Lessons from the Khobragade case

There is such a big ruckus about breaking the law in the Devyani Khobragade case. One could easily say that the law that has been broken is one that is not practical and was made to be broken. Most laws in India along with their attendant rules are of this nature.

 

The minimum wage in the US is about $8 per hour in most places, and in New York from what I read in the papers it is about $10 an hour. How is this figure computed? By taking the cost of living, I presume. What is the cost of living for a live-in maid who comes from India and stays at her Indian employer's residence? Effectively zero. From what I read, she was being paid handsomely by Indian standards. If she wanted to, she could send most of the money home. Who has that kind of savings in India? Not even a mid-level bank officer after expenses can save so much.

 

Coming to the employer in this case, if she had actually paid the minimum wage, the salary of the maid would have far exceeded her own salary. So are we really expecting her to be paying that kind of amount? To add to this, there is the problem of "overtime". If she is asked to sleep with the kids (don't know if that is true in this particular case) it can be construed as overtime since she is on duty! 

 

There has been a request pending with the Finance ministry for long now from the Foreign ministry to revise pay along with suggestions to change the visa category under which the domestic help for consular staff travel. Meanwhile, a US posting which was much sought after is now sought to be avoided by foreign service staff. Who wants to go to a country which so highly curtails individual freedoms even to enter into mutually beneficial actions? In fact, the more one sees how US officials act, the more one comes to the conclusion that it is a police state where the might of the state is wielded with disproportionate force against every puny offence. The list of "crimes" is long, the enforcement is harsh, and as with every other country on earth, it is the poorer sections of the population that always face the brunt of these laws. What is worse is that these actions are cloaked as being for the "protection of liberty, freedom, equality, human rights, sexual equality...etc. ", all motherhoods which can never be questioned!

 

There is a law in place, agreed. How practical is this law especially in its applicability to this case, where plainly the employment was a consensual contract and not by force, paying wages which are far in excess of what that maid could expect in her home country, with a comfortable work atmosphere without any harassment (no complaint of that nature has been voiced)? Should the law really apply to her employer, a consular official? She does not enjoy "diplomatic" immunity but the definition of diplomatic immunity can be stretched as in the case of Raymond Allen Davis,  the US contractor for the CIA who calmly shot two people dead on a Lahore street in 2011. The US government had him flown back by stretching the argument of who is a "diplomat"! Apparently, he was one. And Devyani, who is actually a consular official is not? But then, the US has always been known for its double standards. We in India also have double standards but we are not so sanctimonious about it. The US in spite of all its contradictions is always pristine and holier-than-thou. 

 

There is another mistake which the US made in this case. They arrested an upper-middle class Indian lady and subjected her to strip search and all such unspeakable atrocities. The problem is, she is "one of us". She could be the daughter or niece of any of the ministers or  IAS officers (she is actually the daughter of one). She is not of some distant pedigree (like the maid in this case) like the bonded laborers in the Gulf whom we can choose to ignore. The establishment in India obviously bristles at this and reacts with vehemence. If this can happen to Khobragade, it can happen to me or my family. The idiots could also have handled it better. By handing over the arrest totally to the US marshals, they let the cold heartless "system" take over. The US marshals know how to arrest, strip, and search. They don't distinguish between different people. They should learn from the Indians in these things. Every prison has prisoners who get food from home, "special visitation rights" so that they don't lack for the other human necessity apart from food, and even special "parole" (a la Sanjay Dutt) to keep visiting home for months at a time before sauntering back to prison. By making a virtue of "everyone is equal before the law" they are digging their own graves. Like I said, they should send the US marshals to India for training - they will go back with a heightened sense of appreciation for all kinds of class distinctions!

 

And then you have the "conspiracy" angle to it. The maid disappears a few months back and there is hardly any effort to trace her. Then she resurfaces and her family is flown out of India on a "T" visa a couple of days before the incident. This visa is for the families of those people who go against their governments and cooperate with the US, to fly them out to avoid "persecution" in their home countries. Intended originally for the severest cases of human rights violations, I am sure. The impartiality of Preet Bharara (of Indian origin) is also suspect. He is possibly using this case to advance his political ambitions. 

