Friday, September 29, 2017




RAKESH    MOHAN



                                          
                               Inline image 1


India Transformed  Edited by  Rakesh Mohan; Published by Penguin (Viking) ; Pages 656  ; Price Rs 999/-

                             ************************
Rakesh Mohan is Senior Fellow at the Jackson Institute for Global Affairs, Yale University and Distinguished Fellow at Brookings India. He was Executive Director of the I M F, Deputy Governor of RBI, Secretary, Economic Affairs and Chief Economic Adviser to the Ministry of Finance. He has several books to his credit on urban economics, economic reforms and monetary policy.

The book under review is on the progress in the Indian economy during the last twenty-five years since the beginning of economic reforms in 1991. The focus of submissions is on political economy, financial development, trade and globalisation, technology and innovation, agricultural and industrial development and the interaction between the public and private sectors.

The contributors include some of the key policy makers of the period who designed and implemented the reforms, business leaders who grasped the new opportunities that emerged and built some of India’s most successful businesses and analysts and observers who have been among the most critical and thoughtful of this tribe.

India has grown at an annual average rate of around 6.5 % for almost thirty five years. This was a significant acceleration over the average rate of 3—3.5 % over the previous thirty five years. The challenge facing the next generation is to have an annual growth rate of 7 % or more for the next twenty five years.

During the twenty five years since 1991 in some areas the change has been truly transformative, while in others much more could have been done, particularly in the areas of health, education and agriculture.

 The introductory chapter by Rakesh Mohan is a narrative of the road to the 1991  policy reforms and beyond. The progenitors of the 1991 reforms were Prime Minister Narasimha Rao, the Finance Minister Manmohan Singh and the Principal Secretary, A.N.Verma. Manmohan Singh provided the intellectual leadership while Narasimha Rao’s political sagacity, management skills and courage were essential to the reforms project. A.N.Verma was the enforcer of the economic reforms over the next five years.

Rakesh Mohan writes at length on the industrial policy reforms which were implemented in one shot on 24th July,1991. The other reforms were carried out over a period of time.

Montek Singh Ahluwalia provides a vivid first person account of the macroeconomic mess the country faced in 1991. The IMF and the World Bank applied pressure. The Balance of Payment difficulties arising from the oil price increase in 1989-90 had necessitated the use of SDR 3.9 billion from the IMF Extended facility.

 The 1991 crisis—the shock of the 1990 Gulf war pushed the deteriorating balance of payments into a full-blown crisis, leaving the country’s reserves with just enough foreign exchange to cover the import bill for barely three weeks and on the verge of a default on its external loan repayment obligations—gave an unlikely team of a politician, a technocrat-finance minister and a bureaucrat the perfect excuse for executing difficult change.

 One of the distinguished features of macro-economic policy making during the period was the very cooperative relationship between the Ministry of Finance and the RBI resulting in coordinated monetary, banking, fiscal and exchange rate policies right through the Nineties.

Rangarajan provides a first hand account of the sequence of reforms that were carried out. The gradual calibrated sequence of financial sector liberalisation contributed to the maintenance of financial stability throughout the 1990s and the 2000s despite the occurrence of the East Asian crisis and the North Atlantic financial fiasco. Jaimini Bhagwati documents the sequenced financial sector reforms that enabled the institutional reforms and infrastructure building which helped the capital market.

Y.V.Reddy  provides an overview of how Centre-State fiscal federalism is gradually shifting fiscal power to the States. As exemplified by his recommendations as Chairman of the Fourteenth Finance Commission he is all for giving greater fiscal autonomy to the States.

Harsha Vardhan Singh outlines  the progression of trade reforms ; he provides new data on the openness of the economy that has now been achieved. According to him current effective tariffs are not different from some of the most open economies of the world.

Martin Wolf, the highly respected International commentator has used his long-standing engagement with the Indian economy to provide an external view of how perception of the Indian economy’s stance on trade has changed over the reform period. He feels that India will increasingly need to take a leadership role in the evolving global economy.

The great churning of the 1990s among the leading companies in India is ably presented by the  contributions of Mukesh Ambani, Baba Kalyani and R.Gopalakrishnan who grabbed the opportunities and flourished beyond their wildest expectations. Narayana Murthy, Sunil Mittal, Deepak Parekh and Vinayak Chatterjee  illustrate the new entrepreneurship that recognized the new opportunities. New Indian businessmen have emerged who successfully leveraged  the burgeoning market provided  by the Indian consumer and attained competitiveness in international consumer markets.

