The Irony of India

By Khurram Husain

Published in The Express Tribune, January 27th, 2011

“India has no interest in destabilising any of her neighbours, or even in seeing any of them in difficulty,” said the silver-haired gentleman in a thin-striped suit and with piercing eyes. It was a small talk, before a small gathering of Pakistani journalists here in Delhi, at the invitation of the Indian government. But the message was large.

It went something like this. India is nurturing its economy to sustain growth rates in the 9-10 per cent per annum range. At this rate, the size of India’s economy doubles in less than a decade, not bad for an economy which clocked in a GDP of a little more than four trillion dollars in 2010, placing it as the world’s fifth largest economy and still rising.

India has set for itself the target of becoming a middle-income country by the year 2025. That means it cannot afford to run volatile cycles of boom and bust, nor can it afford to fall behind in the race to innovate. Even as the silver-haired gentlemen was gently laying out the facts for us, the Reserve Bank of India (RBI) was preparing to present its third quarterly review of monetary policy, an announcement that lays out the state of the economy as seen by the central bank.

“[G]rowth has moved close to its pre-crisis trajectory even in the face of an uncertain global recovery,” noted the RBI. The “pre-crisis trajectory” the RBI is referring to is a growth rate of 8.5 per cent. That puts India in close competition with China, the world’s fastest growing economy. Note the last words of the observation above: “even in the face of an uncertain global recovery.” Meaning, as the economies of the US and the EU battle the prospect of a second recession, and a possible sovereign credit crisis, the economy of India is part of a growing set of economies in Asia, led by China.

In order to nurture and sustain these growth rates, India needs to overcome all instability in its neighborhood. The distinguished gentleman, as well as others we have met here thus far, have all been clear to point out that there is a great deal of concern with internal stability in India. “But at least in the case of the Naxals, for instance” quipped one senior journalist, “I’m glad the instability is borne of hunger and not religion. You see, you can feed a hungry human who has picked up arms against you, but what do you do with those who pick up arms in the name of religion?”

But religion has crept into the Indian political vocabulary and landscape. And curiously enough, it has entered through the back door of the secular, democratic nationalism that has been the hallmark of Indian politics ever since the Nehru years. Just a few days earlier, for instance, a train carrying BJP student activists to Srinagar had been surreptitiously turned around and taken back to the station from whence it had originated. And on January 24, senior leaders of the BJP were arrested trying to enter Srinagar with the intention of raising the Indian flag there on Republic Day.

This is irony at its best. Here is a country that values its economic rivalry with China over everything else. A country that treasures and takes supreme pride in its six-decade long experiment with democracy. A country that is deeply religious, yet sees its own salvation in making sure the state is aligned with no particular faith. And in this very country, a political party that seeks to hold the highest elected offices of state, runs in the name of the supremacy of one religion over others, and which seeks to plant the flag of the secular republic in Srinagar, is physically prevented from doing so by the government of the day.

If India’s growth rates can persist in spite of the “uncertain global recovery,” if India’s democracy can thrive in spite of the BJP’s attempts to transform it into an illiberal republic, then we in Pakistan need to understand how irrelevant we are becoming in the 21st century world. And perhaps we need to see the irony in that: irrelevant in spite of being the epicentre of a superpower’s destiny.

Robin Hood economics

Khurram Husain


NOW don’t get me wrong. I’m all for “recovering looted wealth” and I’m all for using the proceeds to help educate our youth.

I’m also all for hiking outlays on health, and I would like nothing more than to see our government’s expenditures soar by almost 400 per cent in five years.

The intention behind many of the reforms proposed by the Pakistan Tehrik-i-Insaaf in its “economic plan” is admirable, although one is at a loss to see how it will actually work. It’s hard to see where the money will come from to pay for the boost in welfare spending and deficit cutting considering the major potential revenue heads now belong to the provinces.

The plan purports to run the country through a state of emergency. Every category of the plan is headlined “emergency”. So once voted in, we are told, the party will declare an “expenditure emergency’ and a “revenue collection emergency” and a “governance reform emergency” and an “institution reform emergency” and so on.

