Confidence itself is only a trick!
Influential, if somewhat oracular newspaper editor Shekhar Gupta, recently quoted the late General Sundarji , about what keeps a soldier going in an assault. One group turns tail because their lead man does. Another, alongside, charges forward to avenge the dauntless courage and sudden sacrifice of their front-man. Both groups are trying to take the same difficult hill but the behavior of the first soldier is crucial. Panic is contagious. So is courage. And who dares, wins.
Mr.Gupta used the military metaphor to suggest India has no reason to import a panic not of its own making. He likened the Indian financial crisis to a deficit of jawanly courage, brought on by fickle, mistaken, and damaged sentiment.
I think Mr. Gupta has a solid point. As we watch the global financial crisis unfold, it is remarkable how the bullish voices in India have all but died out. Any that persist are muted, embarrassed, and preface their remarks with caveats and conclude them with codicils.
The prevailing, if turn-coat wisdom, is that all is lost. It is turn-coat because the same people will be singing hosannas of optimism once we climb another 5,000 points on the Sensex. But, right now, they say we are headed towards a certain abyss, a pit, with the pendulum swinging ever closer, hurtling towards point zero and certain destruction. That we are dug into a hole so deep that it will take us years to emerge.
This is ridiculous. Where is the perspective in all this? Why are we treated to jatra-strength breast-beating that refuses to look at reprieve despite a slowing but still growing economy? The utter lack of balance does not worry these pundits, or the editors of the financial papers and TV channels who let them prattle on. It must be difficult, I will admit, to find anybody willing to emit a ray of sunshine amongst all the dark clouds though.
It reminds me of a recent Newsweek cover story on “Temperament”. In it, Nancy Gibbs writes, “Temperament is a special subcommittee of character: it is less intellect than instinct, more about music than lyrics.” So the music our “experts” on the stock market hear at present must be a discordant and hellish cacophony without end.
It seems possible, if you’re anything of a sociologist, that the Indian economic and stock market analyst suffers, along with most of his countrymen, from a deep seated inferiority complex. He does not really believe the much-touted “India story” and goes along with it as long as the foreign investor appears to do so.
He is just the product and result of being a poor little post-colonial player, the babufied “Macaulay’s Child”, burdened by undigested learning, destroyed by adversity: in short Rudyard Kipling’s “hot-house plant”, a “native” unable to run his own affairs, and willing to destroy 65 per cent of his net worth on someone else’s say so.
He cannot see, like Warren Buffett, the proven long-term player, the honest-to-goodness “Oracle of Omaha”, that the US is currently experiencing a “fire sale” and that it is time to “buy”. This, in a country where there really are serious financial failures being dealt with. Mr. Buffett knows there may be momentum left in the so-called “falling knife”, but he also recognises a good deal here and now, with US stocks indiscriminately down some 40 per cent, and is not bothered about timing the absolute “bottom”.
Our market men too, those who vote with their money instead of their opinions, must share the blame for this disgraceful chaos of capitulation. They have allowed the owners of 10% of market share, in the form of the FIIs and other foreign investors such as the currently hard pressed Hedge Funds, to control the market, lock, stock, and barrel.
Their problems have been adopted as the problems of the other 90%. This means not the usually skittish and shallow-bottomed retail investor but also our domestic institutional players, our insurance sector investors, the mutual funds and the high-net worth players. The foreign investor’s views are, alas, also our views. Their approval makes for our self-esteem. When they say things are not so good, we think likewise, and do likewise, like lemmings. When they buy we buy. When they sell, we sell too and/or stand aside and let the market crash from depth to depth. It is pathetic but true.
And so, the funereal air refuses to lift, with each learned and expert commentator trying to out do the other with the force of his pessimism. And unfortunately, we have no rallying point from the real economy either, unless you count Mr. Chidambaram’s patronising and slow motion remarks for the mentally retarded.
AA Gill from The Sunday Times in England made the interesting point that there seem to be no proper orators left amongst the British politicians, capable of lifting people’s spirits during the crisis that is shrinking Britain to a real, and not imagined, recession, as in India.
The present ones in charge of the UK, such as British Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling, stand around wringing their Leftist hands and making everyone feel decidedly worse. Gill has a point too.
There is certainly no Winston Churchill intoning courage into British ears, his sonorous voice and inspiring words refusing to be drowned out by the whistle, crash and burn of Nazi bombs.
But if we in India insist on being led by the nose, let us take heart from the facts as they unfold in the US. The US National Debt presently is at 38 per cent of their GDP, well below its 1990’s peak of 49 per cent, even if a lot of it is borrowed from China. All the bail-outs in America, even if they inflate to USD 1 trillion, will account for just 7 per cent of their GDP this fiscal, the highest level since 1986, not 1929!
The American economy will certainly revive, sooner, rather than later, in a year, or two, tops, and Mr. Buffett recognises this. Europe, Japan and the rest will follow suit, because they are, in effect, like branch offices of the US.
India will average 6.3 per cent growth in GDP per annum going forward to 2030. So when do we stop whining and start counting our blessings?
(1,051 words)
Friday 31st October 2008
Gautam Mukherjee
Friday, October 31, 2008
Tuesday, October 21, 2008
The Paradox of Thrift
The Paradox of Thrift
In recessionary times, the natural inclination of every individual is to cut back on unnecessary expenses, pay back debt, postpone non-essential purchasing. This seems like virtuous belt-tightening, but if enough people join this particular bandwagon, the economy as a whole begins to tank. John Maynard Keynes called this phenomenon, “the paradox of thrift”. That is why George W Bush advised people to do their patriotic duty after 9/11 and told them to go out and shop!
But what is afoot in India is not the consequence of domestic thrift leading to a significant slow-down, but a mugging of growth owing to a national economic bungling on the grand scale.
Our economic deceleration is because of a wilful miscalculation on the part of the UPA Government. And it may never have come to light, except for the global economy collapsing. As Warren Buffett said, “Only when the tide goes out do you discover who’s been swimming naked”.
But since there is never a cloud without a silver lining, what we are now witnessing is a scramble to reverse gear and cut every conceivable interest rate and cautionary reserve in sight, in a bid to resuscitate a faltering economy.
What is even better for India Inc. and the Indian public is that both the UPA and the Opposition NDA are in competition to devise ways and means to revive growth. But before we go to the presumed glories of the future, let’s take a look at how we came to be at this pass.
Flying in the face of all sage advice and commentary barely a year ago, Finance Minister P Chidambaram and former Reserve Bank of India Governor YV Reddy, relentlessly tightened interest rates, raised cash reserve ratios, put curbs on participatory notes, raised statutory liquidity ratios, reduced rates on NRI deposits, curbed external commercial borrowing, intervened in the currency markets to weaken the rupee, and did all else in their power to suck out liquidity, strangle growth, and barricade India against dollar inflows.
In their wisdom, the UPA wanted a weaker rupee to ostensibly aid exports, even though we have a huge infrastructure led and modernisation-based import bill, not to mention a 70 per cent dependency on oil imports. Side by side, the UPA was also announcing large expenditures such as the farm loan waiver, and other largesse aimed at targeted voters in rural India. The Government was also subsidising the rocketing petroleum prices, not with a hit on the current year’s budgetary books, but with sleight-of-hand Oil Bonds, to be paid for by future generations.
All these policies collectively resulted in growth strangulation, juxtaposed with sharply raised expenditure, leading to vast increases in current account and fiscal deficits, stoking the very inflation the government was trying to curb! When they wrote “Pop goes the Weasel” in the 17th century, they must have had personages like the current UPA money-managers in mind.
