Though little appreciated by most Indians, one of the most important actions taken by the Japanese government of Shinzo Abe in support of the New Delhi regime he is wooing was to save the rupee in the fall of last year.
Already fading from public memory, it should be recalled that the Indian rupee fell off a cliff between May and August last year. It fell from about 56 to the dollar to nearly 69, its lowest ever value against the greenback. Forward markets were flashing red, talking about the rupee falling to a hundred to the dollar by year’s end.
This was noticed in Tokyo where the Abe government was already fashioning a policy for the strategic pairing of India and Japan. The central bank of Japan wrote a letter in late August to Raghuram Rajan, at that point the chief financial advisor of the finance ministry, offering to help India save the rupee. Before he could accept, Rajan was elevated to the governorship of the Reserve Bank of India. But one of his first actions as RBI head was to send a note to his Japanese counterpart, Haruhiko Kuroda, accepting this offer of help.
The actual act was simplicity itself. At the St Petersburg G-20 summit in the first week of September, Prime Ministers Manmohan Singh and Abe agreed that a small existing currency swap would be expanded to $ 50 billion. In effect, India was being allowed the right to tap Japan’s massive three trillion dollar foreign exchange reserves whenever it felt the need — the $ 50 billion limit was a consequence of Indian regulatory caps rather than Japanese unwillingness to offer more.
As a Japanese official said, the currency swap killed the growing tide of bearish sentiments against the rupee and the speculation that was developing in favour of a further rupee slide. While the rupee’s fall had been partially arrested by Rajan’s unusually policy-heavy inaugural statement as central banker — hitting the ground running is something he shares with Kuroda.
The actual currency swap was not formalised until January this year by the two central bankers. More noteworthy, it has never been used by India. A suitable reminder of how speculation and market sentiment is very much a game of the mind, the very idea of the currency swap and Japanese backing scared of speculators. This in turn gave Rajan the type of breathing space he needed to enact the policies to swing the rupee around.
New Delhi’s ruling circle, who like to presume India can do everything on its own and without foreign assistance, have been relatively mealy-mouthed in giving Japan its due. And the Japanese are too pilot and too strategically minded to make a noise themselves.
Singh, an ardent admirer of Japan, might have felt some deja vu. After all, in 1991 when the Indian economy faced meltdown, the emergency international funding that helped Singh affect a turnaround was led by $ 300 million from Tokyo.
The second Manmohan Singh government had a relatively ambitious neighbourhood policy, a goal of a peaceful periphery that it understand as previous governments had was a necessary prerequisite to India being able to play a more proactive role in the international system. Read more
Nothing succeeds like success. And the opposite is also true:once you start going down the slippery slope, the process only accelerates until you reach rock-bottom.India has yet to reach rock bottom but the ill-effects of its decline are evident in its global standing and influence. Read more
Prime Minister Manmohan Singh had hoped to go to China next week with a new visa regime that would have at least given businessmen, workers and academics an easier time travelling back and forth. It won’t happen this trip as the cabinet reportedly didn’t have time to clear it.
But it says something about the difficulties of India’s visa regime in general that this should go all the way to the cabinet for clearance. It also says something that India is so reluctant to provide Chinese visas despite the Middle Kingdom being the country’s largest trading partner and generally a big wheel around the world.
I would estimate about a third of the correspondence I receive from people is about visa problems. Much of it from Indians complaining about other countries. But a fair share about foreigners trying to get Indian visas.
The Indian system, especially the home ministry, don’t get visas. They are treated as the paper equivalent of minefields and watchtowers. Actually, they do little more than provide basic statistical evidence about movements in and out of the country – and movements by middle class people who function inside the law and travel by regular means of transport.
An Israeli study actually concluded that visas provide zero additional security to a country – which is why this security-conscious people began allowing visas on arrival.
India’s visa policy, as senior Indian foreign policy officials admit, is a product of knee jerk responses to crises and embarrassments: terrorist attacks like Mumbai 26/11, illegal migrant scares and so on. Barriers are raised and layers of bureaucratic requirements are made like the birth certificates of your parents or that you have to put a two month interval in between visits to India (I have yet to work out why that helps prevent anything).
Then a backlash sets in, criticism builds up and the system then carves out exceptions to the rules to satisfy various groups or people. India also has a remarkable multiplicity of visas. And, as this oldish blog noted, it also has ever-changing visa regulations:
“The whole policy is filled with exemptions for old people, then women with children, and so on,” said an official. The result is an incoherent policy that resembles a piece of Swiss cheese, filled with holes.
Also, within a month, everyone works out ways to get around these barriers. Foreigners, faced with the two month idling period, often jet into Kathmandu and then travel by road into India. As the Indo-Nepalese border is little more than a string with tin cans hanging from it, they pass right through.
The costs to India in economic terms are high. India gets a pittance of foreign tourists for its size and will continue to do so as long getting a visa is so cumbersome. It costs India, as well, in terms of goodwill in foreign countries. And it makes India’s upper and middle classes look hypocritical given how much they raise a hue and cry whenever a Western nation puts up the slightest obstacle to their getting a visa for their children. Note the continuing furore over the UK demanding a money bond for some Indian travellers. This would actually facilitate Indians travelling to the UK, but just the idea has triggered protests by most Indians.
