Wednesday, November 30, 2011

Economy in trouble…..get back to work guys….


The quarter 2 GDP growth numbers are shocking. It’s after two years that we have again dipped below the 7% mark. We need to drop everything and pay attention to this unnecessary crisis. A combination of factors – policy paralysis, RBI’s missteps, global factors – have led to this slowdown. Even the smallest drop in the growth of the GDP should be thought of as being similar to an attack on the country – and when the country is under attack, its time for us to dissolve our political differences and work unitedly. For starters, it would help if Parliament were allowed to work.

If Parliament had worked for the last 7-8 days of this session, we could have seen important bills go through. That’s the dying need of the hour. For months before the winter session started, we kept discussing ad nauseum all the bills that were being lined up by the government. And yet when the session has started, there is no action happening. The logjam in Parliament has two consequences – one of course is that important bills don’t get passed. The second is that the message that goes out is that the logjam is going to continue. That exerts its own downward pressure on the economy and makes investors flee. Investors like a welcoming climate – a climate of stable economic policies and progressive thinking. If that is missing, investors will exit in no time. Not only foreign investors, even domestic business houses will start taking their investments outside India – as a few head honchos have already hinted.

Apart from the Parliamentary logjam, the other thing that has badly affected economic growth is the bull headed approach of the RBI in controlling inflation. It wants inflation to come down, but it fails to appreciate and understand where it is emerging from. The RBI is behaving like a one-trick pony; increasing interest rates for any and all problems. The problem of inflations is on account of a production constraint in the agricultural sector; the fact that there is more money in the hands of the poor. The problem is not in manufactured items or in infrastructure or power. And yet, the RBI does the only thing it knows to do. Increase interest rates. Interest rate increases will clamp down on manufacturing, but it will do nothing to control inflation in agricultural products. The RBI’s approach is like searching for a lost item under a lamp post even though it has been lost somewhere else; only because the lamp post makes it easy to search there!

RBI may be an autonomous body, but its Board of Governors is made up of people chosen by the finance ministry. The government has to question Subba Rao; pull him up for wrong strategies. It has to lean on RBI to cut interest rates; so as to spur industrial growth back. If needed, a differential interest rate regime needs to be thought of; so that subsidized funds can be provided to certain core sectors of the economy. Instead, what we find is an incessantly spiral of rising interest rates. First the RBI increases its lending rates to banks; that leads them to a hike their deposit rates; that in turn leads to further higher lending rates…..making it difficult to lend cheaply even to the priority sectors. The entire thing needs to be reversed. Interest rates need to be brought down. And deposit rates need to go down too.

To solve the inflation problem, we need to augment agricultural capacity. I noted in an earlier post titled “Politics killing economic growth” (July 27th, 2011): When it comes to food inflation, this is where successive governments have repeatedly failed. There has been nothing substantial achieved in agricultural productivity since the Green Revolution in the mid-sixties. We need to embrace more bio technology. We need more irrigation facilities. We need better food storage facilities so that so much food doesn’t get wasted. We need a better cold chain system. We need more mechanisation in farms and for that we need to develop a system of credit flow to the farmers. We need more power supply at affordable rates. We need a better fertilizers policy......Clearly, a lot needs to be done on this side. Growth of insecticides has almost gone down to zero in the last ten years or so. There is also no growth in irrigation coverage in the country. All of these need to be addressed for inflation to come down. The solution to every type of inflation is not increasing rates; but the RBI seems to believe it is.

We need the policy paralysis to end. We need new laws to be enacted. We need the FDI proposal in multi-brand retail to be notified. We need to welcome all forms of investments – the color of money being irrelevant for a fast growing country. We must overcome the paranoia of being overrun by foreigners. These companies are not the East India Company. And in any case, the East India Company is now owned by Indians! In today’s world, Indians are buying up large companies internationally. How can we disallow others from entering the Indian market then? We need to allow more FDI in the insurance sector, so that more capital can flow in there. There is need for the PFRDA bill to go thru too. We need a new mining policy so that the negative growth that has been recorded in mining this quarter can be reversed over a period of time. There are so many other economic bills pending in Parliament. Then there are acts on which there is no consensus – again not for ideological but political reasons. We need to think of the nation first and politics later.

And very importantly, the witchhunting of corporates to stop. The 2G scam is a classic example of politics bringing gloom and doom to a buzzing segment of the economy like telecom. If the allotment of spectrum at zero cost is taken as part of a continuing government policy, then the telecom scam is a small one and it shouldn’t take away so much of our time. It shouldn’t lead to the blockade of economic reforms.

For long, the similarity of economic policies of both, the BJP and the Congress, led to a stable economic environment in the country. Investors felt that India was a safe bet because both major political parties were largely pro-reform. Today, that appears to have changed. Today, the BJP is playing the politics of opportunism – opposing the government’s initiatives not because of some ideology, but only so as to debilitate the government of the day. Tomorrow, when the BJP rules, the Congress will do the same. This is unacceptable and we must raise our voice against it.

The real truth is that the warning signals are loud and clear. Instead of battling the crisis, we are busy politicking. The media needs to take a lead in raising the people’s voice against all political parties that are blocking Parliament. After all, if there is one thing that politicians fear, it is the media…..

Tuesday, November 29, 2011

Rolling back FDI in multi-brand retail will only worsen matters for the Congress….

If the Congress rolls back the FDI decision, it will find itself in even more trouble than it does right now. Rolling back the decision may give it a few days relief; but the roll-back will make the party into a weakling that anyone could push over. In politics, daring the opposition is as important a part of the game as rolling back and fighting another day. The Congress needs to evaluate carefully the merits and demerits of both before deciding on anything.

The Congress must remember that the opposition to multi-brand retail FDI is purely political. It’s not based on any ideology or logic. There have been several reports that have clarified that the issues being raised by the BJP and other parties are misplaced. The reason the opposition has united against the government on this issue is to force a shutdown of Parliament. Today’s TOI mentions that the DMK (when part of the NDA) had floated a paper seeking 100% FDI in multi-brand retail. Today, it is seeking a roll-back of the proposed 51%. Before this issue cropped up, opposition parties were daring the government with a vote on price rise and black money. Frankly, as far as the opposition is concerned, it doesn’t matter what the issue is. The objective of the opposition is clear. It wants to give a stomping kick to the government’s knees; rendering it ineffective to run or even walk. That’s the trap they laid for the Congress a long time back. If the Congress reverses its decision, it will be walking into this trap.

Let’s play this out a bit. What happens if the government rolls back its decision? It will be a clear indication that it is unsure of its numbers and cannot muster support to pass important legislation. It might as well forget the legislation to enhance FDI in the insurance sector or introduce it in the pension sector. Those bills can be taken off from the agenda. Equally, the new rules of nuclear liability that the Executive (the government) has enacted won’t clear Parliament. Important pieces of legislation like the GST can well be taken off for the entire term of this House. The Land Acquisition Bill also has its opponents, and that can be removed as well. After having been an important part of the Standing Committee on Lokpal, the BJP will no doubt find some differences of opinion and block the passage of that bill too. In short, the government will not be able to function at all.

Basically, if the Congress rolls back the FDI decision now, it will be a dead government. It won’t be allowed to take executive decisions; it won’t be allowed to pass new legislation. It will be a government living on a ventilator. What’s wrong with the politicians in the Congress? Don’t they see the writing on the wall? I know many Congressmen will be thinking that it is better to fly to safety now and fight another day. But the impact of this blow will be so crippling that it will not survive to fight another day.

The likes of Mamata Banerjee will set the agenda for future discussions within UPA-2. There will of course be no more petrol price hikes; Mamata anyways doesn’t understand economics – how could she even know (or care) what the impact of not increasing petrol prices would be on the fiscal deficit? Now that she has absolute power in WB, she will feel that she has the upper hand in her relations with the Congress. When she wants a special package for WB, all she will need to is call Pranab Mukherjee. And dictate her terms.

That’s why the Congress should not roll back its decision. Instead, it must work hard on its allies. A little conceding ground here; a little pressure there should do the trick. The DMK is hardly in a position to exert pressure on the center. It’s only access to power is at the center. In its home state, Jayalalitha is leaving no stone unturned to arrest and prosecute DMK MPs. She is going to hurt Karunanidhi where it hurts the most – by breaking the cable distribution monopoly that the Marans (relatives of Karunanidhi) have enjoyed for decades. Recently, she’s won the Madras municipality away from the DMK, completing the rout at home. In such a situation, the DMK is literally at the mercy of the Congress. The Congress must call its bluff rightaway.

