Riding the Elephant

PM appeared to try – but failed – to emulate 1991 reforms package

Plight of millions of migrants fleeing home continues

The Indian government has tried over the past week to offset some of the serious economic and social effects of Covid.19 on the poor and on business, while at the same time using the urgency of the crisis to announce a series of potentially significant economic and business reforms.

The plans – some extremely tentative and several not entirely new – have included extensive overall privatisation of the public sector, specific increased private sector involvement in defence manufacturing, space activities, coal mining and power distribution, plus open market access for farmers to sell their produce.  Aid measures have included financial and other help for small firms, farmers and migrant workers.

Narendra Modi’s varying face coverings – India Today graphic

India’s economy has been crippled and the poor have been left destitute in the past two months. The country has over 90,000 confirmed cases of coronavirus including more than 56,000 currently active.

Reported fatalities have been relatively low at nearly 2,900, but the economic and social effects have escalated since prime minister Narendra Modi – who came to power six years ago this week – ordered one of the world’s strictest lockdowns on March 24. The lockdown has been extended to May 31, with varying degrees of relaxation around the country.

Modi heralded this week’s Covid.19 and other initiatives when he addressed the nation on May 12 and announced what was billed as a (much exaggerated) Rs 20 lakh crore (US$ 284bn – 10% if GDP) economic package of past and future plans for “land, labour, liquidity and laws“. This would lead to what the prime minister dubbed an Atmanirbhar Bharat or self-reliant India. (Economists estimate the actual government outlay is nearer $28bn).

That was followed by five daily televised media conferences, which ended yesterday (May 17), when Nirmala Sitharaman, the finance minister, listed Modi’s proposals on aid measures and broad-brush policy changes.

Modi’s speech, and subsequent twitter messages, were so strong that there was even speculation he might be planning to use the Covid.19 crisis to trigger major reforms in the same way that Congress prime minister Narasimha Rao and finance minister Manmohan Singh dramatically opened up the economy to tackle a deep financial crisis in 1991. That initiative led to the development of modern India, but the pace of further reform has been slow and, for the past 20 years, there has been speculation about what sort of crisis would be needed to push a government into another mega initiative.

Biswajit Mahant, an environmentalist in Orissa  found this group of 80 walking to Jharkhand last week, on the highway, with little kids walking in the hot sun: “I gave them money for food & they stopped to rest in the shade of a bridge. I informed the district collector & he kindly arranged a bus to take them to the border, saving them a walk of 300 kms … The state govt orders to local police are now clear – any migrants found walking will be given food and water and sent by hired bus till their state border” – and photo below

Modi has undoubtedly tried to reach out to domestic and foreign companies to persuade them to invest and help to revive the economy, but the measures – many of which re-package plans announced in the past – are too uncertain to match up to the 1991 initiatives.

They have also not met the need for an economic stimulus because they do little to accelerate demand. They ignore some key areas including the hard-hit tourism industry and private healthcare (though curiously there is a Rs500 crore allocation to help 200,000 bee keepers).

Even more importantly, they have specifically failed to tackle the continuing social misery – and potential economic problems – of tens of millions of migrant workers fleeing home from big cities since the sudden March 24 shutdown, many infected with coronavirus.

Little has been done by the government to help these workers, maybe as many as 90m of whom have trudged their way hundreds of miles with scarce food. A total of 130 have been killed on the roads. Overcrowded trains have been provided but not in sufficient numbers and states initially blocked their borders.

This week’s measures have provided them with free food for two months (why only two months is unclear), and with countrywide ration cards. The Government has also made a substantial Rs 40,000 crore allocation under a rural work scheme (MGNREGS) to provide employment in their home areas. How effective those measures will be, given extensive bureaucratic corruption, remains to be seen.

Migrant workers

There are estimated to be a total of some 170m migrant casual workers in India and they play a key role in many industries. Employers in the cities are now beginning to worry that they might not return as the economy recovers, upsetting the chances of a quick recovery. Some companies must also now be regretting that they treated the casual workers as little better than slave labour and not as valued employees.

In his speech, Modi said that self-reliance would be based on five pillars – an economy “that takes quantum jumps and not incremental change”, modern infrastructure; a technology-driven system; vibrant demography as a “source of energy”; and a strong demand and supply chain.

