The Economy Is In Dire Straits

The Economy Is In Dire Straits

Finance Minister P. Chidambaram reacted to Narendra Modi’s comment that educated economists in the Government have ruined the Indian economy with predictable arrogance and sarcasm. He implied Narendra Modi had no idea of economics ignoring his soaring vision for India and all the development the challenger has wrought in his home state of Gujarat. But then, Mr. Chidambaram finds himself forced to defend the indefensible for quite some time now.

The economy is truly in dire straits.  Public Sector Banks are facing huge and unprecedented bad debts and has effected lakhs of crores in write-offs as they have been pressurised to lend to people in ‘priority sectors’. These are borrowers with political connections who never had any intention of ever repaying their debts. 

Because the bank officials concerned have only carried out political instructions, hardly any of them is being held accountable. So we have reams of ruinous loans that threaten to collapse the banking sector.

The slight uptick in the economy being highlighted in certain quarters is being caused by better farm output via a good monsoon and high reserve prices. There is also a higher construction sector showing being cited but this is statistical aberration which is actually not representative.  The real estate sector is starved of both growth funds and demand at present, but can just about hold out in the hope of a revival on the back of a Modi led BJP coalition win. This indeed is the main hope for all of the Indian economy poised currently on the brink of the abyss.

High prices of everything combined with runaway inflation have drawn and quartered profits of business and industry or caused precipitous losses. Individuals are considerably worse off over the last couple of years. The rupee has lost a third of its value, setting off a spiral towards pauperisation and household budget pressures, as savings are savaged.

TheTata Group, the largest and most ethical private sector behemoth of India, is earning 80% of its profits from abroad via just two of its companies. TCS, its IT juggernaut, accounts for 59.5% by market value. Tata Motors, read its JLR (Jaguar Land Rover) UK based subsidiary, composes another 20.45% of the market value, according to a revealing report in The Economic Times. All the other listed and unlisted Tata companies in aggregate are not doing particularly well, contributing very little or incurring losses.

Indian Hotels losses for first half 2013-14 are the same as the whole of the previous year at over Rs. 400 crores! The Tata Motors India operation contributed just over Rs. 300 crores in profit while the JLR part of it contributed over Rs. 10,000 crores.

It is no wonder that business and industry is fleeing abroad in order to survive the mismanagement of the UPA Government. A completely different approach to governance has to emerge very soon if India and its future prospects are not to suffer permanent damage.  

There are still some commentators that argue that things are improving. The Bank of America President and India Country Head Kaku Nahate thinks there is a broad-based revival underway. She thinks the quality of it is better than whatever green shoots are appearing in the beleaguered economies of the West.

There is also a lively inflow of FII money into the stock markets because of the high liquidity scenario in the US. This is indeed most fortuitous and is also contributing to our foreign exchange reserves however temporarily. What will happen to this inflow when the US tapering starts, if it does, sometime in 2014, remains to be seen.  What is evident is that it gives the stock market routine jitters at any suggestion of it. But here again, a Narendra Modi led BJP coalition government emerging in May 2014 will go a long way to sustain any emerging optimism about India and its growth prospects. This is being borne out by international brokerages, rating agencies and stock market pundits alike.

Meanwhile, the bad news continues to pile up relentlessly. The fiscal deficit is already touching the full year estimate, implying it will be exceeded by a third or so by the end of this financial year. This even as the current account deficit has been coming down with lesser gold imports and better export figures.

The best we can hope for the next few months is for is the avoidance of an economic crisis brought on by the collapse of any major sector of the economy. The threats are clear in the banking sector and in various over leveraged corporate entities.

The fuel spiral has harmed the transportation business and aviation quite substantially but with easing pressures in the Middle East, things will probably improve. The real overall threat is the tremendous misgovernance and political drift. This needs to remedy as soon as possible to correct the perception that the Government is non-functional and in a funk at the looming prospect of losing power.  Of course, this can only come about after the general elections in concrete terms .And so the process grinds on.

The next stop to assess which way the electorate is going will come after the slew of State Assembly elections are announced very shortly.   

