Retail FDI - a controversy of "illiteralism"?

The fiasco over FDI in multi-brand retail was one of the many faced by the government in the year gone by, but in many ways exemplified the policy paralysis.

Be that as it may, while the government can be legitimately be accused of incompetence, the intellectual opposition to the measure can surely be largely accused of being, simply put, illiteracy. Nothing exemplified this as this op-ed in The Hindu by none other than Prabhat Patnaik. Now, Prabhat Patnaik is not a pamphleteer of the RSS-type, nor indeed one of the Leftist cabal. He is a distinguished professor of JNU, has held important policy positions, and usually argues with his facts and rationale impeccably in place. True even when his prescriptions can be argued as antediluvian.

In this case however, he has "worsted" the worst of the RSS brand of unintellectual pamphleteering. To start with, the very basis, Pareto Optimality.

Vilfredo Pareto, the Italian philosopher-economist, had suggested a criterion for comparing alternative states of society, which has acquired wide currency in economics. According to it, between social states A and B, if there are some persons who are better off, and nobody is worse off, in A compared to B, then A is socially preferable. On the other hand, if some persons are worse off in A compared to B while others are better off then we cannot say that A is to be preferred to B. Taking A to be the social state where MNCs are operating in retail, it clearly follows that we cannot consider their operation to be socially preferable to a state where they are not operating.

If Prof Patnaik take pure Pareto Optimality as a touchstone for every policy action, first up he has been bypassed by the entire body of economics work around Pareto Optimality. Almost nothing in the real world can be Pareto Optimal, given frictional costs of implementation, as well as rent seeking behaviour from all economic agents. Shorn of the jargon, what it means is that in any policy decision taken, there will be winners and there will be losers, the decisions are therefore taken in order to maximise the total benefits accruing to society. In the process, "winners" are incentivised (or taxed) to compensate the "losers".

But I am sure that Prof Patnaik knows more than a thing or two about Kaldor-Hicks Efficiency (among others around Pareto Optimality), but he simply uses amateur sophistry to base his opposition towards a completely indefensible intellectual paradigm. The most eggregious of which is the reference to economic policies of the Raj.

And it is exactly identical to the argument put forward in the colonial context that since imported manufactured goods were of superior quality and benefited the consumers (who would not have bought them otherwise), among whom were numerous peasants, the fact that they destroyed the livelihoods of millions of artisans and weavers, should not be held against the policy that freely allowed such imports. In fact the argument for FDI in retail is a precise recreation of the discourse of colonialism.

The irony cannot be more delicious. The nationalist discourse of the freedom movement bases itself on how India was starved of opportunities to produce domestically the same goods that were incentivised for imports from Great Britain. The greater issue wasnt that of mill-made cloth versus hand-woven, but of the fact that the same was being produced in Britain, and not India. In economic terms, the Pareto frontier was being built through a loss to Indian producers offset by gains to Indian consumers and gains to British manufacturers. The nationalist narrative was largely focused on the last element. Which in itself drive much of the protectionist industrial policies post independence.

With FDI in retail, the propositionists are really saying that efficiency gains from logistics are to be passed on to producers and consumers of India, with the logistics itself being owned "within" India.

Ofcourse, if the touchstone of Pareto optimality, Prof Patnaik style, is taken to its logical end, every single social welfare measure in India will be deemed sub optimal. With coruption eating away much of the outlays and therefore benefits being uncertain while "losers" in terms of higher burden on taxpayers being pretty certainly identified, the equation isnt much different from what he is painting in the op-ed.

Which is really the issue with the opposition to retail FDI, Right or Left (another delicious irony - on most contentious issue, the congruence of views of both makes one wonder) - there is really no intellectual praxis of the opposition, only sophistry to suit a cynical political position.

Left Wing Terror - lessons from Andhra

This headline in the Indian Express today caught my attention. Andhra Pradesh recorded the lowest ever fatalities in recent memory as a result of Maoist violence. Press reports are often half baked, so a its always good to refer back to more rigorous sources. South Asia Terrorism Portal (SATP) is perhaps the best on the matter. Surprisingly, SATP confirms the view - the total number of non-Maoist fatalities in AP in 2011 is 6, and no police/paramil fatalities. For a change, the media is carrying the right facts.