This is also the time for Sonia Gandhi to take charge of the matter and whip the party’s state units into shape. There is a much larger game being played here. For the sake of one assembly by-election in Kerala, the party there cannot be allowed to take an opposing stand. In the BJP, the strongly-pro-FDI Modi – sensing the opportunity – has closed ranks with his party leadership. Likewise, the Shiromani Akali Dal (SAD) strongly supports FDI in retail (and has said so), but has decided to support an adjournment motion in the House if the BJP brings it up. This is the time for allies to close ranks. The last place where there should be dissent coming from is within the party itself. If the DMK is pressured into withdrawing its opposition, the tide would turn; Mamata would come under pressure. While she can pull the strings at the center, it doesn’t harm her interests to be in the good books of the central government. She must also worry that her reputation as an ally is on the blocks – she had earlier ditched the NDA. Who’s going to trust her in the future?

Now’s also the time for the Congress to get into alliance discussions with the Samajwadi Party. In all likelihood, the SP is not going to be able to win the elections in UP on its own. Neither is the Congress. By combining their forces, they may be able to give the BSP a run for its money. Instead of forging an alliance after the elections, they may want to do so right now. Is this an acceptable compromise for the Congress to make? It has been eyeing UP for a very long time. It believes that if it can put UP in order – by 2014 if not right now – it can hope to form its own government at the center yet again. It’s certainly not going to be an easy decision for the Congress to make. The point that the Congress may want to remember is that it’s only in UP that the party has this opportunity to align with a local party as it is not in the “top 2”. It cannot ally with the Biju Janata Dal (BJD) in Orissa, because it’s the main opponent of the BJD. It cannot ally with the JD(S) in Karnataka for the same reason. There is one other state where it has very little strength. That’s Bihar, but the JD (U) is a strong ally of the BJP – so that’s not possible at all.

The SP has come to the rescue of the Congress in the past as well. The Indo-US nuclear deal was passed by Parliament because of the support that the party extended. Even today, it supports the Congress from the outside. Can this relationship be made stronger?

Either the Congress builds an alliance with SP or it chooses to run a weak government. The Congress is in a difficult position. The only other alternative is for it to call for early general elections – but that would be stupid – at least at this point in time. Team Anna – allied as it is with the BJP/RSS – is threatening to start its agitation all over again. As expected, it is blaming the Congress alone for the “weak” Lokpal Bill – even though the all-party Standing Committee has drafted the new bill. Calling for mid-term elections would be political hara-kiri.

The Congress has to choose between an SP-alliance (sacrificing UP) and running a weak government (and losing the General Elections in 2014). It’s not an easy choice. Fight hard now; or withdraw to fight another day. That’s what the party needs to decide.

My own view is that no government should exist if it cannot hold its head high. A weak government gets maligned at every turn. It is not allowed to take decisions; but is held responsible for the logjam. It loses its political clout with every passing day. Continuing for the sake of sticking to power (what power?) is what gives politicians and political parties a bad name. The PM is a noted economist. He has to stick his neck out and explain to the people why the FDI decision is right. This is not for Anand Sharma to do. It is for the PM to do. If the PM talks to the nation, the people are bound to take note. He can brandish statistics; reports; expert comments; share experiences of countries like India. He has to take the bull by the horn. This is the time for the PM to do what he did during the Indo-US deal debate. And then he has to dare the opposition to a fight…..and be prepared to go to the people with the head held high if he loses.

Before I end, it’s worth spending a couple of minutes on the state of affairs in our country is at present. I have complained about this in the past; politics has started to rule every part of our life now. There was a period of time between 1991 and 2009 – when both the BJP and the Congress largely supported reforms. People believed that irrespective of who was ruling at the center, the economic policy of the country would remain on-course. That brought us rapid economic growth. That’s fundamentally changed now. What does the BJP expect if it gets to rule next and the Congress is in the opposition? That the Congress will forgive and forget; and let BJP have a free run? That won’t happen. The Congress will pay the BJP back in the same coin. And if that happens, we will see the next 20 years turn into a period of complete instability. India and Italy are similar in more ways that one. Both are the third biggest economies in their respective continents. Both are run by Italians (haha – that’s a joke!). Let us now not become similar in terms of the political instability also (Italy has had 12 Presidents in the last 20 years). Political instability led to Italy’s ruin. We don’t want the same to happen to India.

The real truth is that Congress has no option but to fight. It cannot surrender. It cannot become a weak government. Also, the India story will end if the Congress pulls back its FDI decision. Equally, the Congress story will end if India pulls back the FDI decision. For the sake of India, the government must not surrender.…..

Rolling back FDI in multi-brand retail will only worsen matters for the Congress….

If the Congress rolls back the FDI decision, it will find itself in even more trouble than it does right now. Rolling back the decision may give it a few days relief; but the roll-back will make the party into a weakling that anyone could push over. In politics, daring the opposition is as important a part of the game as rolling back and fighting another day. The Congress needs to evaluate carefully the merits and demerits of both before deciding on anything.

The Congress must remember that the opposition to multi-brand retail FDI is purely political. It’s not based on any ideology or logic. There have been several reports that have clarified that the issues being raised by the BJP and other parties are misplaced. The reason the opposition has united against the government on this issue is to force a shutdown of Parliament. Today’s TOI mentions that the DMK (when part of the NDA) had floated a paper seeking 100% FDI in multi-brand retail. Today, it is seeking a roll-back of the proposed 51%. Before this issue cropped up, opposition parties were daring the government with a vote on price rise and black money. Frankly, as far as the opposition is concerned, it doesn’t matter what the issue is. The objective of the opposition is clear. It wants to give a stomping kick to the government’s knees; rendering it ineffective to run or even walk. That’s the trap they laid for the Congress a long time back. If the Congress reverses its decision, it will be walking into this trap.

Let’s play this out a bit. What happens if the government rolls back its decision? It will be a clear indication that it is unsure of its numbers and cannot muster support to pass important legislation. It might as well forget the legislation to enhance FDI in the insurance sector or introduce it in the pension sector. Those bills can be taken off from the agenda. Equally, the new rules of nuclear liability that the Executive (the government) has enacted won’t clear Parliament. Important pieces of legislation like the GST can well be taken off for the entire term of this House. The Land Acquisition Bill also has its opponents, and that can be removed as well. After having been an important part of the Standing Committee on Lokpal, the BJP will no doubt find some differences of opinion and block the passage of that bill too. In short, the government will not be able to function at all.

Basically, if the Congress rolls back the FDI decision now, it will be a dead government. It won’t be allowed to take executive decisions; it won’t be allowed to pass new legislation. It will be a government living on a ventilator. What’s wrong with the politicians in the Congress? Don’t they see the writing on the wall? I know many Congressmen will be thinking that it is better to fly to safety now and fight another day. But the impact of this blow will be so crippling that it will not survive to fight another day.

The likes of Mamata Banerjee will set the agenda for future discussions within UPA-2. There will of course be no more petrol price hikes; Mamata anyways doesn’t understand economics – how could she even know (or care) what the impact of not increasing petrol prices would be on the fiscal deficit? Now that she has absolute power in WB, she will feel that she has the upper hand in her relations with the Congress. When she wants a special package for WB, all she will need to is call Pranab Mukherjee. And dictate her terms.

That’s why the Congress should not roll back its decision. Instead, it must work hard on its allies. A little conceding ground here; a little pressure there should do the trick. The DMK is hardly in a position to exert pressure on the center. It’s only access to power is at the center. In its home state, Jayalalitha is leaving no stone unturned to arrest and prosecute DMK MPs. She is going to hurt Karunanidhi where it hurts the most – by breaking the cable distribution monopoly that the Marans (relatives of Karunanidhi) have enjoyed for decades. Recently, she’s won the Madras municipality away from the DMK, completing the rout at home. In such a situation, the DMK is literally at the mercy of the Congress. The Congress must call its bluff rightaway.

