Fear Over Faith

Fear over Faith

Mr. Ben Bernanke, Chairman of the US Federal Reserve Bank is blamed for why the rupee is nose-diving and headed towards Rs. 65 to the US $.

With access to $ 80 billion in FII funding of our debt markets including $30 billion of Government bonds, this is not good news.

Not good because   the FII hot money will leave, as they have shown us in May and June 2013, if the arbitrage goes sour. The FIIs borrow cheap abroad and invest here in Indian debt with a built in calculation for rupee devaluation. If we get worse than what they have provided for, they pull the plug, and leave with their billions.

Bernanke, to be fair to the man, merely said he would like to start tightening monetary policy if signs of growth in the US turned consistently stable, perhaps after September 2013.

This was interpreted to mean that the US would start tapering off its buying of $85 billion in bonds every month under its “quantitative easing” or stimulus to the economy programme, almost right away.

And it caused a lot of money overseas in all the emerging markets (EMs), to rush back to the US, just in case, before this happened. Maybe that is precisely what the professorial Mr. Bernanke intended but we can’t prove it.

At the same time, almost every US analyst is confident that Mr. Bernanke will not take any fiscal measures, in his couple of months in the hot seat remaining, that could hurt the recovery and growth that is emerging. After all, Mr. Bernanke wants his policy to be seen to have worked first.

So far,  US Housing and Real Estate prices have begun to rise quite robustly; unemployment figures show an uptick most of the time, bankruptcies, the City of Detroit and its pension funding notwithstanding, are not very common now.

But we are in August 2013, and the US has certainly not stabilised on its growth path enough to call for a rising of interest rates. Though the latest is the trade deficit figures are a little better.

A tapering off therefore has to come some day; but it does not seem to be anywhere near that day as yet.

The US however, is not suffering from inflation as India is, probably because of the high liquidity courtesy the Fed. The practically zero cost of finance, mandated in the face of fraction of a percentage point growth quarter on quarter. 

And because the US imports petroleum only to conserve its own substantial reserves and does not price it particularly high for the consumer.

Bernanke, due to retire from his Fed post shortly, talked about possibly tightening monetary policy in the last quarter of the year. He said this on the 23rd of May 2013, and ended up impacting all emerging market currencies, including India’s.  

FII money left the party abruptly after this, putting pressure on the rupee, and when more and more left every day; it certainly made matters very much worse.

The Indian rupee fell in line with the EMs at between 5 and 10%, maybe a bit harder than the rest. After all, even the service sector of the domestic economy is in the doldrums, read IT, despite the weak rupee. This is due to long term policy paralysis, the economy shrinking rapidly because of our very tight liquidity position, high interest rates, and runaway inflation.

The Indian Government, unlike the US one, has come up with or done absolutely nothing effective to help matters.

The contrast between the US approach, wherein the Federal Reserve has kept interest rates as low as 0.25% or less, since 2008, and the anti-growth policies of the Reserve Bank of India, could not be more stark.

Now it will be the turn of Mr. Rajan from early September 2013, when he replaces D. Subbarao, and so let us see.

But even when the Indian economy was booming in 2007, the RBI began to apprehend various bubbles and tightened monetary policy lest we grow too much too fast. And when the  Western economies collapsed in 2008, it saw virtue in clamping down even more strongly on what must have seemed to be “irrational exuberance” masquerading as growth.   

India has raised interest rates over a dozen times since 2008,  and tightened likewise the interbank rates, raised the  cash reserves ratios of the banks, and asked for stringent provisioning for bad debts.

All this, with a view to contain inflation, which has permeated the economy regardless; mainly because of our 70% dependence on imported petroleum, prices of which we have no control over.

We do have some preferential pricing in procurement from some of our long term suppliers, but then India taxes the retail product heavily at the Central and State levels too, even as it subsidises the price at the pump. That is why we have some of the most expensive petrol, diesel, and aviation fuel in the world.

We are now taking off the petroleum subsidies, and thereby spiking retail prices of everything, but notice that the taxes stay more or less intact.

Goa took off the VAT, slashing prices by Rs. 11 per litre and offering the cheapest petrol and diesel in the country since 2012.

But meanwhile, to compound matters, the RBI has been keen to dampen high asset prices, seeing it as inflationary . It has discouraged lending to builders, and the real estate sector, and practically forced business and industry to seek opportunities, acquisitions and financing abroad on the similar perception of arbitrage opportunities elsewhere.