Here is where the praise stops though. The article goes on to ascribe the success of anti-Maoist capmpaign to the Greyhounds, the elite police formation in AP. Unfortunately, this is the party line bought hook, line and sinker by most politicians and policy makers as well - terror threats need to be combated using "special" forces. However, had that been true, Chattisgarh and Jharkhand, with their long experience and experiments with "special" forces like Koya commandos and salwa judum would have had the same success. Or for that matter, West Bengal, whose police forces are "special" only in their sheer inexperience and lack of capacities even by Indian standards, would not have seen such a drastic fall in 2011 from the previous couple of years.

The reasons therefore are more complex than the potency of a special force.

At a combat level, the decisive cutting edge comes from intelligence and basic policing capacities. AP has invested persistently in setting up a first class intelligence network against the Maoists, with the State Intelligence Bureau at the helm of that effort. The potency of this network has enabled it (for now) to mask the inadequacies in capacities endemic to police forces all over the country. Absent this, no number of "specials" can do the job, as the Greyhounds themselves discovered in the Balimella incident, where 33 commandos were killed by the Maoists.

At a different, and more strategic level, tackling Maoism (or any insurgency) is a political challenge. Combat forces can soften up the underground and remove the more virulent personalities from the equation, the final solution has to be always political. The exaggerated operations of the Maoists in West Bengal in the last few years had a lot to do with the large scale rural disaffectation with the ruling CPIM cadres. Incidents like Nandigram provided fertile ground for the Maoists to breed violent actions against state (and quasi state CPIM) elements. The transfer of power post elections to Mamta Bannerjee has given an immediate outlet to people's grievances, and the results are therefore visible in the numbers. Maoism is still alive in WB, but has a much harder job at hand. It is upto the state government to not let the situation drift.

The lessons for states like Jharkhand and C'garh are clear. There are no short cuts possible, disastrous attempts like Salwa Judum worsen the issue. Political action and policing capacities need to be built up in order to defang the Maoist threat.

Monetarists view - good viewpoint!

http://business-standard.com/india/news/mihir-s-sharma-out-of-textbook-thinking/459403/
Good one from Mihir Sharma on RBI's monetary policy stance...

Food Security Act - an idea whose time is long overdue?

The cabinet has reportedly cleared the Food Security Bill for introduction in the winter session of Parliament. With this, another round of spirited, but often vitupirative debates has started. For a country that has the largest proportion of malnourished children, the tenor of the opposition is startling, and in case sympotomatic, a scary reflection of middle class sensitivities of the day.

Let us look at some of the objections to the Act.

1. It is too expensive, and we cant afford it.
This is the oft-repeated argument, that the Bill is fiscally ruinous and there is no way it can be afforded. And what is the estimated cost to the fisc? Well, depending on who is doing the maths, it ranges from 30,000 crores to 1 lac crores. Lets take the upper boundary. And as a perspective, compare this against the subsidy on oil (estimated to be touching 60000 crores this year), or indeed, taxes foregone on account of exemptions (mind you, distortionary exemptions, not tax rate rationalisaitons) add up to 6-7 times that number.

Are sops to the middle class of India and vested corporate interests (which is what most exemptions are for) more critical than ensuring a healthier new generation?

2. PDS is too inefficient, and cant be trusted to deliver
An old chestnut, but continuing as a red herring! PDS has been historically inefficient, but has made rapid progress in recent years. Driven by states like Tamil Nadu and Chattisgarh, and bolstered by measures like RTI and innovations in technology, PDS wastages have been reduced drastically. Not just in the exemplar states mentioned above, but almost across the board. The Centre's showpiece UID project is a prime variable to be used to increasae efficiencies even further! The Food Security Bill should be used as an opportunity to carry out more innovations in delivery, not throw up hands in depair!

3. Cash transfers and food stamps are more "efficient" options
Somewhat similar to arguments made in support of "fortified biscuits" in lieu of hot meals in the mid day meal programme for school kids. Cash transfers are a great idea, but not for solving the issue of access. Food security addresses issues of both affordibility AND access.

4. It will be beyond India's means in terms of availability terms
The biggest non sequitor that is peddled about. The total requirement, and in these programmes (just as in NREGA), actuals always come out lower than estimates as larger sections of the populace migrate to superior foods (and superior jobs). The estimated foodgrain procurement for the Food Security bill is 60 million tons, that is exactly the ballpark number being procured today. Without even accouting for a natural growth in procurements that has been over the trend growth in agriculture itself.