This is also the time for Sonia Gandhi to take charge of the matter and whip the party’s state units into shape. There is a much larger game being played here. For the sake of one assembly by-election in Kerala, the party there cannot be allowed to take an opposing stand. In the BJP, the strongly-pro-FDI Modi – sensing the opportunity – has closed ranks with his party leadership. Likewise, the Shiromani Akali Dal (SAD) strongly supports FDI in retail (and has said so), but has decided to support an adjournment motion in the House if the BJP brings it up. This is the time for allies to close ranks. The last place where there should be dissent coming from is within the party itself. If the DMK is pressured into withdrawing its opposition, the tide would turn; Mamata would come under pressure. While she can pull the strings at the center, it doesn’t harm her interests to be in the good books of the central government. She must also worry that her reputation as an ally is on the blocks – she had earlier ditched the NDA. Who’s going to trust her in the future?

Now’s also the time for the Congress to get into alliance discussions with the Samajwadi Party. In all likelihood, the SP is not going to be able to win the elections in UP on its own. Neither is the Congress. By combining their forces, they may be able to give the BSP a run for its money. Instead of forging an alliance after the elections, they may want to do so right now. Is this an acceptable compromise for the Congress to make? It has been eyeing UP for a very long time. It believes that if it can put UP in order – by 2014 if not right now – it can hope to form its own government at the center yet again. It’s certainly not going to be an easy decision for the Congress to make. The point that the Congress may want to remember is that it’s only in UP that the party has this opportunity to align with a local party as it is not in the “top 2”. It cannot ally with the Biju Janata Dal (BJD) in Orissa, because it’s the main opponent of the BJD. It cannot ally with the JD(S) in Karnataka for the same reason. There is one other state where it has very little strength. That’s Bihar, but the JD (U) is a strong ally of the BJP – so that’s not possible at all.

The SP has come to the rescue of the Congress in the past as well. The Indo-US nuclear deal was passed by Parliament because of the support that the party extended. Even today, it supports the Congress from the outside. Can this relationship be made stronger?

Either the Congress builds an alliance with SP or it chooses to run a weak government. The Congress is in a difficult position. The only other alternative is for it to call for early general elections – but that would be stupid – at least at this point in time. Team Anna – allied as it is with the BJP/RSS – is threatening to start its agitation all over again. As expected, it is blaming the Congress alone for the “weak” Lokpal Bill – even though the all-party Standing Committee has drafted the new bill. Calling for mid-term elections would be political hara-kiri.

The Congress has to choose between an SP-alliance (sacrificing UP) and running a weak government (and losing the General Elections in 2014). It’s not an easy choice. Fight hard now; or withdraw to fight another day. That’s what the party needs to decide.

My own view is that no government should exist if it cannot hold its head high. A weak government gets maligned at every turn. It is not allowed to take decisions; but is held responsible for the logjam. It loses its political clout with every passing day. Continuing for the sake of sticking to power (what power?) is what gives politicians and political parties a bad name. The PM is a noted economist. He has to stick his neck out and explain to the people why the FDI decision is right. This is not for Anand Sharma to do. It is for the PM to do. If the PM talks to the nation, the people are bound to take note. He can brandish statistics; reports; expert comments; share experiences of countries like India. He has to take the bull by the horn. This is the time for the PM to do what he did during the Indo-US deal debate. And then he has to dare the opposition to a fight…..and be prepared to go to the people with the head held high if he loses.

Before I end, it’s worth spending a couple of minutes on the state of affairs in our country is at present. I have complained about this in the past; politics has started to rule every part of our life now. There was a period of time between 1991 and 2009 – when both the BJP and the Congress largely supported reforms. People believed that irrespective of who was ruling at the center, the economic policy of the country would remain on-course. That brought us rapid economic growth. That’s fundamentally changed now. What does the BJP expect if it gets to rule next and the Congress is in the opposition? That the Congress will forgive and forget; and let BJP have a free run? That won’t happen. The Congress will pay the BJP back in the same coin. And if that happens, we will see the next 20 years turn into a period of complete instability. India and Italy are similar in more ways that one. Both are the third biggest economies in their respective continents. Both are run by Italians (haha – that’s a joke!). Let us now not become similar in terms of the political instability also (Italy has had 12 Presidents in the last 20 years). Political instability led to Italy’s ruin. We don’t want the same to happen to India.

The real truth is that Congress has no option but to fight. It cannot surrender. It cannot become a weak government. Also, the India story will end if the Congress pulls back its FDI decision. Equally, the Congress story will end if India pulls back the FDI decision. For the sake of India, the government must not surrender.…..

Rolling back FDI in multi-brand retail will only worsen matters for the Congress….

If the Congress rolls back the FDI decision, it will find itself in even more trouble than it does right now. Rolling back the decision may give it a few days relief; but the roll-back will make the party into a weakling that anyone could push over. In politics, daring the opposition is as important a part of the game as rolling back and fighting another day. The Congress needs to evaluate carefully the merits and demerits of both before deciding on anything.

The Congress must remember that the opposition to multi-brand retail FDI is purely political. It’s not based on any ideology or logic. There have been several reports that have clarified that the issues being raised by the BJP and other parties are misplaced. The reason the opposition has united against the government on this issue is to force a shutdown of Parliament. Today’s TOI mentions that the DMK (when part of the NDA) had floated a paper seeking 100% FDI in multi-brand retail. Today, it is seeking a roll-back of the proposed 51%. Before this issue cropped up, opposition parties were daring the government with a vote on price rise and black money. Frankly, as far as the opposition is concerned, it doesn’t matter what the issue is. The objective of the opposition is clear. It wants to give a stomping kick to the government’s knees; rendering it ineffective to run or even walk. That’s the trap they laid for the Congress a long time back. If the Congress reverses its decision, it will be walking into this trap.

Let’s play this out a bit. What happens if the government rolls back its decision? It will be a clear indication that it is unsure of its numbers and cannot muster support to pass important legislation. It might as well forget the legislation to enhance FDI in the insurance sector or introduce it in the pension sector. Those bills can be taken off from the agenda. Equally, the new rules of nuclear liability that the Executive (the government) has enacted won’t clear Parliament. Important pieces of legislation like the GST can well be taken off for the entire term of this House. The Land Acquisition Bill also has its opponents, and that can be removed as well. After having been an important part of the Standing Committee on Lokpal, the BJP will no doubt find some differences of opinion and block the passage of that bill too. In short, the government will not be able to function at all.

Basically, if the Congress rolls back the FDI decision now, it will be a dead government. It won’t be allowed to take executive decisions; it won’t be allowed to pass new legislation. It will be a government living on a ventilator. What’s wrong with the politicians in the Congress? Don’t they see the writing on the wall? I know many Congressmen will be thinking that it is better to fly to safety now and fight another day. But the impact of this blow will be so crippling that it will not survive to fight another day.

The likes of Mamata Banerjee will set the agenda for future discussions within UPA-2. There will of course be no more petrol price hikes; Mamata anyways doesn’t understand economics – how could she even know (or care) what the impact of not increasing petrol prices would be on the fiscal deficit? Now that she has absolute power in WB, she will feel that she has the upper hand in her relations with the Congress. When she wants a special package for WB, all she will need to is call Pranab Mukherjee. And dictate her terms.

That’s why the Congress should not roll back its decision. Instead, it must work hard on its allies. A little conceding ground here; a little pressure there should do the trick. The DMK is hardly in a position to exert pressure on the center. It’s only access to power is at the center. In its home state, Jayalalitha is leaving no stone unturned to arrest and prosecute DMK MPs. She is going to hurt Karunanidhi where it hurts the most – by breaking the cable distribution monopoly that the Marans (relatives of Karunanidhi) have enjoyed for decades. Recently, she’s won the Madras municipality away from the DMK, completing the rout at home. In such a situation, the DMK is literally at the mercy of the Congress. The Congress must call its bluff rightaway.

This is also the time for Sonia Gandhi to take charge of the matter and whip the party’s state units into shape. There is a much larger game being played here. For the sake of one assembly by-election in Kerala, the party there cannot be allowed to take an opposing stand. In the BJP, the strongly-pro-FDI Modi – sensing the opportunity – has closed ranks with his party leadership. Likewise, the Shiromani Akali Dal (SAD) strongly supports FDI in retail (and has said so), but has decided to support an adjournment motion in the House if the BJP brings it up. This is the time for allies to close ranks. The last place where there should be dissent coming from is within the party itself. If the DMK is pressured into withdrawing its opposition, the tide would turn; Mamata would come under pressure. While she can pull the strings at the center, it doesn’t harm her interests to be in the good books of the central government. She must also worry that her reputation as an ally is on the blocks – she had earlier ditched the NDA. Who’s going to trust her in the future?