The biggest potential reform is that there is to be a policy for the private sector to be allowed to invest and operate in all parts of the public sector apart from industries selected as “strategic”. All public sector enterprises in non-strategic areas would be privatised while, in strategic areas, between one and four enterprises would remain in the public sector, the remainder being merged or brought under a holding company.

Stranded migrant workers wait to board a special train home from Chennai – ToI photo

This seems most unlikely to be implemented any time soon – the government’s statement ominously said “timing to be based on feasibility etc”. The first step will be the publication of a policy, but there will be considerable opposition from trade unions and from right wing forces in the ruling Bharatiya Janata Party’s broad Sangh Parivar (family or organisations) that have already started to protest.

Earlier announcements last week said that the private sector’s involvement in defence manufacturing would be boosted with a list of weapons and systems that would not be open to foreign companies. The government hopes this will encourage foreign direct investment by major international defence companies, which will be allowed 74% FDI stakes (up from 40%) on an automatic basis for high technology equipment.

Farmers’ markets

The big initiative for farmers is that restrictions on how they sell their produce are being lifted so that they can avoid bureaucratic and often corrupt mandis (local public sector markets) that currently have a statutory monopoly. This idea of de-regulation has been mooted for some 20 years and is basically a subject for states, not the central government, so it is not clear how far the proposal will go. Selling across state borders will also be freed under Modi’s broader theme of “one nation one market”.

To offset the impact of the Covid.19 shutdown, financing of businesses as small as street vending is being eased with special credit facilities, and farmers are being provided with emergency funding and credit arrangements. Bankruptcies are to be stalled for a year without companies being considered to be defaulters for bad loans. Other measures include liquidity is being boosted for non-banking finance companies.

Overall, there has been criticism that Modi chose this time, when the priority is dealing with the immediate Covid.19 crisis, to launch medium and long-term economic reforms, and that there were not adequate cash handouts and other measures to provide relief, especially for the poor.

It was characteristic of Modi to over-egg the proposals – for both relief and reform – in his initial speech. That will not matter however if what has been laid out in the past week is implemented, but Modi’s track record on execution is not good.

Christie’s cancels three auctions as New York closes down

Jailed jeweller’s works yield an MF Husain record with Saffronart

Sotheby’s seemingly odd decision to go ahead with its annual New York auction of South Asian art yesterday (March 16) after Christie’s cancelled its sales was more than vindicated by highly successful results. Good prices were achieved for the best works, including four world records, one by Nasreen Mohamedi, a respected abstract artist.

Starting not long after trading on Wall Street was paused because of dramatic falls in stock prices, the auction totalled $4.82m (including buyers’ premium). Only seven of the 79 works failed to find a buyer. That was good news for Sotheby’s, which has had some poor South Asian art auctions including one in Mumbai last November when important lots failed to sell.

The highest price yesterday was achieved for a stylish 50 x 33in untitled oil on canvas by V.S.Gaitonde (left) with a winning $1.5m bid that matched the top estimate. Gaitonde was a member of the prominent group of modernist Progressives that began in the mid-20th century.

There was an unusually large clutch of four or five bidders (on the phone) for the abstract work, which went to an anonymous buyer for $1.82m including the premium.

The same collector (the paddle number was the same) bought a 47 x 35in oil on canvas board by Nasreen Mohamedi (left) at a record auction price of $437,500 including the premium ($350,000 hammer).

This beat the artist’s previous record of $363,636 that was achieved at a Saffronart evening sale in September 2016.

Mohamedi, who rarely makes auction headlines, was born in Karachi in 1937 and lived in India till her death in 1990. She shared a studio with Gaitonde and their two works in the auction, both painted in 1963,  have an intriguing similar sensibility.

Best known for her line drawings, she produced only a relatively few canvas paintings. Arguably, seeing her’s and Gaitonde’s paintings together, she is under-valued. “It’s specially significant that Nasreen should make a record sale at a time like this,” said one potential bidder.

The auction began unusually strongly with a 26 x 24in wood collage on board (right) by Zarina (Hashmi), an 83-year old Indian artist living in the US who is known professionally by her first name. The work fetched a hammer price of $70,000, nearly three times the top estimate – $87,500 including buyer’s premium.