At a basic level, it is fundamentally about what sort of country do we want to build. Will we as a society agree to a stunted growth of our new generation? Or will we do all that we can (and some more, if required) to reverse that trend. At the cost, if necessary, of a few less exemptions on real estate projects masquerading as SEZs.

NREGA – the convenient scapegoat for inflation?

A recent blog post @ Takshashila.

http://broadmind.nationalinterest.in/2011/10/nrega-the-convenient-scapegoat-for-inflation/

Indian foreign policy – (Timid) habits die hard?

My piece on the Broadmind blog of Takshashila..

Indo-Afghan dalliance - new game in town?

The strategic partnership between India and Afghanistan signed today is interesting. At some level, it has the potential to be the new game changer in the centuries old Great Game in Central Asia.

What is new? Well, simply, it is a formal articulation of India's intent of "training, equipping and capacity-building" of Afghan security forces. While the phraseology is sufficiently open-ended ("security forces" can mean the civilian police as well as the army, "capacity building" can stop at usual officer training slots in Indian academies), presumably to preempt any paroxysms of fresh hurt from Pakistan, the intent is clear. India is willing to step up the game on Afghanistan.

There is a feeling, not always unjustified that India's strategy of engagement in Afghanistan has been carried out under the protective umbrella of US/ISAF presence. Barring a few hundred ITBP policemen for proximate security of workers building the Zaranj-Delaram project, India has been loath to put any overt military content to the relationship. In a large measure, it is understandable. Afghanistan's long land border with Pakistan is a reality that is not lost on anyone, and India has been very congnisant of the same. But creative policy-making does not necessarily have to remain hostage to geography.

In many ways, India has been building the blocks. The Chabahar port in Iran, the Zaranj highway are all elements of a potential grand bargain of increasing India's military presence in Afghanistan. With the US likely to be gone by 2014, there will be less sensitivities around using an Iranian route to sustain military presence.

An Indian-run training operation, executed cheaper than the current American effort to train Afghan light infantry, coupled with an aid programme that equips the forces for CI operations - will go a longer way than maintaining a US-style presence.

The agreement yesterday might well be the start of something really good.

Pakistan - vindication of India's strategic posture

For long, India's strategic posture towards Pakistan has been described variously as pusilanimous, unimaginative, "soft" - generally, effete. As the Pakistani nation state comes to a pass that uncannily represents MJ Akbar's delightful descriotion of "jelly state", that strategy needs to be evaluated in a newer, better light.

In short, what has been India's own strategic objectives vis a vis Pak? Maintenance of status quo on geography, maintenance of relative "peace" (in terms of no overt hostilities) and minimising cross border terror emanating from there. Measured against each of these objectives, India's stance has paid off big time.

1. Not only has there been absolutely no change in the ground scenario on the geogrophical issue of Kashmir, the level of world support for the "cause" is at its lowest in history. Not even an intifada style uprising last year, or the foolish Ekta Yatra related shenanigans this year could change this reality. The matter has simply vanished from the global political radar, and Pakistan too has been left to make only sporadic belaboured noises.

2. India's military postures, by design or by default (likely to be a combination of both) since Op Parakram has meant that Indo-Pak flashpoint hasnt hobbled investor interest in India. There are lots of other issues with the development paradigm today, but hostilities with Pakistan isnt one. That is a far cry from the '90s, when possibility of Indo-Pak war was a real and present "risk variable" in investor decision making matrices.

3. Cross border terrorism. Using data compiled by the South Asia Terrorism Portal, casualties in India due to cross border terror attacks (in Kashmir and jihadi attacks in other parts of India) show a secular decline in the latter half of the last decade. This is including the data from the black swan Mumbai attacks in 2008. We have fresh challenges on home grown terror (especially of the Maoist kind), but a combination of border management and diplomacy (of the normal and coercive types) has meant that the capacities of the Pakistani state to indulge in cross border attacks on India have been dented. Or at least, diverted elsewhere.

As the US is finding out now, Pakistan is a strange challenge from a strategic perspective. Its an abnormal state born out of abnormal conditions, and therefore defy normal policy responses.

India has been only too aware of this. And our policy responses therefore have been trying to address the same issue. A chronically unstable Pakistan, at war with itself and therefore unable to carry out its own strategic agenda with vigour - that is the ideal state for India. Willy nilly, that is exactly what India has ended up achieving.