Three authorities deal with India’s strategic and securities policies in keeping with the reforms. Shyam Saran and Shivshankar Menon furnish first hand accounts of the progressive change. The geo-political shifts that occurred by the fall of the Soviet Union caused a fundamental rethinking on the part of the Indian foreign-policy establishment. Sanjay Baru analyses the increasing Indian defence expenditure that resulted in the fiscal excesses of the 1990s. He also documents how fiscal prudence flowing from the reforms could have handicapped the Indian defence forces to reduce expenditure.

An interesting theme running through the volume is a comparison of India’s performance with the East Asian benchmark, especially China.

In an erudite and extensive “Foreword” Strobe Talbott, who has studied Indian economy for fifty years speaks highly of the contributions by the  international policy makers and business leaders who have created  the incredible transformation of India.

“ India Transformed “ is a consummate  guide for all  who want to comprehend  the context, content and progress of the reform process. This outstanding book is compulsory reading for all students of banking, economics, planners and those interested in India’s progress in the world stage.


 P.P.Ramachandran
24 / 09 / 2017

Monday, September 18, 2017

I DO WHAT I DO



RAGHURAM   RAJAN




                                    Inline image 1


The book under review   is a collection of speeches and articles by Raghuram  Rajan who  was  RBI Governor from 2013-16. How did he choose  this title?. He was asked if he was  dovish like Janet Yellen or hawkish  like Paul Volker.
​  ​
 "I was getting a little tired of these bird analogies as well as being compared with all these other people," Rajan says. "And so I started off  laughingly, James Bondish: My name is Raghuram Rajan and I do what I do." That phrase stuck on.

Rajan is a world-class  economist who was the twenty-third Governor of the Reserve Bank of India. He is now the K.D.Miller Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago. Rajan was Vice-Chairman of the Board for International Settlements. He  was the Chief Economist and Director of Research of the International Monetary Fund. 
The American Finance Association awarded him the inaugural Fischer Black Prize for the best finance researcher under the age of forty. The other awards he bagged include the Deutsche Bank Prize for Financial Economics, the Euromoney  magazine’s Central Banker of the Year Award and the Banker magazine’s Global Central Banker of the Year Award.  
When Rajan took charge as Governor of RBI  in September 2013, the rupee was in free fall, inflation was high, India had a large current account deficit, and the country’s exchange reserves were falling and India was considered one of the fragile five economies. Rajan sent a stern message about the strength of India’s  institutions and the nation’s  ongoing programme of reform. He outlined a vision  with a  focus on long-term growth and stability during his  “ Thousand Days” in Office.  Rajan explains economic concepts in a readily accessible way whether he deals with debt relief or dosanomics .He addresses key issues  essential to growth: the need for tolerance and respect to assure India’s economic progress
​.​

 The book is divided into three Sections. The first is on “RBI Days”. The second section is devoted to ”The Global Financial Crises” and the last section incorporates  “Occasional Pieces”.

The first chapter sets the stage and gives a gist of Rajan’s  statement on assuming office as Governor. He lays emphasis on “Transparency and Predictability” apart from maintaining the value of the Rupee. He lays down the Five Pillars of Financial Sector which are—1.Clear monetary policy; 2.Strenthening banking structure; 3.Broadening financial markets; 4.Help to small and medium entrepreneurs and 5.Allaying distress of Corporates and financial institutions.

 He explains Dosanomics—how inflation and higher interest rates work against the retirees than low inflation and lower interest rates.(The rate slipped from10.59 % to 4.39% during Rajan’s tenure).In a speech at the TIFR the
​​Governor explains the rationale for fighting inflation to ensure sustainable growth.

Talking of a competitive and vibrant banking system Rajan analyses the problem thoroughly. The most pressing task for public sector banks is to clean up their balance sheets, improve governance and management and to recruit talent with special expertise.

Discussing financial inclusion Rajan declares that technology is the key and wil​l ensure interoperability and obtain benefits of networking and enhance security and financial inclusion.