(867 words)

December  2^nd, 2013

Gautam Mukherjee

Opinion Poll Favourite

Opinion Poll Favourite

A new ORG opinion poll, commissioned by the India Today Group, says the BJP led by Dr. Harsh Vardhan will form the next Delhi Government. And that it will do so on its own with 40 seats. This, on the basis of a 37% share of the popular vote which the BJP expects will surge to over 40% on the 4^th of December, and actually improve the seat tally further.

Another  recent poll, conducted by ACNielsen for ABP  News and Dainik Bhaskar gives the BJP 32 seats for sure but says it could ramp up to 40 if there is a 2%  additional vote swing in its favour. As many as 15-20 seats could be decided likewise but none of the others can hope to win outright. The BJP election campaign, no doubt encouraged by such forecasts, is all set to go into high gear over the remaining days.   

The Polio-busting medical doctor has quickly garnered the highest approval rating for the post of Chief Minister . The Congress however is staring at its deficits of blatant corruption juxtaposed with massive prices.

Unable to countenance its imminent ouster, Congress continues to boycott  discussions  on Opinion Polls calling them ‘unscientific’ and ‘wrong’. Perhaps this  is their way of shooting the messenger before going into a mighty sulk.

Bagging Delhi in addition to the states of Chattisgarh, Madhya Pradesh and Rajasthan, all projected as BJP wins by several polls, will go a long way to provide a boost to the BJP campaign for the Centre. And all this in prospect is already starting to boost the economy.

Nomura, the Japanese Brokerage with an international footprint, is the latest to join Goldman Sachs and CLSA in predicting a BJP victory with a coalition led by Mr. Narendra Modi. Nomura goes on to expect a fillip to the GDP post elections to 5.7%  per annum and rising from the just over 4% it is estimated to be at present.  

Mr.Montek Singh Ahluwalia at the Planning Commission has also said a GDP growth figure of 6% is not difficult to achieve, given some changes in policy. The mystery lies in why the UPA hasn’t done anything about these required changes.

But Nomura suggesting that NaMo will, is great news to look forward to, after nearly five harrowing years of  experiencing the economy being strangled to a standstill.

Most of Business and Industry is groaning under huge debt burdens, acquired in more optimistic times and now caught out in mid- stride. Debt, an essential component of leveraged growth strategies, is very difficult to service in the absence of demand and adequate sales. The policy environment, obsessed only with inflation has nevertheless failed to bring it down. That is why the rupee has lost a third of its value under UPA rule.

The real estate sector, a good barometer for what has gone wrong, is sitting on large inventories, massive debt, high interest rates and slow sales. It is painfully marking time till after the general elections. There are very few transactions despite discounts and subvention inducements, but this too is expected to start easing after the magic month of May 2014.

All of India Inc. except those who are beholden to the patronage of the UPA, are waiting for Narendra Modi, who is widely seen to be an incorruptible ‘doer’.

And this time, the Congress and its friends, bereft of any ideas beyond freebies for the poor, are expected to cool their heels in the Opposition for a very long time. Their stalwarts can sense this already and are terrified at the prospect. Nevertheless, the Congress, it is anticipated, will increasingly suffer from a leadership and policy vacuum that is evident even now. But the days of mere Socialist rhetoric without delivering the goods are truly over. 

India is a country populated largely by young people between 15 and 35 years of age who have surging aspirations and can’t be bothered with a governance that perpetuates poverty.

The UPA as it stands is expected to undergo many defections after the general elections. Conversely, the NDA ranks are poised to swell; particularly when the BJP is seen to have bagged most of the seats towards a majority figure on its own. Again, foreign observers have projected the BJP will win well over 200 seats on its own. 

The constant effort on the part of the Congress and its adherents to depict the BJP as communal is simply not working this time. This is a major strategic plank lost to the river of change for the Congress. Most Muslims, Christians and other minorities have not seen any improvement in their circumstances under UPA rule. They are now being vocal about their disappointment.

The BJP makes no bones about being an ‘equal opportunity’ entity. However, it has certainly not discriminated against the minorities and the vulnerable in all the states it runs. Even the welfare programmes and PDS initiated by the Centre are invariably better administered by the BJP ruled states!

The perceptible BJP wave is gaining real traction now. It has taken the prospective outcome in the Delhi state elections from a hung Assembly to an outright win projected in just over this month! Much of this swing is being attributed to NaMo’s growing popularity. Winning Delhi ‘city state’, as Mr. Modi puts it, will be a prestigious coup. It will come in addition to the wins at the municipal level in Delhi and help better coordination. It will also be a harbinger of the crucial surge to come for the main prize.