Mamata's Bangladesh caper

In the long run, of the many blots on the policy record of UPAII, the one that might end of leaving the deepest scars would be Manmohan Singh's botched Bangladesh visit. What could have been the take-off of a "New Deal" in India's relationship with its near abroad has been left stranded in the runway. More depressingly, the plane awaits clearance from an ATC (aka, Mamata Bannerjee) whose sense of the larger political balance would put BCCI to shame!

The template of India's new deal with Bangladesh had three broad elements:
1. A comprehensive border settlement agreement that dileneates the border and formalises it, finally.
2. A regional transit agreement giving India access to its North East via Bangladesh.
3. A new template of sharing of river waters.

While the promise of the first was kept good, the second became a casualty to Mamata's capers on the third.

The Sheikh Hasina government in Bangladesh has invested a great deal in the new deal with India. Not just in clamping down on the myriad North EAstern rebel groups operating out of Bangladesh, but also in terms of shifting the entire narrative of the relationship from a typical South Asian "India nasty big brother" syndrome to one of shared economic destinies, taking advantage of India's booming economy. In some ways reflecting the reality of new aspirations that is sweeping many parts of the muslim world, the Hasina government has made economic progress as the key cornerstone of the policy direction, and relationship with India is but a natural corollary.

In such a scenario, Mamata Bannerjee's spanner in the works acts as a huge setback to both Hasina as well as India's cause. It rekindles the old fears of arrogant indifference of India to the radical constituencies in Bangladesh. And prevents the big idea of regional cooperative structures to move ahead for India. Land transit through Bangladesh and access to Chittagong port for trade onwards with East Asia can change the economic destiny of India's North East. Strategically, it affords India a huge insurance against the narrow "chicken's neck" access through Siliguri today.

But for now, the template is stranded on the runway. For many years, India's Sri Lanka policy was hostage to Tamil Nadu regional politics. As a result, China and even Pakistan managed to get significant toe-holds in Sri Lanka, helping it materially in the fight against LTTE. One only wishes that India's Bangladesh policy does not fall at the altar of another mecurial regional heavyweight.

Maybe the PM needs to do more than using Shiv Menon as emissary. Pranab Mukherjee with some Dhakai sarees probably stand a better chance!

New banking licenses norms - good, bad or less good?

The long awaited draft guidelines on new banking licenses have been issued by RBI now.

On surface it is an interesting effort to balance the business rationale (of alowing corporates into banking) with the governance imperatives (of preventing conflict of interest situations).

Apparently, the leading contenders for the new licenses (the number has not been divulged yet by RBI) are M&M, L&T, SREI, AV Birla Nuvo. It would be interesting to see the final list of licensees!

Indo-Bangladesh relations - time for a new begining

Prime Minister Manmohan Singh will be in Dhaka for a 2 day visit on Sep 6, and commentators on both sides are optimistic. There is a range of issues that are on the plate, as columnist Haroon Habib says in The Hindu today..


Importantly, for a govt bruised by its mishandling of the Anna Hazare issue, and widely perceived to have become lame duck prematurely, this presents a great opportunity to display energy in policy initiatives.


The big bang policy initiative would really be to resolve the enclaves issue, once and for all. It would involve a small notional (not real) loss of territory to India, but would end a needless issue once and for all.


The other big bang, if the govt shows imagination, would be to start work on a work permit system for Bangladeshi workers in India. In one stroke, it would create a vested interest in Bangladesh for a legal structure, as opposed to the tacit accpetance of illegal immigration today. As the experience with all states sharing borders with less prosperous countries show, economic immigration is almost impossible to stop through physical barriers. The best outcome is to manage the flows through creation of cooperative structures..

If the above is still some distance away in terms of imagination, what is clearly on the agenda is the larger issue of transit. By expanding the issue from a simple Indian access to its North East via Bangladesh to one of regional connectivity, encompassing Bhutan and Nepal, credit goes to Bangladesh and Sheikh Hasina for showing imaginative leadership. A larger regional cooperative structure establishes many more nodes of political support, expands the game, and importantly, diminishes the virulence of opposition from parties in Bangladesh that react impulsively to any Indian deal.

The PM would do well to address the fundamental point there though. In the last 2 decades, India's Bangladesh policy has been hostage to who is in power there. Given that Sheikh Hasina isnt on the throne for life, it is mighty important for us to build bridges across the spectrum. This visit would as good a time as any to start the process.

