Of losses and quick wins

The Bihar assembly results are out and open to interpretation. There will be dissection, postmortem and blame fixing in the coming days. On the face of it, the resounding victory of the Grand Alliance, brings out some very interesting facts. First, the clean image of Nitish Kumar was a factor that helped, but his image was not clean enough and the Janata Dal (United) could only win 71 of the 101 seats it contested. Second, though the clean image of Nitish Kumar made him a popular Chief Minister, a corrupt and convicted Lalu Prasad’s Rashtriya Janata Dal bagged 80 of the 101 seats it contested. Third, Indian National Congress, which was reduced to a humiliating four seats in the outgoing assembly managed to win 27 seats this time. Fourth, the huge crowds that the Prime Minister pulled during his 30 rallies in the state, did not like his message and hence voted someone else.

There are many reasons, which worked in favour of the Grand Alliance and pushed it to a two-thirds majority in the assembly. Similarly there are reasons, which lead to the crushing defeat of National Democratic Alliance. Some of the reasons that immediately come to mind are similar to the ones that failed corporations face during their turnaround. At the end of the last parliament, India was similar to a failing organisation. Big ticket scams, slowing economy, non-existent foreign policy, cash guzzling and zero value social programmes (MNREGA) and fuel subsidies were pulling the country down. India was not allowed to live up to its potential.

Failing corporations employ experienced consultants to turnaround the company. The consultants in turn use tried and tested (sometimes radical) measures to re-engineer the processes and bring in efficiencies. The Modi government promised a similar re-engineering for India. But the similarities end there. A good consultant knows that challenging the status-quo will inevitably bring resistance. Change is the only constant, yet it is the most difficult thing to accept. Try bringing in a radical change in an organisation and it is doomed to fail. The consultants know this and they have found a way around. For the entire organisation to see the benefit of the turnaround exercise, they use quick wins. Quick wins are tasks that are easy to do, take little time to implement but show results that are visible and tangible.

Once the quick win succeeds the rest of the organisation can be easily taken on board and they will act as partners in the turnaround. The Modi government failed in identifying quick wins. Let alone implementing them. The government embarked upon dream projects like Make in India and Swachh Bharat. Both very well meaning projects and will yield results, but in the long run. The mammoth task of bringing millions in the banking network was achieved rather swiftly but again it falls short on expectations. Having a bank account is good but there has to be enough money in it for the account holder to benefit.

The PM is repeating the mistakes the Vajpayee government made. Stressing on big ticket reforms at the cost of quick wins cost them the 2004 elections and the UPA I reaped the benefits five years later.

One of the easiest quick wins for the government is job creation. Job creation in semi-skilled sector. That is where the rural population hunts for employment. The government should emphasis on sectors like highway and manufacturing. These are labour intensive sectors and have a high multiplier effect. Red tape and archaic concession agreements make it difficult for the private sector to bid aggressively and for the government to close the transaction efficiently.

A construction site or a factory not only provides employment to the actual workers, it also generates business opportunities for transport companies, taxi services, restaurants, hospitals, housing companies, and so on, creating further employment opportunities. It helps create an ecosystem, which brings in prosperity and jobs to a region.

So far the government has done things for India, it is now time to do things for Bharat. Gold monetisation might attract India but a country where two thirds of the population is poor, Bharat might find it elitist. The government has lost a year and a half, if it does not wake up to quick wins, it might see a repeat of 2004 and the next government will reap the benefits of the long term reforms that the Modi government is carrying out today. Bihar is a warning bell and we know for whom it tolls.

The deal – what it means to India and South Asia

At last

Twenty months of negotiations, threats and diplomacy has led to a deal, which will stop Iran from acquiring weapon grade Uranium. The details of the deal are still trickling in. According to this CNN report, “The deal reduces the number of Iranian centrifuges by two-thirds. It places bans on enrichment at key facilities, and limits uranium research and development to the Natanz facility. The deal caps uranium enrichment at 3.67 percent and limits the stockpile to 300 kg, all for 15 years. Iran will be required to ship spent fuel out of the country forever, as well as allow inspectors from the IAEA inspectors certain access in perpetuity. Heightened inspections, including tracking uranium mining and monitoring the production and storage of centrifuges, will last for up to 20 years. The U.S. estimates that the new measures take Iran from being able to assemble its first bomb within 2-3 months, to at least one year from now”.

 

Three decades of animosity between Iran and the US, due to political intervention of the latter and an unprecedented hostage crisis during the revolution, seems to be thawing. The deal of course means a lot to Iranian economy (the full impact of the deal will only be felt once the sanctions are lifted next year), it also has the potential to influence much of South Asian geo-politics and economy. Iran has the fourth largest proven oil reserves in the world but exported only 2.3 million barrels a day, against 6.2 million barrels a day (2014 data; US EIA) by Saudi Arabia. The sanctions significantly reduced the exports and forced Iran to store millions of barrels of crude in floating tankers in the Persian Gulf.

 

The future – India

Once the sanctions are lifted, Iran will increase production and export. The oil prices already under pressure from a weak demand and oversupply might see a further decrease in prices. Assuming the diplomatic relations between US and Iran will improve progressively and the deal will hold, it is possible that Iran will provide US access to its ports in the Persian Gulf. It may also offer surface connectivity, enabling the NATO to supply its forces in Afghanistan. These two possibilities have the potential to change things for better, for India.

 

With over 80% of its energy needs being imported, India will stand to benefit immensely by cheaper crude prices. India ran a bill of USD 112.7 billion on oil imports in 2014-15 A price drop of even a single dollar per barrel translates into a billion dollars saved. A substantial drop will provide India with a windfall gain, making precious financial resources available for development work.

 

Indian business also stands to benefit from a sanctions free Iran. ONGC Videsh Ltd. discovered a gas filed in the Persian Gulf (Farzad-B) with an estimated reserves of 21.7 trillion cubic feet. The operating contract (with ONGC Videsh owning 60% stake) was never signed due to international sanctions. The situation will change once the sanctions are gradually lifted next year.

 

The future – Pakistan

On the other hand a friendlier Iran may also mean access to US and NATO supplies to Afghanistan. In the past a hostile Iran made Pakistan the sole point of transit for almost all NATO supplies. The heavy dependence on Pakistan lead to billions of dollars being paid to the army and civil administration by America. The money thus paid found its way to funding various terror groups. The fact that Pakistani establishment sponsored terrorism has long been established by both international governments and strategic research scholars. Professor Christine Fair of Georgetown University in her book, fighting to the end gives a well-researched account of Pakistani army, the ISI and past dictators who indulged in funding Jihad.

 

The dependence on Pakistan to serve its goals in Afghanistan, remains a major reason why the US funds Pakistan. Possibility of an alternate route from Iran puts Pakistan in a situation where the American aid dollars might dry up sooner than expected. While cheaper crude will help India fund its poverty elevation programme, a fund crunch in Pakistan might force it to scale down its terror funding.

 

The hope

What really happens is a question that will get answered only in the future, as and when sanctions are removed and how US engages Iran. But there is a clear opportunity for India to scale up its civilizational ties with Iran and turn them into mutually beneficial business relations. A rejuvenated foreign policy and a business friendly government have the potential to make the transition. Hassan Rouhani as a chief guest at Rajpath, for next Republic Day might do India a lot of favour.