What’s Modi up to in Pakistan?

The 90 minute visit to Pakistan by PM Narendra Modi has “stunned” most observers. None were expecting it. Ironically most leaders, including well protected NATO VIPs, visit Afghanistan unannounced, fearing terror attacks, Modi did so with enough prior notice in media and visited Pakistan stealthily!

Naturally speculation is rife in the media as to the events that preceded the visit and the visit itself of which very little is known other than cleansed disinfected stale media statements and tweets.

Let’s take a look at some of the possibilities. Most of these have been offered as logical explanations by some media pundit, political commentator or the other, so there is nothing new. Of course, Congress tied itself up in knots, offering several of these, often contradicting each other! Let us also assume that wasn’t the entire objective of the exercise ūüėČ

Modi is just frivolous, he likes doing such drama, nothing comes out of it.

Naturally many that do not like Modi have advanced this theory. Modi¬†is of course, not bothered by Congress and AAP making noise. They are never going to get the votes of the hardcore anti-Pakistan lobby. They’ll only end up looking like clowns, perhaps even lose some of their own Wagah candle kisser voters. But he sure bothers about his own core constituency that is conservative, supposedly against any interaction with Pakistan other than sending the army or air force. Why should he make things difficult for himself doing this, that too after the recent Bihar debacle that has weakened him somewhat?

This silly ‘explanation’ has to be dismissed without further consideration.

Modi is doing this to please the international community. So he can say, “look, I tried, it didn’t work”

This is of course, plausible. After all, there may have been some gentle prodding by Obama to ‘go talk to them’ or at least make an effort. ¬†As US is keen on washing its hands off the Afghan mess so it can re-focus on the long term China threat, India Pakistan detente can make a bad mess look prettier.

But this also assumes that Modi is simply uninterested in any sort of peace with Pakistan. He is simply trying to shut a few mouths by making a token attempt and wait for the right moment to deal with Pakistan ‘problem’ militarily.

This argument can be resolved only when he remits office, not until then. We can also look for evidence to the contrary Рthat he wants to leave a distinct stamp on history. He can either do this by obliterating Pakistan so it ceases to be a problem for the next 100 years, or by doing a landmark deal that brings benefits without the costs of war.  Chances are, he is sensible and prefers the latter option.

He probably knows he is the only one who can do it for the foreseeable future. A 15 party coalition headed by Nitish Kumar or Rahul in 2019, even if they manage to defeat BJP/NDA, is unlikely to enjoy a free hand. That is because even if defeated badly, BJP is likely to secure 150+ seats in the LS, enough to make things difficult for any ruling coalition.

There is no plan, it is just theatrics

This is yet another Congress theory. ¬†Simultaneously, its spokies have also floated the other theory (see below) that it is well planned and Parliament has been ‘bypassed’ and opposition deliberately kept in the dark. Pro Congress media divas have been pushing the Jindal angle – a story¬†of prior coordination and choreography brokered by a businessman, effectively rubbishing their own¬†“unplanned, unscripted theatrics” allegations.

Again, it is possible that Modi simply had a brain-wave sitting in Kabul sipping tea, talking to Nawaz Sharif over phone. But while it is possible (and likely) the trip itself may have been unplanned, the state of mind and the game plan that led to it can’t be dismissed casually. Particularly because it has been preceded by other moves such as Bangkok talks, Paris meet, FM Sushma Swaraj attending the Afghan summit in Islamabad etc. In other words, the no plan theory falls flat when circumstantial evidence is considered.

This is well planned, part of an overall master plan

While we may have two (or more) opinions on the potential success or failure, or its appropriateness or otherwise, we can surely say there is SOME plan.

Obviously we (and for that matter most media ‘experts’) don’t know what this plan is and we can, like a bunch of blind men looking an elephant over, can try to make some sense of it by observing evidence that is publicly available.

But we can suggest the contours of what this plan should be, from our own perspective and make some educated guesses on the likely roadmap as well as outcomes.

Enough of triumphalism

It is worthwhile here to diverge a bit and take a look at the triumphalist noise in some sections of our media and analyst community. It goes like this: Pakistan is all powerful now, everyone is queuing up at its door because it has so much influence on Afghanistan and Taliban in addition to its ‘strategic’ location. Modi was a fool all this while¬†and is now waking up to the reality. Hence he is willing to surrender some of his earlier bombastic attitude and join the queue to talk.

