India's strategic loss

My first post in the new year, from a new location - Hyderabad (I should now rename the blog perhaps) has to do with some sad news - the passing away of K. Subrahmanyam – regarded as the father of strategic planning on issues regarding defence and foreign affairs. Unfortunately, I had no interaction with him – except for reading most of his columns appearing in the press – where he was a prolific contributor.

Subrahmanyam – a one-time nuclear hawk – inconsistently supported the nuclear deal that India signed up with the US – a move I would ascribe to advancing age, and a lack of appreciation of the economic realities of the new world. That opinion notwithstanding, I always found his writing to be interesting and well informed. While his insights were called upon by many governments – the Congress government, and the NDA, they were not always taken to their logical conclusion - many of the recommendations of his report after the Kargil war remain unimplemented.

In his demise, India has lost a strategic thinker who had the best for India at heart. May his soul rest in peace.

Integrity Dr Singh?

The CVC is appointed over the protest of the Leader of Opposition. The person has been chargesheeted in a case. And is one of the persons responsible for the 2G scam. The Supreme Court questions how the person can be investigating cases of corruption. The CVC still occupies office, though there is just a chance he may resign.

The election commissioner was appointed while there were allegations of having received money in a charity run by him, from ruling party members.

Raja was finally ousted by pressure from the parliament - and is now being investigated.

His boss - Dr. Singh, continues in office, unscathed and unaffected - constitutional propriety be damned.

Teesta Setalvad is now being investigated by a sessions court for filing false affidavits. A Delhi court had to instruct the Delhi police to file an FIR against Arundhati Roy and her separatist supporters - over-ruling the objections of the police that no case was needed. For this government, Kashmir is not a problem, the government is busy finding and prosecuting "saffron terror".

Various government banks and bankers were found to be taking bribes, and are now being investigated.  Rumours abound that the aviation minister and his party boss have shareholding in two major private aviation companies - companies that he is supposed to regulate, and who have increased airfare by well over 100% in the past one year. Kalmadi roams free - the Rs70,000 crores that were spend to host the CWG remain to be investigated.

Government lies extend to economic growth figures. Gross fixed capital formation for the first quarter this year have been revised from 7.6% to 18.9% (because a new set of inflation deflators are being used) !

Indian defence is in tatters - the latest wikileaks quoted the USA ambassador as estimating that India's "cold start" military doctrine is now in cold storage !

Sometime earlier this year, a movie called LSD made waves. It could describe the operating motto of the Singh government. But Dr. Singh is an honourable man.

Hounding wikileaks

The Chinese government is often lectured for being secretive, of suppressing dissent . So are governments in several other parts of the world - Burma and Iran to name a few. Apparently, this same standard should not be applied to diplomatic missives - or so the US government would have you believe. Disclosing what goes on behind the diplomatic curtain is a crime !

USA government now wants to file a criminal case against Wikileaks founder. Paypal has stopped accepting payments to support the site, and google has stopped offering the site which it hosts. Both these service providers disclaim any pressure from the government. How believable is that?

Eventually, what matters is that ALL countries look after their own interest (and that usually means the interest of the government in power). So take the justification for the action against wikileaks - the assertion that this puts people at risk - for what it is - protestations of a government caught lying.

Why is Ratan Tata protesting about privacy?

Ratan Tata, the Chairman of the Tata Group is, reportedly, planning to move the Supreme Court against publishing intercepts of his conversation with Niira Radia. The stated reason - private conversation not connected with the 2G scam should remain private.

In principle, there cannot be a disagreement with the argument. On the other hand, unless there is something in the conversation that would be of interest to the world at large, it can be assumed that it will not attract attention, even if made public - after all, there is voluminous data that is threatening to come out in Wikileaks, that is likely to attract a lot more public attention over the next few days. So what can be a reason?

Perhaps it lies in a report published many months ago in a little know hindi website. This report, which purports to be a confidential letter written by a taxman investigating the 2G case has some interesting comments. The relevant excerpts are in points 2 and 3 above.
 Some interesting links to the original site are :

http://www.bhadas4media.com/tv/5036-barkha-vir.html
http://www.bhadas4media.com/tv/5071-barkha-vir.html
http://www.bhadas4media.com/vividh/5065-barkha-vir.html
http://www.bhadas4media.com/tv/5036-barkha-vir.html

The role of key media personalities is also revealing.

Draw your own conclusions.

Insurance and IP - an academic view

For years, I have held the view that IP (intellectual property) is no more than a trade barrier imposed by rich countries on poorer ones. I also maintain that once countries like India develop enough to generate their own IP, these very same developed countries will start questioning the need for IP.

Another issue I have long felt that India is going the wrong way on, is patent protection for medicines. Given the large population in India requiring cheap medicines, the model of insurance-led health care is completely flawed. Our negotiators at the WTO have sold India down the path of disaster by conceding to patent protection for pharma products in India, and by allowing private sector companies to offer health insurance - both steps that will take the price of medication out of reach of the common man.

A recent article I read in the TOI from a nobel prize winning economist provides some support to my arguments.  The operating parts from a discussion with Joseph Stiglitz, are :

On Insurance - "Rather than provide better healthcare at lower costs, insurance companies innovate at finding better ways of discrimination. They are inefficient because they are trying to figure out how to insure people who don't need the cover and keep out people who need it......India would be in a terrible mess, given the size of its population, if it went down the wrong route (of private companies for health insurance). They should learn from the mess that the US has got into."


On IP - "...the benefits of IP have been exaggerated and the costs underestimated. IP creates monopolies. And it does interfere with economic efficiency by interfering with the flow of knowledge and the use of knowledge, particularly for developing countries....The question is whether IP promotes innovation. Increasingly, the evidence is that it may actually impede innovation. It is leading to infinite negotiations around patents. More money is being spent on lawyers than on research. The legal cost of using the system takes up more resources than the benefits from the system."


