Category Archives: India

Is “Make In India” Theme Helping Indian Economy? – Part II

By Susmit Kumar, PhD

Please click here for its Part I: Is "Make In India" Theme Helping Indian Economy? – Part I

As shown in Charts 1 to 9 below, India’s foreign trade is following in the footsteps of that of the US, a bankrupt country surviving on printing its currency which happens to be the global currency. As explained in Part I of this article series, before even thinking to become a super-power, a country needs to generate a trade surplus, which the US did for more than 30-35 years after World War II, China since early 2000s (Chart 6, 7 and 8), and both Japan (Chart 4) and Germany (Chart 5) in recent decades. The last two countries are economic super-powers but are too small to be military super-powers.

As explained in my article The US Dollar – A Ponzi Scheme, during World War II, US enticed all other countries by claiming that it would keep its dollar pegged to gold at the rate of $35 for one ounce of gold. (Please read my article “Chinese yuan replacing US dollar as global currency: A not so distant prospect” for how the US Dollar became the Global Currency due to the 1944 Bretton Woods Accord). The US asked other countries to use the US dollar as reserve currency and also for conducting transactions between countries. This resulted in the 1944 Bretton Woods Accord, signed by 44 countries. As per the agreement, you could have asked the US govt to give you one ounce of gold for $35. As shown in Charts 2 and 3, the US had trade surplus from the end of World War II till early 1970s, but since it has had trade deficit year after year. The reason for it is that Nixon de-linked the dollar from gold in 1971, after which the US has just continued to print dollars to fund its trade and budget deficits. This has been going on since the Reagan administration. Had the dollar not been the global currency, there would not have been “Reaganomics”, the much-revered economic theory of the Republican party. According to economist Allan H. Meltzer at Carnegie Mellon University, “We [United States] get cheap goods in exchange for pieces of paper, which we can print at a great rate.” (“U.S. Trade Deficit Hangs In a Delicate Imbalance,” Paul Blustein, Washington Post, November 19, 2015).

Unlike the 2003 Iraq War, for which the U.S. has had to bear all costs, the U.S. made money out of the first Gulf War in 1991, though its allies lost money. Out of about $61 billion cost for the 1991 war, $32 billion was paid by Kuwait, Saudi Arabia, and other Gulf States, and Germany and Japan paid $16 billion. Because of this, the U.S. balance of payments immediately after the war was positive, a very rare occurrence nowadays since it has happened only once in the last 35 years. Apart from these payments, Saudi Arabia and other Gulf countries bought more than $400 billion worth of arms and ammunition from Western countries, mainly from the U.S., over the next decade. This helped in jumpstarting the sluggish U.S. economy, which was facing recession during the last years of the Bush Sr. administration. Following that, it was the information technology revolution that stimulated the economy. The advent of information technology, including the Internet, as well as soaring stock prices and housing markets, which gave consumers extra money to spend (two-thirds of the GDP depends on consumer spending), helped the Clinton administration balance the federal budget and helped state governments increase their revenue beginning in the mid-1990s.

There were two turning points for China. In 1994, China devalued its currency by 34% which caused an increase in its trade surplus at the expense of the then East Asian Miracles countries like Thailand, Indonesia, South Korea and Malaysia, leading to the collapse of their economies in 1997. Again after joining World Trade Organization (WTO) in December 2001, China undersold other countries, increasing its balance of trade year on year. China imports minerals from all over the world, converts them to manufacturing items and sells them to entire world at cut-throat price. China has been under-cutting other countries by selling products below their production costs. But Chinese rulers are not fools who would sustain prolonged losses in selling “Made in China” products at below production costs. As discussed in my article, “The Hidden Cost of Imported Items and The Need to Redefine Modi Administration’s “Make in India” Policy” (read: “The Hidden Cost of Imported Items and The Need to Redefine Modi Administration’s “Make in India” Policy”, Susmit Kumar, January 7, 2017),  a sticker price of 100 rupee “Made in China” may in fact  cost 200 rupee to Indians. If a person in India purchases a "Made in China" commodity instead of "Made-in-India" commodity, then India loses not only a factory job but also indirectly associated jobs such as in schools, hospitals, and auto sector. Instead his purchase of the imported commodity creates such lost jobs in China.

Although India is a member of WTO since its inception on January 1, 1995, it has trade deficit year after year. When the United Progressive Alliance (UPA), led by the Congress Party, took over the reins in 2004, progressive deterioration in trade deficit ensued till 2013. In 2008, crude oil price went up to $140 a barrel, but did not remain this high long enough to damage India's economy. In mid-2008, we got the Great Recession in US which led to the collapse of the price of crude oil. But when it again went up during 2011-13, it damaged the Indian economy and rupee significantly. In 2013, some economists were even started writing the obituary of the Indian economy. Prime Minister Modi is fortunate that he took over the reins in 2014 when the crude oil price went down and not earlier.

At the onset of the 2008 recession, the economies of the East European countries were on the verge of collapse. In an October 2008 speech, Romanian President Traian Basescu pinned the blame on “corrupt” outsiders. He said, “There were smart guys coming to Romania, who had studied at Harvard and Oxford, and they invented how to increase the value of one’s shares without actually having money.” (Craig Whitlock, “Financial Crisis Leaves Romania Reeling,” Washington Post, November 5, 2008.) His statement describes in brief the Reaganomics, the current fundamentals of the US economics. Wall Street has created and sold the US to its Frankenstein China. Until the start of the 2008 economic downturn, Wall Street hedge funds were creating havoc in Third World countries, for instance the 1994 Mexican peso crisis and the 1997 East Asian Economic crisis. Now they are doing the same in the United States and the European Union.

During the 2008 Global Great Recession, the unemployment in Germany was in single digit only, unlike the nearly double-digit unemployment in United States and other EU countries, and the lowest any time after the unification. During the 2008 recession, the German government offered money to firms to retain workers and cut working hours instead of producing layoffs. Hence, Germany came out of recession early. Its manufacturing sector still contributes about 25 percent of its GDP as compared to only 11 percent in the case of the United States. German corporate boards have generally equal numbers of management persons and workers, and hence the future of a firm is decided by stakeholders instead of shareholders. For this very reason Germany is still the world’s second-largest exporter and has not faced the same severe crisis that countries such as the United States and other Western nations have been facing due to emergence of the global Chinese workshop.

The sudden collapse of the Soviet Union is a warning to India. Despite being a military super-power, with significant number of aircraft carriers, submarines, military aircrafts and tanks, second only to the US, the Soviet Union collapsed due to the paucity of some tens of billions of dollars. As explained in my article Communism Collapsed Due to Collapse in Oil Price in Late 1980’s and German Banks – Not Due to Reagan, the Soviet Union collapsed because it could not get external funding for modernizing its economy under Mikhail Gorbachev’s Perestroika and Glasnost policy. There was drastic reduction is price of crude oil, the main Soviet export, during late 1980s and early 1990s after the end of Iraq-Iran War (1980-88). Crude oil price dropped from an average of $78.2 a barrel in 1981 to as low as $7 a barrel one time. These two factors led to a rise in Soviet external debt. In 1985, Soviet oil earnings and net debt were $22 billion and $18 billion, respectively, whereas these numbers in 1989 were $13 billion and $44 billion, respectively. By 1991, when external debt was $57 billion, creditors, many of them major German banks, stopped making loans and instead started demanding repayments, contributing to the collapse of the Soviet economy (Jeffrey Sachs, The End Of Poverty, The Penguin Press, New York, 2005, p. 132.). Because of lack of hard currency Russia's shelves were empty of bread. In 1984-85, the USSR imported 55.5 million tonnes of both wheat and coarse grain, a record for a single country to take in one year. Beginning with the 1972-73 crop season, the Soviet Union imported more wheat than any nation had ever done. It is an irony that today Russia is the number one exporter of wheat in the world.

Had oil prices increased, like it did during early Putin administration (2000s) or had German banks financed Gorbachev’s Perestroika and Glasnost like Japan and China financed US debts since 1980s, the USSR and communism would not have collapsed in 1991. 

Unlike the Soviet Union, the US has been getting external funds from Japan during 1980s and 1990s, and thereafter from China, in form of treasury bond investment as well as foreign investments in its private sectors and other government bonds, like Fannie Mae and Freddie Mac bonds. Till last year, both Japan and China had more than $1 trillion US Treasury Bonds, each. Even countries like India and Russia had significant amount of their FOREX invested in the US financial system.

As explained in Part I, the “Make-in-India” policy of the Modi government has no significant positive bearing on the trade deficit. India should stop listening to the US educated economists and MBAs because their brains are poisoned by massive propaganda of the Reaganomics by the Republican Party in US. Reaganomics is reduction of taxes and the promotion of unrestricted free-market activity. As explained above, had the US Dollar not been the global currency, there would not have been “Reaganomics”. In order to achieve trade deficit, the Modi administration needs to come up with a way to incorporate the German and Chinese industrial policies.

Unless India makes a change in its policy to become self-sufficient in consumer items, which it is importing right now, it will be always in danger of going into the emergency ward of the IMF which would nothing but set back the Indian economy for couple of decades. Without becoming self-sufficient in consumer items, India has no hope of becoming a super-power.

Chart 1. India Monthly Balance of Trade (1995-2017):

Chart 2. US Monthly Balance of Trade (1950-75):

Chart 3. US Monthly Balance of Trade (1975-2017):

Chart 4. Japan Monthly Balance of Trade (1980-2017):

Chart 5. Germany Monthly Balance of Trade (1950-2017):

Chart 6. China Monthly Balance of Trade (1984-2017):

Chart 7. China Monthly Balance of Trade (1995-2017):

Chart 8. China Yearly Balance of Trade (2004-2015) :

The Hidden Cost of Imported Items and The Need to Redefine the Modi Administration’s “Make in India” Policy

By Susmit Kumar, PhD

If you live in India and purchase a "Made in China" commodity instead of "Made-in-India" commodity, then your home country loses not only a factory job but also indirectly associated jobs such as in schools, hospitals, and auto sector. Instead your purchase of the imported commodity creates such lost jobs in China."

