Book Review: India unleashed

A senior journalist tells a lucid story of how reforms played out in a diverse, democratic country

The past 25 years have witnessed an upheaval in the global political and economic order. The fall of the Berlin Wall and the dissolution of former Soviet socialist republics proved to be a major catalyst. This is an era that also saw the rise of a new category of nations called “emerging markets”, which differentiated them from the earlier, somewhat-pejorative Third World classification. Nothing can be more dramatic in this period than the rise of China and India, two dissimilar Asian neighbours sharing a contested and uneasy border.

After the 2008 trans-Atlantic financial crisis, these two countries contributed to world economic growth in large measure. The subsequent slowdown of China’s frenetic growth, and a re-assessment of its position as the world’s manufacturing shop-floor, has shifted focus to India and its economic growth potential. Indeed, India’s attempts to showcase itself as a global economic and political power — it is the fastest growing economy in the world today, albeit from a lower base — has its fair share of sceptics.

There are many who have been stung by India’s hesitant steps in the past; a disappointed international investor had once commented sardonically how India will perennially remain a “potential”, always looking to fulfil its destiny.

This book comes at a time when India’s hopes have been rekindled once again, even though the country finds itself at strategic cross-roads. Shifting power templates and uncertain economic currents have forced India to rethink its priorities.

Turning Point 

All existing equations have been re-arranged: old friends have turned lukewarm, past indifferent relationships have become super-charged. In the midst of all this, a change in the political leadership also saw old rules rewritten. While economic policy is still work-in-progress, fresh energy has been invested in foreign policy. The world is once again looking at India with new eyes.

The author’s long and successful career as a journalist, first in India and then in Singapore, has afforded him a ring-side view of history as it unfolds; his perch at Straits Times has provided a unique vantage point for the south and south-east Asian theatre. The author has attempted to encapsulate India’s transformation over the past 25 years in 350-odd pages. He crisply outlines the grand aspirations, highlights the transformational moments and unabashedly shows up the warts.

The narrative begins with the notion of India shining, the redemptive features of a diverse and democratic republic that continues to defy disbelievers. The high point of India’s emergence as an emerging power, the author feels, came during the country’s swift and capable response to the December 2004 tsunami. Caught unawares by nature’s brutal and devastating fury, India refused all external help and marshalled its own administrative and defence capacities to provide relief to affected areas. In fact, India went a step further and provided disaster relief – both in terms of material as well as capacity — for many neighbours equally ravaged by the rising sea waves. This event marked a turning point; it heralded the arrival of India as a mature and capable republic that could not only take care of itself but was willing to support its neighbours in times of need. India was no longer dependent on hand-outs or external support for coping with natural disasters.

Change Comes

Beyond this unfortunate but symbolic event, the author writes that India’s reputation was also burnished by its armies of software engineers and the resilience of its populace. This is also a chronicle of India’s increased engagement with the world, emerging from its self-imposed exile and re-establishing its position in trading and strategic negotiations. Beginning with former Prime Minister P V Narasimha Rao’s prescient “Look East” policy, helped in some measure by Singapore, to Prime Minister Narendra Modi’s “Act East” policy, an on-going high-octane engagement with the US or the balancing act with China, India’s strategic imperatives are much more dynamic and challenging. In the midst of all this the usual suspects — corruption, bureaucratic inertia, scams, turf wars, terrorism, internal schisms and faultlines, diplomatic mis-steps, political expediency trumping good governance, among others — keep tripping up India’s chances.

The author leavens his account with numerous anecdotes, some of them experienced first-hand. These makes the reader an almost unwitting observer as events unfold. The author also calibrates expectations by stating that the book is not an academic work. Yet there is a gnawing and empty feeling in some places that could have used some research to highlight India’s on-going battles.

For example, the chapter on the Comprehensive Economic Cooperation Agreement, signed between India and Singapore in 2005 after years of haggling, probably deserved some more details. This is important because some of the issues have gone on to define India’s stand in subsequent global multilateral negotiations, or in on-going plurilateral talks. The readers would have definitely benefited from the author’s simple explanations and lucid style.

