cunning in Nepal, so as to challenge the traditional comfort characteristic of India-Nepal ties.

China is infusing large amounts of money in Nepal to minimise the warmth New Delhi and Kathmandu have enjoyed through economic cooperation. On the ‘softer’ side, China is missing no chance to slap its cultural load on Nepal.

Hence, the number of Nepalis wanting to learn the Chinese language has seen a dramatic rise in recent years. Still, it will be difficult for China to counter India’s traditional position in Nepal.

Politically, the advent of Maoism in the mid-1990s gave China a big foothold in Nepal. But Maoism in this Himalayan Kingdom has been so diluted that it has almost lost its Chinese soul, especially in the face of the complex conditions produced by local competitive politics.

For many years, Maoists were able to hold on to power because they were pragmatic and flexible in their political programming.

The Maoists in Nepal designed their policies in keeping with the changing political situation of the land. They rose to occupy the highest positions in the country, but in recent years they have lost the sheen after the top Maoist leadership’s dubious stands were exposed and the former insurgents frittered away the credentials to stay on the high moral ground.

China is watching the developments in Nepal closely. The 2013 election has given the new regime a mandate to govern, not rule ruthlessly and without a sense of direction. In this new composition, Maoists are a minimal force.

From a larger geo-strategic point of view, China perceives India to be getting close to the world’s only superpower. Therefore, it has been seeking to encircle India through various advances.

Some may argue that this is perhaps partially an existential tussle caused by China’s continuing complex vis-à-vis India. Perhaps China still sees India as a collaborator of the colonial British Army that plundered Chinese cities.

However, this seems like a ridiculous argument when China, today, is one of the biggest offenders of human rights. It makes little sense as to why China would seek to shape its current engagement with India on the basis of an event that happened over a century ago, and that too under the control of colonialists, not Indians per se.

Still, India and Nepal, in all their diplomatic manoeuvrings towards China, must take into account the complexities of the Middle Kingdom.

Time and again, the Chinese leadership has asserted its belief in co-existence — India has been acknowledging this without giving heart to it, as this country has its own share of complexes, born out of Chinese betrayals that began in 1962. Nepal, with its unique historical position, has rarely had to face-off with either Beijing or New Delhi.

India and China appear to be in a tug of war, with their many unresolved issues. It is difficult to be optimistic about the future, given the incorrigible complexes of both Beijing and New Delhi. The Himalayan face-off is a reality, and it is going to be an enduring one.

India and China are competing everywhere on earth — from nearby Pakistan to faraway Africa — for natural resources and diplomatic edge. The situation is no different in the rugged terrains of Nepal.
-Atul K Thakur
Email: summertickets@gmail.com
(Published in The Pioneer on April22,2014)

Beyond borders

Many multilateral cooperation platforms have eluded smaller nations, contradicting their own rationale for existence. Nepal is no exception to this phenomenon and has badly missed out on chances to carve out a position to deal with major bilateral issues in South Asia and beyond. The country’s long democratic transition has made its standing even more precarious.

Before 2001, Asia had two distinct royalties—Nepal and Bhutan. With the unnatural ending of the partially feudal legal throne in Nepal, the country ushered in a complex web of mismanaged political arrangements. Later, the prominent advent of the Maoists and Madhes-based political parties were in the right spirit of the times but later developments have shown their inefficiency in dealing with the cores of polity and diplomacy.

Living under an unjustified ‘big brother syndrome’ and making impractical moves for trilateral initiatives have broken down Nepal’s conventional edge vis-à-vis its relation with India. Prachanda’s latest visit to New Delhi was primarily seeking Indian confidence for the Chinese presence back home. This was a sort of blunder, though it was surprisingly overlooked by the Indian side.

Nepal’s external policy should be directed by its own self-interest instead of excuses. The political establishment in Kathmandu should reckon that the diplomatic engagements of two almost equals—India and China—do not happen on a single front but on many counts. Among them, the most formidable is economic ties. Li Keqiang’s first foreign trip as prime minister to India was aimed at settling the border dispute and boosting economic ties. Straight after India, he flew to Pakistan, and total results of his visit have proved abysmal.

