'It will be business as usual when Modi visits US'

'India and China must get to know each other more. The spirit and interaction can be much friendlier than it is today and we must not allow border disputes and all to stand in the way because if the interaction is at a hostile level, we forget it won’t help.'

'It will be business as usual (when Modi visits the US). The denial of visa will be a thing of the past. I have said it before, that at that level these issues are not allowed to interfere with the flow of diplomatic discourse. Therefore they will concentrate on important issues.'

'I think expectations over the Budget are a bit overblown. In terms of revenue generation, expenditure, it is not terribly important as it is only a half-yearly Budget. But its signals will be important as to which direction the government would go.'

The second and final part of former cabinet secretary Naresh Chandra’s interview to Sheela Bhatt/Rediff.com.

Part 1: 'What civil service expects will be a test for Modi'

How do you see the Narendra Modi government’s approach to China?

I think it’s very pragmatic. On certain issues whether the government is led by a strong leader like Modi or by a coalition government, there are red lines that you cannot cross when it comes to territorial settlement.

On Arunachal Pradesh it is clear that there is hardly a possibility of any ‘give’ from the Indian side. But such large economies on either side of the Himalayas cannot remain strangers to each other. There is lot to be gained by interaction and cooperation. The test of leadership lies in getting the best out of the opportunities that exist.

So the fact that you have a dispute does not mean that you should reduce cooperation or interaction as a cross retaliation. You may have to cross retaliate to settle some urgent dispute. But, as a long-term policy we must pursue opportunities of doing things not only by trading with each other but by cooperating with each other.

Because, there are many areas where you can determine that the interests of China and India are allied, like on the important issue of climate change. We can work together, and have done so before. When it comes to piracy on the sea, dealing with religious fanatic terrorism, these are issues of common interest.

There are many areas like the relationship of China with Pakistan, certainly very negative and disturbing as far as we are concerned. China for some reason feels very disturbed when we accord any status to the Dalai Lama.

What will be the main thrust of Modi’s China policy?

See, you have to change the situation. Today the situation is very strange. We are almost strangers. The Chinese do not know what is going on in India and the Indian side also does not know enough of China. With exchanges, Modi wants knowledge and understanding to improve.

Indians and the Chinese together are almost one-third of the world. They must get to know each other more. Much more. The spirit and interaction can be much friendlier than it is today and we must not allow border disputes and all to stand in the way of that because if the interaction is at a hostile level and not a very friendly level, we forget it won’t help.

The world is not composed of India and China alone. The more we are seen deadlocked in our bilateral relationship, the more leverage other nations get in dealing with each of us. China knows and India knows that there are other players, Russia, Japan and so on.

So we can’t act in such a way that we pose as if we want to gain at the expense of the others. That situation makes us lose more in our interaction with the third party. So we have to have a certain trust in the wisdom of the Chinese leaders and try to inspire corresponding trust in them.

Should Modi be a hardliner? Softliner? Or merely pro-trade?

It will depend on the issue. On strategic issues, defence, security, on terror, corruption, you have to be a hardliner. When it comes to other issues like civil liberties, harmonious living conditions, improving trade ties with neighbours, we don’t have to take a hardline view. Particularly with Nepal, Bangladesh, Bhutan and Sri Lanka.

Does the shadow of the denial of US visa to Modi after the Gujarat riots extend to the bilateral relationship?

I have a feeling we have crossed that stage now. Many times the US government works under the pressure of their procedures -- they call it standard operating procedures. So they make an annual report to their Congress on many issues which amounts to interfering with the internal affairs of other countries.

They do it with Russia, China and India as well. So they do a kind of analysis, paperwork and all that and come up with a conclusion of their own. They feel they had enough reason and information to deny him a visa at that time. But since then enough water has flowed under the bridge. Even in India the whole set of allegations have been subjected to judicial process, they have seen that the courts have given certain judgments and come to conclusions, which has now brought about a situation that denial of visa is no longer tenable.

