Nepal Moves From One Year of Living Dangerously to the Next

The Madhes issue remains unsettled with the Maoists and Nepali Congress unable to amend the constitution without the support of the UML.

The Madhes issue remains unsettled with the Maoists and Nepali Congress unable to amend the constitution without the support of the UML.

Nepal's prime minister, Pushpa Kamal Dahal 'Prachanda'. Credit: Reuters

Nepal’s prime minister, Pushpa Kamal Dahal ‘Prachanda’. Credit: Reuters

Kathmandu: The year that started with the blockade of the India-Nepal border by Madhesi protestors ended with the obstruction of Nepal’s national parliament. At the start of 2016, the Madhes-based parties, as a part of their protest against the newly-promulgated constitution, stopped the entry of vehicles at key border points – and India had tacitly supported them. Those five months of the blockade, coming hot on the heels of the 2015 earthquakes, were a nightmare for Nepalis as they coped with severe shortages of daily essentials and rampant inflation.

On September 20, 2015, the second constituent assembly that was elected in 2013 – after the first one, elected in 2008, failed to produce a constitution – passed the country’s new constitution with the approval of over 85% lawmakers. This, in the eyes of the three major parties that were behind the constitution – the Nepali Congress, the Communist Party of Nepal-Unified Marxists Leninists (CPN-UML) and the CPN (Maoist Center) – lent the document an overwhelming legitimacy. But the Madhesi parties and some Janjati organisations refused to accept the new charter. They hit the streets against the decision of the Big Three to impose the constitution on the basis of numerical supremacy. As protests spiralled, around 50 people, mostly Madhesis, were killed in police firing, further inflaming a volatile situation. The Madhesi parties decided that the best way to make Kathmandu heed their concerns would be to cut off the capital’s essential supplies, hence the border blockade.

The blockade would eventually be lifted at the start of February 2016, when the four-month-old constitution was amended for the first time, supposedly to address the concerns of the Madhesi parties.

The new amendment guaranteed proportional representation of Madhesis and other marginalized communities in government bodies. It also made ‘population’ rather than ‘geography’ the primary factor for drawing up electoral constituencies so that there would be more representation in the national parliament from the Madhes.

India welcomed the amendment and declared that the border was now open from its side. The Madhesi parties, bereft of India’s support, had no option but to agree to India’s decision. But unlike India, which seemed to be in a mood for ‘course correction’, the Madhesi parties never accepted the amendment, which they termed ‘insufficient’ since it was silent on their main demand of redrawing federal boundaries. There was a feeling among Madhesi actors that the Indian establishment had once again ‘used and abandoned’ them.

Nepal's prime minister, Prachanda, with Indian external affairs minister Sushma Swaraj in Delhi, Septemebr 2016. Credit: PTI

Nepal’s prime minister, Prachanda, with Indian external affairs minister Sushma Swaraj in Delhi, Septemebr 2016. Credit: PTI

Whatever the reason for India’s support of the blockade – its desire to cultivate Madhesi parties or as an expression of its displeasure with Kathmandu – the then prime minister, K.P. Sharma Oli milked it to maximum advantage. The aim of the blockade was to bring Kathmandu to its knees, but Oli refused to budge and was quite successful in portraying the Madhesi parties as ‘India’s stooges’ and in projecting himself as a bulwark against India’s ‘ill designs’ on Nepal. In playing up anti-India nationalism, he was also cultivating his core supporters up in the hills. It would not be wrong to say that during the five months of the blockade, anti-India sentiments in Nepal had reached an all-time high.

The disagreements that led to the blockade continued to simmer as the Oli government failed to resolve the key Madhesi issues. So at the start of August, the Maoist leader Pushpa Kamal Dahal ‘Prachanda’ replaced him as prime minister. The Madhesi parties supported Prachanda in the belief that they could trust him more than Oli, who had come to be seen as ‘anti-Madhes’. Then, at the end of November, the new government of Prachanda tabled a bill in parliament to amend the new constitution for the second time, again to address Madhesi concerns.

Second time unlucky

The second amendment proposed to separate the hilly regions of province 5 so that this province, just like province 2, would be ‘Madhes-only’. The fate of the five remaining districts in Tarai-Madhes, the areas that were not covered either by province 2 or province 5, would be decided by a future federal commission.

On citizenship, foreign women married to Nepali men would now be eligible for Nepali citizenship when they renounced the citizenship of the country of their origin. On official language, all mother tongues would be included in the annexe of the constitution at the recommendation of the Language Commission (which already exists). On representation in the upper house of federal parliament, the other Madhesi concern, a total of 56 members would be elected from the seven provinces on a population concentration basis, provided that there are at least three members from each province.

India swiftly welcomed the proposed amendments. The Madhesi parties were once again circumspect. While the they had rejected the first amendment outright, they said they would support the second amendment, provided there were a few tweaks. Their main reservation with the second amendment was that it left the fate of the five disputed districts – Jhapa, Morang, Sunsari, Kailali and Kanchanpur – to the federal commission. The Madhesi parties wanted an immediate settlement of these districts.

Provinces of Nepal. The provinces, created by the new constitution, will be named once elections to their respective legislatures takes place. Wikimedia CC 2.0

Provinces of Nepal. The provinces, created by the new constitution, will be named once elections to their respective legislatures takes place. Wikimedia CC 2.0

They want two contiguous Madhes-only provinces spanning the entire length of Nepal. Only such a demarcation, they believe, will put the native Madhesis in plurality in these provinces. As it is, the new constitution divides the Madhes region among four separate provinces, with only one province, province 2, consisting exclusively of Madhesi territories.

The Madhesi parties also want the election of the upper house of federal parliament to be solely on population basis. (Again, the proposed amendment on this clause does not go far enough for them.) The main political actors contend that since the lower house will already be elected exclusively on population basis, it makes sense to ensure enough representation from smaller provinces in the upper house so that these provinces are not completely ignored.

On other demands, there are varying interpretations. For instance Federal Alliance chairman Upendra Yadav wants Hindi recognized as a national language, on par with Nepali. But this is seemingly not the demand of other Madhesi parties. There is also a dispute over the kinds of citizenship provisions the Madhesi parties want. But federal demarcations, again, is the main issue, and on this they have a common stand.

Currently, the UML and seven other small opposition parties have been interrupting the parliament for over a month against the proposed ‘anti-national’ second amendment. They fear that if the Tarai plains are completely separated from the hilly regions, it could ultimately lead to secession of the entire Tarai belt, something Madhesi intellectual C.K. Raut is campaigning for. India’s quick approval of the second amendment also makes the UML and its supporters suspicious that New Delhi is working hand in glove with secessionists like Raut. And they see the decision to include all mother tongues in the annex of the constitution as a Trojan horse to make Hindi a national language – something that is anathema to the nationalist UML.

Polls apart

Meanwhile, the constitution stipulates three sets of elections – local, provincial and federal – by January, 2018. If there are no elections, there will be a big constitutional crisis. But as things stand, elections are unlikely anytime soon. Madhesi parties say they will agree to elections only if the major parties make changes in the constitution in line with their demands. But with the opposition occupying over a third of the legislature, it will be impossible for the ruling parties to pass the amendment bill without its support.

File photo of protestors in the Madhes. Credit: Reuters

File photo of protestors in the Madhes. Credit: Reuters

Nepal has been completely taken up by these political and constitutional disputes in the past 12 months. As a result, governance has deteriorated and vital development endeavors have been shelved. Amid this political squabbling, earthquake victims have been denied timely help. They continue to shiver in their makeshift tents in the bitter cold. Another issue of national importance, the impeachment motion against Lokman Singh Karki, the freewheeling head of the main constitutional anti-graft body in Nepal, the Commission for the Investigation of the Abuse of Authority, has also been put on hold.

Since it does not have a two-thirds majority, the ruling Congress-Maoist alliance is increasingly inclined to declare the date for local-level elections by putting the amendment bill on hold. The main opposition has assured them that it will also agree to allow parliament to function if the government takes the electoral route. The Madhesi parties, however, rule out any elections unless the constitution is first amended.

The year 2017 promises more inaction and chaos. In all likelihood, the country won’t be able to hold the three sets of election by the stipulated time. If this happens, the Madhesi parties will argue that even the little remaining credibility of the new constitution has been lost. Extremist forces in the Madhes, chiefly led by Raut, could then see their influence increase. And the nationalist rhetoric of UML and the monarchist Rastriya Prajatantra Party (RPP) will get more strident, further alienating the marginalized groups.

Even if the current parliament logjam is somehow broken and elections are held on time, the same populists could rule the roost, thereby again increasing the already dangerous level of political polarization. And no one knows what will happen if Raut throws his hat into the electoral ring. With Nepal’s mixed election system, he is likely to win at least a few seats, which will mean that the issue of the secession of the Tarai plains will formally enter Nepal’s parliament.

Losing the plot

As the political logjam drags on into the foreseeable future, the overarching national goal of Nepal graduating from Least Developed Country (LDC) status into a Developing Country by 2022 will be missed. Achieving the goal requires over 9% annual growth over the next five years; the current rate is under 4%. Healthy economic growth is also important for job creation. But with a stagnant job market and paltry wages on offer, more and more young Nepalis are looking to leave the country at the first opportunity they get. Already, every single day, around 1,500 people leave Nepal to work in the Gulf countries; there are many more undocumented workers who go to work in India.

Of course, it’s not all gloom in Nepal. The graduation target of 2022 may not be met but the UN still expects Nepal to graduate by 2024 on the basis of its superior human development record, even though the per capital income criteria for graduation will most certainly be missed. Individual actors like Dr Govinda K.C. (the crusading doctor who has single-handedly changed the face of medicine in Nepal) and Kulman Ghising (the chief of the country’s public power utility who has been able to dramatically cut down power-cut hours) provide another glimmer of hope. They are proof that individuals are capable of affecting social change even if the entire system is dysfunctional.

But without political stability accruing from a durable constitutional settlement, such examples of excellence will remain exceptions and never become the norm.

Biswas Baral is a Kathmandu-based journalist who writes on Nepal’s foreign policy. He tweets @biswasktm.

