M K SHUKLA

dealing-with-trump's-hasty-ambush

Dealing with Trump's hasty ambush

Readying to hit Iran hard, US President Donald Trump, who is seen as a reincarnation of famous or infamous Russian Tsar Ivan the Terrible, has pressured India's pain points. The withdrawal of preferential duty on some Indian goods may hit New Delhi's exports worth $6.5 billion on top of severely damaging its Exim business with Iran following the US move that has already brought India under the Iran sanction regime - from which there was a waiver for some time. Add $2.5 billion of India's exports to Iran, and the total damage to Indian exports works out to $9billion in one single Trump stroke. This is not a small amount for a country like India that has been for years running huge trade deficits reaching a record $176 billion in FY19.


Like all relationships, Indo-US relations have not been without pain points. Without going far deep into the past particularly the Indira-Nixon years, one could see those pain points emerging and hurting the overall ties between the two great democracies. And creating avoidable uncertainties in the minds of the leaders of both countries. Take, for instance, the relationship between the two countries following the signing of Indo-US, or US-India, civil nuclear deal. While the deal helped India engage in legitimate nuclear commerce, it didn't help the US very much till recently when its nuclear power building company Westinghouse got out of insolvency problem.


Even though the blame for the failure to avail of the benefits of the nuclear deal lay squarely on US businesses, bitter sentiments marked Washington grievances on the issue. True, everyone has a tell-tale tendency to eat the cake and have it too. But nations, like individuals, resolve this problem through dialogue and negotiations. Of course, the bitter US feelings for not getting immediately the benefits of the nuke deal was mitigated and assuaged to a large extent by a series of defense deals.


And defense and related technology deals are possibly the best means to carry forward and smoothe the relationship between the two countries straining under huge trade deficit of over US$20 billion in India's favor and apparently unequal playing field between Indian and American businesses, made worse, for instance, by one tax rules for Indian e-commerce companies and another for US and other companies. It seems the tax rules changed in the last months of 2018 might have been born out of a miscalculation on the part of the government which read too much in the personal conflict and disliking between Amazon boss Jeff Bezos and President Trump who often exchange not too pleasant greetings on the Twitter. Prone and extremely vulnerable to malicious gossip, we Indians have a self-destructive pathological tendency to mix gossip with state policy.


The trade deficit of US$176 billion in FY19 tells us a disturbing story - that we don't have money in our ATM and that we are living off on borrowed money. It also tells us that there are serious structural problems with our economy and political governance. Clearly, the US is in a position to help us improve our economy. But they want something in return - fair treatment for their businesses vs spent forces of Indian businesses. They are ready with their proposals for massive investment in defense industries, stressed assets reconstruction, manufacturing, and marketing and so on.


The question is are we ready?


(By M K Shukla & Rakesh Ranjan)

04 Jun 2019
modi-govt-2.0-outlining-a-growth-story:-drive-conveniently,-drive-easy

Modi Govt 2.0 outlining a growth story: Drive conveniently, drive easy

India needs an investment ranging from $5 to 10 trillion to develop its infrastructure, science, agriculture, industry, and commerce to a point where the per capita GDP improves from $2000 to $20,000 in the next 10 years. Where will, or could, this money come from? Only from the US, Europe, and East Asian countries like Japan and South Korea. Forget about China. Let it invest in Pakistan.

 

That being the reality, New Delhi may have to work really hard and pragmatically in the next few months to streamline its economic reform agenda and tune the foreign policy accordingly. The concept of economic nationalism is good, but it has to be distilled too often through pragmatism to turn on its potency.

 

Currently, Europe, which could be one of the major financiers to India's growth story, has been waiting helplessly for the last 15 years for a free trade agreement. Similar is the story of trade relations with the US which has expressed its great displeasure by withdrawing the GSP trade scheme. Trade relations with Japan and South Korea are good but not without creases. 

 

In all cases, irrelevant issues have been raised by negotiating officials. So the matter needs to be sorted out at the government and ministerial levels.

 

The US move to withdraw GSP on India's exports to that country has only added urgency to the matter of redefining India's relations with financing countries. No great achievements would be made if New Delhi tries to woo Chinese capital, which is already tied with financing India's adversaries and enemies.

 

The US president is known for his transactional nature. Since the US played a pivotal role in backing France-sponsored Western move to blacklist Masood Azhar by taking the issue to the larger UNSC, which would have made China explain the reasons for its 'constructive support' to Azhar, China blinked and backed off because it had no valid reasons for imposing its willful and malicious hold on Azhar's blacklisting.

 

For a much-needed favor shown to India, Trump naturally wants reciprocal favor. And like always, New Delhi is whining and grumbling. Instead of sending the new foreign minister Jaishankar to Washington to handle the matter urgently and negotiate a win-win deal on minor trade issues that could snowball into bigger problems, spinmasters are trying to convey that the move may not be much damaging.