Rajan calls for new institutions such as bankruptcy courts and turnaround agents and a change in the mindset where the willful defaulter is not lionized but chastised.

In his lecture at the D.D.Kosambi festival in
​G​oa,Rajan  included a reference to “Hitler” which attracted a lot of flak. It was aimed at the need to remedy the weakness of government capacity in general. The I I T lecture is an argument for tolerance, respect and the right to have different views. Rajan includes his speech at the Brookings Institution on international issues—competitive monetary easing.

In his four lectures on Global Financial Crises Rajan points out that we are experiencing a widespread  high productivity growth but low investment relative to desired savings, which has pushed down interest rates and pushed up asset prices. 

“Occasional Pieces” contains gist of seven articles/ speeches. In a critical analysis of the American role in Iraq  Rajan declares that the end of the cold war gives the U S  both the power and the interest to spread democracy and capitalism by force. He records that institution building is one area where international financial institutions and policy makers have learned from experience and used commonsense to devise practical approaches without much guidance from academics.

Regarding Demonetisation  Rajan clarifies that in February 2016 when the government asked his views on demonetisation, “in no uncertain terms” he expressed his reservations against it, saying short-term economic costs would outweigh long-term benefits and there were “better alternatives to achieve the main goals” (unearthing black money, fighting terror finance and fake notes). When he was asked to prepare a note, he reiterated this, outlined the preparations needed for it and also what would happen if the preparation was inadequate. “At no point during my term was the RBI asked to make a decision on demonetisation,” Rajan writes.

Rajan  wants to put the record straight that the central bank was not a party to demonetisation and to that extent he wants to rescue the reputation of the institution. The RBI, which had shied away from declaring how much of junked currency was deposited in banks in the limited window provided, last week in its annual report said 99 per cent of the currency had returned.

On RBI’s Dividend Policy Rajan is trenchant about paying a larger amount to Government. The RBI  pays no interest on its liabilities but earns interest on its  financial assets. RBI earns surplus profits as the manager of the country’s currency. The Central Board has paid out the entire surplus to the Government amounting to Rs 66,000 crore during the last two years. During 2016-17 the amount transferred was Rs.30,659 crore. If RBI  pays a special dividend it creates additional permanent reserves—equal to printing money. The bottom line is that the RBI  should transfer  to the Government the entire surplus retaining just enough buffer that are consistent with good central bank risk management practice. “There is no free lunch”, declares Rajan. The Government should acknowledge its substantial equity position in the RBI and subtract it from its outstanding debt when it announces its debt position.

Rajan writes tersely on the independence of R B I. According to him the multiple layers of scrutiny, especially by entities that do not have the technical understanding will only hamper decision-making. The Government appointed
​ ​
 R B I Board which includes ex-Officio Government officials as well as Government appointees should continue to play its key oversight role. Vacancies in the R B I Board, which have remained unfilled
​ ​
for many months now should be filled quickly so that the full expertise and oversight of the Board can be utilised. There is an informal understanding that the R B I Governor has the room to make needed decisions in the interests of the macro-economic stability. None of this should be changed. It has to be explicitly stated that the Governor’s rank is commensurate with the position of the most important technocrat in charge of economic policy in the country. More clarity about the  R B I's role and a clearer assertion of its independence would be in the nation’s interest, declares Rajan.

 On his laying down office the former Governor declared that he had not resigned. He quit when his term ended. Rajan said, “We never reached a point where the government made me an offer to stay on... There was no offer on the table. That’s fair to say.”The least pleasant aspect of my job was dealing with bureaucrats who were trying to undercut the Reserve Bank so as to expand their turf”

 Raghuram Rajan has confessed his failure to solve the problems of RBI retirees who number over 25,000.He has written “...On the internal front, my biggest regret is that I could not solve a long-pending matter that I inherited from my predecessors: securing for retired RBI staff the same pension benefits that government employees enjoy, despite repeated government assurances that the matter would be addressed. I hope the government will do the right thing here...”(Page 211)

 Rajan’s speeches and articles do take forward the reform agenda in Indian banking and financial sector.

book to be read carefully  by all interested in India’s economic advancement.

