VOX POPULI
by
Aam Admi
Issue: 158 Date: 04.07.2016
Contents:
1.
Subramaniam Swamy At
It Again
2.
Indian Banking System: A Case For Hercules
After Cleaning The Aegean Stables
3.
India’s Overtures To USA: A Foreign Policy
Disaster In The Making
Subramaniam Swamy At It Again
The PM's comment on Subramaniam Swamy's attacks on RBI
Governor Raghuram Rajan and other Finance Ministry officials including a veiled
attack on Arun Jaitley, is too little, too late. Admonishments need be
timely which is the first thing a teacher learns while handling children. If
reprimands are belated the child knows that the teacher is not serious or that
the teacher can be taken advantage of. With adults the
situation is no different and the same rule applies and more so with those
who are in politics. The validity of the premise is confirmed by the fact
that Subramaniam Swamy, the loose cannon that he is has started off again
tweeting first, philosophy and then continuing where he left off on
the RBI Governor. The PM has to lay down the line firmly so that people
know that he means business.
Indian Banking
System: A Case For Hercules After Cleaning The Aegean Stables
The NPA's at banks have led to their showing financial
distress with the balance sheets over the last three quarters streaked in
red. This has happened for both the public sector as well as the private sector
banks. The largest defaulter with the Indian banking system is the much
beleaguered Vijay Mallya of the Kingfisher group who has been in the news for
the last few months. Following him closely in terms of the size of loan
defaults is the Jaypee group who are at the present moment in discussions with
banks to restructure their debt. It is said that 400 Cos., among which are the
Who's Who of Indian industry, account for more than 80% of the NPA's with the
Indian banks. That is sufficient indication of the malaise with industry which
has been laggard with growth for the last six months and more. Unless the banks
find a solution to their loan recoveries and start lending again under maybe
new terms, it is doubtful whether any industrial growth will happen in
this financial year. This in turn will affect the GDP growth which Arvind
Panagariya, Vice Chairman, Niti Aayog is positioning at in excess of 8%! If talk
could pump up stock markets sometimes, it is naive for our government
economists to believe that economic figures will also go the same
way.
However, if we want to move ahead what we need to do is
to establish accountability in our banking system. It was the bankers who
sanctioned the loans to industry and it is they who are responsible for
recovery of the amounts. Like fair-weather friends, they cannot enjoy
themselves while the going was good and when the milk sours throw up their
hands and ask the government to step in. This is precisely what has happened
with leading bankers seeking immunity from the CBI and the CVC if they are to involve in re-structuring the
industrial and service industry loans so that repayment can start. This is like
seeking a carte blanche to persist with the connivance between bankers and
industry that is well-known.The Chairperson of the State Bank of India went a
step further while giving testimony lately to a Parliamentary Committee
enquiring into loans given to industry. When the Kingfisher group defaults came
up she said that a political solution need to be found to arrive at a
settlement. When the loans were sanctioned did they seek the concurrence of
their political masters? Then why are they coming now to the government seeking a political solution. If they are
helpless in recovering the loans or finding a solution to the mess that they
created let them say so and then the government can take action to
establish if these bankers are proved to be conniving and/or incompetent.
If there has been contravention of rules then disciplinary action per banking
rules should be taken against them. This is being stated since if one takes
the Kingfisher case, banks were over-eager to give loans to the group,
though it was clear that the group was over-stretched. What was the consortium
of banks doing when one or the other was funding Kingfisher when it had been
clear that they were a basket case? Why were red flags not raised to stop
further sanction of bank loans? And now why is Arundhati Bhattacharya
seeking a political solution?
The suggestion of hers is not the end of this process but the
beginning of a long line of banks queuing up for the government or their
political masters to bail them out once the Kingfisher case is accepted to
be dealt with in this manner. Is this not a situation where our senior bankers
are passing the buck to their higher-ups? Are they not in this manner washing their
hands off and seeking absolution from the complete discharge of their
responsibilities? Do they then need to be preserved in their cushy chairs? If
you look at the banking system on an impartial basis then you see them
sanctioning loans to industry where they are entertained in cash and kind while
when it comes to the deprived segments of our society, the loan sanctions dry
up since this class is unable to meet the demands of the bankers. The rule book
is thrown at such needy people to justify the banks inability to offer a line
of credit.
It has been reported that in the belt in Maharasthra which
has seen a spate of farmer suicides, the performance of our PSB's - Public
Sector Banks has been far below target and the farmers are being made to run
from pillar to post to get their loans sanctioned. The bankers seem to refuse
to realise that sanctioning some of the loans could have saved a few
lives. The similar situation persisted when the UPA government sometime back
had written off some Rs. 60,000 crores worth of farmers loans which bankers at
the ground level refused to write off citing procedural issues though the
political decision was existing.
This is the status of our banking system which knows to ask
for salary hikes citing pressures of work and rising prices but ensures that
work is avoided by quoting one or the other excuse while sanctioning
credit and smoothening the way for funding their
industry cronies as long as their interests are taken care of. Raghuram
Rajan, RBI Governor had started the process of putting the banking system under
some rigour but now with his imminet departure we will have to
get someone like Hercules from the pages of history, since his
experience of cleaning the Aegean stables will be very useful here.