 

The commerce ministry has said and believes that the GSP withdrawal may impact marginally as the total duty reduction under the scheme was only $190 million a year on the trade value of $6.3 billion. Since, in 2018, India had a goods trade surplus of $21.3 billion with the US, the ministry is not bothered about the fact that what begins as a trickle could become a powerful trend. Look at our trade deficit with China: it began as a trickle 15 years ago and now it costs a huge $70 billion that empowers China to freely finance our adversaries, enemies, and internal saboteurs.

 

New Delhi doesn't seem to have played its hands deftly during the first NaMo term 2014-19 on issues that concern the West, which remains the largest source of FDI, FPIs, technology, IT, and outsourcing businesses. In 2018, for instance, it created avoidable tax hurdles in the functioning of Amazon. It really sent out a wrong signal that it was being done to protect domestic e-commerce and other retail businesses. After the Vodafone incident, this was the second instance of creating unnecessary tax problems for major foreign operators. In both cases, the FinMin was run by lawyers.

 

So, in a sense, it's a great relief that the FinMin has come to be occupied by Nirmala Seetharaman who understands the complexities of global finance and business.

 

Looks like she may get adequate support from the new foreign minister who after retirement was put on probation in learning the ropes of international finance and trade at Tata Sons. This couldn't but have been done with an agreement between Ratan Tata and Narendra Modi. Possibly, Modi's first term taught him that he needed a foreign minister who could deal with global businesses as proficiently as he dealt with politics. And so, he must have organized Jaishankar's appointment on Tata Sons. 

(By M K Shukla & Rakesh Ranjan)

02 Jun 2019
dealing-with-trump's-hasty-ambush

Dealing with Trump's hasty ambush

By IndianMandarins 04 Jun 2019

Readying to hit Iran hard, US President Donald Trump, who is seen as a reincarnation of famous or infamous Russian Tsar Ivan the Terrible, has pressured India's pain points. The withdrawal of preferential duty on some Indian goods may hit New Delhi's exports worth $6.5 billion on top of severely damaging its Exim business with Iran following the US move that has already brought India under the Iran sanction regime - from which there was a waiver for some time. Add $2.5 billion of India's exports to Iran, and the total damage to Indian exports works out to $9billion in one single Trump stroke. This is not a small amount for a country like India that has been for years running huge trade deficits reaching a record $176 billion in FY19.


Like all relationships, Indo-US relations have not been without pain points. Without going far deep into the past particularly the Indira-Nixon years, one could see those pain points emerging and hurting the overall ties between the two great democracies. And creating avoidable uncertainties in the minds of the leaders of both countries. Take, for instance, the relationship between the two countries following the signing of Indo-US, or US-India, civil nuclear deal. While the deal helped India engage in legitimate nuclear commerce, it didn't help the US very much till recently when its nuclear power building company Westinghouse got out of insolvency problem.


Even though the blame for the failure to avail of the benefits of the nuclear deal lay squarely on US businesses, bitter sentiments marked Washington grievances on the issue. True, everyone has a tell-tale tendency to eat the cake and have it too. But nations, like individuals, resolve this problem through dialogue and negotiations. Of course, the bitter US feelings for not getting immediately the benefits of the nuke deal was mitigated and assuaged to a large extent by a series of defense deals.


And defense and related technology deals are possibly the best means to carry forward and smoothe the relationship between the two countries straining under huge trade deficit of over US$20 billion in India's favor and apparently unequal playing field between Indian and American businesses, made worse, for instance, by one tax rules for Indian e-commerce companies and another for US and other companies. It seems the tax rules changed in the last months of 2018 might have been born out of a miscalculation on the part of the government which read too much in the personal conflict and disliking between Amazon boss Jeff Bezos and President Trump who often exchange not too pleasant greetings on the Twitter. Prone and extremely vulnerable to malicious gossip, we Indians have a self-destructive pathological tendency to mix gossip with state policy.


The trade deficit of US$176 billion in FY19 tells us a disturbing story - that we don't have money in our ATM and that we are living off on borrowed money. It also tells us that there are serious structural problems with our economy and political governance. Clearly, the US is in a position to help us improve our economy. But they want something in return - fair treatment for their businesses vs spent forces of Indian businesses. They are ready with their proposals for massive investment in defense industries, stressed assets reconstruction, manufacturing, and marketing and so on.


The question is are we ready?


(By M K Shukla & Rakesh Ranjan)

modi-govt-2.0-outlining-a-growth-story:-drive-conveniently,-drive-easy

Modi Govt 2.0 outlining a growth story: Drive conveniently, drive easy

By IndianMandarins 02 Jun 2019

India needs an investment ranging from $5 to 10 trillion to develop its infrastructure, science, agriculture, industry, and commerce to a point where the per capita GDP improves from $2000 to $20,000 in the next 10 years. Where will, or could, this money come from? Only from the US, Europe, and East Asian countries like Japan and South Korea. Forget about China. Let it invest in Pakistan.

 

That being the reality, New Delhi may have to work really hard and pragmatically in the next few months to streamline its economic reform agenda and tune the foreign policy accordingly. The concept of economic nationalism is good, but it has to be distilled too often through pragmatism to turn on its potency.