But at the end of the day, all measures taken by the Government have not worked. Instead, a thriving 8% plus GDP growth per annum economy has been cruelly slowed; with its GDP halved.

The irony is that there has been no attempt to course- correct or reverse this anti-growth policy  despite its lack of traction or success.  Inflation, particularly food inflation, clearly is a great worry but the Government has not been able to control food prices at all.

There is a demand supply mismatch compounded by high transportation costs. The remedy of giving away subsidised food in various welfare schemes has also proved to be ineffective.

There is an acute need to change policies towards encouraging both the private sector in business and industry and agriculture too.

The Economist says we must resurrect our enthusiasm for Reform. The Government has to see itself in less regulatory, extortionate, and profligate terms; and become a friend to entrepreneurship instead.

Mr. Narendra Modi wants to take the politics and economics of this country forward  and should be given a chance to do so.  

(1,096 words)

August 6^th, 2013

Gautam Mukherjee

Bluff & Bluster

Bluff And Bluster Could Be Worse Than A Wing And A Prayer

Milton Friedman, an axiomatic economist himself, said inflation is the one form of taxation that can be imposed without benefit of legislation. Like a most promiscuous individual who professes virtue, our Government tells us its losing battle over the last five years has been with inflation.

But not for want of trying to control it, at the expense of the very engines of the economy. So this failure, by implication, must be excused. The cost of living has rocketed upwards but we must endure it as our due because of the actions of our elected representatives in the Government.

That  the rampant inflation has lightened the load of some of the national debt reckoned in rupees because of its perpetual devaluation, over 13% since May 2013 alone, and the termite- like eating away of even a fixed amount of hard currency debt, is another story of undeniable mathematics.

There is always a silver lining of this kind, but losses such as this one will make lenders specify more stringent safeguards and conditions in future dealings with India. Some exporters and importers, some IT companies too, have also benefited from this sharp devaluation if they had prior agreed fixed price contracts. But in a weakening, uncertain economy, this can only be a one-time windfall.

The general malaise is what is driving the foreign investor and his billions away, because you cannot make money standing on a land sinking like Atlantis below your feet. But our Government does not have to explain itself to a band of highly erudite economists.

It deals essentially with the semi-literate and the illiterate, and can try and cheat them with comic book images of richness and poorism, money and the lack of it, haves and have nots,  always depicted in simplistic, idiomatic  crudity, without once going into why we are poor amongst all our potential riches. And never ever have to go into who is responsible for our shabby circumstances.

The UPA employs a strategy of bluff and bluster to cover up the economic perils facing India. It also seeks to distract the public from the disastrous effects of its failed economic policies.

Economist Jagdish Bhagwati of Columbia University, a firm reformer, so  not amongst the busload of ‘povertarians’, who seem to prey on us like so many flies on a carcass; says  present policies could take us back to the crisis of 1991.

That was when we could barely pay for our import commitments for seven days, and had to put our few billions of dollars in gold, on a plane to Switzerland, in order to obtain a little bridge financing.

The ‘B&B’, as in bluff and bluster, is then typical of desperation; of the Finance Minister assuring us he can make the payments on the current account deficit, at least for this year, and other such leaky boat assurances.

Mr. Bhagwati is also quoted as saying that Congress’s survival in power beyond the end of this term of office and economic prosperity are  ‘tied together’.

But the UPA does not think so, holding its voting public does not comprehend the gravity of the situation and can be misled.

And accordingly, it is not growth the UPA has pursued or is going to. It relies instead on the ‘poverty politics’ strategies promoted by   Mr. Amartya Sen, Mr. Jean Dreze and others, which to their mind have much better emotional quotient.

If Opinion Polls are any indication, the people of India are not impressed, but as usual these are educated correspondents, and who knows what the voting masses are thinking. Nobody but the grass-root cadre might know and these people too are never asked.

But keeping the election strategies aside for a moment, the moves to remove more and more of the petroleum subsidies, commendable as it might be in macro-economic terms, has been timed very badly indeed. Subsidies can be removed in times of prosperity  without anyone minding much, but hurt doubly when prices are spiralling out of control anyway. 

So making the price of diesel and petrol ever costlier while the rupee continues to lose value, is a near perfect formula for runaway inflation of the suicidal kind and puts incredible price pressures on the people at large.

This despite the stern efforts to curtail liquidity on the part of the RBI which have failed to stem the drop in the rupee value but wrecked the stock market and destabilised the banks.

