01, March 2019 01/03/2019 – Posted in: EDITORIALS – Tags: , ,

Wider and Deeper

India’s strategic calculus to eliminate Pakistan-sponsored terror must be multi-dimensional.

The devastating attack on the CRPF convoy on February 14 at Pulwama has caused outrage in the country. The Jaish-e-Mohammad, Masood Azhar’s terrorist outfit located in Pakistan, has owned up to the attack. Our diplomatic endeavours have ensured that the attack has been condemned in capitals across the world, including in Riyadh and Ankara, which routinely support Pakistan in its rants on Kashmir at the conferences of the Organisation of Islamic Countries. US National Security Adviser John Bolton stated that the US supports India’s right to self defence. India undertook an anti-terrorist air operation, destroying terrorist bases in Pakistan. This will have some salutary effect on Pakistan, but will it eliminate the terrorism emanating from the country?

In the strategic calculus of the Pakistan army, maintaining a controlled degree of hostility vis-a-vis India is essential. A hostile relationship with India enables the Pakistan army to maintain its primacy in that country. In addition, there is the desire for vengeance against India, which Pakistan blames for its dismemberment in 1971. The army has created an ecosystem in which terrorist groups can exist safely. These groups provide a cheaper option to an economically-weak Pakistan to bleed India. With the likely withdrawal of US troops from Afghanistan, the Pakistan deep state considers itself well poised to divert the products of its terrorist factories to India. Without a well-thought out strategy, we will be reacting to one terrorist attack after another. Such a strategy will need to be multi-dimensional.

The first element of our strategy must be to demonstrate to the Pakistan army that India can cause it excruciating pain if the ISI continues to sponsor terrorism against India. This requires creating a military capability which can cause significant damage at short notice. We do have conventional military superiority over Pakistan. However, the lack of political resolve and our inability to fight a two-front war has emboldened Pakistan. It is essential that our defence budget be enhanced over the next few years to build up a sufficient capability to act as a devastating deterrent. Alongside, we need to reorganise our military to be able to operate at short notice. Essential reforms are needed in the higher defence organisational structure to ensure efficiency and professionalism. These reforms must not be marred by political short-sightedness and bureaucratic self-interest.

The second element of the policy is coercive diplomacy, which has been steered well by our political leadership and foreign office. We have been able to successfully project Pakistan as the epicentre of terrorism. This lowers Pakistan’s image in the comity of nations, minimising foreign investment and economically weakening the country. Some deft diplomacy has also ensured that Pakistani workers find it difficult in foreign lands, including in Gulf countries, which adversely affects remittances. The cacophony demanding the total isolation of a country of the size and population of Pakistan is not a realistic expectation.

The third and the most important element must be our acceptance of the fact that a sizeable population in the Kashmir Valley has been alienated. This sustains militancy in Kashmir and allows Pakistan to fish in troubled waters. This alienation needs to be addressed through a political process. A perception of broken promises to Kashmir, of intolerance, persecution and victimisation of a religious minority in other parts of the country, causes distrust between the population of the Valley and the government. To maintain their indispensability, political parties in J&K are ever ready to exploit such sentiments.

One lesson from the elimination of militancy from Punjab is that as long as dissonance over perceived or real grievances continued between Delhi and Punjab, Pakistan managed to keep the militancy alive in the state. For militancy to flourish, local support is the oxygen which provides logistics and intelligence to militants. Once the dissonance between Punjab and Delhi was eliminated by positive political action, the militancy dried up. Similarly to eliminate militancy from Kashmir, it is most essential to eliminate dissonance between Delhi and the Valley. All options should be open to find a political solution within the territorial and constitutional framework of the Indian Union.

After every major terrorist attack, it is freely opined by prime-time TV warriors and anchors that Pakistan has declared war against India. There is a clamour for an immediate military response .We need to realise that the cross-border deployment of armed forces must be taken after a lot of deliberation and thought. It is not possible to employ the military might of a country in cross-border operations every time there is a terrorist incident lest one gets into a shooting war. There are other instruments available to a state which can be applied effectively and economically to achieve the desired results while fighting terrorism emanating from a rogue state. Carrying out co-coordinated covert operations to fight a Pakistan-sponsored proxy war should be an important facet of our security policy. In democracies, covert trans-border operations are primarily in the domain of the civil external intelligence agency, which besides collection of foreign intelligence are also mandated to carry out subversion and sabotage in target areas.