There are two major hidden costs to India when you buy an imported item.

(1) The first major hidden cost is that we lose jobs that would have been created inside India if you would have bought instead a “Made-in-India” item. When you buy a 100 rupees imported item, then its sticker price, i.e. 100 rupees is actually equivalent to say a 200 rupees “Made-in-India” item. This is so because a “Made-in-India” item generates jobs in a domestic factory which pays to its employees and local businesses to buy ingredients for the item. Nowadays employees spend their salaries and wages to purchase goods and services from foreign businesses. Businesses make their own purchases and hire employees, who also spend their salaries and wages throughout the local, regional, and state economies. A chain reaction of indirect and induced spending continues, with subsequent rounds of additional spending. In economics, this chain reaction employment is divided into three categories:

(i) Direct jobs: Employment in manufacturing plant.

(ii) Indirect jobs: Employment changes in suppliers and distributors.

(iii) Induced jobs: Jobs resulting from direct and indirect employees spending more and increasing consumption. For an example, employees expending creates jobs in industries like auto, housing, school/college and food, i.e. as the employee will rent or buy a home and auto, his children will attend school or college, etc. The government will also be getting taxes from these jobs which would be spent on infrastructure and welfare schemes. There are additional secondary effects by job creation through benefits of improved access to infrastructure, such as access to more reliable power allowing enterprises to produce more, and more efficiently.

Based on one study, the table below shows the number of all jobs (Direct, Indirect and Induced jobs) created for each direct job in a sector. In a certain sector, the total number of all jobs per direct job was as high as 19.

(2) The second major hidden cost is that when you buy an imported item, it is costing India its hard-earned dollars. In India, people use the Indian rupee when they pay storeowners, who in turn purchase imported items from domestic importers. The importers pay in US dollar when they buy these items in world markets, and these dollars are provided by banks in India that are authorized to do transactions in foreign currencies. Hence, in the end, India has to get these dollars from somewhere, say from the dollars earned by exporters or foreign investors. If India does not have enough dollars to pay for imports, it has to devalue its currency so that exporters can export more. As India imports 70% of its oil and oil is priced in dollars in the world market, the oil price increases in terms of rupee, after devaluation. Whenever there is a price rise in commodities such as petrol, opposition parties and common people blame the government for the price rise, whereas they should blame their own countrymen who are purchasing imported items. Indians, who purchase cheap imported items, do not realize that they are in fact paying much more than the sticker price.

Therefore, if we take entire economy into consideration, a 200 rupee tag of a Made-in-India item might be cheaper than 100 rupee rag imported item. Therefore, the Modi government needs to redefine its “Made-in-India” program to consider the above-mentioned facts and also to teach Indians the benefits of purchasing “Made-in-India” items. The government should target imported products that are killing domestic jobs and provide tax-breaks as well as subsidies towards labor cost to manufacture these products, similar to what it does in MGNREGA in rural sector. Rather than allowing profit-oriented large conglomerates to create factories for this purpose, the government should allow only small cooperatives, working on no-profit-no-loss principles, to manufacture these products locally so that more and more jobs are created.

Stop Taxcuts-fueled Consumer-driven Economy Which has Led the US to the Brink of Impending Bankruptcy

By Dr. Susmit Kumar, Ph.D.​

The Modi government needs to stop listening to the US-educated economists’ mantra of trickle-down economy, i.e. to use taxcuts to fuel a consumer-driven economy. The same mantra has led the US to the brink of impending bankruptcy. It should not increase the income-tax exemption limit from 2.5 lac rupees. Instead it should use the collected tax wisely to come out of perennial trade deficit and also to directly target the economy of rest 80 percent of the population who have been largely left out of the economic boom.

"In PPP (Purchasing Power Parity) terms, US dollar should be only 13 to 14 Indian rupees, one-fifth of the market value. If you take the Delhi metro from Connaught Place/Rajiv Chowk to Dwarka (30 km) it will cost you 25 rupees, i.e. about one third of a dollar, whereas for same distance in the Bay Area, California the metro will cost you 8 dollars. Hence the US dollar is over-valued."

The US is on the verge on economic bankruptcy by following the taxcuts-driven trickle-down economy. The US dollar is over-valued; hence trickle-down economy is somehow working temporarily in the US. For more than three decades, by taking advantage of the dollar being the global currency, the US has been able to print as many dollars in order to fund its twin deficits (trade deficit and budget deficit), something India cannot do, i.e. India cannot fund its deficits by printing its currency Rupee.

In Purchasing Power Parity (PPP) terms, the US dollar should amount to only 13 to 14 Indian rupees, one-fifth of its current market value. If you take Delhi Metro to go from Connaught Place/Rajiv Chowk to Dwarka (30 km) it will cost you 25 rupees, i.e. about one-third of a dollar, whereas for same distance in the Bay Area, California the metro will cost you 8 dollars. Hence the US dollar is over-valued.

Once China brings down the dollar, as explained in my article Chinese yuan replacing US dollar as global currency: A not so distant prospect, and the dollar reaches down to its actual PPP value, there will be a complete collapse of the US economy, akin to the Russian economy during 1990s. Right now even after massive loss of manufacturing jobs, the living standard of even an hourly wage American is at the same level as middle-middle income class Indians. At even $10 an hour, working in a restaurant, they make $1600 a month, out of which they spend $200-$300 on food, $700 on the room rent and $300 to $400 on a car. But if the dollar comes down to its real PPP value, there will be complete chaos in the US. Then a brand new Toyota Camry in US would cost $125,000 instead of $25,000 and it will be out of bounds even for the middle class in US. Right now the moment a person in US gets a $50,000 a year job, he buys a brand new car like Camry.

"If India wants to be a super-power, it needs to follow China rather than he US, i.e. India needs to be producer country."

During 2011-13, India saw how its increasing trade deficit can destroy its economy. India can barely manage its trade deficit by its Foreign Direct Investment (FDI) which is about $50 billion a year, and NRI remittances (about $70 billion a year). For this very reason India's credit rating is just one notch above the junk status. When the crude oil price went above $100 a barrel during 2011-13, India could not pay her $180 billion to $200 billion a year trade deficit, leading to the collapse of the country's rupee from 44 to a dollar to 62 to 1 dollar.

Although it was unexpected for so-called economic experts (None of the experts saw India's debt bubble coming. Sound familiar?, The Guardian, 26 August, 2013 ), I had warned about collapse of Indian economy in my books, published much before the 2011-13 crisis. Nowasays India’s trade deficit is increasing by leaps and bounds with China, on the same pattern as the US trade deficit with China. If India wants to be a super-power, it needs to follow China rather than he US, i.e. India needs to be producer country, with trade surplus as well as it should be able to provide minimum necessities, mainly food and housing, to all its citizens, otherwise it will be always in danger of economic collapse. If the crude oil price again goes above $100, Indian economy would have same fate as that of Greece. After the onset of the Ukraine crisis, the US used its dollar as a weapon to destroy the Russian economy, but Russia was able to withstand it mainly because it was running both trade surplus and budget surplus.

"If we take into consideration the entire economy, a 150 rupee tag of a Made-in-India item would be cheaper than 100 rupee tag imported item."

The raise in the income tax exemption limit will give extra income to maybe 10% of urban population in order for them to buy things like car rather than a 2-wheeler (extra few thousand rupees a month) resulting in a marginal increase in industrial growth but the same few thousand rupees a month can drastically raise the income level of a family in low income group. The brunt of demonetization and coming action against the benami properties will be felt by unorganized labor as housing industry would be down for next several years because it was the black money in cash which was fueling the housing industry. The government needs to keep the same 2.5 lac income tax exemption limit and give the extra money to help the semi-skilled and un-skilled labor.

India has been spending its precious dollars on importing simple items like scissors, air coolers and idols which can be manufactured easily in the country. Not only India is spending its hard-earned dollars to buy them it is also losing the related manufacturing jobs. A 150 rupee tag price of a domestically manufactured item may be cheaper than a 100 rupee tag imported item because out of 150 rupee, the government would be getting tax, it will generate job in a family which would lead to associated jobs in industries like auto, housing, school/college and food, i.e. as the worker will rent or buy a home and auto, his children will attend school or college, etc.

Hence if we take into consideration the entire economy, a 150 rupee tag of a Made-in-India item would be cheaper than 100 rupee tag imported item. Therefore, the government should target the imported products which are killing the domestic jobs and provide tax-breaks as well as subsidies towards labor cost to manufacture these products, similar to what it does in MGNREGA in rural sector.

Rather than allowing profit minded large conglomerate to create factories for this purpose, the Indian government should allow only small cooperatives, working on no-profit-no-loss principle, to manufacture these products locally. The World Trade Organization (WTO) should not intervene for the country providing subsidies to these industries because majority of high-tech industries in the Western countries have origins in government subsidies.

For an example, the US-based Tesla, which makes electric cars, sells solar panels and launches rockets into space, is mainly funded by the government subsidies (Elon Musk's growing empire is fueled by $4.9 billion in government subsidies, Los Angeles Times, May 30, 2015). It is an open secret that China has become the world's number one exporter of consumer goods only by providing government subsides to manufacturing firms. A country should never import a mass consumed item because not only it loses related manufacturing jobs, it will also be at the mercy of factors outside its control.

