Mainstream, VOL LVII No 28 New Delhi June 29, 2019
Saturday 29 June 2019
by Harish Chandola
India has so far not commented on the danger or possibility of a nuclear war erupting in its neighbourhood, in West Asia, where a very dangerous development is taking shape in the Persian Gulf, to which an American nuclear-powered aircraft carrier is heading, to be joined by bombers, following unspecified threats from Iran.
This is in retaliation to a statement made by the Iranian President, Hassan Rouhani, who said his country would no longer abide by the terms of a deal signed with the US and other world powers to limit its nuclear programme in return for economic relief.
Iran is now poised to resume its slow but steady march towards making nuclear bombs, which American National Security Adviser, John Bolton, said any Iranian attack would be met with unrelenting force.
The two sides had signed a nuclear deal four years ago when Barack Obama was the US President. It promised to set back Iranian nuclear programme by more than a decade to break the cycle of threat and counter-threat between them since the Iranian Revolution 40 years ago.
The Iranian Revolutionary Guards are located in the region, including Iraq, and Iranian naval boats patrol the entire Persian Gulf.
The nuclear deal, called the Joint Compre-hensive Plan of Action (JCPOA), was being complied with by Iran, but critics of it in the US complained that temporary restrictions on it would ultimately legitimise Iran to produce missiles.
US President Donald Trump pulled his country out of the agreement last year, calling it a disaster and renewed sanctions. He cancelled waivers to let some countries continue buying Iranian oil and punish those that trade with it.
India is one that buys Iranian oil. It has said nothing whether it will continue buying.
Iranian President Rouhani hoped that European countries would honour the deal. He said his country would begin stockpiling low enriched uranium and heavy water in sufficient quantities and would not accept any limit on Iranian enrichment, which suggests that it will move closer to building a nuclear bomb. This would please hardliners in his country. It is also trying to stop European countries from following the US. He may not succeed.
American troops are not far from the Iranian-backed forces in Iraq and Syria. Its warships are also close to the Iranian patrol boats in the Gulf. America recently declared the Iranian Revolutionary Guards a terrorist group. Iranians also called the American forces the same. Bolton recently wrote an article in the New York Times, entitled “To stop Iran’s bomb, bomb Iran.”
Bombing would not destroy Iranian nuclear know-how. It would drive its programme underground, making it more dangerous.
The US has Israel with it in the region.
At the moment the chances of negotiations between the US and Iran on the subject appear limited, though America is trying to use Switzerland for a possible venue for talks with Tehran.
India has said nothing on how it is viewing this threat in its neighbourhood.
Mainstream, VOL LVII No 28 New Delhi June 29, 2019
Sunday 30 June 2019
by Rajaram Panda
As if the North Korean issue where United States President Donald Trump burned much of midnight oil with words such as “fire and fury”, “totally destroy” flew with impunity only to be matched by “dotard”, “evil man” by the North Korean leader Kim Jung-un but ending with two summits in June 2018 in Singapore and in February 2019 in Hanoi, both with no result, leaving the de-nuclearisation issue in the limbo, the American President in a dramatic turnaround withdrew from the 2015 Joint Comprehensive Plan of Action in May 2018, the nuclear deal reached with Iran along with Germany, France, the UK and the European Union, and imposing fresh draconian economic sanctions, thereby raising tensions in the Middle East. With the endorsement of Trump, Japan’s Prime Minister Abe Shinzo travelled to Tehran on June 12-14, 2019 offering to mediate the stand-off between Tehran and Washington. That yielded no positive outcome.
Abe’s peace mission showed a flicker of hope, at least a temporary thaw. But the attacks on two tankers, Kokuka Courageous owned by a Japanese company Kokuka Sangyo and transporting methanol from Saudi Arabia to Singapore, and Front Altair, owned by Norway’s Frontline, and carrying a Taiwan-bound cargo of 75,000 tons of petrochemical feedstock naphtha picked up from Ruwais in the UAE, even when Abe was in Tehran, a solution looked suddenly like a mirage.
Tensions have risen since Trump demanded Tehran curb its military programmes and influence in the Middle East, and pulled the US out of a deal between Iran and the global powers to curb Tehran’s nuclear ambitions. Iran has repeatedly warned it would block the Strait of Hormuz if it cannot sell its oil because of US sanctions.