This book provides an account of India’s travels and travails over the past 25 years. Readers wishing to figure out the troughs and crests of this journey should pick up the book. It is exceedingly well written; even for those wishing to explore issues in depth, this book provides a good starting point. It is an enjoyable slice of India’s post-reforms history.

India Rising: Fresh Hope, New Fears

Ravi Velloor

Konark Publishers

Rs 530

The review originally appeared in The Hindu BusinessLine. It can also be read here.

The SBI merger: is bigger always better?

The process increasingly looks like a shotgun wedding, with not enough opportunity to pause and ponder

The anticipated merger of the State Bank of India (SBI) with its five associate banks and Bharatiya Mahila Bank (BMB) finally got off the ground with the government sending a letter to all seven banks on 20 June. From thereon, the time taken for obtaining individual board approvals, appointing legal and accounting firms as well as investment banks, getting them to conduct due diligence and arriving at a fair share swap ratio, was under two months.

That should be some kind of a record. Deals involving smaller companies or banks have taken far longer. And this is the country’s largest bank, SBI, merging with six other pretty large banks. There are many imponderables involved in such negotiations: for example, the overlap in the combined physical network, the people question, or integrating disparate back-end systems and processes. Clearly, the government is in a hurry to complete this merger.

The merger is being pursued in the belief that larger automatically means better. Vanity is also a motivating factor—creating an institution that will make it to the list of the world’s largest banks confers bragging rights.

There are perceived gains as well: the government, as shareholder, feels it will have six less capital-hungry banks to worry about. There are also expectations that a larger institution will be better equipped to deal with sticky loans, thereby enabling fresh credit outflows to productive sectors. Productivity and efficiency gains are among other expected benefits. But these could turn out to be illusory given the SBI’s legacy and ownership structure. A former SBI chairman had once remarked that reforming SBI was like trying to make an elephant dance. Even after discounting for exaggeration, there are grounds for circumspection; a large and unmanageable bank is getting even larger.

What’s even more worrying is how the process increasingly looks like a shotgun wedding, with not enough opportunity to pause and ponder. Three issues merit wider debate.

One, the merger patently lacks shareholder democracy. Individual shareholders have been discouraged from objecting. Anybody wishing to oppose must own at least 1% of either bank’s share capital (for example, that amounts to 77.6 million SBI shares) or must marshal 100 shareholders irrespective of their shareholding. According to SBI’s annual report for 2015-16, only five shareholders owned more than 1% in the bank on 31 March 2016: the President of India (60.18%), Life Insurance Corp. of India (11.27%), HDFC Trustee Co. Ltd (on behalf of HDFC Mutual Fund, 2.08%), Bank of New York Mellon (as depository for SBI’s outstanding global depository receipts, 1.86%) and Reliance Capital Trustee (on behalf of Reliance Mutual Fund, 1.09%).

Similarly, chances are that mostly institutions own shareholding of over 1% in the three associate banks with public shareholding—the State Bank of Bikaner and Jaipur, State Bank of Travancore and State Bank of Mysore.

While it is safe to assume that the President won’t be objecting, it is also unlikely that any institutional investor will really challenge the process. The SBI owns 100% in the State Bank of Patiala and State Bank of Hyderabad, while the government owns 100% in BMB. Two other associate banks were merged with the SBI earlier: the State Bank of Saurashtra in 2008 and State Bank of Indore in 2010.

In the face of such power asymmetry, in which one set of shareholders has greater rights than another group, the predictable has happened. Left trade unions in Kerala have taken the deal to court; there it might languish for a time.

Two, the merger seems to overlook a critical, post-crisis concern—the too-big-to-fail (TBTF) question. Tremors of the 2008 trans-Atlantic financial crisis were felt all over the interconnected world. The TBTF theory posits that some institutions are so large and intricately interconnected with different parts of the economy that failure can create a systemic shock. This forced many governments to bail out large financial institutions with taxpayer money. It might also be instructive to note that many countries have been formulating preventive TBTF regulations. Australia, for example, has prohibited any merger between the country’s four largest banks. Switzerland, on the other hand, has the world’s most stringent capital norms.