Now’s also the time for the Congress to get into alliance discussions with the Samajwadi Party. In all likelihood, the SP is not going to be able to win the elections in UP on its own. Neither is the Congress. By combining their forces, they may be able to give the BSP a run for its money. Instead of forging an alliance after the elections, they may want to do so right now. Is this an acceptable compromise for the Congress to make? It has been eyeing UP for a very long time. It believes that if it can put UP in order – by 2014 if not right now – it can hope to form its own government at the center yet again. It’s certainly not going to be an easy decision for the Congress to make. The point that the Congress may want to remember is that it’s only in UP that the party has this opportunity to align with a local party as it is not in the “top 2”. It cannot ally with the Biju Janata Dal (BJD) in Orissa, because it’s the main opponent of the BJD. It cannot ally with the JD(S) in Karnataka for the same reason. There is one other state where it has very little strength. That’s Bihar, but the JD (U) is a strong ally of the BJP – so that’s not possible at all.

The SP has come to the rescue of the Congress in the past as well. The Indo-US nuclear deal was passed by Parliament because of the support that the party extended. Even today, it supports the Congress from the outside. Can this relationship be made stronger?

Either the Congress builds an alliance with SP or it chooses to run a weak government. The Congress is in a difficult position. The only other alternative is for it to call for early general elections – but that would be stupid – at least at this point in time. Team Anna – allied as it is with the BJP/RSS – is threatening to start its agitation all over again. As expected, it is blaming the Congress alone for the “weak” Lokpal Bill – even though the all-party Standing Committee has drafted the new bill. Calling for mid-term elections would be political hara-kiri.

The Congress has to choose between an SP-alliance (sacrificing UP) and running a weak government (and losing the General Elections in 2014). It’s not an easy choice. Fight hard now; or withdraw to fight another day. That’s what the party needs to decide.

My own view is that no government should exist if it cannot hold its head high. A weak government gets maligned at every turn. It is not allowed to take decisions; but is held responsible for the logjam. It loses its political clout with every passing day. Continuing for the sake of sticking to power (what power?) is what gives politicians and political parties a bad name. The PM is a noted economist. He has to stick his neck out and explain to the people why the FDI decision is right. This is not for Anand Sharma to do. It is for the PM to do. If the PM talks to the nation, the people are bound to take note. He can brandish statistics; reports; expert comments; share experiences of countries like India. He has to take the bull by the horn. This is the time for the PM to do what he did during the Indo-US deal debate. And then he has to dare the opposition to a fight…..and be prepared to go to the people with the head held high if he loses.

Before I end, it’s worth spending a couple of minutes on the state of affairs in our country is at present. I have complained about this in the past; politics has started to rule every part of our life now. There was a period of time between 1991 and 2009 – when both the BJP and the Congress largely supported reforms. People believed that irrespective of who was ruling at the center, the economic policy of the country would remain on-course. That brought us rapid economic growth. That’s fundamentally changed now. What does the BJP expect if it gets to rule next and the Congress is in the opposition? That the Congress will forgive and forget; and let BJP have a free run? That won’t happen. The Congress will pay the BJP back in the same coin. And if that happens, we will see the next 20 years turn into a period of complete instability. India and Italy are similar in more ways that one. Both are the third biggest economies in their respective continents. Both are run by Italians (haha – that’s a joke!). Let us now not become similar in terms of the political instability also (Italy has had 12 Presidents in the last 20 years). Political instability led to Italy’s ruin. We don’t want the same to happen to India.

The real truth is that Congress has no option but to fight. It cannot surrender. It cannot become a weak government. Also, the India story will end if the Congress pulls back its FDI decision. Equally, the Congress story will end if India pulls back the FDI decision. For the sake of India, the government must not surrender.…..

Monday, November 28, 2011

Policy paralysis is the opposition’s only objective….that’s why we need new rules for Parliament….

Policy making happens either in Parliament. Or through executive decisions. By blocking Parliament, and by objecting to Executive decisions, the opposition – mainly the BJP – wants to perpetuate the sense of policy freeze that has dogged the country. By now, its a well known fact – political opportunism of the BJP is making it conduct itself this way. If the policy freeze continues, growth slows down and we fail to respond to the global crisis….. This is precisely what the BJP thinks will get it to power. Clearly now is the time to look at new rules of engagement within the Indian Parliament….

Just look at the tragedy that the Indian Parliament has become. A full week has gone by. In any case, it’s a short session of only 3 weeks duration. One third of the time has already been wasted and not one piece of business has got conducted. What kind of political rubbish is this? What’s the point in discussing issues in debates on TV, when the same issues cannot be discussed in Parliament? For one reason or the other, the opposition wants to block the Parliament. These days, a new trend has emerged. It doesn’t matter what the strength of the party is. Even a few MPs can block the working of the Parliament – there will always be a few other trouble makers who will extend support in the form of shouting slogans. If its not the opposition MPs making the trouble, there will always be a few disgruntled ruling coalition MPs who’ll do the job. Either way, Parliament stops functioning and the legislative business of the country comes to a grinding halt.

I think we need to change the way Parliament works. The first suggestion (no….make it demand) I have is that if the session is supposed to be for 21 days, then the session will not end without 21 days of work being conducted. If this means that the session has to be extended, so be it. In this present case particularly – where a big backlog of bills exists, it would be a particularly wise thing to do to extend the session by at least 2 weeks.

The second change I demand is that the Parliament should not be allowed to be adjourned for more than 2 days at a stretch. For whatever reason, if there is a logjam in Parliament for two continous days, the Parliament has to function for the next 4 days of the week. This must be mandatory and those who don’t agree with this should stay out. The rest of the MPs can continue with the business. This will ensure that at least 2/3rd (4 days out of 6) of the work gets done.

The third change is that Marshals – a specific provision for using them exists – must be used if any party or group of MPs, belonging either to the ruling party or the opposition, stops Parliament from functioning. Currently, there is some sort of a taboo associated with the usage of Marshals. One can imagine thrown-out MPs rushing out of Parliament and straight into TV studios to complain about the murder of democracy. When Parliament is stalled by MPs, is that not murder of democracy?

The BJP is the most irresponsible of all parties. Even before the winter session had commenced, there were news that the party was looking for ways to stall Parliament. It was also aided to some extent by the Left – but to be fair to the Left, theirs is an ideological political struggle. Besides, they never personalized the working of the Parliament by boycotting Chidambaram. When the BJP was ruling at the Center, did it not bring out any Executive decisions without conferring with Parliament? Surjit Bhalla mentioned the same point on TV last night. The Times of India today mentions that the BJP was supportive of a 26% FDI in multi-brand retail till as recently as 2009. In fact, its 2004 election manifesto expressly mentioned this. It fought the last elections on the basis of the 2009 manifesto. It was defeated, right? Then should it not concede the right to rule to the Congress till 2014? Why has it been raising one issue after another – and all at the same time – as if the skies would come crashing down – if they were not discussed in this very session? Why does every discussion have to be followed up with a vote? Why does every party have to seek an adjournment motion – knowing fully well that rather than adjourning the normal business of the house, the motion ends up adjourning the house for the full day itself?

Quite clearly, the opposition won’t let Parliament work. It won’t let the government take Executive decisions. And so as to deflect the nation’s blame, it will attribute the blockade of Parliament to some imaginary government scheme. Apparently, the Congress wants Parliament to stall, because they don’t want to introduce the Lokpal. Wow. Have we totally bid goodbye to logic and sense in politics? Since media doesn’t take a stand against such inane logic, it makes me wonder if media has become a mere mouthpiece of politicians to be used to spread utter nonsense. It is under pressure from Anna that the Standing Committee has been meeting regularly. How many Standing Committees meet this frequently? If the Congress was not interested in bringing out the Lokpal Bill, it could have slowed down the working of the Standing Committee under some excuse or the other. Politicians are masters at delaying things – this should have been an easy task for them.