The blast that struck the Kokuka Courageous is suspected to have been caused by a magnetic mine and was hit twice over a period of three-hours. Front Altair was “suspected of being hit by a torpedo”. Though accusations and counter-accusations flew around, the issue of safety of marine transport assumed priority in the Middle East and took centre-stage. Though whosoever was responsible for this despicable acts, attacks on civilian vessels threatened to disrupt stable supply of energy, impinging on the economies of several resource-importing nations. The attacks on oil tankers quickly drove oil prices up by four per cent over worries about supplies from the region.
The most worrying part of this development is that the two tankers were attacked as they navigated through the sea off Oman near the Strait of Hormuz in the Middle East. The geographic positioning of the Strait of Hormuz is of huge strategic importance in the global maritime trade. It is positioned as the main artery for global crude oil transport. Most of the crude oil imported by Japan from the Middle Eastern countries such as Saudi Arabia and the UAE transit through the Strait of Hormuz, positioning the strait as a lifeline for Japan’s energy supply.
In an emergency session, the UN Security Council members condemned the attacks as violations of international law. UN Secretary-General Antonio Guterres told a meeting of the UN Security Council on cooperation between the United Nations and the League of Arab States that the world cannot afford “a major confrontation in the Gulf region”. The Council discussed the attacks behind closed doors at the request of the United States. The Japanese Government issued an advisory to Japan-related vessels navigating through waters near the scene of attacks and called for efforts to ensure the safe navigation of ships by conducting information-gathering activities.
Strategic Importance of Strait of Hormuz
The explosions occurred near the Strait of Hormuz, which serves as a crucial passageway for much of the oil from Gulf States. At its narrowest it measures a mere 21 nautical miles, yet in 2016 it ushered through some 18.5 million barrels of oil per day, according to the US Energy Information Administration. Those numbers make it an important choke-point; any conflict there would have a staggering effect on trade.
As a crucial gateway, the Strait of Hormuz is a place through which almost a third of all crude oil and other petroleum products transit. The recent attacks on tankers have raised fears that the route is vulnerable to assaults and that it could threaten and destabilise oil prices. The Strait of Hormuz lies between Oman and Iran. It links the Gulf north of it with the Gulf of Oman to the south and the Arabian Sea beyond. A skinny waterway, 33 km wide at its narrowest point, and with the shipping lane spanning just 3 km wide in either direction. Almost one-fifth of the world’s oil passes through the Strait, some 17.4 million barrels per day in 2018. The bulk of this traffic heads for Asian markets like China, India and Japan. OPEC members Saudi Arabia, Iran, the UAE, Kuwait and Iraq export most of their crude via the Strait. Qatar, the world’s biggest liquefied natural gas exporter, sends all of its LNG through the Strait. There are few alternative routes.
The US lost no time in accusing Iran behind the attacks, just as it was in the case of four tankers off the coast of the UAE, including those from Saudi Arabia, attacked in May, a charge Tehran denied. Washington released a video showing a boat belonging to Iran’s elite Revolutionary Guard for approaching the stricken Japanese vessel and carrying out some operations, explaining that the unit was “removing an unexploded limpet mine” from the attacked vessel.
A Pentagon statement blamed Iran behind the attack. Calling the attacks “a blatant assault”, Pompeo alleged “terror, bloodshed and extortion” as part of the Iranian strategy. Denying involvement, Tehran called the charges as “ridiculous” and “dangerous” and the US claim as groundless. It accused the US of waging an “Iranophobic” campaign. So far, there has been no concrete evidence as to who conducted the attacks and for what purposes or that how the attacks were committed. During the time when Abe was in Tehran mediating in order to ease tensions between the US and Iran, Iran’s Supreme Leader Ayotollah Ali Khamenei refused to have any dialogue with Washington, telling Abe that Tehran would not repeat its “bitter experience” of negotiating with the US. American and European security officials as well as regional analysts cautioned against jumping to conclusions, leaving open the possibility that Iranian proxies or someone else might have been entirely responsible.
From his side, Trump has shown no sign of softening his stance, saying that it is too early to make a deal. Unless Washington softens its hardline stance and Tehran shows some restraint, the fear of an accidental clash could become real. While the US sent an aircraft carrier strike group to the region, Iran has threatened to blockade the Strait of Hormuz. Washington said the deployment of about 1000 more troops to the Middle East were only for “defensive purposes”. In the event the situation in the region gets further destabilised, it could lead to spikes in crude oil prices, dealing a great blow to the global economy. Abe’s mediatory role having yielded little result, either side should recognise the weight of their responsi-bilities in the interest of regional and world peace and seek mutually acceptable solution, with or without outside mediation. TheTimes of India observed in an editorial on June 20 thus: “US military intervention at this stage, perhaps driven by the old and discredited neo-conser-vative agenda of regime change and forcible export of democracy, would be disastrous. It would be a replay of the Iraq fiasco which destabilised the global order, gave rise to IS and pushed Russia into adopting an aggressive stance.”
