Stop the politics of division

on Monday, October 13, 2008

Last week, in responding to some of the hundreds of reactions i received to my September 28 column on the anti-Christian violence in Orissa and Karnataka, i tackled the vexed question of conversions to Christianity, which many readers argued constituted a provocation for the violence. But the conversion issue is not purely a religious one: behind it lies a profoundly political question, one which goes to the heart of the nature of the Indian state, and indeed to the very idea of India itself.
In my original piece i argued that violence is part of a contemptible political project whose closest equivalent can in fact be found in the ‘Indian Mujahideen’ bomb blasts. Both actions are anti-national; both aim to divide the country by polarising people along their religious identities; and both hope to profit politically from such polarisation. In this context, the issue of conversion becomes a diversion. Because to say that conversions are somehow inherently wrong would accord legitimacy to the rhetoric of the Bajrang Dal and its cohorts — who declare openly that conversions from Hinduism to any other faith are anti-national. Implicit is the idea that to be Hindu is somehow more natural, more authentically Indian, than to be anything else, and that to lapse from Hinduism is to dilute one’s identification with the motherland.
As a Hindu, i reject that notion utterly. I reject the presumption that the purveyors of hatred speak for all or even most Hindus. Hinduism, we are repeatedly told, is a tolerant faith. The central tenet of tolerance is that the tolerant society accepts that which it does not understand and even that which it does not like, so long as it is not sought to be imposed upon the unwilling. One cannot simultaneously extol the tolerance of Hinduism and attack Christian homes and places of worship.
And as an Indian, i would argue that the whole point about India is the rejection of the idea that religion should be a determinant of nationhood. Our nationalist leaders never fell into the insidious trap of agreeing that, since Partition had established a state for Muslims, what remained was a state for Hindus. To accept the idea of India you have to spurn the logic that divided the country in 1947. Your Indianness has nothing to do with which God you choose to worship, or not.
To suggest that an Indian Hindu becoming Christian is an antinational act not only insults the millions of patriotic Indians who trace their Christianity to more distant forebears, including the Kerala Christians whose families converted to the faith of Saint Thomas centuries before the ancestors of many of today’s Hindu chauvinists even learned to think of themselves as Hindu. It is an insult, too, to the national leaders, freedom fighters, educationists, scientists, military men, journalists and sportsmen of the Christian faith who have brought so much glory to the country through their actions and sacrifices. It is, indeed, an insult to the very idea of India. Nothing could be more anti-national than that.
One reader, Raju Rajagopal, writing ‘‘as a fellow Hindu’’, expressed himself trenchantly in describing ‘terrorism’ and ‘communal riots’ as ‘‘two sides of the same coin, which systematically feed on each other.’’ The only difference, he added, is ‘‘that the first kind of terrorism is being unleashed by a fanatical few who swear no allegiance to the idea of India, whereas the second kind of terror is being unleashed by those who claim to love India more dearly than you and i, who are part of the electoral politics of India, and who know the exact consequences of their actions: creating deep fissures between communities, whose horrific consequences the world has witnessed once too often in recent decades.’’
That is the real problem here. Nehru had warned that the communalism of the majority was especially dangerous because it could present itself as nationalist. Yet, Hindu nationalism is not Indian nationalism. And it has nothing to do with genuine Hinduism either. A reader bearing a Christian name wrote to tell me that when his brother was getting married to a Hindu girl, the Hindu priest made a point of saying to him before the ceremony words to the effect of: ‘‘When i say God, i don’t mean a particular God.’’ As this reader commented: ‘‘It’s at moments like that that i can’t help but feel proud to be Indian and to be moved by its religiosity — even though i’m an atheist.’’
As a Hindu, i relish pointing out that i belong to the only major religion in the world that does not claim to be the only true religion. Hinduism asserts that all ways of belief are equally valid, and Hindus readily venerate the saints, and the sacred objects, of other faiths. Hinduism is a civilisation, not a dogma. There is no such thing as a Hindu heresy. If a Hindu decides he wishes to be a Christian, how does it matter that he has found a different way of stretching his hands out towards God? Truth is one, Vivekananda reminded all Hindus, but there are many ways of attaining it.
So, the rejection of other forms of worship, other ways of seeking the Truth, is profoundly un-Hindu, as well as being un-Indian. The really important debate is not about conversions, but between the unifiers and the dividers — between those who think all Indians are ‘‘us’’, whichever God they choose to worship, and those who think that Indians can be divided into ‘‘us’’ and ‘‘them’’. The reduction of non-Hindus to second-class status in their own homeland is unthinkable. It would be a second Partition: this time a partition not just in the Indian soil, but in the Indian soul.
It is time for all of us to say: stop the politics of division. We are all Indians.
-Shashi Tharoor