Visa Rejection for Krewella is Latest Sign India is Limiting Contact With Pakistanis

The well-known musicians were forced to cancel their planned appearance at Pune’s Sunburn festival because their visas to travel to Indian were rejected.

The well-known musicians were forced to cancel their planned appearance at Pune’s Sunburn festival because their visas to travel to Indian were rejected.

Krewella. Credit: krewella.com

Krewella. Credit: krewella.com

New Delhi: By the time the Sunburn festival wound down in Pune, around 150 musicians invited from around the world had performed for thousands of gyrating electronic dance music fans. All except, the sister duo, Krewella, whose act was cancelled after their visa was application rejected because of their “Pakistani heritage”.

On December 27, a day before the Sunburn festival opened, the two sisters, Yasmin and Jahan Yousaf, posted a handwritten note on their official social media accounts. “It is with heavy hearts that we inform you that due to our Pakistani heritage, our visas have been repeatedly denied and we will not be able to enter your country for [the] Sunburn festival,” the sisters wrote in a letter addressed to the ‘India Krew’.

Just two weeks before they posted their cancellation, they appeared in a short video on the Sunburn Festival site telling the “desi Krew” that they were going to be in Sunburn with “tons of new music”.

But, that was not to be. “Our team tried every avenue possible but now have reached the end. We are so heartbroken since we were looking forward to being reunited with our Desi Krew,” they wrote.

When asked about the case, officials in the Ministry of External Affairs denied having any say in the matter, pointing to the home ministry as being the arbiter for approving any visa applications of Pakistani nationals and third country citizens of Pakistani origin.

This is a consequence of the change in visa rules in 2009 after the role of David Headley in the 26/11 Mumbai terror attacks came to light. Headley, a Pakistani-American, got a visa to India based on his U.S. passport and then conducted reconnaissance in several parts of Mumbai. Under the new rules, Indian missions abroad lost their discretion power to grant visas to any Pakistani-origin national; instead, all applications have to be processed by the home ministry.

There is an entire separate category of ‘Visitor visa’ only for “Pakistan Passport Holders who have not renounced their Pakistan Citizenship”. Pakistan, unlike India, allows for dual citizenship which means that they can keep two travel documents.

As per the rules, applicants of Pakistani origin would have to provide “proof of renunciation of Pakistani citizenship” if they apply for a visa on a US passport. If they can’t furnish this proof, they will have to apply on a valid Pakistani passport for a visa. Further, those born outside Pakistan and who have never held Pakistani nationality have to provide a notarised affidavit that the applicant never held citizenship or a Pakistan Origin Card or National Identity Card for Overseas Pakistani.

In November, a young Indian journalist, Purvi Thacker, had conducted a social media campaign when the visa application of her best friend, Pakistani national Sarah Munir, was rejected. Munir was hoping to travel to India to attend Thacker’s wedding.  A second attempt for an Indian visa ended with the same fate.

Both Sarah Munir and the Krewella sisters had visited India before – but failed to get the home minisrty’s green light this time, an indication that there has been an unannounced hardening of the Modi government’s position on people-to-people contact between Pakistanis and Indians. Krewella had performed at the 2014 Sunburn festival.

On social media, there have also been other shouts for help for facilitating visas of family members who happened to be of Pakistani origin:

South Block officials deny there has been any tightening in the process for approving visas for Pakistanis or Pakistani-origin applicants. But, earlier this year, media reports had said that there had been an unusual spike in the rate of rejection of visa applications by Pakistani nationals in the first five months of 2016. India-Pakistan relations had deteriorated from the first week of 2016 after terrorists sneaked into the Indian Air Force Base in Pathankot and laid siege to it for three days.

India Today had reported last June that 53 % of visa applications of Pakistani nationals submitted between January and May 2016 had been rejected. This was a sharp jump from 17% in 2014 and 24% in 2015. The Indian ambassador to Pakistan, Gautam Bambawale had apparently brought this up during a meeting with the home minister Rajnath Singh. The Economic Times wrote that government officials explained the “drastic reduction in grant of visa may have been because of stringent security measures adopted by the agencies”.

What threat the home ministry’s mandarins saw from Krewella and others like them is not known.

For now, Indians will have to make do with YouTube:

Why are We All Eating at McDonald’s? Multiculturalism in 2017

Multinational brands that offer culturally ambiguous products – like the McVeggie burger – will get to define global citizenship in the coming year.

Multinational brands that offer culturally ambiguous products – like the McVeggie burger – will get to define global citizenship in the coming year.

McDonald's in India. Credit: Owen Lin/Flickr, CC BY-NC-ND 2.0

McDonald’s in India. Credit: Owen Lin/Flickr, CC BY-NC-ND 2.0

In this year of political shocks and ideological upheaval, I’ve realised a couple of very inane things: Subway smells the same in every country. And so do McDonald’s french fries.

Looking back, determining who belongs where has been one of the predominant political issues of 2016 and as 2017 rolls around the corner and Brexit plays out and Trump takes office, this question will continue to take up space in the political arena. But on a more individualistic level, people will have to ask themselves what makes them feel like they belong to a place – what music, food, memory, movie, book is definitional to them and what will their choices say about their national identity?

As countries close their borders down in 2017 and rid themselves of the physical presence of immigrants, what will happen to the cultural output from these communities? Will Trump’s wall be solid enough to shut out Mexican food and music along with actual human beings or will these cultural nuggets linger on, living a strange half-life of their own – which may take the shape and form of the taco bowl that Trump enjoyed earlier this year.

At this point in the year, it is hard to think of anything new to say about the decline of multiculturalism. I am just one of many who have been dismayed to find that many people in the world don’t subscribe to the liberal values that I have taken for granted. On one hand, it seems relatively easy to clamp down on visas and deport people – the refugee crisis shows it is shockingly easy to physically uproot a person. But on the other hand, I think of the musical notes from other cultures that sneak into ‘American’ music, that ‘Tex-Mex’ or ‘American-Chinese’ are distinct gastronomic categories and that McDonalds and Coca-Cola offer a consistent sense of familiarity anywhere in the world and I realise that it is impossible to fully differentiate between one cultural identity and another. Once you set out on this exercise of defining a national identity, where do you really stop – how do you rid a person of plurality?

the-wire-logo-2017
Although this seems heartening at first, there’s a massive caveat that comes to mind almost immediately. McDonald’s is only a comforting, familiar experience everywhere because of the brand of cultural homogeneity that it has perfected. It’s the corporation that is often cited, rightfully, to make a case for the Americanisation or westernisation of the world. Curry houses in Britain may have started shutting shop – due to South Asian immigrants returning home after the ‘leave’ vote – but McDonald’s branches around the world will probably remain open because the culturally-tweaked, globalised products they offer don’t belong to any community or person in particular and so are harder to discriminate against.

The Indian McVeggie is not an age-old family recipe with immense emotional value, though ads for the company will tell you that the restaurant itself can be the venue for meaningful memories. One ad traces a couple’s relationship from being friends to dating, to married and then eventually married with kids – McDonald’s is part of their life’s narrative.

There’s nothing particularly Indian about the ad and it doesn’t fixate on the Indianised version of the menu either. The promise is so simple that it doesn’t have to be spelt out – you’re cosmopolitan and modern for associating with McDonald’s. And of course, the vegetarian options on the menu are carefully calibrated to cater to the country’s specific palette as well as dietary and financial preferences.

Global consumer brands allow us to feel cosmopolitan or like ‘global citizens’ without really surrendering our cherished cultural idiosyncrasies. But the compromise they strike create products that don’t really fit in anywhere – the McVeggie is not American, although a burger is essentially a cultural import from the US and McDonald’s is an American corporation; but nor is the McVeggie Indian, even though it is made to cater to Indian consumers’ tastes and unique to the country.

This is possibly the one form of multiculturalism that is bound to survive the ascent of nationalism in the coming year, since it offers a comfortable, if compromised, middle-ground between the global and local. You can be a ‘citizen of the world’ within the confines of your own nation.

Multinational consumer brands symbolised a borderless world and integrative globalisation but as the optimism of that perspective fades, these same brands will come to signify a different perspective on globalisation. One which emphasises the fact that borders can be rigid, not porous, and the most accessible way to be multicultural will be through culturally ambiguous products consumed within set geopolitical borders.

This isn’t really a new way of participating in the global economy, it’s what we do on a daily basis anyway. However, until now McDonald’s branches have more or less coexisted with other institutions like immigrant-run curry houses in Britain and their equivalents across the world. I’m afraid that the coming year will bring more of the former and much less of the latter.

What a Twitter-Happy Trump Might Mean For Nuclear Diplomacy

Far from making America great again, Trump is more likely to make America grope again in the darkness of the post-nuclear age.

Far from making America great again, Trump is more likely to make America grope again in the darkness of the post-nuclear age.

Republican presidential candidate Donald Trump speaks at news conference to promote his new book "Crippled America" in the Manhattan borough of New York City, November 3, 2015. Credit: Reuters

Republican presidential candidate Donald Trump speaks at news conference to promote his new book “Crippled America” in the Manhattan borough of New York City, November 3, 2015. Credit: Reuters/Files

Hillary Clinton lost the election, but a question she tweeted during the campaign remains critically important for the world. Can a man so easily baited by Twitter be trusted with the nuclear codes?

Donald Trump’s likely policies after assuming office later in January require triangulation of three known character traits. First, his twitchy thumbs can jump into action to spray his thought bubbles over the Twitter-sphere before his brain is engaged. Second, he possesses a unique capacity to deny outright something he said, even if digitally recorded. Third, he is a professional deal maker.

Trump’s nuclear Twitter spray

During the US election campaign, Trump thrice asked a foreign policy adviser: if we have nuclear weapons, why can’t we use them?. In a New York Times interview, he seemed to suggest Japan and South Korea could obtain their own nuclear arsenals. On December 22, President-elect Trump tweeted: “The United States must greatly strengthen and expand its nuclear capability.” The same day President Vladimir Putin also spoke of the need to do the same with Russia’s deterrent.

One positive spin on the Trump tweets is to suggest that far from threatening Russia, Trump is issuing an open invitation to Putin to team up against emerging powers: two superpowers to rule the world. This is a pipe-dream in a multi-polar world with Russia at best a regional power and Russian and US interests coinciding on a few but diverging on several key interests, goals, threats and enemies.