 

In the midst of all these complications and angles to the case, it is very amusing to read the statements put forth by the US authorities. It goes something like ( I am only paraphrasing) "We are committed to following procedures", "All the procedures and rules were meticulously followed", "We value the relationship with India", " Everyone is equal before the law", "The US stands committed to human rights (please ignore their drones over Afpak!)" and all such inanities. Most US institutions and multinational corporations are masters at this kind of communication, where motherhoods are doled out in response to specific questions, and we are supposed to be happy, nay overjoyed, with their response! 

 

Coming back to laws that cannot actually be implemented, they should again learn from India in these things. We are masters at having strict laws and messy rules on paper, while allowing all kinds of loopholes for the influential (and the corrupt) to exploit. They should send their lawmakers here for some training under our Babus. And their politicians could do with some instruction from ours too!

Fwd: Chasing Mammon

Chasing after something that the world

has decreed is good for me;

even in fullness never enough,

for someone had more than me!

Higher, faster, stronger. Move!

for what is stillness, but sloth?

For that which we value we need more

though all else may be lost!

In pursuit of demanding mammon

all my days till now were spent.

In the race, I left life behind

clutching at empty recompense!

Disappointing speech by Rajan - Lecture at HBS

Raghuram Rajan on the "positive" aspects of the current situation in India. Though the arguments he makes are all based on solid facts (one expects nothing else from him of course), one gets the feeling that this is too much of a case of looking at the optimistic side, exacerbated by the fact that if you are part of the establishment, as he is now, you start sounding like a salesman whose bonus depends on making the sale.

The fact is that the government has screwed up big time in the last few years. The Indian economy is too vast and has too many opposing pulls and pressures to make anyone pulling it in a particular direction succeed fully. Hence the depredations of the ruling party could do only so much damage. The 2G and Coalgate scams are being sidetracked into semantic arguments on whether the CAG stated the "right" figure; what about the brazenness of the act of allocating natural resources in such an egregiously unfair manner? I also get the feeling that dragging Kumaramangalam Birla and a few retired bureaucrats into the CBI probe is just a ploy to make the industry and the bureaucracy back off and leave the government well enough alone.  Project clearances are an issue, all infrastructure projects that have been launched in the last few years are a sinkhole for money with no progress to show; job creation is not improving; there are no moves even to remove the most obvious bottlenecks to get things going. And who created these bottlenecks in the first place? The Grand Old Party. What about NREGS followed by the Food Security Act? The Party likes such schemes since it gives its functionaries ample scope to siphon off money while it passes through the channels, ostensibly to reach the poor. How is the resultant deficit going to be funded? Rajan does not even mention these things.

On the other hand, he is intent on looking at the bright side. When you put on rose-colored spectacles the world is bound to appear very rosy. He says that short run fixes are good; they are, provided you nail what created the problem in the first place. On that, he is silent.  His analysis of what dampened the "India success story" reads as if it was just a policy reaction to global events that caused it; how very macro top down! 

"Growth increased corruption", Rajan says; I 've heard this before, along with variants like "a democracy at our stage of development is always corrupt",  and "corruption is an inevitable part of growing up". May be, but you can leave such analysis to the historians, it is their job; as policy makers it is the job of the government and the bureaucrats to minimize corruption by creating transparent processes and eliminating opacity, while they are actually doing the opposite. The argument that corruption is inevitable is not going to solve anything, we already know that; what has the present government done to reduce corruption, or has it done all it can to increase it?

And he joins Chidambaram in decrying gold imports, the favorite whipping boy of the Indian policy-makers nowadays. In fact, Indians are smart in consuming so much gold; it is among the very few things that "fiat money" cannot touch, and hence the politicians and the central banks don't like it. 

He says "The immediate tasks are more mundane, but also more feasible one: clearing projects, reducing poorly targeted subsidies, and finding more ways to narrow the current-account deficit and ease its financing.:"   

 Yes, we know that. But this is something any novice could have told you five years back, or ten years back; these things were not done. Now that elections are nearing, the government will take some steps to show that it is at least attempting some these things I presume?