(925 words)

November 28^th, 2013

Gautam Mukherjee

A Social Media Revolution

A Social Media Revolution

The number of people in India with access to the Internet, particularly with the popularisation of ‘smart’ phones, has been growing exponentially. It will continue doing so, via the millions, high and humble , who are already connected by mobile telephony, even as the cost of smart phones keep coming down. Add in the spread of fibre- optics, broadband, the use of computers, tablets and so forth throughout. The jungle drums will have grown wings, the grapevine new sinews.

 Juxtaposed to the  raging debate about fallen firebrand Tarun Tejpal, tying himself up in more humiliating and hypocritical knots with every passing day; there is a remarkable keeping up with the twists and turns of the story. And also loads of derisory commentary from ordinary people.

 Almost everyone has noticed the pointed silence on l’affaire Tejpal from the Congress Party and  its camp followers. This even as the same people continue to bay for harsh action  in other  such eruptions such as  the Asaram rape case. There is a blind and polarised morality afoot, an ‘us and them’ set of rules, applied without embarrassment. Or perhaps this is what Mr. Arun Jaitley half- jokingly called “secular rape”.

Thankfully, the mainline media has, this time, joined Social Media in its outrage. But the commentary online has fuelled the opinion formation almost on par with the mainline efforts in this salacious case. It shows what it is capable of in the long run.

By way of contrast, and with every intent to smother, the highly articulate, erudite, urbane, otherwise modern and suave Union Law Minister Mr. Kapil Sibal, has been attempting to gag the Social Media for quite some time.

And this, while seeming quite happy to face the storm of protest and criticism for his efforts. But all the angry opposition to his moves has not stopped him from trying time and again to cat’s paw this attempt at blatant censorship. A censoring and taming of civil society opinion that is. And not just the reprehensible child pornography, or offensive/dangerous incitements of hatred, which should certainly be curbed.  

But the attempt to stifle free electronic communication on matters of import, is actually reminiscent of Mrs Indira Gandhi’s ham-fisted Emergency manoeuvres, which were accompanied by the jailing of senior journalists to boot.

And this wanting to regulate and control a reasonably spontaneous medium is allegedly at the behest of the topmost levels of the Congress Party. How the current Government must long for the old days of AIR and Doordarshan, those convenient  newsprint shortages, the very limited numbers of papers and magazines.   

The current Minister for Information & Broadcasting, Mr. Manish Tiwari, another prominent lawyer , also appears uncomfortable with Social Media. This perhaps because it is truly democratic, can be anonymous, and is essentially uncontrollable. The I&B Minister in days of yore pretty much told the media what to do, which photographs and documentaries to show, what to write, and when. But here is the swift to react Social Media, gone all electronic and digital, using mobile telephony, tablets and computers. News or comment spread instantly on self- operated communication devices, almost free, once you’ve paid for and possess a device that can access the Internet, and a ‘plan’ that makes it work.

One part of failing in the attempt to muzzle the Social Media is the technical difficulty of stopping messaging/blogs/ tweets/whatsapp/bbm/text/You Tube/Instagram/MMS etc. via platforms, mobile networks and servers when located abroad. The other part is a desire to use the powerful medium to counter- blast  the Party and Government’s own views. This, particularly since the Opposition BJP, and its prime ministerial candidate Narendra  Modi is so adept at using it. There is also the frustration of trying and failing to suppress such communication. Lastly, it is difficult to bribe or intimidate hundreds and thousands, maybe millions of people, into submission and conformity.

Of course, laws do exist, and others are being framed,  to check abusive, false, inaccurate or intrusive use, to malign, scare- off, slander, incite etc. and this is as it should be.

But while all this portends the brave new world we live in, much of ‘old media’ finds itself compromised. Many journalistic standards have plummeted. Not only has editorial authority been subordinated to the marketing department, but ‘paid news’ has become commonplace.

There  are whisper campaigns about the allegiance of large media houses, including the alleged acceptance of large wads of cash, to highlight, debunk or ‘spike’ features on various issues in a manner that smacks of blackmail and motivated reportage.