P.P.Ramachandran.
17 / 09 / 2017


WILLIAM  DALRYMPLE



                                                  Inline image 1


Koh-i-Noor by Wiliam Dalrymple and  Anita Anand ; Published by Juggernaut  ; Pages 239 ; Price Rs.499/-

                          ***********************  
When I visited the “ Tower of London “ I saw at close quarters the “Koh-i-Noor” Diamond which had adorned the crown of the British Queen. Now comes a book on the famed diamond-- written in two parts. The  first part is by William Dalrymple ,Scottish historian, noted Travel writer and impressive historian of the Mughals and Afghanistan. He who deals with  the history of Koh-i-Noor and its time with the  Mughals and in Iran, Afghanistan etc. The second part is  by Anita Anand ,a London based journalist, who wrote on the granddaughter of  the last Maharajah to own the diamond. She recounts  how the diamond found its resting place in London and what was the reaction of the monarchy to it. 

The book is a dramatic re-telling of a saga of loot, murder, torture, deceit and colonial greed intertwined with the diamond. Dalrymple and Anita make an admirable attempt to distinguish history from myth.


 Koh-i-Noor, the Mountain of Light, ‘retains a fame and celebrity unmatched by any of its larger or more perfect rivals’ even though there are eighty – nine diamonds larger than it. What makes the Koh-i-Noor so infamous and alluring that all the other gems that once rivalled it have been forgotten?.

The Koh-i-Noor —  the 'Mountain of Light' — was a 190.3 metric carat stone. Its very early origins are difficult to establish. Its first possibly verifiable appearance is as part of Shah Jahan’s peacock throne. The gem, in its original shape and size, did not glitter as European-cut diamonds did. Stung at the criticism, Prince Albert (Queen Victoria’s husband) ordered that it be cut to better catch the light. And so the Koh-i-Noor was cut to size — reduced by more than half to about 90 metric carats. Today, it lies glittering in its case at the Tower of London.

 The  diamond  remains  a symbol of looting during colonial times. According to Dalrymple  “There is absolutely no doubt about how the gem was taken away. It is complete nonsense to say it was gifted by Maharaja Ranjit Singh” . However, the Indian Solicitor General, Ranjit Kumar, told the Supreme Court “ …that the diamond had been gifted to the East India Company by Ranjit Singh.” The Ministry of Culture distanced itself from its Solicitor General’s comments.

The origin of the Koh-i-Noor  is still uncertain but it is supposed to have originated from South India where gems and precious stones of such extravagance were   used to decorate idols in temples. The Koh-i-Noor, among other brilliant stones, made its way to the Mughal treasury and it was considered to be one of the most valuable possessions. And so bedazzled was Shah Jahan by its size and beauty that he got it embedded in his grand peacock throne. India's gems and diamonds, particularly the Koh-i-Noor, were so popular, that the Afghan ruler, Nader Shah, couldn't keep his hands off and took the throne, along with the diamond, back to his kingdom.

The story continues further till the glorious diamond   reached the hands of the Sikh ruler, Maharaja Ranjit Singh. After many deaths and the destruction of the Sikh empire that followed, the diamond was finally taken away by the Britishers from the hands of the boy king, Duleep Singh and was sent off to England, to awe Queen Victoria.

 “We do not know anything about it in clear terms till the 1740s, when one of the historians of Nader Shah, Muhammad Kazim Marwi, mentions that he saw it clearly when he was in Herat, attached to the head of one of the peacocks in the Peacock Throne”

There is a curse associated with the Koh-i-Noor. You can’t say it is cursed, but many people who held it had terrible luck. Nader Shah was assassinated, Ahmed Shah Abdali had his face eaten away by maggots. Shah Zaman was blinded. Shah Shuja was deposed and his son tortured in front of him. Five of Maharaja Ranjit Singh’s successors met a violent death. There was an outbreak of cholera on the ship that took the stone to London. The Duke of London who began cutting it, died. The present Queen has not worn it even once.

The book abounds in interesting characters, but Dalrymple is fascinated by Nader Shah. “All the other kings inherited power. Nader Shah was the son of a shepherd who worked his way up. Having said that, he was a very puritanical and unpleasant character.” Dalrymple recounts how John Lawrence kept it in his pocket and forgot about it. “Before that, it was used as a paper weight by a Maulvi.”