He talks of "strategic incrementalism" - do the small things first, pluck the low-hanging fruits. But he misses the major point. Everytime we screw up, allow things to go to the dogs, we shall say this, and start again with the low-hanging fruits. When are we going to reach the high-hanging ones, and how?

All in all, quite a disappointing speech, I would say....

(Rajan's speech attached below)

Filtering Out the Real India
(Leatherbee Lecture by Dr. Raghuram Rajan, Governor, Reserve Bank of India on India: Opportunities and Challenges Ahead' at Harvard Business School (HBS), Boston, delivered on October 15, 2013)

 

Indian cricket fans are manic-depressive in their treatment of their favorite teams. They elevate players to god-like status when their team performs well, ignoring obvious weaknesses; but when it loses, as any team must, the fall is equally steep and every weakness is dissected. In fact, the team is never as good as fans make it out to be when it wins, nor as bad as it is made out to be when it loses. Its weaknesses existed in victory, too, but were overlooked.

 

Such bipolar behavior seems to apply to assessments of India's economy as well, with foreign analysts joining Indians in similar swings between over-exuberance and self-flagellation. A few years ago, India could do no wrong. Commentators talked of "Chindia", elevating India's performance to that of its northern neighbor. Today, India can do no right.

 

India does have its problems. Annual GDP growth slowed significantly in the last quarter to 4.4%, inflation is high, and the current-account and budget deficits last year were too large. Every commentator today highlights India's poor infrastructure, excessive regulation, small manufacturing sector, and a workforce with inadequate education and skills.

 

These are indeed deficiencies, and they must be fixed if India is to grow strongly and stably. But the same deficiencies existed when India was growing fast. To understand what needs to be done in the short run, we must understand what dampened the Indian success story.

 

In part, India's slowdown paradoxically reflects the substantial fiscal and monetary stimulus that its policymakers, like those in all major emerging markets, injected into its economy in the aftermath of the 2008 financial crisis. The resulting growth spurt led to inflation, especially because the world did not slide into a second Great Depression, as was originally feared. So monetary policy has had to be tight, with high interest rates contributing to slowing investment and consumption.

 

Moreover, India's institutions for acquiring land, allocating natural resources, and granting clearances were overwhelmed during the period of strong growth. Strong growth increased the scarcity and value of resources such as land or mineral wealth. To the extent that these were cheap in the past, there was little reward to misallocating them. Growth, however, increased the rents to corruption.

 

Similarly, industrial development led to growing encroachment on farmland and forests and the displacement of farmers and tribals. India is a developing country with a civil society possessed of first world sensibilities. Protests organized by politicians and activists led to new environmental laws and land acquisition laws that aim to make development sustainable. Over time, India will learn to streamline the new laws to make them more functional, but in the short run a side effect has been more bureaucratic impediments to investment. So growth, as well as the reaction to that unbridled growth, created a greater possibility of corruption.

 

Fortunately, a vibrant democracy like India has its own checks and balances. India's investigative agencies, judiciary, and press started examining allegations of large-scale corruption. The unfortunate side effect as the clean-up proceeded was that bureaucratic decision-making became more risk averse, and many large projects came to a grinding halt.

 

Only now, as the government creates new institutions to accelerate decision-making and implement transparent processes, are these projects being cleared to proceed. Once restarted, it will take time for these projects to be completed, at which point output growth will increase significantly.

 

The combination of excessive (with the benefit of hindsight) post-crisis stimulus and stalling large projects had other consequences such as high internal and external deficits. The post-crisis fiscal-stimulus packages sent the government budget deficit soaring from what had been a very responsible level in 2007-2008 of around 2.5 percent to over 6 percent. Similarly, as large mining projects stalled, India had to resort to higher imports of coal and scrap iron, while its exports of iron ore dwindled.