Being an attractive place to visit, a non-complicated place in terms of getting in and out, and otherwise seeming to be friendly and efficient would massively improve India’s image and create jobs. It would also be a huge multiplier in terms of “soft power” besides being more in line with India’s democratic polity.
The United Nations Department of Economic and Social Affairs recently said 3.2 million Bangladeshi migrants had settled in India. India, it noted in its report on international migration, has the “single largest bilateral stock of international migrants in the developing world.”
This number won’t be taken too seriously in India as it does not really take into account the bulk of illegal migrants. The S.K. Sinha report, which is commonly cited, came up with about 5 million Bangladeshi migrants each in Assam and West Bengal alone. It came up with about 15-16 million migrants in all.
While India and Bangladesh look set to miss signing a land border agreement in the last few months of the Manmohan Singh government, it seems likely it will be concluded at some point in the coming year or two. At this point, with a border that at least no longer looks like Swiss cheese, the issue of migration should be taken up at some point.
It costs a Bangladeshi about Rs 1000 to 1500 to get someone to get him across the Indian border, with a good bit of that money probably going to the Indian Border Security Force. Nothing will change the fact it costs a pittance to get across the border. And for the foreseeable future, the pull factors on the Indian side of jobs, a slightly higher income and so on will also remain. Combine this with the fact that, unlike the US-Mexican border, the people on both sides of the Indo-Bangladesh border are identical in appearance, language, culture and are both often bereft of any major identity documents.
This is, for all practical purposes, a nearly open border.
The issue therefore is not to attempt to stop migration. That simply cannot be done and everything that has happened since 1971 — or even 1947 — can stop this.
What should really be done is the introduction of a temporary work visa for Bangladeshis. In other words, a legal channel that would regularise the illegal traffic. What would be the benefits?
1. Migrants would be socialised into coming to working in India and then returning. Contrary to popular belief, a fairly large number of migrants go back and forth along the Indo-Bangladesh border. It is a joke in the home ministry that Bangladeshis who wanted to go back would surrender to the Indian police, be carted back home at New Delhi’s expense and then return, via a smuggler, after their business at home had been done. More than a few Bangladeshi migrants end up staying in India longer or forever because they find it difficult to go home given their illegal status.
2. If such a visa is linked to an Indian employer, it would make it easier for India’s police or security forces to track down legal workers who go AWOL. And there would, no doubt, be quite a few. But if an easy enough path is created for them to go back and forth legally, the incentive to become a fugitive would that much lower. If the Indian employer faces fines or other punishment if the Bangladeshi disappears into the wild green yonder, there would be an additional set of eyes on the migrant.
3. A legal channel would help de-criminalise the border. People trafficking has a whole host of complementary sins from prostitutions, organised crime and a corrupting influence on security forces that could be eliminated or at least diluted.
This would not necessarily stop illegal migration. But it would divert a large number of the Bangladeshis who cross into a legal channel. That would be a start.
The normal political way to sell this is to combine a tougher policy against illegals with a sunny open door for the legal migrants. The Northeast, which is especially sensitive about Bangladeshis of any hue and colour, might find the idea of legal migration more palatable if it is merged with sustained drives against illegal migrants.
Ultimately, what will stop migration are the economic fortunes of Bangladesh. Dhaka has been a remarkable economic and social success the past decade. But it still remains poorer per capita than India even if its human development index is better. However, thanks to India’s free trade agreement, Bangladesh now exports some billion dollars’ worth of textiles and other things to India, creating both wealth and a pro-India business group inside both major political parties in Bangladesh. One can see this in Mexico, with the US economy tanking and the Mexican economy looking pretty good, there has been net migration of Mexicans out of the US.
Prime Minister Manmohan Singh has joined others in his government by claiming, at the Group of 20 summit in St Petersburg, that the decline in the values of most emerging economy currencies is partly to be blamed on the West.
I had assumed it would take a minor miracle for Narendra Modi to take the Bharatiya Janata Party to what even his supporters saw as a minimal 180 seat to put together a ruling coalition. Read more
There’s been a large amount of commentary on the huge surge in Indian gold imports, the damage it is doing to the current account deficit, with much weighing of the pros and cons of the government’s feeble attempts to stem the yellow tide. Read more
By the standard of the Nonaligned Movement, the recently-concluded summit in Tehran was relatively exciting. The United Nations chief, Ban Ki-moon, severely criticized the host country, Iran. The latter’s boss, Ayatollah Khamenei, verbally abused the UN in return. The new Egyptian president, Mohamed Morsi, inveigled against the Syrian government, triggering a walkout by the latter’s delegation. Read more
Speaking at a seminar at the University of Warsaw earlier this month, I gave a tentative obituary to the so-called Manmohan doctrine. The doctrine, never officially espoused by the Indian Prime Minister, Manmohan Singh, was put forward by his key aide for such semiotic formulations, Sanjaya Baru. Read more