No liquidity means no investment towards growth, but essentials will have to be purchased nevertheless at ever increasing prices. And projects underway will have to be completed with unplanned price escalations. Some will consequently fail and be abandoned amidst horrendous losses.

From low or minus growth at present we are headed for worse stagflation next. And that too will be something we will waltz into, full of our good intentions, that like a sofa- cum- bed, are meant to serve the dual purpose of getting this Government re-elected, and alleviate a smidgin of poverty too.

The manipulation of the vote banks is as cynical as any Zimbabwe that noted Columnist Swapan Dasgupta likened India to recently.

Our Election Commission may prevent blatant rigging Zimbabwean style, but our polity has not grown up enough to deserve a better class of politician yet. Our laws are there to be subverted. Our politics is the politics of money power and muscle devoid of any vision, idealism or understanding of economics for that matter.

(908 words)

August 5^th, 2013

Gautam Mukherjee

Time To Short The Market

Time to short the market

Mr. D. Subbarao, our RBI Governor, about to remit office, has failed to control inflation with his tight monetary policy over the last five years. Three- times Finance Minister Mr. P.Chidambaram, has, over the one year since he moved from Home to Finance, failed to promote domestic growth in the economy. Nor has he managed to enthuse domestic players and foreigners to invest in India.

Mr. Anand Sharma in Commerce & Industry has fared no better at stimulating exports. Everyone, from the Prime Minister downwards, has been caught up in short term bureaucratic measures designed to fire-fight, without delivering the desired results.

So much so, that the economy is now in some peril of total collapse. The deficits are likely to spiral out of control at the macro-economic level, bringing on an unprecedented crisis. Price rises at the micro-economic level are becoming increasingly dramatic and causing great hardship to millions of people.

The welfare measures, motivated or well- intended as they might be, are inadequate, inefficient, and the financing of which are also putting a great strain on the economy.

And the key reason for this all around alarming situation is because the Government has not taken one bold step to stimulate the economy in the last five years! Nothing dynamic or effective has been done to promote growth, either on the infrastructure investment side or by way of consumption.

Inflation, that Governor Subbarao has tried  so hard to battle by choking off liquidity and throttling growth, is largely imported, along with 70%  of our petroleum needs, and therefore beyond our control.

As for the investors in the stock markets around the country, the clarion call has gone out from the experts to ‘short’ everything, meaning bet on lower and lower prices on even intrinsically good stocks. Foreign experts think only our ‘small-caps’, already beaten down to minimal levels, are long term good value, while the rest are over-priced at current levels.

The thumbs down has come as the rupee continues to lose value and company results are getting steadily worse. The pundits are therefore confident there is money to be made only as the market goes down.

How much downside is expected? Perhaps 14,000 or 15,000 on the Sensex, 4000 or 3,500 on the Nifty, in short order, and then who knows? The opinion polls that show no clear winner in the general elections are also depressing sentiment. It is important for the BJP and NDA to consolidate its lead in the coming months. Meanwhile, India is about to exit the $ 1 trillion mark in total size of market value as well.

China and Hong Kong together account for more than $ 6 trillion market capitalisation on their separate stock markets by way of contrast. Even Australia, with its limited population, has a stock market capitalisation of $1.3 million, ahead of us at $1.03 million today.

Mr. Chidambaram says he will be able to finance this fiscal’s ever rising current account deficit. But this is a desperate admission.  He is just about technically right, because our remaining foreign exchange reserves, lowest in years, can pay for seven months of imports at current levels, and the financial year ends in March of 2014.   

Mr. Chidambaram is credited with staving off a ratings downgrade by the international agencies a couple of months ago, but he did it by restricting and deferring expenses and cutting planned capital expenditure, thereby also slowing the economy.

Perhaps there are too many contradictory pulls and tugs on our economic thinking. Economist Prime Minister Mr. Manmohan Singh and his acolyte Mr. Montek Singh Ahluwalia at the Planning Commission, are instinctively liberalisers. But they are constrained by the thinking of arch- Socialists Mrs Sonia Gandhi and Mr. Rahul Gandhi in the Congress Party.

The Opposition and the allies of the UPA also have largely Socialist views. This is in addition to the perspective of the Ministry of Finance, the large PSU banks, the RBI, the tax authorities, all making for a thorough kedgeree of our economic policies.

Besides, the impact of the urban voter, most concerned with economic issues, is not yet fully appreciated by the political class. Will the 60% of the rural population continue to be seduced by traditional postures or will they also demonstrate rising aspirations along with the 40% of urban voters? Or will the fragmentation in the polity between the collection of the regional parties and the two national parties postpone serious consideration of the economic needs of the country? Will we descend into banana republic status in the meantime?