Sotheby’s probably went ahead, despite the escalating coronavirus gloom, because preparations were too far advanced to be halted. Bidders were making absentee offers over the weekend, which could have made it hard to halt the sale. Reserve prices were lowered, according to market sources, and a major effort was made to attract bidders.

There were only a few people in the auction room, but there was strong bidding by telephone and on line, attracted by keen prices and strong provenance of previous owners and galleries.

When I asked Hugo Weihe, who used to head Christie’s South Asia sales and has also been ceo of Saffronart, the market leader, why the results were so good at a time of a global melt-down, he replied “It was mostly a function of the quality of the material, the market remains smart that way”.

“It was a good market – there’s plenty of money out there,” said Conor Macklin, who runs the India-linked Grosvenor Gallery in London’s Mayfair.

Dinesh Vazirani, co-founder of Saffronart, took it a stage further and wondered “if people are looking to acquire long-term assets at a time of such uncertainty”.

Christie’s South Asian auctions were scheduled for tomorrow (March 18), so it had more time than Sotheby’s to pull down the shutters, in line with the auction house’s other New York sales.

There were to be three auctions, two of them offering about 150 works collected since the mid-1990s by Kito and Jane de Boer.

Now based in Dubai and London, the de Boers started collecting when Kito de Boer worked for McKinsey in Delhi. Advertised as Christie’s “largest and most important single-owner sale” of South Asian art for several years, the auctions will be revived when the virus crisis is over.

Also running last weekend was a smaller on line auction by Dubai-based Artiana, which sold 36 out of 40 works for a total of $1.47m, below the low estimate of $1.70m.

More headlines were generated earlier by Saffronart auctions of art and other luxury items, including a Rolls-Royce Ghost saloon, owned by Nirav Modi, a billionaire diamond jeweller and trader. Modi is charged in India for alleged money laundering and corruption, and is now in London’s Wandsworth prison awaiting extradition proceedings.

Ordered by India’s Enforcement Directorate, the auctions (on line on March 3-4 and live in Mumbai on March 5) yielded Rs60 crore ($8.55m) including the premium, with all the 112 lots being sold.

Modi was known in the art world for having sound knowledge and good taste when he was considering buying works. That was demonstrated when a world record of Rs13.44 crore ($1.92m) including the premium (Rs15.68 crore, $2.24m hammer) was achieved in the Saffronart auction for a work by M.F.Husain, a leading member of the Progressives group.

This was a striking 74 x 108in oil on canvas diptych, Battle of Ganga and Jamuna: Mahabharata 12, (above) with a strong provenance – Modi bought it in a Christie’s auction in 2008 for $1.7m, where it was being sold by Masanori Fukuoka, a prominent collector who owns the Glenbarra Museum in Japan.

The top price of Rs15.68 crore ($2.24m) including the premium, was paid for Boys with Lemons, a 36 x 22in oil on canvas (above) by Amrita Sher-Gil that Modi acquired from the artist’s family. Both the Husain and Sher-Gil are thought to have been bought by a leading collector for her Delhi art museums.

The Rolls-Royce sold for twice its estimate at Rs1.68 crore ($240,000). Last May, over $8m was raised for India’s tax revenue department when Saffronart auctioned other top works owned by Modi, achieving prices up to $3.7m.

There’s no chance of Sotheby’s sort of New York success , or Saffronart’s with Modi’s collection, being repeated till the coronavirus crisis eases. The results show however that good works new to the auction circuit and with sound provenance attract collectors and significant prices.

Politics and personal rapport deflect trade row and lack of initiatives 

Thirteen dead in Delhi clashes over citizenship legislation

President Trump’s state visit to India was always going to be a raging success, and so it turned out in terms of the mutual praise bordering on adoration exchanged between him and prime minister Narendra Modi, strengthening the personal bonds of two leaders who have much in common.

Both politicians gained in terms of voter appeal and Trump said it was a “great fantastic two days”. On best behaviour and mostly avoiding controversy,  he praised Modi as “a man I am proud to call my true friend”, though he was “a very tough negotiator”. India would always hold a very special place in our hearts”.