With the escalation of tensions, Iran appears poised to break the 2015 nuclear deal with world powers, an accord that Trump repudiated in 2018. In the deal, Tehran agreed to limit its enrichment of uranium in exchange for the lifting of crippling sanctions. Now, Iran is threatening to resume enriching uranium closer to weapons-grade levels if European nations do not offer it new terms to the deal by July 7. Iran’s Atomic Energy Organisation has said it has quadrupled the rate of enrichment and will breach the stockpile limit soon, unless other parties fulfil their commitments as per the 2015 deal. Any such breach would raise already heightened tensions between Iran and the US. Trump has said he is ready to take military action to stop Tehran getting a nuclear bomb. Meanwhile, US sanctions have cut off opportunities for Iran to trade its excess uranium and heavy water abroad, putting Tehran on course to violate terms of the nuclear deal regardless.
Reactions on Tanker Attacks
As soon as the news of the attacks on two tankers in the Sea of Oman emerged, a flurry of international reactions poured in from various countries, companies, and political figures as well as financial markets. Russia warned against rushing to apportion blame for the suspected attacks, saying that the incident should not be used to stoke tensions with Iran. While voicing the events as tragic, Russia warned that it should not be used speculatively in order to avoid further aggravating the situation in an anti-Iranian sense. Russia’s reaction was a counter to Trump’s attempts to use this to rally countries in the world in an antagonistic manner and to further tighten draconian sanctions against Tehran.
The incident spiked oil prices by as much as four per cent. International bonds issued by the Gulf Cooperation Council states weakened, pointing to apparent investor apprehension.
UN Secretary General Antonio Guterres warned that the world cannot afford “a major confrontation in the (Persian) Gulf region”. EU urged “maximum restraint”. Germany stressed ‘de-escalation’, saying the development was “extremely worrying”. France urged ‘restraint’ from all actors, stressing the need for respect for “freedom of navigation”. Kuwait reported normal maritime operation and expressed readiness for any emergency precautionary measures to ensure the safe operation of its fleet. In the meantime, owner of Front Altair, one of the vessels involved, denied the vessel sank and said the Norwegian tanker was still afloat.
Iran’s nuclear agency spokesman Behrouz Kamalvandi said that “The countdown to pass the 300 kilograms reserve of enriched uranium has started and in 10 days time [June 27] … we will pass this limit.” But he said Iran would be open to going back to observing the limit if it gets help from other signatories to the agreement in circumventing US sanctions on its vital oil industry. US called Iran’s plan to surpass an internationally agreed limit on its stock of low-enriched uranium “nuclear blackmail” and that it would be met with increased international pressure. So, things are getting messy.
French President Emmanuel Macron expressed regrets on the Iranian announcement, urging Tehran “to behave in a way that is patient and responsible”. Britain said if Iran exceeds the nuclear limits it would consider “all options”. It may be recalled that Britain and France signed the deal with Iran, along with China, Germany, Russia, and the United States. Iran is angry that the other parties to the nuclear agreement have not done enough to help the battered Iranian economy recover from the sanctions while still insisting Iran keep its part of the bargain. Trump called the 2015 agreement “horrible”, saying that he would like to negotiate a new one. But the United Nations atomic watchdog agency says Iran continued to meet the terms of the 2015 pact. While Washington has pulled out of the deal, the other signatories have not. So, Trump has complicated things by his unilateral decision. Amid rising tensions, Iran has said that it would not initiate a war but will give a crushing response to any aggression.
The statement made by the US Central Command that the US has no interest in engaging in a new conflict in the Middle East makes sense. He observed: “We will defend our interests, but a war with Iran is not in our strategic interest, nor in the best interest of the international community.”
Oman and the UAE, which both have coastlines along the Gulf of Oman, did not immediately issue any public comment. Saudi Arabia and the UAE, both majority Sunni Muslim nations with a long-running rivalry with predominantly Shi’ite Iran, have previously said attacks on oil assets in the Gulf pose a risk to global oil supplies and regional security.
