Is it the New Normal?

New Normal, in common parlance, was a consequence of the financial crisis of 2008. By the end of the global recession in 2012, ‘new normal’ not only referred to things deemed to have permanently changed in the world’s economic and financial reality but had found wider usage to mean most things that had initially appeared to be deviations from the norm but were subsequently seen to entrench themselves in practice and in public discourse. Thus a departure from the usual that becomes the rule, the ‘abnormal’ made the standard, best approximates what we think we mean by a new normal. After a decade of indiscriminate use, the phrase is now trite. In the absence of consensus, its innate presumptuousness remains stark. And yet, far too many things change without evincing signs of changing back.

The 2014 General Election in India was seen to be a break, a departure, a new beginning—many things rolled into one. It was only three months after the 2019 General Election—which was not framed by superlatives or radical descriptors—that the Indian body politic seemed to have begun undergoing a change. Since August 2019, a series of things has happened that would appear to affirm this shift. After Kashmir (shorthand for the abrogation of Article 370 and the bifurcation of the state of Jammu and Kashmir into Union Territories), the National Register of Citizens (NRC) exercise in Assam, the Ayodhya verdict, the Citizenship (Amendment) Act, 2019 (CAA) and its consequent protests and, most recently, the violence in the National Capital Territory of Delhi, Indian politics, rather the environment in which it plays itself out, has arguably not been this volatile for a long time, not at least since the demolition of the Babri Masjid on December 6th, 1992. The Ayodhya verdict, perhaps because it came from the court, was celebrated or met with resignation, depending on where one stood. Protests against the NRC were limited. Kashmir was a fait accompli given to the country. And then came the CAA, releasing the felt but unseen tension post-Kashmir and the rest.

The backdrop to this volatility is a global churn. Who foresaw the protests in Hong Kong? And when it did happen, the eruption soon had less to do with the withdrawn extradition bill than the unvented public grievances with the decline in political and civic freedoms since 1997. Who would have thought, before the protests, that South America’s richest and most stable country, Chile, would become a near-basket case? A divided Britain did leave the European Union (EU) and the Greek police have metamorphosed into Europe’s muscular gatekeepers. Does the continent finally fear an impending ‘strange death’ and has lost the appetite for being swamped again? As for recovery and clean-up after the coronavirus, has the epidemic only bared its teeth outside China? In a short span of time, open borders, over a range of reasons, have become closed again.

The recovery of the national space and prerogative as a political project is a work-in-progress from Donald Trump’s US to post-Brexit UK to India. And the much-derided ruling PiS (Law and Justice) in Poland or Hungary’s demonised Viktor Orbán are very much part of the political remoulding underway. With Uruguay (the Scandinavia of the Global South) ending 15 years of leftist rule on March 1st by electing Luis Lacalle Pou, notwithstanding the return of a Kirchner proxy next door in Buenos Aires, the consolidation of the right appears to validate the new nationalism.

External Affairs Minister S Jaishankar caught the significance of the global moment when, speaking at a conference in New Delhi on March 2nd, he said: “Competition is not just amongst states but often within them, reflecting the tension between the older order and the emerging one.” It is not merely a polarised world, but countries polarised within. To the extent this is the new reality for the foreseeable future, changes at home and abroad have implications for citizens and states in how they deal with each other and how business is conducted among states. On that note, the global churn from an Indian perspective is both a challenge and an opportunity, with possible complications wrought by the political situation in India.
As much as we would like to connect the present political moment—its événements—to economy and trade, to foreign policy and to defence and security, there is much afoot in these other arenas adding fuel to the debate on India’s ‘new normals’.

THE GREAT DIVIDE

The protests against the CAA—and the subsequent violence in Delhi—are not the first instance of an agitation turning violent, or resulting in rage and rampage, in fairly recent memory. The post-Mandal violence of 1990 in northern India, as witnessed in Delhi and its neighbourhood, was not mainstreamed. The post-Babri violence happened on a bigger scale but there was public revulsion, which was reflected in the opinion pages of newspapers too. This lack of tolerance for the violent aftermath of a social and political rupture, irrespective of the identity of perpetrators and the causal chain and despite the subjectivity of commentators, used to be a given.

It is not merely a polarized world, but countries polarized within. The global churn is both a challenge and an opportunity for India, with complications wrought by its domestic politics in the aftermath of Kashmir, CAA, Delhi

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But we have witnessed a few departures of late. What followed the CAA was Shaheen Bagh and what followed from Shaheen Bagh was the violence in Delhi, not necessarily sequencing cause and effect in strict order. There is an argument that Shaheen Bagh has mainstreamed what is essentially an Islamist protest, masquerading behind the secular tokens of the Constitution, the Tricolour and BR Ambedkar publicised by members of the intelligentsia. While the reality of Shaheen Bagh remains in the domain of deduction and debate, its appearance has undoubtedly signalled a change. Women in hijab, often with children, sitting in for days on end in the capital’s winter, becoming the collective face of the protests. That has been new. We do not know enough yet to conclude this is, hereafter, a normal.