There follows beneath each heading a series of steps that sometimes read like they were written up by Robin Hood himself. They range from the comparatively basic steps like “all symbols of Pomp and Glory to be shut down” to bombastic declarations of a “Frontal Attack [sic]” on cartels and speculators and hoarders and gas and electricity thieves.

All this has been tried many times already. Remember the attempt of the Competition Commission to penalise the cement cartels in 2009 or the stock market crash and investigation of March 2005? Where did the 2009 suo motu against the sugar barons lead? Too often the pursuit of vested interests leads back to the homes of your own partners in power, and it’ll be no different for the PTI.

For all the apocalyptic metaphors that the party is so fond of there is something that they don’t know about their favourite one: the tsunami. Eventually all tsunamis recede, and the ground reasserts itself as the waters inevitably move back to the oceans from whence they came. The land always wins against the tsunami.

I don’t doubt that election night will be a big night for the party, although exactly how big remains to be seen. But that night will end, and the thousand and one nights that will follow will see the stubborn reassertion of the status quo, the same political landscape, the same constellation of capital and constituency, that the party claims in its economic plan it is out to destroy.

Without a firm foothold in the new political set-up, the plan becomes a little irrelevant, considering that when the curtain rises on the next parliament, it’s highly unlikely that the PTI will carry enough votes to form a government on their own and they are more likely to become embroiled in the politics of transition.

To whom will the party reach out for a coalition? The PML-N? The PPP? What will they do with the MQM, the regional party whose support has been essential to almost every government since 1988? Or will they choose to sit in opposition for five years?

And then there’ll be the stubborn reality of Pakistan’s economy, its many complex dysfunctions and difficult trade-offs.

Diverting gas from industry to power, to take one example, something the plan presents as a solution to the circular debt has always met spirited resistance from industry, and will likely discourage investment.

Gen Musharraf tried to rule the country through a far more drastic state of emergency than the one the PTI is envisioning.

Almost everything their programme talks about was tried in the first three years of the general’s rule.

There was a slash and burn accountability drive, loan recovery drive, documentation of the economy drive, imposition of GST drive, and so on. It all petered out with a whimper.

In over a decade of dedicated pursuit, NAB couldn’t even recover Rockwood Estate, and where it was pursuing dozens of cases against the ‘top leadership’ of the PPP and the PML-N, it had to declare the top leadership of the PML-Q to be squeaky clean, and was talking about recovering five billion from this scam here and seven billion from that scam there.

“Recovering looted wealth” sounds good to the ears, but always snags on the inconveniences of the law, of multiple jurisdictions, and of overlapping political loyalties, and it makes for a lousy platform on which to build a vast spending plan.

Nawaz Sharif was bequeathed a vast mandate to rule through the election in 1997. Gen Musharraf, who took on titles of state like they were feathers in his plumage — he was at one point the prime minister, the president and the army chief all at the same time — was forced, by 2002, to square his game on the same status quo he had sworn to uproot in 1999.

With all their power, both these rulers failed at many of the reforms the PTI is claiming it will undertake, including the Robin Hood economics.

So what makes the PTI think they will succeed where these two failed in bringing about revolutionary change? Not even the most optimistic take on their prospects sees them taking anywhere close to the number of seats in parliament that Nawaz Sharif had in 1997.

And no matter how much the party of the establishment they may be, they will never be more of an establishment’s party than Musharraf was prior to the 2002 election.

Keeping in mind the political realities the party will be operating within, it seems unlikely they will be in a position to take on the powerful vested interests that have consistently thwarted the kinds of reforms the party’s economic plan envisions.



http://dawn.com/2012/08/30/robin-hood-economics/

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"Fear not for future, Weep not for past!" (P.B shelley)

By Khurram Husain | 11/8/2012

IF members of the cabinet believe they can pin the economic failures of the government on their finance minister, Mr Hafeez Shaikh, they should think again.

The finance minister is right to point out that the failures are something for which the government needs to take `collective responsibility` After all, under whose watch were unrealistic promises given of ending loadshedding by Dec 31, 2010? Under whose watch were the controversial rental power contracts signed, one of which just had to pay up $17 million to NAB in order to be able to quietly slink out of the country? And who`s taking responsibility for the telecommunications ministry today, which has failed to even arrange a consultant for the 3G auction that has been delayed by over six months now, and on which the government has been relying for an impressive $800 m inflow to help stabilise a deteriorating external account? There is no other way to put this. There has been a large-scale and collective failure to run the affairs of this country by the present government, and that failure cannot be pinned on any one individual.