China cannot simply throw off the burden of its past. It has a few allies to date and Nepal should not have irrational expectations from China. In the lexicon of Nepal’s political economy, trade should be given extra attention. Trade and diplomacy must be the mainstays of external policy. There is no reason why Nepal should distract from this fundamental understanding. The hyped ploy of breaking conventions has given little positive outcome so far. The lack of any political stalwart is another cause
of concern; the country is missing a pacifier like Girija Prasad Koirala like never before.

New efforts are being made to hold Constituent Assembly elections in November, which will be a great test of the political parties en masse as there is great disenchantment among the populace for their false promises. People’s representatives need to come to terms with the fact that the masses are only concerned with leading the country out of the present mess. The internal atmosphere will shape Nepal’s external policy; so clarity over this would do well for the country’s future course.

In South Asia, Nepal is situated strategically to carry forward its independent stature. Despite the gloom and doom over the last two decades, Nepalis in general have endorsed democracy. This is a sort of accomplishment, as modern ideas and aspirations are routed through such welcome changes. If there is balance on the political home turf, it will be much easier for Nepal to claim its deserved position in the world.

There is no tailor-made solution for a firm footing in external matters except for being internally strong while chasing difficult targets externally. Relying less on theoretical paradigms and taking a more practical approach would make foreign policy maneuvering a more informed exercise. As a sovereign state, the boldness of Nepal’s action should display its sovereignty. Unlike China or India, it has never earned the ire of cunning colonial motives. This is a reality and not bound to be changed.Thus, it allows Nepalis to take pride in its non-interfering nationalistic pedigree.

In the present ideal-deficient time, bilateralism is the order of the day for nations. Hence, Nepal too should define its priorities accordingly. Among the most important changes, it should learn to look beyond India and China as the world is much bigger. With a changed mindset and a mature leadership, Nepal has the capacity to draw resources from beyond.

However, India will stay its closest ally, even when Nepal expands its presence across the globe. China has a different angle on seeing the world but it is a very formidable force in itself, which India has learnt since 1947. Nepal, for a while, can learn from India’s follies in the 1962 war. It is time for a course correction in Nepal.
Atul K Thakur
Email:summertickets@gmail.com
(Published in The Kathmandu Post on July05,2013)

US-China Cold War in Korea

The complete loss of bilateral trust in the peninsula is directly proportional to the expansionist interests of Beijing and Washington, DC. While the former patronises Pyongyang, the latter is an ally of Seoul

The Korean peninsula is again going through a rough time. North Korea’s nuclear test and South Korea’s close military co-operation with the US has lead the region and international community towards deep uncertainty. But this is not for the first time that there have been tensions in the Korean region. The two countries have been bitter rivals since the Korean War ended in 1953.

From North Korea’s standpoint, its aggression has been surfacing because of South Korea’s over-reliance on the US. Over the decades, South Korea’s easy access to nuclear capacity has created a sense of grave insecurity within the dictatorial regime of North Korea.

However, it is by manipulating this potential threat from a neighbour that the dynasty in North Korea has endured for long. And, the swiftness with which Mr Kim Jong-un succeeded his father as the Supreme Leader of North Korea confirms it. As for South Korea, it has moved with the times, keeping in mind its defence and trade-related requirements, under the shadow of the US.

North Korea, too, found in China, a patron to help it challenge the combined might of the US-South Korea alliance. Nevertheless, its reliance on China is not quite on the same level as the symbiotic relationship that South Korea shares with the US. But a liberal South Korea tried to bring about a rapprochement in the past with its ‘sunshine policy’ — this was a genuine initiative put forth by then President Kim Dae-jung in 1998.

The policy was a big step towards improved political and economic engagement with North Korea. Unfortunately, within a decade, it ceased to exist. This created ground for never-ending acrimony between these two countries. The present wave of hostilities in the Korean peninsula is possibly generated in response to the recent leadership change in South Korea and US President Barack Obama’s unprecedented aggression towards the ‘wrong part of world’.