As far as the objective observer of our economy goes, we have failed to strengthen the capital account of the country by attracting long- term investment. Many things and services in India are over-priced. And India has continued to depend on short- term portfolio investment via FIIs to manage its current account obligations. This supported by the large and steady inward remittances from migrant workers, NRIs and PIOs abroad. The inward remittances actually rival the FII investments, and are economic life- savers because they are not volatile.

Recent Government steps to check the further fall in the value of the rupee impacted both the banks and the markets squarely. It resulted in a mass exodus of FII money in the debt and equity markets to the tune of over $10 billion in two months.

This exodus has also resulted in further pressure on corporate borrowers and lending institutions alike. The retail interest rates are also being forced up for individual borrowers and deposit rates may also have to be raised.   

The possibility of raising money abroad via external bonds being mooted now will expose the country to greater dependency on the circumstances prevailing in the global economy. Meanwhile we are projecting a further shrinkage in the GDP figures which casts doubt on its success beyond a committed NRI population.

The overall report card shows a total failure to manage the economy in UPA 2.Growth, already halved, is vaporising away. Inflation, partially because of the staged removal of subsidies on oil and gas, increase in the price of electricity, sharp upswing in all FMCG goods, let alone consumer durables and capital goods, is and will continue to play havoc. The price rise issue is getting ever bigger by the day.

Every person is being painfully affected; and the increase in the price of even ordinary food items across the board is not going to go away anytime soon.

(1,075 words)

August  1^st, 2013

Gautam Mukherjee

The Writing On The Wall

The Writing On The Wall

The substantial CNN-IBN tracker opinion poll broadcast concluded  on the 26^th of July, places the NDA  winning up to 180 seats to the Lok Sabha and at the pole position.

And it suggests, being an early poll, that the BJP has the momentum to take the tally higher, perhaps to over 200 seats on its own, making the formation of a government very much easier.

Mr. Rajdeep Sardesai, who anchored the poll discussions, said, several times, that this might be the last poll before the elections because the Election Commission is thinking of banning them.

But, everything depends, for the BJP and NDA, albeit on the pronouncements of an urban intellectual set of panellists, on not ending up reinforcing negatives that could put off the undecided and luke-warm .

The poll panellists all agreed that the concern of the voters is largely based on economic issues such as the huge and growing corruption, the massive price rise, the slowing economy, the policy paralysis etc..

The considered opinion of the panellists that included Mr. Swapan Dasgupta, Mr. Yogendra Yadav,Mr.Surjit Bhalla and Mr. Ramchandra Guha, was that if the BJP concentrates on addressing these key concerns of the voting public during the poll campaign, in the remaining months before the elections, it will do even better than the poll indications.

There was a possibility discussed, that the elections could come sooner than the 9 or 10 months that remain between now and April 2014.

This, if the UPA thinks it may be better to have the general elections before the forthcoming Assembly Elections. Of the ones coming up, they could lose at least three, if not all four of them, said the panellists.

To follow on to the general elections after several defeats may not be very encouraging to their prospects, which are already under siege. That means the general elections could be upon us in 3 or 4 months.

And while Mr. Narendra Modi is the preferred candidate for Prime Minister over Mr. Rahul Gandhi as per the poll, he needs to be supported more strongly by the various components and moving parts of the NDA to maximise gains. He is also ideally placed to push the NDA’s economic vision to enthuse the public, having done very well in his home state of Gujarat.

The loud assertion that the BJP is communal, a default posture when it comes to the Congress Party, is losing its power to influence, because the Congress is suffering from massive anti-incumbency negatives and is seen to be responsible for the nation’s troubles on multiple fronts.

The poll suggests Congress will lose as many as 70 seats on its own from its previous 2009 tally of 206. Hopefully, Election Commission permitting, there will be more polls conducted that will show this precipitous fall getting worse for the Congress, and BJP and allies gaining further ground.

There is no doubt that economics now leads the purely political in any country around the world. Man cannot live on political rhetoric alone and most people have shifted position to make it very clear that it is important for them to get ahead.

Aspirations now have top billing, as many Muslims in Gujarat have indicated and voted their conviction in favour of Mr. Modi, and the political formation which can deliver on this is expected to get the vote nationally too.

The NDA as a whole therefore, along with its supporting organisations, needs to submerge all its long pending political agenda issues towards communicating this singular objective in a convincing manner.  All NDA and allied voices must present a unified vision and commitment to the economic betterment of India as need of the day No.1.