As a corollary to the above, while the liberal intelligentsia and secular establishment’s stance on sectarian rhetoric from Hindu agents provocateurs has not changed, there has been an absence of attempts to retune the same from their Muslim counterparts to genuinely secular issues and community concerns. For instance, in the not-too-distant past, a Mohammad Shahabuddin or Azam Khan’s statements that crossed the line would be contextualised by citing deprivation, poverty, marginalisation, etcetera. No such attempt was deemed necessary in the case of, say, Sharjeel Imam. Perhaps the last five years have significantly dented that narrative? With universal housing, toilets for all and subsidised cooking gas for the poor—regardless of implementation and efficacy—has the ground for allegations of discrimination and/or deprivation shrunk?

A connected and visible trend has been the rather indifferent indulgence of most of the so-called secular parties, perhaps with the exception of the Congress and the Trinamool Congress, towards the anti-CAA protests. Cases in point—Arvind Kejriwal, Akhilesh Yadav, Tejashwi Yadav, Mayawati. A few statements (sometimes with a seemingly half-hearted demand, as with Akhilesh and Tejashwi), condemnation of destruction to property caused by protests (Mayawati), playing it safe with polls in mind (Kejriwal).

A less noticed, perhaps overshadowed, political departure has been the Left’s words and actions (or the lack of the same) vis-à-vis the visit of US President Donald Trump. The Left in India had a steady, unbroken diet, adhered to and endorsed, of ‘anti-imperialism’. Bill Clinton’s visit in 2000 was the first by a US President in a couple of decades and it did not pass without the customary leftist rally in some corner of the country. George W Bush’s trip was, of course, a red rag to the Left. But with a personality like Trump, whose trips abroad have been marked by protests in almost all of his host nations, all that came out of the Indian Left was a perfunctory press statement. The Left’s heft at the ballot box has been in a state of erasure for a decade but that did not affect its verbal prowess. Was Trump’s trip evidence of a ‘new normal’ in the affairs of the comrades?

Taken together, the departures, or the things that are new, in the Indian political arena would appear paradoxical. On the one hand, there is a volatility not seen in decades. On the other, there is a silence growing louder. Unlike the militant Democrats in the US or Corbynite Labour in the UK, India’s mainstream opposition has not yet opted for extremist and incrementally maximalist positions. Is that where things will stay, or will the divide widen?

MESSAGE FROM THE MARKET

Unleashed for the post-post-Lehman world of business and finance, the term ‘new normal’ invests itself with every potential for cliché when it comes to the economy. In India’s case, too, there is an overabundance of examples of purported new normals.

Is 5 per cent growth the new normal? When the January forecast predicted no more than that for 2019-2020, it turned out to be the weakest numbers in 11 years, taking us back to 2008-2009 when growth had dropped to 3.1 per cent. But even before the NSO’s advance estimates, slowdown was tagged as a new normal. This would be reinforced, ironically, every time CEOs would turn up at the Finance Minister’s door requesting a stimulus (automobile companies last August) or tycoons would advise and ask for an injection of money. Five per cent as the new normal has takers across the growth-first and quality-of-growth-first divide, with the latter keen to point out the lack of quality in growth through both the UPA and NDA years as having come home to roost.

If uncertainty and fear are the national capitalL’s new normal, it will extend beyond the territory of Delhi. This new uncertainty in internal security does not, however, contradict India’s ‘new security order’

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What about boom and bust or expansion and contraction then? Sanjeev Sanyal, Principal Economic Advisor to the Government, is categorical when he tells Open: “There is no such thing as ‘normal’ or ‘equilibrium’ trend rate of growth. Both global and national economies go through cycles—and each time the variations are touted as a ‘new normal’ till they are proven to be transitory.”

After demonetisation, the then Finance Minister had used the term ‘new normal’ in reference to the Government’s modus operandi. Soon after the Goods and Services Tax was rolled out, it was put on the list of policies adding to the economy’s woes. In this year’s Economic Times pre-Budget survey, 52.8 per cent respondents saw ‘wrong priorities’ as the biggest factor holding the economy back. The Government’s adherence to the fiscal deficit target—itself seen as another new normal—has also come under attack. Much of this criticism would appear to come from a growth-first perspective.