Without naming names, most people interested in current affairs know which groups lean towards the  Leftist Congress, and which, much fewer in number, support the Right- of -Centre BJP. There are also hosts of publications and TV channels that cater to regional interests with leanings of their own.

Not only is this positioning reflected as a political preference, in analytical tonality; but the media houses are seen to be willing to run motivated, sometimes untruthful and propagandist campaigns against the opposing political formation.

The scams that matter are evidently only the ones the opponents are involved in! The victories and good news highlighted are those of the home party. The funding of the media houses and their initiatives are also rumoured to be supplemented by those whom it serves.

Some of the money obviously comes in the form of advertisements, from the Government, various State Governments, Political Parties, Government departments, private companies, individuals, educational institutions, and so on. This too is expected to extract favourable news coverage.

The fallen image of much of the mainline media also allegedly involves other clandestine amounts paid to journalists for that variation of paid news. There is also the out- and- out ‘sponsored’ item which is declared as such, but nevertheless occupies much more space or TV time than heretofore.

The only irreverent and unbridled commentary tends to be on Social Media, with wide fluctuations of unsupervised quality, though even here, various Websites, Blogs  and You Tube offerings do have their political leanings and funding from ‘interested’ sources. Others, many fora are free, and host  largely unpaid and voluntary interaction between citizens. It is this chatting, commenting, posting and joking, largely spontaneous, that is difficult to control.

It remains to be seen how the current combination of a largely ‘committed’ old media and freer, possibly less manipulated ‘new media’, add up to votes for one or the other possible formations. Or indeed the third, or multiple contenders in this forthcoming  general election. In the end, given the level of disenchantment with the incumbents, it is likely to throw up a new coalition led by the BJP.

(1,107 words)

November 26^th, 2013

Gautam Mukherjee

Braveheart

Braveheart

The just concluded cap on Iran’s nuclear weapons ambitions, while an ‘interim agreement’, is yet another demonstration of the Obama administration’s ability to defuse a crisis that had the potential to cause grievous economic harm to the world at large.

Coming  on top of the successful resolution of the Syrian ‘Chemical Weapons’ crisis, albeit with strong Russian help, the duo of foreign policy breakthroughs means an evolution to the politics of war that had plagued the Middle East of late. It also means, for India that imports over 70% of its oil, that we can expect greater stability in petroleum prices going forward with excellent portends for rupee stability and our CAD.

This breakthrough with Iran comes after a 35 year gap filled with mistrust and heaped economic sanctions, some $ 7 billion worth of which have been eased by this accord. It has been rightly characterised by CNN  as the moving of a ‘diplomatic mountain’. And if it is followed through with a comprehensive agreement in six months’ time as projected, will result in a profound shift in the contentious politics of the Middle East, with great economic spin-offs for many, including India.

This ‘Iran Nuclear Deal’, may mean the beginning of a new era of global economic prosperity after several years of slogging dog- days, ever since the economic crisis began in January 2008. And America, with an economy still in crisis itself, has had the wisdom to not indulge itself in yet another set of horrendously expensive wars in Syria and Iran. Particularly, since this time, there is no other country in a position to defray its costs either. The US which has a reputation for War being its ‘Number One Export’, has refrained, twice in a row, from adding to the stereotype. And analysts have been quick to suggest that this accord with Iran may go down in history as President Obama’s finest foreign policy success.

Domestically in America, the gung-ho militarist mood of the George W Bush era may be shelved indefinitely, and perhaps rightly so, given the less than truthful basis of the war with Iraq and its untruthful bogey of the “Weapons of Mass Destruction”.  And these are definitely economically grim times.

Not long ago, the world witnessed a confrontation when ‘Obamacare’, a medical insurance system aimed at the poor, garnered so much opposition from the Republican Party that it brought the US Government’s finances to a standstill. It threatened a default on US sovereign debt, and combined with the proposed tapering of stimulus by the US Federal Reserve Bank, may yet emerge as a crisis point once again.

This successful agreement between the Iranians, with a reputation for being tough negotiators, and the 6 world powers involved, will also result in the continued lifting of a large number of crippling economic sanctions, just as it also has in the Syrian context. Iran is itself in considerable economic distress with a quarter of its eligible people unemployed, and will be hugely benefited with its trade flows taking off afresh. This is  also good for India, with its cordial relationship with Iran, in terms of bilateral trade.