For years, North Korea has routinely violated the Treaty on the Non-Proliferation of Nuclear Weapons. But the country’s third and latest nuclear test worried the American establishment to such an extent that North Korea is now considered by Washington, DC to be a serious threat — in fact, it seems to have been listed as the ‘foremost security threat in the region’.

North Korea’s young and immature Supreme Leader has only made the situation worse by behaving unmindfully. At the height of a crisis such as this, North Korea has made a terrible blunder by not pushing for serious negotiations.

North Korea may succeed in engaging the US, but it has no infrastructure to effectively challenge the world’s mightiest country. The US is formidable because it can fight relentlessly. Often, it even wages war without apparent reason. This is perhaps because it has no civilisational back-up that India enjoys, so it has little to consider regarding the moral degradation that comes with such aggression.

A few weeks ago, the North Korean Government stepped up the security-cover it provides to foreign diplomatic missions in Pyongyang. Before that, it had stopped the movement of South Korean workers employed in a giant business district run by both countries — this was an attack on business interests, and had more than just a symbolic impact on South Korea. It made Seoul more worried over its vulnerable location. South Korea’s capital is close to the demilitarised zone and could be demolished in case there is a military confrontation with the North.

The complete loss of bilateral trust in this region can be seen as directly proportional to the expansionist interests of both China and the US.

‘Multi-lateralism’ is an obsolete term today — the US has ensured as much with its remarkable follies in the past six decades. The Cold War has been over for more than two decades now, and there is no supposed threat from the Soviet Union which does not even exist. But given the manner in which the US is responding to any Chinese overture around the world, it seems like the the foreign and military policies of America are yet to move with the times.

As for China, it is not always what it appears. Sometimes, its actions help clear the fog around it; at other times its intentions are unclear. For example, in the Korean region and even in Nepal, China has played an awkward role. Remember North Korea was once sanctioned by China too under its opportunistic state policy. And Nepal will pay the price for cosying up to the Asian giant.

As for the Korean clashes, they will probably not end in the foreseeable future. But India can, meanwhile, learn a lesson from China which has undertaken a dangerous march in the neighbourhood, outside of its den. It needs to be careful
-Atul K Thakur
Email: summertickets@gmail.com
(Published in The Pioneer on May7,2013)

Nepal’s politics at a cross roads

Prithvi Narayan Shah, 18th century king and the father -figure of Nepal, had once termed his country’s position as “a yam between two boulders”. He was, of course, referring to Nepal’s unusual status between the two intimidating giant powers — India and China. Even to this day, his metaphor aptly defines the existing state of affairs in Nepal’s strategic terms with its neighbours. Despite the fact that Nepal as a nation is far older than both of its principal neighbours, it has not been able to come out of the major influence of the two, especially India.
While the India-Nepal relations have historic backing from a series of factors, China’s quest to downplay India’s special friendly status with Nepal is part of Beijing’s narrow imperialistic ploy. Now, both in international relations and domestic politics, Nepal is facing the adverse implications of recently increased political engagement with China.

In broad terms, Nepal has suffered a lot by mismanaging its conventional role of a passive and focussed nation that tempered its special peaceful standing in South Asia. In his later days, King Birendra shared close relations with China, and so the royal massacre of 2001 shocked the Chinese greatly. King Gyanendra, who then occupied the throne in highly suspicious circumstances and without the respect that his predecessors enjoyed from an average Nepali, sought to cement ties with China by offering it space in the South Asian Association for Regional Cooperation in 2005. India had been understandably less than amused by Kathmandu’s overture to China.
Since the end of the monarchy, Nepal’s politics has turned more inward looking. The breathless twists and turns hatched by political parties, whose working patterns are radically different from one another. Such is the friction among them that the attainment of any goal collectively or individually has become a lot more challenging. After the bloodless coup in February 2005, Mr Baburam Bhattarai, a thinking leader from the Maoists’ camp, came forward against the obstinate ideological hardline pursued by the likes of Mr Puspa Kamal Dahal, popularly known as ‘Prachanda’, called for the democratic means of struggle — that was a point of highest accomplishment in Nepal’s democratic transition.