The irony is this fixing-things-that-weren’t-broken policy, was unleashed, when we were thriving. Business and Industry were reporting good results. The stock market was booming. India Inc. was busy going international with mergers and acquisitions, and even agriculture was doing far better than the year before. The Indian economy, as a whole was growing at a projected 9 per cent for fiscal 2008.
Growth decompression, said the government, affects only India Inc. And our inflation, they said, was due to runaway, speculative demand in the domestic economy; whereas it was mostly the sharply spiking price of oil, over which, India, doing nothing to curb its demand, had no control.
Oil prices have now halved, thanks to the global financial meltdown and subsequent fall in demand, and ergo, our WPI inflation rates have been tending downwards over the last five weeks.
But by now, our GDP growth estimates are at 7 per cent for 2008. We have a recession in the Real Estate segment. There are grave threats of consumer defaults on home, car, and credit card loans/debt.
Business and Industry too are forced to borrow at 14 per cent and above, if they manage to borrow at all, particularly in the medium to small sectors, impacting their margins, and forcing the postponement of modernisation and expansion.
Infrastructure projects, always grappling with the twin problems of long execution and payback periods, have been unable to raise money in the distressed global markets, and can’t get any money from the tight local credit markets either. They are all at a standstill. And, let us realise, when it comes to infrastructure, this impacts not just fiscal 2008 or ‘09 or ’10, but casts a shadow on projected GDP growth well into the future!
The BJP economic think tank, comprised of former finance ministers Jaswant Singh and Yashwant Sinha and former disinvestment minister Arun Shourie, have called for a raft of urgent measures, some old, some new, to get things going. They want drastic action, beyond the stage-by-stage 250 points CRR cuts and somewhat tentative 100 bps Repo rate cut, announced by the Government so far.
The BJP has called for Repo interest rates to be cut by a further 200 basis points to a much healthier 6 per cent by March 2009. And by way of a brand new suggestion, they have called for a strengthening of our public sector banks with a USD 10 billion rights issue to augment their USD 40 billion footprint collectively. This is intended to boost their lending power to domestic business and industry.
The BJP has also aired some protectionist ideas, such as a banning of short-selling and PN notes with regard to the stock market, and accounting calls to acknowledge off-budget debt on the books. The BJP also wants a Sovereign Wealth Fund created with our foreign exchange reserves and the money put to fund our infrastructure development, instead of languishing in US Treasury Bonds.
In any event, the two major political groupings seem to be pointing in the same direction for once, coming down once again in favour of growth. But, no one has a magic wand, and all need to bear in mind that monetary measures always work their effects after a time lag.
So perhaps, the next time around, no Indian Government will be so casual about killing the golden goose of growth, and eschew their periodic urge to bite the very hand that feeds.
(1,053 words)
October 21st, 2008
Gautam Mukherjee
Published in The Pioneer on Wednesday,October 22,2008 as "The wages of misplaced thrift" and online at www.dailypioneer.com. Also see it archived under "Columnists" at www.dailypioneer.com
In recessionary times, the natural inclination of every individual is to cut back on unnecessary expenses, pay back debt, postpone non-essential purchasing. This seems like virtuous belt-tightening, but if enough people join this particular bandwagon, the economy as a whole begins to tank. John Maynard Keynes called this phenomenon, “the paradox of thrift”. That is why George W Bush advised people to do their patriotic duty after 9/11 and told them to go out and shop!
But what is afoot in India is not the consequence of domestic thrift leading to a significant slow-down, but a mugging of growth owing to a national economic bungling on the grand scale.
Our economic deceleration is because of a wilful miscalculation on the part of the UPA Government. And it may never have come to light, except for the global economy collapsing. As Warren Buffett said, “Only when the tide goes out do you discover who’s been swimming naked”.
But since there is never a cloud without a silver lining, what we are now witnessing is a scramble to reverse gear and cut every conceivable interest rate and cautionary reserve in sight, in a bid to resuscitate a faltering economy.
What is even better for India Inc. and the Indian public is that both the UPA and the Opposition NDA are in competition to devise ways and means to revive growth. But before we go to the presumed glories of the future, let’s take a look at how we came to be at this pass.
Flying in the face of all sage advice and commentary barely a year ago, Finance Minister P Chidambaram and former Reserve Bank of India Governor YV Reddy, relentlessly tightened interest rates, raised cash reserve ratios, put curbs on participatory notes, raised statutory liquidity ratios, reduced rates on NRI deposits, curbed external commercial borrowing, intervened in the currency markets to weaken the rupee, and did all else in their power to suck out liquidity, strangle growth, and barricade India against dollar inflows.
In their wisdom, the UPA wanted a weaker rupee to ostensibly aid exports, even though we have a huge infrastructure led and modernisation-based import bill, not to mention a 70 per cent dependency on oil imports. Side by side, the UPA was also announcing large expenditures such as the farm loan waiver, and other largesse aimed at targeted voters in rural India. The Government was also subsidising the rocketing petroleum prices, not with a hit on the current year’s budgetary books, but with sleight-of-hand Oil Bonds, to be paid for by future generations.
All these policies collectively resulted in growth strangulation, juxtaposed with sharply raised expenditure, leading to vast increases in current account and fiscal deficits, stoking the very inflation the government was trying to curb! When they wrote “Pop goes the Weasel” in the 17th century, they must have had personages like the current UPA money-managers in mind.
The irony is this fixing-things-that-weren’t-broken policy, was unleashed, when we were thriving. Business and Industry were reporting good results. The stock market was booming. India Inc. was busy going international with mergers and acquisitions, and even agriculture was doing far better than the year before. The Indian economy, as a whole was growing at a projected 9 per cent for fiscal 2008.
Growth decompression, said the government, affects only India Inc. And our inflation, they said, was due to runaway, speculative demand in the domestic economy; whereas it was mostly the sharply spiking price of oil, over which, India, doing nothing to curb its demand, had no control.
Oil prices have now halved, thanks to the global financial meltdown and subsequent fall in demand, and ergo, our WPI inflation rates have been tending downwards over the last five weeks.
But by now, our GDP growth estimates are at 7 per cent for 2008. We have a recession in the Real Estate segment. There are grave threats of consumer defaults on home, car, and credit card loans/debt.
Business and Industry too are forced to borrow at 14 per cent and above, if they manage to borrow at all, particularly in the medium to small sectors, impacting their margins, and forcing the postponement of modernisation and expansion.
Infrastructure projects, always grappling with the twin problems of long execution and payback periods, have been unable to raise money in the distressed global markets, and can’t get any money from the tight local credit markets either. They are all at a standstill. And, let us realise, when it comes to infrastructure, this impacts not just fiscal 2008 or ‘09 or ’10, but casts a shadow on projected GDP growth well into the future!
The BJP economic think tank, comprised of former finance ministers Jaswant Singh and Yashwant Sinha and former disinvestment minister Arun Shourie, have called for a raft of urgent measures, some old, some new, to get things going. They want drastic action, beyond the stage-by-stage 250 points CRR cuts and somewhat tentative 100 bps Repo rate cut, announced by the Government so far.
The BJP has called for Repo interest rates to be cut by a further 200 basis points to a much healthier 6 per cent by March 2009. And by way of a brand new suggestion, they have called for a strengthening of our public sector banks with a USD 10 billion rights issue to augment their USD 40 billion footprint collectively. This is intended to boost their lending power to domestic business and industry.
The BJP has also aired some protectionist ideas, such as a banning of short-selling and PN notes with regard to the stock market, and accounting calls to acknowledge off-budget debt on the books. The BJP also wants a Sovereign Wealth Fund created with our foreign exchange reserves and the money put to fund our infrastructure development, instead of languishing in US Treasury Bonds.