 There are many references to large diamonds in sources from Vijayanagar, Babur’s diary and Humayun’s . Koh-i-Noor became  a symbol of British  loot in India, which was seen by three million people  in the Great Exhibition of 1851 in London.

The opening chapter deals with the Indian pre-history of the Koh-i-Noor, where Dalrymple talks about how Hindus began to equate the diamond with the Syamantaka and the legends of Krishna. The “Jahangirnama” is full of stories of diamonds.

While the Mughals are known to be fashionable, one does not  associate such a craze with Maharaja Ranjit Singh. It was during his reign that the Koh-i-Noor acquired singular status. “For him, it was a symbol of conquering the Durranis,”

  “Lord Dalhousie gave the task of finding out the history of the gem to Theo Metcalfe. Now this bloke began to trace the history of the gem in Delhi a whole 100 years after the Koh-i-Noor was last there. He goes around the streets of Delhi gathering gossip. And, this bazaar gossip of 1849 became the history of Koh-i-Noor. Theo  had a theory that Nader Shah acquired the Koh-i-Noor through a turban swap with Muhammad Shah Rangila. ”

As Nadir Shah is assassinated, the diamond once again finds itself a new home, Afghanistan, where it remains for the next seventy years. From there the diamond finds its way to the treasury of Maharaja Ranjit Singh, however, not before being used as a paperweight by an ignorant mullah. Here, in the reign of Maharaja Ranjit Singh, ‘the Koh-i-Noor first began to achieve real fame and gained the singular status it has retained ever since.’

 Anita  deals with the history of the diamond from the mid-nineteenth century. Continuous succession wars, finally led to the elevation of  the Boy King, Duleep Singh as the crown king with Rani Jindan as the regent. Like Ranjit Singh, the British coveted the diamond hungrily and set the stage for its conquest under the guise of the Second Anglo-Sikh War. With the signing of the Treaty of Lahore, the diamond was permanently lost to India. However, Koh-i-Noor did not hold the same magnificence for everyone. Before its final passage to England, the diamond was left in the care of John Lawrence for a brief period who, according to his biographer, ‘solemnly removed it from its casket, placed in in his waistcoat pocket, took it home and promptly forgot all about it.’

   History comes alive and it is indeed an enticing tale of the ill famous diamond that now sits in the Tower of London, giving hope to the people of its return to its original land. However the diamond is claimed by Iran, India, Pakistan, Afghanistan and the Taliban.

This is an un-put-downable book that can match the suspense and speed of a Sherlock Holmes novel.

P.P.Ramachandran.
10 / 09 / 2017

Tuesday, September 5, 2017


MIHIR  BOSE

*********************************************************************
                                  Inline image 1

The Indian Spy: The True Story of the Most Remarkable Secret Agent of World War II by Mihir Bose; Published by  Aleph Book Company ;  Pages 350 ; Price  Rs.599/-

                           *****************************

 Mihir Bose is a London based journalist who wrote an impressive biography of Netaji Subhas Chandra Bose entitled “The Last Hero”.His latest book is “The Indian Spy” which was originally published as “ Silver: The Spy Who Fooled the Nazis.”

 Subhas Chandra Bose continues to be a mysterious character who dominated the Indian political stage by his colourful personality and impressive achievements. Seventy years after his demise in an “alleged plane crash” Bose continues to hold a high place in the India pantheon.

The book under review piles on yet another mystery in the form of Bhagat Ram Talwar. He was the man who was with Bose when he escaped to Kabul in 1941.  Talwar was christened  “Silver” by the British intelligence. The Communist Party of India has published a book on him.He wrote “The Talwars of Pathan Land"  eulogising his role in Netaji’s escape from India.


Talwar was a  Hindu Pathan, born in Ghalla Dher village not far from Nowshera .Silver was a member of Naujawan Bharat Sabha (Young Indian Association) founded by Bhagat Singh.

Mihir reconstructs very carefully the real Talwar  basing his study on  original documents from a number of  archives . He proves that Talwar   spied for the Italians, Germans, Japanese, Soviets and the British, cheated Subhas Bose and made a pile of money .