By demonetization and coming action against Benami properties, PM Modi has already solidified his urban vote for next 2019 elections. They will vote for the ruling NDA because he is the first person in history of India who has taken any concrete step against corruption. Apart from over-all growth in Indian economy, he needs to provide basic necessities to the un-organized labor who are feeling the brunt of his policies against black money otherwise he may have same fate as the NDA1's in 2004 parliamentary election which they fought on “India Shining” slogan.

India Needs to Treat Its Foreign Trade Same as Defense Sector, Part-2

Susmit Kumar, Ph.D.

Published at South Asia Monitor on May 18, 2016.

Instead of becoming an exporting country like China, India is becoming an importing country like the US. In 2004, India trade deficit was in upper $20s billion whereas in 2015 it was $137 billion. On the other hand, China’s trade surplus was $177.5 billion in 2006, $298.1 billion in 2008, $160.0 billion in 2011, $382.46 billion in 2014 and $602 billion in 2015. Due to $100+ a barrel crude oil price, the current account deficit of India was $78 billion and $88 billion in 2011 and 2012, respectively. The trade deficit for these two years were $162 billion and $200 billion, respectively. Due to drastic reduction in crude oil price in last couple of years, the trade deficit has gone down somewhat.

India’s trade deficit with China has been increasing at an alarming rate – $18.65 (2009), $26.67 (2010), $36.28 (2011) and $52.68 (2015). In 2015, India’s exports to China was $8.86 billion only whereas China’s exports were $61.54 billion. Same year, US had $366 billion trade deficit with China. US exports to China was $116 billion whereas China’s exports to the US were $482 billion. In the first half of 2011, nearly 70% of shipping containers returned empty from the US to China. Significant number of shipping containers, returning from the US to China, had fodder for Chinese cattle. India is facing the same issue with China, i.e. majority of shipping containers returning from India to China are empty.

Due to record trade deficit during 2011-13, exchange rate of India’s rupee (with respect to US dollar) went down from 44.17 in April 2011 to 62.92 in September 2013. In 2015, India was able to overcome $137 billion trade deficit with the help of $72 billion NRI remittance and more than $50 billion Foreign Direct Investment (FDI). Had the crude oil price would have been $100+ a barrel instead of $30+ a barrel, India’s trade deficit in 2015 would have been more than $300 billion and rupee would have collapsed causing significant damage to the Indian economy. In next several years, the middle class population in India would even surpass the entire US population, increasing its trade deficit to the US level which is $400 billion to $600 billion a year. In no way Indian economy can survive this much import. As discussed in my “Chinese yuan replacing US dollar as global currency: A not so distant prospect” (May 1, 2016) article, Yuan is going to replace US dollar as global currency within a decade or so. Hence in next 1991 type FOREX crisis, India would have to go to China to get a loan in Yuan and at that time China might ask for some concession in the territorial dispute which no Indian government would accept because if the governing party would accept the Chinese demand, it would not again come to power for several decades. Hence in such a situation, India would have no option but to default on loan payments, which Argentina did in 2001, causing India to be in dog house of international financial system for decades.

In the current global economy model, China has become world’s production center. It imports minerals from all over the world and using these minerals, it manufactures consumer products to sell all over the world. Even without the 2008 economic crisis, China would have emerged as the dominant economic force by being the largest lender in the world, and almost all major consumer countries would have to declare bankruptcy to China after a couple of decades or so. Therefore, the current global economy model is not sustainable.

That’s why India needs to treat its trade deficit as it treats the defense sector, i.e. it needs to balance its foreign trade without keeping monitory profit in mind.

Let us see how the foreign trade works for India. In India, people use the Indian rupee when they pay storeowners, who in turn purchase imported items in the world market. The importers pay in US dollar when they buy these items in world markets, and these dollars are provided by banks in India that are authorized to do transactions in foreign currencies. Hence, in the end, India has to get these dollars from somewhere, say from the dollars earned by exporters or foreign investors. If India does not have enough dollars to pay for imports, it has to devalue its currency so that exporters can export more. As India imports 70% of its oil and oil is priced in dollars in world market, oil price increases in terms of rupee, after devaluation. Whenever there is a price rise in commodities such as petrol, opposition parties and common people blame the government for the price rise, whereas they should blame their own countrymen, who are purchasing imported items. Indians, who purchase cheap imported items, do not realize that they are in fact paying much more than the sticker price.

Hence India should never import a mass consumption item and it should find a substitute for an imported mass consumption item at the earliest. As crude oil is the biggest import item in India, costing a net $117 billion in 2015, India should find alternative fuels like corn-based alternative fuels include biodiesel, bioalcohol (methanol, ethanol, butanol), chemically stored electricity (batteries and fuel cells), hydrogen, non-fossil methane, non-fossil natural gas, vegetable oil, propane and other biomass sources.

Brazil is the world's second largest producer of ethanol fuels. The Brazilian car manufacturing industry developed flexible-fuel vehicles that can run on any proportion of gasoline (E20-E25 blend) and hydrous ethanol (E100). Introduced in the market in 2003, flex vehicles became a commercial success dominating the passenger vehicle market with a 94% market share of all new cars and light vehicles sold in 2013. By mid-2010 there were 70 flex models available in the market, and as of December 2013, a total of 15 car manufacturers produce flex-fuel engines, dominating all light vehicle segments except sports cars, off-road vehicles and minivans. The cumulative production of flex-fuel cars and light commercial vehicles reached the milestone of 10 million vehicles in March 2010 and the 20 million-unit milestone was reached in June 2013. As of June 2015, flex-fuel light-duty vehicle cumulative sales totaled 25.5 million units and production of flex motorcycles totaled 4 million in March 2015. India needs to do the same even if it costs more than what it pays right now to foreign countries for its oil import, i.e. $177 billion in this endeavor. Despite having 7th largest land mass (nearly 1/6th of Russia and 1/3rd of US as well as China also), India has 2nd largest arable land area in the world, nearly equal to the US, the largest in the world. US agriculture production, employing only 2% of its population, is much more than India. Hence India can easily do what Brazil has done.

India imports consumer items like phones, furniture, water coolers, and erickshaws, to name few, mainly from China. India can easily manufacture these by doing reverse engineering which China does with everything, from phones to military aircrafts. Private firms in India may not manufacture these consumer items as they would not like to have loss making plants but the government should manufacture these by providing subsidies which China does with majority of items it manufactures. Also one manufacturing job creates additional jobs as the worker would buy consumer items like say food, clothes and car, children would go to school and he would rent or construct house, increasing spending in housing sector. Hence by importing items like furniture, country is losing these additional jobs apart from the manufacturing jobs directly associated with the item in consideration.

Copyright Dr. Susmit Kumar 2016

India Needs to Treat Its Foreign Trade Same as Defense Sector, Part-1

Susmit Kumar, Ph.D.

Published at South Asia Monitor on May 17, 2016

A country spends significant amount of money on its defense without thinking about any monetary benefit from defense sector. For an example when India buys an aircraft carrier or dozens of fighter aircrafts, it does not get any monetary benefit out of them. In this two-part article, we will see that a country like India needs to treat the increasing negative Balance on Current Account same as it does with the defense sector. Balance on Current Account is defined as the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers.

The 1991 FOREX crisis in India, when RBI had to airlift sixty-seven-ton gold to London as collateral to get a $2 billion loan from IMF, is considered to be a watershed moment in Indian economy. India needs to learn to keep its trade deficit in check which has caused demise of many countries in past. Despite having no significant setback in domestic economies, the countries suffered heavily for decades to come when they have FOREX crisis. As they have to go to the IMF to get loans, IMF imposes its bitter pills, like to devalue the currency, raise interest rate by double digits, sell prized public sectors at throw away prices to foreign investors and reduce budget deficits by reducing subsidies and spending on social services. Their stock markets crash wipe out significant amount of money and also devaluation of the currency results in drastic decrease in entire wealth of the country, like real estate, minerals and labor, with respect to other currencies, which finally results in inflation.

Let us study countries, devastated by FOREX crisis:

The 1997 East Asian Economic Crisis – After China devalued its currency by 35% in 1994, only Japan devalued its currency to maintain its export level. Other Asian countries delayed devaluation until 1997. This caused a sharp fall in the exports of East Asian countries like, Thailand, South Korea, Malaysia, and Indonesia while China’s 1997 exports increased by 20 percent. Japan also had a trade surplus of $91 billion that year. This resulted in sharp drop in FOREX reserves of the former countries, making them venerable to the currency manipulators. For an example, South Korea’s foreign exchange reserves at the end of 1997 were only $8.87 billion, compared to $29.4 billion at the end of 1996. After the 1997 crash of the economies of Thailand, Malaysia and Indonesia, these countries have lost their place in global economy, i.e. nobody talks about them right now.

The 1991 Collapse of Soviet Union – Soviet Union needed external funding for modernizing its economy under Mikhail Gorbachev’s Perestroika and Glasnost policy. There was drastic reduction is price of crude oil, the main Soviet export, during late 1980s and early 1990s after the end of Iraq-Iran War (1980-88). Crude oil price dropped from an average of $78.2 a barrel in 1981 to as low as $7 a barrel one time. These two factors led to a rise in Soviet external debt. In 1985, Soviet oil earnings and net debt were $22 billion and $18 billion, respectively, whereas these numbers in 1989 were $13 billion and $44 billion, respectively. By 1991, when external debt was $57 billion, creditors, many of them major German banks, stopped making loans and instead started demanding repayments, contributing to the collapse of the Soviet economy.

The 2001 Argentina FOREX crisis – Argentina went through an economic crisis in 2001. Instead of bowing to IMF dictates, it defaulted on $132 billion, mostly of foreign debts, and the investors had to take haircuts on their investments. At the height of the crisis in 2001, four Argentinian presidents took oaths and resigned in just ten days. At that time, Argentina’s fiscal deficit and debt were only 3.2 percent and 54 percent, respectively, of its GDP. Due to 2001 default, Argentina is still having trouble in getting foreign loans.