 

An increase in gold imports placed further pressure on the current-account balance. Newly rich consumers in rural areas increasingly put their savings in gold, a familiar store of value, while wealthy urban consumers, worried about inflation, also turned to buying gold. Ironically, had they bought Apple shares, rather than a commodity (no matter how fungible, liquid, and investible it is), their purchases would have been treated as a foreign investment rather than as adding to the external deficit.

 

For the most part, India's current growth slowdown and its fiscal and current-account deficits are not structural problems. They are all fixable by means of modest reforms. This is not to say that ambitious reform is not good, or is not warranted to sustain growth for the next decade. But India does not need to become a manufacturing giant overnight to fix its current problems.

 

The immediate tasks are more mundane, but also more feasible one: clearing projects, reducing poorly targeted subsidies, and finding more ways to narrow the current-account deficit and ease its financing. Over the last year, the government has been pursuing this agenda, which is already showing some early results. For example, the external deficit is narrowing sharply on the back of higher exports and lower imports. The government and the Reserve Bank said it would be $70 billion this fiscal year, down from $88 billion last fiscal year, but recent data suggests it could be lower still.

 

This leads me to another point. Because analysts keep looking for major structural reforms to fix the deeper economic challenges, they ignore smaller steps or dismiss them as "band aids". But strategically placed small steps – strategic incrementalism for want of a better term – taken together can deal with the immediate problems, thus buying time and economic and political space for the major structural reforms.

 

Put differently, when the Indian authorities said they would bring the fiscal deficit below 5.3% last year, no one believed them. The final outturn was 4.9%. Similarly, while we project the CAD to come down to 3.7% this year, I think we could be pleasantly surprised. Not all the actions we have taken are pretty, and not all are sustainable, but they have done the job.

 

Indeed, despite its shortcomings, India's GDP will probably grow by 5-5.5% this year – not great, but certainly not bad for what is likely to be a low point in economic performance. The monsoon has been good and will spur consumption, especially in rural areas, which are already growing strongly, owing to improvements in road transport and communications connectivity.

 

The banking sector has undoubtedly experienced an increase in bad loans, often owing to investment projects that are not unviable but only delayed. As these projects come onstream, they will generate the revenue needed to repay loans. India's banks have the capital to absorb losses in the meantime.

 

Likewise, India's finances are stronger than in the typical emerging-market country, let alone an emerging-market country in crisis. India's overall public debt/GDP ratio has been on a declining trend, from 73.2% in 2006-07 to 66% in 2012-13 (and the central government's debt/GDP ratio is only 46%). Moreover, the debt is denominated in rupees and has an average maturity of more than nine years.

 

India's external debt burden is even more favorable, at only 21.2% of GDP (much of it owed by the private sector), while short-term external debt is only 5.2% of GDP. India's foreign-exchange reserves stand at $278 billion (about 15% of GDP), enough to finance the entire current-account deficit for several years. Even if you count all of trade credit as well as maturing deposits held by overseas Indians as short term debt, India's reserves can pay them all down and still have money left over.

 

That said, India can do better – much better. The path to a more open, competitive, efficient, and humane economy will surely be bumpy in the years to come. But, in the short term, there is much low-hanging fruit to be plucked.

 

For instance, we are committed to developing our financial system, and carefully expanding access to finance can be a source of tremendous growth in the years to come. We are also embarked on large infrastructure projects. For example, the Delhi Mumbai Industrial Corridor, a project with Japanese collaboration entailing over $ 90 billion in investment, will link Delhi to Mumbai's ports, covering an overall length of 1483 km and passing through six States. This project will have nine mega industrial zones of about 200-250 sq. km., high speed freight lines, three ports, six airports, a six-lane intersection-free expressway connecting the country's political and financial capitals, and a 4000 MW power plant. We have already seen a significant boost to economic activity as India built out the Golden Quadrilateral highway system, the boost from the Delhi Mumbai Industrial Corridor can only be imagined. The best of India is yet to come.

 

Back to the cricketing analogy, India is an open argumentative society. But we are prone to mood swings, perhaps more so than other societies, perhaps in part driven by our excitable competitive and very young press. Stripping out both the euphoria and the despair from what is said about India – and from what we Indians say about ourselves – will probably bring us closer to the truth.