In any event, the two major political groupings seem to be pointing in the same direction for once, coming down once again in favour of growth. But, no one has a magic wand, and all need to bear in mind that monetary measures always work their effects after a time lag.
So perhaps, the next time around, no Indian Government will be so casual about killing the golden goose of growth, and eschew their periodic urge to bite the very hand that feeds.
(1,053 words)
October 21st, 2008
Gautam Mukherjee
Published in The Pioneer on Wednesday,October 22,2008 as "The wages of misplaced thrift" and online at www.dailypioneer.com. Also see it archived under "Columnists" at www.dailypioneer.com
Monday, October 20, 2008
Game Changers
Game Changers
Portnoy’s Complaint author Philip Roth once said, “memories of the past are not memories of facts, but memories of your imaginings of the facts”. That is why no two people quite agree on an eye-witness account.
And, that, at best, is how the world goes forward, believing in facsimiles and fantasies, because it is the belief itself, and not the factual about it, that makes everything real.
Then again, maybe it is a fusion of fact and fantasy that makes for the United States going into their presidential election on November 4th. We can clearly see a charismatic front-runner candidate, all but elected, except for the notorious “Bradley Effect” or because of an Act of God.
The Bradley Effect is named after long-term Black Los Angeles Mayor Tom Bradley. It alludes to White voters who ultimately do not vote for a Black candidate, even though they say they will.
But Barack Obama, even if he is denied the presidency, has already made history. He is the first African-American presidential candidate. He is also the most successful US presidential fundraiser; with the best primary season organisation of all time.
Obama is an eloquent visionary and change agent. And he is resolutely inclusive at the same time. There are echoes of an uncanny amalgam about him. We can hear reverberations of the messianic “I have a dream” persona of Martin Luther King Jr. speaking at the Lincoln Memorial in 1963. And also, we hear a voice from another time, that flat Boston-accented Harvard privilege shining through. We can hear the “idealistic realism,” of an “ask not what your country can do for you…” John Fitzgerald Kennedy.
With Philip Roth to guide us, we can see JFK morphing into Obama, a similar poetry inspiring our souls afresh, during another cold 20th January 2009 Washington inauguration.
Having said this, there is, of course, no nostalgic recourse, no place, or time, or indeed, patience, in 2008, to replay the Sixties.
But still, a mantle, skipping backwards some 45 years, ignoring the Clinton and Carter years in between, clearly has been passed on to a man who walks and talks legacy. Perhaps this is because Obama talks change also, using his merit and hard earned privilege to promise a return to governance for the people and not just the rich.
Barack Obama walks purposefully, with the spring of youth in his step, like a man on his way to redeem a very Nehruvian pledge. A redemption that is, yes, also faintly Socialist, but in America today, that means Centrist. It is a Centrism that will also come, ironically, after being preceded, in the last days of George W Bush’s Republican administration, with nationalisations and bail-outs that no Left Wing government could have faulted.
But Obama’s mission as a Black man will be to redeem a pledge, made not just by King and JFK as they gave wings to the Civil Rights Movement. It is also to fulfil the dream of Abraham Lincoln, and the blood of thousands who died in the American Civil War.
Barack Obama is a “transformational figure” on his way to deliver on a promise that will ignite a Future calling out to be advanced, if not perfected. It is a Future of a young nation reaching maturity. If he succeeds, Obama will not only transform the face of America, but that of its friends and enemies, in sum, the potential and destiny of a much globalised world grown “small”.
And for us, in India, never given an inch by any Democrat President since JFK, it is nevertheless time to applaud the success of a man that will be good for America, healing its rifts, and putting it back on its economic feet. Because only then, it is plain to see, can the rest of us, in turn, realise our own hopes and dreams.
We should understand all the more because India too is crying out for a Game Changer. The old, oft trotted out rhetoric of a faked secularism has played out its course. It is now riddled with contradictions, corroded by anger, and shamed by betrayal.
But the rescue does not lie in a hundred regional aspirations contending in a morass of chaos, or the pornographic feeding upon “minority grievance”. Or, even, on the spewings of Liberal intellectuals that delight in sedition in the name of equity and justice.
And, as is often the case, the solution is here and in plain sight. But, in an evolutionary context, it will have to play out; in not One, but Two Acts; just as it did in America between the Sixties Civil Rights movement and today.
Our First Act is already over a decade old, and featured a pioneering Mr.LK Advani who exposed the face of “pseudo-secularism” with his Ram Rath Yatra and its aftermath. He catapulted his party to power, putting the nuts and bolts numbers at the disposal of his friend and senior, Shri Atal Bihari Vajpayee.
It needs to be said, now, before the dust of electoral battle obscures such markers, that it was mainly the vision of Shri Lal Krishna Advani which dragged the Indian Right, kicking and screaming in embarrassment, owing to a kind of Bradley Effect of our own, outing us, from the margins of history to which we had been relegated. It was Advani who established, and gave respectability to, the Saffron Flag and the Lotus symbol in the national consciousness.
Perhaps Mr. Advani’s time has finally come and he will be rewarded with his own turn to lead this country, fed up, as it is, with a lax security regime. But, while poor security, and our stalled, unnecessarily bound and gagged economic growth, may well place the NDA in power again, the true historical significance of Mr. Advani’s long innings in national politics goes much deeper.
Mr. Advani has been instrumental in reinstating Hindutva, and the unapologetically militarist and free-market legacies, of great men, nearly forgotten, like Shri Syama Prasad Mookerjee, Shri C Rajagopalachari, and the greatly neglected, even maligned, Shri Subhash Chandra Bose.
But the Second Act is clearly yet to come. Mr. Advani’s natural successor in spirit Narendra Modi, is not prime minister yet. But he is already a third term chief minister. He is phenomenally successful and undeniably runs the most business-friendly administration of any state of the Indian Union. He is tough on terrorism and committed to promoting prosperity. Is this then the correct template for India going forward? And even if it is, do we need some more time, and alas, more blood on the streets, to admit it to ourselves first?
We will, of course, see for ourselves when Act Two actually opens. Meanwhile, it is enough to realise what makes for a Game Changer. It is certainly more than mere leadership. It is something grander, something epochal, and needs some people to pave the way; and yet others to stand aside.
(1,050 words)
October 20th 2008
Gautam Mukherjee
Published in The Pioneer on November 1, 2008 as "India needs a game changer" and online at www.dailypioneer.com and archived there under "columnists".
Portnoy’s Complaint author Philip Roth once said, “memories of the past are not memories of facts, but memories of your imaginings of the facts”. That is why no two people quite agree on an eye-witness account.
And, that, at best, is how the world goes forward, believing in facsimiles and fantasies, because it is the belief itself, and not the factual about it, that makes everything real.
Then again, maybe it is a fusion of fact and fantasy that makes for the United States going into their presidential election on November 4th. We can clearly see a charismatic front-runner candidate, all but elected, except for the notorious “Bradley Effect” or because of an Act of God.
The Bradley Effect is named after long-term Black Los Angeles Mayor Tom Bradley. It alludes to White voters who ultimately do not vote for a Black candidate, even though they say they will.
But Barack Obama, even if he is denied the presidency, has already made history. He is the first African-American presidential candidate. He is also the most successful US presidential fundraiser; with the best primary season organisation of all time.
Obama is an eloquent visionary and change agent. And he is resolutely inclusive at the same time. There are echoes of an uncanny amalgam about him. We can hear reverberations of the messianic “I have a dream” persona of Martin Luther King Jr. speaking at the Lincoln Memorial in 1963. And also, we hear a voice from another time, that flat Boston-accented Harvard privilege shining through. We can hear the “idealistic realism,” of an “ask not what your country can do for you…” John Fitzgerald Kennedy.