Trump’s spokesman Jason Miller explained that in the December 22 tweet, “Trump was referring to the threat of nuclear proliferation and the critical need to prevent it,” which is almost Trump-like in attempting to convey a meaning exactly opposite of that actually said. A day later Trump said, “Let it be an arms race … we will outmatch them at every pass and outlast them all.”

A third positive spin would be that by asking why not use the bomb, Trump grasped their essential uselessness. His musings on Pacific allies underlined the fundamental paradox of nukes for some but not for others if they are useful for deterrence and operationally usable.

But then, why not encourage a free-for-all proliferation? In international diplomacy, relationships are often transactional. Will Trump dismantle the nuclear deal with Iran if it jeopardises his incipient partnership with Russia to defeat ISIS? Will he move closer to Taiwan and risk undermining China’s cooperation on checking North Korea’s nuclear ambitions?

Four sceptical notes

The Obama administration committed itself to a trillion-dollar nuclear upgrade over the next 30 years. Enlarging the US nuclear stockpile would reverse decades of policy by successive Democratic and Republican presidents. The rationale for weapons cutbacks was best provided by former president Ronald Reagan with his genius for soundbites. “A nuclear war cannot be won and must never be fought,” Reagan said in 1984. There are four grounds for scepticism about nuclear weapons being the pathway to making America great again: dis-utility, cost, risks, and a deepening global anti-bomb norm.

A nuclear bomb has not been used again after 1945, largely because it is essentially unusable. If used against a non-nuclear nation, the political cost of damage to the international reputation if the user would far exceed any expected military utility. This explains why America and the Soviet Union accepted defeat and withdrew from Vietnam and Afghanistan instead of escalating to the nuclear level. Their only – and even then limited utility is deterrence of another nuclear power. But here too, there is an inescapable paradox which renders them unusable. If deterrence breaks down and the enemy does use the bomb, retaliation in kind leaves both sides worse off.

To be credible, possession must be accompanied by the full infrastructure of delivery, command and control systems, the capacity to absorb a surprise first attack, survive and retaliate with sufficient destructive power against the enemy. There must also be robust safety and security features at every stage of the cycle, from design of facilities and rigorous screening of personnel, to storage, assembly and deployment of nuclear materials, warheads and delivery systems. This makes the nuclear weapons complex extremely costly.Belief in the bomb being a cost-effective substitute for conventional military power – which, because of the strong taboo against nuclear weapons, remain essential for capacity to use force in support of diplomacy – has proven to be delusional.

A mushroom cloud rises with ships below during Operation Crossroads nuclear weapons test on Bikini Atoll, Marshall Islands in this 1946 handout provided by the US Library of Congress. Credit: Reuters

A mushroom cloud rises with ships below during Operation Crossroads nuclear weapons test on Bikini Atoll, Marshall Islands in this 1946 handout provided by the US Library of Congress. Credit: Reuters/Files

The number of times that we have come frighteningly close to nuclear holocaust is simply staggering.

In January 1961, a 4MT bomb (that is, 260 times more powerful than Hiroshima) was just one ordinary switch away from detonating over North Carolina when a B-52 bomber on a routine flight went into an uncontrolled spin.

In the 1962 Cuban missile crisis, the US strategy was based on intelligence that no nuclear warheads were present in Cuba. In fact there were 162 warheads already stationed there, the local Soviet commander had taken them out of storage to deployed positions for use and the top three commanders split on whether or not to launch them against US targets.

On October 28, 1962, a missile launch base in Okinawa received an authenticated order to launch missiles. The local commander used rare common sense and further clarifications confirmed the order was a mistake. Other veterans dispute this account.

On June 3, 1980, amidst the tension of the Soviet invasion of Afghanistan, national security adviser Zbigniew Brzezinski was awakened close to the proverbial 3 am by his military aide General William Odom with the news that the Soviets had launched 220 SLBMs at the US. Brzezinski asked for confirmation and Odom called him a second time with a correction: the number of missiles hurtling towards the US was 2,200. Brzezinski decided not to wake his wife, preferring she die in her sleep. As he prepared to call President Jimmy Carter to authorise US retaliatory strikes, Odom phoned for the third time: it was a false alarm triggered by a 46-cent defective computer chip.

In November 1983, in response to NATO war games exercise Able Archer, which Moscow mistook to be real, the Soviets came close to launching a full-scale nuclear attack against the West.

On January 25, 1995, Norway launched a scientific research rocket in its northern latitude whose stage three mimicked a Trident SLBM. Within seconds, the Russian early warning radar system tagged it as a possible US nuclear missile attack. Fortunately the rocket did not stray into Russian airspace owing to system malfunction and the alert subsided.

Following the Ukraine crisis, in the one year period March 2014 to 2015, one study documented 67 specific incidents between Russia and NATO – 13 of which were “serious” and five, “high risk.”

The nuclear equation is biased against peace

For nuclear peace to hold, deterrence and fail-safe mechanisms must work every single time. For nuclear armageddon, deterrence or fail safe mechanisms need to break down only once. This is not a comforting equation. Deterrence stability depends on rational decision-makers being always in office on all sides – a dubious precondition. From later this month, leaders with their fingers on the nuclear buttons will include Trump and Kim Jong-un. It depends equally critically on no rogue launch, human error or system malfunction. The above examples prove conclusively that this is an impossibly high bar.

The more the number of nuclear weapons in existence and the more countries that possess them – the more the risk of a nuclear war multiplying exponentially. If not by design and intent, this could result from an accident, a rogue launch, human error or system malfunction. When we combine this with the proliferation of fake news, the risks of a nuclear launch by mistake are magnified manifold under current conditions. Recently, for example, Pakistan’s defence minister Khawaja Muhammad Asif threatened a nuclear attack on Israel – via a tweet, of course – in response to a fake news story that Israel had threatened Pakistan with nuclear weapons.

https://twitter.com/KhawajaMAsif/status/812370140507545600

The strengthening global norm against the bomb

With growing global consciousness of nuclear risks and threats, has come a strengthening determination to act to reduce and eliminate them. On December 9, 2014, 127 states signed the “humanitarian pledge” to stigmatise, prohibit and eliminate nuclear weapons. In pursuit of that promise, on December 23, 2016 the UN General Assembly resolved to convene a conference in New York in March and June-July 2017 “to negotiate a legally binding instrument to prohibit nuclear weapons.” The resolution was adopted by a massive 113-35 (13 abstentions) majority. The US and allies that shelter under its nuclear umbrella voted against.

All this shows why, should Trump try to implement his nuclear thought bubbles, he will quickly find himself swimming against the global tide of opinion on the wrong side of history and humanity. Far from making America great again, Trump is more likely to make America grope again in the darkness of the post-nuclear age.

Ramesh Thakur is co-convenor of the Asia-Pacific Leadership Network for Nuclear Non-Proliferation and Disarmament and professor in the Crawford School of Public Policy, Australian National University. The second edition of his book The United Nations, Peace and Security: From Collective Security to the Responsibility to Protect has just been published by Cambridge University Press.

What to Expect in Indian Politics in 2017

The state elections in 2017 will indicate which way the winds are blowing and will also chart Modi’s rise or fall.

The state elections in 2017 will indicate which way the winds are blowing and will also chart Modi’s rise or fall.

A collage of the main political players we can look forward to in 2017.

A collage of the main political players we can look forward to in 2017. Will Modi and the BJP be able to hold their position?

On November 8, 2016 Prime Minister Narendra Modi decided to ban the old  Rs 500 and Rs 1000 notes, intending to root out black money and corruption. Never had a government taken such a radical step to demonetise almost 86% of the currency in circulation. The impact, he knew, would be strong  both on Indian economy and Indian people.

“The 500 and 1000 rupee notes hoarded by anti-national and anti-social elements,” he justified, “will become just worthless pieces of paper.” However, as it turns out after a month and a half, the demonetised notes worthily made their way back into the banking system, thus, defeating the very purpose which the prime minister had so dramatically announced.

‘Did black money turn legitimate’ was the constantly hovering question every economist of repute wondered about. While the Reserve Bank of India has failed to offer a convincing answer until now, the government has conveniently turned the rhetoric of eradicating black money upside down. It now sees demonetisation as the first step taken towards a futuristic digital business era.

Modi’s immense popularity and his direct talking had a majority of the Indian people swaying towards his side in the 2014 parliamentary election. This also gave him the political strength to take radical steps like demonetisation, which did not unnerve his establishment despite throwing up innumerable tales of people’s sufferings. Modi remained stoic even as the opposition’s clamor grew against him towards the end of 2016.

Possibilities in 2017

The serpentine queues at the banks and ATMs may have ended and people may have gotten used to less cash in their pockets but the note ban will continue to remain the primary topic of political discussion in 2017 – at least in the first half of the year when its impact on Indian economy be weighed and scrutinised. And this, perhaps, will also dictate how the Indian political landscape shapes up this year.

The Congress party and the Aam Aadmi Party have already started to question the motives of the BJP-led union government. Both the Congress scion, Rahul Gandhi and AAP leader Arvind Kejriwal have alleged that note ban – which flushed banks with unprecedented deposits – was done to help out big corporates which are reeling under heavy debts. The State Bank of India’s almost simultaneous decision to ‘write off’ Rs 7,016 crore which was loaned to 63 big corporate accounts not only explained the government’s intention but also showed a huge gap between its words and actions, they alleged.

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While Kejriwal has gone all guns blazing against Modi, Gandhi adduced the Sahara-Birla diaries – which allegedly lists Modi as one of the many beneficiaries of commissions amounting to nearly Rs 70 crores – in his recent speeches to attack Modi’s demonetisation.

Gareebon se kheencho, ammeron ko seencho (take from the poor and give to the rich),” he said at every outlet, alleging that note ban was nothing but ‘economic robbery.’

With most other opposition parties like the Trinamool Congress, Left parties, the Samajwadi Party and the Bahujan Samaj Party upping their ante against demonetisation, it looks quite possible that the political rhetoric in the country would revolve around the monetary reform, its impact, and its intentions, through the first few months of 2017.