If one can consider the fact that bombs are not going off every other day in Pakistani cities and TTP is yet to takeover a district or two, and Balochistan remains part of Pakistan as a major triumph, there can be some merit to this argument. But by any decent standard, Pakistan is a long way from being a normal state that domestic (let alone foreign) businessmen dare to invest in. The oil bonanza is gone, likely forever, seriously undermining its key source of free cash from Saudis and UAE. The Arabs are in fact worried their own dollars are digging the graves of their regimes by feeding the Islamist monster they no longer control. Pakistan’s¬†other benefactor, China, is facing enough economic problems at home, slower growth and need¬†to cut excess capacity created by over investment. All the big talk of $46 billion ‘belt and road’ remains just that – big talk and may remain that way even ignoring security problems. And the costs – India getting annoyed and playing its own games with USA, are mounting by the day making it a worthless game in the long run. The very fact that Uncle Sam is washing hands off Afghan mess also means he is no longer going to write big cheques to the Pakistan army for logistics support, worthless as it was. Even President Ghani is getting fed up, because Pakistani generals don’t seem to have the means to bring Taliban to the table.

Pakistan (and its friends among the left wing in India) should be living in a fools paradise if they can assume that simply because it shares a border with troubled Afghanistan, it has a massive geo strategic advantage it can milk for eternity to bleed India while keeping its own home safe and secure. Far from it.

What’s the way forward?

  1. It should be clear to everyone things are at a stalemate. China is unable to ‘use’ Pakistan to stop India or restrict its options. Pakistan is unable to change India’s behavior by using terror proxies. It is not able to get Taliban to rule Kabul. Nor is Kabul able to defeat them, with or without US help. India is not able to ‘fix’ Pakistan once for all militarily. And then there is ISIS that doesn’t dance to anyone’s tunes but only obeys the Quran.
  2. This stalemate can go on for years, as it has been going on for years anyway. But in case you missed the point earlier, there is ISIS, that doesn’t dance to anyone’s tunes but only obeys the Quran. This wildcard entry has changed the game for all players, big or small. The only difference is the extent to which each player worries about it. Clearly Pakistan has to worry the most because it has ploughed and fertilised the field, sown the seeds and grown the crop of Islamist fanaticism and jihadi mindset only to see the “crop” ready to be harvested by the purer green ISIS. And the rest have to worry because Pakistan has enough nukes.
  3. China’s top priority is to fix its domestic economic mess that has serious implications for the future of its communist regime itself. It just doesn’t have the bandwidth for adventurism that too against a rising India that is steadily jacking up the price for China’s game plan. ¬†Modi has shown India can deliver a big market and huge gains on the positive side, should China be ready to play ball.
  4. Uncle Sam has lost all interest in Middle East and its oil. It’s economy has moved on. All he wants from the region is for Islamist terrorism to remain bottled there and not bother mainland USA or Europe. He can, in order not to lose face, keep, at relatively cheap cost, sufficient forces in the Af-Pak arena for decade or more to ensure Taliban can never overrun Kabul even if it can’t be defeated.
  5. Pakistan simply can’t continue its self poisoning strategy for that long hoping to gain mysterious strategic depth and leverage against India when Uncle finally leaves. Along the way it can stage a Mumbai or two and slow India down by 1-2% but nothing more can be gained.
  6. It is in this context we have to see Modi’s recent moves. India too has to get its economy moving if it has to challenge China’s rising clout in the region and more importantly to win elections.
  7. Given all this regional context, the contours of an eventual settlement and the road map can go like this:
    1. Put a lid on the Kashmir issue by agreeing to current borders either immediately or after a cooling off period
    2. Turn the Afghan problem into an opportunity by getting Pakistan Army to give up its paranoia over India’s investment there.
    3. Obviate the need for terror proxies so Pakistan can begin a genuine cleanup of its system instead of the farcical changes to extract dole from USA. This strengthens its democratic institutions too.
    4. Strengthen regional connectivity and economic integration including transit rights across Pakistan and pipelines going the other way for everyone to gain.
    5. Ensure the discord and conflict between India and Pakistan doesn’t become valuable playing cards for this or that super power.
    6. Bring China into the game by promising huge market that can absorb most of its excess capacity. In addition, China gets reassured India will not get close to USA/Japan beyond a certain point
    7. All of this eventually leads to a situation where Asia manages its own affairs, limiting Uncle’s role with India and China playing their rightful role as regional-cum-global powers

Obviously there is a lot of big ifs in a process this complicated and for results to be so spectacular. It may take years. But some items in the check list such as (1) and (2) above are definitely possible. Particularly the Kashmir one, though intractable by assumption, has seen several near deals along similar lines. It just takes political will.

