An early June report of Standard & Poor’s — the well-known sovereign bonds and country risks rating agency which speculates that India may be the first country among Brazil, Russia, India and China (BRIC) nations to lose its S&P investment grade BBB- status labelling it a high-risk country for foreign investment — has shaken the stock exchanges and money markets. However, this damning report doesn’t seem to have unduly perturbed the mandarins of India’s economic ministries in North Block, Delhi although India’s BBB- rating is the lowest investment grade (top grade: AAA) awarded by S&P. A further down-grade will signal investors worldwide — including domestic investors — that the bonds issued by the Union government have been reduced to junk status, meaning there’s risk of government default. In short, it’s a red light to all investors.
The Union government’s response to the detailed S&P report, which cited a consistently falling GDP growth rate for the past seven quarters and policy formulation paralysis as causes of a possible rating downgrade, has been a confused medley of flat denials, blaming the European Union debt crisis and other external developments. And the common mantra that emerges from North Block and government agencies is that the “fundamentals of the Indian economy” are sound. This standard government response to all criticism of mismanagement of the economy needs examination.
In an economy in which 60 percent of the population is engaged in agriculture production but which contributes a mere 20 percent of the GDP, it takes either grand delusion or outright brazenness to proclaim that fundamentals are sound. The fallout of persistent under-investment in rural infrast-ructure is that every year, an estimated 20 million tonnes of foodgrains production and 40 percent of rural India’s horticulture produce valued at Rs.50,000 crore, is wasted because of inadequate storage and farmers’ inability to speedily access urban markets.
In industry the clock seems to have been turned back on the historic industry liberalisation and deregulation policy initiative of July 1991. Despite a severe nationwide shortage of electricity, constructing a power plant reportedly requires 118 separate permissions and clearances. And according to affordable housing entrepreneur Jerry Rao, a low-cost housing project requires 17 pre-construction and 10 post-construction government clearances which typically take 24 months.
Even as agricultural and industrial growth have hit rock bottom, the country’s education system continues to produce millions of school dropouts and sub-standard graduates, while the public healthcare system is allocated a mere 1.5 percent of GDP annually. Moreover the Indian economy with reputedly sound fundamentals is underpinned by perhaps the world’s most corrupt police force and slowest judiciary. The end result: an under-provided, under-educated and unhealthy population under-served by a dysfunctional justice system with little protection from anti-socials. Against this socio-economic backdrop to proclaim that the fundam-entals of the Indian economy are strong, is not only absurd, but downright ridiculous.
Good opportunity to break Kashmir impasse
The 179-page report of three kashmir “interlocutors” — a senior journalist (Dileep Padgaonkar), an academic (Radha Kumar) and a former Central information commissioner (M.M. Ansari) — appointed in 2010 by the Central government “to interact with all shades of public opinion” and “suggest a way forward that truly reflects the aspirations of the people of Jammu and Kashmir”, offers renewed hope of resolving the 65-year-old India-Pakistan dispute over the status of Kashmir.
After interacting with 700 delegations, prominent citizens and more than 5,000 people statewide over a period of 11 months, their report confirms “a sense of victimhood” in the Kashmir valley, the outcome of persistent denial of democratic rights, rigged elections, arbitrary arrests and smothering of all dissent through harsh laws. It also confirms this as the prime factor behind the “demand for azaadi and an Islamic state”.
Even though this country’s supra nationalists don’t like to be reminded of it, when the pre-independence kingdom of Muslim-majority Kashmir ruled by a Hindu ruler acceded to India in 1948, the first brief Indo-Pak war resulted in the division of the kingdom into Pakistan-Occupied Kashmir (PoK) and the state of Jammu & Kashmir in India. Under the terms of the articles of accession incorporated as Article 370 of the Constitution of India, J&K was accorded special status within the Indian Union and conferred a degree of autonomy denied to other states. However, over the past six decades, the provisions of Article 370 have been steadily eroded. The interlocutors’ report recommends a reversion to the 1952 position when the state enjoyed the autonomy promised by the accession articles and the unamended Article 370.
To restore the autonomy of J&K, the interlocutors’ report also recommends greater devolution of administrative and financial powers to the state government and a greater say for it in the choice of J&K governor. Other sensible and commonsense recommendations are to increase the proportion of administrative officers from within the state, and reduction of the “intrusive presence” of security forces. Moreover, the interlocutors recommend that for administrative purposes J&K should be divided into three regions — the valley, which is predominantly Muslim; Ladakh, with a large proportion of Buddhists; and Hindu-majority Jammu — by creating three regional councils. But surprisingly after sitting on the report for seven months, the Congress-led UPA-II government hasn’t commented on it.
Quite clearly, the prolonged impasse over J&K — the prime cause of the ruinous arms race in the subcontinent — has to be broken. Fortunately, in the past two years, there has been relative peace, and tourists are returning to the valley. This is a good time for New Delhi to accept the interlocutors’ report. Although it proposes reversion of the process of the steady integration of J&K with the Indian Union, it is an honest acknowledgement that the spirit of Article 370 has not been respected by New Delhi, and it also includes a prescription for healing the wounded hearts and minds of the Muslim majority of Kashmir.