 

 

Time

Awesome ruins of old, in crumbling decay,

Majestic monuments rendered to dust,

Some proud monarch, ruler of bygone days,

Built to pander to an immortal lust;

For who does not want his name to live on,

In hearts and minds of generations to come?

The entire earth he may have fought and won,

But what price achievement, it's all for nought!

Time, the great ravager, levels all things

With no regard for the monarchs of old;

It's only we, in our vanity, who think,

We can leave our marks behind when we go.

Look not at the ruins and see what is lost

but, glory in the present, and rejoice!

Dinesh Gopalan

Impressions of a lost civilization

A short one-week trip to Cambodia which we undertook in end-September - the pictures are in the link below.

Few monuments leave you as stunned as Angkor Wat does. It is the largest religious monument in the world, set in the middle of dense rain-forests, majestic sculpted buildings of stone, lying desolate and partly in ruins. The scale of the buildings and the audacity of vision of the builders leaves you breathless, the desolation of its present state makes you ponder about what happens to even the greatest monuments in the hands of that ravager Time (reminded me of Shelley's Ozymandias), and its setting in the middle of untouched tropical jungles makes it almost surreal.

Angkor Wat, though the most famous, is not the only temple in the jungles around Siem Reap in Cambodia.  The kings of Cambodia in the tenth to twelfth century or thereabouts built several such monuments in worship of their Hindu Gods. Vishnu is the presiding deity, and the motifs for the sculptures are drawn from the Mahabharata. The influence of the Cholas who ruled South India during that period extended to the far east as well; even the culture and religion of the Khmers (the locals of Cambodia), though Buddhist, seems to be more a synthesis of Hinduism and Buddhism. Buddhism being as tolerant a religion as Hinduism has managed a synthesis of the Hindu religion that was there before without their monuments suffering the same fate as the Bamiyan Buddhas. One of the main deities in Angkor Wat is a large standing Vishnu from the neck down, with the head of Buddha. The head apparently was fixed by the Buddhists after some bandits carried of the head.  

A visit to Angkor Wat and the other temples of Siem Reap is like going into the sets of an Indiana Jones movie. Majestic temples lying desolate, dense jungles all around, in a country that still retains its rustic charm. Travelling in Cambodia is perhaps what travelling through the rain-forests of Kerala or Tamil Nadu must have been a hundred years back. Though the comparison is not strictly accurate, since the roads, where they exist, are much better than what we can manage to build today.

The population at around 14 million, is less than any of our metros, and the people are charming and mild-mannered. They have been through their share of troubles with the Khmer Rouge killings in the seventies; it looks like the society has still not fully recovered from that dark period in Cambodian history. The economy is not very strong, the two major industries seem to be tourism and garments. The food, which reminds you very much of Thai food,  is outstanding. Any place you visit from the most humble road-side eatery to the star hotels serve the freshest and most delicious fare. 

Everything is priced in dollars. The local currency, at 4000 to the dollar, is not in much use. As a result of this, you are likely to be quoted "one dollar" prices for things as diverse as a pineapple, to a T-shirt in the night market! It does make things a bit expensive, certainly more expensive than what you would expect in that setting. Hotels, though, are surprisingly cheap. You will be able to get 4-star quality accommodation at 30 to 40 dollars a night.

The attractions that the city offers are also quite good. They have a thriving pub street where all the tourists converge in the evenings, a bustling market that is open till late, and generally everything that a leisure traveler may wish for. Massage and "allied" services are freely on offer. Perhaps because the population is so low, but certainly due to the much better sense of neatness, the place is incredibly clean. Can you imaging a canal running through the middle of the city with not even a plastic bottle floating on it, the water looking fit enough to drink?

A nice place to travel to, and if you have more time, you can combine it with Bangkok (bus-able), Malaysia, Singapore or Indonesia. 

Pictures in the link below (the people you have to endure are self, wife, and wife's two cousins with spouses):

 

http://goo.gl/qq1OZd