If cabinet members are finding it hard to face their voters because of this failure to govern, they should find a better narrative to hide behind than `it`s all the finance minister`s fault` This is well intentioned advice, because if you think about it, blaming it all on one minister raises another more troublesome question: why did you retain this minister if his track record is so bad? There are two areas that have most directly constrained the ability of the finance ministry to be able to address the country`s growing economic difficulties.One is the National Finance Commission Award of 2010, which has seen transfers to the provinces rise to more than Rs.800 billion in the last fiscal year, leaving precious little fiscal space left for the federation. The finance minister has complained on more than one occasion that the Punjab chief minister has more resources to play with than he does! The other major constraint has been the power crisis, which is almost entirely out of the finance ministry`s control.

Who is going to hold the ministries of water and power and petroleum accountable for the numerous failures to stem losses, to manage dwindling supplies of gas or to arrange future supplies? We`ve had too many abortive attempts to start the process for construction of an LNG terminal, too many line losses in the electricity distribution companies, too much money absorbed by the power bureaucracy without giving us any corresponding return in the form of reliable electricity supply.

The biggest problem with the finance team`s handling of its difficult position is the optimistic spin they`ve constantly tried to put on things.

In the cabinet meeting where the minister came under attack for the state of infation in the country, for example, the anger was prompted in large part by the rosy take on inflation that the finance minister had just presented, which sought to declare victory in the government`s fight against inflation.

The minister ought to know that of the entire constellation of economic forces that operate in any society, none is so intimately a part of people`s living experience as prices and inflation. It is the most important yardstick by which people measure a government`s performance justly or not being a separate matter.

Whenever budget time rolls around, for instance, the one question on everyone`s mind is always what items are going to become cheaper.

One can tire of explaining to the people that the government doesn`t set the prices of things the way it used to, but to no avail. The market is far too distant and disembodied an entity to have a place in people`s imagination. And prices, by contrast, are far too close and intimately experienced a reality to be left to abstract terms.

In most people`s mind, prices are something like the expression of an epic struggle between good and evil, between the dark forces of selfishness and avarice versus the benevolent light of charity and trust, and in our time, in our country, good almost always loses because it has few takers at the top.

That`s the gist of how economic forces are perceived in the popular imagination. It`s not so much that people are living in the past and think that government sets all prices.

Rather in their perception if government cannot be a player in this epic battle then what good is it? And if another institution of government enters the vacuum and starts ordering prices to march to its commands it walks away with the people`s trust and their hearts.

There is a vernacular meaning to the term `relief for the masses` that gets lost in translation, and technocratic policymakers would probably be well served by efforts to recover this meaning.

So when people feel their purchasing power eroding,they`re not likely to find reassurance in abstract notions like `fiscal deficits`, and `too much money chasing too few goods`. And they`re likely to get quite annoyed by talk of victory in the fight against inflation. Instead they are more likely to want to know who is stealing the joy from their hearts, and who can catch this thief for them.

Prices and inflation are treacherous terrain for any politician or any policymaker in Pakistan. The language and views and priorities of government always find little traction in the minds of its constituents. That`s why it`s best for a policymaker to avoid commenting on the state of prices, except to portray it as an ongoing struggle.

The government does itself a severe disservice by allowing its finance minister to become a scapegoat for the myriad failures that are on the electorate`s mind. But the finance minister should also give more attention to how he formulates his take on things, and should present the economic challenges facing the country a little more bluntly.
The writer is a Karachi-based journalist covering business and economic policy.

khurram.husain@gmail.com

Innovative power solutions
By Khurram Husain | 11/15/2012

TOO much of our economic commentary has descended into a pall of the same old laments.

Not enough thinking is being devoted to solutions that are outside the box.

Take the power crisis as the major example. All thinking and commentary is focused on the large issues of fuel pricing and supply, of circular debt and line losses.