Things are not similarly idealistic and flexible now, even with Mr Bhattarai as the elected Prime Minister having greater acceptability inside the party and outside. The conclusion that can be drawn over the failures of Constitution making on another deadline is that Nepal’s polity is undergoing a major change in its fundamentals.
Consequently, the assertiveness could be found at an all-time high among the elite political participants, though this is hardly surprising as every major political change in Nepal (even in the past) has created a new class of elite with shrewd aspirations. That’s why the project of democratic revolution has not met with the success that it deserved in Nepal since 1950.

Chronic political deadlock is denting the credibility of mainstream political forces in Nepal. There is the need for an immediate consensus among the country’s political parties to acknowledge the progress that democratic movements have made since 1990, when the county first tasted democracy, although on restricted scale. Misleading demands of the Rashtriya Prajatantra Party, the Rashtriya Janshakti Party and others for bringing back the Constitution of 1990 or to go for an election only because the term of the CA has ended is condemnable. Such a move will give a fresh lease of life to a defunct monarchy. Despite the failures of the CA, revisiting the last seven years since the abolition of monarchy presents many positive landmarks on which the future base of democracy could thrive.

In this time of uncertainty, the Interim Constitution of 2006, which is still functioning, can offer the new proposed Constitution all the progressive set of rules that is enshrined in it and has a degree of high credibility. The Interim Constitution consists of all the major issues to be followed in the future, such as the abolition of monarchy, provision of federalism, participative representation in state services and others.

The intra-party feuds in the major political parties of Nepal and the failure of these parties to reach a consensus on crucial issues including on the CA, have severely damaged the democratic spirit of the country through decades of struggle. As compared to the Nepali Congress and the CPN (UML), the Maoists are new to power and lack the soundness they should have as representative of a ruling collation.
The issues of federalism based on ethnic identity need a sensitive response on the policy front. Unfortunately, exactly the opposite has been done by the top political leaders. Before the Madhesi parties’ total convergence with the Maoists on this front and their outsmarting acts over NC-CPN(UML), the region of Madhesh had passed through a rather volatile phase in which many lives were lost in the process of peaceful demonstrations in favour of statehood. A major blast in Janakpur (unofficially Nepal’s political laboratory) left four dead, including an emerging Maithil-Nepali leader Ranju Jha.

Kathmandu has to be more accountable in the changing times to the Madhesi-Janjatis who now have a greater say over political matters and can easily make or break the established political discourse for their long-anticipated rights. The concentration of power in Kathmandu has to be reduced. While this will happen with the upcoming execution of the federal model, it may not cure all the maladies of ‘divisive political mania’. Still, its impact at least in selected terms would be long-lasting in favour of a peaceful and stable Nepal.
In the ongoing round of political manoeuvrings, India has played an apparently passive role. Diplomatically though, this cannot be taken as inertia, as silence speaks too. No longer is India ‘Swyambhu’ and no longer is Nepal ruled by the comprador capitalists.
Atul Kumar Thakur
June 24,2012,Sunday, New Delhi
Email: summertickets@gmail.com
(Published in The Pioneer, June 18, 2012/ http://www.dailypioneer.com/columnists/item/51822-nepal%E2%80%99s-politics-at-a-crossroads.html )

In Times of Change

The recovery from the chronic global slowdown is only partially complete in both developed and developing countries. However, developing economies are better off depending on local conditions and medium-term productivity growth rather than the large, globally integrated, influential forces that dominated economic activity before the financial crisis, and still play an important role in moulding global regulatory policies. The robust growth registered in emerging economies in the last decade has thwarted suspicions regarding these blocks. Yet, several tensions and external events have the potential to disrupt the process of development.

Output is expected to come in stronger than anticipated in performing economies. The other case could be that very strong speculative capital flows that characterised the third quarter of 2010 may return. Either scenario could potentially accentuate inflationary pressures in the global economy: both those emanating from commodity markets and those coming from increasingly binding capacity constraints in a number of emerging markets. In such a scenario, which pre-supposes that policy tightening efforts underway are not sufficient to rein in demand, authorities would be obliged to tighten more aggressively in 2012, thus leading to a more pronounced slowdown in 2013.