During the 2009 Euro Crisis, the affected countries, called PIIGS (Portugal, Ireland, Italy, Greece and Space), had significant negative Balance on Current Account in last more than a decade whereas Euro countries, like Germany, Holland, Belgium, Finland and Austria, had positive Balance on Current Account in the same period.

Since 2010, the United States also has been proposing limits on “sustainable” trade surpluses and deficits. The proposal has been rebuffed by the BRIC (Brazil, Russia, India, China) countries and also Germany, which currently produces the second-largest trade surplus in the world. The US proposal is nearly the same as the one proposed by the British economist John M. Keynes and his team (the Keynesian stimulus plan is named after him) during the deliberations that led to the 1944 Bretton Woods Accord. Keynes was a brilliant economist who foresaw a global crisis due to large trade imbalances that would lead to instability in the global economy.

When the future of world trade was discussed, and the Bretton Woods conference was planned in the early 1940s, many Third World countries were still under colonial rule and had absolutely no say in those discussions. The main deliberations took place between the United States and Britain exclusively, and at Bretton Woods all other countries were invited simply for the formal signing-in ceremony.

During the 1944 Bretton Woods agreement deliberation, there were two competing plans for the future of the global economic order—Britain’s Keynes plan and United States’ Harry Dexter White plan. Keynes favored a world currency, to be called bancor, and managed by a global bank and an International Clearing Union. That “neutral” world currency would be exchangeable with national currencies at fixed rates of exchange. Under Keynes’s plan, both debtors and creditors would be required to change their policies. A country with a large trade deficit would pay interest on its account and devalue its currency to prevent the export of capital. On the other hand, a country with a large trade surplus would increase the value of its currency to permit the export of capital. A country with a bancor credit balance more than half the size of its overdraft facility would be required to pay interest on it. Keynes went so far as to propose the severe penalty of confiscation of surplus if at the end of the year the country’s credit balance exceeded the total value of its permitted overdraft.

Under the White plan, the US dollar was to be the global currency and the United States was given veto power in the workings of the IMF and the International Bank for Reconstruction and Development (IBRD, later incorporated into the present World Bank). Because of the two world wars the European countries were deeply in debt and had transferred huge amounts of gold to the United States. They also needed money from the United States for their postwar reconstruction. Therefore, the United States was able to impose its will and its plan at Bretton Woods.

During the 1997 East Asian economic crisis, a popular phrase was used to characterize the IMF and its policies: For the average person the actual meaning of IMF was “I’M Finished.” After watching IMF at work during the crisis, Joseph E. Stiglitz, the 2001 winner of the Nobel Prize in economics, wrote in April 2000: “I was chief economist at the World Bank from 1996 until last November, during the gravest global economic crisis in a half-century. I saw how the IMF, in tandem with the US Treasury Department, responded. And I was appalled. … The IMF may not have become the bill collector of the G-7, but it clearly worked hard (though not always successfully) to make sure that the G-7 lenders got repaid.” In the IMF, major decisions, including the election of its managing director, require an 85 percent super-majority. The top three countries, having the highest votes, are the United States (16.75 percent), Japan (6.24 percent), and Germany (5.81 percent). Hence in IMF, nothing can happen without the wish of the US.

In his book Globalization and Its Discontents, Stiglitz, who was also a member of the Council of Economic Advisers under President Clinton, described meetings where President Clinton was frustrated because an increase of one-quarter to one-half percentage point in the interest rate by Federal Reserve Bank Chairman Alan Greenspan might destroy “his” nascent economic recovery. A comparison here with the actions of the IMF during the East Asian debacle is instructive: There, the IMF forced interest rates to raise by 25 percentage points—fifty times the interest rate Clinton complained about—for economies going into recession

Copyright Dr. Susmit Kumar 2016

Samajas of India

The below linked document (pdf) gives an outline of some samajas of India. It was published by the New Delhi Prout Research Institute. In spite of numerous inaccuracies as regards the detailed blocks and districts (and the fact that new districts and blocks have been created since this review was carried out), to the knower of India's languages, various cultural expressions and socio-economic potentialities the document gives an idea of the fundamental thoughts and principles that go into the formation of PROUT samajas.

Samajas of India, New Delhi Prout Research Institute (pdf 11 MB)

The below sketch provides an outline of 44 proposed samajas of India, names underneath.

Detailed outline of one of India's samajas, Kashmiri Samaja:

Northeastern India

By P.R. Sarkar

(20 April 1989, Kolkata) – The northeastern region of India comprises Assam, Arunachala, Mizoram, Meghalay, Manipur and Nagaland. To the noith of India are the small states of Nepal, Bhutan and Sikkim.

The shape of Nepal is like a rectangle – the length from east to west is greater than the width from north to south. Nepal is a multi-cultural country. Just as there is no particular ethnic group called “Indians”, similarly there is no particular ethnic group called “Nepalese”. The inhabitants of Nepal are of Austric-Mongolo-Negroid origin. There are a number of languages in Nepal including Nawari, Gorkhali, Angika, Bhojpurii, Rai, Lepcha, Sherpa, Bhutia, etc. The most important language in Nepal is Gorkhali. The inhabitants believe in different religions – some are Hindus who follow the Shaeva or Shakta cults, while others believe in a mixed religion of Hinduism and Buddhism. Large parts of southern Nepal are plains, but in the north are the Himalayas. In the west is the Terai and in the east, the Duars. Central Nepal is colloquially called “Madesha”. The inhabitants of Nepal have the same ethnic origin as those of India, and they introduce themselves as Madeshi. Generally the Nepalese people have pointed noses; only the Gorkhas have flat noses. The language of the Morang district of Nepal is Angika, while Bhojpurii is the language of the westernmost part of Nepal. Bengali is spoken in Jhanpa district in the east. The Gorkhas are devoted to Shiva. One of the names of Shiva is “Gorakśanatha”, and as the people are the devotees of Gorakśanatha, they are called “Gorkhas”. The Gurung and Rai communities have mixed ethnic origins – their forefathers were Indians and their foremothers were Mongolians.

"Northeastern India has immense socio-economic potential.
This potential should be properly harnessed for
the collective welfare of all the inhabitants."

They are Mahayanii Buddhists by faith and they eat beef. The Gorkhas eat raw buffalo meat. The Joshi Brahmins who live in the hilly regions are Pashchimá Brahmins – that is, Brahmins from western India – and they usually use the surname Upadhyaya. The Lamas who settled in Nepal are of Tibetan origin. The central part of Nepal – that is, the plains – is called the Kathmandu Valley. It is inhabited by the Newars who are tall and follow the Hindu religion. The other inhabitants of Nepal are the Sherpas, Lumbus, Lepchas, Bhutias and Tibetans. The people of Bengali origin are settled in Jhanpa district. The languages of the regions other than Jhanpa district arc of the Indo-Tibetan group. The oldest script of Nepal is Bengali. Up to 1773, the Newars were the rulers of Nepal, and the royal language was Newari written in Bengali script. In 1773 the Gorkha leader Prithvi Narayan Shah forcibly occupied Nepal on the festive day of Dolyatra. Thcre is no such language as Nepali. In fact, as many as 17 languages are spoken by the inhabitants of Nepal and Gorkhali is one of them.

About 100 years later, the British general Octonloney occupied Nepal. A truce between Nepal and Great Britain was signed at Sugaoli which became known as the “Treaty of Sugaoli”. According to this treaty, the British army would include a Gorkha regiment in its ranks; the inhabitants of Nepal would be paid in Indian currency at Motihari near the Nepalese border; there would be no passport or visa system between Nepal and India; and there would be tree trade between the two countries.

Bhutan is located to the north of Bengal and to the east of Nepal. Both the inhabitants and language of Bhutan are called “Bhutia.” The language is of the Indo-Tibetan group. The people follow the Buddhist religion. Bhutan was also a British colony, and British currency was once prevalent there, but now Bhutan is a sovereign state.

To the north of Bengal, and to the east of Nepal and to the west of Bhutan, is Sikkim. Its inhabitants are Lepchas and Bhutias. Their religion is Mahayajani or Lama Buddhism.
To the east of Nepal is NEFA – North East Frontier Agency – which is now known as Arunachala. Its old name was “Baliapaŕá” This small state of India is situated next to China. The inhabitants speak Assamese and Bengali and follow the Buddhist religion. Christian missionaries converted a small portion of the population to Christianity. After independence the area was renamed Arunachala, and it enjoys the status of a B-class state (that is, a small state) in the Indian constitution.

The original inhabitants of Darjeeling were Lepchas and Bhutias. The British developed Darjeeling as a hill town. Darjeeling district is similar in size to the Garbeta block of Midnapore district in Bengal. Tea, maize, the large variety of cardamon and oranges are grown in abundance here, but there are no particular mineral resources. Agricultural produce is exported from Darjeeling. In Darjeeling district there were about 300,000 Nepalese – that is, Lepchas and Bhutias. About 200,000 of these were permitted to settle in India after being driven out of other areas. Some Nepalese settled in Darjeeling district and some cleared the jungles in Madarihat in Jalpaguri district and settled there. Amongst the Nepalese who were allowed to settle in India, some were Gorkhas. Those who settled in Darjeeling district are divided into two distinct groups – Nepalese and non-Nepalese – and amongst the Nepalese there are Gorkhas and non-Gorkhas. So in fact there are very few Gorkhas in Darjeeling district.