Iranian Foreign Minister Mohammad Javad Zarif said the timing of the attacks was “suspicious”, because a Japanese tanker was hit while Prime Minister Abe was in Tehran seeking to defuse US-Iran tensions. After Trump acted at the beginning of May forcing Iran’s oil customers to slash their imports to zero or face draconian US financial sanctions, Iran’s oil exports have dropped to around 400,000 barrels per day in May from 2.5 million bpd in April 2018.
If the US commits itself to make economic and diplomatic efforts unilaterally to bring Iran back to the negotiations on a broader deal, it would not cut any ice with Tehran. Trump abandoned the 2015 Iran nuclear deal successfully negotiated by former President Barack Obama as he wanted Iran to curb not merely its nuclear work but also its development of missiles and its support for proxy forces in Iraq, Syria, Lebanon and Yemen.
Notwithstanding the suspicions aimed at Iran behind the attacks on the two tankers without any conclusive proof, it is argued that if Iran indeed was behind the attack, it could have been that it was trying to acquire negotiating leverage and perhaps increase global pressure for US-Iran talks. Though there is always the possibility that somebody shall blame the Iranians, it is also possible that this “represents an effort to bolster Iranian diplomacy by creating a perceived international urgency to have the United States and Iran talk”.
US Secretary of State Mike Pompeo told that the US assessment of Iran’s involvement was based in part on intelligence, as well as the expertise needed for the operation. It was also based on recent incidents in the region, which the US also blamed on Iran, including the use of limpet mines in the Fujairah attack. He also tied Iran to a drone attack by Yemen’s Iranian-backed Houthi rebels on a crucial Saudi oil pipeline around the same time. Based on these, Pompeo observed: “Taken as a whole, these unprovoked attacks present a clear threat to international peace and security, a blatant assault on the freedom of navigation and an unacceptable campaign of escalating tension by Iran.”
The attacks on the oil tankers, including one —Kokuka Courageous—owned by the Japanese, came less than a day after Abe made a rare conciliatory visit to Tehran seeking dialogue. It was indeed a tough moment for Abe. The US and its Persian Gulf allies, led by Saudi Arabia, have mounted a steady campaign of diplomatic isolation and economic punishment of Iran, which they blame for militancy in the Middle East. Egypt too called for the perpetrators to face “all legal responsibility”.
Saudi Arabia, a close US ally, is a bitter rival of Iran. An arch rival of Iran in the region on religious lines, Crown Prince Mohammed bin Salman of Saudi Arabia, accused Iran and announced his country’s preparedness to deal with any threat to his people, territorial soverei-gnty and other vital interests of the country.
Iran has repeatedly warned in the past that it could block the strategic Hormuz Strait in a relatively low-tech, high-impact countermeasure to any attack by the US, and if it cannot sell its oil because of US sanctions. Doing so would disrupt oil tankers travelling out of the Gulf region to the Indian Ocean and global export routes. As a major importer of crude from the region, Japan is concerned and has urged the international community to jointly deal with the issue of energy security.
Opinions in the US are divided. Some senior US officers hold the view that the Trump Adminis-tration is moving too quickly towards retaliating, possibly with military force without building a public case that Tehran was responsible. There are others who are of the opinion that the Trump Administration should seek to build international support for steps to safeguard shipping traffic, using naval ships from the US and other countries to escort tankers and other vessels through the Persian Gulf and into the Arabian Sea. Though Pentagon officials are worried that Iran and its proxies could conduct its own reprisals against US forces or allies in the region if Washington escalates the confrontation, the US would find itself in a situation that it is at war with Iran to defend its strategic interest but that would not be in the best interest of the international community. The Trump Administration is best aware that heavy reliance on military pressure, sanctions and other tactics against Iran carry risks that it can ill-afford to take. Any miscalcu-lation or misunderstanding risks a spiral towards a more direct confrontation.
Amid conflicting accounts of the attacks, it seems irrational to accuse Iran behind the attack, especially when Abe was on a peace mission in Tehran. But then, Iran is not always a rational actor either. Writing for the Bloomberg, Bobby Ghosh argues that Tehran could have seen Abe as merely as an emissary for Trump, and therefore striking a Japanese tanker could have been a message to him. Seen another way, Iran might have seen this as the best way to fight back against sanctions and gain leverage in talks. If this is the case, Iran’s acts would have been anything but rational.