Sanyal says: “The Indian economy continues to enjoy macrostability despite recent extraneous shocks, and remains capable of annual growth rates in excess of 7 per cent. A global recovery would obviously help, but we should continue to focus on improving access to credit, lowering the cost of capital, removing bureaucratic hurdles and simplifying the tax structure.” Much of that work, in the longer run, ought to strengthen the fundamentals, which in turn would certainly shift the normal, contributing to not just growth but also the quality of growth.

The return to protectionism in trade across the world should not surprise New Delhi. India has just had its own mini trade war with the US and a trade deal is yet to be signed. Geo-economic and geopolitical developments cannot leave trade unaffected and the spillover effect, as seen in the US-China trade war, seems to have dovetailed with India’s tendency to not rock the boat, especially its own. But opting out of the Regional Comprehensive Economic Partnership (RCEP) for now does not signal a new normal in India’s approach to trade since it has been traditionally, and instinctively, protectionist.

Rajat Kathuria, Director and Chief Executive, ICRIER, tells Open: “As an economist, I’m concerned about the direction trade policy has taken. Other countries that are now becoming protectionist, such as the US, Japan, South Korea or more recently China, have already used the global market to increase their competitiveness. That’s the only possible route for us to pursue our own interests.”

Kathuria admits that India’s concerns vis-à-vis the RCEP were not unfounded, not merely because of its China fulcrum but also worries about the impact on the dairy and agriculture sectors given the presence of Australia and New Zealand. But is it ever a good idea to sit out? “Domestic reform is difficult in India. We need either a crisis [as in 1991] or an outside commitment as the compulsion. The RCEP could be used to anchor domestic reforms. As we did with the WTO and the patent regime, we could go in, sign and then take, say, 10 years and give ourselves a phase-in for tariff reduction.”

If we look for new normals in trade, the better example is the protectionist global sentiment. India, though caught up in it, is still largely doing what it always did.

THE CAA AND AFTER

Since August 2019, India has broken still fresher ground in diplomacy. Narendra Modi’s revival and revitalisation of foreign policy is now almost six years old. But the reaction of foreign, particularly Western, governments to Kashmir and the CAA is new. For a country whose political class has traditionally been mindful of reactions abroad, the absence of condemnation in strongly worded statements from the US Department of State or the Organisation of Islamic Cooperation (OIC)—barring Pakistan, some noises from Iran, Turkey and erstwhile Mahathir Mohamad’s Malaysia—ought not to surprise, just as China’s criticism should not, although it is a sea change from the decades when India would be pilloried at the OIC.

Dhruva Jaishankar, formerly of Brookings Institution and currently director of the US Initiative at the Observer Research Foundation (ORF), tells Open: “To the extent executive branches of various governments have offered criticism [such as the US State Department], it has mostly been related to internet shutdowns and political detentions in Jammu and Kashmir, rather than the change to Article 370 itself.”

Some of the criticism on the CAA has been shriller. But this too is complicated by immigration debates in many countries. Japan’s citizenship criteria are stringent. The EU is worried about another influx of refugees. Immigration reform is currently stalled in the US. Moreover, much of the criticism has clubbed the CAA and NRC together.

The world has become transactional where the Indian economy’s size and its still-acknowledged potential as a market make the difference. At the same time, the worldview of transactional leaders, from Donald Trump to Modi himself, whose ‘India first’ is a pursuit of whatever benefits India without ideological baggage, has been bolstered by the increasingly nationalist turn in the West, from Boris Johnson’s UK to Emmanuel Macron’s France—the latter’s protestations against nationalism notwithstanding—to even Germany’s toughening stance on immigration.

However, none of this takes away from Delhi’s achievement. Nandan Unnikrishnan, Distinguished Fellow at ORF, tells Open: “It is a credit to Indian diplomacy in dealing with both the West and the rest of the world that, for instance, the EU has not passed its resolution [on Kashmir and CAA].” But the bottomline is that such latitude is tied to India still being seen as a locomotive to kick-start the global economy as Unnikrishnan calls it: “We have to deliver on the economic promise. Then a lot will be forgiven.”

The criticism directed at India has come primarily from the Western media, from legislatures, such as the European Parliament, and from opposition parties, such as Labour in the UK and sections of the Democratic Party in the US. A few US presidential candidates (Democrats naturally) have spoken out about the violence consequent to the protests. But, overall, governments have been muted in their criticism. Trump’s own statement on Indian soil—“[Modi] wants people to have religious freedom, and very strongly… They have really worked hard on religious freedom”—was not just an endorsement of the Prime Minister but an acknowledgment that Indian diplomacy had saved this round.

THE LIMITS OF PAX INDICA

It will take a while till the contours of Delhi’s worst violence—ostensibly timed to Trump’s visit—since 1984 are fully mapped and its undercurrents accurately gauged, if at all. The alleged involvement of professional gangs as well as the real damage to trust between communities may be eclipsed by the fear that it could happen all over again and on a bigger scale. If this uncertainty is the national capital’s new normal, it will extend itself beyond the territory of Delhi.