Pakistan will have less leverage over the US withdrawal from land-locked Afghanistan, less hold over Afghan fighters recruited to harass India in Kashmir, and on the plus side, better economic relations itself with Iran.  Afghanistan too can develop much better diplomatic relations with its Iranian neighbour and not be quite so dependent on Pakistani good graces, or be intimidated as much by its dictates.

This ‘historic’ agreement and its implied consequences have left Israel suspicious of Iran’s sincerity to not pursue a weapons programme as pledged.  They think the Iranians may use these coming months to accelerate their uranium enrichment and weapons programme etc. The Saudis, long the beneficiaries of the US estrangement with Iran, are also not very pleased.

As a major Shia nation, amongst a large number of Sunni nations in the region, Iran is once again emerging onto the world stage as a full partner. This has been absent since the fall of the Shah Reza Pahlavi. The geopolitical situation therefore may indeed be stabilising thanks to the recent positive developments in both Syria and Iran, but, as usual, it cannot please vested interests that have been profiting from the rifts and conflicts in the region.

But, in an economically troubled world coming out of recession in painfully slow degrees, these are very good and necessary developments. Two huge crises with the potential to result in devastating wars that would have completely broken the back of the already precarious ‘energy’ economics, are on their way to fruitful benefits for many. The P5+ 1, namely the US, the UK, Russia, China, France, and Germany have pulled off a very worthwhile accord with a more practical and less ideologically driven Iran under President 

Hassan Rouhani, who rightly expects the treaty to ‘open new horizons’.

China, often seen as a military threat to India, is taking its international obligations more and more seriously, as is Russia. They are now, without a doubt, not only amongst the world’s great powers, but growing more influential by the day. They too are not inclined to be confined to being regional players anymore. This shift in priorities helps India, particularly in its strategic equation with Pakistan. China is likely to take a more defensive role to support its old ally Pakistan going forward. It is likely to discourage Pakistani aggression against India. For itself, it has been signalling a less belligerent posture with India on border talks etc. lately. This is because China stands to gain much greater dividends from leveraging its trade and industry initiatives with an India which has enormous potential.

The age of multilateralism, in which India could also play a significant role, despite its present weakness, may be well and truly dawning.

(975 words)

November 25^th, 2013

Gautam Mukherjee

Life

Life

Why is it that the several that gain their very prominence, and sometimes a very decent living to boot, from setting stridently lofty standards for others, nurse a subconscious wish to be hoisted on their own petard?  

The psychologists and ‘shrinks’ have their hypotheses of course, but the question is still worth asking. Could it be the secret urge to be brought down? Is there a desire to be ‘bad’ combined with a masochistic need to be humbled? Is it hubris, low-self esteem, a ‘fix-it’ manipulative mindset, moral bankruptcy, the corruption of power, the feeling of being ‘above the law’ or  a  delusion of invincibility?

Is it the flirtation with danger and disrepute that provides the frisson to a jaded sexual appetite? We have seen this happen, to the headline writer’s delight, time and again. The fire and brimstone preacher caught with his pants down, the craven evangelist, the flawed idealist, the ‘incorruptible’,   an otherwise charismatic politician who posts pictures of his ‘family jewels’ via mms, gay rock stars roughed up by ‘yobs’ in public toilets, film heroes caught being serviced in cars,  lurid politicians in bunga-bunga mode, wannabe ingénues snuffed out like candles.

It is an unsavoury potpourri, but more funny than tragic when one looks at the disgraced perpetrators. But then, there is the very real suffering and trauma of the victims, especially when it ends, as it does so frequently, in gruesome murder.

But, here Tehelka, long in the public’s face for its intrusive style of journalism, its ‘stings’

involving secret cameras, its flowery prose, has come a cropper.  The hidden cameras have long

been seen by many as unfair if not illegal ‘entrapment’. In addition, Tehelka’s Left-leaning tone,

largely seen as pro-Congress, positions it, somewhat superciliously, as morally superior. But now,

as the cliché would have it, its Editor is himself in the dock for a spot of moral turpitude.