James Stavridis of the Bloomberg, however, thinks differently. According to him, Iran is the likely culprit and the US should work hard to avoid military confrontation by bringing more allies to its own side and ratcheting up pressure by other means. He also agrees that Iran is not driven by pure reason, which would make more attacks and still more tension possible. Keeping the Strait of Hormuz open is going to be the biggest challenge for the US and its allies, as well as the oil importing nations.
Would a global alliance deter Iran from attacks at sea? At least Trump thinks so. But that is not easy. Given the threat perception, it will be immature to discount Tehran going the Pyongyang way if its sovereignty comes under assault or at least if Tehran perceives such an attack. Tehran’s announce-ment of breaching the nuclear-stockpile cap imposed by the 2015 nuclear deal by July 8 and threats to enrich uranium beyond a 3.67 per cent limit, meant to prevent it from making weapon-grade material, if the European signatories do not move quickly to save the deal is another bother. Though the European signatories—Germany, France, the UK and the European Union—remained vocally supportive of the nuclear pact, and continued to criticise the US for abrogating it in 2018, they have rejected the ultimatum issued by Tehran, saying that they would not keep the deal alive under Tehran’s threats. If considered from all possible sides, it is Trump who is responsible for having created this mess and has proved to be the biggest disrupter of global rules.
There is also a possibility that Iran would not have been too immature to poke the American bear and therefore the likely culprit could have been some actor that wants US-Iran tension to rise. It is also possible that Iran wanted to choke off the flow of oil through the Strait of Hormuz as an attempt to strike back at the word of sanctions, particularly aimed at the US. Though oil prices that had fallen in the wake of rising tensions soon rebounded after the attacks, the main concern is that apart from the free passage of oil through Hormuz, a quarter of the world’s liquidised natural gas travels that way too. A prolonged conflict could have debilitating conse-quences on LNG trade throughout the world.
Regardless of whether Iran was responsible for damage to vessels in the Sea of Oman, it still gets the blame, with or without any conclusive proof, and suffers the fallout, observes oil strategist Julian Lee in a Bloomberg opinion piece. Trump just needs an alibi to fix Iran without any valid reason. This does not mean to suggest that the attacks are justified. Far from it, the acts are condemnable and the international community and all stakeholders need to find out the person(s)/country(ies) responsible and bring them to justice. But whosoever is held accountable ought to suffer the consequences.
The moot question is: who gains from these attacks? If Iran directly or through proxies is behind the acts, it sends a message that transit through the world’s most important choke-point for global oil flows is not safe without its consent. If Trump thinks to cajole Iran with crippling economic sanctions to bring it to its knees, Trump would be living in a fool’s paradise as Iran is not expected to acquiesce quietly. While other nations in the region will bear the cost of disruptions to their own oil exports, the US and its allies will have to cope with higher crude prices and disruptions to supplies. Considered from all accounts, whosoever is behind the attacks is no friend of Iran as the Iranian leadership would be least expected to insult a guest from Japan on a peace mission to attack the tanker while he was on Iranian soil.
Trump might feel free to keep all his options open, including military strike, but he should be best advised to think about the consequences for which he alone would be responsible. The world would not pardon him for creating the mess. The US would have lost its ability to protect and defend freedom of navigation through diplomatic means. Claiming to avoid a war and sticking to a confrontationist posture at the same time do not gel well in international diplomacy. Putting more pressure on Iran would only enhance the probability of a US-Iran conflict in the Gulf which would be in nobody’s interest. Khamenei was candid when he told Abe that his country would not repeat its “bitter experience” of talks with the US. Trump is best advised to understand the significance of this statement and accordingly craft his policy for the region.
Dr Rajaram Panda, a former Senior Fellow at IDSA and until recently the ICCR India Chair Visiting Professor at Reitaku University, Japan, is currently a Lok Sabha Research Fellow, New Delhi. He can be contacted at e-mail: rajaram.panda[at]gmail.com
Mainstream, VOL LVII No 28 New Delhi June 29, 2019
Sunday 30 June 2019, by Arun Kumar
The former Chief Economic Advisor, Dr Arvind Subramanian, has set the cat among the pigeons by coming out with a paper (referred to as AS below) showing that the Indian GDP growth has been over-estimated in the period 2011-12 to 2016-17 by 2.5 per cent. So, the average growth rate during this period, instead of being seven per cent, would be 4.5 per cent. More accurately between 3.5 per cent and 5.5 per cent.