It is very easy to get entangled in debates of secularism versus communalism, but it is not material to the cause of winning this election and forming the next Government.

Even the arduous task of coalition building after the election results are known, will be easier by far if the alliances are sought on the basis of an economic vision that potential allies can agree upon.

The other political point that could chime in very well with an economic main thrust is the issue of federalism. This is an election that will be won by a sum of states with the NDA being led by a Chief Minister of Gujarat, rather than someone from the BJP’s own “High Command” sitting in New Delhi. The poll panellists did remark on this aspect as well.

The States of India have been chafing under various pressures exerted by a Centre to extract conformity on various issues and to ensure compliance to a coalition dharma. The States have in turn, particularly if they are UPA allies but not part of Congress, extracted various concessions from the Centre including ministerial berths and so on.

A Narendra Modi led Government is likely to give teeth to federalism and its empowerment via decentralisation of many issues in a way that cannot be reversed in future.

Congress has never been very good at treating its allies with respect, once they have managed to get what they want. For that matter, it tends to treat its own Chief Ministers as so many branch heads and the Governors of States and even the President of India, as conveniences to do its bidding.

Misuse of central agencies to harass and confound state governments is also very much part of their political style. Even Union Ministers at the Centre and Ministers of State are kept on a leash by similar means. There are no doubt historical reasons for this, developed from the excessive centralisation of power brought about during Mrs. Indira Gandhi’s long innings.

But the 2014 election may end up changing this model to quite some extent.

Painting Mr. Modi out to be an autocratic Chief Minister and unsuited to Vajpayee style coalition management is also a canard, because no one can be this popular in his home state for over a decade, and now around large parts of the country also, without carrying people along with his vision and style.

As for strategic insight, not only has Mr. Modi, early in his campaign made an impact in Uttar Pradesh where the CNN-IBN poll puts  the BJP tally higher than any of the others, but he was astute enough to realise it was going to be crucial to his campaign from the start.

This is only the first of many intelligent moves expected from him, but he needs to temper his brilliance with caution and the discipline that no one in the BJP or its allies blunts his march to power with discordant notes that don’t belong in his economic symphony.

(1,114 words)

July 27^th 2013

Gautam Mukherjee

is it a good time when it is bad

Is it a good time when it is bad

The legendary wildcatter oilman J Paul Getty who went on to buck the big oil companies by offshoring his refining to the Gulf, invested one million dollars, his entire profit from a gusher he had drilled as an independent, into the US stock market after the Wall Street crash of 1929. That was when every dollar stock had plummeted into a ‘penny stock’ indiscriminate of pedigree and provenance.

It took nerve to do that in the aftermath of the slew of brokers and stock market millionaires who committed suicide when they comprehended the extent of their losses at the abrupt end of the ‘roaring twenties’. But we are talking about a very exceptional man here, a legend amongst legends.  This million dollars of J Paul Getty’s investment grew so much that it became a bedrock of his legendary fortune in years to come.

Our own cherubic market bull, Rakesh Jhunjhunwala, who calls his company Rare Enterprises, after himself presumably, says he has never seen so much pessimism about Indian equities as he countenances nowadays. And he agrees the retail investor has gone missing.

Everything that could have gone wrong already has- a market in the dumps for 5 years in a row, an FII investment flight with billions of dollars moving out of both equity and debt every month, other emerging markets seeming more attractive, including China. Then, bonds crashing, rupee free- falling, GDP growth stymied, IIP numbers at a stand- still, manufacturing negative, exports down, FDI in the doldrums, an RBI bereft of a good idea, a helpless Finance Ministry, and on and on.

Private equity, even from usually keen Singaporeans has also left the building, and venture capitalists have gone off to greener pastures. The Mauritius ‘round robin’ route is feeble because one needs to earn money to go round-robinning and even corruption is down of late.

For the uncomprehending it means sending black money out of the country via hawala or shell transactions. And bringing it back into the stock market via Mauritius because there is a nil- tax treaty in place for investment from entities registered there. And thereby laundering the black money white as well. But since all this can be expensive in handling fees along the route, the stock market must undo the damage, except it cannot at the moment.

But, says Rakesh Jhunjhunwala, this is an excellent time to buy chosen equities because the valuations are incredibly attractive. They could get even better if the markets fall further but there is intrinsic value in many of the beaten down stocks of companies with good products and services and not much debt. The highly leveraged have been punished mercilessly says Jhunjhunwala evenly.