Emerging new economic dimension to Afghan policy

In the brouhaha over Anna Hazare, the mainstream media seems to have missed this very interesting development on Afghanistan. An Indian consortium of PSUs and private secotr companies presented a final bid for the enormous Hajigak mines in Afghanistan's Bamyan province. The consortium is led by SAIL, and has 3 PSU and 3 pvt sector companies. Importantly, the Foreign Ministry is taking keen interest in the affair, with the new Foreign Secretary, Ranjan Mathai, taking personal interest in pushing the deal through.

This represents a marked shift in India's Afghan policy, which has been hitherto primarily predicated on a large aid programme, and a somewhat diffident political agenda (of balancing Pak influence). If the Hajigak bid is successful, it will mark the start of the building of a strong economic and a qualitatively different strategic content to India's approach in Afghanistan.

The economic content of the deal is self explanatory, the strategic content is co-terminus.

To start with, the iron ore from Hajigak can only be evacuated through the Chabahaar port in ran. India spent a lot of money and patience in building the Zaranj-Delaram highway,hoping to use that as a crucial linkage to Chabahaar, the only route to India (from Af) that doesnt pass through Pakistan. While some infrastructure has been created, the route has been used sparingly. This deal, if successful, will mean that we would need to use it substantively. Ergo, relations with Iran need to be rescued from the confusion that it has fallen into in the last few years.

Second, while Bamyan is a relatively "peaceful" area, the project would stick out like a large, juicy target to every Taliban/terrorist-type in Afghanistan. Its vulnerability will increase manifold when the US starts drawing down troops from there. We would therefore need to deploy significantly larger numbers of troops there (not the diffident effort of a few hundred ITBP policemen that we have till now) for physical security of the project. Which in itself would entail sorting out a supply chain, maybe through the same Chabahaar route, but also through the Northern Distribution Network (NDN) currently used by NATO as an alternative to its Pakistan routes. NDN traverses through Russia and Central Asia, and given that the logistics lines are "oiled", our efforts would be more political (in taping the principals up) rather than infrastructural (as in Chabahaar). Which in turn would require a very different quality of engagement with Central Asia.

Afghanistan is Great Game territory, but today, the game needs substantive economic narratives. Its good that we are waking up to it, but are we prepared to play?

Lokpal - good start, but neither sufficient nor indeed necessary

Here is an interesting study recently done. Establishes, through a fairly intensive empirical exercise, the effectiveness of RTI as a tool against corruption. In this case, the public service being "tested" was issuance of ration cards. The results are illuminating. Shows out clearly that using RTI as a tool is as good as paying a bribe! Ergo, there is no material marginal cost to the poor in not giving a bribe, as he has a policy tool at his disposal.

Which is where the current India Against Corruption frenzy misses. We have a dearth of good policies that lead to corruption. And again, inadequate policies lead of generation of black money.

One, the two are linked in some ways, but not the same...Black money is simply income generated on which no tax has been paid..Primarily, it arises becase of 3 reasons

1. Tax levels are too high - people dont want to pay tax
2. Tax regime is too complicated - its too messy, hence people look to take the easy way out
3. Tax regime is full of loopholes, encouraging people to evade taxes

In India, we have had massive movement in #1 sicne reforms - our rates are in line with rest of Asia...But 2 and 3 are largely pending..the GST and DTC are the big bang reforms to adress both those issues..Unfortunately the GST has been hanging fire for 2-3 years now, thanks to the cussedness of a few state govts...Once done, these should substantially make the tax regime simpler and better monitorable...The amount of black money generated through normal "business" should automatically reduce (we have seen that with reduction in tax rates as well)..Which is what Ila Patnaik said in an IE column..

Corruption on the other hand is a 100% criminal activity, but the really large part of it is due to one reason - very large residuary (or discretionary) powers with the govt..Reforms was supposed to take discretionary powers out of govt hands...Unfortunately, due tovaious reasons, there are still too much discretion left with the govt..Primarily because regulatory regimes have not kept pace with increased demand for various things, esp natural resources and changes in technology...There is a large pending agenda on this...Mining Rights laws, strengthening regulators in various natural resources sectors - this is a vast area, this is what is sometimes described as "2nd gen reforms"...This givt has been singularly criminal in not acting on the above, despite its mandate...

Unfortunately, the "I am Anna" movement misses the big picture - Nandan Nilekani was right!

Perspective - from an unlikely source

Kafila is an interesting blog - run by the Left Liberalati, but often at odds with the puritan strains of the Left elite...