The Reserve Bank of India (RBI)—in keeping with various multilateral agreements at the Financial Stability Board, G20 and the Bank for International Settlements—has designed a risk mitigation framework for dealing with “domestic systemically important banks” or D-SIBs. The framework recognizes SBI and ICICI Bank as D-SIBs, both of which must maintain higher common equity tier I (CET I) than their peers. It allows national authorities greater discretion in the selection and risk mitigation processes than what’s prescribed for global systemically important banks, G-SIBs.

But here’s the thing. Once the merger is completed, SBI could become part of the G-SIB club, ending RBI’s discretionary approach. What happens then? Will the current capital shield be adequate? If no, what impact will additional CET I have on expected efficiencies? Even if it doesn’t get clubbed with G-SIBs, RBI will perforce have to review its D-SIB framework.

Finally, a speculative thought. Rumours are China now wants in on plurilateral trade in services agreement (TiSA) and India has also expressed a similar desire. Leaked TiSA documents show nil barriers to financial services imports, including total freedom to overseas financial companies for acquiring local outfits. Is the SBI merger a pre-emptive move then?

Some of these conversations need to happen now, not post-merger. Especially whether bigger is always better.

This appeared in Mint newspaper on September 21, 2016, and can also be read here

Lost History: An encounter with the 'king' of Turtuk, a border village near Gilgit-Baltistan

The village is just 10 km away from Pakistan-occupied Kashmir and became a part of India as recently as 1971.

Entrance to the Royal Palace, Turtuk village

A guided tour of the Ladakh's Turtuk village, in the mountainous region of Baltistan that is on the border of Pakistan and India, ended at what is known in these parts as the Royal Palace. After a long walk down narrow and undulating lanes in the crisp afternoon sun, shepherded by a nimble 16-year-old, we had arrived at what was supposed to be the highlight of our excursion. At first glance, it was slightly underwhelming – the house is larger than its neighbours, but little else set it apart.

The palace doors opened into a colonnaded courtyard that supported a verandah with no visible access. A short flight of stone steps, which rose steeply through a hidden corner, brought us to a figure supine on a floor mat. Our guide gently nudged the figure – a man stumbled out of his afternoon siesta, disoriented by the sight of so many strangers. He was feeble and slightly bent.

Smoothing the creases on his shirt and patting his disheveled hair into place, he led us into a room, apologising for not according us a better welcome. He explained, somewhat diffidently, that working the fields in the morning sun had induced the mid-day torpor.

He then sat on a couch, but not before picking up a wooden sceptre, crested with a distinctive metal serpent head, and placing it pointedly on his lap. He then becomes Yabgo Mohammad Khan Kacho, the king of Turtuk and descendant of the Yabgo Dynasty of Chorbat-Khaplu, a region that now falls beyond the Line of Control and in the contested territory of Pakistan occupied Kashmir. Though he no longer enjoys the powers nor the official recognition as a past royalty, he is known in these parts as the king.

Yabgo Mohammad Khan Kacho, King of Baltistan.

Across the border

Turtuk is a quaint village perched barely 10 km from the Pakistan border, under the benign gaze of the K2 peak across the border. The village, located in the Sheyok river valley about 200 km from Leh, is a verdant relief amidst the spare and stark beauty of Ladakh’s landscape.

Turtuk, in Ladakh district, is in the Indian-administered part of the Baltistan region and borders Pakistan’s Gilgit-Baltistan area.

The Gilgit-Baltistan are has for years existed largely away from the glare of Indian and international media, but the spotlight has been on it for the past month, after Prime Minister Narendra Modi publicly promised – twice in quick succession, in his Independence Day speech and before that, in his concluding remarks at the all-party meet on Jammu and Kashmir in Delhi on August 12 – to highlight the plight of residents of Balochistan and Pakistan-occupied Kashmir to the world. While Balochistan is a province in Pakistan, which has been fighting for autonomy, Gilgit-Baltistan is a part of PoK.

The Gilgit-Baltistan territory is special – it is a crucible in which trade, culture, religion, languages and cuisines from Europe, Central Asia, Afghanistan and China have come together for centuries. India has made many claims over the province and many analysts have recounted its recent political history. Interestingly, a thin strip of this province juts into India.