Given a five year horizon though, says Jhunjhunwala, who thinks a return of 18 per cent annually is decent in usual times; he expects very much more from this distressed Equity.

Of course, he does have hundreds of crores that he made over the years following his hunches on the stock market, and has developed a certain self- assurance as a consequence. But he is signalling that India still has a bright future and the present troubles both here and in the West are temporary. Quite a clear voice in the wilderness, and not one that belongs to a Government spokesman.

Jhunjhunwala does not think 2013 is anything like 2000, when he also exhorted all who would listen to consider buying in, because the market was destined to rise. But what took a year then to double will now take five to deliver multiples he says. How does he know- well he has great hunches and follows them. He does not call himself a great economist, but he does keep up with what is going on in the markets around the globe.

Other contrarian strategies being applied by India Inc. and indeed some PSUs involved in oil and gas and mining too, is to seek opportunities abroad using our liberalised policies on making productive investments abroad.

In this regard, we almost have a convertible currency, especially compared to the years under very stringent capital controls that preceded 1991. This has resulted in more Indian FDI going out to acquire companies and raw materials abroad than has come in to India from foreign entities over the last eighteen months. Besides about 80 per cent of all FDI into India lately has been brought in by MNCs to strengthen their subsidiaries and JVs here, and has not gone into new green-field projects.

Business has a way of rooting out opportunities, and if they are considered lucrative enough, dramatic and dynamic action tends to be taken, even in an essentially laid- back Indian corporate bazaar.

The technology transfer that both the Government and private sector always seeks comes to us as part of the package when we stop pleading for it and simply ask how much for the whole company instead.

Indians do make an impact nowadays, and contribute, just from tourism, not secret bank accounts, and some 3 per cent of the Swiss economy for example. They also constitute the biggest private sector employer in the UK.

If one adds in the content of the Swiss bank accounts, with zipped lips on ownership, but without bothering about all the other tax havens which contain a good deal of Indian money too, we could  probably stop being considered an emerging nation.

Our cloak and garb of poverty works to define us a lot of the time because there is self-evident truth to the statement that millions of our people are abysmally poor.

But we also have a lot of wealth concentrated amongst very few people. And the millions in population tends to keep us competitive and, as yet, still a good ‘outsourcing ‘ destination.

So yes, it is sometimes true that it is good when it is bad. It is just very difficult to tell.

979 words

July 25^th, 2013

Gautam Mukherjee 

The Game Changer

The Game Changer

The starkness of the proposition that is Narendra Modi for prime minister, has served to awaken  a discourse never before given to such clarity. It is a discourse that takes on the hypocrisies and myths built up over 65 years since independence.

It covers the whole gamut from communalism, secularism, poverty alleviation, development and most importantly, governance as a responsibility to deliver results and not another set of empty promises. This has so set the cat amongst the pigeon s that the entire political class is having to adjust to a new paradigm in the history of Indian politicking.

Many in the BJP, let alone the UPA and elsewhere, are shell-shocked, and are trying to dilute the proposition. They are saying it is not at all certain that Narendra Modi will in the end be projected as the prime ministerial candidate.

What these good people miss is the fact that in the eyes of the public and in the eyes of the rank and file of the BJP and its ideologically compatible and supporting organisations, the vote has already gone in. The tryst with destiny has been logged on.

Whatever the outcome of the elections turn out to be, Mr.Modi has been given a chance to get as many seats for the BJP as he can. If he does well, it will be difficult to resist his bid to ultimate power, and if he fails he will go back to Gujarat. Mr. Modi himself  is not afraid of risking his arm and needs to be commended for his fortitude in the face of blistering opposition from within and without. And the campaign has not yet begun in right earnest.

Broadly speaking however, the need to project leaders and their ideas has become crucial in the age of 24x7 Television, Social Media, blogs on the Internet, the 140 letter Twitter, and a sharpened, even activist, editorial comment.

Not to mention some very motivated, if light- weight, headlines in papers that should be prouder of their work. In this wealth of choice of expression, every medium and moniker is fighting to influence, if not form, the opinion of its adherents.

It  has become all about news and views debated by ordinary people. The days of pundits talking down to an audience are largely gone. Today even a Nobel laureate like Amartya Sen is seen as a devotee of the establishment and the Congress Party, a blatant campaigner to his cause, and not as an oracular voice from the height of his tremendous intellect. And there are a good number of such partisan  ‘experts’ all pounding their pulpits and grinding their axes.