With Philip Roth to guide us, we can see JFK morphing into Obama, a similar poetry inspiring our souls afresh, during another cold 20th January 2009 Washington inauguration.
Having said this, there is, of course, no nostalgic recourse, no place, or time, or indeed, patience, in 2008, to replay the Sixties.
But still, a mantle, skipping backwards some 45 years, ignoring the Clinton and Carter years in between, clearly has been passed on to a man who walks and talks legacy. Perhaps this is because Obama talks change also, using his merit and hard earned privilege to promise a return to governance for the people and not just the rich.
Barack Obama walks purposefully, with the spring of youth in his step, like a man on his way to redeem a very Nehruvian pledge. A redemption that is, yes, also faintly Socialist, but in America today, that means Centrist. It is a Centrism that will also come, ironically, after being preceded, in the last days of George W Bush’s Republican administration, with nationalisations and bail-outs that no Left Wing government could have faulted.
But Obama’s mission as a Black man will be to redeem a pledge, made not just by King and JFK as they gave wings to the Civil Rights Movement. It is also to fulfil the dream of Abraham Lincoln, and the blood of thousands who died in the American Civil War.
Barack Obama is a “transformational figure” on his way to deliver on a promise that will ignite a Future calling out to be advanced, if not perfected. It is a Future of a young nation reaching maturity. If he succeeds, Obama will not only transform the face of America, but that of its friends and enemies, in sum, the potential and destiny of a much globalised world grown “small”.
And for us, in India, never given an inch by any Democrat President since JFK, it is nevertheless time to applaud the success of a man that will be good for America, healing its rifts, and putting it back on its economic feet. Because only then, it is plain to see, can the rest of us, in turn, realise our own hopes and dreams.
We should understand all the more because India too is crying out for a Game Changer. The old, oft trotted out rhetoric of a faked secularism has played out its course. It is now riddled with contradictions, corroded by anger, and shamed by betrayal.
But the rescue does not lie in a hundred regional aspirations contending in a morass of chaos, or the pornographic feeding upon “minority grievance”. Or, even, on the spewings of Liberal intellectuals that delight in sedition in the name of equity and justice.
And, as is often the case, the solution is here and in plain sight. But, in an evolutionary context, it will have to play out; in not One, but Two Acts; just as it did in America between the Sixties Civil Rights movement and today.
Our First Act is already over a decade old, and featured a pioneering Mr.LK Advani who exposed the face of “pseudo-secularism” with his Ram Rath Yatra and its aftermath. He catapulted his party to power, putting the nuts and bolts numbers at the disposal of his friend and senior, Shri Atal Bihari Vajpayee.
It needs to be said, now, before the dust of electoral battle obscures such markers, that it was mainly the vision of Shri Lal Krishna Advani which dragged the Indian Right, kicking and screaming in embarrassment, owing to a kind of Bradley Effect of our own, outing us, from the margins of history to which we had been relegated. It was Advani who established, and gave respectability to, the Saffron Flag and the Lotus symbol in the national consciousness.
Perhaps Mr. Advani’s time has finally come and he will be rewarded with his own turn to lead this country, fed up, as it is, with a lax security regime. But, while poor security, and our stalled, unnecessarily bound and gagged economic growth, may well place the NDA in power again, the true historical significance of Mr. Advani’s long innings in national politics goes much deeper.
Mr. Advani has been instrumental in reinstating Hindutva, and the unapologetically militarist and free-market legacies, of great men, nearly forgotten, like Shri Syama Prasad Mookerjee, Shri C Rajagopalachari, and the greatly neglected, even maligned, Shri Subhash Chandra Bose.
But the Second Act is clearly yet to come. Mr. Advani’s natural successor in spirit Narendra Modi, is not prime minister yet. But he is already a third term chief minister. He is phenomenally successful and undeniably runs the most business-friendly administration of any state of the Indian Union. He is tough on terrorism and committed to promoting prosperity. Is this then the correct template for India going forward? And even if it is, do we need some more time, and alas, more blood on the streets, to admit it to ourselves first?
We will, of course, see for ourselves when Act Two actually opens. Meanwhile, it is enough to realise what makes for a Game Changer. It is certainly more than mere leadership. It is something grander, something epochal, and needs some people to pave the way; and yet others to stand aside.
(1,050 words)
October 20th 2008
Gautam Mukherjee
Published in The Pioneer on November 1, 2008 as "India needs a game changer" and online at www.dailypioneer.com and archived there under "columnists".
Friday, October 10, 2008
Wet Wet Wet: With Barbarians At The Gate
Wet Wet Wet: With Barbarians At The Gate
Tough leaders in democracies use pejoratives when they are frustrated. These are vaguely derogatory, depend on tone to deliver their bite, and not outright swear words. And they target, not just the Opposition, because, after all, it is their duty to oppose; but also fellow party members, colleagues in government, advisers, hangers-on, and allies, particularly in coalitions. In short, anybody, or in reference to anyone, who has the temerity to feel uncomfortable when firm steps are taken to deal with situations. Firm steps that carry risks, electoral risks!
In the long ago eighties, Dame “Iron Lady” Thatcher, a good friend of our own “Indira is India,” used to call a wide range of people, in her own party, elsewhere, in her household, even certain less than forthcoming domestic pets, “wet” and whole collectives: “wets”.
This curious and panic inducing description, particularly in a country given to near incessant rainfall; was liberally used by the grand dame in public and private, in personal audiences with Queen Elizabeth II, and even in parliament. So much so, that it inspired a very popular and melodious British Pop Group of the time, to call themselves wet too, not once, but three times, as in, “Wet Wet Wet”.
Nearer home and present times, it is sometimes the Opposition that does the describing, calling incumbent prime ministers “weak” and “weakest” ; but probably feels a little foolish when the “weak” manage to get their own way in the end.
But not all elected leaders are quite so decorous. President Nixon liberally used expletives to describe a wide range of his contemporaries and situations. He also recorded his performances for posterity, so that all the world could admire his fluency. He was a Mormon, but also a consummate foul-mouth, who probably wanted to be portrayed by history warts and all. And, not surprisingly, that is how we remember the Republican president who delivered the body blow to the “Iron Curtain” with his bold tilt towards China.
Dictators, kings, chieftains, rulers, billionaires, and paupers, for that matter, are often coarse; but they don’t even have to brush their teeth, like Chairman Mao, if they don’t want to; let alone win elections.
But tough, attitudinal leaders in democracies, without benefit of absolute power, do sometimes get a lot done, besides calling people names. And the 1980’s must have been particularly good for tough democratic regimes.
Mrs. Gandhi liberated Bangladesh, to no great lasting benefit, but with undeniable courage, and in defiance of the US. She also crushed the Naxalite movement in West Bengal using the redoubtable Mr. Sidhartha Shankar Ray; all the while calling all sorts of people “elitist” and “anti-poor” herself. The duo used the Emergency, in 1975, to unleash a police and para-military pogrom, to effectively wipe it out.
It was bitter medicine, for a virulent disease, but also resulted, in a political revulsion among Bengalis that saw the end of Congress Party rule in West Bengal; replaced, ever since, for over thirty years, by a ruinous and toxic Communist rule that persists to this day.
But Mrs. Gandhi didn’t let possible political consequences deter her from doing her duty by the country. She did it again, authorising Operation Blue Star in 1984, arguing a terrorist was a terrorist, and a Sikh was a Sikh, and refusing to be confused between the two. She paid for this conviction with her life, but it was a tremendous demonstration of character, and does explain why Indira Gandhi admired Joan of Arc in her often lonely childhood.