But there was relatively little of substance affecting the relationship between the US and India, and the consequences of Modi’s brand of Hindu nationalism led to media coverage of the visit being disrupted by violent clashes between police and rival groups of rioters linked to protests over new citizenship legislation.

Melania and Donald Trump with Narendra Modi in Delhi

Thirteen people were killed, vehicles and buildings burned, and teargas used in north-east Delhi, just 12kms from where the state visit was taking place on February 25. The protests over what is seen as anti-Muslim citizenship legislation have run for over two months, but this level of violence between rival groups was new. It stemmed from a BJP local politician threatening over the weekend that his Hindu followers would clear the streets of Muslim protestors if the police did not do so first.

The main announcement during the visit was that India is buying $3bn helicopters for its army and navy. This had however been under negotiation for some time and was specially packaged as the lead item.

There was no apparent progress on a long-awaited trade pact, and rumours of possible deals on nuclear power stations and a counter-terrorism centre did not materialise.

The highlight of the visit was an astonishing rally (left) on February 24 of over 100,000 cheering supporters of Modi’s Bharatiya Janata Party, many sporting white caps with the words “Namaste Trump”. The crowds were mostly bussed into what is billed as the world’s biggest cricket stadium in Ahmedabad, the main city of Modi’s home state of Gujarat, to greet Trump and his wife Melanie a few hours after they arrived in India.

The massive crowd’s adulation of Modi as well as Trump smacked more of events organised by leaders of totalitarian states than a democracy. The Indian prime minister however revels in such occasions, as did Trump who proudly said later it was the “greatest greeting ever given to any leader”.

Both men gained in terms of voter-oriented political prestige from that event and the whole visit. There are 4m-plus people of Indian origin in the US, who are potential voters for Trump in November’s presidential election. For Modi, they form a significant and influential diaspora. More than 800,000 are from Gujarat and are instinctively his overseas cheerleaders.

Modi is also proudly credited by many voters in India for having raised the country’s profile on the world stage, so the Trump visit has also enhanced that reputation.

A welcoming wall poster in Ahmedabad

By normal standards for state visits however, this was brief, billed as “two days” but actually just 36 hours – an overnighter in less formal parlance. Trump was invited to be the chief guest at India’s Republic Day parade last month but did not accept, mainly it is thought because of problems with a proposed trade deal.

It was Trump’s first visit since he became president, though he and Modi have met at least seven times, most flamboyantly in Houston last September at a “Howdy Modi” rally staged by the diaspora with up to 50,000 Indian Americans. Modi took Trump along as the co-star, setting the stage for the much larger event in Ahmedabad.

The only formal agreements this week were for co-operation on mental health and safety and an oil industry issue. More important were talks covered international affairs, terrorism, security, defence, and energy technology that will have laid down plans for development of initiatives.

They included setting up working groups on curbing narcotics trafficking and reinvigorating homeland security, but nothing was said publicly to indicate that Trump had pressed Modi on issues of religious freedom – which Modi said somewhat implausibly he supported and encouraged.

On international affairs, Trump said that the two leaders had agreed on “revitalising the Quad initiative”, which includes Japan and Australia. This link-up is designed to contain China’s ambitions in the Indian Ocean and South China Sea. It has made little progress in recent years, although a meeting was held at ministerial level last September.

Trump also made a point of saying more than once that he was close to Imran Khan, Pakistan’s prime minister, as well as Modi, offering in a press conference towards the end of the visit to mediate – something he knows India rejects. That was the nearest he got to a controversial remark during the visit.

NDTV evening news screen split between riot fires in north-east Delhi and the Trumps arriving for a banquet in the presidential palace

It is rare for defence deals like the helicopter orders to be included in such a visit – the last time it happened was when Modi visited Paris in April 2015. He set up a deal for Dassault’s Mirage fighters that became highly controversial and haunted him for years with allegations of corruption.

Trump alluded to trade problems several times during the visit, linking that with remarks about Modi being “tough”. Before he arrived, he did his regular trick of putting his hosts on the wrong foot with negative comments. “We’re not treated very well by India,” he said last week, though he added in the same breath “I happen to like prime minister Modi a lot”.