Anatomy of crisis

If your palms start to sweat whenever you see the business headlines or flip to a business channel, you might draw solace from the fact you share these symptoms with millions. Investors across the world are in a state of absolute panic. As they dump risky assets like shares and rush to safe havens like gold and government bonds, stock markets and currencies across the world keep falling.
The origins of today’s crisis can be traced back to mid-2007 when three things became clear. One, low income or sub-prime US households that had borrowed heavily from banks and finance companies to buy homes were defaulting heavily on their debt obligations. Two, the size of this sub-prime housing loan market was huge at about $1.4 trillion. Three, Wall Street’s financial engineers had packaged these loans into really complicated financial instruments called CDOs (collateralized debt obligations). American and European banks had invested heavily in these products. However, no amount of financial engineering could protect investors from one simple and irrefutable principle—if these housing loans turned ‘bad’, the instruments that were based on these loans would lose value. CDO prices started plummeting as defaults on US home loans rose. Falling prices dented banks’ investment portfolios and these losses destroyed banks’ capital. The complexity of these instruments meant that no one was too sure either about how big these losses were or which banks had been hit the hardest.
Banks usually never hold the exact amount of cash that they need to disburse as credit. The ‘inter-bank’ market performs this critical role of bringing cash-surplus and cash-deficit banks together and lubricates the process of credit delivery to companies (for working capital and capacity creation) and consumers (for buying cars, white goods etc). As the housing loan crisis intensified, banks grew increasingly suspicious about each other’s solvency and ability to honour commitments. The inter-bank market shrank as a result and this began to hurt the flow of funds to the ‘real’ economy.
To cut a long story short, today’s financial crisis is the culmination of these problems in the global banking system. Inter-bank markets across the world have frozen over. Indian banks are in the middle of a severe cash crunch. Wall Street blue-chips like Bear Stearns and Merrill Lynch have been acquired by other more ‘solvent’ banks at bargain-basement prices. Lehman Brothers, which had survived every major upheaval for the past 158 years, went bust. Panic begets panic and as the loan market went into a tailspin, it sucked other markets into its centrifuge. The meltdown in stock markets across the world is a victim of this contagion.
Some questions need answers at this stage. Why are the sensex and the rupee getting hurt so badly by the woes of the American and European banks? Their presence in India is minuscule compared to the nationalized banks or the bigger private banks. A glance at Indian banks’ balance sheets will show that their exposure to complex instruments like CDOs is almost nil.
A word, ‘globalization’, and a phrase, ‘risk aversion’, should explain why India has not been spared the contagion of the US and European banking crisis. Global investors are seriously concerned about the prospect of a great upheaval, if not a complete collapse in the banking system in the developed world. This, they fear, would affect all financial transactions in the near term. Going forward, this disruption could trigger a global recession (that is about 3% growth in 2009 for all economies put together). Agencies like the International Monetary Fund have endorsed this view.
The upshot is that the global investment community has become extremely riskaverse. They are pulling out of assets that are even remotely considered risky and buying things traditionally considered safe—gold, government bonds and bank deposits (in banks that are still considered solvent). Emerging markets like India have over the last few years offered spectacular returns but have always been considered ‘risky’. It is not surprising that they have got the short shrift in the flight to safe haven.
Does India deserve to be treated differently? Are we the victim of irrational ‘herd’ behaviour where differences across economies are getting blurred in this mad rush to safety? Yes and no. It is true that our economy depends more on domestic rather than external drivers, a fact that we keep touting endlessly. However, it is also true that we have embraced ‘globalization’ fairly enthusiastically over the past decade-and-a-half.
This, from an economic perspective, means two things. For one, we depend more on external markets to sell our goods and services. In 1995-96, for instance, we sold 9.1% of our goods abroad. In 2007-08, we sold 13.5% of our goods to foreign buyers. It also means that we depend more on external funds to support our growth. 7% growth target realistic
In the last fiscal year alone, we borrowed $29 billion from foreign lenders and got $34 billion of foreign direct investment. A global recession would hurt external demand. ‘Risk-aversion’ among international lenders could limit access to international capital. Both India’s financial markets and the real economy will be hurt in the process. The 9% growth target doesn’t seem that ‘doable’ any more; we should be happy to clock 7% this fiscal year and the next.
The sell-off in the stock markets is not entirely the effect of global contagion. To a degree, it reflects anxieties about our prospects of future growth. The blood-letting in the financial markets is unlikely to stop soon. Governments and central banks (the RBI’s counterparts) are trying every trick in the book to stabilize the markets. They have pumped hundreds of billions of dollars into their money markets to try and unfreeze their interbank and credit markets. Large financial entities have been nationalized. The US government has set aside $700 billion to buy the ‘toxic’ assets like CDOs that sparked off the crisis. Central banks have got together to co-ordinate cuts in interest rates. None of this has stabilized the global markets. Thus, it is impossible to predict when the haemorrhage will stop and what will stem it. That said, history tells us that financial crises end as suddenly as they start. I would not be surprised if by early next year, the worst of the mayhem is over. The wounds that it leaves behind could take longer to heal.

