India-US Relations Blog

Good Indian Boys Go to Harvard, Sort of

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As a younger man, I was not a good Indian boy.  I did not study Engineering, or graduate from MIT or Harvard. However now I can easily atone for those errors.

Recently, Harvard, MIT, NYU, The University of Pennsylvania, and other top-tier universities have begun to offer comprehensive online courses, free of charge, and open to all who wish to apply.  In some cases Universities are offering entire curricula of study online, formally, complete with offline learning tools, coursework supplements, and collaborations with private education companies.  What began as an experiment is clearly an opportunity not just to shake up the antiquated system of traditional university education, but a new means of delivering education to millions without access to meaningful schooling.

In India a toxic cocktail of poverty, poor infrastructure, weak administration, and mismanagement often mean millions of students lack access to basic education.  As universities and educational institutions offer online courses, students will be less dependent on public infrastructure and rent seeking officials to acquire basic skills. Formal degrees will still be bound to the onsite, admissions based system, but in many subjects the advantage that a formal degree offers will be minimal.  As a means of delivering basic education and post-graduate skill-sets, in literacy or language studies, clearly the future in India must lay in some hybrid-model of online and onsite learning.

Regardless of whether this immense opportunity is seized and developed upon, the University system itself will undoubtedly be shaken up in the next several years. In certain areas like medicine or aerospace engineering, online courses would be an interesting supplement but not a path to a career or true skill-building–although innovative universities could still enhance the knowledge and skills of working doctors and space engineers through well-designed courses.  However in Liberal Arts fields where expensive equipment or hands-on training is not required, there might be little difference between a campus student and an intelligent and motivated online student. Just as newspapers discovered, someone else may offer for cheaper what they will not.

In recent times, students in Indian Universities have had the privilege of watching MIT or Stanford professors teach physics, computer science or electronics engineering and compare their teaching with that of their own professors. In the humanities and basic sciences Indian students could supplement their lectures with the extraordinarily rich set of courses from Yale University. Skeptics could check these videos and see the chasm that separates the Indian classroom and a Harvard or Yale classroom. Now students can not only watch these lectures passively but also participate in them like an overseas student would, discussing the topics and performing the exercises. The biggest impact of the online education revolution will be on India. India has millions of students itching to learn, and this ought to be a new area of extensive co-operation between India and the United States.

India Business

Currency Woes

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In 2008, while a global financial crisis was devastating advanced economies like the United States and Europe, creating levels of unemployment and instability not seen since the Great Depression, emerging markets like India incurred only modest negative impacts- and sometimes even prospered in spite of it. In fact, in 2009 alone, while the United States contracted by 2.6%, India’s growth rate increased from 7.4% in 2009 to 10.4% by 2010.

However, since then, the proposition that India has weathered the financial storm is becoming increasingly implausible. Signs of financial distress are taking shape in a debased rupee, which reached a 10-year high of 57.06 against the US dollar on June 22. Troublesome current account deficits have made foreign investors wary of India’s financial health, causing them to pull their capital out of India’s markets. Government policies like retroactive taxation on foreign investors have also discouraged investment, further weakening the rupee. Yet, for all that a weak currency implies, suggestions that a devalued rupee is categorically undesirable for India’s growth are incorrect. In fact, a weak currency provides a number of opportunities that India can use to bolster its domestic industries in ways it could not do otherwise.

The most direct advantage of a weak rupee is that it makes India’s exports more competitive in overseas markets. This happens because a weak rupee means that India’s goods are cheaper relative to foreign goods, making them more attractive. Higher demand for India’s products stimulates exports and reduces imports, which increases India’s overall output. While foreign goods are more expensive, the increase in manufacturing puts people to work at home and supports competitive domestic industries. If India invests its money wisely, a devalued currency can also reduce the real value of its debt, lessening the burden of future payments with higher growth rates.

Indeed, it is not always clear whether a strong currency is good for an economy. The desirability of any movement in exchange rate depends on why that movement occurred. If a country’s businesses are lucrative and there are innovative entrepreneurs entering the market, the demand for the currency will increase as investors try to purchase that country’s assets, thereby strengthening the currency. On the other hand, if a country is running persistent budget deficits, causing interest rates and inflation to rise, the demand for that currency will also increase because investors will seek higher returns on their bonds, again causing a stronger currency. Yet, there is a palpable difference between the two cases. In the first, high growth potential underlies the strong currency; in the second, it is worrisome budget deficits. So it is not always the case that a strong currency indicates a strong economy. But what does that mean for India?