They have an interesting take on the attitude of the Left towards the Anna movement.

Anna..even more..But really this far, and no farther...

Pratap Bhanu Mehta with a sensible suggestion to end the impasse...

Must say this is going to spaces that should make the core of Anna's support group (middle class Indians) very very uncomfortable. Look at the some of the collateral noises being made..

1. This is all because of "reforms" - the PM alluded to it in the IIM, Cal Golden Jubilee speech (separately, its a pity that the IIM-C event happens now, takes the attention away!). What balderdash! If anything, corruption is a result of not enough reforms. People remember the typical corruption cases in the '70s and '80s? Cement quota, gas quota, telephone quota - these were simply taken out of the equation because of MMS's 1991 effort. But with people like the Bhushan's, Swami Agnivesh and Medha Patkar (motivated, dedicated activists all, but with distinct ideological bents) joining the effort, the narrative is bound to get tricky.

2. "My way or the highway". I was listening to a speech by Arvind Kejriwal - the entire tenor was, "Jan Lokpal is all perfect, anything else is a vested interest talking". Tomorrow, SAS Geelani can sit on a dharna and fast @ Jantar Mantar, and say "my version of the Kashmir solution, ie, integration with Pak, or nothing else". The spirit of give-and-take that is at the core of a liberal democratic society is missing in the narrative. Again, something that the middle class supporters of Anna should worry about.

3. As a real collateral damage, the government is being let off the mat on crucial pending policy decisions - from GST to FDI in retail - stuff that is absolutely critical to countering the oncoming "Endgame" (as John Maldin describes it).

Anna - some more

Mihir Sharma in Indian Express - makes a very good point

Anna Hazare - good or bad?

Interesting take by Pratap Bhanu Mehta. PBM consistently has some of the best "takes" on politics..

NSG guidelines on ENR - a "betrayal", or a challenge?

Recently, the Nuclear Suplier's Group (NSG) adopted new rules on transfer of ENR (Enrichment and Reprocessing) technologies. It was widely interpreted to be detrimental to the "clean waiver" that India received as part of the storied Indo-US "nuke deal".

But what is really the impact? My take...

There is a huge amount of confusion and lack of understanding on the isue of nuclear commerce in general, NSG/waivers et al in particular...That is expected, but then it means that the debate in "popular" fora on the issue becomes polemical rather than topical and rational..

First, what is NSG? NSG is a group of countires who have voluntarily come together to set out standards of nucelar commerce and curb non-proliferation...

Second, what are these NSG "guidelines", of the sort that the recent meeting of NSG passed w.r.t ENR tech? These are "voluntary" guidelines that members are expected to follow while trading with other countries..

Ergo, each member nation is really "free" to carry on as they jolly well wish, technically speaking..We have had numerous instances of that...Russia supplying fuel for Tarapur in 2001, when 32 out of 34 members of NSG then publicly commented that the action would circumvent Russia's NSG commitments...Or indeed, Kudunkulum 1/2, which technically could be argued were outside NSG guidelines...More recently, China's supply of Chashma 1/2 (and now 2 more) to Pak could be described similarly...

The question therefore is, if everything is "voluntary", why bother? What is the big deal about the NSG "waiver"? the answer, simply is, "institutional shame", if I may use that word..While NSG is a voluntary group, its members have sworn collectively to implement a set of non-proliferation guidelines...Therefore, every time a member of group chooses to do a trade that clearly "violates" the guidelines, it marks itself out as an 'exception"....Given the optics, no country wants to be known publicly as a serial "violator", not on an issue as touchy as nuke proliferation in the international context. (mind you, one is not talking of AQ Khan style proliferation, which is anyway outside the "system")...

Hence, each trade of that sort becomes a political battle to be fought...And diplomatic credits encashed....Russia's fuel supplies to Tarapur, or Kudumkulum, or indeed Chashma by China - each deal involved enormous amounts of public posturing, diplomatic battles...Net net, its not a scalable model if people are interested in scaling up trade...