The big dilemma confronting democratic governments is the choice between bailouts and debt waive off. Undoubtedly, capitalist prudence orders for the former. Often bailouts occur more frequently than mass waivers of debt, albeit India presents little difference with its distinct polity and populist commitments. Indeed, complete financial recovery could be a desired endgame, though conquering it would be a pipedream under the present circumstances in which regulators, governments and financial institutions are functioning across powerful economies.

Moreover, high fiscal deficits and rising sovereign debt pose medium-term challenges to a wide-range of OECD countries. So is it time for top rank global policy makers to acknowledge this epoch making economic shift in favour of emerging economies and start sending telepathic connections across the world?

Consumption Conundrum
The global economy has grown over the decades by relying heavily on American consumption and policy dominance (good or bad). This intensified with the disintegration of the USSR in 1991 as it resulted in the demise of an alternative ideological block. The structural force behind large US consumption has been a significant middle class. The middle class is an ambiguous social classification, broadly reflecting the ability to lead a comfortable life. But the current downturn has brought this process to a halt. US households are saving again in an effort to rebuild lost wealth. The consensus forecast is that this will be a lasting effect of the global financial crisis.

How can the world economy fill this void in global demand brought on by the retrenchment of the American consumer class? Naturally, the emerging middle class in China, India and other populous countries are moving to become the next global consumers under the changed set of conditions. But the policy support to achieve such a rebalancing is not easy in these countries facing different lacunas. In short, Asian consumption is tied, according to many analysts, to long-term institutional changes.

Shifting Nexus Of Power
At this decisive phase, as economies in Sub-Saharan Africa and the Middle East develop and open up to trade, links between Asia, the Middle East, and Africa are expected to grow further. Economic integration between these regions and the emergence of south-south trade will certainly result in the formation of influential trade hubs. The trade of the future will be determined by the availability of cheap resources and the destination of final demand; this would be a big accomplishment for these hitherto tail-spinning economies. Big corporations from the developed economies have already begun to question whether the challenges of outsourcing their production processes outweigh the benefits of producing locally. In this respect, Africa and the Middle East offer both low-cost production capabilities as well as a rapidly growing domestic market.
It is becoming rather obvious that China may be losing its status as the "manufacturing leader." Cost economics that have long worked in China's favour have come full circle: domestic wages are on the rise, eroding much of the cost arbitrage offered to foreign companies. Even Chinese companies are affected as improving living conditions in the hinterland discourage potential migrants from seeking work in urban coastal provinces. Furthermore, an aging population in the next decade will likely weigh down labour supply and impact wage competitiveness. As Chinese production moves up the value chain, workers are demanding higher wages, better working conditions, and added welfare benefits. Thus, rising labour costs, along with pressure to loosen control on its exchange rate, could pose a serious threat to China's international competitiveness if productivity does not correspondingly improve.

Intermediate production, rather than locally produced finished goods, as an economic structure presents immense opportunities for emerging markets to develop specific capabilities and capture a bigger share of the supply chain. From a company's perspective, an emerging trade network with a wide portfolio of capabilities allows for diversification in the supply chain rather than extreme reliance on a single country whose competitiveness may be decreasing.

Nonetheless, China will remain an important, if not dominant, player in the future. The country's burgeoning middle class is set to become more affluent and boost consumption levels in the next decade. The head of emerging markets at Morgan Stanley, Ruchir Sharma's newly published book, Breakout Nations: In pursuit of new economic miracles gives some lucid views about the new wave of competency coming from the side of emerging economies.

Challenges On Home Ground
The cheap flow of foreign capital had made Asian economies such as China and Japan exclusively powerful in the region for a long time before opening of other economies, primarily India. But lately both Chinese and Japanese economies are under excessive strain because of their over integration with western nations. The case with India is different because liberalisation took place later and with active regulatory restraints.