The prime minister’s reference to the three disputed areas has got foreign policy and strategic experts parsing his words, as well as setting off a maelstrom of articles and Op-eds (examples are here, here and here).

Overnight, a new country

This prompted me to wonder: what would the people of Turtuk, just a stone’s throw away form Gilgit-Baltistan, make of Modi’s statement? Would they also be deconstructing his speech?

One thing is certain. Nationality or sovereignty are elusive, if not transient concepts for the king and villagers here. And there's a good reasons for this.

One night in December 1971, village residents went to sleep as Pakistan citizens. They awoke next morning as Indians. Turtuk, along with three other villages in the vicinity – Tyakshi, Chalunka and Thang – were occupied by advancing Indian armed forces during the 1971 war of liberation of Bangladesh.

Turtuk residents have only one grouse – the Indian army should have gone a little further and occupied the rest of Baltistan. The overnight change of sovereignty split many families along the Line of Control – parents on this side with children and grandparents on the other. Political conspiracies abound on why the Indian army did not move further afield when it was there for the taking.

Kacho, Turtuk’s king, also has some family on the other side. He traces his lineage to the Ghaz tribe from West Turkestan, a region today known as Central Asia. His ancestor, Beg Manthal, came to Baltistan in 800 AD from Yarkhand (which is part of modern-day China’s Xinjiang region) via the Saltoro ridge (which is to the west of the Siachen glacier) and conquered Khaplu, in modern-day Gilgit-Baltistan.

The Yabgo dynasty, Manthal onwards, ruled the Chorbat-Khaplu region of Baltistan for a millennium, expanding it over time to Ladakh’s frontiers on one side and to Ghizer district on the western edge of Gilgit-Baltistan. The dynasty ended in the first half of the 19th century when the Dogra empire, which had, in 1846 taken control of Kashmir, forming the princely state of Jammu and Kashmir, expanded its kingdom North and East.

A wall at one end of the room has the family tree painted on it, going back centuries.The king said the Indian army helped him document this. In the face of an elusive administration, the Indian army means many things to most Baltistan residents – employer; buyer of locally-produced vegetables, milk, fruits and meat; provider of healthcare and education as well as occasional source of telecom network and other basic infrastructure.

The king describes himself as a writer and said his father didn’t want him to work but just spread the word about their family. He was not trained in anything but made to read a lot. He read books written by local historians and decided that the best thing to do would be to tell his people what they were all about.

But, the Indian government banned his book based on complaints from a sect that saw blasphemy in his account of how their religious order was established, he said. He contested the ban in Indian courts and eventually won after years of litigation. But he rues the fact that he didn’t retain a single copy of the book – he doesn’t even remember the name of the Delhi-based publisher.

Connected, yet isolated

Turtuk is a microcosm of Baltistan’s inclusive culture: a multi-ethnic village, with around 4,000 residents speaking different languages and praying to different gods. Different denominations – Nurbakshi Shias, Sufis, Sunnis, Buddhists (and perhaps even Ahmadiyas and Ismaili Shias) – live peacefully, farming and trying to make sense of the burgeoning tourism business. Turtuk was opened up to tourists only in 2010. The chairman of the local school and healthcare committee remarked that many old Turtuk residents would long to see cities, but now, the cities were coming to see them.

Turtuk was an important junction on the Silk Route with ancient linkages to Tibet, Afghanistan and the steppes of Central Asia. A part of China’s One Belt, One Road initiative, an attempt to resurrect the Silk Route that connected parts of Asia, Europe and Africa, will now come close to Turtuk as it proposes to pass through Gilgit-Baltistan.

Turtuk residents fervently wish that the LOC opens up so they can meet family on the other side, re-establish social connections and perhaps even resume commerce.

The king is still recounting the region’s old linkages when his narrative is cut short with new arrivals, guests of a senior army officer posted in the vicinity. Yabgo Mohammad Khan Kacho apologises and rushes off to attend to the new rulers of Turtuk.

This article was originally published in www.scroll.in and can also be accessed here