Maybe Anna should go on a fast today. Not on Dec 11th. If he does that today, he may not need to do it at the end of the session. Maybe the threat of his fast will make politicians conduct themselves better and let Parliament function. But Anna also likes to be coy about the opposition. Not once has he complained that Parliamentarians are stalling Parliament. Not once has he criticized the opposition and small ruling coalition parties for blocking Parliament. Not once did he come out in defence of Justice Santosh Hegde in Karnataka – against whose report the BJP has been steadily chipping away. The State BJP President wants to throw out the institution of the Lok Ayukta itself – and yet Anna did not raise his voice. And then Anna complains that he is considered the BJP’s “mukhota”? If Anna wants the Lokpal bill passed, he must demand that Parliament work first.

As a citizen of this country, I demand that the rules of Parliament be changed to allow it to function. I demand that Parliamentary functioning be made mandatory. I demand that parties which stop Parliament from working be blacklisted for the remaining period of the session. If erring football players can be shown the Yellow card, why can’t an independent referee (maybe the CJI or maybe a newly created Parliamentary ombudsman?) show the erring MPs the yellow card?

The policy logjam is part of the opposition’s strategy. To discredit the government and to snatch the rights to rule the country from the government by these means. Sometimes, they are helped by some members of the ruling coalition also. There is zero concern for the nation. There is zero concern for the problems of the poor. There is zero concern for the economy. All of that concern is to be shown only on TV debates. When it comes to delivering in Parliament, opposition MPs prefer to wring their hands in intentional and strategic purposelessness.

The real truth is that the current winter session needs to be extended by 2 weeks. There will be no loss if MPs stay back in Delhi a little longer. Their constituencies can live without them for that much time. There is also an urgent need for changing the rules of Parliament – ensuring that the working cannot be disrupted beyond a point. And the days that are wasted need to be covered up by extending the session. There cannot be any relenting in this……

Sunday, November 27, 2011

The interesting story of an aam aadmi in Delhi….

I was at the Delhi half marathon yesterday and when returning back to the airport, I used the services of an ordinary local black-and-yellow taxi – what used to be called DLY in the old Delhi parlance. Many interesting things came up in the 30 minute long ride to the airport! Many of which reveal the real story about economic progress in the country.

When I sat in the cab, my fears of the Delhi taxi system made me clarify what the “fixed rate” would be for the drop to the airport. “Rs 350”, the driver said. “I thought it was Rs 200” I said. “Arre saab…..those days are long gone. Now it’s a new airport; it’s farther away; the prices of petrol have risen so much” etc etc. Rs 350 it was going to be. But that started off an interesting conversation.

Dhani Ram (an apt name as you will realize by the end of this post!) was from Himachal. He had many complaints. “We used to get apples at Rs 20 a kg. Now they cost Rs 120 a kg. Tomatoes used to sell for Rs 10 for 1.5 kgs and the vendors would almost beg you to buy. Now they cost Rs 40 a kg and no one keeps two hoots on whether you buy or not. Things have become very costly”. “But your income has also gone up” I countered. “That’s true…..but it’s difficult to feed the family” he said. So I asked him about how many family members he had. It turns out he had one son (10th standard), one daughter (9th standard), a mother and his wife. So five mouths to feed and he was the only bread earner. He had been driving a taxi in Delhi for the last 24 years. He can be described as a “classic aam aadmi”. One who slogs to feed his family. An urban aam aadmi, but an aam aadmi nonetheless.

As the talk progressed, I asked him if the taxi was his. “No. I have to pay Rs 450 a day to the thekedar. I also have to fill petrol on my own. After that, whatever I make is mine. If I don’t have any business on a particular day, all the loss is mine”. Tough I thought. So I asked him how often that happens. “Not very often” he said and then went on to describe how he took good care of his family. He put his kids in schools and forced them not to work but to study. He didn’t want to buy a new taxi – there would be too much burden. He had a “happy life” free from tension. He had a nice house in Himachal and his family had a lot of shaan there. He showed me a picture of his house on his mobile phone. And it was truly a fancy house. More like a bungalow with a fa├žade perhaps inspired from one of Ekta Kapoor’s shows on TV!

Very soon, the conversation took a different turn. Very soon, he was gushing about the consumer durables in his house. He had a TV, a refrigerator and a water cooler. He even had a second vehicle at home. He was happy his mother was able to watch TV all day long. He was thinking of putting his kids through a  “computer ka course” so as to get good jobs later. He wants his kids to learn English because that is needed in today’s world. “My life has been wasted…..I don’t want my kids’ life to also be wasted also”. He was clear his daughter would study as well. In a few years, I will have both my kids earning money for the family. Dhani Ram was also happy with the quality of Delhi roads, the new airport……When I asked him if the Delhi metro had affected his business, he responded loftily “The metro is always overcrowded. My taxi isn’t”. The optimism ended the conversation! His biggest complain with his business? The fact that there are many “radio cabs” being allowed now. They’re hurting his business. Competition affects everyone!

We saw a cop hold a driver near the airport. “These guys are the biggest thugs in Delhi. They are all corrupt. All they want is to extract money from drivers. They hide behind the corners so that they can nab drivers. If they wanted to control the traffic, they should be seen clearly so that no one breaks the rules”. It was pointless telling him that if rules were to be followed only when the cops were there, how would that be sustainable. I have found taxi drivers always talk about the cops. Recently in Kolkata, I asked my cabbie what the biggest change was with the coming of Mamata Banerjee. He said that the cops have become “more strict”. Now they work. That is why the traffic moves more smoothly! Also, they are less corrupt now! Mostly the cops get it left, right and center. Sometimes – very rarely – they come in for a bit of praise!

We didn’t discuss politics at all because I consider politics to be a private subject. I was more interested in knowing the life of the aam aadmi – an illiterate taxi driver who is representative of a lot of people in the underbelly of Delhi – and indeed any city. I do such conversations with many taxi drivers in many cities. Everywhere I find common strains in the conversations. The struggle with prices. The poor state of the roads (not in Delhi). The harassment of the cops. The high cost of fuels…..

For me, the highlight of the conversation was the hope about the future. Dhani Ram wants to get his kids educated. He wants them to learn English. He wants them to study computers. He has hope that they will not have to lead a life like his. That’s the big change from maybe 20 years back when Dhani Ram himself must be the strapping young man that his son is now. For him, the taxi option was perhaps the only option available. For his kids though, the world is starting to open up.

While he complains about the cost of food articles (mainly), he also realizes that his quality of life has improved very significantly in the last so many years. He can think of buying apples; I doubt if he could do that when they were costing Rs 20 a kg. He is able to feed his family in spite of the high cost of petrol and veggies. He is able to put his kids through school…..

Dhani Ram’s dependence on his mobile phone is the thing I keep writing about when discussing the 2G “revolution”. Yes I prefer to call it that rather than a scam. Had it not been for the cheap pricing, Dhani Ram wouldn’t have had the mobile phone in his hand. It’s the only way for him to source business. Take his mobile away and he would be transported back (almost) into the dingy past where people like him struggled to get business. The mobile phone is more than just a mobile phone. It’s a proud camera too! I didn’t ask him this, but I have a feeling that at least one other member of his family would be having a phone; so keeping in touch would not be a bother for him.

I found no anger or animosity in Dhani Ram. No bubbling-under frustration with the political system as I find amongst the middle class. He didn’t bring up the issue of politics, nor did I. But since it was a freewheeling discussion with both of us starting off new conversations, there was nothing that stopped him from raising the subject of politics. In my mind, this is proof that the aam aadmi is more concerned about his “rozi roti” than the politics in his country. If Dhani Ram could make more money; if his kids to get jobs; he wouldn’t care about the politics of Parliament, elections or even the protests.

The real truth is that Dhani Ram is a quintessential aam aadmi. He complains about the problems in his life when he first starts to speak. But deep within, he realizes that things are getting better. Things could be much better though. People like Dhani Ram want jobs and more money in their hands. Not for them the politics that is the staple of the middle class. Dhani Ram has hope…..and it is this hope that makes him live on….

Kiran Bedi in trouble once again…..

There is an old saying that there cannot be smoke without fire. In the case of Kiran Bedi, there is suddenly a lot of smoke all around her and her NGOs. Does this mean that there is a fire somewhere nearby?