Later he grumbled that India had been “hitting us hard” on trade with tariffs that are “the highest in the world”. There would be a “tremendous trade deal”, he said, but maybe not before the November election.

There are tensions over trade in various areas including agriculture, medical devices, digital trade and new tariffs stemming from the Modi government’s increasingly protectionist policies. Modi’s Made in India campaign also clashes with Trump’s similar approach for the US.

Earlier this month, even though the Trump visit was imminent, the US removed India from the list of developing countries that benefit from US tariff preferences on countervailing duties because, as a G-20 member, it was no longer a “developing country.” Last March, the US raised tariffs on steel and aluminium and suspended India’s tariff free access for some $5.6 billion in exports under a 1970s-era Generalized System of Preferences

There are other points of tension between the two countries whose relations, overall, are more troubled than they have been for some years.

Modi referred to their “global strategic partnership”, carefully avoiding the word allies that the US would like but India refuses to acknowledge.

Trump and Modi rose above such details, but that was personal rapport, not lasting co-operation.

Amit Shah pushes the Hinduvta agenda too far for many people

Modi wants to transform society – and has widespread support

Narendra Modi is facing the first major test of his political leadership, and of his image of apparent invincibility, since he became India’s Bharatiya Janata Party prime minister in 2014.

His authority is still intact but, largely because of the provocative actions of his henchman, home minister Amit Shah, he is being challenged by the biggest and longest-running country-wide protests for decades.

Demonstrations dominated by the young claim that the two Hindu Nationalist politicians have gone too far with their basically anti-Muslim drive since winning an overwhelming general election victory eight months ago. At the same time, Modi has failed to manage the economy effectively and create jobs.

The main target is an amendment to India’s citizenship laws launched in early December that discriminates against Muslims by favouring Hindus and other religions, plus an associated National Register of Citizens (NRC) promoted by Shah that could create social havoc as the minorities, the poor, and others without family documents struggle with corrupt officials to prove their rights.

Some states have refused to implement the citizenship legislation (though they may be constitutionally bound to do so), and there are rumblings of discontent among the BJP’s allies. The legislation is now being challenged in the Supreme Court.

There is a sense of a pending crisis in the country because of widespread concern and speculation about how far – and how forcefully – the Modi-Shah duo intend to go with their aim of creating a Hindu Rashtra (polity), and for how long they are prepared to be tolerant of dissent and protests.

Some critics suggest that, like populist leaders elsewhere, they welcome protests – or the prospect of them – because they can respond with repressive measures.

In Kashmir, when they cancelled the special status of the Muslim-dominated state in a constitutional coup on August 5, they imposed an unprecedented massive security shutdown with curfews, blocked internet and mobile telephones, and detention of political activists.

Internet and social media are still partially blocked, despite international protests and criticism by India’s supreme court, and leading mainstream politicians remain under a form of house arrest after almost six months.

Significantly however, the change in Kashmir’s status, and the security action, has had widespread support across India, as did an earlier cancellation of the Muslim triple talaq method of instant divorce.

The citizenship legislation however went too far for large swathes of public opinion, Hindu as well as Muslim,  mainly because of the prospect of the NRC. There was extensive violence, burning of vehicles and attacks on shops that provoked tough repressive action. In Uttar Pradesh, where an extreme Hindu priest is the chief minister, there was extensive and brutal police repression, with reports of young protestors being assaulted by vigilante groups.

There are also reports of detention centres being built to accommodate those (Muslims) who fail the citizenship test, and the chief of army staff has talked publicly about de-radicalisation centres to deal with radicalised Kashmiri youth (later explained as “army goodwill schools” to avoid radicalisation) .

It is easy, as some critics have done, to relate this to China’s re-education camps that are used to stifle protests by a million Uighurs in the western province of Xinjiang, and it is equally easy to dismiss such a comparison as extreme for a democracy such as India.

Observers wonder however how far in this direction India will have moved by the time of the next general election in 2024, when Modi and Shah will want to inspire their party cadres and win votes. In last year’s elections, concern about the worsening economy was eclipsed by Modi campaigning on national security and on tough action against terror attacks emanating from Pakistan.

