Sunday, October 30, 2011

Mani Shankar Aiyer is wrong about Formula 1…..

The biggest criticism for the Formula 1 event held yesterday for the first time in India must have come from Mani Shankar Aiyer – who thought that this was all a criminal waste of money. That if the money had been deployed for helping the poor, it would have been much better used. Now, on the one hand, there is nothing wrong with what Mani has said…..all our efforts must be to help the poor. And yet, on the other hand, everything that he has said is wrong.

This same logic of “spend only on the poor” should then work against India hosting IPL matches (what is there to cheer if the center of gravity of the cricketing world has shifted to India with the IPL?); or organizing the Lady Gaga and Metallica concerts (who cares; not even 1% of Indians listen to such music); or constructing a premium residential or business tower (its just an ugly display of wealth); or India attempting to join the global biggies in the space race (we should learn to build better trains first) or any number of such ambitious programs that India is involved in. Mani may even question the reason for building such a swanky airport at Delhi, the sea-link in Mumbai and the airconditioned metro in Bangalore (and Delhi). Mani’s logic essentially is that India is one homogeneously poor country – and until the last poor man alive is bathed, fed and educated, no other program should ever be thought of. This is an extreme form of socialism and harms the country’s interests more than serving them.

It’s only a step away from out-and-out socialism and the adjunct philosophy of communism. There must be perfect division of wealth. Taxes must be kept high, so that the rich are forced to share their wealth with the poor. All activities which represent pomp and splendor must be shunned. Why, Mani may argue that there must be restrictions on what kind of houses can be constructed – anything more than 2 bedrooms being disallowed by law. The Planning Commission must control all resource allocation – the private sector anyways knows only how to make profits for itself being the logic. This is a huge move back to the 1970s when License Raj was at its peak. This is a way for politicians like Mani to gain more power back for themselves – after all, the growing clout of the private sector has made many ministers feel very feeble. Does Mani realize that if we went back to the License Raj, our growth rate would most likely plummet to the 3-5% Hindu rate of growth? Does Mani recognize the contribution made by India’s private sector?

Apart from the move back to the License Raj, what Mani fails to recognize is that we are a hugely heterogeneous country – with people having different levels of affluence, interests, aspirations and dreams. What would happen if the government’s agenda was solely to look at the issues facing the poorest of the poor? Well – noble as it may seem – this would lead to a worsening of the economic condition for the entire country – and most notably for the poor. In today’s world, it is impossible for the government to undertake all economic activity. Governments around the world – including the erstwhile proponents of communism like China and Russia – rely more and more on the private sector to create job opportunities, enhance investments and in short, lead the economic growth. If the rich were considered as undeserving, then what would stop them from migrating out of India – setting up their factories in the ever-welcoming lands of China, Vietnam or even Thailand? Already there is news that Rahul Bajaj is considering shifting his company’s manufacturing facilities from India to China. Would it be pro or anti-poor if the government made an aggressive bid to retain Bajaj’s interest in India? Is it wrong if Narendra Modi gives financial concessions to attract a Tata Nano or now a Maruti to his state? Would this amount to the government pandering to the interests of the rich? Or would it qualify as being pro-development and pro-poor?

It’s pretty much the same with the Formula 1. Agreed, there is no “practical” utility of hosting a F1 game – in the sense that if India didn’t host it, it would not make any difference materially to India. However, look at what the event does to the stature of India in the minds of people living outside. They believe that India has moved up a few notches when it comes to organizing and managing large scale projects – especially related to infrastructure. When they see such events being held in India, they see it as some sort of a certificate of “having arrived” – this in turn attracts more foreign investments into the country. The direct benefits for the tourism and hospitality sector are all well documented. But more important than those is the impact the successful hosting of the Formula 1 has on the confidence of the people in the country.

The Formula 1 is one of the effective antidotes to the negativity that has pervaded the country in the last 18 months. We are living in times when we believe that everything in India is bad. If Anna’s supporters were to be believed, everything is wrong in this country – every politician is corrupt; every government system is inefficient; every law is flawed; every public institution is politicized etc. As a nation, we lack the maturity to put the good and the bad into separate compartments. We cannot understand that both co-exist in every society. We tend to shove everything under one single compartment. A few years back, everything was good about India. FDI inflows were increasing, savings and investments were high, GDP growth was nudging 10%, all P5 leaders came calling on us, the US bent over backwards to give us the nuclear deal…..etc etc. And now, everything is bad – the inflation is too high, there is corruption everywhere, the PM is weak, no one except Anna is right etc etc. We have no appreciation for the many high points of India’s performance even today – the fast-growing GDP, the rising urban and rural income levels, the scorching exports performance, the strong domestic consumption story…..nothing at all. I look at the Formula 1 as being a mood-lifter. A feel-good event, that gives us our confidence back. After a very long time, I saw the main story on the front page of the TOI a great “sunshine” story – something that made me feel proud of my country. Something that made me hold the paper with hope and joy….

