Goose And Gander

Goose And Gander

The Government moving things along via the ordinance route, is the best thing it could have done by way of a New Year present to the nation. Coming alongside its determined push with the bureaucracy, to  ease the rigours of doing business in India, while catalysing the ‘Make in India’ campaign.  

With his penchant for acronyms, the Prime Minister  has asked bureaucrats to turn away from ‘ABCD’- avoid, bypass, confuse, delay, in favour of ROAD (to Success)- responsibility, ownership, accountability and discipline.

Between himself and the Finance Minister, they are making strong efforts to also get the RBI to make some much needed banking reforms, as well as start the interest rates on a downward cycle.

 Also, with the start of the GST, hopefully by 2016, a new Finance Sector Law to replace some 60 overlapping ones, the sum total will truly start the second generation economic reforms, and attract huge amounts of foreign capital at last.

There are four ordinances, coming thick and fast, days after the ruins of the Winter Session of Parliament. The Opposition, is now deprived of its ability to block legislation via the Rajya Sabha, and has to think on its future strategy again. Agitating on the streets is not going to help it generate more than heat and dust; what with the next Assembly election after Delhi, namely Bihar, not coming before the end of 2015 or even early 2016.

The Opposition is calling the Government undemocratic for using ordinances and bypassing parliament, after being roundly out-maneuvered; but has, in effect, brought this upon itself by a disruptive Rajya Sabha strategy that was amateurish, short-sighted, and not thought through with regard to consequences.

When the BJP did its own obstructing during UPA rule, the mathematics stacked up differently. The previous Government was a coalition, without the numbers to push through its agenda via a joint session.  Besides, The BJP in Opposition participated in a spirit of bipartisanship for the passage of a number of crucial bills.

The present Opposition stopped any movement on the Insurance Bill for example, even though it had passed through the multi-party Select Committee as required. So, it is not quite a goose and gander equation any longer. The BJP Government is in a stronger position than the UPA ever was, and very determined to see its plans come to fruition.

The Union Cabinet has just approved, and sent to the President of India for clearance, an amended Land Acquisition Act. Projects related to Defence, Rural Infrastructure, Industrial Corridors, and presumably Roads that form part of this thrust, will not need prior consent from affected land owners, nor require the complicated Social Impact Assessment procedures. The enhanced compensation and rehabilitation clauses however have been retained unchanged. This will enable an entire logjam of infrastructure projects to recommence; and provide a fillip to the moribund housing and construction sector. It will also help ease the pressures on much old PSU bank-lending, which is presently in the NPA column.

The Insurance Act raising the FDI component to 49% has also been put to an ordinance, along with another to permit the auction of Coal Blocks, and yet another to process arbitrations as well. The Insurance business will see billions in foreign investment now, though probably after the joint session of parliament passes the ordinance into a pucca law. There is also some concern that the insurance ordinance does not specify an exit route, in case things do not work out according to expectation.

And the Coal Blocks will now be e-auctioned to provide fuel to the electricity generation plants and other industries, which have been making losses using expensive imported coal for quite a few years now.

The Arbitration ordinance is to make it convenient for the process to take place in India rather than it being taken abroad routinely, as in the Vodafone case. Large Indian law firms, used to earning humungous fees for long-form arbitration, conducted over several years, charging by the sitting, have predictably begun to grumble that the nine months granted to settle such cases is inadequate. They are also not too pleased with the lump-sum fee requirements in the ordinance. But the foreign corporations have already welcomed the changes, and see it as part of the ease of doing business promise.

The Modi Government is firmly changing the way vested interest works in this country, while it’s going about it. Of the several hundred ordinances promulgated by the GOI over the years, despite being often in a comfortable position in parliament, the BJP has now passed six, for the President to endorse. If this is the only way to push the applecart forward, then so be it!

 (781 words)

December 30^th, 2014

Gautam Mukherjee

Bharat Bhagya Vidhata Mark II

 

Bharat Bhagya Vidhata Mark II

 

Here comes the end of 2014, and it is a good time to give thanks. The Nehruvian ‘Idea of India’ we have had to endure for so long was based on a derivative and borrowed vision from the West and the USSR. It gave us an industrial backbone, a democratic tradition, some excellence in higher and technical education certainly.  But it also muddled our thinking, entrenched our red-tapism, and stopped us from living up to our potential with an economy freed from ‘big brother’ shackles. The  commitment to pluralism, freedom of worship, tolerance, and cultural diversity, is innate to  the Indian people, even when it was a criss-cross of many kingdoms and rulers.  Jawarharlal Nehru did not invent it!

The  Nehruvian  era was, in hindsight, largely a mirage of post-colonial impracticality, of a fake non-alignment, as we were actually in the Soviet Camp, and  a Third World misery-loves-company attempt at solidarity that never took off. And the big powers, including our patron, openly mocked our hapless, essentially naked- and-hungry punditry. But we ourselves couldn’t see it, owing to a sad deluded hubris.

All this, including an exaggerated, Gandhian, turn-the- other- cheek pacifism, is, at last, getting the push; and we are on  the move, going towards our true home, our real-selves. We are finally, not on a ‘Discovery of India’, like a Sahib familiarising himself with his bailiwick, but one of self-discovery.

We are led by a vigorous leader, grown from the grass-roots, determined to break from the past, and blaze a proud new trail. India is changing, breaking free, articulating a staunchly nationalist and patriotic new Raj Dharma. It is building on those foundations of the Freedom Struggle that have been wilfully ignored and obscured by the overstaying Nehru-Gandhi dispensation.

Bestowing a Bharat Ratna on Pandit Madan Mohan Malviya and beginning the process to build a giant new statue of Sardar Patel are just two notable examples of this reorientation. No more, probably for good, are we going to be subject to a corrupt, anachronistic and rent- seeking Congress Party, careful to disguise itself; very much the Wolf in Red Riding Hood, but cowled in a Socialist Hoody.

The best national level thing that happened in  2014 was the coming of Narendra Modi as Prime Minister along with a thumping majority for the BJP. This was a validation of the popular will, 65% of it shaped by people between the ages of 15 and 35. It is a clear-eyed assertion, since reinforced in a number of State Assembly elections that have continued the Moditva trend.

If the BJP moves faster on the economy now, having got used to the levers of power over seven months, this country will certainly be a very different place by 2019. Dramatic things have happened already, electorally speaking, with the BJP forming a Government for the first time in Haryana, and Maharashtra, and Jharkhand. If it wrests a lead role in the governing of J&K, a festering and chronic problem will be finally on its way to a solution.   

The year coming up, 2015, is going to be the tipping point. It will be momentous for the Indian Right emerging slowly but surely towards centre-stage, and it will see unabashed economic development.  The Government has already decided to bypass the parliamentary logjam. Let us be clear, despite the shrill noise of the outmanoeuvred Opposition, that the BJP has no choice but to pass practically every law it formulates first via ordinance, followed by a joint session of parliament.   The Opposition, diminishing in strength with every new State Assembly election, conversely, has only its majority in the Rajya Sabha to rely upon.

But the snowball is beginning to roll. Even a decidedly high-brow economic conservative like the RBI Governor Raghuram Rajan is finally signalling better times.  

The media hyped non-controversy with regard to Conversions is an attempt to hark back to the Congress narrative demonising the Sangh Parivar as communal.  After all, everyone is free to convert anyone else, particularly since there is, practically speaking, no hope of ever proving abstractions like coercion or inducement in our notoriously arthritic legal system.

It is ironic that the Congress is examining if it is ‘Anti-Hindu’.  The thing is, it is not even pro-Muslim because it has done nothing exceptional for any of the minorities despite its decades in power. 

As part of a complete change, the Government should seriously think of officially changing India’s name to Bharat. India derives from the Indus which is gone for good to a benighted and nuclear armed Pakistan.  Naming this country Bharat on our passports will put paid to the associations from the British era, while also getting away from the boxed-in singularity of being called Hindustan, paradoxically, from the Mughal era.

Bharat will open a new chapter of renewed greatness with a connection to our ancient heritage instead.