Raghuram Rajan in his remarkable work, Fault Lines mentions India's growing income inequality and the dangers that a social underclass poses to the country's economic future. His strong emphasis on the ills of maturing cronyism in India's power centre is worthy enough to be considered as a grave threat to the essence of India's constitutional mandate. Rajan is right in pointing out the growing numbers of Indian billionaires are mostly products of networking rather than enterprise.

For the last several months, the Indian economy has been consistently juggling between controlling inflation and maintaining robust economic growth. In order to control spiralling inflation, the Reserve Bank of India chose to sacrifice growth in order to check the inflation. The 20-month period, until October 2011, of rising interest rates has slowly but surely put the brakes on economic growth.

For keeping alive the basic mandate of India's growth, the wave of policy/regulatory laxes need to be checked at any cost and synergising efforts should be made to retrieve Indian economy's lost confidence. Instead for unwarranted follow-up laws, we require an overhaul in the existing regulatory framework;India can't afford an ill policy regime.

Inflation, that had threatened to derail India's growth for several months, had shown signs of weakening in the recent past weeks. However, inflation is on the rise again, and it is likely to stay in the 7.0-9.0 percent range in the coming months. The central bank cannot afford to conclude that inflation will stabilise in the medium term. So far in 2012, the RBI has already eased the reserve requirements for banks, infusing liquidity into the economy. It is likely that further liquidity could be infused into the economy in the coming months. Measures to ease liquidity may, however, not be enough to provide a much-needed fillip to the economy.

Growth is slowing down, investment is falling, and business sentiment is on the decline. In the absence of any credible government action, the central bank may not be able to stave off calls for reducing interest rates for too long. Questions about whether or not the interest rate will be reduced ahead are giving way to when and how dramatically it will be cut.

Leading social historian, Ramchandra Guha's assertion that the India's economy is a fifty-fifty economy, best reflects the trend, and our economy has been following since 1991. Making Indian economy hundred percent functional should be the prime task of policy makers-the two basic ideas cam materialise this dream-growth with equity and emancipation of the marginalised with ensuring lowest possible economic disparities. Under a mixed or market driven economy, nothing more could be anticipated.
Atul Kumar Thakur
Email: summertickets@gmail.com
(Published in Businessworld, May16th 2012)

Material Planks in India-China Relations

India-China seems very similar in many trajectories like both countries had faced monarchy and later western imperial pressure in the past but surprisingly they emerged with entirely distinct ethos. China opted for socialism along with classical way of statecraft and diplomacy where words used to obfuscate the real intention; like its projected insistence on border issues which creates complexities in relationship with India.
Most strikingly China didn’t recognize the Mack Mohan line (Excerpted from its official minutes) and further kept denouncing the promises made by their statesmen like Zhou Enlai and others on strategic mutual agreements with Indian authority.

Consequently there never formed a unified perception on India-China relationship either in India or China. So, at least initial years showed very gloomious outcomes for both the country just after successful experiments with their respective mode of political system in late nineteen forties. Its matter of fact that apart from its dubious standing on foreign policy China has been showing a deliberate progressive development in their internal governance under visionary leaderships that stimulated the growth pattern of its economy.
Albeit these not remained consistent in equitable manner following an institutionalized pattern of corruption and denial of basic rights like freedom of expression and independence of press or fourth estate as it is called usually.

Unfortunate Tienmen square incident was much at par with such repressive state policy; China’s internal conditions are very different and fragile from an outsider’s perceptions of its might and prosperity. Today China facing huge resentment of its civil society and media over the atrocities they impose on rudimentary natural rights; an alluring example being vivid in my mind how peoples acted differently from Chinese government.
Recently China’s Central TV (CCTV) came under the fire and very outlandishly there was huge joy among the media persons including staffers of this state owned Tele Vision since they became overloaded with its biased view with the government authorities.

Chinese authorities out rightly denied such basic rights and any other similar claims like introduction of multi party democracy in socialistic pattern; a senior party leader had recently refuted such any propositions in near future.
So, China have very stringent consideration on its own insistence both at home and the world; such impatient with others view presents major hurdles for any constructive maneuvering.
Case is somehow very different in Indian side where its immaculate ethos has very strong constitutional backups with absolute democratic formulation which radically marked its difference with dogmas of Chinese system.