Her son, Rajiv Gandhi, as prime minister, put in Mr. SS Ray once again, as Governor, to mop up in Punjab; and also Julio Ribiero and KPS Gill, tough cops both, with a mandate to end the Khalistan movement. This, they most ably did.
Rajiv Gandhi, a soft-spoken gentleman, was moved nevertheless to speak of action that would remind the terrorists, and the Pakistanis who supported them, of their grandmothers: “naani yaad dila denge,”, wagging his finger from the ramparts of the Red Fort, no less.
Mrs. Thatcher, on her part, broke the backs of very powerful Trade Unions, used to domination ever since WWII and pampered by successive Labour Governments. Their version of Socialism wouldn’t have allowed Britain to move into the 20th century, wouldn’t allow closure of industries that were bankrupt, ports without traffic, mines that were spent. It was a difficult path to tread, and Thatcher was expelled from office, eventually, by her own Conservative party, but not before she had brought Britain back from the brink of being a failed state and restoring a little of the once “great”.
Her counterpart in America, Ronald Reagan, called “Reaguns” often enough by disgruntled left-wingers, played a pivotal role in ending the sufferings of Eastern Europe, by finishing what his predecessor Nixon had started.
Reagan ended the Cold War by upping the ante on the USSR with his multi-billion dollar “Star Wars” defense shield, and had no compunctions about calling the Soviet Block “The Evil Empire”. It was Reagan who precipitated the disintegration of the USSR, bankrupting them as they tried to keep up, and forcing the pulling down of the Berlin Wall. Reagan, avuncular and steely at once, was the only one amongst his global contemporaries, who pulled it off without losing any of his popularity.
Today, as we look around us here in India, the epitome of a soft state, bullied by our neighbours, intimidated by multiple pressure groups, reeling day-to-day from the havoc being wrought by Jihadists, Naxalites, “freedom fighters”, communalists of various hue, and other assorted thugs; we might do well to remember Prime Minister Indira Gandhi. Mrs. Gandhi did not play ducks and drakes with India’s internal security.
There was then, as there is now, much public debate, much media critique, motivated, narrow, and sectarian politicians pushing their agendas, equally vociferous civil society caterwauling; and just as many accusations of victimisation and persecution of minorities.
Thomas Sowell, an American writer and economist from the 1930’s wrote: “If the battle for civilization comes down to the wimps versus the barbarians, the barbarians are going to win.”
That there are barbarians at the gate is beyond doubt. We must be busy with our understanding of civilisation, but either way, for our survival, we cannot afford to be wimps.
(1,050 words)
10th October 2008
Gautam Mukherjee
Published in print, The Pioneer, Tuesday, October 14th, 2008, as "Barbarians at the gate" and online at www.dailypioneer.com Also see it archived under "Columnists" at www.dailypioneer.com
Tough leaders in democracies use pejoratives when they are frustrated. These are vaguely derogatory, depend on tone to deliver their bite, and not outright swear words. And they target, not just the Opposition, because, after all, it is their duty to oppose; but also fellow party members, colleagues in government, advisers, hangers-on, and allies, particularly in coalitions. In short, anybody, or in reference to anyone, who has the temerity to feel uncomfortable when firm steps are taken to deal with situations. Firm steps that carry risks, electoral risks!
In the long ago eighties, Dame “Iron Lady” Thatcher, a good friend of our own “Indira is India,” used to call a wide range of people, in her own party, elsewhere, in her household, even certain less than forthcoming domestic pets, “wet” and whole collectives: “wets”.
This curious and panic inducing description, particularly in a country given to near incessant rainfall; was liberally used by the grand dame in public and private, in personal audiences with Queen Elizabeth II, and even in parliament. So much so, that it inspired a very popular and melodious British Pop Group of the time, to call themselves wet too, not once, but three times, as in, “Wet Wet Wet”.
Nearer home and present times, it is sometimes the Opposition that does the describing, calling incumbent prime ministers “weak” and “weakest” ; but probably feels a little foolish when the “weak” manage to get their own way in the end.
But not all elected leaders are quite so decorous. President Nixon liberally used expletives to describe a wide range of his contemporaries and situations. He also recorded his performances for posterity, so that all the world could admire his fluency. He was a Mormon, but also a consummate foul-mouth, who probably wanted to be portrayed by history warts and all. And, not surprisingly, that is how we remember the Republican president who delivered the body blow to the “Iron Curtain” with his bold tilt towards China.
Dictators, kings, chieftains, rulers, billionaires, and paupers, for that matter, are often coarse; but they don’t even have to brush their teeth, like Chairman Mao, if they don’t want to; let alone win elections.
But tough, attitudinal leaders in democracies, without benefit of absolute power, do sometimes get a lot done, besides calling people names. And the 1980’s must have been particularly good for tough democratic regimes.
Mrs. Gandhi liberated Bangladesh, to no great lasting benefit, but with undeniable courage, and in defiance of the US. She also crushed the Naxalite movement in West Bengal using the redoubtable Mr. Sidhartha Shankar Ray; all the while calling all sorts of people “elitist” and “anti-poor” herself. The duo used the Emergency, in 1975, to unleash a police and para-military pogrom, to effectively wipe it out.
It was bitter medicine, for a virulent disease, but also resulted, in a political revulsion among Bengalis that saw the end of Congress Party rule in West Bengal; replaced, ever since, for over thirty years, by a ruinous and toxic Communist rule that persists to this day.
But Mrs. Gandhi didn’t let possible political consequences deter her from doing her duty by the country. She did it again, authorising Operation Blue Star in 1984, arguing a terrorist was a terrorist, and a Sikh was a Sikh, and refusing to be confused between the two. She paid for this conviction with her life, but it was a tremendous demonstration of character, and does explain why Indira Gandhi admired Joan of Arc in her often lonely childhood.
Her son, Rajiv Gandhi, as prime minister, put in Mr. SS Ray once again, as Governor, to mop up in Punjab; and also Julio Ribiero and KPS Gill, tough cops both, with a mandate to end the Khalistan movement. This, they most ably did.
Rajiv Gandhi, a soft-spoken gentleman, was moved nevertheless to speak of action that would remind the terrorists, and the Pakistanis who supported them, of their grandmothers: “naani yaad dila denge,”, wagging his finger from the ramparts of the Red Fort, no less.
Mrs. Thatcher, on her part, broke the backs of very powerful Trade Unions, used to domination ever since WWII and pampered by successive Labour Governments. Their version of Socialism wouldn’t have allowed Britain to move into the 20th century, wouldn’t allow closure of industries that were bankrupt, ports without traffic, mines that were spent. It was a difficult path to tread, and Thatcher was expelled from office, eventually, by her own Conservative party, but not before she had brought Britain back from the brink of being a failed state and restoring a little of the once “great”.
Her counterpart in America, Ronald Reagan, called “Reaguns” often enough by disgruntled left-wingers, played a pivotal role in ending the sufferings of Eastern Europe, by finishing what his predecessor Nixon had started.
Reagan ended the Cold War by upping the ante on the USSR with his multi-billion dollar “Star Wars” defense shield, and had no compunctions about calling the Soviet Block “The Evil Empire”. It was Reagan who precipitated the disintegration of the USSR, bankrupting them as they tried to keep up, and forcing the pulling down of the Berlin Wall. Reagan, avuncular and steely at once, was the only one amongst his global contemporaries, who pulled it off without losing any of his popularity.