It means that there is no unambiguous answer to what the ideal value of the rupee should be. What matters instead is how the government adjusts its policies in response to the movements in its currency. Government policy, like retroactive taxation, should certainly not discourage foreign investment, but that is still a narrow confinement in analysis. If policy makers and central bankers realize that a weak currency does not mean a weak country, then they can use this window of opportunity to support domestic producers. With strong growth, investment in India will return as the rupee becomes more attractive, and India will, hopefully, return on its path to prosperity.

Defence And Strategic Affairs Blog

Blood Feud in Islamabad Complicates U.S.-Pakistan Relations

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A long summer of political turmoil has begun that makes harder the search for a new equilibrium with Washington

A tale of two capital cities in the grip of political uncertainty unfolded in South Asia last week.   Islamabad was the scene of a fast-paced soap opera that throws into further doubt the future of the democratization process and complicates efforts to repair the breakdown of U.S.-Pakistan relations.  Meanwhile in New Delhi, simmering tensions within the coalition government erupted into open revolt, further constraining decision-making at a time when the United States in seeking to draw closer strategically.

This post will focus on the Pakistani case, the more acute of the two; a subsequent post will deal with the political tussles in India, which might ultimately prove to be cathartic.

Pakistan has long been marred by political ructions that have more to do with clashing personalities than principled disputes.  The country’s trajectory might well be materially different absent the blood feud between Benazir Bhutto and Nawaz Sharif in the 1990s.  Likewise the on-going vendetta between Sharif and Asif Ali Zardari, Pakistan’s current president and Bhutto’s widower, is impeding progress on critical national problems as well as tarnishing the very concept of democratic governance.

Yet even against this background, last week’s events were extraordinary.  Striking, too, was how, with the country once again earning a top place in the roster of failed states, Pakistan could reliably be counted on to give credence to that dubious billing.   This time Zardari and Iftikhar Chaudhry, the Supreme Court’s chief justice, were the ones spewing bad blood, in the process upending a tenuous measure of political stability that had recently emerged in Islamabad.

Since its installation in March 2008, Zardari’s government has been in a running struggle with the powerful military establishment and an assertive judiciary.  These ructions have given rise to persistent fears of yet another army coup – as recently as earlier this year – as well as accusations that the Supreme Court is acting in cahoots with the military to undermine Zardari and his prime minister, Yusuf Raza Gilani.  Against heavy odds, however, the two somehow managed to limp along.  Last month Gilani became the country’s longest-serving prime minister, a signal accomplishment in view of how many of his predecessors have been hanged, exiled and otherwise forcibly evicted from office.  And while his administration was highly unpopular and hardly a model of competence, it was well on its way to becoming the country’s first democratically-elected government to serve out its allotted five-year term.

Yet this past week, the Supreme Court suddenly sent Gilani packing on the grounds that his contempt-of-court conviction in April disqualified him from holding office and serving in parliament.  The conviction stemmed from Gilani’s defiance of the court’s order to reactivate a dormant money-laundering case brought by the Swiss government against Bhutto and Zardari.  Chaudhry’s focus on the case strikes many observers as overzealous, given Swiss reluctance to re-open the investigation, the constitutional immunity Zardari enjoys as president, and the long record of Islamabad power brokers using corruption allegations to harass political opponents.

Chaudhry justified Gilani’s removal as demonstrating the rule of law in a country where governmental malfeasance is endemic.  Some commentators view the action as part of the institutional skirmishes that can be expected in Pakistan’s halting democratic transformation and note that Chaudhry also has turned his attention on abuses perpetuated by the security establishment.  An activist Supreme Court that sees itself as a guardian of the public integrity has likewise emerged in neighboring India.

But Gilani’s dismissal appears to be less about the advancement of constitutional concepts than the settling of personal scores.  The chief justice, a hero of the popular movement that forced Pervez Musharraf into exile, is reportedly indignant that Zardari refused, until forced to bow to public pressure, to reinstate him to the bench after Musharraf sacked him at the start of the state of emergency that was declared in November 2007.  Once returned to the court, Chaudhry promptly struck back by invalidating a general amnesty that Musharraf had forged with Bhutto and Zardari, thereby opening Zardari to criminal prosecution once he leaves the presidency.