Tehelka, originally set-up as a website erected on a shoe-string, but with moneyed supporters in the shadows, came to the nation’s notice by mounting a damaging, if ultimately hollow attack, on the Atal Bihari Vajpayee Government, using its trademark low-blows and aggressively intrusive means.

Then, Tehelka’s management thought nothing of attempting to trash several reputations including those of then Defence Minister George Fernandes, that of his companion Jaya Jaitley, several military personnel and others.  Subsequently, Tehelka milked the notoriety for years, collecting donations and subscriptions, portraying itself as a victim of the BJP Government’s harassment, and evading all questions on its less than ethical and credible methods, that allegedly included  ‘staged’ footage and outright ‘plants’.

Could it be that the fallen from such manufactured grace can’t endure their pedestals? Is it a burden to be taken so seriously for one’s mere sleight of hand? The inveterate finger- pointer Tarun Tejpal, is only the latest fly caught in the honey-pot. He has been a man of many parts. A journalist with India Today and Outlook, then an Editor/Writer/Impresario/BJP baiter/Congress camp follower.  

Tejpal was about, apparently indulging his James Bond fantasy in a Goa hotel lift, with, as it turns out, an unwilling young whistleblowing woman. He acted promptly to try and diffuse his ‘lapse of judgement’, but his reputation, always a little ‘sharp’, may have sprouted a new layer of question marks. The rest of Civil Society, The Goa Government, quite a few of his employees, and much of the Media, are apparently not for turning. The Congress Party is,  predictably, keeping quiet.   

In a fractious poll-season, when the dirty tricks department of the beleaguered Congress Party is in full spate looking for straws in the wind, a self-goal like this from a loyal supporter is not helpful. Today, the largely pro-government media, mindful of the nature of the flow of sarkari advertisements it lives on, is still having to grudgingly admit that the BJP’s prime ministerial candidate is gaining ground with the people across the country. The broad media does this now, but is still very eager to find and report anything to the contrary. Even if it is trivia on fumbling  of dates and facts used rhetorically by NaMo on the stump!  But fortunately the reams of bizarre Rahulisms outdo NaMos bloopers anytime.

The ground below our feet is shifting relentlessly towards the new India that NaMo wishes to usher in. We can all feel it. It is a change that will break through many certainties and assumptions of a ruling elite grown rigid and arthritic.

The economy of India, gasping for relief is waiting for this development and marking time as best as it can.

Perhaps this sort of incident involving Tejpal is why people love sad songs. They reminds us of relentless, inexorable change, all that we have loved and lost, our betrayals and humiliations, the fading of youth, innocence, and sometimes, that ‘momentary lapse’ of what we call good sense.

In Portugal, sad songs have a traditional genre called the ‘Fado’, filled with longing and the sense of loss. It exists in the Manohar Parrikar ruled Goa too, but alas as an endangered species, in these days of homogenised global trends and a hungry tourist economy.  

The dowager Lady Grantham, in the popular fictional TV series Downton Abbey, about turn of the century British aristocracy, makes a robust remark that might be part of the answer: she says in Season 4, episode 8, ‘No life appears rewarding if you think too much about it’.  

And any fall from grace by definition is innately painful, and no less if it results in exile. The Congress Party and its hangers on must be looking at its philosophies and missteps in private, even as it packs its bags and prepares to relinquish its hold on power.  

(952 words)

November 21^st, 2013

Gautam Mukherjee

Honest Dupes

Honest Dupes

They say people who don’t break queues cannot get ahead. It explains the greedy chaos Indians can manifest faster than any flash-mobbing crowd elsewhere. Another saying says good guys finish last. In poll season this time however, thanks to the Supreme Court and a failed attempt to overrule the verdict via an ordinance, the ‘good guys’ stand a better chance because the convicts are debarred and removed from the field. Though, it doesn’t really do the trick in its entirety, because the crooks can rule by proxy via wives, sons, uncles, aunts, mistresses etc. and even technically untainted Hench- men; all of whom can stand in for them .   

Another rather famous near proverb does say that a rich man cannot enter the kingdom of heaven. In fact, that it is easier for a camel to go through the eye of a needle, it says. There might be truth as opposed to Socialism in this one, truly speaking, and gazing out at what is going on all around.  