Will it affect the outcome of upcoming assembly elections?

At the moment, no one can speculate.

Two factors, however, have to be kept in mind. Firstly, Modi’s supporters are firmly behind him in support of the move. They vehemently project him as an honest, incorruptible leader, someone who, unlike the Congress, is capable of taking prompt decisions. Amidst a divided opposition, they have managed to sail his ship through muddy waters.

Secondly, opposition against the NDA government is bound to grow as it will enter its third year in 2017. Hence, it will be a year when people will be better placed to judge the government and vote with larger objectivity. As the floating population will grow, the opposition parties may reap its dividends.

The outcome of elections would largely depend on which one of these trends reflect more powerfully in the political battleground.

Seven states of India are going to polls in 2017 – five of them in the first half of the year. While the biggest election would be the much-awaited Uttar Pradesh polls on which most political observers are keeping a keen eye, Punjab, Uttarakhand, Goa and Manipur will elect new governments too. Towards the latter half of 2017, BJP’s prestige state Gujarat and Himachal Pradesh will be witness to keen electoral battles.

Barring Punjab where the BJP is a junior partner to Shiromani Akali Dal (Badal) and Uttar Pradesh, the most politically significant state, all the other five will see a direct confrontation between the Congress and the BJP as regional parties do not have much of a hold in them.

A man sits wearing a Narendra Modi mask before an event. Credit: Reuters/Files

A man sits wearing a Narendra Modi mask before an event. Credit: Reuters/Files

Where the BJP can score?

The polls in Uttar Pradesh are generally a four-cornered fight with the Samajwadi Party (SP), the Bahujan Samaj Party, the BJP and the Congress in the fray. In 2012, the SP won with a comfortable majority with merely 29% votes in its favour. Therefore, each party’s will focus on consolidating caste and community equations more than advancing developmental issues.

The BJP has put all its energy into winning UP, the biggest state in India with 403 assembly seats. It has played its Hindutva card to polarise the voters on religious lines and complimented this communal tactic with efforts to forge an alternative OBC-Dalit-upper caste alliance.

Uttar Pradesh Chief Minister Akhilesh Yadav with his uncle and Samajwadi Party leaders Ram Gopal Yadav and Shivpal Yadav. Credit: PTI/Files

Uttar Pradesh Chief Minister Akhilesh Yadav with his uncle and Samajwadi Party leaders Ram Gopal Yadav and Shivpal Yadav. Credit: PTI/Files

Given that the SP has until now commanded the substantial Yadav-Muslim population and BSP has the support of Dalits (almost 22% in UP), BJP’s efforts to create a new caste front will be keenly watched. With the turmoil in the SP and the Congress’ failing attempts to consolidate a vote bank in UP, the poll may be a straight battle between BJP and BSP, unless a larger pre-electoral alliance disrupts the existing political equations.

Manipur and Gujarat will be the second-most watched states in 2017. Both states are going to polls at different times of the year. Manipur is strategically important for the BJP after its victory in Assam. Its ‘look-east’ policy in the north-east has paid rich dividends to the party. Its tactical silence over the contentious inner-line permit issue because of which Manipur kept going up in flames through the last year indicates that BJP is keeping its cards very close to its chest. Until now, it has only occupied itself with poaching important leaders from the Congress and building a political consensus for the party among multifarious identity groups.

Gujarat, however, will be the biggest test for the saffron party. The state saw the resignation of Anandiben Patel as the chief minister, a Dalit upsurge against the Sangh Parivar’s cow-protection campaign and the Patel agitation over the last two years. The party is said to have lost considerable ground in the state where Modi ruled for three straight terms. Both Congress and the AAP are trying to fill the political vacuum after Modi.

Since it has always been a prestige state for the party – the Gujarat model of economic development was the USP of Modi’s campaign in 2014 – it will be politically contingent for the BJP to win it back. This will cement its place as the most powerful party in India.

In Himachal Pradesh and Uttarakhand, the party would like to wrest control from the Congress, which is already facing several corruption charges in both the states.

But in Goa, both the Congress and a fledgling AAP hope to do exactly the same from the Laxmikant Parsekar-led BJP government, which too has entangled itself in charges of corruption and weak governance.

Where will the Congress stand?

BJP is the biggest party in terms of control of states, while its national rival, Congress still commands the greatest number of votes polled in all states. However, while the saffron party is on a definite upswing, the latter will have to do something really drastic to re-energise itself to stem its continuing decline.

As of now, the Gandhi scion, the only acceptable leader in the party, is trying to re-invent himself. If his last few speeches are something to go by, he has been unabashed in his criticism of the Modi government. His speeches reminds one of the Congress party in the 1960s and 1970s – welfare oriented, uncompromisingly secular-nationalist and sternly pro-poor.

Rahul Gandhi's recent speeches reminds one of the Congress in the 1960s and 1970s. Credit: Reuters/Files

Rahul Gandhi’s recent speeches reminds one of the Congress in the 1960s and 1970s. Credit: Reuters/Files

Rahul Gandhi has launched an attack on big names of corporate world and have not spared leaders from his own party. His has quite consciously been trying to shift the party’s direction from being a market-friendly force towards a social democratic one, Congress’ insiders say.

Gandhi has been reading that script lately.

However, in most states that will go to polls, it can’t boast of even one credible mass leader in any of the seven states. The dearth of regional leaderships may hurt the Congress’ poll prospects, however hard it may try.

In Punjab, Captain Amarinder Singh is fighting his last election but AAP is more than a roadblock to his chief ministerial ambitions. Similarly, Ibobi Singh, the three-time Congress’ chief minister of Manipur, will fight its most crucial elections as an anti-incumbency factor against his government is at an all-time high. Himachal Pradesh’s chief minister Virbhadra Singh, too, is battling several charges of corruption.

As Gandhi is trying to re-energise the party with negligible support from its rank and file – and with patronage and corruption entrenched in regional units – it will be a herculean task for the grand-old party to rise beyond expectations. But it will still be interesting to watch what happens within the Congress and what strategies it adopts to oppose the Modi government.

The surprise element

One party that could surprise both its detractors and supporters is the Arvind Kejriwal-led Aam Aadmi Party. It has been trying to consolidate voters in Punjab, Gujarat and Goa ever since it won Delhi.

Political observers say that it stands a real chance of capturing power in Punjab, where it has led a powerful campaign against the Badals. Agrarian distress, the massive drug trade in the state and corruption are three issues on which AAP laid its foundation stone in Punjab. All three are emotional issues in the state and as a result it has built a considerable mass base.

Arvind Kejriwal, chief of Aam Aadmi Party (AAP), shouts slogans after taking the oath as the new chief minister of Delhi during a swearing-in ceremony at Ramlila ground in New Delhi February 14, 2015. Credit: Anindito Mukherjee/Files

Arvind Kejriwal, chief of Aam Aadmi Party shouts slogans after taking the oath as the new chief minister of Delhi during a swearing-in ceremony at Ramlila ground in New Delhi February 14, 2015. Credit: Anindito Mukherjee/Reuters/Files

Similarly, it has consistently worked in Goa over the last two years and built a strong organisation in the coastal state. It has highlighted corruption in mining activities and the real estate sector and at the same time built its base among the underprivileged sections like fishermen, small traders and landless labourers.

The party has reasons to be hopeful in 2017. If it wins even one of these states, Kejriwal is most likely to become the most vocal opposition leader in the days to come.

But the real challenge for him would be to first stop dissensions, which have surfaced quite frequently, within the party and then to develop a second line of leadership if it is serious about his party’s expansion plans.

2017 – Modi’s biggest test

The elections in 2017 will indicate which way the winds are blowing and will also chart Modi’s rise or fall. Although state politics are largely governed by caste and community equations and the political campaigns are centred around state-level issues, Modi – given his charismatic appeal – has been a propelling figure in BJP campaigns until now. He is undoubtedly the most popular mass leader India has had in its recent history.

The Sangh Parivar machinery has managed to turn him into a political star – someone to be infatuated with, someone whose achievements have to be celebrated opulently and also someone whose mistakes can be forgiven.

It is this stardom that will be put to test in 2017.

The Ongoing Attack on JNU’s Democratic Academic Structures

The administration has been encroaching on the educational structures of JNU which is dangerously undermining the democratic ethos of the university.

The administration has been encroaching on the educational structures of JNU which is dangerously undermining the democratic ethos of the university.

Students protest outside the convention centre in JNU. Credit: Twitter

Students protest outside the convention centre in JNU. Credit: Twitter

Devising and maintaining academic norms are central to the making of a good university and a vibrant intellectual culture. A good university is one which offers students not only an excellent education, but also the necessary democratic space that makes this really meaningful. The essence of this is critical thought, the spirit of questioning and an excitement about ideas. When buttressed by reading and learnt skills like research or writing, it makes education truly significant and transformative, rather than a mechanical means to achieve ends process. The attack on the public universities that we are witnessing all over India is designed to kill public education. At the heart of this is gagging voices, stopping dissent, ending debates and attempting to erase difference. In other words, the end of the university as a democratic space. It is this that we have been witnessing in this last year in JNU.

In brief – there has been a steady encroachment on and an attack against, perfectly viable structures of education that had been in place in JNU. At the risk of repeating the obvious, JNU has had an exemplary academic record – in the areas of teaching, research and publication. JNU’s students can be found in all areas of public life – government, politics, education, the arts, scientific research and active politics – to name but a few. It is then urgent to ask why everything that has not only functioned well, but has been exemplary, is being undone.

In this year we have witnessed different attempts to undo principles that maintain university structures. These include undoing the principle of seniority and rotation as the only grounds for becoming chairs or deans of centres (departments in JNU are known as centres); the appointment of wardens; the creation of a rash of new committees whose decisions have become binding; holding such important meetings as those of the academic and the executive councils during vacations; incorrect minuting of the proceedings of such meetings and the blatant refusal to correct these when pointed out, amongst others. Additionally, informal meetings of the vice chancellor with chairs and deans of the university are becoming places for discussing matters of both academic and statutory relevance to the university. Further, there is an alarming push to dilute the academic standards of the university by increasing the numbers of “certificate courses” and encouraging the system of online education.