Some months back, it was the Indian Express that carried a story alleging that Kiran Bedi charged her conference organizers business class fares but actually traveled economy. Even the economy tickets she bought from Air India were discounted to the extent of 75% – as she availed of the benefits that the government gave her as part of her Gallantry Awards entitlement. At that time, she had said that the conference organizers knew about what she was doing. When TOI did a check with a few organizers, they denied being aware of this. This time around, it’s a lawyer who has filed a complaint against the Kiran Bedi. Again, the nature of the accusation is similar to the one in the past – Kiran Bedi (it is alleged; not proved yet) has misappropriated donations made by foreign companies.

As expected, Kiran Bedi responded by tweeting about her innocence. But rather than giving an explanation, she played the “I am always under attack” card – again. This time she apparently tweeted “For me now nothing is a surprise” making it appear that she was the victim of another campaign of slander against her. But if there really wasn’t anything at all in the case, then why did the
Delhi Court
order the Delhi Police to file an FIR at all? Why did the court simply not throw out the complainant’s case?

That brings me to the point of abuse of power that Kiran Bedi has been exercising. Why was the Delhi Police averse to registering an FIR against her? Because she was their former boss? Because she still has friends in the organization? Or because she is a part of Team Anna – and any action the cops took against her would be seen as the Central government victimizing her? Now that it is the court that has ordered the filing of the FIR, the Central government can heave a sigh of relief!

The allegation against Bedi is serious. She apparently took a donation of Rs 50 lacs from Microsoft Corporation with the purpose of giving free computer training to children and families of BSF, CISF, ITBP and CRPF personnel, besides other state police organizations. Apparently, she cheated an organization called Vedanta Foundation and asked it to pay Rs 6000 per month per center to her two foundations on the grounds that she had arranged for land and electricity for the center. The allegation is that it was the police that organized the land and electricity; not Kiran Bedi. Apparently, Microsoft discontinued the donation to her NGO.

Of course, Kiran Bedi’s defence will again be that she has not done anything for herself. It is all for her NGOs! Even if this is for the NGO’s, is this the kind of moral conduct we expect from one of the most visible; the most loud; the most vitriolic and sarcastic member of Team Anna? Kiran Bedi of course has another excuse for all the charges against her. It appears that everyone is out to get her. First it was the media that was out to get her. Now it appears that it is the judiciary that is out to get her. In this respect, she is similar to many politicians. Politicians earlier used to claim the “foreign hand” for every problem that struck them. Even now, politicians always claim that it is the media that is out to get them. Remarkable similarity between the two, isn’t it?!

I wonder what Anna is going to do now. Is he going to ignore the charges against Kiran Bedi – all in the interest of not derailing the anti-corruption movement? Or is he going to say: Enough is enough and ask her to leave the team? He’s promised to reconstitute his team – but again that’s been more of an empty promise than actual action. Anna’s own credibility is under pressure – what with recent stories about his “Talibanisque” ways of treating people who drank liquor in his village and the ridiculous comment he made after Sharad Pawar was slapped by a goon. When Prashant Bhushan had been attacked by another goon, Anna didn’t comment the same way as he did when Sharad Pawar was slapped. Is this what we expect from a so called Gandhian?

Kiran Bedi should herself step down from Team Anna to avoid any more problems. That’s the only solution left for her now. Her continuation is an embarrassment for the movement itself. But will she? Unlikely. Here again, she’s like many politicians. Refusing to step down unless sacked by their parties.

The real truth is that Kiran Bedi’s credentials have been completely eroded. She thinks she is morality and honesty personified; instead she’s turning out to be just another ordinary citizen. One who has many skeletons in her cupboard. She throws stones at other’s glass houses; but she’s forgotten that she’s living in a glass house herself!

Friday, November 25, 2011

Multi-brand retail: Who gains, who loses…..

As expected, a political uproar has arisen over the government’s decision to allow up to 51% FDI in multi-brand retail. On the one hand, there are some UPA allies like the DMK and the TMC who are opposed to the government’s decision; on the other hand, the NDA’s ally, the Shiromani Akali Dal (SAD) has written a strong letter of support to the government. The usual cribbers – Left for ideological reasons and the BJP for opportunistic ones – were also out in full force yesterday. As expected, Parliament is expected to waste a few more days of the winter session on this subject.

Reforms are not easy under the best of circumstances. When the economic liberalization began under Narasimha Rao in 1991, it was not out of some strong urge to reform that the Congress had. We were pushed into it by the severe balance of payments crisis that loomed over us in those days. It took many years to dismantle the License Raj – and even in doing so, some areas were never reformed. For eg., Labor laws in India continue to remain stuck in some past era. There was much opposition even then to the liberalization process. Today, when we look back at the last 20 years, most people (without political biases!) would agree that liberalization has helped India scale up its economic performance. We have grown the economy some six and a half times in the last 20 years; taken 300 million people out of poverty; increased our forex reserves to nearly 300 billion dollars; and made India the second fastest growing major economy after China. There was very little support for reforms in 1991. But they delivered. There is very little support even now for reforms. But they too will deliver.

So who are likely to benefit from a rapid growth of organized retail?, In my view, there are three segments of people who will benefit. As the papers indicated yesterday, one segment is the farmers – who can expect to get a larger share of the price the end consumer pays. The TOI reported yesterday that farmers should get about 10-30% more than what they are getting now. The second segment that benefits is the very large segment of consumers. Prices of goods can be expected to drop by 5-10% as economies of scale and competition drive prices down. We have seen the impact of this already – even with a relatively modest presence of large format domestic stores. Pricing in Big Bazaar is cheaper for most items compared to the ordinary retail outlet. This is what drives people into the large format stores. The third segment to benefit would be educated middle-class urban youngsters who can expect to be absorbed in gainful employment in large numbers. If the IT revolution gave jobs to millions of English speaking urban youth, the retail revolution would do the same for the sons-of-the-soil youngsters (those who cannot speak fluent English). The Commerce and Industries minister, Anand Sharma says that as many as 10 million jobs can be expected to be created if modern retail picks up.

There are of course tremendous other gains from having a developed modern retail sector. Wastage of fresh produce is expected to come down by 30% or more. The back-end infrastructure including cold storage chains and transportation networks are expected to be modernized. As a friend and reader of my post (thanks Hiten! I couldn’t have put it better) yesterday pointed out in a comment: “Food Processing Industry will boom for next 10 years. SSI will rejuvenate and busines of becoming OEM for private labels will prosper. I am happy because, supply chain mngmt will come off age in our country. I am happy that heavy automotive industry will prosper. I am happy that these 52 towns n cities will expand their limits to accomodate these mega stores. I am very happy that our youth will get job that shall bring respect and individuality to their hard work. I am happy we shall finally understand the value of politeness and courtesy when these customers walk into the stores. We are going ahead with a cultural change, and that makes me immensely happy”.

Which are the segments that are going to lose out? The biggest segment is the segment called “intermediaries” – the chain of middlemen who buy from the farmers and pocket huge amounts of margins before they deliver the goods in the hands of the final consumers. The problem with the middlemen is that they haven’t added enough value to the food chain. Had they done so, many of our current problems of cold storage and rotting food items wouldn’t have arisen. In addition to the middlemen, there is a certain type of kirana stores who could lose out. Those who don’t modernize. Those who cannot improve their customer service. Those who prefer to charge high margins and keep prices high. These are the typical mid-scale kirana stores – with 200-1000 sq. ft of shop area located within prime residential colonies – who are going to be challenged. Even they can grow since the overall retail business is expected to grow rapidly in the next twenty years – provided they upgrade their facilities. The smallest retailers which make the bulk of our present retain network – cigarette and paan shops, corner stores which sell daily food items like milk and groceries, hardware shops, etc are not expected to lose at all. These are segments which provide the “last mile” connect in retail – and their place is protected.