These are big problems, no doubt, and their resolution is critical to finding a way out of the situation. But they are not the only way forward, and the deeply intractable and interconnected nature of the challenges they present means most reform-minded comments tend to descend into a general lament at the hopelessness of it all.

What is lost in this excessive gloom is innovative solutions, small scale, that can be replicated in large numbers.

Some of the most innovative thinking in the field involves what they call the `point of consumption` generation.

This means exactly what it says, that you generate the electricity exactly where it is meant to be consumed.

The thinking is not different from how computing has evolved over time. The earliest computers were mainframes, large boxes with massive amounts of computing power locked up in them, connected by wires to a multiple number of terminals from where users accessed this computing power separately.

In time mainframes were replaced by desktop computers, which contained all their computing power in one unit with a terminal. And eventually of course the desktop gave way to the laptop, which has now given way to the tablet.

Something similar is happening in the power sector around the world, but a lot more slowly.

The old model, to which we are all committed, is of a sin-gle large power generation house, linked by wires to many houses where the electricity is consumed. But the new model envisions many small power-generation points, located at the points of c o n s um p t i o n,which can use the power supply from the grid to supplement its own capacity, or feed its surplus electricity back into the grid.

In urban areas, this is hard to imagine as of now. I don`t know many people who have successfully installed solar panels at home to bring down their purchases from the grid, nor do we have `two-way` meters that can channel electricity back into the grid for us.

But in remote areas, a marvellous experiment has moved beyond the drawing board into reality, and is gathering momentum. Across Gilgit Baltistan and Swat and Dir, for instance, micro hydel projects are being adopted with remarkable speed, and with remarkable results.

Large numbers of villages, that were until recently living without any prospect of electricity because the cost of bringing the grid to them was prohibitive for our cash starved government are now enjoying free electricity throughout the summers thanks to a small turbine, and a manually cut channel to carry water falling from mountain streams.

The technology used in these micro hydel projects is all indigenously manufactured in Besham near Swat. I hear it was brought to Pakistan as part of an aid programme run by some European agency, but Pm not sure of its origins.

What Fm sure of is the speed with which it has been adopted across the mountain communities, from Dir and Swat to Gilgit Baltistan. They seen tiny villages propped up high on rocky mountainsides lit up with light bulbs at night using this technology, which the villagers have purchased by pooling their money. And Fve seen this across Gilgit Baltistan.

Very similar thinking can be applied down country. In the plains of Punjab, for instance, mountain streams may not exist, but the water flows in the canals can be used to generate electricity during the summers using similar turbines, adapted for use with slow-moving, high volumes of water.

Small turbines installed in containers can be lowered into the canals during the summer time, with a single wire running to the nearest grid station, and the electricity produced can be shared by a single community.

Thousands of such small scale projects can light up large areas of rural Punjab through the difficult summer months, perhaps enough to keep small-scale industry going and prevent livelihoods from shutting down.

This is not rocket science.

It is already being done on a large and rapidly growing scale across the mountain regions of the north, and adapting the same technology for use in the plains of Punjab requires only a small push from the provincial government.

There are many `point of consumption` solutions around the world which harness the local geography of the area being serviced to develop innovative power generation systems on a small scale.

Solar applications and wind applications are very expensive if we think of them in terms of the old `mainframe` model of large-scale power generation houses feeding a national grid.

But if we think of them in terms of `point of consumption` generation they become a lot more feasible, especially for communities that don`t need much more electricity than what it takes to run a few bulbs and a couple of fans.

None of this is to imply that work on the large-scale problems of the power sector should stop. It is simply to suggest that it would be a good idea if that work were to be supplemented by efforts to innovate and develop more `point of consumption` generation ideas as well.

As these innovative solutions spread, then technology can be developed which helps share the electricity thus generated from those areas that are surplus to those that are deficit, with appropriate markets for pricing and settlements for shared electricity.

Of course, there are obstacles and challenges in implementing such thinking, but no path out of the power crisis is without obstacles and challenges. In this case, the success of the cottage industry based out of Besham is the model that needs to be studied carefully and replicated in other areas.
The writer is a Karachi-based journalist covering business and economic policy khurram.husain@gmail.com