Indian Role in Anti-terrorism War Damages National Interest

By Balraj Puri

Whosoever may be responsible, more than the other, for recreating tension between India and Pakistan, in particular over Kashmir, India was none too pleased with the advice it received from all world powers to talk to Pakistan, including in Kashmir.

But why did India have to queer the pitch in its relations with Pakistan and raise the issue of Kashmir at this hour. Soon after offering "unconditional and unambiguous support" to the global anti-terrorism fight, India started a persistent campaign, for including Kashmir in the fight against the terrorists. India drew parallel between the way terrorists struck at America on September 11 and their attack at the assembly in Srinagar on October 1. There was a similar parallel between the way Taliban provided safe heaven to bin Laden and the way Pakistan harboured terrorists who operate in Kashmir. India also warned the anti-terror coalition against inclusion of Pakistan in it in view of its post record and its close collision with Taliban. Fears were expressed that withdrawal of sanctions on US aid to Pakistan would be used by it to increase its armed strength which would pose threat to India. Our foreign minister Jaswant Singh is reported to have cancelled his meeting with Joseph Bidden, head of the US foreign relations committee, because he had supported the US move to lift sanctions against Pakistan.

India's efforts to include Kashmir on international agenda was responded by Osama bin Laden's Al Queda which in its video taped statement "ordered the Americans to stop support to Hindus in Kashmir." It, for the first time, put Kashmir on international terrorist agenda. It was almost a literal echo of the voices of some naive Hindus who were looking for an opportunity in what is being perceived as a clash of civilisations between the West and Islam for settling score with the latter; in particular with Pakistan by joining the former camp.

The official interpretation of Al Qaida's threat attributes it to the influence of the ISI. It is based on the presumption that understanding between Pakistan and Taliban has remained unaffected after the former joined the American war against the latter. The ban on SIMI, inter alia, is being justified on grounds of its links with the ISI and the Talban.

True, the ISI had links with the Al Qaida, Taliban and possibly SIMI. General Musharraf himself was a patron of the Rabta Trust, which is now banned in America and Pakistan. The CIA and the ISI which had jointly created the Taliban are jointly trying to destroy them. If there are doubtful elements in the ISI, they are more a threat to Pakistan than to India. Already to ward off such a threat Musharraf sidelined the ISI chief and his two army generals.

Even Taliban pose a greater threat to Pakistan than to India. According to a survey of a Pakistan paper, Musharraf is the most hated person in Afghanistan. With Pushtoon community in Frontier Province and Baluchistan virtually in revolt against the Pakistan's Afghanistan policy, prospects of revival of a movement of an independent Pushtoonistan are haunting Pakistan. In the rest of the country also, jehadi forces are threatening the pro-America government. How the Pakistan government suppresses this threat within the country and supports them in Kashmir should become a more serious problem for it than for India.

At a time when Pakistan is fighting a war for its integrity and survival, why did India started crying wolf and tried to divert international attention from war against terrorism to the threat it perceived on its western border? Expectedly it just succeeded in reducing its status to that of parity with Pakistan and received sermons for restraint.

Similarly whatever be the outcome of the jehad of terrorists against the government in Pakistan, their jehad against India in Kashmir is bound to receive a set back. But why was India in a hurry to seek priority for its fight against jehadis and thus tried to shift undivided attention of the anti-terrorism coalition away from its first target in Afghanistan? Notwithstanding India's brave declarations of its capacity to fight terrorism in Kashmir on its own, why had the Prime Minister to rush a missive to President Bush — like a damsel in distress — telling him that there was a limit to India's patiance when the state assembly was attacked by the terrorists. What immediate relief we expected from America? But why single out a single world leader for such an appeal? If it was a diplomatic move, to win international sympathy, why not a similar letter sent to the governments of the other countries? Sole trust in America and excessive expectations from it not only was a national humiliation but also an embarrassment to the super power of the world.

Expectedly we are advised to talk to Pakistan on the Kashmir issue, keeping in view the wishes of the people. The New York Times, reminded India, more bluntly that "it cannot crush Muslim aspirations in Kashmir with the use of force". Much more needs to be done at diplomatic level and within the state to resolve the issue.

How have Kashmiri Muslims reacted to the latest developments? Most of the Muslims everywhere, including those who condemned the terrorist attack on New York, are, in varying degrees, swept by a sort of an anti-America wave. Kashmiri Muslims have not remained unaffected by it. There are many reasons that have cumulatively caused it. Without going into its causes and merits, its effect on Kashmir, includes marginalisation of the Muslim leadership that Pakistan had recognised so far. Anti-America slogans have replaced anti-India and pro-Pak slogans. Whether it turns out to be a loss or gain, will depend upon how the popular Muslim sentiment is interpreted and channelised. That would also apply to the Muslims in the rest of the country — its largest minority. Media has projected Shahi Imam of Delhi as the most representive voice of India Muslims; without understanding the fact that his status is no more than that of Imams of thousands of mosques in the country. His diatribes against America have been cited as proof not only of fundamentalist, fanatic and extremist character of the entire Muslim community but also of their lack of patriotism. Vociferous demands are being made for his arrest and trial for sedition and disloyalty.