The rationale and timing of Gilani’s ouster also seems suspect.  Since parliament is the only body empowered to dismiss a prime minister, many observers (here and here) describe it as a sort of judicial coup.  Moreover, when the Supreme Court first convicted Gilani on contempt charges, it seemed content to limit itself to the highly symbolic sentence it meted out – detention amounting to mere seconds.  Its abrupt ruling last week has led some to conclude that it was a diversion meant to deflect attention away from bribe-taking accusations against Chaudhry’s own son, which Zardari’s camp may be orchestrating.

Gilani’s removal proved to be the opening act of a chaotic week.  Zardari quickly settled on Makhdoom Shahabuddin as a replacement, only to have a court issue an arrest warrant for the man.  The warrant has to do with Shahabuddin’s alleged involvement in a drug importation scandal while he was serving as health minister.  Significantly, the court acted upon the request of an anti-narcotics body run by the military.  Gilani’s son is also implicated in the matter and a warrant was similarly issued for his detention.

Zardari’s second choice, Raja Pervez Ashraf, easily won parliamentary approval by week’s end but he, too, has had run-ins with the judiciary.  The Supreme Court earlier ended his stint as the federal minister in charge of power production when it found that a program he oversaw to spur private generation of electricity was riddled with graft.  Ruling that he is “liable both for civil and criminal action,” the court has instructed the National Accountability Bureau, an anti-corruption agency, to open an inquiry.

Given Chaudhry’s doggedness on the matter, Ashraf is unlikely to be left off the hook regarding Zardari’s corruption case, opening up the possibility that he, too, could be removed from office in short order.  And another opportunity to nettle the president will arrive in the coming days as the Supreme Court moves forward on the bizarre Memogate affair.  A judicial commission earlier this month concluded that Zardari confidante Husain Haqqani was guilty of disloyalty to the nation during his recent stint as Pakistan’s ambassador in Washington.  The finding opens Haqqani open to possible treason charges and has become another political headache for the beleaguered Zardari.

As argued in a previous post, the rising tumult of domestic politics is exacerbating the strains in U.S.-Pakistan relations and complicating efforts to resolve the seven month-long blockade of NATO supply lines into Afghanistan that is costing Washington a $100 million a month as cargo is shipped via more expensive routes in Central Asia.  A quick end of the dispute is very much in Islamabad’s interests and on several occasions appeared to be within reach.  The thread-bare public treasury – not to mention the Pakistani army’s vast business empire – is in desperate need of revenue that would come from increased transit fees as well as the $3.5 billion in military and economic assistance that the Obama administration has requested for the upcoming fiscal year.  Moreover, the country will soon be forced to turn once again to the International Monetary Fund for a financial lifeline, a move that will require Washington’s sufferance.

Given Islamabad’s record of turning over Al Qaeda figures as a means of buying American good will, last week’s announcement of the capture of a militant thought to be in charge of some of the terror network’s international operations may be a further signal that the security establishment wants to mend ties with Washington.

Yet events of the past week herald the beginning of a long summer of political turmoil in Islamabad that makes harder the search for a new equilibrium in U.S.-Pakistan relations.  Don’t be surprised if the resulting exasperation in Washington results in renewed calls for unilateral military action on Pakistani soil, for further reductions in U.S. aid levels, and an for overall approach of “congagement” or “benign neglect” toward Islamabad.

This commentary was originally posted on Chanakya’s Notebook.   I invite you to follow me on Twitter.

Defence And Strategic Affairs Blog

Time to Cool the Rhetoric on Pakistan

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However justified, the public berating of Islamabad has become counterproductive

The comments made by Defense Secretary Leon E. Panetta during his swing through South Asia last week once again raise the question of how coordinated the Obama administration’s regional policy is.  An earlier post flagged this issue two months ago by noting the curious timing of Washington’s decision to offer a large bounty for the arrest or capture of Hafiz Muhammed Saeed, a major jihadi leader allowed to live in plain sight in Pakistan.

True, the decision was overdue and eminently warranted, as Saeed is a man who for too long has escaped the dispensation of justice.  But it was announced in a way sure to rub Islamabad’s already inflamed sensibilities, just as Washington began an effort to salvage collapsing relations with Pakistan.  It was unveiled during a visit to New Delhi by Wendy Sherman, the U.S. Under Secretary of State for Political Affairs, who no doubt wanted to address complaints that the administration was letting Pakistan slide on the issue of anti-Indian terrorism.  But as it was issued on the eve of Deputy Secretary of State Thomas R. Nides’ arrival in Islamabad, the open reminder about their perfidy was a strange way to commence a trip aimed at making nice with Pakistani leaders.