Some have confused this with the latest GDP growth data showing the Indian economy slowing down to 5.8 per cent. AS is not talking of this slowing down of the economy but of mis-estimation during the earlier years up to 2016-17. If the AS analysis can be extended, the current rate of growth may turn to be close to 3.3 per cent. AS should also not be confused with the controversy regarding the incorrectly specified unorganised sector data used in calculating the current GDP.
So, what is AS about? It uses a methodology different from the usual one used to estimate the GDP and its growth rate. Why was this required? The usual way divides the economy into sectors and adds up the contribution of each of them to get the total size of the economy. There are nine major sectors in the economy with each divided into public and private sectors and organised and unorganised sectors. So, one is talking of 27 sectors because the public sector is an entirely organised sector. There is need for data for each of these sectors and also a method for estimating their contribution to the GDP. Why go for a different method when such an elaborate method is used by the statistical department of the government?
Ever since January 2015, controversy has dogged the GDP and its growth. The base year for calculating the GDP is changed periodically and this was changed to 2011-12 (from the earlier 2004-05). The results for the new series were declared in January 2015 when the NDA Government was in power. This new series showed a sharp jump in the growth rate of the economy. Even the dismal performance during the UPA-II years looked better. The NDA performance distinctly looked better than what people remembered as the UPA performance. They did not look at the improved figures of the UPA years, so the NDA took credit for the economic recovery.
But there was no back series before 2011-12, so one could not tell if the earlier performance was also better. Many experts also questioned the new data because the economy did not seem to be doing so well; at seven to eight per cent rate of growth there should have been feel good all around but that was missing. Within the committee which had recommended the use of the new data base for the private firms (called MCA21) there were disagreements. There were companies that were not filing returns, benami companies, etc. So, the data needed closer scrutiny. How were the companies which were not filing returns to be counted and what would be the implication of existence of a large number of fictitious companies called ‘shell companies’? A blowing-up factor was applied to account for these companies but critics felt that this could give an upward bias to the GDP calculations.
A committee of the National Statistical Commission came up with a back series in 2018. But the government did not like it since it showed better performance under UPA-I and II than under NDA-II. To construct this back series a new methodology was adopted since the data was not available for the earlier period. The government rejected it.
The government later in 2018 came out with another series which showed that the perfor-mance under NDA-II was better than under UPA-I and II. Such a switch in results is always possible since the GDP is an estimate based on many assumptions. One can choose different assumptions to come up with different results. Be that as it may, this was seen as a politically motivated GDP series. What strained credulity was that the GDP growth was shown to be the highest during the year of demonetisation—8.2 per cent in 2016-17. By all accounts the economy had tanked that year with decline in employ-ment, investment, credit off-take and rise in work demanded under MGNREGS by workers losing work in urban areas and returning to rural areas. The government withheld employ-ment data till after the elections since it showed unemployment reaching a 45-year high of 6.1 per cent. Data on employment generated by MUDRA loans and farmers’ suicide data since 2016 have not yet been released.
Now in 2019, it has been revealed that the MCA data has 38.6 per cent ‘out of survey’ companies. The initial fear of the experts that the use of MCA data base may lead to over- estimation was being validated. So, the new GDP series has faced five controversies. These are difficult to resolve since one cannot go back and collect data of the past again.
Consequently, to settle the doubts a new method has to be found to estimate the GDP. One can look for variables which can predict the GDP well. Also, one can look for the inter-national experience in the matter, as AS has done.
The government has come out with guns blazing trying to discredit AS’s method and the results. Certainly the method can be criticised because of several infirmities pointed out by this author in the last three years. Like, the missing unorganised sector data, especially after the three shocks administered to the economy since 2016 November—demonetisation, GST and the NBFC crisis—and the missing black economy data. Further, the Indian economy is unlike any other economy since it has a huge unorganised sector, so comparisons with other economies can be erroneous. But these issues can wait till AS is analysed in detail.
As the government was embarrassed so its spokespersons started attacking AS. First, they say that the change in base year to 2011-12 was based on expert advice. Of course, but there was unsettled controversy among experts which is now proving to be damaging to the official series. Second, it is said that the new series follows the UN mandated methodology (of 2008). But that methodology does not justify the use of an erroneous data base or tweaking the services sector in such a way as to show higher growth in some periods and lower growth in other periods. Third, in support of the official data it is argued that experts from the IMF and World Bank have accepted the new series. But they are not data gathering agencies and have to accept the data given to them by the government. This is not independent corroboration of data. Fourth, it is said that base change is a normal process of GDP estimation. But AS is not objecting to base change. The issue is what data base should be used to estimate the GDP. Certainly not one which has large errors in it.