One contact in Mumbai even talks about the risk of “SRCC” – Strikes, Riots, Civil Commotion – being generated in order to justify clampdowns. Such extreme ideas raise memories of the two-year State of Emergency declared in 1975 by India Gandhi, then the Congress prime minister.

Modi restructuring society

Sources both within and outside the BJP suggest that Modi believes India needs an overhaul of how society works in order to meet his ambition of building a strong, successful and self-confident nation.

This would galvanise the 80% of Indians who are Hindus with a sense of nationalism, reducing the power of traditional elites (typified by the Congress Party and its Gandhi dynasty), strengthening the potential for the poor with a sense of empowerment, simplifying and improving the way that government works and impinges on people’s daily lives, and gaining respect abroad.

Shah (below) however, whose political role has escalated in recent months, seems to have little interest beyond establishing Hindu rule at the expense of minorities. There is considerable speculation about whether he and Modi are fully united and are playing a modified version of good-cop-bad cop, or whether Shah is going further than Modi would wish. What is clear is that Shah has none of Modi’s vote-pulling charisma as a populist leader.

The constructive aspect of Modi’s ambitions is rarely taken into account internationally by liberal opinion which is appalled by the seemingly anti-Muslim policies and does not appreciate that Modi is tapping into both a growing sense of national pride among aspirational youth, and a latent but easily aroused aversion to Muslims among a significant number of Hindus.

S. Jaishankar, the former top diplomat who is now the external affairs minister, has talked in Washington about a “new India” that his foreign audiences had been reluctant to recognise. “This new India is a different being, one that lives in second tier cities, and speaks and feels differently,” he said, referring without being specific to the base of Hindu nationalism.

It remains to be seen how sensitive Modi is to international criticism because he wants India to carve out its own form of society that does not conform to the west’s liberal norms.

His aim is to show off India as a successful economically strong and internationally important country, first in 2022 when it hosts the G20 conference, and then maybe the Commonwealth biennial summit in 2024 just before the general election.

Perhaps more ominously though, the Rashtriya Swayamsevak Sangh (RSS), the extreme umbrella organisation to which the BJP belongs, celebrates its 100th anniversary in 2025, which will require more Hindu nationalist-oriented achievements.

The immediate focus is how Modi and Shah handle the citizenship legislation, which Shah says will go ahead.

Then there is the bigger question about the National Register of Citizens that Shah originally said would be in place by 2024. It is currently not clear how far he will push this, but Swapan Dasgupta, an MP and prominent Modi-supporting columnist, indicates that it might not go ahead for some time.

“The architecture of any proposed register is not yet clear,” he says. “It has to be designed and there needs to be a wider understanding in society about what to do with those who are declared illegal”.

That indicates the need for a national debate on the issue, but neither Modi nor Shah have shown any interest in public debate, or tolerance of criticism which is usually rejected as being “anti national” or “pro Pakistan”. This makes people extremely cautious about what they say, even in private, for fear that someone will report back to Modi or Shah.

There is also deep dissatisfaction about the government’s focus on religion-based divisive policies while failing to arrest a decline in economic growth, which has fallen to an 11-year low of 4.5-5%, and a failure to generate jobs promised by Modi.

Prospects of a good rabi (spring) harvest indicate the decline in growth might have bottomed out and Modi is expected to spring some surprises via his unimpressive finance minister, Nirmala Sitharaman’s annual Budget speech on February 1.

BJP would not win a majority today

This is reducing support for the government. An opinion survey published in this weekend’s edition of India Today found that, if there were a general election now, the BJP’s seats in the Lok Sabha would fall from the 303 won in last year’s general elections to 271, one seat short of a simple majority. But Modi’s personal rating has only dropped slightly  by 3% to 68%.

The February 1 Budget is one of three significant dates for Modi. The second, on February 8, is the election for Delhi’s assembly, which will test the BJP’s popularity and could lead to victory for the local-based Aam Aadmi Party.

Later in February, the Supreme Court is expected to rule on the constitutionality of the citizenship legislation.

It is tempting to wonder whether it would suit Modi, if not Shah, for the court to rule against it, or at least demand some changes. That would be one way of curbing the current protests, giving Modi and Shah time to reassess what to do next.