He was awarded one of the highest military decorations by Nazi Germany, and was handsomely paid by all the powers that benefited from his information and treachery. According  to the author , Silver actually deceived the Nazis on behalf of the British and Soviet Union. British intelligence employed Peter Fleming brother of Ian Fleming ( creator of James Bond) to handle Silver. Silver fed false information directly to Berlin, where Netaji was among those who were fooled . He made a dozen trips during the war period between Peshawar and Kabul travelling on foot and masquerading as a Muslim. He escorted Netaji to Kabul through the dangerous badlands, west of the Indus and convinced the Italian Ambassador into issuing a passport that enabled Netaji to flee to Germany via USSR.


On the afternoon of 22 February 1941, a small, clean-shaven, nondescript man, walked down an alleyway in Kabul and knocked on the back door of the Italian Embassy. Afghanistan was a neutral country, the war far away from its borders.

The Afghan employees of the Embassy who were gathered round the back entrance having a smoke thought the visitor was  a local. He wore the Karakuli Afghan cap, a long shirt that came down below his knees, and flowing, loose-fitting trousers. The man’s mission aim was to meet the Italian ambassador. He told the guards he was a cook who had been sent to work for him. The guards showed him into a room where the Ambassador was sitting behind a large desk framed by the Italian flag and a huge picture of  Mussolini.

The Ambassador was not  sure whether the man was a spy. The man told him he had been sent by Herr Thomas, the German who ran Siemens’ Kabul office.  ‘I  have just been asked to see you.’ said the visitor.

 The Ambassador  rang  Herr Thomas and  listened  to what the German was saying. A few minutes later the  Ambassador closed the door behind them, offered a seat to his visitor and, speaking slowly in English, said, ‘My name is Pietro Quaroni and I am the Ambassador of the Italian Legation in Kabul.’

The man then told Quaroni his name was Rahmat Khan. He  told the Italian that he was not an Afghan but an Indian who had arrived from India on 27 January, having made the near-200-mile journey from Peshawar to Kabul on foot, through tribal territory that separated Afghanistan from British India. Khan explained that he had  acted as guide and escort to the charismatic Indian revolutionary, Subhas Bose, who had escaped from India and now wanted to go to Berlin to seek German help to free India from British rule. Khan and Bose had established contact with the German Embassy in Kabul some weeks earlier, which is how they had been put in touch with Herr Thomas. Khan’s call on Quaroni was the last throw of the dice to make sure Bose secured travel documents which would help him cross the Afghan–Russian border and then, via the Soviet Union, make his way to Hitler’s Germany.

Unlike the Germans, Quaroni proved very willing. In three weeks  Bose was given the passport of an Italian diplomat and was escorted over the Afghan border and put on a train to Moscow, from where he took the overnight sleeper to Berlin. There met Hitler, and eventually travelled to Japan to raise an army to fight the British.

Within days of Bose’s take-off , Khan the escort was became  Khan the spy for the Italians. A few months later Khan was taken over by Italy’s Axis partner, Germany. But while Khan took money from both the Italians and the Germans he was from the beginning  deceiving both countries. Khan worked with the Russians and  fooled the Nazis. Later still he worked for the British, who gave him the name Silver.

The Germans  awarded him the Iron Cross, Germany’s highest military decoration, for his services to the Reich, and gave him a transmitter which he used to broadcast directly to the headquarters of Abwehr, Hitler’s secret service, in Berlin. He also swindled the Axis of £2.5 million in today’s money. The Germans never  suspected these broadcasts. They  were  military information concocted by the British in the garden of Delhi’s Viceregal Palace. Before the war had ended he also deceived the Japanese, making him a quintuple agent, the only one of the Second World War. 

 Silver was a Matriculate and  spoke broken English, and  knew no other European tongue. He was not even impressive. But  everything in his life was astounding beginning  with his  unusual upbringing.

 The book has unexpected turns — how Talwar double crossed Netaji and facilitated the arrest of most of his lieutenants and how his guru was left to die in the USSR by comrade Achar Singh Cheena.

After vanishing in 1945, Silver arrived in India in 1948 and nothing is known of what he did between 1948 and 1973.In 1973, an International Netaji Seminar was held in Calcutta and Silver resurfaced, creating a myth about what he had done during World War II and also publishing his memoir in 1976.It is not known where and how he passed away in 1983. Mihir’s book  is an absorbing account and replete with  supporting anecdotes and evidence. 

P.P.Ramachandran.
03 / 09 / 2017