India’s financial A.Q. Khan network

General Pervez Musharraf—whose record in conning his masters (whether these be in Islamabad or Washington) is unparalleled—made out that all Pakistan-related proliferation was caused by A.Q. Khan, who was retired and therefore “no longer a government official”. Living up (or down) to its reputation of being irrationally credulous where its own favourites were concerned, the CIA apparently bought Musharraf’s story, as did the US administration. So whatever took place was the consequence of the independent activities of a single scientist gone rogue, and not part of a GHQ program to make some extra money through nuclear commerce, adding to its profits from staples such as the South Asian narcotics and hawala networks. A.Q. Khan was complicit in the nuclear proliferation emanating from Pakistan, but as part of a network that comprised hundreds of retired and serving scientists, military personnel and civil servants. In India, an “A.Q. Khan network” has been operating since 2004, again with multiple players, but this time in the financial markets and not the nuclear technology field. As yet, however, the Government of India has shown no indication that it is aware of this network and the systemic risk it poses. 

The CBI, ED, DRI and RBI claim to have finally realised that the deliberate defaulting of bank loans through collusion between businesspersons, politicians and officials has reached levels that threaten to sharply slow down the Indian growth story. Such malpractices have coexisted with RBI policies that ensure a lucrative and risk-free margin to multiple foreign financial institutions, even while the central bank has been draining large tranches of manufacturing and service industries of affordable finance. Arbitrage is the name of the game in India, and North Block has long specialised in incentivising such activities by those holding foreign currency, while adopting measures limiting the spread of the bond market. There is indeed a trillion dollar need for infrastructure, but to rely on middle class savers to fund such expenses is unrealistic. What is needed is to replicate what the US did over a century ago while developing its railroad system, which was to attract large flows of funds from wealthy overseas investors through the bond market. The clerk or junior manager in India, who parks his or her meagre savings in LIC, should not be expected to shoulder the financial burden of ensuring that infrastructure in India reaches minimally acceptable global standards. Rather, wealthy pension

funds in the EU or in North America should be incentivised to invest in bonds created for the purpose, rather than continue to pour money into the equities market and make huge returns through rigging of prices, in the process cheating the small investor of his savings. Gitanjali Jewellery is not the only private company in which the LIC bought shares at peak value, only to suffer losses once prices inevitably came down to levels better matching fundamentals. India’s financial “A.Q. Khan network” first drove equity prices higher and higher through using its influence in the FII community and over government policy (sometimes simply by official statements of intent of policy) and thereafter “persuaded” public institutions to purchase such shares, much of which were held by India’s “Khan” and his cronies. Profits were assured through insider knowledge, and such moneys were raised through looting of middle class investors. Given price fixing and rigging in several of the stock prices in India, a citizen may ask as to why so much discretion has gone the way of SEBI, an institution where our own “A.Q. Khan” is said to have got appointed those who did his bidding. Our “A.Q. Khan of Indian Finance” has moles everywhere, including in the present dispensation, who give his syndicate real time information collected by the banking system, by exchanges and by other agencies, not to mention prior knowledge of impending monetary and fiscal measures. And yet, it seems that no investigative agency has connected the dots to unmask India’s own counterpart to A.Q. Khan and his network, such as by checking on his continuing contacts and past history with officials manning sensitive agencies. Real time information still being made available to him by accomplices include data which can be used to so manipulate equity markets enough to generate close to Rs 75 crore a day of pure profit for him alone, parked abroad through payment highways created by monetary authorities “so as to meet the needs of global commerce”. The same authorities who sent the informal economy into the ICU by choking them of liquidity from 8 November 2016 onwards. 

Just as Pakistan’s A.Q. Khan operated through a network of serving and retired officers, so does his financial sector counterpart in India. Otherwise it would not have been possible for him to, inter alia (a) get selected helpful CMDs and EDs of banks, (b) make government banks sell loans at low rates to private banks, which almost immediately resold them at a profit, (c) engineer Corporate Debt Restructuring deals where the money saved by the borrower would be split with “Khan”, (d) get so-called “watchdogs” to ignore or compound cases of favourites, while going after those deemed as a threat to the network’s underground business empire, (e) creating dossiers, including manufactured data, on target individuals and ensuring that agencies go after them on the basis of dodgy evidence, and even (f) postpone the introduction of enhanced security features in India’s currency by many years, while ensuring that companies blacklisted by the Home Ministry continued to supply vital items involving currency printing in the country. Depressingly, this list goes on and on and on. 

Prime Minister Narendra Modi needs to be informed about the activities of the financial “A.Q. Khan network” operating in India at speed since 2004, and which seems not at all to have been inconvenienced by the 2014 Lok Sabha election results. India’s “A.Q. Khan” has damaged the economy severely since 2004, by subverting critical financial infrastructure so as to ensure that his global and local moneybag associates increase the zeroes in their offshore holdings of undeclared money at the expense of a country where 300 million people go to bed hungry every night. Just as the Pakistan state had “no knowledge” of the A.Q. Khan network, neither it seems is the Government of India aware of the domestic financial A.Q. Khan network, comprised of high roller operators busily sabotaging the future of India.