Explanations were sought from moderate and liberal Muslims about their stand and that of Indian Muslims. They have diowned Shahi Imam and asserted that he did not represent the Muslim mind. But a more important issue is definition of patriotism.

While moderate and liberal Muslims have started speaking out and media has starting taking notice of them, it is necessary to define the limits of patriotism. Shahi Imam may be condemned for the type of language he uses and for his views on most of the subjects. But has he not condemned Pakistan for being a traitor to Islam and said, "common people there will teach General Pervez Musharraf a lesson for betraying the cause of Islam?" Has he not condemned the Pak sponsored jehad in Kashmir as un-Islamic. On Kashmir, his stand is more nationalistic than many liberal Hindus. Condemnation of Pakistan and support of Indian case on Kashmir are certainly very parochial tests of patriotism. But if a Muslim leader passes these tests, should his loyalty be still doubtful? Even a fundamentalist Muslim can be as loyal to the country as any fundamentalist Hindu can be. In no case anti-America outbursts, however wrong, can be equated with disloyalty to India. But six students were asserted in Delhi on the charge of sedition for distributing anti-America leaflets. What could be a better way of undermining the basis of patriotism.

India's stand on a post-Taliban policy is no less uninformed about ground realities and its national interest. Its insistence on key role for the Northern Alliance in the new regime would further alienate the Pushtoons who comprise the most numerous ethnic community of Afghanistan and are totally unrepresented in the alliance. Any regime without due representation to the Pushtoon will be unstable. It is true that they are the ethnic base of Taliban. But it is equally true that they used to rever Gandhi and Abdul Ghaffar Khan. Urges of a community do take different ideological expressions — sometimes from one extreme to the other — depending upon which ideology can give them better expression. But on this account no community can be written off for ever. In their present anti-Pakistan mood, they could be helped to assert their identity through a non-fundamentalist ideology instead of diverting their hostility towards India.

In its post September 11 role, India has neither been able to promote its national interest nor raise its moral and political stature in the world. Within the country Muslim and Hindu fundamentalism got a new impetus. It weakened internal unity and plural character of the country which would further undermine its international role at this crucial turn of history.

A re-assessment of the realities and realignments in the world, its own potential and strategic priorities is called for by the leadership of India if its aspires to play a role befitting its size, strength, geo-political position and civilisational background in the interest of world peace and its own enlightened self-interest.

Concern at Bank health

By K Viswanatha Rao

One of the steps favoured by the Reseve Bank o f India (RBI) in its mid-term monetary and credit Policy announced on October, 22 may appear to help the banks but will harm them eventually. This is interest on deposits at variable rates.

Interestingly, the RBI zeroed in on this facility after observing, rightly, of course, that the banks have been able to mobilise huge savings, as the saving public don’t have other risk free avenues.

True, we have the Public Provident Fund (PPF) operated by select banks and post offices and various insurance policies on offer from the LIC (now from private sector players as well) besides some Post Office schemes. But these are primarily variations of the same recurring deposits and can be tapped after a long wait.

Real estate and gold are preferred destinations for parking idle funds. But both are often un-affordable, at least the middle class vath limited sources of income. These are prone to the market moods and as such fluctuations in their value is the norm, not the exception.

The corporate sector is virtually closed as a savings option these days, During the three months from April to June this year, only one company entered the capital market to mop up just Rs. 10 crore. In the same period last year, there were forty-one public issues for Rs. 410.80 crore.

Merchant Bankers and their ilk are aware of the poor response that awaits them to any invitation to contribute to the paid-up capital. The root cause is not the lacklustre performance of the corporate sector. But the awareness among the public that public contribution to the paid - up capital is treated as a non-refundable, interest free loan.

There is also another aspect to the public apathy. It has something to do with the window dressing of the bottom-lines. By different methodologies, a profit can be shown as a loss. There is no law on the statute book, which stipulates payment of dividend at a minimum fixed per centage. Since it is not compulsory, there is no in-built incentive to offer dividend either.

This is not the case with bonus; in fact, the Supreme Court has decreed that bonus is a deferred wage and must be paid at the lower rate (in the slab) of one month’s wages. If the Apex Court had not ruled thus, every enterprise covered under the bonus act will certainly try to wriggle out of the commitment by showing a loss, yes, in a perfectly legal manner.

Given these realities, banks have become the preferred destination for parking funds for varying periods. The depositor naturally expects and gets a fixed rate of interest at present to meet what can be described as inevitable and irreducible demands like rent, ‘insurance and unavoidable expenses, which keep looking up north, simply by efflux of time.