The administrative undoing of the university first. Those unaware of the details would wonder why a university with a well oiled, routinised, system, should needlessly revamp it. However, a closer look at the patterns emerging make it patently obvious why this overhaul has been undertaken. The ‘whetting’ of all incumbent chairs and deans, with demands for ‘vision documents’ from them, followed up by an interview with the administration, is merely a way of lining up loyalists. However, sustained protests by the faculty and the teachers’ association has ensured that at least the seniority and rotation principle has not been entirely dispensed with.

Similar interference has been noticed in the renewal of contracts of some faculty members who also double as wardens of students’ hostels. The changes in these procedures, which should – according to JNU’s statutes be discussed and decided formally – have all been brought in without following due process and are being hastily implemented. This kind of motivated revamping of administrative structures is matched by the attack on academic practice. Normally, all academic matters in JNU – like the creation of courses or requests for creating new centers – are whetted at different levels. This usually goes through a rigorous process from within centres, via schools, boards, and finally the academic and executive councils. This ensures both quality and a democratic decision making process and the deliberations in statutory bodies like the academic, or the executive councils are done with care, giving attention to detail.

'Ideas are notice-proof' Credit: Twitter

‘Ideas are notice-proof’ Credit: Twitter

This year we have seen these being flouted repeatedly – thereby violating the sanctity of academic procedures. To begin with, following due process in relation to these meetings is essential for maintaining the sanctity of both academic practice and of intellectual standards. Amongst other matters, this would mean ensuring that the largest numbers of members would be able to attend these. Instead, we have seen academic and now executive council meetings being fixed in vacations – a practice unheard of in any good university. Second, all meetings must maintain accurate minutes. This is the essential for efficient and ethical functioning. Normally, draft minutes are circulated, and members’ responses in writing solicited – these are then formally approved by the floor in its next meeting. However, not only have there been glaring errors in minuting the 141st meeting of JNU’s academic council, these were not corrected even when pointed out.

Two of the most shocking of these has been the fudging of an academic council decision regarding selection committees for posts, giving the vice chancellor undue rights to change the list of experts and, the claim that the UGC Gazette notification of May 2016 that makes interview marks the principle criteria for admitting research students had been discussed, which was certainly not the case.

Third, the discussion of some courses has been done in a manner that substitutes academic rigour with skulduggery. Take, for instance, the case of the certificate courses brought by the special centre for Sanskrit studies to the 141st academic council. These courses were discussed very seriously and received thoughtful and generous, suggestions from colleagues. However, the Sanskrit faculty chose to deliberately misrepresent the fact that they had been asked to revise their courses and instead went to the press to report, incorrectly, that their courses had been turned down. On the contrary, one out of the three presented was passed, while two were sent back for revisions. Under normal circumstances revised courses should be brought back for discussion when the academic council reconvenes. However, in a shocking turn of events, the course on Yoga, declared as “approved” by the chairperson at the 142nd academic council held on December 26, was not discussed after revision. And here, I am not even entering the more messy terrain of why JNU should even consider offering ‘certificate’ courses, when it has a well established structure of research degrees in place.

These are just a few examples of how JNU’s excellent intellectual and political culture is being undermined. The very worst has been the utterly unacceptable language of attack, steady marginalising and more recently threats of “disciplinary action” against colleagues who attempted to protest this blatant violation of all norms and functioning of the university. The fight to protect JNU – and all other public universities in the country – is a fight for a democratic Indian future that ensures just and equal education to all. This is not just JNU’s fight – it is something every concerned citizen should be a part of.

In 2017, a Large Part of World Foreign Policy Will Likely Be Defined By Trump

A look at what’s coming up in the year ahead on the global foreign policy front.

A look at what’s coming up in the year ahead on the global foreign policy front.

Donald Trump makes a face at his caucus night rally in Des Moines. Credit: Reuters/Scott Morgan

Donald Trump makes a face at his caucus night rally in Des Moines. Credit: Reuters/Scott Morgan

The first year of the Donald Trump administration in the US is awaited with trepidation and nervousness in world capitals, with foreign policy crafted by an ultra-conservative White House set to have far-reaching consequences. Security concerns and Islamist terrorism will drive US policies in the Middle East, just as Latin America is waiting for the axe to fall over immigration and trade strategies. The rest of the world braces for a confrontation between Beijing and Washington.

While the US president-elect’s tweets and policies will reverberate throughout the planet next year, long-standing active hotspots and internal factors in various regions will keep foreign ministries busy round-the-clock in the Trump era.

Africa

One of the first dimplomatic visitors to India in the new year will be Kenyan President Uhuru Kenyatta. He will be coming as the chief guest to the Vibrant Gujarat summit, but will also take forward the implementation of some of the decisions taken during Prime Minister Narendra Modi’s visit. This will be his second visit to India since the India Africa Forum in 2015. Kenyatta’s visit will take place as his country gets ready for its sixth presidential elections in August, which will have immense significance due to Kenya’s position as East Africa’s economic powerhouse. The presidential elections, which will be in August, have already become controversial due to the efforts to change the electoral law. The opposition’s protests became so loud that the UN Development Programme and ambassadors from Western countries had to issue a statement denying Kenyatta’s accusation that they were meddling in the 2017 polls. The Kenyan government also barred a US NGO from conducting an electoral awareness programme.

President of Kenya Uhuru Kenyatta waves to his supporters in front of a church in his hometown Gatundu. Credit: Reuters/Marko Djurica

President of Kenya Uhuru Kenyatta waves to his supporters in front of a church in his hometown Gatundu. Credit: Reuters/Marko Djurica

But even beset with its domestic concerns, Kenya is keeping a strict eye across the border at Somalia, where international efforts to bring stability has faced numerous roadblocks. On December 28, the Somalian parliament postponed the presidential polls for the fourth time till January 24, 2017. A day earlier, a joint statement from the UN and certain Western nations assailed the National Leadership Forum for adding more seats to the upper house after electing MPs, who will then vote for the president. It will only be the second election (the previous one was also indirect) held since the ouster of dictator Mohamed Siad Barre in 1991. Somalia’s fate is critical to fight the al-Qaeda-linked al-Shabaab who control large swathes of territory and have been trying to subvert the electoral process by threatening to kill electoral delegates.

Besides, there are three other big African electionscoming up, in Rwanda, Liberia and Angola. While Rwandan president Paul Kagame is the frontrunner to win a third term, both Liberia and Angola will get fresh faces with their current incumbent not running in the polls.

The African Union will also have to elect a new chairperson in January, which is seeing the normal divisive politics between the francophone and English-speaking countries, and also regional blocs.

It remains to be seen if there is a smooth transition in government in two other states, Algeria and Zimbabwe, helmed by long-governing but ageing strongmen. In the meantime, local complications will continue to fester in BurundiGabon, the Central African RepublicEthiopia and the Democratic Republic of Congo.

ISIS was ousted by the US military in its last stronghold in Libya in December 2016. But a return of political stability to the war-ravaged country is far from certain, with the Government of National Accord in Tripoli struggling to gain a semblance of legitimacy.

the-wire-logo-2017

More than politics, commodity prices are likely to shape not only the destiny of Africa, but the pecking order of countries within. 2016 has been a disastrous year for most large African economies which depend on the export of resources, with prices of commodities like oil, bauxite, copper, gold, timber and diamonds crashing. Global lenders have predicted a modest recovery, but there will be two rates of growth – a higher one for the resource-poor but diversified nations and a lower level for commodity-dependent countries.

As the economies of South Africa and Nigeria continue to stumble, the voices of smaller but relatively better-governed countries like Botswana and Rwanda could become more prominent.

Latin America

After Africa in 2015 and West Asia in 2016, 2017 could be finally be the year for India to do strengthen its Latin America outreach. In June 2016, when Modi landed in Mexico city for a few hours to get a promise on support for India’s Nuclear Suppliers Group membership bid from Enrique Peña Nieto. The host obliged, but the guest also promised to be back for a substantial visit. And if Modi finally makes it to Latin America this year, he is likely to tick off more countries in the region. Brazil could be one of them, as the Brazilian president Michel Temer would also be in India in mid-2017 for the second time within 12 months for the IBSA summit. He was earlier in Goa to attend the BRICS summit in October 2016.

Of course, both of Modi’s potential hosts in Brazil and Mexico are on a sticky wicket, domestically, this year.

Mexican President Enrique Pena Nieto gestures during a news conference in Mexico City. Credit: Reuters/Edgard Garrido

Mexican President Enrique Pena Nieto gestures during a news conference in Mexico City. Credit: Reuters/Edgard Garrido

Peña Nieto will have to deal with Trump in power in the White House, still smarting from his only foreign foray during his campaign. The visit hurt the Mexican president even more, with a majority of Mexicans blaming him for the ‘strategic misstep‘ of inviting Trump. With Trump likely to be under pressure to show some action on his fundamental campaign platform to ‘build the wall’ and rip apart the North American Free Trade Agreement, Mexico will have its work cut out to attract foreign investors who were usually drawn by prospects of tapping into the US market.

In Brazil, a modest recovery forecast of less than 1% GDP growth coupled with unpopular economic reforms could cause Temer to have a tough fight on his hands in the 2018 presidential elections. That is if he retains his seat amidst widening corruption allegations that have emerged from investigations into the Petrobras scandal.

The first presidential election will be in Chile in November 2017, where the ruling centre-left coalition faces a challenge from a conservative former president and an independent left-leaning senator.

The big question in Venezuela is, of course, whether Nicolás Maduro will survive yet another year of daily streets riots, an opposition dominated-National Assembly and a devastated economy. He will probably scrape through.

Demonstrators clash with members of Venezuelan National Guard during a rally demanding a referendum to remove Venezuela's President Nicolas Maduro in San Cristobal, Venezuela October 26, 2016. Credit: Reuters/Carlos Eduardo Ramirez

Demonstrators clash with members of Venezuelan National Guard during a rally demanding a referendum to remove Venezuela’s President Nicolas Maduro in San Cristobal, Venezuela October 26, 2016. Credit: Reuters/Carlos Eduardo Ramirez

Things look more positive for the other left bastion, Cuba, with President Raul Castro predicting a 2% growth in GDP. But with Venezuela continuing to be in the economic doldrums and Trump likely to make attempts to unravel Barack Obama’s policy normalisation of relations, Castro has a difficult last year left to make his mark, before handing over to a successor by early 2018.