India’s
Overtures To USA: A Foreign Policy Disaster In The Making
India
for long has played an important role in international affairs. For quite some
time in the mid-20th century India was considered a respected leader of the
Third World - an agglomeration of the countries of the developing world
struggling with their problems of development and poverty and seeking a voice
and wishing to be heard in international forums somewhere in between the voices
of the West and the Comecon countries. The Comecon included Russia and the
grouping of Communist countries commonly referred as the economies behind the
Iron Curtain, since pulled down. Then China attacked India in 1962 and we had
the wars in somewhat close succession with Pakistan in 1965 and 1971 which
necessitated arming ourselves. With the USA showing a definite tilt towards
Pakistan because of their own compulsions of the Cold War and desiring to have
a front with Russia through Afghanistan, India had no option but to turn
towards Russia. An Indo-Soviet treaty was signed to seal this alliance
which apart from the strategic military advantage was convenient to India since
trade between the countries was in Indian Rupees. This was advantageous for
India which was then facing severe foreign exchange problems. At that time one
could say that India was pushed into Russia's arms by the USA which had
tried to threaten India militarily during the war that resulted in the
formation of Bangladesh because Indira Gandhi had supported Mujibur Rehman in
his fight for freedom.
Strange
are our present times since with close to four and a half decades having
passed, India and the USA are mutually calling themselves 'natural
allies', what with one being the largest democracy in the world while the other
being the most powerful democracy in the world. In the intervening four decades
or more the world has changed remarkably with Russia no longer a super-power
and with that the Cold War having become of lesser relevance except with the
USA and Russia infrequently counting each others nuclear stockpiles.
China has stepped into the void vacated by Russia and shares a hot and
cold relationship with the USA, hot on trade and cold when it seems that
China is adamant of being perceived as the dominant power in Asia particularly
with the countries in South East Asia.
As
far as India is concerned after Pakistan being Enemy No. 1, China is Enemy
No. 2 considering that we had a short war on our north-eastern borders with
them in 1962 and that we have border demarcation issues in our shared
boundaries. Thus it makes eminent sense for India to woo the USA away from
Pakistan and cozy up to them to keep the China bully at bay. That has been the
mainstay of our foreign policy for the last decade or more. That is precisely
also the reason why despite the many times that India was shortchanged by
the USA in dealing with Pakistani on terror issues, by putting sensitive components
and equipment on the Export Control list in the 70’s to the 90’s which put back
India’s nuclear and space programs back by at least three decades and
snubbing India's claim for a permanent seat in the UN Security Council. Other
than that along
the way after the 9/11 attacks and the setting up of Homeland Security Dept. in
the USA, there have been incidents, one can say of minor nature, wherein our
political leaders and eminent persons involved in the arts and entertainment
field have had the embarrassment of being detained needlessly and body-searched
at multiple US airports including even the late President A P J Abdul Kalam. In spite of all this we have gone through the
process of signing the Indo-US Nuclear Deal.
The
Indo-US Nuclear Deal was signed when the Republican George Bush II was the
President of USA and which deal has not moved much though the Democrat Barrack
Obama, the new incumbent in the White House has paid token lip-service to the treaty
but did not do
anything much to get it off the ground. In the rest of the world with the Cold
War coming to an end, the
celebrated movements the
Third World like NAM – Non-Aligned Movement, have lost their relevance and
have died a slow death. The countries of this grouping depending on their size
and economic relevance are currying favour with the only remaining Super-Power,
the USA and to a lesser extent with China. India’s position now in world
affairs is like an also-ran though with increasing economic resources India is
looked at as another funding source in Africa when countries are rebuffed by the
Western developed countries or China.
In
this context the recent overtures by PM Narendra Modi towards the USA are to be
seen with concern. The
reason for this is that the USA sees the world through its convenience and its
own best interests. As indicated earlier the Nixon – Kissinger regime was
almost one could say as anti-India and Pakistan in their eyes with all the
evidence in front of them of involvement in cross-border attacks and incitement
in Kashmir could do no wrong. That was
when the Export Control regime was at its strictest blocking supplies of almost
every single order of critical items for India’s defence research establishments.
Even the Indo-US Nuclear Deal was signed because it serves the USA’s business interests of
getting orders for the GE nuclear reactors and also getting massive business
for weapons that are needed by India’s armed forces modernization programs.
Even the recent support by the USA
for India to join the NSG is to be seen in the context that it smoothens the
way for the supply of GE reactors for India’s ambitious nuclear energy program.
Thus in all this context why Narendra Modi should jump off the deep-end in
embracing the USA is something that cannot be understood. We are moving into a
subordinate relationship with the USA and will find ourselves being cornered to
act in what will not be in India’s best interests. This applies to doing the
USA’s bidding in the Indian Ocean or the South China Sea. Also the timing of
ramping up the relationship by PM Narendra Modi is suspect. The USA being in the Presidential Election
Year it is not a time very judicious to move too close since one is not sure as
to who will be the next incumbent in the White House. Among the two main
contenders are the Democrat Hilary Clinton and the Republican Donald Trump. If
Clinton wins then the Democrat will be operating with her hands tied since both
the Senate and the House of Representatives are controlled by the Republicans.
If the Republican Donald Trump wins then not only India but the world will have
its relations with the USA in turmoil. Thus therefore it would been wise to be
a bit wary of the relationship with the USA at this point in time and not go
into overdrive as Narendra Modi has done with four visits to the USA in the two
years that he has been in power. In foreign policy Narendra Modi needs to learn
that cautious and sure steps are better than seek overarching and pathbreaking
milestones otherwise we will have fiascos like the chai with Nawaz Sharif in
Pakistan and lately the snubbing of India’s membership to the NSG by China.
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