The RBI credit policy aptly noted that the holders of deposits in the banks generally belong to the fixed income groups. They expect a reasonable interest in excess of the long-term inflation rate. Well, rate of inflation, is, simply put, increase in the cost of (a basket of) consumer items over time. When the apex bank decrees a cut the interest rates, as happened now it causes disquiet among the fixed deposit holders.

Many avenues of parking funds today have become risky propositions, where the principal itself is not safe. The RBI seems to be acutely aware of this and hmce smugly suggested variable interest rate structure.

The fact of the matter is that the depositors, despite their all-absorbing concern for security of their savings cannot be expected to take a raw deal. Certainly not. The minimum they are willing to accept and want is cushion against inflation. As inflation continues, they would love a return that would ease the pressures caused by inflation.

The RBI credit policy refers to this facet of public deposits as a constraint on the banking system in its ability to effect further cut in the lending rates. If there is more money with a bank it can lend more. More money can come in if the interest rate is attractive. To keep paying this interest and to make a small profit too alfter meeting all other expenses, some body should pick up the tab and that some body is naturally the borrower from the bank. In other words, the lending rates are dictated by the interest rate on deposits. The question is how to reduce the lending rate without undermining the growth of bank deposits.

To help the banks to ‘gain freedom’ from the above said cycle, the central bank has mooted the new idea of variable rate of interest on deposits. In a sense, it is not a new idea, even in the Indian context. The banks already enjoy the freedom to offer variable interests on long-term deposits.

That the facility has not been popular with the depositors is a different thing. For various reasons, the depositors have tended to favour fixed interest rate regime. This tended to suit the conservatives and status-quoists among the bankers. Result? The flexibility that banks have in lowering their lending rates in the short run is effectively reduced.

For public sector banks the average cost of fund mobilisation is over seven percent. For many of the private sector banks, it is even higher. The non-interest operating expenses generally stand at around 2-3 per cent. This and the high level of sticky loans (non-performing assets in the banking jargon) push up the bank-lending rate,

Recently, the Vajpayee government has taken steps to reduce the interest on Provident Fund and National Savings Schemes (in the official jargon these are contractual savings schemes). Yet, an expert committee set up by the government under the chairmanship of RBI deputy governor Y V Reddy has advocated a more sustainable and flexible interest rate regime for these savings instruments.

The RBI now has veered round the view that the Reddy prescription is good enough to the banks as well for their long-term deposits. There is a caveat. Depending on the business cycle and inflationary cycle, the interest rates could vary in both directions. As a consequence, the advisory doesn’t necessarily imply a poor yield on the deposit. Then where is the catch? Why there are no suitors?

Even according to the credit policy document, the banks have parked a huge percentage of their money (36.3 per cent) in government securities. And it is in far excess of the minimum prescribed under the Statutory Liquidity Ratio (SLR) This year (up to October 5, 2001) this investment was significantly higher at Rs.43, 664 crore. Around this time of last year, the SLR need attracted Rs.25, 636 crore.

Whatever be the reasons for ‘the attraction’ towards the government securities, the fact of the matter is, these fetch poor yields, an interest of about ten percent or even less. Banks should learn to make better use of their funds and they should try to earn more. In a general sense that is not the case now. Under the latest RBI directive, the banks have to keep a minimum of 5.5 per cent of net demand and term liabilities as cash reserve ratio. This will fetch them an interest of 6.5 per cent

Let us look at this issue more closely. If a bank has a deposit of Rs. 100, the SLR norm takes away 36.3 per cent and gets an interest of Rs. 4. CRR requirement impounds another 5.5 per cent and the return (interest money) is Rs. 0. 3575. Whatever the bank wants to earn either by way of a profit or to pay for the interest (on the deposit) it has to do make up with the balance of Rs. 58.

Here in lies the crux of the problem the new variable interest regime will throw up. A bank will put its best foot forward to earn more if there is a compulsion to pay. If there is no fixity on the interest liability, the attitude is bound to be different. They will offer an interest they can afford. The looser is the depositor. He belongs to the unorganised sector unlike say a bank employee, who has the protection of his union.

So, what would happen is most ‘ordinary’ deposits will tend to be for just a year or less. Because, as things stand, the variable interest regime is unlikely to encompass such deposits. Also, because, inflation as officially calculated is much less than what it is actually.

Banks will do well to remember that the depositor makes sacrifices to save and naturally , therefore expects to get back his principal with compensation for the inflation. The depositor knows that the money will not remain idle with the bank and believes that it will be put to productive use, benefiting him in the process. There is bound to be a feeling of being let down if there is no fixity of interest even on long- term deposits.

While on the issue of wage board recommendations, the Supreme Court had observed thus: The rates recommended by the wage board should be paid as these depended more on the capacity to earn, not on what is shown as earned.

The analogy applies to the Banks.

--Syndicate Features