Now that is exactly what India's objectives were...We were looking to scale up - on fuel supplies, on new power plant tech, and of course, on ENR as well (along with tons of other nuke related tech)....The only way to do that would have been to get a "waiver" from NSG, ie, an institutional recognition that we are "kosher"...Which would simply enable all member countries to enter into formal nuke supply agreements with us (123 style), and carry on trade in "normal, scalable" fashion..Which is precisely what has happened..We have concluded 123-style agreement with a host of countres - Russia, France, Kazakhstan, Canada and some more..With a few more in the pipeline - Japan, NZ etc...(The voluntary nature of the arrangement is also visible on the flip side as well - even though we are now kosher, Australia has demurred on entering into an agreement, on account of purely dometic issues)...

Importantly, trade has started - most conspicuously of fuel, but baby steps on LWR reactors from Russia and France as well...

Where does this ENR thing fit in the narrative? At the margin, its problematic...(It was always problematic, as there was little support for this aspect of the deal in the US legislature, even when there was widescale support for the deal itself - and private commitments were said to be given by the Bush administration to select legislators on that)...But at the same time, the voluntary aspect of NSG now comes into play...India is a "kosher" member of the "club" (trading gorup, not NSG, yet)...So France can sell us the reactor, the technology, the fuel...And through the same bilateral contract, ENR tech as well (something that they have publicly confirmed in the recent past)...It would still create a bit of noise, but given that its India, and given that the rest of the deal is fully "compliant" - the dollars to France (Euros rather!) will likely speak louder than that noise...In practical terms, India is actually more worried about the "optics" of the new guidelines than the real impact - we had an interview of Srikumar Bannerjee where he clearly says that he isnt really interested in ENR tech...And the way to deal with the optics would be to hasten bileteral trade - which is what the whole deal was entered for! Unfortunately, the last few months have been lost on account of the various corruption related noise, as also Fukushima...

Last bit, on our membership of NSG...Why is it a "game changer"? Simple..All rules/guidelines of NSG are set by consensus...Once we are a member, efectively there cant be a guideline implemented that goes against our interests!

There is a nice article by Harsh Pant on this - its a bit incomplete, but useful..

For those interested in the arcana, here is the US 123 agreement and the NSG waiver to India.

Intelligence reform - finally something substantive

In the ruckus over corruption and general policy paralysis in government, a redeeming piece of news has largely gone unnoticed (and un-analysed). Manish Tewari, the otherwise insufferable spokesman of the Congress, has piloted a private member's Bill to (finally) initiate structural reforms of some sort on Indian intelligence.

The INTELLIGENCE SERVICES (POWERS AND REGULATION) BILL is an attempt to define the powers, appointments, jurisdictions and above all, oversight of intelligence agencies in India.

Bizarre as it may sound, not one intelligence agency in India today has a legislative framework notifying their work in general. All of them have been setup through executive notifications and work on completely ad hoc terms of reference. Ergo, each government has used (and misused) the intelligence apparatus as it deemed appropriate.

The mandate of the "oldest" agency, the Intelligence Bureau (IB) did not change significantly from its colonial avatar of Indian Political Intelligence (IPI), even as threats to the state morphed. Going after opposition politicians, conducting opinion polls, tapping phones and communications of politicians (on both sides) and bureaucrats - these have remained a big, some say the biggest, mandate of IB.

The decay in the capabilities of RAW, which once was the cornerstone of India's finest foreign policy achievement (1971, Bangladesh), is another case in point. While Indira Gandhi gave it a high pedestal in policy-making, Morarji Desai was openly hostile. Structurally, the bigger decay started when the Vajpayee PMO created the NSA's office as the de facto intel czar. RN Kao publicly protested, but to no avail. This got further institutionalised in UPAI, when MK Narayanan, first as Internal Security Advisor and then as NSA, became the superboss of all intel agencies (including IB, thanks to a colourless Shivraj Patil).

Above all, India remains the only country in the civilised world where intelligence agencies are not subject to Parliamentary oversight. A glaring error of commission on our approach to national security. And scams in RAW and NTRO are begging to be out in the limelight.

The new Bill tries to rectify some of the structural flaws.

First, it creates a clear reporting structure - RAW, IB and NTRO report directly to the PM. This is how it should happen, multiplicity of authorities create confusion and dilutes resources.

Second, it creates a high powered Parliamentary oversight body, the National Intelligence and Security Oversight Committee.

Third, it documents and bestows "police" powers to the three agencies. Today, none of the three can legally arrest anyone.

There are lots of missing gaps in the Bill - there is no structure of financial oversight of the agencies, it misses out key structures -SFF for example (which is an armed unit reporting to the Cabinet Secretariat) and so on. But as a start, its sorely needed. As of yesterday.