 

Currently, Europe, which could be one of the major financiers to India's growth story, has been waiting helplessly for the last 15 years for a free trade agreement. Similar is the story of trade relations with the US which has expressed its great displeasure by withdrawing the GSP trade scheme. Trade relations with Japan and South Korea are good but not without creases. 

 

In all cases, irrelevant issues have been raised by negotiating officials. So the matter needs to be sorted out at the government and ministerial levels.

 

The US move to withdraw GSP on India's exports to that country has only added urgency to the matter of redefining India's relations with financing countries. No great achievements would be made if New Delhi tries to woo Chinese capital, which is already tied with financing India's adversaries and enemies.

 

The US president is known for his transactional nature. Since the US played a pivotal role in backing France-sponsored Western move to blacklist Masood Azhar by taking the issue to the larger UNSC, which would have made China explain the reasons for its 'constructive support' to Azhar, China blinked and backed off because it had no valid reasons for imposing its willful and malicious hold on Azhar's blacklisting.

 

For a much-needed favor shown to India, Trump naturally wants reciprocal favor. And like always, New Delhi is whining and grumbling. Instead of sending the new foreign minister Jaishankar to Washington to handle the matter urgently and negotiate a win-win deal on minor trade issues that could snowball into bigger problems, spinmasters are trying to convey that the move may not be much damaging.

 

The commerce ministry has said and believes that the GSP withdrawal may impact marginally as the total duty reduction under the scheme was only $190 million a year on the trade value of $6.3 billion. Since, in 2018, India had a goods trade surplus of $21.3 billion with the US, the ministry is not bothered about the fact that what begins as a trickle could become a powerful trend. Look at our trade deficit with China: it began as a trickle 15 years ago and now it costs a huge $70 billion that empowers China to freely finance our adversaries, enemies, and internal saboteurs.

 

New Delhi doesn't seem to have played its hands deftly during the first NaMo term 2014-19 on issues that concern the West, which remains the largest source of FDI, FPIs, technology, IT, and outsourcing businesses. In 2018, for instance, it created avoidable tax hurdles in the functioning of Amazon. It really sent out a wrong signal that it was being done to protect domestic e-commerce and other retail businesses. After the Vodafone incident, this was the second instance of creating unnecessary tax problems for major foreign operators. In both cases, the FinMin was run by lawyers.

 

So, in a sense, it's a great relief that the FinMin has come to be occupied by Nirmala Seetharaman who understands the complexities of global finance and business.

 

Looks like she may get adequate support from the new foreign minister who after retirement was put on probation in learning the ropes of international finance and trade at Tata Sons. This couldn't but have been done with an agreement between Ratan Tata and Narendra Modi. Possibly, Modi's first term taught him that he needed a foreign minister who could deal with global businesses as proficiently as he dealt with politics. And so, he must have organized Jaishankar's appointment on Tata Sons. 

(By M K Shukla & Rakesh Ranjan)

same-tactics-don't-work-time-and-again:-quick-take

Same tactics don't work time and again: Quick Take

By IndianMandarins 12 Dec 2018

Victory bequeaths its own aura on victors. And the aura blinds them to the reality that defeat is lurking right there in the corner. It happened to Narendra Modi and Amit Shah; and it would happen to Rahul Gandhi and his cohort of buccaneers.

 

Four years ago, while great electoral scholars were still blinded by the stunning victory of Narendra Modi in the 2014 national election, Indianmandarins was the first to warn the PM against the fatal risk of straying from two fundamental tenets of feasible Hindutva - of protecting farmers' interests at all cost and selective culling of cattle. Our concern was then triggered by an acute Ministry-made shortage of urea right at the time of Rabi sowing. It was also born out of the fear of the terrible consequences for agriculture arising out of not slaughtering unwanted cattle and letting them stray in villages.

 

No one listened, because victory is not only blinding, it tends to make one deaf and insensitive. And the cost for it is always penal. At one shot, the BJP has lost Rajasthan, Madhya Pradesh, and C'garh. And it may well lose the national elections as well if it doesn't mend its ways and set its mind free.

 

Since knowledge has never been cheap, Indianmandarins refrains from unsolicitedly advising the BJP what it should and could do to win the hearts of farmers and landless peasants in the short run to 2019 national election.

 

For Rahul and his gang of public school boys and girls, the victory in three northern states is manna from heaven. Since even God's mercy is not unlimited, they have to be careful, more because they have won without presenting people with an alternative narrative or vision. Further, the margin of victory is so narrow in terms of overall vote percentages that the Congress in the three states would find itself on a cleft stick running the administration. Besides, the internal fault lines in the party may pose additional problems.

 

The victory of Congress in three northern states is offset by its humiliating defeat in Mizoram. The party is now out of power in the entire Northeastern states. In electoral terms, this loss may not be significant, but it reinforces signals of its retreat as a national all-India party. The defeat in Telangana also casts a shadow on its effort to emerge as an acceptable opposition to the BJP.

 

So, for Rahul, the road to power still leads only to Tuglaq Road despite some sunshine this winter.

(By M K Shukla)

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