The Cachar, Goalpara, Dhubri, Nagaon and Kamrup districts are the Bengali speaking districts of Assam. The British occupied Assam in 1824 and later separated it from Bengal Presidency in 1912. The inhabitants of Cachar district were originally Bengalees. The king of this area was Shiva Singha and the capital of his kingdom was Haflong. The British occupied Cachar after defeating him. The areas of Goalpara, Coochbihar, Sitai, Dinhata, Mathabhanga and Shitalkuchi formerly constituted Rangpur sub-division. Before the British occupied this region, it was included within the Coochbihar Native State. Later Goalpara was separated and the remaining portion was known as the British Rangpur sub-division. Goalpara was made a separate district with its headquarters at Dhubri. The northern part of Dhubri is adjacent to Bhutan and the inhabitants are mainly Rajbangshi Bengalees who speak the Rangpuri dialect of Bengali. In the census reports their mother tongue is wrongly recorded as Assamese. The northern part of Nagoan district is full of forests and jungles, and the southern part is hilly and also full of forests which are inhabited by elephants. Most of the population are Bengalees who speak Bengali. Only a small number of people speak Assamese, and most of these people use surnames such as Mandal, Bhunya, etc. In Hojai, Lanka and Lumding all the people are Bengalees.

The headquarters of the Kamrup district is Gwahati which is also the capital of Assam. The people are mostly Assamese. Some of the sub-divisions like Nalbari, Barpeta, Haoli, etc. are full of forests and are the Bengali speaking areas. Some parts of Barpeta district are entirely Bengali speaking, but the number of Bengali Muslims is more than the number of Bengali Hindus.

Meghalay comprises the Garo Hills, United Khasia and Jayantia Hills and the Tribal Council. Kumuda Ranjan Singha was the king of the old Meghalay state. The inhabitants are Garos, Khasiyas and Bengalees. The Bengalees outnumber the rest of the population. Shillong is predominantly a Bengali city.

The royal family of Manipur used to speak Bengali. The kings of the Tripura and Manipur were initiated by Chaitanya Mahaprabhu. The inhabitants of Manipur follow the Gaoriya Vaeshnava religion, and their main scripture is Chaitanya Charitamrita written in Bangali. The capital is Imphal and the language is Mithei Manipuri written in Bengali script. The army of Manipur was chiefly manned by the Kukis.

Amongst the different ethnic groups of the northeastern region of India, an atmosphere of cordiality and fraternity has to be developed. Amongst the Bangali Hindus and Bangali Muslims, cordial ties must also be well-established. All kinds of social, economic, cultural and educational activities must be accelerated. This work should continue with a lot of intelligence and tact. Movements and agitations against the exploitation and deprivation of the local people must be launched immediately, and the Bengali speaking areas must be brought within the purview of the Bangalistan movement. The future of the entire northeastern region of India is very bright.

In North Bengal, the Assam Valley, Karimganj, Silchar and Cachar the topography, soil and climate are quite different from those of Ráŕh. Ráŕh is about 300 million years old and at that time these places were under water. When the Himalayas came into existence, they were under water. After the formation of the Himalayas, they rose up out of the sea and were built up with the accumulated sand and silt from the Himalayas. All these places did not come into existence at the same time, which is why we can see three areas with distinct types of soil in North Bengal. One is diyára, river side alluvial soil; the second is t́ál, large strips of plain alluvial soil; and the third is barren or sandy soil. The hills of Ráŕh are higher than those of the Khasia and Jayantia Hills. As a result of constant erosion for 300 million years, the mountains of Ráŕh have become small hills. In ancient times the rivers of Ráŕh were ice fed, but now they are rain fed. Like Ráŕh, the rivers of Tripura are rain fed, but the duration of the rains in Tripura is longer than in Rárh. As a result, for most of the year the rivers remain full of water. Hydroelectric plants for industrial development can be easily established in Tripura. If the government wants to generate cheap electricity in Tripura, North Bengal and the Assam Valley, hydroelectricity is the most suitable source of power. In comparison, the cost of solar energy will be greater. In this vast area there are many large rivers like the Mahananda, Balasai, Tista, Buritista, Jaldhaka, Godadhi, Brahmaputra, Barak, Kushiyara, Gomati and Pheni. From these rivers it is quite easy to produce much hydro-electricity. The soil in this region is slightly sandy, but the soil in Ráŕh is sticky. Sticky sandy soil is ideal for jute, pulses and other summer crops. Good summer crops include Bengal gram, horse gram, pea, etc. The rivers of North Bengal carry a large amount of alluvial soil, and the soil of this region is very soft. So while constructing dams, a strong concrete foundation must be built. The Koshi river has changed its course about 100 times in the last 135 years because of the soft soil in the area. It is essential that the foundations and sides of all the dams constructed in this region are made with concrete so that the dams will last a long time.

This is also a jute producing area. From jute, industries such as nylon, rayon, match sticks, plastic and jute’s wool can be developed. High quality warm clothing can also be produced by manufacturing nylon and wool. In all these areas jute spinning mills can be developed. To establish cotton spinning mills in Ráŕh, vapourisation will have to be artificially produced in factories, but in North Bengal the local climate is very congenial to fibre production, so artificial vapourisation is not necessary for spinning jute. In North Bengal custard seeds, drumsticks and mulberry plants are plentiful, hence there can also be abundant silk production. This area – except Balurghat, Raiganj and the northern portion of Malda – is full of alkaline soil which is ideal for mangoes and lichiis. Pineapples and bananas can also be grown in abundance. Jalpaguri, Coochbihar, Dhubri, Karimganj, Cachar, the Assam Valley, Silchar and Tripura are ideal for the cultivation of jackfruit. From banana, pineapple and jackfruit good quality fibre can be manufactured for the cloth industry. For the cultivation of pineapple and bananas, a humid climate is required, but jackfruit requires no particular climate – it can grow in all climates and soils. The climate of Tripura is extremely congenial for jackfruit. Besides fine fibre, alcohol can also be prepared from jackfruit in Tripura and alcohol related industries, pharmaceuticals and medicines can be developed. High quality sugar can also be prepared from jackfruit. In the Terai area where there is heavy rainfall, oranges can grow in abundance, therefore medicinal industries from fermented orange juice can also be set up. In Jalpaguri bran oil can be produced from paddy husks, and if it is mixed with limestone, large scale cement industries can also be established. In Darjeeling and the Assam Valley there are rich deposits of copper. In Cachar, Karimganj and Tripura soft wild bamboo is plentiful which can be used as a raw material for the paper, plastic and rayon industres. A new type of alternative food can be extracted from the green leaves of the bamboo plant. Fine fibre can be produced from pineapple leaves.

If dams are constructed on the rivers, artificial canals can be built and used as water transportation routes for power boats. On both sides of the roads segum, mahoganv and shal trees can be planted. The local climate is very congenial for the rapid growth of these types of trees which can be utilized for the production of non-mulberry silk. To establish industries in this region, hydro-electricity can be easily produced. Electricity can also be produced from solar energy, but it will be more expensive. In Raiganj, Balurghat and North Malda, aus paddy will grow abundantly. North Cachar, Mikar Hills and Lumding have the same sort of problems as Tripura. The Meghalay rivers are partly ice fed and partly rain fed. This area receives heavy rainfall, so it is advantageous to produce hydro-electricity. The soil is not very fertile, so food crops do not grow well. Sugar cane can be grown profitably, so the paper and sugar industries can also be developed. The Meghalay Hills are similar to those of Tripura, and the plains are like North Bengal.

In the regions where there is heavy rainfall, mango and lichii can grow, but in certain places they will be infested with worms. The best mangoes and lichiis in India are grown in this region. The more one proceeds towards the coast, the more humid the climate becomes, and such a climate is ideal for growing pineapple, banana and betel nut. In English supari means “areca nut” but in Indian English it is “betel nut”. Betel is a Tamil word which means music. The more one proceeds towards the west, the drier the climate becomes. Such a climate is not ideal for banana, pineapple, etc. In Mithila in Bihar, no pineapple or banana is grown.

Northeastern India has immense socio-economic potential. This potential should be properly harnessed for the collective welfare of all the inhabitants.

Copyright Ananda Marga Publications 2012


An Impending Nuclear War Between India and Pakistan Over Kashmir

Originally published in Global Times, 1995.

Susmit Kumar, Ph. D.
For centuries Kashmir was a place noted for its adherence to the gentle Sufi form of Islam. Kashmir was the only place where no communal riot and killing took place during the partition of India. But since 1989, India has been fighting Pakistan-sponsored infiltration in Kashmir.

India and Pakistan fought two full-scale wars over Kashmir. Since 1989 India is fighting Pakistan-sponsored aggression in Kashmir. In last ten years, more than 25,000 people have died in Kashmir. Since 1996, India has lost more than 2,000 soldiers in Kashmir and several thousands are being wounded every year. More than one third of the Indian Army, about 450,000 troops, is tied down in Jammu and Kashmir to fight a couple of thousands of irregulars. India is spending thousands of crores of rupees every year to fight them.

After getting control of more than 90% of Afghanistan, the Pakistan army is sending the irregulars to Kashmir to fight the holy war. According to intelligence sources, about 8,000 to 10,000 Islamic fundamentalists, mostly Arabs and Afghans and trained in Afghan war universities, are in Pakistan-controlled Kashmir ready to enter India to fight the Islamic holy war. The Line of Control (LOC) in Kashmir is about 780 kilometers long and it is quite impossible to stop the infiltration of these mercenaries. Right now, the situation in Kashmir is worse than that in 1965 when Pakistan’s dictator Ayub Khan infiltrated guerrilla units on mass scale that led to a full-scale war.