So I have a feeling they were going to review it any way after seeing the additional facts that have come out.

What will be the mood like when Modi goes to the US?

I think it will be business as usual. The denial of visa will be a thing of the past. I have said it before, that at that level these issues are not allowed to interfere with the flow of diplomatic discourse. Therefore they will concentrate on the main important issues.

There is a feeling that India-US relations, at least the conduct of it, has plateaued, it has become very sluggish. Some of it is true and some is not because there was a lot of exchanges between Indian and US officials and may be not very high-profile decisions were taken but a number of good decisions have been taken including in defence cooperation.

At the same time, a lot of good opportunities have remained unutilised in defence cooperation and other areas, with the new government people are expecting that things will proceed faster, especially in defence. There are issues which are of great importance in the bilateral context so there you have to make as much progress as you can. It’s a question of coming to a deal on fair terms.

When one party to the negotiation is seen as much more powerful than the other, then of course there is always the level of suspicion on the side that feels I’m not as strong as the guy I’m dealing with. But this attitude can be taken too far. Take India for instance, we have one attitude while dealing with the US and totally opposite attitude while dealing with Nepal or Sri Lanka. So we are people in the middle range of the pecking order.

On Modi’s table, how will America and China weigh against each other? Will China get the bigger share of investment opportunities or America?

It depends. When it comes to technology and cutting-edge technology, it has to be the US, but when it comes to manufacturing and trade of physical goods, it has to be China. The most crucial is the cost factor. The advantage with China is the close distance though there are the Himalayas in between, but the advantage of opportunity in relation to the US is that it is the place where the best technology is available today.

I’ll give you an example: we attacked the hapless vice-chancellor of Delhi (on the issue of the four-year degree course). Of course, you’re copying US universities. My question to these critics is, which university should we follow? Look at the number of Nobel Prize winners from India. A dozen colleges from the US have five times the number of Nobel laureates, whether it is Harvard or California or Georgia, Chicago, Stanford… So is it something wrong to match the standards of American universities? What should we copy? How many Nobel Prizes have the University Grants Commission-run colleges won? It’s wrong attitude to say that just because something is parallel in America it is bad. In the US who cares whether you have a three- or four-year course?

So this is a very distorted sense of understanding of global education and shows a certain cowardly mentality, in my view -- you are still showing a subjugated colonial territory attitude. We have to grow out of immature approaches.

How do you see the situation in Mosul and the issue of Iraq and the fate of kidnapped Indians?

I think there are certain adverse and certain positive factors. The adverse factor is that no government has control of that area. So you are dealing with people who are on their own. Many people are with militant leaders. In some places they are conducting mass executions, in some places they are crucifying people.

At the same time, Indians are nobody’s enemies there. They are innocent. So even the most dangerous militants will not have any personal point to score by harassing or killing Indian hostages. My sense is that our people have approached not just the Iraq government, which is militarily engaged, but also other outfits like the Red Crescent, Saudi agencies operating in that area and the Syrians if they can help in extricating these people out of this dangerous area.

So we’re going about it the right way and I think every possible avenue is being explored to get them out of there.

There is a lot of hype about the Budget. Some people say it will be a Budget like never before.

I think it will be both. It will be mixed. The point is that in any case very few months are left of 2014. People are not realising that the Budget will be passed in July or August. In any case it’ll be operative till March 31. So I think expectations are a bit overblown. It is going to be a short Budget. The importance of this Budget is that it is the first of the new set-up.

So in terms of revenue generation, expenditure, it is not terribly important as it is only a half-yearly Budget. But its signals will be important as to in which direction the government would go. I have a feeling that because of things like current account deficit and balancing the books, the finance minister is not going to be terribly ambitious.

He is not going to say I’m going to spend this big on this scheme and this much more on employment and food security. He can’t do it because it will be fiscally irresponsible. So what he will do is to give you signals that he’s going to cut down on subsidies, especially those where a major part goes to those who do not deserve it, like rich farmers.