Colombian president Juan Manuel Santos will not only have to justify his Nobel Peace Prize, but also keep an eye ahead on the 2018 legislative and presidential elections with former president and Yoga practitioner, Alvaro Uribe, snapping at his heels. The next 12 months will be critical in implementing the peace agreement with the leftist militant rebel group FARC. Santos skipped a referendum after he re-negotiated the agreement with the former guerrillas. But he will have to show that he is punishing some of the rebels charged with serious crimes to ensure that his legacy remains intact and the ruling party returns to power.

For Latin America, the victory of Trump, with his campaign platform of immigration curbs and tariff barriers, was not good news. It came at the end of an already tough year of low commodity prices which shrunk the region’s GDP by 1.1%. After the second consecutive year of contraction, hope is on the horizon with the World Bank forecasting GDP growth of 1.8% in 2017 as copper and oil prices are expected to rise substantially.

The rightward, pro-business political swing in the region is likely to persist and even strengthen in 2017. But if the economic recovery is just moderate, left politicians are still in the game to tap onto a rising swell of frustration.

Just like other parts of the world where US influence could retrench under an inward-looking Trump administration, China may step in to the subsequent void – but not without fuelling growing resentment over the largely commodity-driven relationship. This could be a window of opportunity for India to boost its presence, just as Latin America scouts around to diversify its circle of partners beyond the US, China and a faltering Europe.

Europe

Trump will encounter his counterparts from the rest of the world, including India, at the G-20 summit in the north German city of Hamburg in July. This will probably be the first time that the new and old world leaders will take measure of each other at an international summit after the real estate tycoon takes over the White House. Indian officials believe that it would be also be the stage of the first meeting between Modi and Trump.

The location of Europe for the intermingling of the old and new could not be more appropriate, with the EU going through a crisis of confidence in the 50th anniversary year of the Treaty of Rome. Europeans are still processing the last 12 months, when it witnessed multiple terror attacks, the largest-ever refugee crisis and the stunning Brexit result. But, as they enter 2017, the latest results from a Eurobarometer survey show that exactly half of Europeans are optimistic about the future of the EU, while 44% remained pessimistic. The most optimistic and most pessimistic countries were not a surprise – Ireland and Greece, respectively.

The biggest challenge to the Eurozone, according to many observers, may come from Italy in 2017. Italy, which takes over G7 presidency on January 1, had already a very tumultuous 2016 with the resignation of Prime Minister Matteo Renzi over the resounding defeat of the referendum to bring in constitutional reforms.

The date to watch is January 24, when the Constitutional Court will decide if the ‘Italicum’, an electoral law passed in 2014 to bring political stability, will stand. A decision to abrograte the law, which provides for more seats to a party with over 40 percent of the popular vote, could keep out the populist anti-euro Five star movement from forming the next government. With the main opposition parties currently being anti-euro, any referendum in Italy on the single currency would be a close call.

A potential decision to leave the Eurozone by the third largest economy in EU would certainly put the European project in serious jeopardy – already reeling from Brexit.

In the same month as EU commemorates the Treaty of Rome with a special summit, it will have to gear up for an unprecedented divorce. British Prime Minister Theresa May has committed to trigger Article 50 of the Lisbon treaty by the end of March to begin formal negotiations for UK to leave the EU. So far, there have been no gaps among the Europeans who have been united in their collective wish to see UK ‘punished’ with a ‘hard’ Brexit. This unity is likely to persist, with the UK not having much leverage to introduce dissension in the opposite camp which could allow it to have some sort of access to the common market. Due to Brexit, the UK economy is forecasted to grow only at 1.3% in 2017, down from 2% in 2016.

Credit: Reuters

Credit: Reuters

It will not just be Brexit that will haunt the European project this year – a hectic electoral calendar with an uncertain outcome in major economies will keep the internal environment churning.

Netherlands will be first country to watch, where the candidate to defeat is the ultra-right Geert Wilder who has improved his standing in polls after his conviction for inciting violence. But even if the anti-immigrant and anti-Islam Freedom Party becomes the largest party in the 150-member Dutch parliament in the March elections, it is unlikely to form the next government with no political parties ready to align themselves to form a coalition.

A month later, the French will also have to troop to the polls for the first round of voting in the presidential elections. Following Trump’s win, the anti-immigrant National Front’s Marine Le Pen has had a surge of confidence, claiming victory. But all polls so far have termed conservative presidential candidate Francois Fillon as the favourite to succeed the deeply unpopular Francois Hollande. But even if Fillon wins, it will be interesting to watch if he tilts France towards Russia. Fillon has nurtured a friendship with the Russian president, dating back to his tenure as prime minister. He has also previously criticised the imposition of EU sanctions against Russia for its invasion of Ukraine and annexation of Crimea.

The Germans would definitely prefer Fillon to Le Pen – but they also have an election to go through by September. Angela Merkel’s popularity has bounced backed to around 57%, after having dipped over her handling of the refugee crisis. So armed with a tougher immigration position, Merkel is very likely get elected to a fourth term but with smaller number of seats, which will make coalition formation critical. Meanwhile, alarm bells are already ringing that Russia is conducting a cyber disinformation campaign to meddle in the German elections.

With the elections requiring a stronger position on immigration, the deep divisions within the EU may be bridged a bit, but tensions remain as to the integration of the remaining refugees within the borders. It will not take rocket science to forecast that Russia – and China – will continue to exploit these differences by creating informal groupings.

Donald Trump and Vladimir Putin. Credit: Reuters

Donald Trump and Vladimir Putin. Credit: Reuters

Individual EU members may be more amenable to work with the Trump administration as Washington works on a deal with Russia on the removal of sanctions and Syria. The Iran deal could be one matter on which the EU relies on the moderating influence of Putin to ensure that it is not torn up by the incoming US president. But Moscow will certainly enjoy the show if Washington and Europe go head-to-head over NATO, an institution on which Trump has vociferously expressed his opinion.

While Putin would be rather smug at having ‘won’ 2016, he also has domestic concerns – mainly about the economy. The optimistic forecast of rising oil prices could help to bring the economy out of the doldrums, but it may not be enough to dispel the gloom and compel Putin to undertake much-needed reforms. The support of the Republican establishment to Obama’s targetted sanctions and expulsion of 35 Russian diplomats could be a complication, but is not likely to derail the steady march towards a formal Trump-Putin ‘bromance‘.

Meanwhile, Turkey’s cosy relationship with Moscow, which seems to be further reinforced after Russia’s mild response over the killing of the Russian ambassador, will certainly worry EU as Ankara is the gatekeeper of its refugee control plan. President Recep Tayyip Erdoğan was already miffed at the EU for its criticism of the ongoing nation-wide post-coup purge of ‘Gulenists’. But Turkey holds the reins in this deal and EU will have to hold its nose and pay up.

Middle East

India will begin the year with the highly symbolic visit of the Abu Dhabi crown prince Sheikh Mohammed bin Zayed Al Nahyan as the chief guest at the Republic Day parade. A few months later, Modi will be travelling to Israel and Palestine as the first Indian prime minister to make the journey since the establishment of diplomatic relations. The Middle East (or West Asia as India prefers to call it) will certainly be high on New Delhi’s foreign policy priority list in 2017.

The region is already getting much attention from a certain resident in a sky-high tower in New York, even before he takes over the most powerful job in the world. Outgoing secretary of state John Kerry’s warning that the two-state solution was in high peril will just be shrugged off, with Trump expected to increase support for Israel, turning a blind eye to settlement expansion and possibly move the US embassy to Jerusalem. But it will become rapidly clear to Trump that the US and Israel will largely have to march on their own drumbeat, with new friend, Russia not willing to endanger its burgeoning ties with the Arab world. The Palestinians are, therefore, more and more likely to take their case to an international platform where Israel can be easily shown to be isolated – just as it pushed for the year-end UNSC resolution.

With Trump not willing to arm rebel fighters and ready to cut a deal with Russia, Syrian President Bashar al-Assad is likely to survive 2017. The US will concentrate on the fight to retake Raqqa and Mosul from ISIS. This will only highlight the inherent contradiction within Trump’s Syria policy – projecting Iran as the enemy number one at a time when both are essentially fighting the same enemy. The Russians, now the dominant player in Syria, will ensure that a sidelined US does not imperil its deal with Iran and Turkey.

While ISIS may lose most of its territory in Syria and Iraq this year, this will not be the end of the road. Though Trump could trumpet it as his ‘mission accomplished’, ISIS will continue to flourish as a ‘brand’ for Islamist insurgencies and lone wolf attacks from North America to Southeast Asia, with security agencies anxious about spillover effects from the return of fighters.

A member loyal to ISIS waves an ISIS flag in Raqqa. Credit: Reuters/Stringer/Files

A member loyal to ISIS waves an ISIS flag in Raqqa. Credit: Reuters/Stringer/Files

By now, the conventional wisdom is that the Iran deal will not be thrown into the bin. But the dominant anti-Iran sentiment in Trump’s cabinet picks will have to find some outlet – and Tehran is understandably wary with presidential elections due in May. President Hassan Rouhani will be standing for a second term, but Washington’s hostile position could reinvigorate Iranian hardliners who had been subdued in the last few years by the support of supreme leader Ayatollah Al-Khamenei for the nuclear deal.

In the Gulf, Oman could play an important role. It has been the outlier Gulf state to maintain ties with Tehran and even facilitated secret talks between Iran and the US. Whether this move by Muscat – known for its strategic hedging – is a bellwether for the road ahead of the new US administration, is now a much-asked question.

Saudi Arabia is projecting Oman’s joining the fold as a diplomatic victory, but it would be the only silver lining in an otherwise difficult year. Rising oil prices in 2017 due to a Saudi-brokered OPEC agreement will bring in much needed cash into the treasury emptied out by expensive ventures like Yemen. But despite a recovering economy, deputy crown prince Mohammed bin Salman may adopt a much more reticent foreign policy – even avoiding ratcheting up tensions with Iran beyond a point. This is despite Saudi Arabia and Gulf nations having a good relationship with the incoming cabinet members like General James Mattis. The unpredictable nature of Trump’s response to rising temperatures in the Middle East could moderate any adventurism.