(808 words)

December 27^th, 2014

Gautam Mukherjee

 

 

Bring On The Audacious Wizard

Bring On The Audacious Wizard

For the seven months of the Modi Government extant, it has been curiously hesitant when it comes to its economic initiatives. And this is jeopardising its core credibility. The dithering is in sharp contrast to its bold electoral and foreign policy moves, full of characteristic flair and dynamism. But since the entire Modi promise is predicated on economic growth, the Government must urgently realise that time-is-a-passing.

Could the gap in the electoral calendar provide the needed window of opportunity?   Between now, making ready for, hopefully, big-bang Railway and Union Budgets in February 2015; the Delhi State elections coming soon; and the Bihar elections later, next winter; there is some time to concentrate on pumping up the economy.

There is a lot of delivering to do. Reports of an Ordinance to launch 49% foreign investment permissible in Insurance, and an extension of the Coal Ordinance, is in the offing. There might have to be many other ordinances till its Rajya Sabha numbers are bettered, but the Government should not be shy about it.

The Administration, in addition, wants to  urgently push through thousands of crores worth of stalled Infrastructure projects, and revive the lucrative Mining industry.  A new, user-friendly law for the Financial Markets, instead of 60 overlapping ones, is also in the works. But can this Government implement any, or all of this, with speed, verve, and confidence?

Various commentators have been trying to make sense of Modi’s economic caution and diffidence, but at the core, it still remains a mystery. Could it be that Modi’s Gujarat formula of driving change via the bureaucracy is not working here? Could it be the resistance and vacillation of the Finance Ministry and the RBI? Could it be the absence of an economic vision to take the country speedily towards a laissez faire free-market?   Instead, we have clumsy attempts at ‘Forever Young’ Socialism, mixed with pseudo- reformist nostrums. This makes for a peculiar tasting cocktail, that smells fusty; of UPA trained bureaucracy, and date-expired ingredients.

The Modi Sarkar has shown an unjustified preference for gradualism, while the economy continues to gasp. There is an inexplicable urge to continue various UPA initiatives. There are no interest cuts to revive the investment cycle. There are far too many taxes. Why is MoS Jayant Sinha talking of reintroducing Estate Duty, abolished way back in the eighties? What kind of luddite signal does this send out? The Finance Ministry has not pushed the retrospective taxation button, but neither has it firmly shelved it. The much reviled MAT tax is proposed to be cut to 7% in SEZs, instead of abolishing it altogether.  Where is Modi’s personal imprint in all of this?

And anyone could have told the Finance Minister his taxation targets were unrealistic, given that the economy was in intensive care when this dispensation took over. Income Tax on Individuals and Corporations does not yield more than it costs to administer, imposed, as it is, on a very narrow base.  So why is this Government fighting shy of introducing a universal but minimal Expenditure Tax instead? And what about downsizing the expensive Government itself?

Where are the big-bang reforms to transform the economic destinies of millions of young people? Nothing has happened yet, except for the deregulation of diesel pricing, on the back of a drastic fall in international oil prices.

Today, given the tax shortfall, Mr. Jaitley will probably have to cut rupees one lakh crore in Government expenditure, if he is to achieve his deficit target. Already, there is a painful 20% cut in Health-care which hurts the poor the most.  

BJP President Amit Shah’s ‘Total Politics’ approach, wherein he doesn’t allow any walk-overs  to so-called unwinnable seats, has paid rich dividends. From the state level in Gujarat, to the general elections in Uttar Pradesh, and now in a series of State Assemblies, the BJP Party machine has worked to stretch targets.  

Prime Minister Narendra Modi, the fountainhead of the new BJP that promotes  ‘Sabka  Saath Sabka Vikas’,  his personal charisma undimmed, has  continued to be the chief election campaigner. He is ably supported by Shah, following-through in his wake. The BJP has, over the last year, won the highest share of the popular vote also, time and again. It will, unless the public turns sceptical, win the big states of Bihar, West Bengal and Uttar Pradesh too, and before the next general  elections in 2019.

But, great as this election juggernaut is, it must be backed by solid growth on the ground, before the shadows lengthen any more, using, perhaps, the billions pledged by foreign countries already.

The Modi Government must now reveal it has the audacity and wizardry to grow the economy to unprecedented heights. Then it can surely rule a Congress Mukt Bharat for at least the next ten years.

(814 words)

December 24^th, 2014

Gautam Mukherjee

The Consolidation Continues

The Consolidation Continues

Is the bulk of the mainstream media reflecting the changes in the vox populi , or getting stuck in an endless repetition of ‘yesterday’s papers’?  What excuse does it have to root vigorously for a Congress line, when its ‘master’s voice’ has been reduced to 44 seats in the Lok Sabha, and is continually losing power in more and more State Assemblies?  

Why does it frown upon the RSS/BJP assertion that there should be  an anti-conversion law for all religions, or else everyone should be free to convert according to his conscience, with each religion free to evangelise as it wishes.

But, if you’re an innocent Martian, recently beamed down, reading and tuning in, you might be forgiven for thinking it is BJP that is in the Opposition, being inconvenient, after being roundly rejected by the people! The daily goings on are reminiscent of a ‘White Russian’ style opposition to Stalinism, which stubbornly persisted some years after the Russian Revolution.

Joseph Stalin, renowned in history for his ruthlessness with fellow countrymen who opposed his version of the ‘revolution’; predictably undertook a massive purge. This put-paid to the remains of  the old Russian aristocracy, most  ‘counter-revolutionaries’, including those who had infiltrated the ‘Red’ bastions, and the well-to- do middle class; the last as a matter of principle. Stalin just didn’t believe in a perceived opponent’s change of heart.

The BJP led by Modi, in a thriving  and vibrant democracy, definitely, perhaps naively, does. But, of course, it also does not have the wherewithal to conduct any Stalinist style pogrom to rid itself of its detractors, however unfair, provocative and unreasonable they may be.

It is true enough that the bulk of the extant mainstream press and TV is beholden to the erstwhile Congress/UPA regime; having benefited from years of its patronage. But the continued bias and propaganda, in favour of a defeated idea of ‘pseudo-secularism’, is both morally offensive and an insulting disservice to the popular will. Is the mainstream Indian media taking blatant and twisted advantage of the robust freedoms granted in this country?

As things stand, the Modi Government is moving determinedly towards a two-term presence, and so this bias will have to be reworked. The BJP on its part, should seriously encourage some of its well-heeled supporters to start or purchase/consolidate private TV channels, newspapers  and FM  radio stations with enough spark and reasoned commentary promoting the right-of-centre economic views of the Government to counter the Congress leaning propaganda on extraneous matters.

The BJP is only well configured and effective in the Social Media, but weak in the mainstream, in English and the vernacular, which since it reaches many more, must be addressed. The BJP’s romantic reliance, on a largely unpopular and ineffective DD and AIR combination in this space, is simply not good enough.   

The historical and sociological narrative on the ground however, has changed.  There is an important new story to tell. And since May 2014, it has been evident that the people of India have been voting decisively for it. It is for the new BJP, and not the old Mandir-Masjid version. The new BJP, that is embodied in Prime Minister Narendra Modi’s ‘Sabka Saath, Sabka Vikas’ message.  

But, as in any polity, there  are singularities. These emanate from the broader Sangh Parivar, and even from some MPs, MLAs, new Ministers and old Governors; either through sheer gaucherie, or  because they feel left out. These elements are therefore making efforts to attract attention, and possibly put pressure on the Government to protest their perceived marginalisation.

But, having said this, there is little justification for the mainstream media to give these deviants from the official  line the oxygen of so much publicity. They should be praising the Government instead for being singularly focussed on development for all.

The Roman proverb vox populi vox dei, meaning the voice of the people is no less than the voice of God, is worth a mention here.  The J&K and Jharkhand election results are significant for signalling the continuance of the Modi/Shah Wave. They also suggest Delhi’s election, coming up next, will also fall to the BJP’s tally.

This makes it all the more frustrating for some in the Congress-supporting mainstream media, that likes to portray the BJP as divisive, obscurantist, polarising, majoritarian and communal. In Parliament, this negative projection has both provided an excuse for obstruction and done its damage, preventing little legislative work to be done in the Winter Session.