Having done that, they will try to introduce measures that unlock private capital. I’m not interested in government programmes as long as I get the benefits, whether it is education or hospitals I don’t care. So you see, here people go to government hospitals, but the government hospitals are so crowded that finally the poor people will have to go to private hospitals. The private hospital may be closer to home.

I think this government would try to correct a very wrong attitude of the previous government, trying to do everything by themselves, even primary education, middle schools. I don’t know why the state and central governments wanted to hang on to monopoly in education and public health. So what this Budget will do is show that for a whole lot of socially important programmes, they are going to encourage private investment.

This government is planning unprecedented modernisation of the Indian military.

It should be done. I always somehow get surprised that we forget the fact that we are one-sixth of humankind. We may forget it but the rest of the world won’t. So if you have to organise yourself into a single government and you’re one-sixth of the world, others see a lot of weight out there, both for good and bad. So they are not going to leave you alone.

The other thing is you have a fairly large amount of territory, not as large as Russia, China or the US, but almost 80 percent of it is very productive, which is not true for China and Russia. Ee are in any case overpopulated -- more than 1.2 billion now.

So there are things we have to do for ourselves now. We have to be self-sufficient in defence and security. Till the time the people of India feel secure and their government has organised proper defence of their life and liberty, they cannot make a contribution. In order to make a contribution towards peace and harmony in our neighbourhood and the rest of the world, you have to feel confident and secure…

But our human index figures and actual poverty of above 23 percent don’t justify the heavy military spending.

These are difficult questions of choice. What distinguishes the leader from a common man is that the leader has the responsibility of making choices. The higher the position of the leader, the more complex is the decision-making. Now, should the expenditure on military be two percent or 2.5 percent or five percent is a question of judgement and you’re quite right.

The crying need is for more resources in sectors like health, primary education, clean drinking water, they are very high priorities. People can ask what is the use of having a very strong and modern military when you have the largest number undernourished children and poor rural health facilities.

So there has to be a balance. There is no absolute yardstick … So what Modi is trying to do is to make sure that the money given for defence sector is best utilised. The more modern the equipment the lesser is the pressure on the numbers. The question is not then of quantity but how much of lethal power can you generate. Modern military technology is that when you have a capacity to retaliate or apply force, it should be done in a very cost-effective manner.

People don’t realise it. They say you don’t have ammunition or shells. But shells and ammunition have a shelf life if you overstock, after every three years you keep destroying it, I won’t say it is a waste of money, it’s something needed, but if you overdo it, you’re wasting it.

So you have to exercise your judgement to measure the scale of threat and then generate it. Then you need to have that capacity of generating inventory fast. So when you say modernisation of the army, you have to build capacities in a very cost-effective manner and you should organise action faster.

In the same way, you cannot over-prepare yourself because when you do so you pay a cost. Some people say we are short of cost for fighting a war, suppose we are 50 percent under-stocked in the past 10 years to face a conflict, so if you’re 50 percent under-stocked for the past 10 years, you have saved 50 percent of the budget. So it’s a reverse insurance premium.

Do you think issue of Gopal Subramanium's nomination to the Supreme Court was handled badly?

Yes, it is an important issue. I’m not an expert on these matters. I handled a few cases when I was home secretary I was also secretary, law and justice. You know it’s a question of where the power resides.

In the US the judges are appointed by the president in view of a standard confirmations period. The SC has nothing to do with it. The present chief justice was not even a justice of the Supreme Court or a federal justice. He was an employee of the government and George Bush said he is going to be the justice.

Now in our case, consultation is provided, but to say that the government cannot press the argument and it has no role, that can’t be the case. I believe what Justice Lodha had pressed for was that the government should not appoint a judge who has not been recommended by the collegium. But the government need not appoint every person recommended by the collegium. Otherwise it becomes a self-appointing body. The SC cannot have the final word.

I agree, in Subramanium’s case whoever leaked it (the confidential IB report on him) was unfair. You’re right, it is not a very happy situation but if somebody has indulged in leaking, it was not necessary, actually.