Today, as we look around us here in India, the epitome of a soft state, bullied by our neighbours, intimidated by multiple pressure groups, reeling day-to-day from the havoc being wrought by Jihadists, Naxalites, “freedom fighters”, communalists of various hue, and other assorted thugs; we might do well to remember Prime Minister Indira Gandhi. Mrs. Gandhi did not play ducks and drakes with India’s internal security.
There was then, as there is now, much public debate, much media critique, motivated, narrow, and sectarian politicians pushing their agendas, equally vociferous civil society caterwauling; and just as many accusations of victimisation and persecution of minorities.
Thomas Sowell, an American writer and economist from the 1930’s wrote: “If the battle for civilization comes down to the wimps versus the barbarians, the barbarians are going to win.”
That there are barbarians at the gate is beyond doubt. We must be busy with our understanding of civilisation, but either way, for our survival, we cannot afford to be wimps.
(1,050 words)
10th October 2008
Gautam Mukherjee
Published in print, The Pioneer, Tuesday, October 14th, 2008, as "Barbarians at the gate" and online at www.dailypioneer.com Also see it archived under "Columnists" at www.dailypioneer.com
Wednesday, October 8, 2008
Opportunity Knocks If We React Quickly Enough!
Opportunity Knocks If We React Quickly Enough!
India has a mere twelve per cent exposure to the export market: software, back-office customer support and Business Process Outsourcing (BPO) services, diamond polishing and re-export, auto parts, engineered goods, other exports, iron ore, grain, sundry commodities and, its people, both skilled and unskilled. This is despite our best efforts to date, and not by design. Our impact on world trade is around 1 per cent. That is why our inward remittances from Indians working abroad rival our export figures.
But, as things stand in the global economy, our currently low dependence on exports puts India in a unique pole position and affords a great opportunity to benefit from the present situation.
Because India runs overwhelmingly on its internal growth drivers, and even as the global financial markets are melting down, Finance Minister P Chidambaram, blithely ignoring the 500 and 700 point daily drops in the Sensex, says he still expects to restore a 9 per cent Gross Domestic Product(GDP) growth rate in fiscal 2009.
Mr. Chidambaram is backed up by the Planning Commission’s Mr. Montek Singh Ahluwalia, who still expects us to post an 8 per cent GDP growth in fiscal 2008 and suggests the stopped Foreign institutional Investment (FII) flows will resume after a couple of months.
Commerce Minister Kamal Nath also supports the view that our economy is doing well, citing revived manufacturing statistics, export statistics, investment statistics and particularly, a 124 per cent rise in Foreign Direct Investment (FDI); the last most welcome, because this money goes into the ground to create new factories, facilities and jobs.
The Prime Minister too is hinting at imminent change, saying that the Reserve Bank(RBI) is watching the liquidity situation very carefully.
When all the economists in the government, including Mr. Subbarao at the RBI, and Mr. Bhave at the Securities and Exchange Board (SEBI), keen on facilitating liquidity, one might be forgiven for reading the pronouncements as intended and rapid unmuzzling of the Indian economy, after a year spent obsessed with inflation. It looks like our economic managers are hinting at reducing some of the highest lending rates in the world, sooner rather than later, given the understandable drying up of foreign fund flows.
If India indeed cuts RBI regulated lending rates aggressively, for once as a pre-emptive measure, the country could benefit immensely. If the RBI cuts rates in a motivated, planned, monitored, and phased manner, say every six weeks, inclusive of the Repurchase Agreements (Repo), the Reverse Repo, and the Prime Lending Rate; and further cuts the Cash Reserve Ratio(CRR) of banks, say, once every quarter for the next year; we could see spectacular results in reaction.
After all, even with four further half percent cuts in the CRR, Indian banks would still be capitalised higher than everywhere else, albeit lower than the current 10 to 13.65 per cent. This conservatism with Cash Reserve Ratios is welcome in these uncertain times, and in any case, our lending processes are rigorous, and loans go only to the most deserving candidates. But, all in all, all these actions, taken together, would inject very badly needed liquidity into parched business and industry.
If undertaken, it will deliver a dramatic jump-start to our artificially suppressed economy, get our infrastructure projects surging forward, and get all our business and industry motors humming again. We will suffer a little consequent inflation perhaps, from consumerism, with cheaper money oiling the wheels, but not much, because it will be offset by decelerating oil prices and enhanced growth in the near term.
What we would also gain, by way of contrast, if nothing else, is a star economy in a sea of troubled ones. At present, in the celebrated BRIC, only Brazil is weathering the storm well. Russia is down with oil, and China is afflicted by US weakness. And that leaves us.
In fact, the contrast between the somewhat devalued trillion dollar Indian economy and the battered 3.5 trillion Chinese economy, is in the ways the two are structured. A full third of the Chinese economy is dependent on exports and another third on contract manufacturing for entities abroad, mainly US companies.
Similar, or even higher figures obtain for Japan, South Korea, Indonesia, Malaysia—all with their economies heavily dependent on US purchasing.
Singapore, a large, Canary Wharf-like Asian office block for the West, ditto Hong Kong, if you ignore the looming mainland, and beleaguered, tourism dependent Thailand, are also in trouble and largely helpless in the near term.
Other Asian economies such as Vietnam, Cambodia, Myanmar, tiny Brunei and even Australia, do not figure as emerging markets that can yield bumper profits for anyone. Australia has grown dependent on the Chinese and Japanese, both down themselves, in lieu of the distant and now recession hit Europeans. Myanmar, with considerable potential, is, sadly, locked away in its own time-warp.
SAARC Economies such as Pakistan, Nepal, Sri Lanka and Bangladesh, in our immediate neighbourhood, are slight, and bedevilled by long term weaknesses and deep political instability.
This is the time therefore for India to be bold. It has every reason to pump-prime its economy now, when our problems are few in comparison, and when almost every other country is falling hard. We are down in sympathy, no more. If we can successfully demonstrate that our domestic economy alone can retain growth rates of 9 per cent, even without foreign fund flows, we will paradoxically, and inevitably, attract massive foreign investment, both as FDI and FII.
Not everyone is currently penniless abroad. The Sovereign Funds of the oil rich nations have very few decent investment options in the near term. Our relaxation of Participatory Notes norms should be accompanied by a Ministry of Commerce initiative to attract such monies. We should not make the perennial mistake of always and exclusively looking West in all seasons, even for External Commercial Borrowing (ECB) operations, also recently opened up again.
Our bourses have fallen to below 50 per cent of peak levels in the face of an FII and Hedge Fund withdrawal of a mere USD 10 billion since we learned of the sub-prime crisis. Just one Sovereign Fund from the Gulf could set such an amount right! It is, after all a win-win situation for both. We could, if we seize the moment, become the best performing economy and market in the world, circa 2009.
(1.050 words)
October 8th, 2008
Gautam Mukherjee
India has a mere twelve per cent exposure to the export market: software, back-office customer support and Business Process Outsourcing (BPO) services, diamond polishing and re-export, auto parts, engineered goods, other exports, iron ore, grain, sundry commodities and, its people, both skilled and unskilled. This is despite our best efforts to date, and not by design. Our impact on world trade is around 1 per cent. That is why our inward remittances from Indians working abroad rival our export figures.
But, as things stand in the global economy, our currently low dependence on exports puts India in a unique pole position and affords a great opportunity to benefit from the present situation.
Because India runs overwhelmingly on its internal growth drivers, and even as the global financial markets are melting down, Finance Minister P Chidambaram, blithely ignoring the 500 and 700 point daily drops in the Sensex, says he still expects to restore a 9 per cent Gross Domestic Product(GDP) growth rate in fiscal 2009.