In Truth, Dark Times

on Monday, October 6, 2008

Tarun Tejpal

DICTATORSHIP WALKS in through the front door, often without a preamble, one sunlit morning. Fascism almost never rings the bell. It slips in through the backdoor, climbs in over window-sills, pads up the basement, locates a rotten rafter to make its covert entry. Dictatorship is showy. It lodges itself in the living room, confident it commands the house. Fascism is sneaky. It quietly settles into every room, knowing it runs the house. Dictatorships can be overthrown by the people. Fascism is the people.

Of course we must not be alarmist. We are a great democracy. Look at our Constitution. Look at our Parliament. Look at our free and fair elections — well, okay, prolific elections. Look at our free and fair media — well, okay, prolific media. Look at our free and fair judiciary — well, okay, our judiciary. Let us not try and list the police and the bureaucracy: we have a consensus of unhappiness about them. In a great democracy — well, okay, a great democracy in the making — these are minor flaws. No doubt, evolution will make us perfect.

This catalogue of virtues is only enumerated by those of us who live inside India’s charmed circle. To whose privileged lives the soaring idea of democracy can provide a glittering embroidery. It’s the banquet hall view of the state — cosy with good food and fine conversation. And it is articulated only by those of us who have somehow managed to grab a seat at the table, even if it is a low one. It’s useful to remember, every ruling class from Caesar to Stalin has believed it was doing right by its people.

Today to read the Indian state through the banquet hall is to read a crocodile through a handbag. Only those who confront the beast know its true nature. A thousand handbags cannot tell you how mercilessly the jaws of a crocodile clamp. But all around the country there are numberless Christians, Muslims, displaced tribals, turfed-out farmers, brutalised dalits, disputing citizens, who can give you a clear idea of its brutal force. Each of their accounts tears the heart out of the idea of India.

Experience is a gift for anyone. Especially for journalists. Seven years ago some of us at TEHELKA were accorded a special opportunity by the Indian state. For blowing a sharp whistle we were dragged into the entrails of the beast. How fearsome its innards were — with not a hint of the beauty of the handbag! Among the many intimate journeys we were taken on was a special starring role in a commission of inquiry. This is a special trick of the beast — an invite to a lengthy palaver at the end of which, when no one is looking, the guest is eaten. For 19 months we participated, along with more than 15 lawyers including some of India’s finest, in a burlesque of lies and immorality against us. It was a rare education. We were forever cured of the banquet hall view of the state

IN GUJARAT last week, a commission of inquiry has just eaten up its guests. Justice Nanavati, mandated to inquire into the Godhra tragedy and its violent aftermath, has delivered an astonishing verdict. Flying in the face of all evidence, he has perilously declared that the bogey burning was the result of a local Muslim conspiracy. At the best of times such a conclusion would have called for caution. To do so in a time of ratcheting communal tensions, with all the facts suggesting otherwise, is nothing short of disastrous.

The truth of Godhra is awful, but it’s not a conspiracy. All the evidence indicates that neither the state nor the local Muslims played any premeditated role in the horrific assault on the train. Once the dastardly event was over, a sinister attempt began to give it a political colour. In the pages that follow, a six-month-long TEHELKA investigation reveals how the establishment and the police broke every rule in the book to manufacture a conspiracy theory. Nanavati was meant to snooker the state’s unlawful conduct. Instead he has endorsed it!

The chances are he will get away with it. As it is universally, India’s secure classes have a charitable view of the system they run. Breathless with carving out the pie, they have little time for distant niceties. In a country of a billion people, a few hundred Muslims mouldering in jail can arouse only so much concern. Citizens move on slogans not on details. Politicians and policemen bank on that.Terrorism is a headline; individual innocence is a nuance. And anyway all those Muslim names sound the same after a while. As do the tribal. And the dalit.

Fascism keeps padding in into our rooms on animal feet. We know the answers. Enforce the law. Ensure justice. Follow the Constitution. The beast knows them too. Only too well. It knows these are the very leash by which it should be bound. But the stake anchoring the leash — public will: as represented by media, intelligentsia, civil society — has come loose. It has badly splintered, lost its sense of anchorage, and it believes the beast will maraud elsewhere and never round on it. The fables of the world are full of such foolishness.