It’s this point that Mani misses. If Mani had his way, he would order all school children to only study till they got 100 out of 100 in every subject. He would fail to understand why it’s important for Jack to play at times. What I find surprising is that just a few days back, he was defending the Rs 600 crores that Mayawati spent on the creation of the fancy park in Noida, pointing out that the GOI’s budget was some Rs 7 lac crores per annum and Rs 600 crores was a small sum of money to pay if it helped to lift the pride of the dalits. This is indeed true and I supported his views then. But if that is true, then why is it not OK for the GOI to give an inaugural tax concession to the organizers of F1? How does it matter whether the event is organized by a private player or by the GOI (Ajay Maken’s statement)? In the new world, both the private sector and the public sector work together for the country’s progress. There is no case for giving incentives to the public sector while denying the same to the private sector. What should be done instead is that the discount should be limited to the first few years only – so that it works as an incentive to bring in investments. And the same rule should be applied to both public and private sectors.

In any case, today is not the day for controversies. Today is the day to celebrate the success of Formula 1 and indeed of India itself. It makes me proud that we as Indians can do as well as – if not better than – the rest of the world. In the type of times we are living in, every positive stroke is helpful. Even the most self-motivated need some external motivation – and as Indians, we’ve got our motivation from the way the F1 event was organized and executed. I salute the Jaypee Group for taking India into a different league altogether. For dreaming bigger than the politicians can. For recognizing India’s plurality of interests. And for having the courage to take on India’s complex and often enervating systems. I also salute Mayawati for having the courage to supporting something that could get her into political trouble – especially when the Congress attacks her now. Hats of to you!

The real truth is that the Formula 1 race was the best thing that’s happened to India in the last several months. I feel a certain positivity radiating through most of my urban middle-class friends. I hope this positivity spreads. I hope we stop being so self-critical. I hope we start believing a little more in ourselves. Yes we have problems, but we can overcome them. Everything is not bad in our country. Today is a day to celebrate…..let nothing come in the way of that!


  1. The decision on whether GOI should give tax concession to a private event lies in the social cost benefit analysis of the event.

    As far as F1 and events like Metallica or Lady Gaga or IPL are concerned, these are private events and do not have a social return on investment. GOI should think twice before squandering public wealth in the form of inaugural tax concessions.

    Infrastructure projects like Metro or sea link havea long term social benefit. The swanky airport is a social need.

    Events like Olympics and Commonwealth Games have a net social benefit as they help build diplomatic relations between countries. F1 is hardly an event like that.

    Mani's logic is not of India being a homogeneously poor country, but rather of India having limited resources, which needs to be utilized with caution. He does not discourage the private sector from carrying out such events - his only point of view is that these should not be at a cost to the society at large.

    As far as image is concerned, this does better the image of the country. However, so many other things could have made this image better. For instance, India does not have a major transhipment hub. All major container traffic to India comes via Dubai or Colombo. Would not a mega container transhipment terminal build a stronger image of India?

    Also, F1 is a mood lifter for the elite, unlike Cricket World Cup, which appeals to the masses

    I do disagree with Mani's comments over Maya's Rs. 600 cr park in Noida, which is nothing but an architectural stereotype that every ruler has wanted to create as a mark of his or her rule in a country.

  2. Dude... I guess u blong to urban upper/middle class dude... I blong to rural lower midl class.. i kno d authenticity of Mr. Aiyar's comments.. though am not a supporter of Mr. Aiyar's comments... I wud lyk u to blog on such issues in a much broader manner..:)

  3. Dude.. wateva u say.. i guess u r frm an affluent indian family.. n u cant undrstnd d thots of a man frm a rural poor family...Do u still blive in wat our politicians say..? Do u still blive in wat our system predict?.. F*** dem all.. dey all r same.. N lemme ask u.. is it fair enof to giv concession to F1 organizers?.. R u aware how much compensation d guy, on who's land F1 track was built, was given.. D urban stereotypes r good to post online dude.. but not in practice.. u r neither wel informed nor seem to be willing to b informed..nyways.. nice post..keep posting..