Consider this. At a time when the Non-Performing Assets (NPAs) of public sector banks (PSUs), at the highest ever, are threatening to sink the banking system, it is revealed by the RBI that loans of rupees one lakh crores have been written off over the last 13 years. This means, over the whole of the current UPA regime, and a little before it too. The outstanding numbers, are even higher, closer to double this figure, at some Rs. 1, 85, 00,000 crores, principal and interest included,  but not all of it declared NPA or written-off as yet. That tends to be done at yearly rests of some Rs. 15,000 crores.

But then, declaring an outstanding amount as a bad debt actually helps the bank save taxes and  takes the pressure off trying to recover the money. Deputy Governor of the Reserve Bank of India Mr. KC Chakravarty, ‘flaying’ the PSU banks for this practice, calls this a ‘technical write-off’.  

Bottom line, this RBI certified figure means borrowers have walked off with Rs. 100,000 crores or more, 95% being ‘big borrowers’ from the ‘priority segment’ against lending mandated by the Government. Most , with at least a borrowing of Rs. 1 crore or above. This is a national outrage, of course, but the revelation seems to be swamped by all dimensions of other maladies.

When these borrowers do not repay an instalment of the debt and interest outstanding for at least 90 days beyond due date, it turns into an NPA. And this non-payment has resulted in the banks writing it off despite no pay- back/recovery or consequence for the borrower! What a neat way this is to embezzle millions!

The ‘big loans’ of over Rs. 1 crore, are authorised and sanctioned by the Boards of the banks, and so, incredibly, by way of excuses, there is no one down the ladder that goes out of his way to follow up for recovering the money.  And with a ‘technical write-off’ effected, there is no outstanding showing on the books of the banks either.

This is the case with the SBI, the biggest PSU bank with the largest amount of such NPAs, but smaller banks such as Bank of Maharashtra, Syndicate Bank and so on, are much more vulnerable to capsizing,  because they are listing with 30% of their loans turned bad.

No wonder then that the Government is issuing new banking licences, and hoping desperately to spread the muck all over the system, even as there is a fresh infusion of capital and a new set of debtors.

This loss, conveniently jettisoned from the books of the banks over 13 years, in aggregate, is more than the Rs. 60,000 crores worth of farmer loans written off by the UPA Government in the face of a  slew of farmer suicides. Though there too, in the waiver, there were a lot of big farmers benefited rather than the truly impoverished who never could qualify for bank loans even as they were the very core of the ‘priority segment’.

Besides, it played very well politically, and contributed to the re-election of the UPA in 2009. But this time around, on the threshold of 2014, the Bank NPAs are perceived to be of a piece with all the other corruptions and scams that seem to be riddling this government.  Could the loans be wilful and deliberate pay-offs to supporters and well-wishers using, as usual, public funds?

The Congress Party does have a tendency to apportion public money as if it were their own, and in order to obtain political mileage out of it. It is almost as if the PSU bankers are hand-in-glove with the defaulters.  But, it is also clear that in a rent-seeking regime such as we live under at present, any collusion of this kind would not be surprising. Neither is the myth-making of being the most interested in the poor and needy and the welfarism made to look as if it is coming from the party coffers.

What then is to be done about the vanished Rs. 100,000 crores?  Nothing. It is all legal and above-board.  Also, it is difficult to say how it will play.  After all, who knows who will vote for whom and why.

(874 words)

November 17^th, 2013

Gautam Mukherjee

Ask Not For Whom The Bell Tolls...

Ask Not For Whom The Bell Tolls…

Apart from demanding sympathy from the people for the sacrifice of the Gandhi family who have lost three of their members tragically, Congress has rolled out the same old pitch  about ‘Inclusiveness’, implying it somehow has a monopoly on this.

Economic innovation is, inexplicably at near zero and thus a huge disappointment coming from the Party that has been in Government for most of the time since Independence. And implementation on all fronts is even at a minus on a relative basis! Sometimes it appears that the Congress Party’s much publicised ‘concern’ for the poor needs a large pool of voters, some 300 million people at least, to stay poor in perpetuity.

The Congress Party may not have anything new to offer going into the general elections in 2014, but are certainly very keen on being re-elected. It is banking on its ‘Povertarian’ platform. Its predictable pitch includes dollops of economically damaging and badly administered Welfarism, full of more leakages and corruption than ever before.  