Once, a few good men had a good idea. The idea of India. It resulted in the most magical political experiment of the 20th century. It allowed a complex, ancient, trampled civilisation an enviable entry into modernity. The experiment is still on. In truth, there are dark days — increasingly too many — when it seems to be sliding towards failure. In their roster of virtues, the original visionaries had a gift that made their grand experiments possible. Like the finest literary writers they had the gift of empathy. The ability to intimately imagine the life of another. It took them to a place beyond caste, community, and religion. It made the idea of India possible. It is a gift we need to rediscover again, at every level. To imagine once again the life of one man, one woman. One people.

Pains of a slowing economy


I am not usually a pessimist. But i predict that India will suffer a lot of pain in the next 18 months, as the economy slows down along with the current global slowdown.
The US, Europe and Japan are sinking into recession together. Forget claims that India has decoupled from the US and can keep growing fast regardless. India and most developing countries are indeed much less dependent on the US economy than in the past. So, Indian growth will be dented rather than smashed. GDP growth will slide from 9 % last year to 7% this financial year, and to maybe 6% next year.
Now, 7% is a miracle growth rate by historical standards. You might think that declining from super-miraculous to merely miraculous growth cannot be particularly painful. You would be dead wrong. The direction of change matters more than the absolute level. Rising from 5% to 7% is blissful, but falling from 9% to 7% is painful. And a subsequent tumble to 6% will be more painful still.
To appreciate why the direction of change matters so much, recall the 1990s. India went bust in 1991, reformed by globalising, and reaped the reward of fast growth. GDP growth averaged 7.5% in the three-year period 1994-97. India’s growing integration with the world economy enabled it to share in the global economic boom of those years. Foreign institutional investors flooded into all emerging markets, including India, sending stock market prices spiralling.
Indian optimists thought that miraculous growth was here to stay. But along came the Asian financial crisis in 1997, and the Indian economy slumped along with the global economy. Indian GDP growth averaged just 5.5% in the next five years.
Now, 5.5 % may not sound too bad, just a modest deceleration from the 7.5% of the preceding boom. Indeed, India’s 5.5% at the time was one of the fastest growth rates in the world. Yet, the change in direction, from acceleration to deceleration, caused enormous pain.
Industrial growth crashed in 1997-98, and barely limped forward for years. Many industries had borrowed massively during the mid-1990s boom to invest in world-class new plants, for which there was suddenly no demand. Huge projects were abandoned unfinished, with companies defaulting on mega loans. These financial defaults brought the lending institutions also to the verge of bankruptcy, from which they were saved mainly by creative accounting and a friendly RBI. Medium and small companies crashed along with their larger brethren. Employment went into a tailspin. Stock markets crashed and companies stopped repaying fixed deposits, so household investors suffered trauma.
The budgets of the central and state governments assumed steady growth of revenue year after year. But the 1997 slowdown hit tax collections. Meanwhile, a bumper Pay Commission award hugely inflated the wage bills of central and state governments. So, governments, corporations, employees and household investors were all sucked downward into a whirlpool of distress. The only saving grace was the IT boom, sparked by the global Y2K scare. But that turned out to be a bubble, and it burst in 2001.
Difficult though these years were, they did not witness economic collapse. India did not revert to the old Hindu rate of growth of 3.5%, witnessed in the three decades after independence. GDP growth in 1997-2002 averaged a solid 5.5%. But the direction of change was downward, not upward, and that was enough to cause widespread distress.
I fear we are about to see a repetition of that process. As in the 1990s, a booming world economy first lifted Indian growth (and stock markets) to new heights for several years, giving rise to the illusion of permanency. As in the 1990s, the subsequent global slump is going to cause an Indian slump too. As in the 1990s, the fiscal problems of the government are going to be exacerbated by a Pay Commission award.
However, we are much better prepared for this downturn than we were in the 1990s. Our foreign exchange reserves are almost $300 billion, cushioning our balance of payments. Corporations have not gone on a borrowing spree paying 20% interest, as they did in the 1990s — they have large cash reserves, modest debt-equity ratios, and interest rates are much lower today. The banking system is in relatively good shape. The latest Pay Commission award this time is less onerous than the 1997 one. Our savings rate has crossed 30%, and can keep financing a healthy rate of investment. Infrastructural sectors like telecom, power, roads, and ports will be only minimally affected by a recession.
Nevertheless, pain will be widespread and sometimes deep. Income and job opportunities will slacken, sometimes dramatically. Many companies will suffer shrinkage or bankruptcy, especially small ones. Boom sectors like transport, restaurants, trade, real estate and exports will go into reverse gear. Credit will tighten, for consumers as well as companies. Corporate profits will slump. The revenues of central and state governments will fall, curbing their ability to alleviate distress. The stock markets will fall further, and the Sensex may fall below 10,000. Tighten your seat belts: we are running into rough weather.