But, the growing new reality is amongst the people, turning out in large numbers to vote, both in Jharkhand and Jammu & Kashmir. The BJP has won 25 seats in J&K, just three less than the PDP, and the largest share of the popular vote at 23%. It is now a strong contender to share power  there over the next six years. It makes eminent sense for PDP to join hands with it, so that together, they not only have a strong and stable Government, but the J&K administration is better aligned with the Centre.

In Jharkhand, the BJP has a massive lead in the popular vote share with 39%, and has won a majority on its own. The upcoming Government to be formed will be the first stable one since the State was carved out of Bihar. The verdict in Jharkand has also added to the tally of BJP run States, and bodes well for its increasing numbers in the Rajya Sabha, crucial for it to pass legislation with greater ease in future. This result is also a great chance to put the tremendous natural resources of Jharkhand to use.

And if these electoral victories and gains are giving the Opposition in Bihar the jitters, well they might, because the BJP will soon be ruling on its very doorstep.

 Delhi is indeed next, and then come the big states of Bihar, West Bengal and Uttar Pradesh, all before the next general elections in 2019. If all, or most of these, are won by the BJP, it will greatly consolidate its prospects for the next general elections in 2019.

The South of India also awaits; and BJP President Amit Shah, in perpetual election mode, is well aware of his party’s lack of electoral presence there; with just one important alliance with the TDP. More wins are bound to come, like a self-fulfilling prophecy, and to give further teeth to mission ‘Congress Mukt Bharat’. And if the people continue reduce the Congress Party to a footnote, where will all its vociferous fans in the media and out in civil society go to?

(1,093 words)

December 23^rd,   2014

Gautam Mukherjee

The Only Star Of The Right Is Narendra Modi

The Only Star Of The Right Is Narendra Modi

Ideas may be flowing at a right-of-centre conclave in Goa, but most of the participants are painfully obscure. There are hardly any media or political stars, and any that might be counted to serve, can be reckoned on the fingers of both hands.

The Right Wing Indian thinkers and professors don’t live in India; they come if transported in, all-expenses paid, five-star and first-class. They are employed in the West, mostly in the United States, where they are appreciated and well paid.

As for Right Wing Indian novelists and litterateurs; do they exist at all? The newly minted Ministers of the Modi Government are bravely trying to hold the fort, but they all lack authority and track records, and seem very self-conscious.  

Spiritual Guru Sri Sri Ravi Shankar is indeed a stellar presence, but his being there is by way of an oblique blessing. But if it is wattage to be compared, the only one who can surpass his luminescence, though in quite a different way, is Prime Minister Narendra Modi himself.

Indeed the Prime Minister, risen to his present prominence via his own merit, patience, and determination; with  large dollops of assistance  from alter-ego Amit Shah, and the erudite support of legal beagle Arun Jaitley; is the only one who can hold his own in any arena, Left, Right, Centre, or Foreign.

This poignant state of affairs underlines the lack of space and opportunity for the Right Wing species in a Bharat that was officially Socialist and very Congress, till lately. Aficionados of the Right were labelled Communal by rote, and segregated from serious consideration.

The sad thing is that it is anybody’s guess how long the BJP Government, with an absolute majority to boot, will continue to allow itself to be pilloried by a media and intelligentsia that still clearly ‘belongs’ to the previous  dispensation. Every day that passes, the press and TV criticise this Government’s every little peccadillo, all in the name of democratic discourse, with nary a word against a UPA Government that failed the people of this country on almost every front.

The noisy bias and distortion in portrayal continues as if the BJP is still languishing in the Opposition. The bulk of the media makes no effort to reflect the verdict of the people and their demonstrated willingness to give the Modi Government a chance. This lot instead talks of curbs on press freedom and media witch-hunts, when the only person who ever imposed that kind of thing formally was once-upon-a -time Prime Minister Indira Gandhi.

Current Congress President Mrs Sonia Gandhi, preferred patronage to get her way. And the old media stars grown substantial under the ancien regime’s ‘system’, are now plotting the downfall of this Government by the process of a thousand deprecating propaganda cuts. If they praise at all, it is faint, and qualified; but if they find cause to condemn and reject, the blood is up, and everyone is in full flow.

But as yet, the BJP has no mechanism in place to counter this adverse propaganda. DD and AIR is simply not enough. There has to be a substantial Right Wing private media akin to Fox in the US to drive home the message.  Here, Times Now has appropriated elements of the Fox Style, but the politics of the Times Group does not serve.

The LeftLib establishment is relentless and well organised. It controls almost every prominent media group, both in English and the vernacular, and is populated with masses of well-regarded spokesmen, embedded in the media, and by way of external commentators and talking heads.

This can only be countered by an equivalent presence in media and civil society as powerful as the one the Congress Party has built up over the decades. Unfortunately, the BJP does not have decades to turn the tide.

Much has been done right by the Prime Minister and his techie friends in terms of the Social Media, but much remains to be done in the mainstream media. It therefore loses points on the PR front on a daily basis. The fringe elements in the Sangh Parivar who say and do bizarre things. are played up continually, and end up defining the BJP narrative.

The Prime Minister, the only star in the firmament with the ample goodwill of the people, is being boxed into a corner. Not only that, the legislative agenda of the Government has been clearly stymied by a reviving Opposition seizing its opportunity.  

The Prime Minister never tires of saying his sole agenda is development and progress for all.  But too many, not very important people in the Parivar, are promoting obscurantism, misogynistic views and blood-curdling communal agendas.

(778 words)

December 20^th, 2014

Gautam Mukherjee

Is Swarajya Truly My Birthright?

Is Swarajya Truly My Birthright?

Lokmanya Tilak coined the term Swaraj near the turn of the 19^th century.  He used it to epitomise the yearning for independence, centre-piecing it in his wonderful assertion, and paying for it by being whisked away to Burma for six long years.

Rajaji, the eminence grise behind the first avatar of this publication, coming further down the pike, in the 20^th, put his finger on a major malaise of Socialist India, coining the apt descriptor: ‘Licence-Permit Raj’.

Today, in the 21^st, the meaning of Swarajya has turned metaphorical; and may well embody the growing yearning for economic progress, finally stripped of its Socialist fetters.  The spirit of C Rajagopalachari, our first Governor General, founder of the brave, given the times, and far-sighted Swatantra Party; putative ‘conscience keeper’ to the Mahatma, may be getting all set to ride again.

But Swarajya, ‘in our own write’, is hard to come by. Those Socialist ideological moorings are still holding us back, though the knots may indeed be loosening at last. We now have a young and aspirational polity, demanding economic betterment without excuses.

Even then, the din and intellectual confusion of a retrogressive clinging, the yesterday-men howling and lamenting their loss of power, tell us we are still a long way from home. This, despite the decisive installation of a right-of-centre BJP Government, with a clear majority, for the first time in 30 years.

And the announcement of a host of measures on the anvil, including the raising of the foreign participation limit in indigenous defence production to at least 49%, the delicensing of several categories, and even agreeing to a 100% foreign ownership on a case-by-case basis.

There are many other sparklers in the works: billions in foreign investment from Japan and China to be invested in renewing the Indian Railways, fast and faster bullet trains, Russian diamonds to be sold directly to Indians, helicopters to be manufactured here, a dozen new nuclear plants to generate electricity,  PSU bank privatisation up to 48% , divestment of other PSU shares to raise over Rs. 60,000 crores for the Government coffers, raising the FDI limit in Insurance to 49% to bring in more than $ 10 billion in investment, implementation of a GST to raise the GDP by up to an estimated 1.7%, the scrapping of some 90 redundant laws to start with, solar power, clean rivers, efficient governance, and so on. 

Never has a Government of India attempted to do so much to get the economy moving again in such a short time since its advent. But many of these things are meeting with enormous resistance on their way to implementation, by a fragmented but disruptive Opposition. The Opposition is also panicked, and consequently more strident. It is despairing of being pushed into oblivion by the ruling party’s blitzkrieg of electoral success, ongoing in the Assemblies now, juxtaposed with the seeming irrelevance of their ideas which no longer resonate with the voting public.  