People in India think that the best solution of the Kashmir problem is to convert the LOC to an international border, but no government in Pakistan can ever agree for it because it will not be acceptable to either Pakistani Army or Pakistani people. There are several factions in the Pakistani army which work independently of each other. People in India and elsewhere praised the Bus Diplomacy and subsequently signing of the Lahore Declaration by Indian and Pakistani prime ministers in February this year. Although Nawaz Sharif got a huge political mandate in the last election and has been able to ease out other power centers, the president and chief justice, the Kargil Operation by Pakistani army clearly shows that who has the final control over the power in Pakistan. Nawaz Sharif did not fully understand the magnitude of Kargil crisis till it was full blown. Just few weeks ago the US State Department issued a stern warning to the Pakistani generals not to overthrow the Nawaz Sharief government.

Even if the Kashmir problem is solved, the Inter-Services Intelligence (ISI) of Pakistan (Pakistan’s equivalent of the US’s CIA) is not going to stop its terrorist activities in India. ISI’s sponsorship is not limited to Kashmir only. It is funding, training and supplying arms to militants and separatists all over India – as far as in Assam and its neighboring states. In the hills of Bangladesh and deep forests of Bhutan and Myanmar, ISI is operating 30 to 40 training centers for separatists operating in the Northeast states. Pakistan is supporting Islamic agressors not only in India, but also in countries like Egypt, Tunisia, Algeria, Tajikstan and Dagestan. ISI and Pakistani army are rouge organizations. They think that they can inflict heavy casualty on India by their low-cost war like Kargil operation and India will not increase the intensity of war because of their nuclear blackmail, i.e. they will use nuclear weapons if India will go for full-scale war. But there is a limit of patience of India. India will have to go for a war with Pakistan in very near future to end its sponsorship of aggression. As predicted by noted US thinks tanks, this war will end with the use of nuclear bombs by both the countries. In this article, we will discuss the history of the Kashmir and why India will have to invade Pakistan to solve the activities.

1. Kashmir – History of Conflict

When the British left India in 1947, British-controlled states, also called British India, were divided between India and Pakistan in plebiscite along religious lines. Twelve million Hindus and Muslims fled from one area to another and half a million people lost their lives in the ensuing communal riots. Under the Indian Independence Act of 1947, the paramountcy of the British over about 600 princely states lapsed and they were free to join India, Pakistan or become sovereign (i.e. the sovereignty of each of these states was to revert to the ruler). The Indian National Congress had demanded the two-nation theory to be applied to these princely states too. According to the Indian National Congress, these princely states should not be allowed to become independent and they should join either India or Pakistan on the basis of geographical contiguity and wishes of the population. But the Muslim League opposed it. On June 13, 1947, Jinnah said that the princely states were sovereign for every purpose. Again when the British formulated the draft instrument of accession for the states on defense, external affairs and communications, Jinnah opposed it and said that he would guarantee the independence of the states in Pakistan and publicly reiterated it on July 18, 1947. In order to accommodate Jinnah’s point of view, the British enacted article 7(b) of the Indian Independence Act of 1947.

Within few months of the independence, Sardar Patel, the Indian home minister, integrated 561 princely states, having 800,000 square kilometers and population of 86 million, with India. For this very reason Patel is often compared with Bismarck of Germany who unified Germany in the late 19th century. But his work was much harder than Bismarck who used both “blood and iron” to integrate a dozen states, whereas Patel integrated 561 states without shedding any blood. Jinnah thought that after the lapse of paramountcy many princely states would stay out of India. He tried his best to persuade Bhopal, Hyderabad, Jaisalmer and Travancore to become sovereign states. He even accepted the accession of Junagarh, which had a Hindu majority, to Pakistan in utter violation of the two-nation theory. But Sardar Patel dealt firmly with all these states.

Jammu and Kashmir (J&K) was a princely state. Had it been a part of British India, it would have gone to Pakistan as Muslims constituted about 77% in the state. In 1846 the British sold Kashmir to Raja Gulab Singh of Jammu for a payment of seventy five thousand Nanakshahi rupees under the Treaty of Amritsar. During that period, there was nothing unusual in selling territories. In 1804, Napoleon sold the state of Louisiana to the USA against a payment of fifteen million pounds. After the lapse of the paramountcy in August 1947, Maharaja Hari Singh of J&K, the great grandson of Maharaja Gulab Singh, was not interested in joining either India or Pakistan. Within a week of getting independence, Pakistan planned an operation codenamed Gulmarg to invade J&K on Oct. 22. On August 20, the details of the plan marked “Top Secret”, signed by the then Pakistani Commander-in-Chief Field Marshal Claude Auchinleck, a British, fell into the hands of an Indian Army officer Major Onkar Singh Kalkat who informed about this plan to the Indian defense ministry. But the Indian defense ministry did not take any measures. On October 22, 1947, about 5,000 tribesmen led by Pakistani Army regulars attacked J&K, and quickly captured large parts of J&K. Instead of exploiting their initial success, the tribesmen stopped to loot, rape the women, kill the inhabitants, burn the houses and abduct young women to take back to Pakistan. Maharaja made a desperate appeal to India to come to his rescue, but India took the stand that it was not in position to send troops to rescue Maharaja. On October 26, the intruders massacred about 11,000 out of the 14,000 residents in Baramullah and destroyed the Mohra power station that supplied electricity to Srinagar. In panic, Maharaja Hari Singh signed the Instrument of Accession on the same day. The raiders were just five kilometers from Srinagar.

On October 27, India airlifted massive army to Srinagar in the nick of time and captured Baramulla and major parts of J&K within two weeks. The intruders were on the run and the Indian army would have captured the entire J&K territory. But against the advice of Sardar Patel, Prime Minister Nehru took the matters to the UN Security Council on January 1, 1948. India accused Pakistan for sending its regular troops and tribesmen. It led to the establishment of a Commission, UN Commission in India and Pakistan (UNCIP) by the Security Council to assess the claims and counter-claims of the two countries. Although Pakistan initially denied any involvement, later on it accepted that its army was involved. The chairman of the UNCIP was Dr. Josef Korbel, father of the US secretary of state Ms. Madeline Albright. On August 13, 1948, UNCIP passed a resolution asking Pakistan to withdraw its troops and tribesmen from the entire state of J&K. “Once Pakistan withdraws them, the administration by the local authorities needs to be restored, India will reduce its troops to the barest minimum and then a plebiscite will be held to ascertain the wishes of the people of the state.” The cease-fire came in effect on January 1, 1949 and the cease-fire line became the Line-of-Control (LOC) in J&K.

In fact it was wrong on the part of Nehru to take the Kashmir issue to the UN. It is said that had he given few more days to the army, the entire J&K would have been recaptured. 50 years later, the nation is still paying the price of his blunder. By taking the matter to the UN, he internationalized the issue and made Pakistan a party in J&K issue. After signing the Instrument of Accession by Maharaja Hari Singh, J&K became a part of India. It was completely legal under the Indian Independence Act, 1947, signed by both India and Pakistan, which gave the sovereignty of J&K to Maharaja Hari Singh after the lapse of the British paramountcy. There was no provision of plebiscite in the Indian Independence Act 1947 to ascertain the wishes of the people of the princely states. In fact on February 4, 1948, the US representative, Warren Austin, said in the Security Council, “With the accession of J&K to India, this foreign sovereignty (of J&K) went over to India.” On September 15, 1950, Justice Owen Dixon clearly stated in his report to the Security Council that Pakistan violated the international law by crossing the boundary. Hence it was completely wrong on behalf of Nehru to agree for a plebiscite on a territory that was an integral part of India. However the plebiscite was conditional upon Pakistan withdrawing its troops and tribesmen from the state and restoration of administration to the local authorities. In last 50 years, Pakistan has not fulfilled the first two conditions and hence is responsible for the stalemate. In fact, in 1957 the UN Security Council adopted a resolution on the basis of the UN mediator Ambassador Gunnar Jarring of Sweden who wrote in his report: “In dealing with the problem under discussion as extensively as I have during the period just ended, I could not fail to take note of the concern expressed in connection with the changing political, economic and strategic factors surrounding the whole of the Kashmir question, together with the changing patterns of power relations in West and South Asia. The council will further more be aware of the fact that implementation of international agreements of an ad hoc character which has not been achieved fairly speedily, may become progressively more difficult because the situation with which they were to cope has tended to change.”

2. Indo-Pak Wars

India, Pakistan and China control 45%, 35% and 20%, respectively, of the original J&K territory. China got about 35,000 square kilometers in Aksai Chin in 1962 war and another 5,000 square kilometers in Balistan ceded by Pakistan under a treaty signed in March 1963. Had Pakistan been able to get Kargil heights, it would have suited China too as it would have caused problems for India in deploying troops in LOC along Indo-China border in Aksai Chin. Indian Kashmir has three regions: Kashmir Valley (hereafter called India-Administered Kashmir Valley or IKV), Jammu and Ladakh. IKV, Jammu and Ladakh have Muslim, Hindu and Buddhist, respectively, majorities. Pakistan-Administered Kashmir (PAK) has Muslim majority. The bone of contention is just IKV, a one hundred mile long valley, which is about 9% of the original J&K territory.

India and Pakistan fought three wars, in 1947-48, in 1965 and in 1971, and two out of these were over Kashmir. Apart from these three wars, India has been fighting a covert war since 1989 in Kashmir. This year both the countries came close to a full-scale war when Pakistani Army regulars occupied the peaks in Kashmir overlooking the important Indian highway linking Srinagar to Leh, the capital of Ladakh.