Panetta’s words were similarly understandable but also counterproductive.  While in New Delhi he took a gratuitous swipe at Pakistani officials by publicly joking about the necessity of keeping them in the dark about the U.S. commando mission that killed Osama bin Laden – “They did not know about our operation.  That was the whole point.”  And in Kabul, he lashed out by warning Islamabad that U.S. leaders are reaching “the limits of our patience” regarding the sheltering of Afghan insurgents in the tribal areas.  The rebukes also follow the conspicuous snubbing of President Asif Ali Zardari at the NATO summit in Chicago last month.

To be sure, Panetta’s criticisms are entirely right on the merits.  Evidence of Pakistani treachery is in ample supply and has become the standard by which duplicity among allies will henceforth be measured.  The Abbottabad raid would have ended futilely, and most likely fatally for American forces, were the generals in Rawalpindi brought into U.S. confidence.  Likewise, Pakistan has played an egregious double game in Afghanistan, serving as the toll road for provisions destined for the same U.S. troops being killed and maimed by jihadi militants it enables.  And Panetta’s scolding only echoes the uncharacteristically blunt charges leveled last September by Admiral Mile Mullen, the immediate past chairman of the Joint Chiefs of Staff, who more than anyone else in Washington tried to establish a personal rapport with the Pakistani military leaders.

Yet the public smackdowns also undercut important U.S. interests.  A senior Pakistani military leader is quoted in the Washington Post as saying that he views the pointed joke in New Delhi as “an intended insult” and that “It is not the exclusive domain of the United States to lose its patience.”  The Los Angeles Times reports that the reprimands were so ill-received in Pakistan that they derailed a nearly-complete agreement to reopen key NATO supply lines into Afghanistan that Islamabad shut down after an U.S. airstrike killed 26 Pakistani soldiers near the Afghan border last November.

The closure is costing the United States some $100 million a month as cargo is shipped via more expensive routes through Central Asia.  In recent months, Islamabad has publicly insisted on a sharp increase in transit fees and a fulsome apology for the border incident in exchange for restarting the supply lines.  But according to the Times, Pakistani officials in private had in the last few weeks begun to back away from their public calls and many in Washington thought that a transit deal was within sight.  Now, following Panetta’s criticisms, Islamabad is back to demanding a full public apology.  The upbraiding might also have thrown a spanner in the exploratory talks that U.S. and Pakistani officials have held on a new counterterrorism partnership.

More broadly, the harsh rhetoric does not help the fragile democratization process within Pakistan.  A quick resolution of the transit dispute is very much in Islamabad’s interests.  The thread-bare public treasury –not to mention the Pakistani army’s vast business empire – is in desperate need of revenue that would come from increased transit fees as well as the $3.5 billion in military and economic assistance that the Obama administration has requested for the upcoming fiscal year.  Moreover, the country will soon be forced to turn once again to the International Monetary Fund for a financial lifeline, a move that will require Washington’s assent.

But U.S. officials also need to reckon with the new complexity of Pakistan’s domestic politics.  Gone are the times when a military autocrat could simply order up strategic cooperation with Washington, as Pervez Musharraf did at the outset of the U.S. war on terrorism.  Nowadays, Zardari’s elected government must contend with volatile public opinion that is incensed with perceived U.S. affronts to the country’s sovereignty and honor.  It also does not help that many Pakistanis see Zardari as an American patsy, a contention that his chief political rival, Nawaz Sharif, has seized upon with an alacrity that is matched only by its hypocrisy.

This week’s finding by a judicial commission that Husain Haqqani, Zardari’s first ambassador in Washington, is guilty of disloyalty to the nation provides Sharif with another drum to beat.  So Zardari has very narrow space to maneuver, especially as parliamentary elections approach, perhaps as early as this fall.  Sherry Rehman, the current Pakistani envoy in Washington, rightly notes that Panetta’s blunt rhetoric “leaves little oxygen” to those in Islamabad who seek a better relationship with the United States.

In between his broadsides last week, Panetta also said something that should be borne in mind by every Washington policymaker tempted to express his frustrations and indignations in the open:

It’s a complicated relationship, often times frustrating, often times difficult…. But the United States cannot just walk away from that relationship.  We have to continue to do what we can to try to improve (the) areas where we can find some mutual cooperation.

There is surely a place for tough talk in U.S.-Pakistan relations but these days it’s best kept behind closed doors.