Congress Vice President Rahul Gandhi has made quite a symbolic point of visiting villages and sleeping in the huts of the poor over the years. But as for changing things- even in his own impoverished constituency, let alone at a national level, there is very little done.

As for ‘Inclusiveness’, Congress’s own grisly record on murder and mayhem is glossed over. The most glaring is the 4,000 Sikhs killed over three days in October-end and November 1984 in the Capital of Delhi. Not so long ago, there was a bloody clash between the hordes of refugees from Bangladesh, encouraged by the Congress Party to the point of a demographic shift, and the angry native Assamese, in Congress ruled Assam. There are scores of other instances over the years, in Bihar, in UP, in then Congress ruled Gujarat, and other parts of the country. And yet, Congress thinks nothing of pointing fingers at others probably banking on public memory being short.

There is, besides this hypocrisy, a bankruptcy of new ideas, particularly modern ones. This disappoints our highly aspirational citizenry, a majority of whom are very young and many of whom are Muslim. At the same time, the international community, that had high hopes for India, is disappointed with India’s mismanagement 0f its affairs.  These high hopes have now been transferred to BJP’s prime ministerial candidate Narendra Modi, who has a solid reformist image and a reputation both for administrative efficiency and delivering economic growth. The excitement is growing as NaMo is being received rapturously by huge crowds wherever he goes around the country.

Eminent economist and former Finance Ministry mandarin Shankar Acharya writes in the Business Standard that it is too late for the UPA to make any impact on the economy in its remaining months in power. This, just as the wholesale price index (WPI) hit over 7%, brought on by the obscene price of vegetables. The retail price index, of course, has been in double digits for more than a couple of years running, and almost everyone is feeling the pressure.

The bad news keeps pouring in on every aspect of the economy including the much vaunted Service Sector, which accounts for over 50% of the economy today. Even IT is struggling despite the fall in the value of the rupee, partly because the customers in the US and Europe are themselves in bad shape. And because we have, by and large, not learnt how to climb up the value chain of IT software throughout all the boom years gone before.

The Export sector is doing better because of the beaten down rupee, but still not very well. Besides, it accounts for around 12% of the economy. Manufacturing, where we have been falling behind for years due to dismal infrastructure support- roads, rail, power, water, land, is in the doldrums, and employment numbers, despite a large pool of qualified people, are not really growing.

Shankar Acharya implies that all of it is the consequence of previous ‘folly’ because the ‘wisdom’ of policies, if any made, is certainly not showing results. There is always a time lag. 

The prime minister may well call policy-making ‘complex’ as he did at the CBI’s 50^th Anniversary function, but the end results have been unimpressive under UPA rule.

Mr. Chidambaram’s present tenure is marked by the highly publicised VCES scheme that reprises his VDIS Scheme in a previous turn as Finance Minister. Will it succeed? Perhaps, but the yield is unlikely to put a dent in our economic woes. Apart from this initiative, by choking off gold imports, the CAD which was getting out of hand, is showing a sharp reduction, and might help the value of the rupee. Provided of course that the US does not begin tapering its stimulus which badly impacted the rupee months ago when it was expected to begin by September.

The retrospective tax provisions, sprung in a fit of high-handedness, are still on the table, despite the negative reaction of almost all would- be and existing foreign investors.

Indian born Indira Nooyi of Pepsi recently announced that her company was going to invest some 33,000/- crores up until 2020 in ‘manufacturing,  agriculture, infrastructure and innovation’, but India is no longer a ‘go to’ investment destination for most foreign companies. This, she said, is because of multiple reasons, including the economic slow-down on top of particularly high corruption, red-tape, difficult working conditions, the policy paralysis, and that retrospective tax slap administered to Vodafone.

The UPA, seen to have mismanaged the economy and reforms process, is widely expected by the foreign direct and institutional fraternity (FDI & FII) to be voted out of office in 2014.

While all macroeconomic efforts, says Acharya, is meant to reduce inflation and promote growth, the UPA has clearly failed to do either! Is it therefore any wonder that Narendra Modi and his development politics is pulling ahead of  UPA’s retrograde ideas? There is talk of a Modi Wave in the offing, and the country and the world is waiting.

(1,002 words)

November 14^th, 2013

Gautam Mukherjee