After watching the helplessness of Indian Army in 1962 Indo-China War, Pakistan’s dictator Ayub Khan devised a plan codenamed “Operation Gibraltar” under which Pakistani Army infiltrated guerrilla units on mass scale in Kashmir Valley thinking the Muslims would revolt en masse against the Indian Union which did not happen. Then the regular Pakistani troops crossed the LOC in J&K. In 1965, the UN military observer group Brigadier General Nimmo reported to the UN about the massive infiltration by guerrilla units from Pakistan side. This infiltration was a deliberate violation of all the UN resolutions on Kashmir. But the UN did not take any action. Pakistan thought that Indian Prime Minister Lal Bahadur Shastri would limit the war to J&K. But the Indian Army crossed the international border in Punjab and Rajasthan to relieve the pressure in J&K. They had encircled Lahore from three sides when the cease-fire occurred. In fact, the US had prior knowledge of the “Operation Gibraltar.” In early 1965, Sidney F. Giffin published a book titled The Crisis Game which was based on two war game exercises conducted by the Institute for Defense Analyses, Washington DC, a Pentagon think tank along with Harvard University. One game was titled “Kashmir 1966: As a fictional crisis” and the second was on Cuba. According to the wargame, the fictional war between India and Pakistan over Kashmir would start on September 1, 1966. They were right about the date, but the war started on September 1, 1965, i.e. one year earlier. According to the war game, Pakistani Army attacked in J&K and reached the outskirts of Srinagar. Then Russia advised India to counter attack East Pakistan (the present day Bangladesh), but the Indian prime minister did not do so. In the meantime, China attacked India in Sikkim, which caused the US to intervene, and in turn, US asked India to hold a plebiscite in J&K. But they were wrong about Indian prime minister’s decision to order the counter-attack on Lahore. Although India won some strategic areas, like Haji Pir Pass and the Uri-Punchh bulge, in Kashmir, it returned all of them under the Tashkent Agreement signed in January 1966.

The massacre of hundreds of thousands of Bengali speaking Muslims in East Pakistan by the Urdu speaking West Pakistani Army in 1971 and subsequent creation of Bangladesh clearly demolished the two nation theory of Jinnah based on religion. In fact, Jinnah himself drank, ate pork and did not say his prayers, and could therefore not be described as a Muslim. In the Pakistan’s general election held in early 1971, Avami League, headed by Sheikh Mujeeb, father of the prime minister of Bangladesh Sheikh Hashina, won the majority. But instead of handing him the power, West Pakistani leaders arrested him and unleashed a reign of terror in East Pakistan. In his book The Betrayal of East Pakistan Lt. General Amir Abdullah Khan Niazi, who was the head of the Pakistani Eastern Command and surrendered to the Indian forces on December 16, 1971, wrote, “On the night of March 25-26, 1971, General Tikka Khan (the then head of the Pakistani Eastern Command) turned the peaceful night into a time of wailing, crying and burning…The military action was a display of stark cruelty, more merciless than the massacres at Bukhara and Baghdad by Changez Khan and Halaku Khan, or at Jallianwala Bagh by the British General Dyer.” India missed a golden opportunity to solve the Kashmir problem when it had 93,000 Pakistani troops as prisoners of war and about 5,000 square kilometers of territory in the Pakistani Punjab from where a million people had fled. In magnanimity, Ms. Indira Gandhi gave all these up under the Shimla Agreement, signed in 1972, on the promise by Z. A. Bhutto that he would convert the LOC into international border. He pleaded that it would take time for him to mould public opinion in his country for this; otherwise it would lead to a weakening of the nascent democracy that had emerged after 14 years of army rule.

3. Covert War Since 1989

For centuries Kashmir was a place noted for its adherence to the gentle Sufi form of Islam. Kashmir was the only place where no communal riot and killing took place during the partition of India. Prior to 1989, more than 600,000 tourists used to visit every year the lakes and houseboats on these lakes in Kashmir. But since 1989, India has been fighting Pakistan-sponsored terrorism in Kashmir. It all started by the fateful decision by the V.P. Singh government in releasing five jailed terrorists in exchange of Rubaiya Sayeed who was kidnapped by the Jammu and Kashmir Liberation Front (JKLF). Although JKLF received supports from Pakistani authorities, their goal was an independent country. In early 1990s, Militants attacked and killed Hindus in the Valley that caused Hindus to flee from the Valley. Now there is no Hindu left in the Valley. There are army bunkers at every major intersections in Srinagar. By 1995, Indian authorities crushed the JKLF movement. Also people in Kashmir have become fed up with violence and they are yearning for peace. But in last couple of years, the ISI started sending Islamic fundamentalists trained in Afghanistan’s terrorist universities into Kashmir Valley. Now the Kashmiris, who fought against the Indian authorities, have been siding with Indian forces to fight these non-Kashmiri Islamic fundamentalists. In an article titled “Kashmiris Militants Join the Mainstream”, published in The Washington Post dated July 3, 1998, Molly Moore wrote, “Many of the same Muslim separatists who spent much of the past decade blowing up military convoys and extorting money from the shopkeepers of Srinagar have used the proceeds to join the mainstream – building expensive new homes, opening private businesses and running for public office. The transformation of some former rebels is part of a dramatic shift in the 9-year-long guerrilla war in this Himalayan state. Self-described former militant commander Javaid Hussain Shah said he felt euphoric when he joined the militancy in 1989. Shah said, “We believed it was a holy jihad. Once we jumped into it, we realized that was mirage. When I saw innocents being killed, I switched sides.” Many of his followers have re-armed and are preparing to launch their own assaults against militants. In mid-1997, work at HMT, ITI and other plants were resumed. In late 1997, India’s winter game was held near Srinagar and resort hotels were opened for the first time since 1989.

In 1996, ISI created Talibans (meaning madarsa students) and within couple of years got control of 90% of Afghanistan. Pakistani Army regulars fought along with the Talibans in Afghanistan. They manned all the infrastructures like fighter planes, tanks, communications, etc. It is unthinkable that students from madarsas would fly modern fighter planes. Islamic fundamentalists from countries like Jordan, Syria, Tunisia, Yemen, Libya, Sudan, Saudi Arabia, Algeria and Egypt fought in Afghanistan in the name of Jihad, the Islamic holy war. They received training in training camps established by the CIA for fighting the ex-Soviet troops in Afghanistan in 1980s. Now the ISI has been using same terrorists in Kashmir and also in places like Chechnya, Dagestan and Egypt. In May this year, The Washington Times reported that many members of the Kosovo Liberation Army (KLA) were trained in Afghanistan’s terrorist universities. Recently Russia has captured several Islamic fundamentalists, trained by ISI, in Dagestan where it has been fighting a bitter battle with Islamic separatists. ISI has been getting several billion dollars in illegal drugs deals from poppy cultivated in the Pak-Afghan border area and hence, it is not dependent on any funding from Pakistan’s civilian government.

Early this year Pakistani army gambled by occupying heights in Kargil overlooking the strategic highway connecting Srinagar and Leh, the most populous city Ladakh. For last more than a quarter century, the Indian forces used to leave the bunkers at those heights during the harsh winter. But this year they found Pakistani Army troops and Islamic fundamentalists mostly Arab mercenaries, when they went to their bunkers after the snow started melting. In the ensuing battle, India had to use its airpower to dislodge the intruders. This led to worldwide condemnation of Pakistan. It was because of Indian restraints in not crossing the LOC that it did not turn into a full-scale war. The seriousness of the problem can be judged from the fact that despite having hectic schedule on the US Independence Day, President Clinton talked to Pakistan’s Prime Minister Nawaz Sharif for several hours on 4th of July, which led to withdrawal of Pakistani troops from Indian territory. In Kargil, India lost close to five hundred troops.

4. Solution of Kashmir Issue

Although Pakistan withdrew its troops and Islamic fundamentalists from Kargil, ISI has increased its activities in sending terrorists in Kashmir and in the Northeast states. This has led to a dramatic increase in terrorism in these areas. There are several cases of rocket attacks on Indian Army and paramilitary camps, and also their daring raids on these camps. Since Kargil crisis, hundreds of army and paramilitary troops have been killed. Recently, several ISI officials are captured in Assam and its neighboring states. During the Kargil crisis, there were several cases of rail sabotage in Northeast when Indian troops were being transferred from the eastern states to J&K. Between 1971 and 1991, population of Hindus in Assam decreased from 72.5% to 67%, and population of Muslims increased from 24.5% to 28.4%. This was due to illegal infiltration of Muslims from Bangladesh. Now ISI has started using them to create troubles in the Northeast. If infiltration is not checked, ISI may start to create a Kashmir like situation in the Northeast. India is bleeding in terms of both money and manpower. Hence, the next Indian government has to find a solution of Kashmir problem.

4.1. Repercussions of A Plebiscite in Kashmir – A situation may arise when India may have to agree to hold a plebiscite in Kashmir because of extreme terrorism by hardened Islamic terrorists. As Jammu and Ladakh regions are Hindu and Buddhist majority areas, respectively, India will allow the plebiscite in the Kashmir Valley only. Like East Timor, the plebiscite will be held under the UN supervision. Unlike IKV, the situation in PAK has completely changed since 1948. Under Article 370 of the Indian constitution, a non-Kashmiri Indian cannot buy any land in Kashmir and hence, original Kashmiri Muslims are in majority in IKV. But there is no restriction in PAK and at several places in PAK, the original Kashmiris are now in minority because of large-scale settlement by Punjabi Muslims. Pakistan will try its best to limit the plebiscite in IKV only. Under pressure from India, G-8 countries, and also Muslims in IKV, plebiscite will be held in both PAK and IKV. Also, Muslims in IKV will not opt to participate in the IKV plebiscite only as it will limit their options to only two – to remain in India or to become a part of Pakistan.