Now that, from a Professor of Columbia University, and a former Chief Economist of the world bank - may carry more weight than my own arguments - but I'm happy that atleast a part of the academic world is taking a sensible stance. I wonder if the bureaucrats in the Indian government that make up these policies are listening!

A Visit to the USA - The Good, the Bad, the Ugly

I just returned from an 18 day vacation to the USA. This time around, my understanding of the issues affecting the country was certainly better than ever in the past. Some thoughts.

The Good

Nature has been kind to the USA, and the citizens have used nature well. Large open spaces (outside the metro cities – and large parks in most metros), clean air and reasonable infrastructure in most parts make the country extremely livable. I envy the houses and community infrastructure most places enjoy – something India may take a long time to achieve, if at all.

Obama’s policy of funding infrastructure is clearly visible, with roads being built in most places I visited. Perhaps more so than in India!

Local government representatives seem responsive to needs of their electorate. I heard stories of people reaching out to their senators to get issues sorted out, and the senators responding! India seems to have the same population per MP. Some lessons to learn here.

The Bad

Bureaucracy is abundant. JFK immigration took 90 minutes to clear – with immigration officers either absent from their stations, or busy sipping coffee and chatting among themselves – oblivious to the mile long line of travelers waiting to have their passports checked. Reminded me of Calcutta of the late ’70 when communists were at their peak!

Compared to that, Indian immigration is now a breeze – at 3:30 at night, it takes less than 10 mins to clear two plane load of travelers.

Socialism exists in various forms – housing taxes come bundled with school fees – clearly detrimental to those who have no children, but have to pay. This forces ghetto of a different kind – communities are generally homogenous with age and social strata determining housing – because of the taxes involved. The argument that the same level of education is available to all levels of income earners is fallacious – you can only stay in a community if you can afford to pay the house taxes of that area!

The Ugly

The healthcare system is a rip-off. Hospitals charge fees that have no connection to the value of service provided – George Washington University Hospital charged me a $1000 for a clinical examination of my daughter – no tests, no ambulance, no admission. I was advised (later on) that these fees are best “negotiated”! Wow!

The pharmacies are even more of a rip-off. A medicine that was supplied by Sun Pharma (which would, I assume, be making about 20 paise per tablet) was charged at $6 per tablet! Further, the pharmacy keeps the prescription – so that more than the prescribed medication is not made available to the patient. In a country where guns can be purchased in the department stores (almost), and where freedom to harm yourself is protected as a fundamental right (almost), the need to “protect” the patient against medication, (increasing the cost of drug delivery by several times what it needs to be – by eliminating competition in distribution) is criminal.

Overall, the country remains seriously uncompetitive in most matters. Most businesses make money through cartelization (finance), or through regulations (patent protection, visa controls, minimum wages) creating entry barriers. The basic education system stresses more on games and less on studies – a football coach at a college will likely earn 5x-10x what the math teacher makes. The country has some serious challenges to face as it comes to terms with a world where other countries offer greater opportunities for growth.

Nuclear lies and obfuscation

The Civil Liability for Nuclear Damage Bill 2010 is well on its way to become law. The Congress and the BJP have, between them decided to sell the Indian national interest to the multinational corporations, with a few crumbs that the Indian companies will pick up along the way. Here is a set of expert opinion that I wish had received greater attention:

1. Dr. A Gopalakrishnan - former Chairman AEC - and a consistent opponent of the legislation - explains why the preamble and object of the bill is a veil of lies. He clearly lays down the benefits to US companies.
2. A report in the Hindu - that illustrates the way the government is going to bulldoze the interests of the local population

3. My friend M V Ramana, a physicist currently at Princeton and Suvrat Raju explain the moral hazard in the legislation. At an estimated cost of Rs18cr megawatt, it still remains a wonder why the same effort is not spend on solar

4. Vardarajan - who had of late shifted to defending the government policy on nuclear power, is constrained to comment on weak bill that will let foreign suppliers off the hook in the eventuality of a nuclear holocaust

5. More by Ramana and Raju on the moral hazard of the policy being followed by the government.Given the effect we see on the world economy by the relatively benign "moral hazard" of unsupervised banking, I shudder at the effects that this moral hazard will eventually have on India.

Besides the cost of setting up the power plant @18crs per MW (estimated) other costs that need to be considered (and have been outlined in the discussions of the Parliamentary committee - but not quantified) are:
- Finance ministry - Insurance premium will be likely in the range of 1.8% - 2.7% of the 300mn SDR that is mandated
- Home ministry - Costs of damage arising out of conflict, hostilities, war, terrorism - need to add to security forces
- Ministry of Water resources - Ministry does not have facility for testing water quality from view point of nuclear contamination. Need to study impact of contamination on humans, crops, animals
- Ministry of environments and forest - what efforts are to be made to safeguard the environment around the nuclear facility
- Department of food - storage of foodgrains - distance and operating procedure
- Ministry of health and family welfare - Ministry is nowhere ready to meet emergency arising out of nuclear or radiological emergency. Hospitals not equipped - bill does not have a single clause on health care during nuclear emergencies - only compensation due to health effects of radiation.
- Ministry of Agriculture - Disaster Management system not aligned for radiological fallout.
- Ministry of defense - fool-proof protection of nuclear assets cannot be guaranteed

Assuming that these concerns are addressed, what would be the actual "cost" of nuclear power. And of course, we have not even taken into account the cost of storing the "spent fuel" over the next 100 years !

Ofcourse, the Prime Minster has committed to the US that India will pass this bill - and the Prime Minister is an honourable man. If Indian lives are lost, that is just "collateral damage".