But fortunately, ordinary people go on social media at a minimum today, or on their mobile phones and Whatsapp,  on an interactive basis. And most of this discourse displays a growing dissatisfaction with the state of play on practically every item of governance, and the functioning of the polity, much of the vital and unvarnished commentary delivered with a sense of humour.

The High Priestess style adopted by Mrs Sonia Gandhi may be of a piece with a carefully cultivated mystery. But there is a certain impatience amongst the public, if not amongst the unasked rank and file workers in her own party, who expect her to win elections for them.

The impatience is with this consistent behind the arras statement from the ‘High Commmand’, subject to multiple interpretations as it is passed down via many hands. Inaccessibility, at least physically, amongst the powerful is understood in these dangerous times, but an absence of an electronic presence even as one clearly plays puppetmeister is seen to be a little offensive. Politician, one might say, explain thyself.

The silence and inaccessibility substituted by cohorts of  spokespersons strenuously parroting the party line, comes across as somewhat sly, because it is shadow- play, and does not compute on camera or admit to any clear attribution or accountability.

And British royalty style waving from the balcony, or the podium for that matter, does not do the trick, though the clung to urgency with regard to Welfare is expected to even in the face of adverse  Opinion Poll results.

After all, British royalty for all its quirks and stage management, does enjoy a crusty constitutional support, whereas the remnants of  the Gandhi family has devised a peculiar power without direct responsibility model all of its own . But there is a poignancy about this role playing against the backdrop of Time and Change. 

Prince William married a Commoner, and his son, 3^rd in line to the throne, has the blood of a Democrat and reportedly, even an Indian woman from Surat, flowing in his veins.   

On another familiar, Octavio Quatrocci, has died relatively early, but his ghost  along with the guns he allegedly had a hand in supplying, is still very much around. The Bofors scandal may now stay likewise shrouded in mystery, but its effects still have play.

This partially is a positive, because the now ancient Bofors guns, enhanced by some local jugaad, did acquit themselves very   well in the Kargil  skirmish in Mr. Vajpayee’s time.

At the receiving end, Pakistan and its formidable ISI intelligence apparatus admit, if in private, that sometimes two, or even a dozen wrongs, do make a right. It is all a matter of managing perceptions.

The Government has also thought fit, in desperate messaging, to drastically  reduce the poverty line based on some wizardry  in the Planning Commission. It is a time-tested Stalinist move, where statistics seek to substitute reality.

Not only that, it claims the best results on poverty alleviation have come from Bihar and Odisha. It is no secret that the incumbent Government is wooing both states and their current rulers for the post poll scenario. This is surrealistic jugglery of statistics, by excluding the last two years of drastically lower growth in GDP, say many sceptical economists. And determined propaganda to believe and claim the welfare spending is working.

Of course it is working, for many in the delivery pipeline, but not the poorest of the poor. If only anyone on 24x7 TV cares to ask them instead of relying on Planning Commission statistics.

 The Government, like all central and state governments elsewhere, is adept at projecting happy illusions seeking to replace reality, relying on acolytes in the well- inclined mainstream media via legitimate advertising spend.

And those flattering junkets/accolades, and the all- important access to power. It is a win-win for both,  designed only to amplify matters which tend to be in the public domain already, churned out  dutifully by the Government’s own  truth- and- lies publicity machine.

1,103 words

July 24^th, 2013

Gautam Mukherjee

Economics Indian Style is our pervasive impact on the world

 

Economics Indian Style is our pervasive impact on the world

Prominent Nobel laureate for economics Mr.Amartya Sen, erstwhile of Cambridge University in England and Harvard in the US, is much listened to in India at the highest echelons of power and in the National Advisory Council.

Mr. Sen’s views on ‘Welfare Economics’ and the urgent need to uplift the poorest of the poor are part of the ruling UPA’s blueprint. That his ideas may turn out to be responsible for the bankrupting of India, is, of course, another story.

 At less exalted but salt of the earth levels, you have the East African/ British Indians thrown out in the sixties and seventies, who took over the corner shop trade all over the UK and transformed it into the hard-working businesses that seemed, like the 24 hour super markets in the US, to never close. There was rarely any outside help employed in these shops, the various members of the family ran them in a demonstration of typical Indian thrift and effective economics.

The generations next, assimilated and confident as British Asians of Indian origin, have branched out very successfully into many more substantial businesses; the theatre, fashion, the media, films, television, authorship, medicine.

Mr. VS Naipaul, part of the diaspora, can also be claimed in this regard, along with his long anticipated Nobel Prize and his books, mostly to do with India.