Political parties that oppose multi-brand retail can be grouped into four types. First, there are some like the TMC who believe (wrongly) that large format stores will be harmful to the farmers. The truth – as pointed out above – is anything but. Farmers will get more remuneration in their hands. Then there are those like the DMK and JD(U) and others who believe that this will lead to more unemployment as neighborhood kirana shops shut down. As shown above, this is a theoretical possibility, but our experience till data has shown otherwise. As per an article in the online edition of The Economic Times dated June 15th, 2011: Since 2006, when most big retailers either entered the retail space or began expanding their network, sales in local kiranas have grown in the low single digits even less than the GDP growth rate, while modern trade has grown in strong double digits, though at a much lower base. For instance, sales at modern stores grew 34% in 2006 and 29.3% in 2010. Traditional stores could increase sales only 1.5% in 2006, but improved the growth rate to 6.2% last year. So Kirana stores haven’t lost revenues or haven’t shut down – only their rate of growth has slowed down. Even this, I believe is temporary as it takes a little while for them to adjust to the new realities. Kirana shops have tremendous advantages – their proximity to their customers; their personalized touch; the credit facilities they sometimes extend; the home deliveries they do etc are reasons why they continue to grow. The third type of opponents is the Left parties which fundamentally don’t like FDI – especially in the consumer sector. Frankly, I have no problem with their opposition, because their’s is an ideological opposition. If their ideology carried much weight, they wouldn’t find themselves in the pathetic political state they find themselves in right now. The last type of opponents is the BJP – a party whose core constituency is traders. The exact same mid-level traders who will be challenged by modern trade. The BJP ideologically supports FDI, but in this particular case, it is caught between a rock and a hard place.

On balance, there are more people who will benefit (consumers – more than 300 million; farmers – another few hundred millions and urban middle-class educated folks – maybe a few million) than lose (semi-organized mid-scale traders – a million on the outside). The BJP may want to ask itself whose side it prefers to be on – the hundreds of millions of consumers and farmers or the few million traders.

The real truth is that even sixty years after independence, we still suffer from a persecution complex. Persecution by the foreigner. The fear of the foreigner continues to haunt us. But I sometimes wonder if this is genuine fear; or just opportunistic politics…..

Thursday, November 24, 2011

Congress allows multi-brand FDI…..now what will the BJP do???!


The Congress finally took some decisive action. It finally gave an indication that it had the appetite for taking “bold” decisions. By opening up multi-brand FDI, it has shown that it can handle the opposition parties; it can also handle opposition from within its own allies. The move is bound to lift the sentiments in the business sector; hopefully this decision is indicative of a much larger resolve – to take other long-pending decisions and push itself forward and out of the pit.

But the politics around multi-brand retail has just started. The final decision about allowing the Walmarts and the Carrefours will remain with the state governments. So now the BJP will be tested. It was needlessly opposing the Congress’s proposal to allow multi-brand FDI. Now what will it do in its states? Will Modi not allow the global chains to open up in his state – a state that has perhaps the largest numbers of its citizens living in the western world – or atleast having relatives there? A state which has traditionally (since before Modi!) been pro-business. Will Modi disallow Walmart from entering even if it comes in with a plan entailing massive investments and job creation? Will there be no modern format stores in Bangalore – a city in which we saw the first “cash-and-carry” Metro store opening many years back when FDI was opened up in that format? Bangalore boasts of ambitions of being a global city – will its BJP government play petty politics and ruin the state’s reputation? My own view is that once the politics has died down, all BJP governments will all fall in line and allow – in fact, welcome – these stores in!

We have seen a lot of this kind of politics in center-state relations recently. When petrol prices are raised and the BJP rants against the central government, the Congress challenges the BJP states to lower their sales tax if they cared so much for the people. But the BJP governments do nothing! It is one thing to go to media and protest against something; totally different to convert such lip service to actual action.

There is a reason why the Congress has taken this so called bold action. Basically, the Congress acts only when it is pushed. In this case, the party realizes that passing new laws in Parliament is going to be difficult, if not impossible – what with the BJP and the Left in an intransigent mood. The Parliament was blocked for the 3rd day yesterday – largely because of the siege laid by the BJP and Left; 15% of the winter session has already been wasted. If new laws are not going to be passed by Parliament, at least the ones that can be passed by the Executive should be. Since politics in our country is likely to remain opportunistic in the future as well, I am happy that such contentious issues are proposed to be kept outside Parliament. Take the PFRDA bill for instance. Both the BJP and the Congress agree that FDI should be allowed; and that it should be presently kept at 26%. Knowing fully well that this limit may have to be raised in the future – and that Parliament may continue to remain a difficult way to get approvals – the Congress has decided to keep the FDI limit in the pension sector outside the PFRDA Act itself. The limits will be specified by the Executive; not the Legislature. If an increase is required, it can be taken without going to Parliament. For the same reasons, the BJP wants to have the FDI limit specified within the Act.

This is not a happy situation. When the government has to keep matters outside of Parliament, it cannot be a happy situation. But the politics of the times has led to such a situation. Take the Insurance sector for example. The present FDI limit is 26% and there is a serious need to enhance that to 51%. We need more insurance coverage in the country – and with every new policy issued, there is need for more capital to set aside by the insurance companies. Indian companies are not in a position to bring in the tens of billions of dollars that are required. Unfortunately, the FDI limit is specified in the Insurance Act itself and increasing the limit is proving to be impossible – given the opportunistic opposition of the BJP. Had the FDI limit not been specified inside the Insurance Act, but kept with the Executive, the limit would have been raised by now.

I have argued in the past that opening up FDI into multi-brand retail is a good move. Like many others, I used to believe earlier that the move could eat up jobs in the neighborhood kirana stores sector. But after talking to experts, I realized that this is not true. Multi-brand FDI must not be seen in isolation. It must be seen as a larger economic belief that the country needs more and more investments to be made. It would be silly of us to block investments – whether domestic or FDI. Of course, policies need to be carefully crafted so as not to cause harm to existing businesses.

In most cases, the fears of Indian businesses (and politicians) are unfounded. When the new economic policy was unveiled in 1991, most Indian businesses were worried that they would be edged out by international competition. Instead, what has happened is that local businesses have prospered. Those Indian businesses which were savvy have grown; those which could not modernize have floundered. A whole new breed of entrepreneurs has come about. In hindsight, the fears about opening up the economy were unfounded. I can still remember the days when politicians used to create panic about the impact that computerization would have on our economy! Today, we cannot live without computers. In fact, much of India’s economic revival has happened because India decided to embrace new technology. I think the same is going to happen with multi-brand FDI. There is an unnecessary worry about kirana shops shutting down. They won’t. Instead, they will modernize and cope. With the opening up of so many domestic large format stores – we have already seen a sea change in the way the neighborhood kirana stores operate. Their service levels have also improved; they give home deliveries; they offer credit if required; they have personal relations with their customers (none of this can be matched by the large format stores!).

Modern retail brings in a whole new kind of experience for consumers. Prices usually drop; there is more variety to choose from; there is time saving as most shopping can be finished off in one store; and the shopping experience is much more fun. It is this experience that has made millions of customers move at least part of their shopping budgets to the big stores. If one were to argue that this money could have stayed with the neighborhood shops – had large format stores not come in – that would be technically right. That money would indeed have been spent at the kirana store. But the point is that with the fast growth in retail spends that we are seeing in the country, even with so much money going away to the large format stores, the kirana stores are still growing. This is not an “either or” kind of decision; this is a case where both formats can grow side by side.

I am happy that riders have been put in the policy. The minimum investment specified is $100 million – but honestly this is a very small sum of money for global retail chains. That 50% of this investment will be in back-end is a good move – because it will help in infrastructure development. It remains to be seen whether the 50% condition is for the whole investment brought in – or only for the minimum 100 million specified. Also, sourcing a minimum 30% from small and medium enterprises will hopefully boost that sector. And lastly, allowing global stores to open up only in the 1 million plus is a good initial move. Over a period of time, I am sure this condition will be waived off. This is the way policy works in India – one step at a time!

The real truth is that we need many more reforms. I remember the Pepsi line: “Yeh Dil Maange More” in this context! I hope the government can continue down this path. My worry is that the BJP and the Left will use this policy announcement as another excuse to block Parliament. Let’s wait and see if that happens. If it does, we will know what the real agenda of the opposition is…..

Wednesday, November 23, 2011

Finally, Supreme Court intervenes to deliver justice in the 2G bail matter….

The Supreme Court intervened to deliver the long-delayed justice to the 2G scam accused. By granting bail – the Supreme Court has reinforced its long-practiced preference for “bail not jail”. Not only has the SC corrected the mistakes made by the High Court and the Trial Court, it has also criticized the basis on which the bail had been denied to the accused by these courts.

There are several points that the SC has made while delivering its bail order.

Firstly, it has said that it saw little merit in keeping the accused in jail even after the investigations were over and the chargesheets had been filed. This is precisely what I had written in my post of October 23rdHappy that charges have been framed…..but now bail must be given to the 2G accused”. Once the investigations are over and the chargesheet has been filed, there is no risk of the accused tampering with the evidence.