Fifth, it is argued that a larger data base is being used. But, no one is saying that a better data base should not be used. What is being said is that the newer data base is erroneous, hence not necessarily better. It should be used after the errors are fixed. Sixth, official estimate is said to be based on accepted methodologies. But, the criticism is of the assumptions being suitably chosen so that the method does not remain objective as officially claimed. Seventh, the official position is that AS is attempting to sensationalise the matter. So, if one finds errors should one keep quiet? More importantly, can one make policies with incorrect data and should not one apply correctives as soon as possible? Finally, it is asked, why did Dr Subramanian not object to the GDP data while he was in office as the CEA? But, he did express doubt in the 2015 Economic Survey. As a responsible government officer could he have done more? If he had resigned would that not have created a much bigger stink?
In brief, this is not the time to raise false issues around a new way of estimating the GDP, even if it is itself erroneous. The need is to grapple with the more serious issue of what is Indian economy’s more correct growth rate.
After all, polices depend on the correct figures.
The author, an eminent economist, is the Malcolm Adiseshiah Chair Professor, Institute of Social Sciences, New Delhi. He is the author of Indian Economy Since Independence: Persisting Colonial Disruption, published by Vision Books. He can be contacted at e-mail: nuramarku[at]gmail.com and arunkumar1000[at]hotmail.com
Mainstream, VOL LVII No 28 New Delhi June 29, 2019
Sunday 30 June 2019, by SC
In the midst of the intense gloom that has engulfed secular democrats of all hues of late following the return to power for the next five years of the present-day BJP run by the Narendra Modi-Amit Shah duo, the parliamentary proceedings in the Budget session were enlivened by a few memorable speeches from the Opposition benches. One of them was that of Mohua Moitra, a newly-elected Trinamul Congress MP from the Krishnanagar Lok Sabha constituency of West Bengal. While underscoring a “ten-fold increase in the number of hate crimes between 2014 and 2019” she added: “The lynching of citizens in broad daylight is being condoned. From Pehlu Khan in Rajasthan last year to Tabrez Ansari in Jharkhand yesterday (June 24, 2019) the list is not stopping.”
Significantly in his customary reply to the discussion on the President’s address to Parliament, PM Narendra Modi was compelled to speak out on the Jaharkhand lynching incident. While asserting that all such violence, whether in Jharkhand, West Bengal or Kerala, must invite uniform condemnation, he said: “The incident (Jhar-khand lynching) has pained all of us, including myself. The culprits must get the strictest punishment.” However, such statements have no value if words are not followed up by deeds. As far as Modi is concerned, his earlier pronouncements on similar incidents did not carry weight as those turned out to be nothing short of lip-service.
However, the lynching of Tabrez Ansari has been widely denounced by all sections, both Muslims and non-Muslims, in Parliament and outside. Lok Sabha experienced uproarious scenes on the issue yesterday. Raising the matter during zero hour, Trinamul Congress leader Saugata Roy called it a blot on humanity and demanded that the BJP should look into the affairs of the States ruled by it. In his words: “BJP members are speaking about West Bengal but not taking steps on what is happening in Jharkhand and other places. This is an example of religious intolerance and TMC will continue to protest against mob lynching.” He further told the Lower House that it was a clear case of “cold-blooded murder” since Tabrez, who had sustained severe head injuries, was kept in custody for four days (obviously without getting medical treatment).
Not only Saugata, several Muslim MPs, Azam Khan, Barrister Asaduddin Owaisi, Shafiqur Rahman Barq joined him in demanding justice for Tabrez.
Outside Parliament too there have been largescale protests by several organisations including the Social Democratic Party of India as well as United Against Hate. Such protests took place in the Capital’s Jantar Mantar and Jharkhand State Bhavan. Demonstrators carried placards declaring: “We can‘t turn Hindustan into Lynchistan”.
The public protests on this issue are a clear manifestation of the people’s growing anger at the way the BJP is functioning following its massive victory at the hustings this year.
To ignore such mass opposition to the BJP’s manner of operation would be disastrous for the country’s ruling party in the days ahead.
June 27 S.C.