Mr. Chidambaram is backed up by the Planning Commission’s Mr. Montek Singh Ahluwalia, who still expects us to post an 8 per cent GDP growth in fiscal 2008 and suggests the stopped Foreign institutional Investment (FII) flows will resume after a couple of months.
Commerce Minister Kamal Nath also supports the view that our economy is doing well, citing revived manufacturing statistics, export statistics, investment statistics and particularly, a 124 per cent rise in Foreign Direct Investment (FDI); the last most welcome, because this money goes into the ground to create new factories, facilities and jobs.
The Prime Minister too is hinting at imminent change, saying that the Reserve Bank(RBI) is watching the liquidity situation very carefully.
When all the economists in the government, including Mr. Subbarao at the RBI, and Mr. Bhave at the Securities and Exchange Board (SEBI), keen on facilitating liquidity, one might be forgiven for reading the pronouncements as intended and rapid unmuzzling of the Indian economy, after a year spent obsessed with inflation. It looks like our economic managers are hinting at reducing some of the highest lending rates in the world, sooner rather than later, given the understandable drying up of foreign fund flows.
If India indeed cuts RBI regulated lending rates aggressively, for once as a pre-emptive measure, the country could benefit immensely. If the RBI cuts rates in a motivated, planned, monitored, and phased manner, say every six weeks, inclusive of the Repurchase Agreements (Repo), the Reverse Repo, and the Prime Lending Rate; and further cuts the Cash Reserve Ratio(CRR) of banks, say, once every quarter for the next year; we could see spectacular results in reaction.
After all, even with four further half percent cuts in the CRR, Indian banks would still be capitalised higher than everywhere else, albeit lower than the current 10 to 13.65 per cent. This conservatism with Cash Reserve Ratios is welcome in these uncertain times, and in any case, our lending processes are rigorous, and loans go only to the most deserving candidates. But, all in all, all these actions, taken together, would inject very badly needed liquidity into parched business and industry.
If undertaken, it will deliver a dramatic jump-start to our artificially suppressed economy, get our infrastructure projects surging forward, and get all our business and industry motors humming again. We will suffer a little consequent inflation perhaps, from consumerism, with cheaper money oiling the wheels, but not much, because it will be offset by decelerating oil prices and enhanced growth in the near term.
What we would also gain, by way of contrast, if nothing else, is a star economy in a sea of troubled ones. At present, in the celebrated BRIC, only Brazil is weathering the storm well. Russia is down with oil, and China is afflicted by US weakness. And that leaves us.
In fact, the contrast between the somewhat devalued trillion dollar Indian economy and the battered 3.5 trillion Chinese economy, is in the ways the two are structured. A full third of the Chinese economy is dependent on exports and another third on contract manufacturing for entities abroad, mainly US companies.
Similar, or even higher figures obtain for Japan, South Korea, Indonesia, Malaysia—all with their economies heavily dependent on US purchasing.
Singapore, a large, Canary Wharf-like Asian office block for the West, ditto Hong Kong, if you ignore the looming mainland, and beleaguered, tourism dependent Thailand, are also in trouble and largely helpless in the near term.
Other Asian economies such as Vietnam, Cambodia, Myanmar, tiny Brunei and even Australia, do not figure as emerging markets that can yield bumper profits for anyone. Australia has grown dependent on the Chinese and Japanese, both down themselves, in lieu of the distant and now recession hit Europeans. Myanmar, with considerable potential, is, sadly, locked away in its own time-warp.
SAARC Economies such as Pakistan, Nepal, Sri Lanka and Bangladesh, in our immediate neighbourhood, are slight, and bedevilled by long term weaknesses and deep political instability.
This is the time therefore for India to be bold. It has every reason to pump-prime its economy now, when our problems are few in comparison, and when almost every other country is falling hard. We are down in sympathy, no more. If we can successfully demonstrate that our domestic economy alone can retain growth rates of 9 per cent, even without foreign fund flows, we will paradoxically, and inevitably, attract massive foreign investment, both as FDI and FII.
Not everyone is currently penniless abroad. The Sovereign Funds of the oil rich nations have very few decent investment options in the near term. Our relaxation of Participatory Notes norms should be accompanied by a Ministry of Commerce initiative to attract such monies. We should not make the perennial mistake of always and exclusively looking West in all seasons, even for External Commercial Borrowing (ECB) operations, also recently opened up again.
Our bourses have fallen to below 50 per cent of peak levels in the face of an FII and Hedge Fund withdrawal of a mere USD 10 billion since we learned of the sub-prime crisis. Just one Sovereign Fund from the Gulf could set such an amount right! It is, after all a win-win situation for both. We could, if we seize the moment, become the best performing economy and market in the world, circa 2009.
(1.050 words)
October 8th, 2008
Gautam Mukherjee
Friday, October 3, 2008
Tales of Hands on Hank and Cool Hand PC
Tales of Hands on Hank and Cool Hand PC
CEO’s as front-men are hard-wired to be optimists.Henry, "Hank" Paulson, Treasury Secretary in the United States was, till lately, a consummate private sector CEO. He did very well at the helm of Goldman Sachs, just before taking on, probably the worst paying job of his life, in the US government.
Our own Mr. P. Chidambaram (PC) is a patrician Senior Counsel of lofty, if expensive, integrity; backed by much inherited land-holding and old money; gilded further by erudition and intellectual superiority; and crowned by tempered political experience. This is, after all, Mr. Chidambaram’s third stint as Union Finance Minister.
So, it is not surprising that every time PC makes one of his anodyne pronouncements on the state of the Indian economy, its stability, its prudence, in contrast with the financial storm that has seized the Western world; it soothes our financial markets and reinforces shaky sentiment. PC does not think we are in any substantial danger of being caught in the maelstrom, despite the Indian stock markets indulging their deep pessimism.
But PC’s boss, Prime Minister Manmohan Singh, quite the internationalist these days, glowing from his success with the Indo-US Nuclear Civil Cooperation Agreement, doesn’t believe we are insulated from the goings-on abroad. Being a celebrated economist himself, Mr. Singh warns us that we cannot possibly maintain our growth plans on track when the rest of the world is teetering on the edge of recession. He is therefore more interested in battening down the hatches and waiting out the fury.
But, in the eye of it, “Hands on Hank”, as The Economist describes Paulson, is challenged by the forces of posterity. He can fail, or go down in history as the man who, like the little Dutch boy with his finger in the dyke, prevented not only the trickle but the flood. And it is veritably a flood of absolute deluge proportions. Paulson did wonder, just as he took the job, about just how many people left after a turn at government, with their reputations intact.
Hank didn’t readily accept the ferocity of the approaching storm at first, using one rescue at a time tactics. But now, Paulson is manning the pumps 24/7 with horns and sirens blaring. The trillion odd, handed out in rescuing Bear Stearns, Fannie Mae, Freddie Mac, AIG, Merrill Lynch; and sundry others, via the newly established government credit programme; plus watching over the orderly dismemberment of Lehman Brothers, will obviously help.
So will the new bailout pack of 700 billion. It too is very creditable first aid. But to create actual solvency and sail into calm waters with most of the flotilla will take much more money than is being talked about at present.
The good thing is, that the US government, like governments everywhere, do not have to find real money in a drawer, to pay out. Governments can simply make book entries for lines of credit; and print more greenbacks on demand, for those who insist on cash. The US financial services economy is leveraged to about 3.5 times the size of the real economy of 12 to 15 trillion, and there is not much choice, because no one else, not even the funds rich Sovereign Funds from the Gulf, are going to throw good money after bad.