In its part India have been sharing very patient relationship with China though always gained complex and improper reply in their deal, so it’s remain a daunting task for even an expert to completely comprehend the transcendences of China’s world view. Explicitly Chinese authorities on many instances shown its uneasiness over India’s emergence in recent decades as they respectively supposed themselves more developed in economic and strategic terms, so never want any comparisons with India since they found only U.S.A, Japan and erstwhile U.S.S.R as their optimum comparable force.
China performs dubious role in foreign policy not only with India but its acknowledged partners like U.S.A as sometimes its called for G2 (China and U.S.A) as drive of aggressive foreign policy but also soonly refuted it.

Even despite being too much integrated with American economy China could visualize the fall of Wall Street as great news and see all such troublesome outcomes as an opportunity and a shift of Geo-economic scenario , so dealing with China indeed requires a cautious approach to handle such fluctuating policy. It’s completely outrageous policy of China where they wish to rise albeit refusing to trust others standing at their feet.
At every level of diplomatic move its foremost challenge before India to constructively engage China in their relationships that may be possible through harmonization of nationalism in both the country. Also both country needs to comprehend their power since conditions are now more balanced as a feeble India and mighty China like of ground realities are no longer exists. So China couldn’t undermine India now and think for India to breakup as they think in 1960’s as many complexities of power equations are becomes historical now.

China-Pakistan equations are another issue that bears great implications for India-China relationship because India seen at center locus by the Chinese government during framing its propensity of strategic ties with Pakistan. China puts their best commitment for Pakistan and India remains the strategic determinant for this albeit it’s also a counter reality that despite such efforts Pakistan is more dominated by the U.S.A than China since their Arm forces sustain on U.S dollars instead of Chinese Yuan.
On the issue of border problem with India, it would be quite asymmetric to conceive that it’s an outcome of India’s position on Tibet instead these policies started long before the Tibetan stalemate. Indeed Tibet should be a matter of concern more for China than India because of historical and geographical similarity but India let continue playing their humanitarian role with the sufferers of Tibet.

China recently professed that Dalai Lama has no role to play in peace negotiation which means now he ceased to be the representative of Tibetan peoples that is in itself a showpiece of China’s fragile and confused policy on such crucial matters. India has firm standing on its foreign policy which allowed it’s to show genuine concern to strife ridden peoples besides it’s also striking co-incidence that historically Tibetans has always showing their faiths in outsiders, so Indian role on Tibet must not acknowledged and confused as an act of intrusion.
Internal scenario of China presents confused and fudged picture for outsiders since hardly it’s provide impartial circumstances of introspection; noted author and journalist Prem Shankar Jha’s book on China “Managed Chaos” vehemently unleash such fabricated trends of Chinese development.

Despite all such odds India and China can strive for good deals on economic co-operation, it’s evident from historical enquiry that economic co-operation has reversed the chronic political stalemate between many countries. Besides both has superb presence at world politics and facing many common challenges like terrorism, economic slowdown, communalism etc, so at numerous level both countries has options for better co-operation that must finally up heal the Asian growth.
India’s bid for permanent seat in United Nations Security Council is a crucial issue where China’s constructive intention could boost the Indian claim which may ushered into a new paradigm of relations.

Both countries are highly integrated to world economy and can move for great symbiotic ties by manipulating Indian software expertise with Chinese hardware edge. India must keep availing the mid path theory of Confusias and Buddha…. Consensus is possible even between the stark divergent sides.
Like India’s first Prime Minister Mr. J.L.Nehru who once gifted with a Panda from Chinese president Zhou Enlai in his China’s visit, some months later Zhou Enlai visited India than he got a healthy dog from Mr. Nehru; but real story is ahead when Mr. Nehru visited next time to China he asked for well being of his gifted dog… reply of Zhou Enlai was it was quite tasty. These means diversions can make things more interesting like these unusual incidences.

Atul Kumar Thakur
September 8th2009, New Delhi
atul_mdb@rediffmail.com