Much of intellectual India is still, as it heads towards its 70^th year since independence, ambivalent. It is shackled to isms that have been discredited globally, even by the people who still hang out the shingle. The world can see a very capitalist China for example, grown mighty as a consequence; and a little Cuba by way of contrast, emerging from a time-warp, reconnecting, reconciling, re-establishing diplomatic relations with the US after half a century. But India, maddeningly, cannot quite make up its mind.

It may be instructive to note that there are very few journalists, commentators, thought leaders, willing to root for the right-of-centre point of view in India. Conversely, there are legions of the Liberal-Left/ Socialist persuasion. And indeed, an overwhelming majority of mainstream newspapers, magazines and TV channels, including those in the myriad vernacular, that chime in alongside.

Is this because India has been Socialist for a very long season.  So much so, that its tenets are semi-embedded in our psyches, and not just peremptorily, in the Preamble to the Constitution.

And many influencers, smarting unbelievingly still, from the loss of their pole positions under the earlier Government, aver, quite subversively, that the very idea of India, as it was conceived : pluralistic, inclusive, secular, diverse, etc. is being subordinated to a majoritarian agenda. There may be strands of justification for this stance, with frequent and bizarre sallies from the Sangh Parivar’s fringes, but it should not turn them against the BJP’s robust economic plans.

But here too, there is a ‘communal’ bogey, an accusation, implicit, and an assertion that growth on the changed terms of a ‘level playing field’ cannot compare to one that clearly purports to favour and protect the minorities.

The young demographic of the voting public may be fed up of a rhetoric that does not deliver, but the bulk of the thought leaders refuse to  update their spiel, hoping against hope that they can hold out for five years, before seeing this Government out of the door.

But why does the ‘Liberal –Left’ portray the Centre-Right  in pejorative terms, 23 years after the ushering in of the first stage of Reforms, that too under Congress rule? The benefits of changes made in I991, which actually began in 1985, have, undeniably, been transformative.

1985 was when the ‘Computerji’, Prime Minister Rajiv Gandhi came into his own, and started dismantling the statist controls of his venerated predecessor and mother. Today, the gains of 1991 are easy to take for granted, but only for those who do not predate that particular Rubicon. Many of the intervening years have given us unprecedented growth, in near double-digits, as compared to the humiliating, almost zero, ‘Hindu Rate’, that preceded it.

So, what gives credence to the ongoing prejudice? Is it the sheer numbers of the LibLeft advocacy, its endless repetition, backed with a self-generated air of authority? Or is it because, from the days preceding Indian independence, the father of the nation, Mahatma Gandhi, made some telling choices? Apart from his own, piquant, small is beautiful, and back to the village ideas; he chose the then fashionable Fabian Socialist leanings of the urbane, young, and personable, Jawaharlal Nehru. He did this over the hard-bitten and largely self-evident free-market philosophies of other stalwarts such as Rajaji, Rajendra Prasad and Sardar Patel.

That these laissez faire principles, albeit with a massive imperialist bias, served the Raj and the East India Company for centuries before, was probably the telling black mark. It was, after all, a thriving and vibrant commercial philosophy.  But the post-colonial world could muster no love for the free-market because it did nothing proactive about the subjugation of the weak   and poor. So policy makers emerging from the foreign yoke wanted first of all to promote equality and social justice. They may be forgiven for believing that Socialism, or even Communism, the new rage since the Russian Revolution of 1917, was indeed the answer.

Cutting to the present day, it is a mystery still, how, those we now label the LibLeft, expect to fund its give-away largesse? Except, that is, through an ever burgeoning fiscal deficit! Why, concurrently, are these people indifferent towards the very engines of growth that can supply the wherewithal? What is wrong with the State unabashedly supporting Business, Industry, FDI, FII, a balancing of budgets, and so on? Growth in GDP is not just ‘crony capitalism’, as the distortion would have it, but a boost for every sector of the economy.

The unleashing of growth since 1991 has produced spectacular results already and put India on the global economic map, even if it is past time to usher in the second stage of structural reforms.  The Sensex, writes Dhirendra  Kumar, of Mutual fund Advisory  Value Research, was at a mere 600 in 1989, two years before the advent of first stage reforms. It had climbed to 3,600 in 1999, and 21,600 in 2008. The BSE Sensex has been growing ‘six-fold per decade’ says Kumar. It is, we know, expected to climb to 35,000 by December 2015.

There is much foreign excitement and anticipation of a bright future for India. The upcoming Vibrant Gujarat Summit in January 2015, is promising to be another economic landmark. It will be attended by US Secretary of State John Kerry, along with a delegation of 80, visiting before President Obama himself arrives for Republic Day. UN Secretary General Ban Ki Moon will also be there, along with Bill Gates, and several other heads of state. There are many proposals to establish new industry in Gujarat, including one to make Kalashnikov AK-47 rifles in the land of the Mahatma.

The fact is, given our gargantuan and growing population, already over 1.30 billion strong, India cannot make any enduring dent in poverty without at least 8% GDP growth per annum. What is needed, as demonstrated by China, are decades of sustained high growth, near or above the double- digits.  But a new Swarajya 2.0, can only truly dawn, when we resolve to break free of the past, and pull out all the stops for the future. 

(1,505 words)

December 19^th, 2014

Gautam Mukherjee

Through Tortuous Swings And Roundabouts...

  

Through Tortuous Swings And Roundabouts, The Government  Makes Progress

An’ losses on the roundabouts means profits on the swings!

Patrick R Chalmers, Poet and London Banker.

The Indian Public Sector is not only chronically inefficient, with just a few companies turning any kind of profit; but also substantially corrupt. The Private Sector, the Unorganised Sector, even the world of NGOs, is no better when it comes to venality.  

India, with all its promise, is ranked one of the worst places on earth to do business. All of it, in addition to the creaky and perpetually needy Government, is in urgent need of major reform, so that it becomes more lucrative to be honest.  

Fraud in PSU Banks in just the first three months of fiscal 2014, totals to 2,417crores; over half of the losses incurred by them in 2013-14 (4,183 crores).The sooner these PSU Banks dilute their equity to 52%, as sanctioned by the Cabinet recently, the better.

The PSU bank managements, often employed through political patronage, need to be ousted. Many bankers themselves are involved in the embezzlement.  Such massive losses of public money are unsustainable by the under-capitalised banks , and these numbers do not include the massive NPAs, in tens of thousands of crores; some of which are being rescheduled now.  Things are much better in the private and foreign banks, because they use a higher level of monitoring technology and data analytics to nip the problems in the bud.  Perhaps the RBI will show some zeal to push this privatisation through, and past all the vested interests.

In addition, a stupendous $ 94 billion in ‘illegal capital’ was apparently exported from India in 2012 alone, a lion’s share of it, due to deliberate misinvoicing. With periodic bans on capital inflows  into the bourses via the anonymous participatory notes, very little of this capital ever returns to this country.  So when are we going to finally go fully capital account convertible, to make such cheating redundant?

Meanwhile, the divestment targets of the Government, over Rs. 40,000 crores in this fiscal alone, is pending. The time left for this now is just 90 days, assuming the ongoing market correction bottoms out soon. As it stands, only a meagre Rs.1,500 crores has been realized from a 5% stake sale in SAIL so far. Finance Minister Arun Jaitley wants to push it through to gain credibility for the Government’s fiscal plans. This sale would meet earlier commitments, before the full budget in February 2015, which will act as a verdict on this Government’s ability to deliver in the short to medium term.  

Second- Generation Reform, except for diesel deregulation, has been non-existent so far. The FIIs are showing some frustration, retracing part of the exuberant run-up  in the indices over the last year. The rupee too is beginning to tank, thanks to lack of growth in the manufacturing sector, despite low inflation.

But still, all this could turn around dramatically.The results of efforts to initiate the GST, which, when operationalised, is expected to add up to 1.5% to GDP; and the Insurance Bill, with an estimated $ 10 billion, or more, to come in against the 49% foreign investment quota; if passed in this session of Parliament, would be a game changer. The Government’s Reform Agenda would receive a great boost. It would, in one stroke, set the scene for a resurgent stock market in 2015, and attract a significant amount of FDI as confidence in India grows.

The Railway Budget, to be presented this time by the acclaimed Suresh Prabhu, is expected to lay-out the first serious modernisation, reform and renewal measures, ever undertaken in independent India, for this venerable institution and lifeline for millions. The FDI expectations in this are massive; enough to drive up the GDP, and likely to feature Japan, China, and maybe France as well.

The outcome of the Assembly Elections in J&K and Jharkhand will also be known very soon. It may well  give the BJP an opportunity to form coalition Governments in both States, a big step up from its marginal presence in both.  And all these Assembly wins and near-wins, with more in prospect, will add to the Government’s numbers in the Raya Sabha, and solve its legislative problems  decisively.

It may appear to some, that the fringe elements within the Sangh Parivar have been queering the pitch for the Government. But the fragmented Opposition, rag, tag, and bobtail as it is, would have found another way to make it difficult anyway.

On the foreign front, though the economic scenario is far from settled, the thumping snap-poll win achieved by Shinzo Abe in Japan, a prominent friend of Prime Minister Modi, will give a fillip to Japanese investment in India as pledged.

All in all, as this year draws to a close, there are good things to look forward to in 2015.

(801 words)

December 17^th, 2014

Gautam Mukherjee

This Banyan Is Just Too Heavy

This Banyan Is Just Too Heavy

If I had eight hours to chop down a tree, I’d spend six sharpening my axe- Abraham Lincoln

Governor Raghuram Rajan of the RBI cannot seem to resist efforts to enlarge his essentially regulatory role. He aspires to be nothing less than a policy-setter for the Modi Government.

Some of his prescriptions, however, are palatable enough. He calls for more tax sops for the middle class to boost the saving’s rate. He also points out that the tax concessions, given in the past, were not indexed for inflation, and have quickly proved to be inadequate. This is equally true of the tax rates, which are absolute, except for exemptions.

Rajan advises the Modi Government to remember that the ‘Make in India’ campaign cannot take off without infrastructure and taxation reliefs. Rajan is right; even if he chooses to state the obvious. He cautions the Government against adopting a China style export oriented campaign. But this is not the Prime Minister’s emphasis. Modi  hopes a proportion of what is made here, if it is state-of-the art, and not the sorry ‘import substitution’ effort alluded to by the RBI Governor, will surely be exported. This is by way of an additional benefit to the country, not a primary objective. Of course, with the West being in the doldrums currently, they may not prove be the actual export markets at all.

Modi’s purpose however  with the ‘Make in India’ call is to attract much needed foreign investment, boost the GDP share of the manufacturing sector, and to provide greater number of jobs to our youth.

For example, when the Russians start making their estimated $3 billion worth of joint venture factory to produce helicopters in India; the majority of the choppers will be absorbed by the Indian Armed, Para-military and Police Forces. Some will certainly go into the corporate ends of  ‘Civvy Street’. But a number, in addition, could well find buyers abroad; just as cars made in India by international marques have done.

Governor Rajan also suggested that to emphasise the manufacturing sector over other ones may result in imbalances. Again, he must understand that the Modi government expects to proceed on multiple fronts simultaneously. And to emphasise any one of them, is not intended to be at the expense of another.    

Given the faltering  statistics, despite a drastic fall in oil prices, a ramp-up in dwindling manufacturing activity is crucial. The latest IIP (Index of Industrial Production), number is at it worst in 3 years. Manufacturing has contracted by a whopping 4.2% in October.

Will Rajan cut rates now?  Curiously, it is not likely. He says that, by themselves,  rate cuts will not restart the investment cycle. But it will certainly help sentiment. Talk of it being too soon as inflation may spike again, strike many as a bogus argument. Particularly, since October 2014 data shows  the CPI (Consumer Price Index), has eased to 4.38%; well below Rajan’s earlier target of 6% for January 2016!

He may have a point on excessive taxation and poor infrastructure though.  And other commentators too, like Pratap Bhanu Mehta, are also complaining that the Government is not working to a plan. To others, the plan is to build massive infrastructure, Chinese-style, using foreign investment from a host of countries including Japan, Russia, the US, Australia, France, Israel and others. President Vladimir Putin’s other recent offer to build 12 new nuclear reactors, with their parts and componentry to be also manufactured in India, is illustrative of this.   

The larger, far more sinister problem is that India runs a very expensive administration. This could prove disastrous in the long run. It destroyed a financially top heavy and once mighty USSR. Our taxes, GST bill notwithstanding, are running away with us. The fundamental question remains: why does India need such a high direct and indirect tax structure?  

In reality, a major chunk, if not all of the Government’s raised taxes, goes to cover just a part of the salaries and expenses of the enormous sarkari set-up. Governments may come and Governments may go, but none seem to get any leaner or more frugal. 

This high tax regime may be  the single greatest disincentive to the ‘Make in India’ campaign.  

 And as for export driven growth, our moment may indeed have passed. But Asian giants like Japan and China used this very route, rising like the Phoenix from the ashes of war and colonial exploitation. They added enormous wealth to their economies; but not without an incredible amount of Government support. This came, by way of low or nil taxes, state-of-the-art infrastructure and processes. There were liberal bank credits, loans, technology. There were MFN (Most Favoured Nation) trade protocols.

The Modi Government’s ‘Make in India’ programme will have to adopt and adapt many of these proactive techniques with the greatest dynamism, in order to succeed.

(807 words)

December 13^th, 2014

Gautam Mukherjee

When Will They Begin?

When  Will They Begin?

The gap between the expectation and the pace of economic reform is widening. Things are not moving fast enough and there is no clear-cut road map. Small administrative and economic improvements have kept coming, but these have only acted as appetisers for the main meal to come.

The Government as a whole seems to pause and mark time when Modi goes abroad on bilateral and Summit meetings, or is out campaigning for the Assemblies. And the Prime Minister has been doing a lot of this rather than attending to governance himself over these first few months.

There are successes to count, handsome pledges of investment and cooperation from several important nations, President Obama himself accepting the invitation to be Chief Guest at  Republic Day 2015, President Xi Jinping’s visit, Prime Minister Tony Abbot’s visit, and now President Putin’s visit, amongst a number of other creditable foreign affairs ‘wins’. On the electoral front, wins in Haryana and Maharashtra and good possibilities in Jharkand, J&K, and in the Municipal and Local Body elections in Kolkata, are indeed substantial achievements.

But, what about the crucial reforms agenda, and the improved day to day running of the Government?  What about those slogans about precisely this?

There is a sureness about Narendra Modi during the electioneering and the foreign initiatives, that goes missing and becomes hesitant when it comes to recasting the nation’s economic possibilities. Here the Prime Minister seems to be influenced by various political and bureaucratic inputs and is unable to put his bold and visionary stamp on the proceedings. For a Government that is pyramided to the top for almost every important  decision, this is an impediment to progress.  

Everything Narendra Modi does personally is still perceived as potentially high-value, but his Government or indeed governance, has not made any big impact on the minds of the people so far. This is creating frustration and disillusionment amongst the BJP supporters and reenergizing the once flattened Opposition. The activity in parliament too is disappointing and as chaotic as in the UPA days of coalitions. Some inexperienced first-time ministers and fringe elements in the Sangh Parivar create unnecessary distractions, offering ready ammunition to the Opposition, and there seems to be no effective mechanism to monitor or control what they say and do.

The litmus test of how all this is to go forward will be the content of the Annual Budget in February 2015- it needs to establish a milestone for the new India that has been promised. If it fails to do so, the patience with this Government will certainly begin to run out.

In the stock markets, till recently, before the latest correction began to set in, most shares were trading at 17 or 18 times earnings. They were doing so in anticipation of the action of the Modi Government to follow. They looked over-valued against actual corporate earnings all the while,  but not if compared to the 25 times prevailing in late 2007.

But those 25 times earnings in 2007 were by way of ‘irrational exuberance’, and a lot of money flooding in via the FIIs in the context of a global bull run. These 18 times now also expect to go to 25 times; but based on solid company earnings in real terms. But with the currently ‘rich’ valuations,  many foreign brokerages are beginning to fight shy, preferring other, ‘cheaper’, markets elsewhere.

China, even a slowed down China, has size in its favour too, and has beaten down stock valuations today. And at a projected 7% growth figure in terms of GDP, it may be the more attractive investment destination. 

India’s dream run as the best performer amongst the EMs may turn out to be an altogether brief season. The amount of FII money coming into India could diminish in future, perhaps being cut to half, or less. This may have already begun, though a major ‘weighting’ review will take place based on both the legislative success of items such as the GST and Insurance legislation being processed in parliament, the international ratings for India in the new year, and the reforms content of Budget 2015.

Meanwhile there is a clamour for a significant ‘correction’, of at least 10 to 15%, in stock prices, in order to make it attractive. Of course, the FIIs, who control the Indian market, with their grip on some 22% of all the floating stock, can engineer this quite easily. They seem all set to do so, taking it down in order to push  it back up again to 35,000 on the Sensex, by the end of 2015.  A reason why this sort of rank manipulation is possible, is because the FIIs invest much bigger sums as influencers, and because the markets have run up, not on hard news but on favourable expectation.

At  present levels, real earnings have to grow to sustain the bull run. This can only happen if the economy picks up substantially. For this, the Government must make a number of bold reforms. Why this first majority Government in 30 years that needs a buoyant stock market for its own disinvestment programme, is being so cautious, to the point of exasperating business and industry,  is difficult to fathom.

Small incremental improvements of the kind that has become routine, can possibly take the GDP to 6.5% per annum. This may be creditable when compared to the dismal low of 4.5% that this Government inherited, but the job creation and alleviation of poverty needs upwards of 8% for several years ahead on the trot. Such growth cannot be generated from the small incremental moves.

The GST, the Insurance Bill, Land and Labour Law reform, are all emblematic of the yearning for change. 

But, along with such legislative change, there have to be changes in the way the young see their possibilities these several months down the line. It  was very exhilarating listening to the campaign promises, but the reality today, while not bad, mainly on the back of the spectacular fall in oil prices, rather than any Government action, cannot yet be declared as good.

And despite the number of Assembly Elections the Modi-Shah  duo may win now, that second term can only come if the people are satisfied that their aspirations too are being met. Controlling more  of the States and eventually, most of the seats in the Rajya Sabha may provide the mechanics of a sustained stint in power, but they cannot substitute for the widespread feeling that this Government is not living up to  its promise.

(1,086 words)

December 10, 2014

Gautam Mukherjee

Incrementalism Central

Incrementalism Central

Talk of the radically bold right-wing moves of Thatcherism, that put paid to the Trade Union Movement in Great Britain, and privatised great swathes of state-owned enterprise, being replicated here, in Modi Raj, is decidedly wishful. 

Not unless Modi himself sits down to give dictation on his presumably reformist economic beliefs in the context of India’s progress. Is there an economist that Modi particularly admires or is his vision a combination of UPA’s welfarism  and a soft capitalism of his own? Since everybody in the Opposition expects Modi to do something radical that they can pounce upon, he may have chosen the opposite, an altogether innocuous and less obtrusive method.

Besides, the Modi Government is long on election campaign thunder, but is essentially incrementalist in economic matters and the pursuit of ‘vikas’. It will still add a percentage, perhaps one and a half, to GDP by doing  this, taking it to 6.5 per cent per annum. 

Former Prime Minister PV Narasimha Rao got his transformative reforms done in 1991, by saying next to nothing at all about them. Modi can’t do that, as he is a great orator, and given to promising much. But paradoxically, if Modi appears to be doing less than he promised, the criticism can only be directed towards egging him on to do more!

Arun Shourie, former Disinvestment Minister in the Vajpayee Government,  recently opined that the plates may be clattering, but the meal is a long time coming. Many other observers claim they are ‘underwhelmed’ by the economic moves made so far. The table-setting however, if that’s what it is, seems to be impeccable.

In 1991, the reforms, which went such a long way to transform the lives of ordinary Indians as well as the Captains of Industry, was a World Bank prescription, and not some home-grown idea. It was said to be almost a dictat, if India wanted any loans and reliefs, as the country stood staring at bankruptcy and sovereign defaults.

It was then, that an erudite Prime Minister PV Narasimha Rao, implemented the first-stage dismantling of the infamous licence-permit Raj. He did it, through an obedient economist, Finance Minister, Manmohan Singh. Obedient, because Manmohan Singh was able to pt aside his personal biases. Singh was,  not long before, quite the Socialist, and teaching at the Delhi School of Economics!

The Modi Government is deeply hampered in its legislative agenda by its lack of numbers in the Rajya Sabha. But even if this were not so, its major reform  intentions themselves are being questioned as decidedly suspect. Some commentators are saying that the high expectations of second generation reforms, and indeed the Reforms Agenda itself, has been thrust on this administration by the expectations of the voting public. And left to itself, it has no over-arching market-friendly vision, or great interest in advancing it.   

Meanwhile, the Modi Government hankers, somewhat unrealistically, given its aggressive campaign style, for consensus- that too, across the political spectrum; presumably, to push through its legislative agenda.

But outside cooperation, is hard to come by, in a political landscape harking back towards status quo and a failed Leftist past. This, even if it didn’t resent Modi’s spectacular success with the voters, which it obviously does.   

The other aspect of the equation, is that the losers in the hustings are constantly looking to make trouble for the Government, often over frivolous or petty reasons. The ruling Government, in turn, is reluctant, to antagonize the much diminished Opposition, except during in its election campaigns to add more States to its tally.

But will all these niceties do it any good, or is the Opposition sensing a weakness to exploit? Does the Modi Governent wish, even long, to be liked, for example?

Chief interlocutor on Modi’s behalf in economic matters, Finance Minister Arun Jaitley, is essentially proving to be a gradualist, bred, as he is, on years in the genteel New Delhi based ‘Opposition’, while Congress played its two –steps-forward-one-step-back game.  But, given the nature of this highly apexed Government, it is very unlikely that Jaitley’s views are very different from those of Modi himself.

Nevertheless, if Jaitley turns out an indifferent budget come February 2015, it will do immeasurable harm to the Modi Government’s image and credibility.  Hoping against hope, the likelihood of a less than electric Budget 2015, is really quite high!

 All this pessimism begs the question, why is Modi going this slow? Is it because he is consolidating his hold on the Government?  Or does he essentially think reform can only be implemented in small bites?   

Jaitley may be considered a good back- room-strategist, but he is not the most electable of people, with little ability to ‘manage political fallout’. This renders him over-cautious, in thrall to the status-quoist bureaucrats, and dependent, like most of the BJP stalwarts, on the over-burdened shoulders of Narendra Modi.

(812 words)

December 8^th, 2014

Gautam Mukherjee

Hope As An Antidote To Despair

Hope As Antidote To Despair

RBI Governor Raghuram Rajan stuck to his high-interest regime in yet another learned sounding but pusillanimous review, his fifth since he took over. He seems to care nothing for symbolism and the gesture that enthuses, and like an unbending Robespierre, wants to drive in fiscal discipline, sharp as stakes, into the Indian body politic; even if it’s the last thing he does!

This time, his apologists, who seem to be legion, cited many things; reminiscent of the voluble blind men of the fable describing an elephant from their own unique perspectives. One talking head said the fiscal deficit was already at 90 per cent of the budgeted limit, implying cutting rates, by say, 25 bps would have tipped over the apple cart. He didn’t care to mention the great reductions in the Current account deficit (CAD), due to the precipitous fall of imported oil prices however. Another said the banks and their NPAs are in a parlous state. Another allowed that every head of inflation was indeed down, but what’s to say it won’t rear up again? One said it was not about inflation but the currency.  The RBI was not cutting in order to protect the rupee.

The Governor, an inflation hawk par excellence, himself said it wasn’t yet time to cut rates. He wasn’t comfortable with the state of the economy- the effects of the slightly deficient monsoon had not yet fully played out over farm produce and food prices. He wasn’t happy with the data on various aspects and would cut when the flow of data drives him to do it. For now, he wasn’t sure that things had turned the corner in any convincing manner.  

Governor Rajan ignores the fact that the US is growing again after  the coddling of 6 years of near zero interest rates, and massive, note-printing stimulus. Perhaps he is content to see India with a 5-6% growth rate, because it is bigger and better than everyone else, except a weakened China, which still outdoes India. But the jobs Modi has promised the young, need an 8% GDP or more, year after year.

Rajan must, given the tone and tenor of his pronouncements, be looking for the perfect moment. This is a scary thought, because it is unlikely to ever arrive, particularly in a chaotic country like India, with an inefficient but gargantuan bureaucracy, and Government to match. Or else, the Governor is not only pathologically cautious, but is tacitly blaming the six -month old Modi Government for not doing  enough to get growth back on track.

His apologists agree.They say that just cutting interest rates may improve sentiment, but won’t actually kick start the investment cycle by itself. ‘Sentiment’, of course, was not something the UPA Government cared to worry about. It drove the Indian economy instead, with its Stalinist focus on a showy welfarism, and what Rahul Gandhi thought was a chic anti-business stance - straight into the none to ‘swatchh’ toilet.

Now that the UPA is gone, it seems to have left behind  a very able Trojan Horse in the form of Governor ‘anti-inflation’ Rajan.

That Finance Minister  Arun Jaitley is going along with the misguided  Mr. Rajan, even after publicly calling for rate cuts in December 2014, not once but several times, is somewhat mystifying. One hopes that he cannot possibly be seduced by the soothing, ‘dovish’ talk of an interest regime of 1.5 to 2 per cent sometime in the misty future; when, and if, the situation allows it. Rajan also said, other things being  equal, that he might begin to cut rates early in 2015.

Now all hopes, to serve as an antidote to despair, have been transferred to the Annual Budget in February 2015. Business and industry, though it is putting a brave face on the goings on, is grimly hoping that it too does not turn out to be a damp squib. There are a lot of good people working on it to be sure, and Jaitley keeps saying it is going to be full of ‘second generation reforms’. But action must surely follow this torrent of talk. The Stock Market too is having trouble scaling new peaks with nothing happening.

Already, it appears, that neither GST, nor the Insurance Bill will see passage in this Winter Session of Parliament.  Frustratingly, nothing big seems to be going through. Small mercies: such as petrol, diesel, domestic cooking gas, and aviation fuel prices, have indeed been cut.

This Government, by letting a Governor of the RBI fly his kite unhindered, seems to be ignoring the monumental expectations of real progress the people harbour. This gradualism, incrementalism, timidity, downright slowness in economic affairs, somehow belies this Government’s massive electoral mandate, and its continued skill at winning the Assemblies.

 The goodwill and patience cannot last indefinitely. It would be a pity if the Modi Government degenerates into a bad  copy of the UPA, ineffectual, congratulating itself all the while, even as the people are unhappy.  

(827 words)

December 2^nd, 2014

Gautam Mukherjee

Will Christmas Come Early For The BJP?

 Will Christmas Come Early For The BJP?

It could well be an early Christmas celebration for the BJP, in the best of  ‘Sabka Vikas’ spirit. It could send out a message of peace and beauty amidst the snows of Kashmir. One that says that here is a vibrant democracy that has triumphed over the bloodshed of terrorists and the machinations of the divisive and cynical. The BJP is not talking of Article 370 anymore. If it forms the Government in J&K, as it well might, 370 may not matter either way.

This dramatic result may be just days away, despite weak attempts to raise the bogey of ‘polarisation’ by soured coalition allies: the National Conference and the Congress Party.  Both are smarting from being roundly rejected by the electorate just six months ago. To make things worse, the Lok Sabha losers, having fallen out, are hurling invective at each other.

Meanwhile, the people of Jammu, Ladakh and the Kashmir Valley, are getting ready to change gears and embrace Prime Minister Narendra Modi’s rousing vision of  ‘Sabka Sath, Sabka Vikas’. As the 71 per cent turnout in the first phase of voting on November 25^th seems to suggest, the people in the Kashmir Valley want change. This despite the usual calls for a boycott by Separatists, and stepped-up Pakistani sponsored terror attacks.

Prime Minister Modi and BJP Party President Amit Shah, palpably take this longing for change very seriously. This could be the tipping point; the moment when the problems of this beleaguered state begin to be solved. Modi remarked at a recent rally in Kashmir, that he has visited J&K every single month of the six months that he has been Prime Minister. And Amit Shah is leaving no alliance, no organisational effort, no electoral tactic, untapped. The BJP’s Mission 44+ for J&K is no empty slogan.

Expert observers  reckon that if the BJP only replicates its general election performance, it will be just a dozen seats short of a majority; at 45 seats in the 87 member Assembly. But, it could well do much better. Jammu and Ladakh together account for 41 seats. Extrapolating just the 33 seats from the mirror image of the earlier election, is in itself, quite exhilarating. BJP led in 30 out of 37 segments in Jammu, and three out of four in Ladakh the last time around. Could it win perhaps  38 or 39 of these seats now?

Much, after all, has happened since the general election results were announced on May 16^th . The magnitude of the victory, the initiatives already taken by the Modi Government, both nationally and internationally, and the possibilities it has opened up, are not lost of the people of J&K. They do not want to be isolated or left behind, and the old dispensation has indeed let them down badly. And the Pakistanis have done nothing but stir up trouble.

Political ascendancy in J&K has tended to be a cozy ‘family’ affair , right from 1947; and even more so after the Kashmiri Pandits were  hounded out of the Valley in the 1990s. Jammu and Ladakh, in the absence of alternatives, has always voted for Congress; and the Kashmir Valley went to either the Abdullah family’s NC, or the Mufti Mohammed Saeed Clan’s PDP.  

This time, prospects are excellent for the BJP in Jammu and Ladakh. But it is determined to make a mark in the Kashmir Valley, to dispel the myth of the so-called ‘alienation’ there. Amit Shah’s organisation has been wooing many of the smaller parties that have had reasonable vote shares  in the last election, even if they lost, or won just 1 and  up to 3 seats, in order to stitch together a post-poll alliance based on actual seat shares.

Having said that, PDP is widely expected to win several  of the 46 seats in the Kashmir Valley. But how many? A clear majority will probably elude it, even with some wins in Jammu and Ladakh. Some  Valley seats may go to the small parties, the rival NC, and even Congress, besides the BJP. Still, PDP could be a potential BJP post-poll ally, depending. There are echoes of the Maharashtra Assembly election in the prospect.

BJP is also conducting a drive to register as many of the approximately four lakh Kashmiri Pandits,  mostly scattered outside J&K, to bolster the 126,000 currently on the electoral rolls. Pandits, potentially constitute 10 per cent of the electorate, in as many as eight assembly segments in the Valley, and could make a dramatic difference to the final poll results.

After the first phase on November 25^th, the next round of voting is on December 2^nd,and three more after that, on December 9^th, 14^th and 20^th. The results will come out on the23^rd ; well in time to  segue into the celebration for BJP patriarch Atal Bihari Vajpayee’s birthday; on the 25^th.

(806 words)

December 1^st, 2014

Gautam Mukherjee

Better Late Than Never

Better Late Than Never

 SAARC today is no longer about India and Pakistan grandstanding and checkmating each other. And consequently blocking every collective  resolution. Bilaterism has entered its blood-stream ever since Narendra Modi became Prime Minister of India, and decided to take on India’s regional responsibilities. And this time, at Modi’s first SAARC Summit, he made it clear that if something could not happen unanimously, it would go through to implementation anyway.

 Seeing the changed atmosphere, Pakistan too has agreed to the proposed SAARC electricity cooperation. This came soon after the Modi-Sharif handshake however. And well it might. Pakistan, particularly Nawaz Sharif’s home state of West Punjab, is starved for electricity! But the speculation remains- is the Pakistan Army going to stand by Prime Minister Nawaz Sharif’s commitment?  

There has been a fast evolving build up to this Summit. Every head of Government from SAARC, except Bangladesh, who had an unavoidable prior engagement, came to the inauguration of the Modi Government. Then, the first country Modi visited as Prime Minister was Bhutan, followed soon after by Nepal. He signed bilateral agreements for a host of things in both places, and pledged to finance them of behalf of India as well. But money is, indeed, at the root of the new efficacy.

Who will pay for SAARC to turn into a looser version of the EU then? This may not feel like a happy question at this time, but things were not always this dire. And, some benefits of a united Western Europe, such as the freer movement of goods, services, people, and jobs, are still evident.

Still, broke as the EU is today, there is no getting away from the bills piling up on the German and French desks, as the strongest economies in the region. It is up to them to keep the ship of union afloat, because the weaker hands cannot.

 Likewise in SAARC, all the smaller constituents must appreciate the Modi Government’s outreach. But they also know the answer about the pay- master with the really deep pockets that wants in.

The revived cooperation right now promises to lead to more road, rail and electricity links. And bigger trade without high tariff walls if it can be pulled off. Pakistan, never happy about giving India a walk-over, second in size, with the bigger nuclear weapons arsenal; came to the table very obviously hyphenated with China.

India knows that there is no containment agenda practicable in these globalised and multilateral times. But while China, the undeniably alpha power of Asia, has been active for quite some time, developing and financing projects everywhere in SAARC, as well as Myanmar to boot; India has only now begun to come to the party.

The scenario is definitely evolving and changing. India was not even invited to APEC in Beijing as an Observer early in November, but only to a preparatory meeting, to rustle up support for China’s ‘Silk Road’ plans.  Modi did not choose to go, but it is a gradual process of induction in statecraft, with several quid pro quos along the way. Pakistan went, as Observer, (and protégé), to the main APEC Summit, and came away with Chinese pledges of $45 billion in investment for itself.

Under President Xi Jinping, there are the ‘Silk Road’ initiatives, backed by money and infrastructure building know-how, which seek to connect every country in the region to China, and then across Central Asia to Europe- by road and rail, in addition to air.

And then there is the ‘Chinese Dream’ policy, being employed to persuade Taiwan towards reunification with the mainland. The latter is a ‘hearts and minds’ effort, being used in the SAARC region as well, a velvet-gloved hegemony, though not quite to effect an absolute merger.

India, as the biggest country in SAARC, is, in fact, China’s most lucrative potential business opportunity in the region today. China has the men, the know-how and the means. India definitely has the need, the appetite, the inclination, and the market size.

There is already nearly $80 billion in trade between India and China, heavily tilted in favour of Chinese exports, and it is headed towards $150 billion soon. The Modi-Jinping Summit in India in October was, without a doubt, the beginning of hundreds of billions in FDI involvements. More than any other nation in the world today, China is flush with surplus and investible funds. Its formidable infrastructure building capacity is being tapped all over the world. It most recently won a bid to build a $12 billion railway in Nigeria, for example. China, even as an Observer, has also just pledged $ 30 billion for SAARC region roads.

And the next SAARC Summit, let us note, will indeed be hosted by Islamabad, but by then, India’s influence with China may have grown considerably.  

(796 words)

November 27^th, 2014

Gautam Mukherjee

Time To Grow Up

 

Time To Grow Up

There is a strategic need to increase the size, depth and sophistication of our stock markets. Right now, it is about as poised as a determined little girl tottering about in her mother’s high heels. We may not be able to attract the trillions we need for development, purely through stage-by-stage drawdown of FDI.  The pledged Foreign Direct Investment, by its very nature, may prove to be quite slow coming in, and will, in any case, be consumed in predesignated projects only.

The Indian PSU banks are in a dreadful state, under-capitalised, over-staffed, and burdened with scandalous bad debts.  The remedy may be to privatise them, but it will be both slow and expensive, because of their extensive liabilities.

The stock market then, particularly a buoyant one, is the place to go to raise funds, inexpensively,  and against equity.

But, a lot needs to be done to widen the scope of the Indian bourses so that they can absorb a great deal more of FII.  We cannot afford to be officious, with layers of over-regulation Indian style either.  We must quantum upgrade of our real-time internet linkages, which are amongst the slowest in the world. We need to replicate, create and offer a range of investment products without caps and codicils, to provide liquidity to many of the equities, in the decent midcap and smallcap space, that FIIs presently avoid. And we need to streamline regulations to provide the reciprocity that other, top stock exchanges, around the world are used to.

Having said that, the current Indian stock market valuation has given it entry into the top twenty of global bourses. Still, it is only just at $1 trillion in market capitalisation, a fraction out of the world total of $ 64 trillion, as per 2013 figures.  

In the Asia-Pacific alone, Japan, Hong Kong, Shanghai and Shenzhen are all bigger, with three of the  four bourses from the same country, China. India, both the BSE and NSE, at rank 12 and 13 presently, need to gear up. They need to facilitate the expected doubling in market capitalisation within four years, if we experience the anticipated multi-year bull  run.

The aftermath of the 2008 global financial crash, with safety nets erected everywhere, over the past seven years, has been particularly turbulent for the developed world. And a period of adjustment and renewal is still ongoing.

In the interim, the old front-runners, still massive in market size from years of leadership, have been overtaken in terms of growth, by China and India.

And that is why a proportion of the seemingly endless global stimulus money, obtained at near zero percent interest, is pouring into this country, and will continue to do so. India has been adjudged the brightest prospect in the Emerging Market universe now and going forward. 

Global investment continues to flow into China, even though growth there has slowed from double digits to a little over six percent in GDP terms, because it remains one of the greatest manufacturing and infrastructure building hubs in the world.

In India, with the Modi Government seeking foreign investment vigorously for massive infrastructure and manufacturing  developments of its own; the quantum, flow and requirement of this foreign money is only set to increase year- on-year  throughout the next  decade. Assuming, as does most of the FII money, that Modi will win a second term as well.

But the FII investment coming into the bourses needs to spread out over a wider universe of stocks to reduce volatility and provide much needed stability. Today, the FIIs own 22% of Indian shares, composed mainly of the 15 companies that account for 35% of the market capitalisation. This is top heavy and concentrated over a very narrow band.  But the reason for this is that most of the over 6,000 listed stocks are hard to both buy and sell. So, for example, the FIIs own over 42% of Infosys even as the company is also listed on NYSE, the world’s No.1 bourse.  

The situation is so askew that the FIIs control the Indian stock market almost completely today. If they sell, it plummets, if they buy, it rockets upwards. For their own convenience, the FIIs tend to buy only the most liquid stocks, the ones tracked by the Sensex and Nifty. And the FIIs are the only ones that can invest billions of dollars at present, and with ease.

Yet, the great, about 34% rise in the price of Indian equity this year, has been achieved on the back of just $15 billion in FII investment approximately.  That such a small amount  can call the shots so comprehensively is highly illustrative of the daintiness of the Indian market. The FIIs have pumped in another $15 odd billion into the Debt Market too, but would invest much more if they were permitted.

The SEBI meanwhile, is busy attaching additional restrictions, such as its fresh curbs on participatory notes from less transparent entities from West Asia. The purpose of this is unclear, but the Indian authorities find it difficult to support  rapid growth,  perhaps fearing lurking threats to security or stability with the stock markets at all time highs.

After the FII holding, the only bigger figure is that of the company promoters themselves, at 28%; and this section is mostly static as promoters don’t usually sell their shares.

The other major influence in the Indian market are the mutual funds, financial institutions, insurance companies and investment banks , NBFCs etc., which together are known as Domestic Institutional  Investors (DII), and collectively own about 15% of the shares  today.

The retail investor, pitifully few in proportion to the population, is mostly conspicuous by his absence, except from share-loving Gujarat, and the city of Mumbai. Nevertheless, the punters, day-traders and so on, have no choice but to follow these big players and their doings and hope for the best.

The HNIs, once counted some ‘Big Bulls’ in their midst. Now, even with the growth of the market valuations to a modest $1 trillion, and given far more stringent oversight by SEBI, they cannot ‘make’ the market anymore. Some Indian stock market icons such as Rakesh Jhunjhunwala or Ramesh Damani are respected for their views, but again it is the FII majors that are today’s market opinion-makers.

But all this can be a great boon if the Modi Government makes up its mind to treat the stock markets as the main potential financiers of infrastructure and industry, and do everything possible to reform and grow the reach and heft of the BSE and the NSE.  

(1,094 words)

November 25, 2014
Gautam Mukherjee