Still, the US government, of all governments, is good for the debt. Beside Henry Paulson’s colleague Ben Bernanke, at the Federal Reserve, will cut interest rates all the way to a quarter per cent, if need be, in a replay of the post 9/11 scenario.
Europe will be following suit; and begin by cutting interest rates this week, in addition to its frantic spate of nationalisations. Because, standing on the platform of their smaller economies, they are, in fact, leveraged much more than the US.
India is going to be conservative, months away from general elections, and with food prices spiking higher, but it will probably be persuaded to ease-up on its chokingly high interest rates designed to curb inflation.
Inflation is, in any case, headed downwards now. But so is growth, estimated now at about 6.5 to 7 per cent for fiscal 2008, down from the 8 to 8.5 per cent thought of just a couple of months ago. But, India could ease up; oil prices have dropped and look like they will stay below USD 100 a barrel for some time to come against reduced demand.
While the global analysis from all sides is deeply pessimistic, the state of play in America is hardly irremediable. Consider the fact that the bailout of USD 700 billion represents just 6 per cent of American GDP and the prior nationalisations and loans another 8 per cent or so. US unemployment is still at just 6 per cent, and not the 20 per cent it was in the Great Depression. Of course, the American economy is also much larger than it was in the 1930s and consequently more resilient.
But for now, as long as it is the government underwriting, nationalising, and printing notes, as necessary, there is really nothing to fear but fear itself. It is fortunate that Republican urges to back free-market capitalism have been reigned in, because at present, that simply wouldn’t work.
On the plus side, the US and European governments are picking up a lot of deleveraged assets very cheap, and buying off equity considerably below par. They are likely to make a profit on quite a lot of it in due course. In a miniscule parallel that is exactly what the Indian government rescue of Unit 64 achieved. They also end up providing much needed succour to the general public.
With all this turmoil, there are those who are announcing the imminent deposition of America as the pre-eminent economic power in the world. These delusional personages are unlikely to see this fond wish come true. But, calmer heads, like PC’s and that of the Prime Minister might well see opportunity calling. India could earn a bigger say in the international financial system as just rewards for our fiscal prudence and efficient management.
We have already been allowed, on an exceptional basis, to pull up a chair to the nuclear high table. Who knows, there may be quite a few others, waiting for us in the financial centres of the Western world too.
(1,050 words)
October 3rd, 2008
Gautam Mukherjee
Published in The Pioneer on the OP-ED Page as "Needed,a bold response" on Wednesday, October 8, 2008 and online at www.dailypioneer.com
CEO’s as front-men are hard-wired to be optimists.Henry, "Hank" Paulson, Treasury Secretary in the United States was, till lately, a consummate private sector CEO. He did very well at the helm of Goldman Sachs, just before taking on, probably the worst paying job of his life, in the US government.
Our own Mr. P. Chidambaram (PC) is a patrician Senior Counsel of lofty, if expensive, integrity; backed by much inherited land-holding and old money; gilded further by erudition and intellectual superiority; and crowned by tempered political experience. This is, after all, Mr. Chidambaram’s third stint as Union Finance Minister.
So, it is not surprising that every time PC makes one of his anodyne pronouncements on the state of the Indian economy, its stability, its prudence, in contrast with the financial storm that has seized the Western world; it soothes our financial markets and reinforces shaky sentiment. PC does not think we are in any substantial danger of being caught in the maelstrom, despite the Indian stock markets indulging their deep pessimism.
But PC’s boss, Prime Minister Manmohan Singh, quite the internationalist these days, glowing from his success with the Indo-US Nuclear Civil Cooperation Agreement, doesn’t believe we are insulated from the goings-on abroad. Being a celebrated economist himself, Mr. Singh warns us that we cannot possibly maintain our growth plans on track when the rest of the world is teetering on the edge of recession. He is therefore more interested in battening down the hatches and waiting out the fury.
But, in the eye of it, “Hands on Hank”, as The Economist describes Paulson, is challenged by the forces of posterity. He can fail, or go down in history as the man who, like the little Dutch boy with his finger in the dyke, prevented not only the trickle but the flood. And it is veritably a flood of absolute deluge proportions. Paulson did wonder, just as he took the job, about just how many people left after a turn at government, with their reputations intact.
Hank didn’t readily accept the ferocity of the approaching storm at first, using one rescue at a time tactics. But now, Paulson is manning the pumps 24/7 with horns and sirens blaring. The trillion odd, handed out in rescuing Bear Stearns, Fannie Mae, Freddie Mac, AIG, Merrill Lynch; and sundry others, via the newly established government credit programme; plus watching over the orderly dismemberment of Lehman Brothers, will obviously help.
So will the new bailout pack of 700 billion. It too is very creditable first aid. But to create actual solvency and sail into calm waters with most of the flotilla will take much more money than is being talked about at present.
The good thing is, that the US government, like governments everywhere, do not have to find real money in a drawer, to pay out. Governments can simply make book entries for lines of credit; and print more greenbacks on demand, for those who insist on cash. The US financial services economy is leveraged to about 3.5 times the size of the real economy of 12 to 15 trillion, and there is not much choice, because no one else, not even the funds rich Sovereign Funds from the Gulf, are going to throw good money after bad.
Still, the US government, of all governments, is good for the debt. Beside Henry Paulson’s colleague Ben Bernanke, at the Federal Reserve, will cut interest rates all the way to a quarter per cent, if need be, in a replay of the post 9/11 scenario.
Europe will be following suit; and begin by cutting interest rates this week, in addition to its frantic spate of nationalisations. Because, standing on the platform of their smaller economies, they are, in fact, leveraged much more than the US.
India is going to be conservative, months away from general elections, and with food prices spiking higher, but it will probably be persuaded to ease-up on its chokingly high interest rates designed to curb inflation.
Inflation is, in any case, headed downwards now. But so is growth, estimated now at about 6.5 to 7 per cent for fiscal 2008, down from the 8 to 8.5 per cent thought of just a couple of months ago. But, India could ease up; oil prices have dropped and look like they will stay below USD 100 a barrel for some time to come against reduced demand.
While the global analysis from all sides is deeply pessimistic, the state of play in America is hardly irremediable. Consider the fact that the bailout of USD 700 billion represents just 6 per cent of American GDP and the prior nationalisations and loans another 8 per cent or so. US unemployment is still at just 6 per cent, and not the 20 per cent it was in the Great Depression. Of course, the American economy is also much larger than it was in the 1930s and consequently more resilient.
But for now, as long as it is the government underwriting, nationalising, and printing notes, as necessary, there is really nothing to fear but fear itself. It is fortunate that Republican urges to back free-market capitalism have been reigned in, because at present, that simply wouldn’t work.
On the plus side, the US and European governments are picking up a lot of deleveraged assets very cheap, and buying off equity considerably below par. They are likely to make a profit on quite a lot of it in due course. In a miniscule parallel that is exactly what the Indian government rescue of Unit 64 achieved. They also end up providing much needed succour to the general public.
With all this turmoil, there are those who are announcing the imminent deposition of America as the pre-eminent economic power in the world. These delusional personages are unlikely to see this fond wish come true. But, calmer heads, like PC’s and that of the Prime Minister might well see opportunity calling. India could earn a bigger say in the international financial system as just rewards for our fiscal prudence and efficient management.
We have already been allowed, on an exceptional basis, to pull up a chair to the nuclear high table. Who knows, there may be quite a few others, waiting for us in the financial centres of the Western world too.
(1,050 words)
October 3rd, 2008
Gautam Mukherjee
Published in The Pioneer on the OP-ED Page as "Needed,a bold response" on Wednesday, October 8, 2008 and online at www.dailypioneer.com
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