Item (3) may be beyond control of even Pakistan army depending on how the Middle East / ISIS situation evolves but the best India can do is to have Pakistan army at least stay neutral and not actively cultivating such groups. To have the Pakistani generals actively pursuing and bumping off anti-India jihadis would take years of peace and non-conflict.

Item (4) depends on (1) and (2) and can be realised fairly quickly. (5) would take a lot of trust and time. (6) is a bonus although as someone (Mulayam?) predicted India China conflict/rivalry/competition would last decades longer than India-Pakistan one and hence needs altogether different strategy.

Lastly (7) would probably remain a utopia at least for our lifetime!

 

GST pains and gains

As the GST bill gets closer to its passage in the RS (where BJP is in minority), focus is shifting the the economic spin offs and benefits. One major industrialist called it a ‘brahmastra’ (a celestial weapon from¬†Hindu mythology) for the Indian economy. Perhaps he overlooked the fact that brahmastra was used for destroying, not improving lives!

Be that as it may, there are also concerns that GST may give more pain than gain in the short term, even medium term. Examples of Malaysia are being cited where inflation shot up by 2.5% for a couple of years. Media reports are even saying this would benefit the Congress in 2019. Given the chaos, screw ups, poor planning and execution that features in almost every project run by Indian babus, it is entirely possible that positive effects of GST will be pushed back even further while teething issues are sorted out. And electorates are famous for their unforgiving focus on the here and now.

This is where the NDA government and PM Narendra Modi face a huge dilemma. It’s a¬†big test of their leadership and courage. Should they implement GST ASAP and “pay” the ultimate price in 2019? Or just hope that things will work out by some miracle? Or perhaps do some creative thinking and plan ahead?

GST1

Learn from others, think ahead

It is safe for Arun Jaitley & co to assume that the first few years will be chaotic. It is also perfectly safe to assume that any inflation, even regular one or those caused by monsoons, dollar rate, oil price or whatever will get assigned to the GST by the hostile media and naturally the opposition. Perceptions do matter in politics and all is fair in war and love.

But all is not lost. There is a great opportunity for Narendra Modi to kill several birds with one stone. He was lampooned in Bihar recently for ’empty’ Jan Dhan bank accounts. He has been facing criticism for not being “bold” enough on reforms. ¬†He does not even have to invent any innovative solution! Singapore has been there, done it and there is no harm copying good things!

Singapore implemented GST in 1994 and it did something very clever – it simply gave cash to each citizen with “GST credit” that compensated for extra cost incurred by lower income families, since GST is by nature regressive. This was carefully targeted and benefits were maximum for lowest income families.

GST credit subsidy direct to Jan Dhan Bank accounts

The suggestion is simple. Crores of Jan Dhan bank accounts have been opened. Modi should simply announce that for first 3 years, Central Government will credit an amount into each beneficiary account that roughly compensates for any additional inflation caused by GST. Instantly he can transform crores of ‘aam aadmi’ that knows nothing about fiscal, taxation policy or GST, cares only for his family and its finances, into grateful supporters of an idea that benefits the economy in the long run.

This need not be a huge fiscal burden. Let us do some back-of-envelope maths. The poor and middle class spend, say, Rs. 5,000 per month on essentials. That’s Rs.60,000 per year. 5% of that should more than compensate any GST impact. That’s Rs.3000 per family. If there are 10 crore families (not individuals) that need help, that’s Rs. 30,000 crores. This is a very liberal estimate since 10 crore families will cover about 40-50% of the population and Rs.5,000 itself is a high number. And yet is peanuts compared to money spent on schemes like MNREGA which didn’t do either the economy or the UPA any good. If needed, funds can be diverted from such wasteful schemes to this subsidy.

The biggest problem of the Indian economy, has been that Prime Ministers and ruling parties have rarely made an effort to sell the benefits of reforms to the common man on the street. Most reforms have been by fiat and stealth. This also means that they cannot even openly take credit for doing a good job on reforms.

Today we have a PM who can communicate well and is certainly not tongue tied. Why not go to town with GST and the subsidy to sell painful but necessary reforms in general to the general public? He may find that the poor voter is clever enough to understand if only it is presented to him in a proper way. And he is not ideologically closed minded or biased, something you can’t say of our TV studio liberal elites.