Asia-Pacific

Japanese Prime Minister Shinzo Abe’s meeting with the president-elect and his trip to Pearl Harbour are part of an effort to ensure that the new Trump administration continues to be invested in a strong US presence in the Asia-Pacific. With Trump favouring a more transactional foreign policy, Abe is hoping to gain first-mover advantage in crafting a personal relationship with the incoming US president.

While Trump’s commitment to the Asia pivot may have alarmed allies, his willingness to bait China – as demonstrated by the phone conversation with Taiwan president Tsai Ing-wen – will find silent supporters in Tokyo, Delhi and other capitals in Southeast Asia. At the same time, an economic trade war between China and US may not be exactly what Beijing’s detractors would desire, with Chinese consumption being a critical engine to drive the global economic system.

With Trump describing most trade agreements from bilateral FTAs to the TPP as ‘bad deals’, negotiators for the ten-member, China-backed Regional Comprehensive Economic Partnership (RCEP) will be under pressure to wrap up talks at the earliest to take advantage of this opportunity. India, which is worried about the impact of relaxation of duties on its domestic industry, will host a RCEP negotiation meeting in July 2017.

Philippines, which is the 2017 ASEAN chair, has already indicated that it considers speeding up of RCEP negotiations as a priority during its helming of the regional group. This contrasts with its intent to keep the South China sea on the backburner, with President Rodrigo Duerte keen to normalise ties with China. When Philippines won the case in the arbitral tribunal in July, there was hope that the ruling could provide the springboard for a more united ASEAN position on South China Sea vis-à-vis China. While ASEAN remains a divided house, Vietnam will continue to be China’s chief heckler. Undeterred, China will keep on building up its military presence in the region and high-sea confrontation will become more frequent, which would automatically require a response from Trump’s Washington, if it wants to be seen as a serious player in Asia.

Incidentally, incoming US secretary of state Rex Tillerson has worked with Vietnam as ExxonMobil CEO in some of the disputed offshore blocks in the South China Sea. This may be good news for Vietnam, but Trump’s own ability to withstand pressure from China in a high-stake diplomatic face-off is still a moot point.

The shadows of spectators are seen through a Chinese national flag during the men's kayak (K1) semifinal at the Beijing 2008 Olympic Games August 12, 2008. Credit: Reuters/Phil Noble

The shadows of spectators are seen through a Chinese national flag during the men’s kayak (K1) semifinal at the Beijing 2008 Olympic Games August 12, 2008. Credit: Reuters/Phil Noble

China’s external environment, actually, is much less complicated than its own domestic situation. At the Chinese Communist Party’s 19th national congress in November, there is an expectation that the politburo reshuffle will unveil the next line-up of leaders to take over from 2022. Chinese President Xi Jinping, who has an unassailable position, will certainly be able to put his stamp on the succession – if Xi abides by the retirement rules and there is one, that is.

But even before that, Beijing will have to navigate the dangerous waters of the election of the Hong Kong chief executive on March 26. With troubles between leaders publicly aired last month, there is little chance that the frontrunner in the polls, finance secretary John Tsang, will get the green light from Beijing. Tsang had on his official blog termed the protest movements as another manifestation of localism which could be a “strong and constructive force”.

Meanwhile, the US’s other ally in Asia, South Korea, is going through a domestic crisis which could lead to early presidential polls if the impeachment of Park Geun Hye is upheld by the constitutional court. The frontrunner in the polls to be next president, Moon Jae-in, has indicated that the deployment of the Terminal High Altitude Area Defence (THAAD) anti-missile system should be delayed until the new administration takes over. The US ambassador to Seoul called for “policy continuity” on THAAD even under a new regime. The deployment of the anti-missile system is in response to North Korea’s nuclear weapons programme, but China and Russia have been critical. There are already indications that North Korea could be getting ready for another nuclear test to grab the attention of the new US President or to influence South Korean presidential polls.

Thailand is scheduled to hold an election in the second half of 2017 – the first since the military took over in 2014. The Thai army has already pushed through a constitution which institutionalises its power in law-making and, therefore, a new government is not likely to bring about much change in policy or unite a divided country. More interestingly, the first year of King Rama X will be carefully monitored for his political inclinations, as the Thai population emerges from mourning the end of the long reign of King Bhumibol Adulyadej.

South Asia

Mattis, former central command commander and the new US secretary of defence, is likely to be a votary for long-term US commitment to Afghanistan. That is the good news for India. Another positive expectation is that while the political stability of the National Unity government remains suspect, observers believe that it will scrape through its term, with external pressure ensuring that the top leaders work together.

But, on the security front, the signs are grim. Even as reports come in that Taliban remain an effective military force, there are also indications that its cash supply may be drying up – which would impact its operations. But, there are doubts that the Afghan army will be able to exploit these opportunities, with soldiers and policemen still crippled by widening gaps in leadership, logistics and equipment.

The banding together of Russia, Pakistan and China to take forward the peace talks with Taliban, is partly a result of anxiety that US presence will acquire a permanence – despite earlier drawdown – under the guise of broadening support for ill-equipped Afghan forces. The fear of ISIS taking root in Afghanistan and spreading to Central Asia has also led Russia to arm Taliban groups in certain areas, according to Afghan security agencies. With Afghanistan protesting the recent troika talks, it may end up sharing the same fate as the moribund Quadrilateral Coordination Group. The key issue for India and Afghanistan and even for some in Washington is whether there could be a way to bring the Taliban to the table, but without Pakistan in the picture.

Islamabad will certainly not deviate from its strategy to be perceived as the indispensable security partner for foreign countries in Afghanistan. To maintain its leverage, Pakistan will continue to provide shelter to terror groups from the other side of Durand line. This, however, will keep its relations with Afghanistan at a boiling point. Nevertheless, the visit of the new Pakistan army chief, Qamar Ahmed Bajwa to Kabul may provide the opening for a thaw in the relationship – even as there will enough sceptics to term it as another false start.

Asif Ali Zardari. Credit: Reuters

Asif Ali Zardari. Credit: Reuters

With 2017 being the penultimate year before the next general elections, Pakistani politics is likely to witness a lot of activity. Former President Asif Ali Zardari’s surprise announcement that he and his son, Pakistan People’s Party chairman Bilawal Bhutto Zardari, will contest in the byelections for National Assembly could lead to a much more combative opposition party, which is yet to see a revival in its fortune under the scion. The latter’s strident anti-India rhetoric did not work in either elections in Pakistan-administered Kashmir or Gilgit-Baltistan.

Politically, the ruling party and the prime minister are in a rather comfortable place with neither the PTI or PPP likely to mount a strong challenge in the next elections. This is despite the ongoing Supreme Court hearings on the Panama Papers that will resume in January. If the hearings are actually able to find a smoking gun which points directly to Nawaz Sharif and his family, then the opposition may get re-energised to return to the streets.

In the meantime, the civilian-military sharing of responsibilities is likely to follow the pattern set by the previous army chief. This would mean that there is not much scope for a return of the bonhomie between Modi and Sharif.

With no visible improvement in India-Pakistan relations, SAARC will also largely remain under mothballs next year, with India diverting its attention towards BIMSTEC and the sub-regional BBIN network. To ensure that Afghanistan does not get cut-off from South Asia if SAARC does not function, Indian officials said that special efforts will be made to keep Kabul part of international connectivity projects which link to Indian transport hubs.

At the start of 2016, Sri Lanka was ready to return to China’s embrace, with the West having disappointed with an inadequate response to its economic crisis.

A year on, all the stalled Chinese infrastructure projects have restarted and Beijing has returned with a bang with even bigger investments. The Maithripala Sirisena government has given an 80% stake in Hambantota harbour to a Chinese firm and another 15,000 acres to construct an economic zone in the surrounding areas. In an ironic twist, former President Mahinda Rajapaksa is the one opposing the Chinese investment in Hambantota, his hometown. To be fair, Rajapaksa is also opposed to the the Economic and Technical Cooperation Agreement (ETCA) with India as it will allegedly lead to an influx of Indian professionals.

Colombo has been pushing India for an early signing of ETCA, which will be inked in mid-2017, along with separate bilateral free trade agreements with China and Singapore next year. Despite the slew of economic pacts, there is not much scope for optimism on the economic front, with IMF forecasting a GDP growth of 4.8% in 2017, much less than the government’s projection of 6.3%.

The main political job to be tackled by the Sirisena government in the first month of 2017 is the debate on the draft constitution on January 9-11, with the opposition and ruling coalition expected to clash on all proposals from the federal structure and power of provincial governors to the role of languages. Two months later, the UN Human Rights Council will consider a resolution on Sri Lanka after a gap of a year. But after a sympathetic report of the UNHRC chief Zeid Al Ra’ad Al Hussein in 2016, there are indications the Colombo will get more time to implement its accountability mechanisms as mandated by the 2015 resolution.

In another part of the Indian ocean, Maldives President Abdulla Yameen is expected to keep his post till the next elections in 2018. There is not much that the international community has not done in order to try to broker a dialogue between the opposition and the government, but all efforts have fallen on the road-side. With most of the opposition leaders in jail or exile, the international community will have to make a serious effort in 2017 to ensure that the next presidential polls are inclusive.

In early 2017, Maldivians will also have to take part in the local council elections. The conduct of the Election Commission in setting the dates for the polls has been controversial – which does not hold out much hope for the fairness of the presidential elections.

China’s presence in the Maldives (as well as South Asia) will continue to rise. After heavy investment in infrastructure projects, the economic linkages are also becoming stronger. Along with Sri Lanka, Maldives is also likely to sign a free trade agreement with China in 2017.

By February 2017, Bangladeshis will have a good indication whether the opposition Bangladesh National Party will take part in the next general elections in 2019. On December 18, Bangladesh President Abdul Hamid began the process of dialogue on formation of the next Election Commission, which will oversee the 2019 polls. Hamid will have to inaugurate his proposal by early February, so as to choose the new elections commission members before the end of the tenure of the chief election commissioner.