Lastly, we need the political resolve, as has been shown by the Narendra Modi government, for making the tough choice of military action against Pakistan when necessary. TV media needs to realise that in a military operation, there will be reverses or perceived reverses for short periods. This can not be a ground for wailing and weakening national resolve.

Indian Express

 

 

Opinion | The Central Statistics Office is an institution that matters

The new GDP series continues to pose a problem because of the constant revisions being done within its period of coverage

We don’t need economists to tell us this, but institutions matter. In an empirical literature too large to cite, the strength of institutions is shown to be what sustains any country through good times and bad. We have many strong institutions in India, only we don’t think about them. The best institutions don’t shout their contribution from the rooftop, but do their work quietly to keep the country humming.

One such is the Central Statistics Office (CSO, renamed from what was once the Central Statistical Organization). National accounts estimation in colonial times was mostly confined to economic activity within the boundaries of British-administered India, and with a limited focus on goods and large-scale service networks like the railways. After Independence, the territorial coverage had to be expanded to include the former princely territories, and the service sector needed inclusion in all its variety and spatial spread.

Extending the post-Independence estimation back to the start of the 20th century was painstakingly performed by a statistician named S. Sivasubramonian, who established that per capita income had remained essentially stagnant during those 50 years. When we remember that several segments of society saw substantially enhanced income during colonial rule, it became clear that the remainder must have become worse off if the average had remained the same. No further explanation is needed for why the movement for political independence gained such widespread traction.

Fast forward to the present, when the gross domestic product (GDP) issued by the CSO is the universal denominator, used to judge fiscal performance, public debt trajectories, financial sector depth, you name it. We took the GDP number for granted because of the professional care which had gone into its estimation, just as we sit on any chair presuming that the skill of the carpenter who made it will ensure the chair supports our weight.

Some years ago, a new series of GDP was issued with base year 2011-12, with a substantially altered method of estimation. Extending the new series back to earlier years has been mired in controversy.

The back series controversy is not that serious, only because people can continue to use the old real growth rates for years prior to the new base year, and shift to the new growth rates for the years after. As far as the nominal aggregates are concerned, a simple splicing factor can be constructed by every user.

But the new series continues to pose a problem because of the constant revisions being done within its period of coverage. The entire series going back to 2011-12 was revised two years ago, on 31 January 2017, followed by another overhaul of the entire series on 31 May 2017, and yet again on 31 January 2018. On these standard issuance dates, only recent year data are normally revised. This year, on 31 January 2019, there has been yet another overhaul of the figures going all the way back to the base year 2011-12.

This latest revision does not alter the GDP growth rates for the early years too much, but growth in 2016-17 has been radically revised upwards, from 7.1% to 8.2%. There is a less radical upward revision for 2017-18 as well, from 6.7% to 7.2%. There will have to be a corresponding revision in the second advance estimate for 2018-19, due on 28 February 2019.

Gross value added (GVA), which is a measure of production without the overlay of indirect taxes like the goods and services tax (GST), or the corresponding pre-GST levies, has been revised upwards for 2016-17 as well, from 7.1% to 7.9% (and less radically for 2017-18, from 6.5% to 6.9%).

I prefer to look at what I call core GVA, after removing the agriculture and government sectors, not because they don’t matter but because they are subject to exogenous vagaries like the weather and Pay Commission upgrades.

The upward revision in core GVA for 2016-17 is more startling still, from 6.7% to 8%. The further widening was on account of the government sector, where the growth rate has been revised sharply downwards from 12.7% to 8.6%. Such a sharp fall, by 4 percentage points, is most puzzling for the government sector, since final audited figures of accounts for 2016-17 would have been available at the time of the last revision, on 31 May 2018.

With government sector growth revised downwards, core GVA sectors have seen a more sharp upward revision in growth rates than GVA as a whole. Growth in the construction sector in 2016-17 (the year of demonetization) has been revised upwards from 1.3 % to 6.1%. Construction estimates are normally based on upstream output of manufactured inputs like steel and cement, and are not normally revised so substantially. Other sectors that have been revised upwards, though not as much, are financial services and real estate (6% to 8.7%), trade and transport (7.2 % to 7.7%) and electricity and utilities (9.2 % to 10%).

A few points in conclusion. Most analysts I know are entirely apolitical, and are quite willing to accept the new revised growth rates, if they are satisfactorily explained. The notes accompanying the 31 January revision do not do this. We had a statistical commission, which was supposed to approve any revisions before they were made public. This time the revisions were not passed by them, and two highly respected members resigned as a consequence.

Indira Rajaraman is an economist.

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