Scientists have been making their mark in both the UK and the US from decades ago too, some going back to the 1930s. Their success, their struggles have distinguished the economic style of Indians who have come from adverse conditions to make their very significant contributions without abandoning their thrifty, economically sound, ways.

Indian origin millionaires and billionaires such as the internationally trading Hindujas, Steel king Laxmi Mittal and family, who specialised in taking over sick steel mills all over the world, pickle baron Patak,  diversified Lord Swaraj Paul and the Ruia brothers, others who have their bases both in London and India, have been prominent in the British  establishment for decades.

Across the Atlantic, you have an equally impressive showing of Indians risen to prominence in business, consulting, politics, even the space programme. A largish number of Indians run some of the best known US companies and multi-nationals, such as Indira Nooyi of Pepsi.

Tata is today one of  Britain’s leading manufacturers, and between its automotive and other interests in steel, hotels , beverages, IT as in TCS,  etc. is also the biggest private sector employer in British manufacturing, with some 45,000 employees.

Tata’s expensive acquisition of Jaguar/Land Rover/Range Rover, three iconic British brands, contrary to the expectations of many, has proved successful and profitable. Apart from a growing presence in India, with its overseas sales out of the UK, particularly to China, making all the difference.

It has been able to retain all 3 of its UK based plants and all its employees and is building a 4th as it gears up to make its own engines, instead of buying them from the previous owners of the marques, namely Ford. This despite the high wages and costs prevalent in the UK compared to India, where the rest of Tata Motors is located.

India Inc. may not be doing well domestically because of falling demand, inflation, high input costs, tight liquidity and political drift, but it continues to be appreciated in some quarters abroad struggling with tough economic conditions of its own.

Consider that Indian FDI projects for 2012-13 in the UK are likely to generate 24 million pounds in value to London’s economy over the next three years according to a report released by the Mayor of London’s Office. It puts India at the Number 2 spot in terms of investment and job generation after the US and ahead of China in Britain. And most of the business is coming from our IT Industry and Telecommunications.

In some ways the trans-national character of Indian business in a variety of fields is helping it survive a particularly difficult time domestically. In 2012, Indian firms invested 12 billion dollars in acquisitions abroad, up 27 per cent over 2011. This despite the fall in the rupee’s value, that has only worsened further in 2013.

At the same time, it must be admitted, that the venturing forth of Indian business and industry to the corners of the globe wherever it perceived an opportunity, was made possible by economic reforms in India. Our growing foreign exchange reserves were partially made available to India Inc. to go forth and multiply in a departure from our Socialist inspired protectionism.

The draw abroad can be attributed to multiple counts; access to monies at low borrowing cost, market share expansion, inorganic growth, diversifying away from India so as to not put all one’s eggs in the same basket, technology acquisitions and so on.

And also because the economy of India has been declining ever since 2008 due to unhelpful Government policies, at least in part

There are also bargain assets to be had all over the Western world today and not just in real estate terms. And Indian firms from the large, medium and ambitious smaller ones are increasingly taking the plunge. There is more Indian FDI going out of the country than there is foreign FDI coming into India presently, if only by a couple of billion dollars.

But the fact is, the world has stopped believing in the India story at home, and so have many of the Indian firms frustrated with the muddled business environment.

We have never managed to attract large capital because of policy paralysis, enormous red tape and rampant corruption. This is often difficult to prove but is nevertheless very much the case if the whispers are to be believed. Generally however, we blame it on the pulls and tugs of our functioning democracy and the rule of law, which is seriously over- burdened and therefore tardy.

The excuses however have worn thin, and many global players are taking their expansion plans elsewhere. Those who are already in the country through joint ventures and subsidiaries are still expanding their investment footprint, and actually account for 80 per cent of the FDI that does come in. But the green-field projects such as POSCO and Arcelor Mittal’s steel venture in Odisha, have sadly floundered.

But abroad, Indian management skills are in demand. Indians are appreciated for their ability to turn around troubled and sick industries and businesses. Used to a chaotic business environment locally, Indian managers are versatile and very good at multi-tasking. Many from the IITs and IIMs have impressed their peers and employers abroad with their calibre and highly developed quantitative and analytical skills.

Increasingly, international recruiting firms are actively placing Indians with the right skills in jobs abroad, even as expatriates are trickling into India to manage their India opportunity. The time may have come to start reckoning on the global Indian.

1,151 words

July 23rd,   2013

Gautam Mukherjee