During their meeting, BNP president Khaleda Zia on December 19 handed over a set of demands, which included names for a search committee to choose the next election commissioners and to formulate a ‘permanent system’ for the polls. The Daily Star’s Mahfuz Anam writes that for the talks to go anywhere, BNP has to be “realistic in its demands”. “AL (Awami League), on its part, must be as accommodative as possible knowing that democracy cannot be a personal gift but an institutional phenomenon that will survive time and transformations,” Anam wrote.

If, as expected, a neutral government is not part of the template, then there could be some compromise on the names for the search committee. However, it remains to be seen if the BNP considers that enough. It had previously boycotted the 2014 polls on this very demand.

In February, the Bangladesh prime minister is likely to visit India, during which agreements are expected to be signed which will allow for India’s participation in development of the Payra deep sea port. Two Chinese companies have already been given a contract for the deep sea port, with Prime Minister Sheikh Hasina also maintaining close ties with Beijing.

One of the reason for Bangladesh getting special attention from Modi has been the unprecedented level of security cooperation, because of which Hasina can hardly do any wrong. Even coordinated mob attacks on Hindu temples in Bangladesh have not jolted the strong links. At the same time, Indian officials are aware that Bangladesh is also a weak link with ISIS and al-Qaeda in the Indian subcontinent finding ample recruits amongst the disaffected youth. In fact, there is fear that if ISIS loses its territory in Iraq and Syria in 2017, it could turn its effort to sustain its franchisees, like in Bangladesh.

The stability of Bangladesh is also critical for India’s regional ambitions. For both BBIN and BIMSTEC, Dhaka is an important lynchpin with an economy which is second to India in terms of size.

Speaking of regional connectivity, Bhutan will have to make another push to get the BBIN motor vehicles pact through the parliament with a joint sitting during next session in 2017. This will be the last step available to get the parliament to ratify the regional pact, which had been promoted as the flagship initiative of the sub-regional group.

Across the Himalayas, the deadlock in Nepali politics will have to be broken in 2017 so that consensus is reached to allow for the organising of local, provincial and parliamentary elections by January 21, 2018 as required by the constitution. The opposition CPN-UML has been stalling parliament and holding street protests to demand the rollback of the second constitutional amendment which would modify the borders of two of the proposed provinces. After negotiations, the three big parties had suggested that the elections be held by mid-2017. In turn, CPN-UML was asked to allow the tabling of the election-related laws and the constitutional amendment in parliament. If the amendment is put on the backburner, the Madheshi political parties will likely return to the streets in the Terai. With UML adamant that election bills can be tabled only after the constitutional amendment is withdrawn, the government does not seem to have many options left, with all Nepali political parties continuing to be in thrall of their votebanks.

Narendra Modi Just Dug Himself a Great Big Hole

In a speech full of faulty economic reasoning, Modi made one factual claim – the number of Indians with official incomes greater than Rs 10 lakh is just 24 lakh. If demonetisation really works, he needs to up that figure substantially in the next two years.

In a speech full of faulty economic reasoning, Modi made one factual claim – the number of Indians with official incomes greater than Rs 10 lakh is just 24 lakh. If demonetisation really works, he needs to up that figure substantially in the next two years.

People in Patna watch Prime Minister Narendra Modi deliver his speech on New Year's Eve. Credit: PTI

People in Patna watch Prime Minister Narendra Modi deliver his speech on New Year’s Eve. Credit: PTI

It was a speech of not just shifting goalposts but vanishing playing fields, and yet Narendra Modi couldn’t resist making a rhetorical point about black money that might well prove costly for him by the time 2019 comes around.

“I wish to share some information with you, which will either make you laugh, or make you angry,” he said, with a flourish half-way through his speech. This was the point where everyone expected him to reveal how many old Rs 500 and 1000 notes had become ‘worthless paper’ thanks to demonetisation but he had another number in mind: “According to information with the government, there are only 24 lakh people in India who accept that their annual income is more than 10 lakh rupees. Can we digest this? Look at the big bungalows and big cars around you… If we look at any big city, it would have lakhs of people with annual income of more than 10 lakh.”

Until then, the prime minister had sought to sweep the growing public concerns about the effects of his demonetisation decision under a fraying carpet of nationalism. But by drawing attention to a stark statistic in an attempt to provide some justification for the chaos he has unleashed in the lives of hundreds of millions of poor Indians, Modi has unwittingly laid down a new metric by which the success or failure of his supposed drive against black money must be judged: will he manage to add the “lakhs of people” who have an income of more than Rs 10 lakh to the list of those who pay income tax? If he doesn’t, then what was the point of subjecting the whole country to so much disruption and pain?

Finance minister Arun Jaitley initially claimed that a certain proportion of the demonetised notes would remain outside the banking system and get extinguished, thus providing a blow to the black economy and a fiscal boost to the government.

When they realised there was unlikely to be significant extinguishing and that most of the high denomination notes in circulation would probably end up getting deposited, Modi and  Jaitley claimed the income tax authorities would be able to track down the owners of black money since their funds had entered the banking system.

Astonishing claims about cash

Now that it is apparent the IT department will not find it that easy to undertake such a massive exercise – its inefficiency is the reason the list of those with official incomes of Rs 10 lakh and over is just 24 lakh to begin with and is unlikely to grow – Modi has tried to sell another bizarre idea to the public about why the cashless hardship they are putting up with is in the national interest.

“Over the last ten to twelve years, 500 and 1000 rupee currency notes were used less for legitimate transactions, and more for a parallel economy,” he claimed in his speech on December 31. “The excess of cash was fuelling inflation and black-marketing. Lack of cash causes difficulty, but excess of cash is even more troublesome.”

Let us consider these astonishing assertions one by one. Modi says that most of the old Rs 500 and 1000 notes were used in the black economy rather than for legitimate purposes

First up, he needs to provide some evidence to back up this claim. Second, even Jaitley, who noted that 25% of high-denomination notes got extinguished in 1978 (and were probably used in the parallel economy), believed the corresponding figure for the 2016 exercise would likely be less than that. So on what basis did Modi tell the people of India in a televised national address that most of the notes he demonetised were not being used legitimately?

Modi’s second assertion – that the excess of cash was fuelling inflation – simply reflects his poor knowledge of basic economics. Indeed, it is astonishing that no one in the PMO or finance ministry had the economic literacy – or the moral courage – to tell the prime minister that the opposite is true, that bank deposits are more inflationary than cash holdings with the public. When the public deposits cash, either voluntarily or, as is currently the case, under duress, banks keep only a portion of this with the RBI as reserve (depending on the ‘cash reserve ratio’) and lend the rest. If the CRR is, say 10%, and an individual deposits 1 lakh with her bank, this leads to an expansion of bank deposits by a factor of 9. This increased money supply is bound to be more inflationary than if the individual had held on to her cash. My monetary economics is rusty so I checked the position with a former board member of the Reserve Bank of India. Pat came the answer: “When M1 enters the banking system and bumps up M3, that will, ceteris paribus, give an upward thrust to inflation.”

What about the third claim Modi made, that “excess of cash is troublesome”? World data suggests there is little or no correlation between the amount of cash in circulation and corruption.

screen-shot-2016-12-31-at-7-31-07-pm

Prime Minister Modi delivering his speech. Credit: TV screengrab

Banking on bank deposits

Modi made another assertion that was both naive and disingenuous when he praised himself for having generated a huge increase in bank deposits. “History is witness that the Indian banking system has never received such a large amount of money, in such a short time,” he said, before holding out the promise of easier credit for poor and middle class citizens.

This assertion is disingenuous because the deposits were coerced and are likely to be reversed as soon as people are able to withdraw their hard-earned money from the banks. But it is naive because Modi and his advisors have not understood the theory of money demand. The demand for money is the amount of assets or wealth that people want to hold in the form of cash. This, in turn, is a function of the volume and frequency of their transactions as well as of interest rates (i.e. the opportunity cost of holding cash). There is also a third component, which is the precautionary demand for money. While the transaction and speculative demand for money may be constant, the precautionary demand for money is likely to increase as a result of the cash shortages of the past two months. Indeed, the longer the economy is cash constrained, the higher will be the precautionary demand so chances are that once the banking situation normalises – as Modi has promised it will – there may actually be a fall in aggregate bank deposits compared to what they were on November 8, 2016, when the demonetisation madness started.

Informal economy is not always black, formal not always white

Modi also appears to be guilty of equating the informal economy with the parallel economy. “Economists”, he said, “agree that when cash is outside the formal economy, it is a cause of worry.When it joins the mainstream, it is an opportunity for development.”  In fact, the informal economy in India is very much part of any logical definition of the “mainstream”. Cash may be the preferred medium of exchange  of India’s informal economy but only a fraction of the informal economy consists of fiscally (or legally) illegitimate transactions. Similarly, a fraction of the formal economy too generates numerous possibilities for black income (via over-invoicing, for example, or the various ingenious methods used in the 2G scam).

Whether they occur, black economy transactions need to be stopped but the mistake Modi made was to buy the pup that demonetisation would be a silver bullet. He now knows it is nothing of the sort and that is why he devoted the bulk of his ’50 days of demonetisation’ speech on Saturday night to listing out various welfare measures his government was taking or going to take for the benefit of the poor. At some stage, it sounded as if Modi had stolen a march on Jaitley and was presenting an early version of the national budget. I will leave the parsing of the schemes he announced to those more qualified than me but at least two of his announcements – for pregnant women and farmers – have already been exposed as overblown:

The weakest point of this shifty speech was when Modi sought to address public concerns about the lack of any action on his part against the role of black money in big politics. Here, there was no promise of change, no scheme: “I urge all parties and leaders to move away from a “holier than thou approach,” to come together in prioritising transparency, and take firm steps to free politics of black money and corruption.”

What the prime minister did was to cleverly use the growing anxiety about the role of money power in politics to hard-sell his idea that all elections in the country – Lok Sabha and assembly – be held simultaneously. Whatever its merits or demerits for electoral democracy, as an anti-corruption proposition it is morally suspect: we politicians will always need black money to fight elections, he seems to be saying. The only way to have less black money is to have fewer elections.