Worse, the cross-border hand that attempted to bleed India through a thousand-odd cuts, stung by surgical strikes and aerial bombardment and diplomatically outclassed, may have insidiously stirred the Delhi pot. Strategic affairs expert Maroof Raza believes that is certainly the case. He tells Open: “Pakistan is drumming up anti-India sentiment inside its borders and using its ‘sleeper’ cadres to join the anti-CAA agitations. Besides, their use of social media to add to the recent social discord [in India] has exposed New Delhi’s ineptitude.” Behind this stark assessment lie multiple challenges that India’s security establishment has been confronting since August 2019. The beating taken by the police’s image in Delhi is both cause and effect of the body blow to the trust between communities. And a discredited or humiliated police does not help when it comes to law and order and internal security.

This new uncertainty in internal security does not, however, contradict India’s ‘new security order’, of which Paul Staniland of the University of Chicago recently identified three characteristics: ‘an emphasis on risk-taking and assertiveness, the fusing of domestic and international politics, and the use of unrelenting spin to hold critics at bay.’ The surgical strikes of September 2016 were not a ‘new normal’ but post-Balakot, few doubts remained that India’s range of response to Pakistan-blessed terror had been expanded and given a hard dimension. In a nuclear-armed neighbourhood, a demonstration of determination in conventional terms would always be complicated when the weaker party resorted to nuclear blackmail. Thus, the best illustration of the new assertiveness was the Doklam standoff of 2017 against a power stronger in both conventional and nuclear terms. Doklam, worrisome as it was, could only have helped convince Washington that looking at India as a strategic counter to China was not a mistake.

The $3-billion mega arms deal India agreed to during Trump’s visit is symptomatic of a defence partnership that has steadily solidified despite differences over trade and Pakistan. The US has also increasingly warmed to letting India acquire more and more sophisticated military hardware. At a strategic level, the Quad of US-Australia-Japan-India has been revived. However, even as the US replaces Russia as India’s biggest arms supplier, this has been a work-in-progress for a couple of decades and as Unnikrishnan says, “We’re increasingly buying more sophisticated arms from the US but we’ll continue to buy from Russia. We will not be dependent on one source. Our objective is the best bang for the buck which is only par for the course and pragmatic.”

Raza warns: “Trump wants defence deals for US arms makers and to create jobs back home. India shouldn’t take the path of Gulf countries that buy arms to buy security from the US. In the past, the US has failed to stand up against China for Japan, a longstanding ally. So can India trust the US? So, India is unlikely to abandon the deep ties it has with Russia and France. The US must accept that.”

As much as the Trump visit saw the use of the term ‘new normal’ for the turn, or elevation, in Indo-US relations, there is actually little to be surprised about, or new, about the way things are shaping up. Strategic partnerships do not blossom out of the blue and follow their own logic of development against the global geopolitical backdrop.

That is why, Unnikrishnan says: “A lot depends on what the US sees itself as. Trump has made sharper what started in Barack Obama’s time: withdrawal and making America stronger at home. Therefore, what we do depends on how much the US stays invested in policies beneficial to our national interests, such as the Indo-Pacific. Afghanistan is a disaster and we had done everything the US wanted us to there, short of putting boots on the ground. At least, the Indo-Pacific is a declaration of intent, which is good. But we should be aware that the US would be primarily protecting itself.”

A cause for concern is that everything is playing out against what defence experts have been calling India’s new normal of low defence budgets. Budget 2020’s defence allocation of Rs 3.37 lakh crore is just about 1.5 per cent of the projected GDP. While revenue expenditures and pension pay outs take out a lot of the funds, the allocations have now fallen to nearly half of the expectation of 3 per cent of GDP. Despite India routinely figuring among the topmost military spenders, the budgetary constrictions are the reason Delhi is not being able to procure more of the advanced hardware on offer from Washington.

Global risk data assessment firm Verisk Maplecroft’s report released in January concluded that political turmoil will be the ‘new normal’ for 2020 across the world. The sharpest rises on its unrest index featured Hong Kong (moving up from 117 to 26, with a current risk profile of –3.8) and Chile (91 to 6, with a new risk profile of –4). India still ranks pretty low down but that is due to the inadequate time span of the protests when the assessment was cut off. Little attention need and will be paid to sundry lists of ranks and scores but the undeniable danger is that if India is seen to be higher risk, with unrest and volatility as its new normal, investors will not be the only ones staying away but their absence will be enough to destroy the economy. And they listen to risk assessors.

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Sudeep Paul

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