This commentary was originally posted on Chanakya’s Notebook.   I invite you to follow me on Twitter.

Defence And Strategic Affairs Blog

A Tough Week for Pakistani Diplomacy

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Events lay bare just how strategically isolated Islamabad has become

As my last post noted, the events of the past week show that New Delhi is sitting pretty diplomatically, being courted ardently by both Washington and Beijing.  Conversely, they also laid bare just how strategically isolated Islamabad has become.

Pakistan’s most recent troubles began with President Obama giving President Asif Ali Zardari the cold shoulder at the NATO summit in Chicago three weeks ago.  Since then Washington has dramatically ramped up its campaign of drone attacks in the country’s tribal areas, which last week killed Al Qaeda’s second in command in North Warizistan.  Officials in Islamabad publicly denounce the strikes as violating the country’s sovereignty and they have helped drive a marked increase in anti-American sentiment.  Yet U.S. officials reportedly believe that they have very little to lose by defying Pakistani sensitivities.

While Defense Secretary Leon Panetta was in New Delhi last week making overtures for a strategic partnership with Pakistan’s arch-rival – including calls for greater Indian involvement in Afghanistan, a neuralgic issue for the Pakistanis – he was also telling Islamabad to stuff it.  Stoutly defending the drone campaign, he declared that “we have made it very clear that we are going to continue to defend ourselves” and “we are fighting a war” in the tribal badlands.

Adding insult to injury from Islamabad’s view was his public chuckle about the necessity of keeping Pakistani officials in the dark about the U.S. commando raid that killed Osama bin Laden – “They did not know about our operation.  That was the whole point.” – as well as his comparison of U.S.-Pakistan affairs with that of India’s own torturous relationship.  As the Associated Press wryly notes,

You know a friendship has gone sour when you start making mean jokes about your friend in front of his most bitter nemesis.

Panetta regularly traveled to Pakistan during his recent stint as CIA director but has purposively avoided going there in the year since he’s moved over to the Pentagon.  Although his eight-day tour of Asia took him to New Delhi and Kabul, among other places, Islamabad was conspicuously missing from his itinerary.  Indeed, showing up in the Afghan capital, he once again unloaded on the Pakistanis, warning them that U.S. leaders are reaching “the limits of our patience.”  General Martin Dempsey, the chairman of the Joint Chiefs of Staff, followed up by telling reporters in Washington that he too is “extraordinarily dissatisfied” with Pakistani actions.

Further evidence of Islamabad’s deteriorating position came from the transit agreements NATO signed last week with several Central Asian countries in an attempt to bypass Pakistan’s blockade on supplies going into Afghanistan, as well as the multiplying calls in the U.S. Congress for reducing military and economic assistance.

Pakistanis like to believe that China is the trump card they can play against the Americans.  This tenet was once again expressed in a recent op-ed that called on Pakistanis to liberate themselves “from the hold of the West by embracing our friends in the East.”  But the real limits to this strategy were once again apparent over the last few weeks.  During a visit to Islamabad in late May, Chinese Foreign Minister Yang Jiechi publicly pledged Beijing’s firm commitment to “firmly support Pakistan in protecting its sovereignty, independence, territorial integrity and dignity.”  Privately, however, he was counseling Pakistani leaders to settle their differences with the Americans.

Zardari must have been shocked by Chinese actions when he showed up in Beijing for last week’s summit meeting of the Shanghai Cooperation Organization.  Executive Vice Premier Li Keqiang (who is widely expected to become the next head of government) made a special point of telling Indian Foreign Minister S.M. Krishna, also attending the forum, that Sino-Indian ties were destined to become the century’s important bilateral relationship.  Li’s phrase is a virtual echo of the Obama administration’s regular formulation about Washington and New Delhi constituting “an indispensable partnership for the 21st century,” and it signals that the two most important external powers in South Asian security affairs are in competition for India’s strategic allegiances.  Underscoring this point is Beijing’s recent move upgrading its ambassador in New Delhi to vice-ministerial status.

Dawn, Pakistan’s largest English-language newspaper, advised the other week that links with China “should not become cause for complacency or reason to assume that a functional relationship with the U.S. is not critical and long overdue.”  If Pakistani leaders had yet to absorb this lesson, this week’s events should have driven it home.  Perhaps that explains Zardari’s conciliatory reaction to Panetta’s broadsides.

This commentary was originally posted on Chanakya’s Notebook.  I invite you to follow me on Twitter.