In the plebiscite, IKV and PAK people will have three options to vote for – United Kashmir as (i) a part of India, (ii) a part of Pakistan, and (iii) an independent country. First option is ruled out as Muslims in neither IKV nor PAK will opt to be a part of the Indian Union. IKV Muslims will think twice before going to Pakistan. Pakistan is a failed nation. During the Cold War, the US preferred for the army generals as the head of states rather than elected executive heads because it is easier to deal with one person (a dictator) than leaders of political parties as in the second case, executive heads change frequently. Hence, the US used to support military coups in the various countries, for examples – Pinochet in Chile, Marcos in Philippines, Military Govts. in South Korea, overthrow and killing of the elected president by the Military junta in South Vietnam during Vietnam War, Suharto in Indonesia, and Mobuto Sese Seko in Zaire. Pakistan is in this list too. In 1980s and thereafter the countries, having US backed dictators at the helm of affairs like South Korea, Indonesia and Philippines, were able to benefit from the US in economic terms. But Pakistan squandered this money in keeping its defense at par with India. Pakistan is too small a country in comparison to India. Its economy is in mess. For last several years, it is in the emergency ward of the IMF. The interest payment on its domestic and external loans takes a large share of the budget that leaves nothing for any other work. In this year’s budget, 45% of total expenditure is earmarked for debt servicing and 22% for defense. Last year the US had to waive its sanctions by allowing the IMF to grant a loan otherwise it would have led to a default on the external debts. US waived the sanctions because of the fear that it might start selling nuclear bomb technology to the Middle-east countries for hard currency. Pakistan is plagued by sectarian Shia-Sunni violence in which majority Sunni community is killing scores of minority Shias in riots. There is no law and order in its most populous city Karachi. Punjabi domination has become a bane of Pakistan federalism. Sindh is in the midst of a civil war and its leaders have started raising the demand of a separate country. Baluchistan has never forgiven Pakistan’s rulers for what they have done to it. North West Frontier Province (NWFP) and Baluchistan have never reconciled to the prolonged governance of the Punjab-dominated military and civilian establishment. Muslims in IKV will think twice to become a part of Pakistan which has not been able to provide a good living to millions of Muslims who went there in 1947 from the Indian Union.

If Muslims in IKV and PAK opt for an independent Kashmir country, then it will lead to a balkanization of Pakistan that will cause Sindh, Baluchista and NWFP to become free from the hold of Punjabis. In an ideal world, an independent Kashmir comprising of IKV and PAK is the best solution. But in the real world, an independent Kashmir will be a Talibanized Afghanistan where there will be no government at all and dozens of factions will fight with each other, and Kashmir will go behind several centuries.

Although some Westerners are predicting that if India will let Kashmir go, then it may lead to a balkanization of India too. But I have serious doubt about it. Pakistan has a history of secessionist movements. Pakistan’s Punjab-dominated army and civil establishment had to use airpower to crush the secessionist movements in Baluchistan and NWFP. Now there is a very strong secessionist movement in Sindh because of the neglect of Bihari Muslims (Muslims from the Indian Union who went to Pakistan after the partition) by the federal and local governments. On the other hand, India never has any secessionist movement barring in few Northeastern states like Nagaland, Mizoram and some parts of Assam. India can lose only these Northeastern states. In Balkan states there were sharp divisions among various religious groups for last several centuries. Although there were hundreds of states that comprised India before 1947 and it is said that it was the British who united India, Indians were bounded by the same culture. When Sheikh Mujeeb, a Bengali speaking East Pakistani, won the election in early 1971, the West Pakistani leaders refused to relinquish the power and instead they butchered hundreds of thousands of innocent Bengali speaking East Pakistani in seven month civil war in 1971. No one can think of a situation like this in India. Kargil crisis has clearly shown that it is the Pakistani generals who hold the main power and not the elected leaders.

But if India let IKV (Kashmir Valley) go, then it will be a doomsday for Indian Muslims. Hindu fundamentalists will butcher them in millions all over India and this massacre will go on for months and belittle the Hindu-Muslim riots that took place during the partition in 1947. We saw how some fanatic Congress party leaders spontaneously organized mass killing of Sikhs all over India after the killing of Indian Prime Minister Ms. Indira Gandhi by her two Sikh bodyguards although there was no prior history of any Hindu-Sikh riot.

5. India-Pakistan Nuclear War

After the Kargil crisis, there is a dramatic rise in terrorism in the Kashmir Valley. There have been several incidents of daring raids by terrorists on Indian army and paramilitary camps. There are several cases of rocket attacks on these camps. In the early years of separatist movements in the Valley, almost all militants were from the Valley and they were fighting for an independent Kashmir. But now almost all militants are non-Kashmiris. They are fighting in the name of Islamic holy war and also for money. ISI lures unemployed Muslims from Islamic countries, mostly from Arab countries, to Afghan terrorist universities. It gives $3,000 to every terrorist for his one month work in J&K. Almost one-third of Indian army’s regular troops is tied down in J&K in fighting couple of thousands of terrorists. Quoting US intelligence sources, US newspapers have reported that about 8,000 to 10,000 mujahideens are ready to enter J&K for the holy war. India has been bleeding for last ten years because of the terrorism unleashed by Pakistan. Now ISI is spreading its activities in the Northeast and elsewhere in India too.

Although Russia gave statements against the US missile attacks on terrorist camps in Afghanistan after its embassies were destroyed in bomb attacks in Nairobi and Dar-es-Salaam, now it is blaming the same Afghan terrorist universities and Pakistan when the graduates from these universities have been giving hard times to Russian troops in Dagestan. Similarly Russia said that the bombing of Yugoslavia by NATO would lead to a world war, but now it is itself bombing its breakaway region Chechnya for harboring Islamic terrorists who are fighting in Dagestan. Russia has given stern warning to Pakistan for giving training to these terrorists and Saudi Arabia for funding them in the name of holy war. Recently Indian and US officials had several rounds of extensive talks over the threat of terrorism originating from Afghanistan.

Hence it is just question of time when India’s patience will ran out. In a conventional war, Pakistan would stand nowhere in comparison to India. India can thoroughly defeat Pakistan within two weeks. According to defense analysts, one of the reasons of surrender by Pakistani army in withdrawing its troops from Kargil heights was the threat of blockade of Karachi port by the Indian Navy. Pakistan gets all its essential items including petroleum, which is very vital for the Pakistani Army, through Karachi port, which is the only port for Pakistan. On the other hand, India has dozens of ports both on its western and eastern coasts. In the case of blockade of Karachi port, Pakistan will run out of petroleum in ten days.

After Kargil crisis, India has been giving warning to Pakistan for sponsoring cross-border aggression. For last 3-4 years, India had weak central governments and hence, it gave opportunity to Pakistan to increase the intensity of aggression both in Kashmir and in other parts of India, notably in Northeast. But according to the exit polls, the next central government in India will have majority support in the parliament and will be stable. As terrorism is on increase and after Kargil crisis hundreds of army troops and paramilitary forces are being killed every month, India’s next central government will have to find a solution, which is to eliminate the terrorist camps in Pakistan and in Afghanistan. India will have to bomb these camps and will go for hot pursuit across the LOC. This will certainly lead to a full-scale war as predicted by several of the world famous think tanks. Also if tens of thousands of Talibans enter IKV, then the only solution for India will be a war.

World famous US think tanks, like semi-official Rand Corporation and the US Army War College’s Center for Strategic leadership, have predicted a nuclear war between India and Pakistan over Kashmir in near future. According to Rand’s report published in early 1998, titled ‘Sources of Conflict in the 21st Century: Regional Futures and US Strategy’, the nuclear war will happen in 2006. According to this report, the insurgency in India Kashmir will become unmanageable. Pakistan’s involvement – never precisely subtle to begin with – becomes highly visible when two Pakistani soldiers, acting as trainers for Kashmiri insurgents, are captured in an Indian commando raid on a rebel-controlled village. Then India warns Pakistan to desist from supporting the insurgencies and threaten dire consequences, Pakistan initiates diplomatic efforts to isolate India, while increasing the levels of covert support for the insurgents. In the spring of 2006, India increases counter-insurgency operations in Kashmir and the rebels are pushed into precipitate retreat. Pakistan’s response is by infiltrating a number of special force teams. Then India launches major attacks all along the international border accompanied by an intense air campaign. Fearful that the Indian will use their air superiority to locate and destroy the Pakistani nuclear arsenal, Pakistan uses a small fission bomb on an Indian armored formation. India’s response is by destroying a Pakistani air base with a nuclear attack. Pakistan then attacks Jodhpur with a 20-kilotonne (kt) weapon. Then India strikes Hyderabad with a 200 kt weapon and threatens ten times more destruction if any more nuclear weapons are used. Pakistan then offers a cease-fire in place. This Rand’s report was published before the nuclear tests by the two countries in 1998. Rand’s report mentioned about active Pakistani army involvement in Kashmir in 2006, but Kargil crisis and recent arrests of several ISI officials in Northeast have shown that India-Pakistan war is going to be in very near future.

According to the war game played at the US Army War College’s Center for Strategic Leadership too, an India-Pakistan clash begins over Kashmir. India, worried that Pakistan could move tanks and armored personnel carriers east from the border city of Lahore and cut off the India-held part of Kashmir, pre-emptively attacks to secure its corridor to that disputed region, pushing deep into Pakistani territory. The Pakistanis, driven backward and fearful of losing their nuclear arsenal, launch a nuclear strike against the Indian force. The escalation to nuclear weapons happens within the first 12 days of the war. The Wall Street Journal published a full-page article on this war game on June 24, 1998. According to a report of the prestigious Stockholm International Peace Research Institute (SIPRI) also, published in May 1998, Pakistan might be prepared to use nuclear weapons even if such an action seemed irrational.

Dr. Susmit Kumar is an Indian-born writer presently residing in USA. Blog: