Madness And His Pal Megalomania

Madness And His Pal Megalomania

A German manic depressive commits suicide by ramming his commercial airliner and its contingent of passengers into an Alpine ravine. A charismatic, well-spoken Indian leader, of the newest, ‘alternative’ political experiment in the capital city state of Delhi, dispenses with the niceties. He bares tooth and fang in a Stalinist move, barely a month into office after a sweeping victory, and uses his new found power to crush dissent.

These are both instances perhaps of a mental health gone awry, an affliction that affects 25% of the world population today. Most of the afflicted draw a veil over their tenuous hold on sanity, and carry on as if nothing is the matter. This kind of plausible madness can indeed seem quite normal, masked by sophisticated medication, well enough to even pass lie detector polygraphs.

The suicidal cum murderous young co-pilot killed everyone because he couldn’t take it anymore, but why?  The mysterious plunging of the Air Malaysia jet not long ago into the South China Sea, also had an allegedly deranged pilot. That yet another Air Malaysia jet was shot down by Russian backed Ukranian rebels just underlines how fraught  air travel, otherwise the safest mode, has become.

There also seems to be a spate of pilot errors almost in direct proportion to the increase in the number of airlines: to wit the recent Air Asia crashes, the Air France, Air Canada and so on. Are these pilots being subliminally indoctrinated in a diabolical new way by the international terrorist organisations? Or are they falling apart, quite by themselves, and just taking hundreds with them?  

Did this German young man do it because he wanted to impress his estranged girlfriend posthumously? In any event, he fooled the clearly inadequate or sloppy screening process, his psychiatrist, and his senior pilot, to carry out his final act.

But the fact is he could pass unchecked through the system in a manner not unlike what made 9/11 or 26/11 possible, except perhaps, that any jihadi ideology was apparently missing ?

But one recurring phenomenon common to deliberate and declared terrorist attacks, and such inexplicable self-destruction with hundreds of unrelated innocents, is the cold-blooded willingness to incur the collateral damage, however horrendous.  Does terrorism of this kind then, need an independent label? These self-destructive crazies seem to have become much more vindictive. Do their medications have side- effects worse than their main lines?

Still, this 27 year old pilot had nightmares, deep depressions, sexual identity issues, and physical health problems too. But chillingly, nobody in the know, rang a warning bell in time. The former girlfriend of the young German realized something was wrong in the five months she was sleeping with him, but merely moved on. Now she tells us he would wake up screaming: ‘We are all going down’.

It was a mass murdering replay of the South African blade runner Pistorius, with a penchant for fire-arms and given to violent mood swings. He murdered his girlfriend over his own delusions, in his own house, apparently without quite meaning to. There too, the girlfriend knew he was mentally disturbed but did nothing to get away from him.

Closer home, a newly minted politician, young, smart, IIT educated, spawned out of a self-righteous mould, turns full circle on his zealous past. He was a former tax inspector, an RTI activist, an agitational, anti-corruption, scrupulously democratic NGO  type, and a Magsaysay Award winner to boot.

Once, not too long ago, he also shone bright with honesty. Now, he says one thing and does another. He has changed with dizzying speed, and uses every Machiavellian trick in the book in his lust for power.

What are this man’s private thoughts now? What made him decide to ruthlessly expel two of his long-standing comrades, because they dared to question him? He didn’t stop there, but with tears in his eyes and emotional speechifying in full spate, he threw out their key supporters too.

To legitimize his actions, he conducted a Party vote, blatantly rigged in his favour, hastily, without debate. But wasn’t this the same man who grew famous for seamlessly lecturing everyone on honesty, probity, transparency, corruption, and a new system of participative governance? Didn’t he use a hectoring tone bristling with contempt for every other politician/businessman  who in his book did less?

And, he made sure he did all his grandstanding in front of the TV cameras.  The man truly loves being in the news, and it was mutual. It is the media that created him into a nationally recognizable face. It is the same media that is now busy recording the unravelling of his dream run.

It is reporting on the stings turned inwards, the thuggery, intimidation, and subversion of the democratic processes. But the collateral damage here is being done to the lakhs of voters he has apparently duped. This is not over yet, but if the stack of promises he made fall flat, it will be tantamount to a democratically conducted confidence trick on all those who flocked to his purportedly egalitarian cause.  

What happened to the man who wanted to dismantle VIP culture, dispense with his security cover, and be accessible to all? Through the travails of the internal party strife he must also be worried about how to deliver with a budget already in deficit, and few tools available to his Government to raise revenues .

It is a good thing for the country that this experiment was conducted in the city state of Delhi under the watchful and powerful eye of the Centre. It is a blessing that such a man does not control the Delhi Police or the land that belongs to the State also!

But is he sorry?  Are such delusional people capable of contrition? If the voting public installed him, it is they who need to be sorry. And to some extent it is the ruling BJP at the Centre that did not consider the Delhi election a priority, that allowed this to happen.

Still, we need to absorb and understand that madness and megalomania do not go with a sense of ownership. They are deviant phenomena with caveat emptor written in almost illegible small-print on them. 

But any amount of the buyer bewaring cannot really protect us against the next lunatic that comes down the pike to exploit a  chink in our armour, or play upon our credulity. That is the nature of the beast, when, like in the dark ages, living itself has grown risky once more. In those ignorant times, people banded together for their safety, but today there may be no real safety left in that bond.  

For: The Pioneer

(1,105 words)

March 31^st, 2015

Gautam Mukherjee

Signposts To The Yellow Brick Road

Signposts To The Yellow Brick Road

The early vote of confidence for the Modi Government came from foreign investors in the stock and bond markets. They pumped in over $ 55 billion.

It may well be time to return the compliment by unshackling it from our dreaded bureaucratic embrace. This could also get the Indian numbers up in the emerging market investment basket, the MSCI, and other such. The impact could run into trillions of dollars per annum with all the bells and whistles in place, and so it is well worth doing.

The Government has proposed the creation of a financial special economic zone which will be comparable in tax and regulatory terms to what the FIIs are used to in any other international trading centre. The sooner this is implemented the better because dealing with the Indian market today is not much fun for foreign investors. 

A new index is slowly coming into play, devised by S&P, that looks at the nearly 5,000 traded stocks in the Indian bourses to provide a more comprehensive picture along with greater investment depth and choice.

Particularly since it is becoming apparent that company earnings, even in the Sensex and Nifty, may not keep up with the multiples in their stock prices in 2015 or 2016, and may need till 2017 and 2018 to better them. This, alongside the climbing GDP figures, that could go double-digit by then, mainly on the back of infrastructure development. Meanwhile, a short-term correction seems to have set in on the bourses.

It's unfortunate that a lot of this non-existent corporate growth is because there is no  domestic credit at a reasonable price to offtake. This is thanks to the RBI’s niggardly attitude to cutting interest rates, in tiny fractions at a time, ever citing inflation.

If only our RBI Governors, including current incumbent, the eminent Raghuram Rajan, worried a  little about how the constant inflation targeting affected the potential of creating employment like Janet Yellen, of the Federal Reserve Bank of the US. It is arguable too that our penchant for over regulation  has ended up killing the banking system and has stopped development in its tracks.

Ironically, the RBI, has never succeeded in controlling inflation with its tight monetary policies, in the face of the erstwhile surging oil prices, and the fact that with an import of 80% of our petroleum, we have  tended to import our inflation willy nilly.

The conservatism is nevertheless maintained in all seasons undaunted. It is the same tune, both when inflation is high, and when it is low – then, finding nothing else to cite, the RBI fears future spikes to justify keeping interest rates high!

The recent moves on the part of the Government, despite its protestations to the contrary, to clip the largely autonomous central bank’s reach and powers is therefore most welcome. It will help the cause of growth and dynamism that cannot continuously run interference from one learned Governor of the RBI after another, and an entrenched central banking bureaucracy clinging to its turf for dear life.

The Government proposes to divest the RBI of its control of the interest rate mechanism, the public debt, the power to regulate long-term bonds, and the power to regulate inflows of foreign capital.

The RBI will not be left with very much if all this goes through the legislative and administrative process, besides making cautionary noises, as always, on its favourite subject, that of inflation.

As things stand, despite some substantial reformist laws implemented by the Government lately, almost a year since it took over, there is an understandable lag effect before the benefits begin to accrue.  Net net, the real economy is not reviving with the alacrity that the bourses had hoped for.

The FIIs had expected greater speed and urgency, given Modi’s reputation for dynamism, and the sorry pass the Indian economy had sunk to in the closing year of the UPA rule.

The Modi Government’s surprising gradualism has already been much commented upon, but now, as too much time has passed since May 2014, the world is also changing. The dollar is strengthening, the rupee is getting weaker, the US is coming good, and is on the brink of raising its interest rates. India may be growing again too, but it has a lot of catching up to do, and this is blunting its appeal somewhat.

On the plus side, the large monies coming into the Government’s coffers from spectrum sale, coal block auctions, the mine and mineral rights, insurance, will all help it reduce the fiscal deficit. This, even as it has increased allocations for infrastructure development in the recent budget proposals and going forward over the next five years. The infrastructure spend will definitely grow the GDP and provide some new jobs as long as the necessary land acquisitions are not held up, ordinance or bill notwithstanding.

Hopefully, our own efforts in this regard will be amply matched by eager foreign investment into this long gestation area, given the handsome short-term consumables in construction equipment, steel, cement, vehicles and the like.

At least now, recent successes suggest the Government will have its start-up stake without having to resort to printing a huge mountain of notes.

Ergo, the fiscal deficit target of 3.9% could, once again, tend towards the 3.6% earlier chalked in. The Government will not, it is true, garner very much by way of direct taxes in any finite time frame, the tax base being terribly narrow, with just 3% of the population in the tax grid.

And there is little hope of increasing this substantially. The unorganized sector is out of it, the farmers are exempt, small business dodges, as do NGOs and Trusts, professionals as in doctors, lawyers, also routinely cheat on their tax liabilities. Given our post-independence ideological restrictions, we won’t tax agriculture, and the 60% of the population that compose our rural folk.

It is ironic that this is now thought to be socially equitable, landlords, agricultural barons et al, without distinction, even as it becomes a tax dodge for many. We may not be taxing the lowly ‘ryots’, but they were once the fundament of the tax regime, when they were far more wretched and poor, in British and Mughal times.  

The splendid ICS had, in effect, to look after just two things: law and order and  agricultural tax collections. And think of it, the absolute inflation for the whole of the gold-standard 19^th century globally, was just 4 per cent! Let us hope this does not become food for thought for the RBI afresh.

But today in India, greater tax realisations can only be expected to come from the GST with its better chances of compliance in service of an economy slated to grow in double digits soon.

But to make rapid progress, our inherent drawbacks must be uprooted, just like all the worn railway tracks, if Bibek Debroy has his way. The Indian banking system needs urgent overhauling. There are large PSU bank debts, a huge NPA over-hang, difficult to disguise, even with  extensive restructuring. Besides, all the banks are under-capitalised, and urgently need to sell 49%  of their equity, as planned, to the private sector.

Will this also go better with an RBI cut to size? Yes, definitely.  In the name of autonomy and stability, the RBI has been more of a stick in the mud to progress than a helpful agent of reform and change.

For: Swarajyamag

(1,235 words)

March 28^th 2015

Gautam Mukherjee

Time To Seize The Day

Time To Seize The Day

Has the Modi Government suddenly grown in stature and authority? It certainly feels like it. This Budget Session of Parliament, has been, unexpectedly, one of the most productive in recent years. The Government presented a well- received budget, and managed to steer through three important laws: namely the Insurance Bill hanging fire since 2008, The Coal Bill, and the Mines and Minerals Bill.

All three are break-through milestones, highly reformist in character, and will encourage both the private sector and the foreign investor , waiting to see whether Modi would implement his promises.  They will now begin to invest and grow, instead of waiting and seeing.  

The success in passing these three reform bills in the teeth of stiff opposition from the Congress, the Left and DMK, with the  Government discovering and consolidating common ground with other sections of the Opposition, augurs well for the future.

The Land Acquisition Bill, though in the eye of noisy  protest right now, is crucial to the Government’s development plans. Therefore its strategy and tactics to push it into law will be keenly watched. But already, the perception is that the government will prevail once again, and perhaps without having to call for a joint session after all.

All this, cumulatively, along with other legislation in the pipeline, including the Black Money Bill just introduced in parliament, and the Cabinet move to induct 33% women into the police forces of the Union Territories, will serve to be gradually transformative.  

The Government, on its part, has already gained huge sums from the auctioning of coal blocks and spectrum. Likewise, immense license fees from mining, along with modernization of methods, are also expected to accrue.

The Government will use most of this money, estimated to run into many lakhs of crores, on creating new and improved infrastructure. This will be supplemented by some $15 billion expected to come in because of the enhancement of FDI in Insurance from 26% to 49%.

The various investment pledges from different countries including China, Japan and America, running at over $ 55 billion; plus the monies from developmental agencies like the World Bank, the ADB, the IMF, the new BRICS Bank etc. will also begin to contribute now.

The Indian Railways, Defence production under ‘Make in India’, Ports, Airports, Rural infrastructure, Highways, Freight corridors, joining of rivers, Solar and Nuclear Energy development etc. will all begin to happen shortly. Millions of new jobs will be created.

The repo interest rates have also been cut by 0.5% to 7.5% by the RBI, and while it is expected that this will be followed by another 0.5% cut through fiscal 2015 itself and a further 1% cut in 2016, the high street banks now need to follow suit. The continued low oil prices projected will be a great help in this regard, because it will tamp down inflation rates.

As the Government moves forward decisively on its economic agenda, it is unpopular in many quarters, and certainly in the media narrative, for its antediluvian notions on social engineering.   This jarring note takes away much of the glory from its reforms.

This country badly needs a move to Right of Centre in its economic policies, because it will usher in double digit growth, which alone can eliminate the grinding poverty faced by a third of the population. But Sabka Saath Sabka Vikaas, cannot happen unless the saffron social agenda is both inclusive, and tolerant of pluralism.

Nor will the international community feel safe and comfortable to commit long-term to an India that is contentious.  The terrorist movements around the globe may have given Muslims a bad name, but  surely there is no compelling case against the Christians,  a peaceful and beneficial minority being  targeted because of their policy of seeking conversions. All the minorities must feel, as they did in Modi’s Gujarat, that this Government is working for them also.

The Right of Centre economic progress that Modi is ushering in cannot sustain, unless this Government wins another term in 2019. The question is whether it can do this by attempting to polarize Hindu opinion.  In some places, this could yield results, but in others it will drive the undecided voter towards the Congress, or any of its friends, including the AAP going national!

But as a policy tilt, it becomes subversive against the diversity and freedom of India. The coalition Government of J&K demonstrates that the BJP is capable of flexibility. Amit Shah recently said the purpose of the BJP-PDP alliance was to ‘solve the problems of Kashmir ‘. Pakistan does not want this, of course, and hence the stepped up terrorism and border firing.   

But It is also a truism that a Right of Centre Government can often accomplish what a Left-leaning Socialist one, cannot. We need to seize the day.

(799 words)

March 21, 2015

Gautam Mukherjee

The 'Make In India' Roll-Out

 The ‘Make In India’ Roll-out

Never mind who grudges it, this will happen- Anne Boleyn

The catalyst may have been an obsessive love affair between Anne Boleyn and an heir-seeking Henry VIII, but the frisson did create the Anglican Church. It reduced the authority and sway of the Pope for all time, and created two rival camps of ‘Papist’ Catholics and ‘Reformist’ Protestants . It became a decisive moment, a turning point, in the history of Europe and the world.

There is a momentous quality, the feel of a tipping point, to Narendra Modi’s “Make in India’ initiative, first hinted at during his Independence Day speech on August 15^th, 2014, launched in September, elaborated in December. It is a break with the povertarian, needy outlook of the past. At its core, ‘Make in India’ seeks to manufacture, here in India, most of its high-value/high-tech domestic needs, particularly in Defense Production, and to a quality specification second to none, with the surplus production to be exported.

Defense is a priority area not only for the nation’s security but because India is the biggest arms importer in the world. This not only means we pay fat premiums because we are over a barrel, but have little control over the subsequent servicing and spare parts support. We also learn little about the technology deployed, and are quite often sold out-of-date equipment at very high prices, with no choice in the matter.

Our R&D capabilities and spends too are almost negligible, not only in defense production, but in other manufacturing sectors as well. But in all of this, as the Modi Government through Defense Minister Parikkar tries to change the system, it faces resistance from vested interests which have long profited from the importation and purchase regime.

Even government agencies such as DRDO and HAL have never delivered very much, except for missiles, and satellite-launch technology. Projects languish for decades, perhaps tainted by the same malaise of deliberately not making progress. The work to change all this will have far reaching effects to India’s benefit, but will call for a daunting systemic overhaul.

The recent export of a coast-guard vessel to Mauritius, inaugurated by the prime minister during his recent visit, is illustrative of the fact that we can now make and export such ships, including the bigger stealth frigates made for the Indian Navy. Work is also going on to build our own aircraft carriers, and when this is done, we will join the ranks of just  five or six countries that can make such  massive and sophisticated warships of 45,000 tonnes and more ( America makes 95-125,000 tonners).

The old British-made Vikrant, a WWII ship, and our only Aircraft Carrier for long, weighed in at just 28,000 tonnes. It was recently retired in favour of its bigger (45,000 tonnes), Russian built replacement, (the former Admiral Gorshkov), elaborately and expensively refitted after many delays. But China is already making 65,000 tonne aircraft carriers, nuclear submarines, other defense equipment and all sorts of aircraft.

India is presently conducting sea trials for the first indigenously built nuclear submarine named Arihant. But, it all takes far too long, and is soon overtaken technologically in the interim. And, all of these examples are describing the ponderous progress made by the government, bilateral efforts, and government-owned units.

The Modi ‘Make in India’ initiative seeks to embrace much greater private sector involvement for the first time, overcoming objections from  certain quarters wanting to keep defence production a monopoly of government enterprise. This despite overall poor results, and vast time and cost overruns.

The ‘Make in India’ initiative also is by no means confined to Defense, and lists at least 13 thrust areas.

But because of the trillions of dollars involved, many of our biggest private players are interested in the military manufacturing. The Anil Ambani led Reliance Group is keen to manufacture helicopters against a requirement of the Armed Forces alone valued at over Rs. 18,000 crores initially. The Tata Group, Mahindra, L&T, Mukesh Ambani’s Reliance, and several others, are also already invested in participating in the private sector cum foreign collaboration to make defence items in India.

The potentially transformative ‘Make in India’ initiative also aims to provide massive employment, coupled with great savings in cost, and a surging boost to the Gross Domestic Product. It is a policy with considerable breadth of vision, designed to sharply boost the declining manufacturing scenario in India from a GDP share of about 15% to 25%, while taking, along with the infrastructure development spends, to a decade and more of double- digit growth, going forward.

The enabling legislation and procedural overhaul is currently a work in progress, less than a year into this government’s five year term, but with only the Insurance Bill passed into law so far. This is in the face of immense Opposition obstruction and filibustering. Still, $ 15 billion in foreign investment is expected to come into the country as a consequence, just from the upping of FDI from 26% to 49%.

Insurance money generally goes into infrastructure projects, with their long gestation periods. The distressed Indian Railways, reviving under Union Minister Suresh Prabhu, has already contracted loans of Rs1.5 lakh crores over 5 years from the Life Insurance Corporation of India towards modernization, manufacturing and infrastructure projects, even before the passage of the Insurance Bill into law.

Minister of State for Finance, Jayant Sinha said India could well do with at least another five insurance behemoths the size of LIC, to meet some of its infrastructure financing needs alone. This is, of course, is quite apart from the fact that much that should be insured is currently not so, both because of the lack of resources in the  under-capitalised insurance industry, and the paucity of innovative products and coverage schemes.

The Government is also gathering unprecedented sums from its auction of spectrum and coal blocks currently, and expects to garner more from the just passed Mines and Minerals Bill which seeks to offer 50 year mining leases to the private sector, while bringing in much needed international mining technology into the country.

Other laws on labour, land, procedures, tax rationalisation etc. are being urgently fast-tracked to make it easy and convenient to Make in India. And then there is the substantial human resource and the infrastructure being built to complement it.

Some areas of manufacture such as automobiles and automobile components have already taken advantage of favourable terms, prevailing over several years now, to make more and more in India. And this, not just in terms of  CKD assembly operations, but sourcing much of the componentry domestically. This activity is slated to grow further and faster, as the second stage of reforms currently being undertaken, gains ground.

Many countries and companies from around the world have declared that they will soon establish specific green field projects. Others are busy expanding existing operations both in terms of size and scope.  Man y are in electronics, telecommunication, power generating and transmitting equipment, railway equipment, but also fashion, chocolates, furniture, more vehicles etc.

This Government proposes to press hard on this flagship initiative. It will give wings to its “Sabka Saath, Sabka Vikas” policies. It is expected to touch the lives of many Indians directly, perhaps more than all other thrust areas put together, including the massive boost planned in infrastructure.

The monies allocated for infrastructure in the 2015 Union Budget and going forward over five years is most encouraging however, and   has been very well received by business, industry and the global investment community. Global developmental lending agencies such as the World Bank, the IMF, ADB, the new upcoming BRICS Bank and so on are keen to  help too in various areas including the further development of  nuclear power.

Many countries will support India on this great manufacturing and related infrastructure building initiative, especially since India is today the fastest growing economy in the world.

Some of them are our traditional collaborators such as America, Japan, South Korea, Singapore and the leading countries of Europe, France, Germany, and Russia. But many others are coming forward too, with immense additional potential, the most important being China, followed by others in the Asia-Pacific Region and West Asia such as Australia, Myanmar, Thailand, Vietnam, Israel, Oman, Saudi Arabia, Iran and Iraq.

Countries in the SAARC region that will be our partners include Nepal, Bhutan, both for electricity generation and transmission, Sri Lanka, and Afghanistan, for many other possibilities.

Mr. Modi’s energetic foreign policy is hand- in-glove with his ‘Make in India’ dream, and designed to bring in massive investments. History will surely look back at this time and mark it as the period in which India began to realise its true potential at last. The spirit of Henry VIII knows now, perhaps in hindsight, exactly what this can mean.

For: The Pioneer

(1,464 words)

March 20^th, 2015

Gautam Mukherjee

Mihir Sharma's RESTART IS NO UPSTART!

BOOK REVIEW

Title:               RESTART –The last Chance For The Indian Economy

Author:          Mihir S Sharma

Publisher:       Random House India, 2015

Price:              Rs. 599/-

RESTART  Is No UPSTART

Writing; author, journalist Pankaj Mishra once told me, is: ‘as individual as a signature’. Mishra meant the interiorscape of the author, his unique way of expressing his thoughts.

Mihir S Sharma, young, articulate, Harvard educated, and currently looking after Opinion at the Business Standard, is a very good writer indeed. He digests his information, and writes engagingly, even racily, about economics.

This is refreshing because many others display their gravitas by writing academic, neutral, verbose, jargon-infested, navel-gazing tomes.

Sharma’s RESTART sparkles with intelligence. It is is a journalistic, traveloguish, deliberately blokey take on many of the economic issues of the day, reprised over the years since independence. It is also very earnest. If readability is its strongest suit, a certain wide-eyed naiveté on the politics of progress may be its weakest.

Sharma thinks, for example, an inveterate political survivor like former Prime Minister PV Narasimha Rao ‘never had an overarching idea of what he intended to do’ with regard to the first stage of Reforms in 1991. They were marked, says Sharma, truthfully enough, with ‘half-measures and timidity’. He writes, somewhat disingenuously, that this ‘set the template for all our efforts at reform since’.

But let us consider that Rao knew exactly what he could get away with. And if we are only looking forward to a solid second stage of reform under Modi, 24 years later, it is probably due to the proverbial curse of Montezuma, or is it his revenge? 

After all, this country set out to be a Fabian socialist realm from the get-go under Nehru. That is a potent witches’ brew indeed, and leaves a bitch of a hangover, with its ‘mixed economy’ and ‘commanding heights’, its disdain for commerce, resulting in magnificent, 2% GDP  growth! But, decades of it creates an addiction to the mai baap Raj, and a culture of entitlement.

Modi might well do Reforms, because he wants to sweep out this failed Nehruvian narrative, and usher in Modinomics in its place. He says he wants modernisation, infrastructure development , manufacturing, fancy farming/agri-business, defence ‘make in India’, etc. all of it topped off with a splash of welfare. He says he’s pro-poor and pro–business both; poverty elimination, not alleviation.

Throughout the narrative, Mihir Sharma tends to conceptually swing both Left and Right. But on balance, he reveals a yen for efficiency, and  a willingness to break a few eggs in order to make an omelette.

Sharma pitches for massive growth: ‘India has a passion for under-capacity’ he states in counter-point. He is correct when he breezily writes that India ‘needs to go through three transformations’ simultaneously. He calls them ‘Democratic transition/ Disruption from building infrastructure/Social transformation’. Sharma suggests the perpetual revolution shake-up that will result, is desirable.

Mihir Sharma’s voice is younger, hipper, than say, that of a Gurcharan Das, or even the magisterial VS Naipaul, but with something their grand-touring style. He incorporates sociology, humour, observation and anecdote to leaven the economics. 

There is psychology too. He points to the Indian prejudice against manual labour. Sharma thinks we are ‘rent-seeking’ and believe ‘you can’t get rich through trying’. He points out that ‘In Indian movies, you inherit wealth, or you marry wealth, or you spurn wealth. You don’t earn it.’ He thinks the key aspiration runs towards ‘one big deal and then joining the rentier-class.’

RESTART feelingly describes the unfortunate decline of Indian manufacturing for lack of policy support, and the unviability of having 60% of our people trying to live off the rural economy when a fifth of them are actually farmers.

Sharma ends his book with a number of policy prescriptions. They are interesting but no ladders are provided. He does not, like most theoreticians, have an answer for how to get this ‘premodern society’ successfully ‘attempting postmodern economics.’

RESTART, given the sweep of its ambition, is definitely entertaining, opinionated, stimulating, almost evangelical. It is well worth a read.

For:  Mail Today

(650 words)

March 18, 2015

Gautam Mukherjee

Reform Via Joint Session Of Parliament

Reform Via Joint Session Of Parliament

The arithmetic is compelling. The 542 seat Lok Sabha plus the 245 member Rajya Sabha make 787. The NDA has 335 in the Lok Sabha, including a somewhat tenuous Shiv Sena with 18 seats. The Shiv Sena, of course, is still smarting from the humbling it had to endure from the electorate in its home state of Maharashtra, and being reduced to a junior partner in the coalition Government there.   

The problem to all legislative success for this government is in the Rajya Sabha. BJP on its own has just 46 seats there, where a majority calls for 123. Counting the Telegu Desam, Shiromani Akali Dal, the AIADMK, and somewhat hopefully, the BJD too, but minus the Shiv Sena’s 3 seats, it comes to 73.

The total of 408 is amply over the joint session majority figure required of 394. But take out the 18 Shiv Sena seats in the Lok Sabha, and the total falls to 390, and in need of some new supporters, perhaps the BJD, which has 20 in the Lok Sabha?

But since the BJD feels somewhat threatened by the BJP in its home state of Orissa, their support can be a little grudging. SP and BSP with 15 and 10 seats respectively in the Rajya Sabha, could, one or both, come to the rescue. But again, they too feel threatened by the BJP in their home state of Uttar Pradesh and are also rivals. TMC in West Bengal, firmly in the Opposition alongside the Congress, CPM, CPI, and the JD(U),  is in a near panic due to BJP inroads  made in its home state. The JD(U) and RLD combine in Bihar feel likewise.

But most irksome and frustrating for the government’s floor managers, is the fact that what would have been a shoo-in if a joint session is called, is not so certain when an NDA ally or two decide to play plays ducks and drakes.

So, it is imperative to garner some of the putative Opposition support on a consistent basis. The Centre can offer inducements of course. The AIADMK has already proved itself amenable during the Insurance Bill vote. The BJD by walking out during the same voting, can perhaps be persuaded towards a broader commitment. The SP and BSP may not refuse to cooperate, given the right incentives.

The hard core Opposition to Modi’s plans come from the Congress with its 44 seats in the Lok Sabha and its 67 in the Rajya Sabha, the JD(U), the RLD where the Nitish Kumar/Sharad Yadav/Lalu Prasad combine are viscerally opposed to Modi,  Mamata Banerjee’s TMC, and the Communists.  

The head winds to the progress of the Indian economy now consist of the unfavorable numbers in the Rajya Sabha, in tandem with developments in the world’s number one economy in the US. The latter can affect foreign investment sentiment that has been very encouraging since late 2013. This will, of course, apply to emerging markets in general including India, as international and US money flows back to the safety and trust of the US  from its trading posts  overseas.  

But since the Indian economy is picking up speed thanks to the sharp cut in its oil import costs, it will continue to receive healthy investment, but basically from those emerging market funds ear-marked for it.

The US might, it is said, raise interest rates to 0.25% to start with in June 2015, just around the corner, though other observers think it will be put off till December. But the US dollar is strengthening sharply right now, probably in anticipation, and the rupee is getting weaker.

There is however no sharp FII sell-off in the stock market, and no slow-down in fresh investments either. Presently the investments in the equity and debt markets combined are the highest ever, in the region of $ 50 billion.

And, unlike in early 2013, the Indian economy is growing. Volatility is however the order of recent days in the stock market, with some analysts predicting a correction of up to 20%. The foreign investor has greater faith in Modi’s ability and experience, to push through his reforms, than many domestic observers, in fact. The home scenario, in contrast, seems consumed by emphasis on the divisive politics of the Hindutva fringe in the Sangh Parivar.

It is imperative however, to break the legislative gridlock in parliament in a predictable manner.  It must break the so-called Opposition unity of the kind that added remarks to the prime minister’s reply to the President’s address recently. This should not be too onerous a task, because  the fragmented Opposition have nothing in common except political opportunism and a vaguely socialist bias.

The Modi Government, mindful of the socialists and their potential to create political havoc, has been careful to steer a moderate course through the shoals and rapids. It retains almost all of the UPA’s welfare programmes, even as it tries to get infrastructure and manufacturing up and running to boost GDP and create millions of new jobs.

Circumstances  have now turned positive. The WPI index has fallen over 2% minus making a case for an accelerated interest rate cut regime. The NPA’s of the banks are humungous it is true, but mostly due to stalled infrastructure projects several hundred in number. If these are restarted, the NPAs will reduce substantially.

The Government is still trying to process legislation via the normal Lok Sabha/Rajya Sabha route despite formidable challenges. This is with a view to include the opinions and objections of the Opposition. The Modi Government principally wants to promote a greater federalism, and seems committed to parliamentary process.

It is not keen on going in haste to joint sessions, because it smacks of rail-roading the Opposition. But having said that, it is apparent that Congress in particular is trying to resurrect its dwindling political fortunes by a  maximum of filibustering, street dharnas, morchas and shrill complaint.

This is all very democratic, but given its extremely corrupt track record, the Congress cannot be allowed to derail the legislative and administrative agenda of the government. And so, if joint session it must be, so be it. Indeed, there is merit in passing a number of key laws, such as the land acquisition bill, that will kick start the second stage of reforms pending since 1991, in a bunch, and as soon as possible.

Once this is done, the resultant momentum in the economy should also enlarge the government’s political space. The final result may be to render the obstruction of the Congress and some others ineffective. This could be a net benefit, but will have to be hard won.  

For:  The Pioneer

(1,103 words)

March 17^th 2015

Gautam Mukherjee

Prosecutions That Further The Government's Reform Agenda

 Prosecutions That Further The Government’s Reform Agenda

 Even as the autonomous Special Court,  which can only be stymied by the Supreme Court, summoned the former Prime Minister, Manmohan Singh, for questioning in the infamous ‘coal scam’; the Congress in a sudden volte face, decided to back the Insurance Bill in the Rajya Sabha.

The Congress Party has 67 seats in the current Rajya Sabha out of 245 (231 elected), to the BJP’s 46. With the help of the Congress, NDA allies and ‘sympathisers’, most legislation can go through with more than the majority 124 votes.

Mr. Manmohan Singh plans to challenge the summons by petitioning the Supreme Court. There have been rousing endorsements and support for his ‘integrity’ and ‘honesty’ from the Congress. Sonia Gandhi along with a galaxy of Congress stalwarts even marched from the Party HQ in Akbar Road, New Delhi, to the former Prime Minister’s residence, in a show of support.

But if the former prime minister allowed himself to be a puppet, he actually had no right to abdicate his constitutional and sworn obligations to the people of India, during his decade in the top job. But several media reports suggest that the Congress High Command is seriously concerned that Mr. Singh may reveal that he had merely rubber-stamped decisions that were actually taken at the behest of the Congress President. While this won’t get Mr. Singh off the hook from the serious criminal charges he is facing, it will seriously implicate and embarrass Sonia Gandhi as well.

The insurance law is now passed, after languishing since 2008, and as a consequence is expected to bring in $10-15 billion of foreign investment and resultant new jobs into India’s underdeveloped insurance sector. This is because the foreign investment cap has been raised,  to 49%, from the erstwhile 26%.

The passage of the Insurance Bill has been welcomed by all players operating in the country. Many of them are foreign companies that that have been waiting for a very long time.

The new law will see a ramping up of private insurance companies in a field dominated till now by the large PSU units like LIC of India. But, as Minister of State for Finance, Jayant Sinha said, India today is in need of at least 4 or 5 LICs’.

If the Congress continues to be driven on to the back-foot by judicial interventions, will it continue to cooperate with the Modi Government’s efforts to usher in Reforms Stage  2?

Just before this one, two other bills were referred to Select Commitees, causing potential delay in their implementation. One is the Coal Bill, where NDA auctions have just elicited bids worth over Rs. 2 lakh crores for just 30 blocks auctioned, with a potential to garner up to Rs. 15 lakh crore when the entire exercise is completed.

This is far in excess of the estimates that the former Comptroller and Auditor General, though he put it in terms of potential revenue lost by the UPA Government. That is, before the Courts cancelled the UPA allocations as illegal. And this highlights the magnitude of the coal scam, the former Prime Minister will be questioned about.

Likewise, another, the Mines and Minerals Bill, has also been sent to Select Committee at the Opposition’s insistence. Here again billions of dollars in earnings and investment would be potentially held up or lost, if it  wasn’t for the covering ordinance the Government passed after the Monsoon Session.

And yet the Congress bitterly criticised the Government for passing some eight ordinances, mostly to get around the deliberate and bloody-minded legislative blockage.

The newly transparent  ‘Spectrum’ auctions for telecommunications, following on from the UPA era 2G scam, are also garnering very substantial bids. They too are part of the same pattern, and expose the rot in the previous administration that deliberately deprived the country of huge revenues.

The most emotive piece of legislation involving farmers, the Land Acquisition Bill, was passed with eleven farmer-friendly amendments, by the Lok Sabha recently. But it was not without drama. There was eight hours of tumultuous debate, walk-outs, and abstentions during the voting. It now needs to run the gauntlet in the Rajya Sabha, where its prospects are not good.

However, this land law is crucial to the Government’s infrastructure development plans. It could very easily also get stuck in yet another Select Committee. And once the bill is introduced into the Rajya Sabha, it cannot be withdrawn from it, without the permission of the House. Will the Government refrain from doing it then, and call for a Joint Session of Parliament instead?  If so, by when?

But since one important piece of reformist legislation has indeed just passed with Congress cooperation, perhaps a way has been found. Juxtaposed with the windfall benefits of what one BJP stalwart called ‘judicial activism’, things may just be looking up for this Government’s legislative agenda. 

For : NitiCentral

(808 words)
March 13^th, 2015
Gautam Mukherjee

Cutting Through The Noise

Cutting Through The Noise

We are a deeply sarkari nation- Mihir Sharma, in Restart

What is the Modi Government’s free-market Guru Jagdish Bhagwati’s take on the bazaar clamour that passes for Indian democracy? He ignores it, albeit from distant Columbia University in New York, and some, if not all of the polemics too.

The 78 year old Bhagwati says, more than once, that he wants to see India open up multi-brand retail to foreign investment on liberal terms and all over the country. And never mind, presumably, that the old  LK Advani-led BJP made much of being opposed to it at the pre-general election stage. That was when the UPA passed a mangled version of the permission, with a characteristic profusion of built-in ifs and buts.

It made a non-starter of the law, even in then Congress ruled Delhi, with its popular three- term Chief Minister Shiela Dikshit at the helm. That missed opportunity seems like a distant memory now, with the Leftist and purported mohalla/block/slum representative democracy, practiced by the ruling AAP today.

But can Modi’s central government, with some of its mooring in the trader community, open up the barrage using his majority in the Lok Sabha? Would it want to? Is it already too late in some senses because e-Commerce seems to have stolen a march? Has technology Ali Baba style, talking of drones to deliver tea to individuals, trumped all? Or is it still a potential GDP and sophistication of the supply backbone driver, given half a chance?

Can the Modi Government with its absolute majority in the Lok Sabha, and a woeful minority in the Rajya Sabha, steer any of its desired legislation through? How much costly time will it allow itself, before using a joint session? And in such an event, can it carry some of its outliers and sympathisers to ensure victory; given the endemic turbulence in parliament?

States run by non NDA governments, and their MPs in parliament, seem to see the Government’s difficulties as their opportunities to extract concessions. Nothing is evaluated on its merits, let alone would-be/ wannabe laws. It is a travesty of the parliamentary system, rendering a non-functioning central legislature.

Let us see what the Modi Government is eventually able to do with the virulently opposed Land Acquisition Law and the Insurance Bill in this Budget Session first. And the Coal Law too, even though its passed muster in the Lok Sabha.

The Opposition, decimated as it was in the last general election, is determined to ensure the failure of this Government by hook or by crook. It is using extreme filibustering, street protest, propaganda, and media warring.  The gauntlet has been thrown down. It is up to Modi’s gumption to power through.

But, and here’s the thing- the world thinks he will win, and this is all just so much noise. From abroad, the perspective on India’s future seems vastly better, though most of the early confidence is coming from the nabobs of the financial markets. But surely, the projection of 8.5% GDP growth in 2015, is indeed mouth-watering.

Warren Buffet , the ‘Oracle of Omaha’, the world’s best known value investor, could have been a natural for India. But irony will rule. One of the richest men in the world, he pulled out of the Indian insurance market in 2013, after just two years of engaging with Indian bureaucracy and government.

His favoured successor, of Indian origin, Ajit Jain, is also his insurance major domo, responsible for a lot of the Berkshire Hathaway Group’s profits. Clearly, Jain and Buffet think life is too short to tangle with India.

But Buffet’s pal and fellow billionaire philanthropist, Microsoft founder Bill Gates; younger, more mobile, and persistent; is indeed still big on both Modi and India.

But what does the other oracle, Marc Faber, perched at Chiang-mai, of the Boom, Gloom & Doom periodical, think of  India’s prospects? Faber thinks they’re of the very best, as long as Modi bulldozes through, and keeps the reform and development momentum going. Coming from Faber, this is an expectation, and not faint praise!

What does Chris Wood of CLSA and the Greed and Fear Report think? He feels all is well after the budget, but regrets the continuance of MNREGA, as well he might.

Wood has been strongly bullish on India ever since Modi started emerging from the scrum that wanted to be Prime Minister in 2014. He can be likened to a highly articulate version of domestic big bull Rakesh Jhunjhunwala, but hailing from of the highly influential international investing set. 

Wood says India is ‘remarkably immune’ to a Fed hike, and has less enthusiastic things to say about China, going forward.  Still, the market did take a tumble of over 600 points on Monday, the 9^th of March, when the rupee fell to almost 63 to the dollar against a strengthening greenback, and rumours of an impending interest increase in America.

Impending, it probably is not. Besides, the Federal Reserve Bank of America is expected to raise just 0.25% from zero, and that too by the end of 2015.Christopher Wood, no doubt, can see his way beyond the initial wobbles.

And what says Marc Mobius, the Yul Brynner look-alike boss of the Franklin Templeton Group? He has always bet big on India in the Asian ‘basket’, and intends to continue doing so.

And the Mutual Fund subscriptions from domestic investors, probably on a monkey-see-monkey-do basis, is pouring into Equity (Rs. 56,000 crores in the first 10 months of this fiscal) and Debt ( Rs. 33,000 crores in January 2015 alone, hoping for several rate cuts), too. Totals are higher than ever before. Besides, both the internationals and domestic institutional players are sure that India is in for a multi-year bull market.

The Sensex is headed towards 35,000 by December 2015, with Nifty above 10,000. And most observers, including Raghuram Rajan of the RBI, presiding over our interest rate mechanisms, seem optimistic. Rajan has cut the interest rate by 0.5 % so far, and seems poised to cut another half per cent in 2015, bringing the repo rate down to 7%. It needs to be at 3%, but that will take time.

While the Indian breast-beaters are in full cry for everything from the price of electricity to tears in our pluralistic fabric, the world sees India as a great opportunity, some saying it is the best bet in a troubled world.

They seem impressed by our renewed emphasis on infrastructure development,  manufacturing, modernising agriculture and related services, the intended rationalising of indirect taxes via GST. And none too bothered by our communal sparring, or bestial reputation as the ‘rape capital’ of the world.

India is changing certainly, its brand equity in flux, but much of the domestic media and intellectual narrative is stuck in the Nehruvian past. It is a nostalgic rose-tinted view that conveniently ignores that at least a third of our people live in abject poverty, due, not a little, to the failure of most of our economic policies since independence.  

In fact, a 2012 Credit Suisse Research Institute’s Global Wealth Report  puts it in sharp focus. It expects India’s dollar millionaires to be some 242,000 in number by 2017. But it also says 95% of Indians have less than $10,000. Only 0.3% of Indians have more than $100,000. And remember, our rupee currency is constantly depreciating.

Still, we do have 237,000 of the richest 1% of people in the world. Of these 1,500 Indians have more than $50 million, and 700 have more than $100 million. But this tiny number is out of more than 1.3 billion people!

So it must be a strange thing, similar to the Stockholm Syndrome, that causes this caterwauling for our socialist past.  But, shake off this rear-viewing delusion we must. And forge ahead, to a prosperity waiting for us with double digit growth, millions of new jobs and decent infrastructure.  

It is this, and its resultant possibilities for the many, as opposed to the few alone, that will truly uplift this nation. And not our perennial arguing and name-calling, that make things seem worse than they are.

For: Swarajyamag.com

(1,352 words)

March 10^th, 2015

Gautam Mukherjee