The second point that the SC made is that since the trial is not going to be over soon – the accused cannot be kept in the jail indefinitely. The SC has clearly admonished the HC and the Trial Court for their insensitivity to the fundamental rights of the accused. It has been compelled to reemphasize that every person is innocent unless proven guilty. Why this was not understood by the lower courts is something I cannot understand.

Thirdly, the SC has rejected the CBI’s argument that the accused could tamper with the evidence. Since investigations are over, the accused cannot tamper with the evidence. But they can surely influence the witnesses. My view is that while it is true that witnesses could be influenced, that by itself cannot be the reason to deny bail. What the courts must ensure is that witnesses are protected. Protecting witnesses is the state’s job – the fear of them being influenced cannot lead to indefinite incarceration of the accused – those who may eventually be found to be not guilty at all. This is what we saw in the Godhra riots cases also when some 90 Muslims who were arrested in the immediate aftermath of the train burning incident were acquitted after spending 9 years in jail – as undertrials. Even then I had raised the question: who is going to retur n these people their 9 years? (August 12th, 2011 – The Stench from Gujarat). This is also one reason why I am not in favor of draconian laws like MCOCA – in spite of the fact that the scourge of terrorism is increasing. I don’t trust the cops in doing a thorough investigation before nabbing the right guys. Under pressure, cops are known to arrest the first guys available. If innocent people are so arrested, and if bail is denied to them under MCOCA, then what kind of a country would we become? We saw the same thing in the Malegaon blasts case – where some Muslims were arrested under MCOCA and put in jail. It now appears that the terrorists may not have been the Muslims at all.

Fourthly, the SC has also argued that the accused cannot be denied bail just because the community’s sentiment is against them. I totally agree with this view. We are not a mobocracy. We are a proud democracy where the rule of law is followed. Public opinion is irrelevant in deciding the guilt of a person. In the case of Raja and Kani and all the others, the public may well have decided that they are guilty. But it’s entirely possible that upon review of evidence, the courts may find them to be innocent. Unfortunately, courts in India often look at public sentiments before pronouncing their judgments. What else could the reason be for the lower courts denying bail to these two?

And finally, the SC has rejected the argument made by the lower courts that the size of the scam was so big that it was fair to keep the accused in jail. The SC has categorically stated that the constitutional rights of the accused do not depend on the size of the charge against them. This is so obvious; I am surprised that the lower courts didn’t believe in this principle.

Likewise, it was a good thing for the Bangalore court to release Yeddy on bail – who knows if he is really guilty or not. Kalmadi also must be released. All the thousands of undertrials lodged in the jails should also be released. And Sify’s Raju should also have been released much earlier – he eventually spent more than two years before being given bail. We saw in the US how both Dominique Strauss Kahn (DSK) and Rajat Gupta were given immediate bails though the charges against them were very serious.

I do hope that the trial court and the higher courts will help separate the two intertwined issues in the 2G scam. One issue is the free spectrum that was given away. In my opinion, there is no scam there. It was a conscious government policy backed by the regulator TRAI’s recommendations. Besides, the same policy was framed and followed by the previous NDA regime. If giving spectrum bundled with the license for free was a scam, then giving diesel, kerosene and LPG subsidized is also a scam. The spectrum may have been valued anything (the so called “presumptive loss” figures that the hyper-active CAG has put out) – but that’s irrelevant. The government was not interested in making that money. Instead, they were interested in increasing the penetration of mobile phones and making it available to the lower strata of society. Had they not followed this policy – and had they charged lacs of crores as suggested by the CAG – the mobile phone penetration would never have reached 800 million. And vast sections of the poor would have remained bereft of the advantages of this tool. The second intertwined issue is the actual implementation of the policy where it appears that Raja may have played tricks. The court must focus its energies on finding out the truth about these tricks. I have also mentioned that there is no point in investigating Pramod Mahajan’s decision to increase the free spectrum from 4.4 to 6.2 Mhz (November 20th, 2011 - Another 2G chargesheet....another round of politics…..another round of misdirected investigations). It is important to investigate why he reduced the charges (as % of Adjusted Gross Revenues) of additional spectrum beyond 6.2 Mhz.

The Supreme Court must also question the lower courts for their wrong verdicts. It cannot simply treat these errors as a case of different courts having different interpretations. The SC had in its verdicts of 1978 clearly specified its preference for bail, not jail.

It’s now time to give bail to all the others accused including Raja – who I read in the papers has never even applied for bail. The rule of law should apply to everyone – whether one seeks it or not. There are no grounds left anymore for bail to be denied to them.

I also wish the judiciary would take upon itself the task of speeding up the trial process in this case and in all other cases as well. The country is keen to know the final verdict now…..not after ten or twenty years. Sukh Ram’s recent conviction – coming after so many yers as it did – carried no deterrence value for others who may want to try similar tricks. Had the judgment come many years back when the matter was still hot, it would have had that impact. Likewise, if Raja is guilty, let him be given exemplary punishment – quickly – so that no one else thinks he can get away lightly.

The real truth is that the SC has done the right thing by releasing the accused on bail. It should now make sure the lower courts follow the same principle with respect to the other accused ……

Tuesday, November 22, 2011

BJP diruptions waste 5% of winter session….

As expected – indeed as planned by the BJP – Parliament was adjourned yesterday without conducting any business. I have been writing repeatedly about this for the last few days. The opposition – mainly the BJP – is conducting itself in a manner that is disruptive and harmful to the national interest. Yet, it takes relief behind technicalities to justify its action.

For eg., the party claims that its boycott of Chidambaram is justified because the Congress had done the same thing to George Fernandes a decade back. Now while this argument is factually correct, what the party does not explain is that George Fernandes had been caught on camera by Tehelka journos. That is why he had been forced to resign. Here was a “proven” case in which even the BJP President Bangaru Laxman was fully involved (Of course, Fernandes was later acquitted of charges). What is the charge against Chidambaram? That he disagreed with Raja on auctions? That he wanted auctions, but chose not to insist on having them? The issue was eventually cleared by the cabinet – and in the cabinet, there are bound to be different viewpoints between different ministers. So Chidambaram was overruled by the PM. How does that make him “as involved as Raja”? But the BJP is happy to rely on the George Fernandes example. The BJP also argues that adjournment motions are a valid Parliamentary tool. Of course they are. But the unwritten law is that they should be exercised with responsibility. No one is denying the BJP the right to use the adjournment motion; but can they reassure us that they will not use it to stall Parliament?

Arun Jaitley made a statement last night that “It is the job of the government to make the house run smoothly”. Let’s understand this statement. What does it really mean? Does it mean that the government must agree with the BJP on points that it has a different opinion on? If so, then effectively, the BJP would be running the government. And even if the government does compromise with the BJP on some points, it is entirely possible that the Left and other parties may not agree with that compromise. For eg., on the boycotting of Chidambaram, the Left is opposed to the BJP. So should Chidambaram stop speaking in the House? So questions on internal security should be answered by the PM or others – but not by the Home Minister? Is this the will of all of the entire House or only of the BJP?

It is not the responsibility of the ruling party alone to run the House. Here’s why. The UPA is in a minority in the Rajya Sabha. Out of the 245 seats in the RS, the UPA has only 92-95or so (Congress – 70; NCP – 7; DMK – 7; TMC – 7; National Conference – 2; maybe a few independents and the NE parties). Even with doubtful support from outside (Independents – max 6; Samajwadi Party – 3; RJD – 4; INLD – 1; and Others – max 5), it barely reaches 110-115. It is still 8-13 short of a simple majority (123 seats). The BJP knows that the UPA is in a minority in the Rajya Sabha. This gives it strength to harass the government. If the BJP decides to block the house, no bill can be passed in the Rajya Sabha. That means that the business of governance stops. If this happens, is it the government’s fault? The BJP’s strategy of blocking Parliament is not coming from any principled opposition on some issues; it is coming from the knowledge that the government has no majority in the Rajya Sabha. The numbers of the ruling party in the Rajya Sabha are so inadequate that even a joint session of both houses will not yield a majority for the ruling side.

When the ruling government is not in a majority in both houses of Parliament, then how can it be singled out for running the houses? In a situation like this, it is important that all parties keep national interest at the forefront. Support or opposition to any bill must be based on well-known party positions. For eg., it was the BJP that introduced 51% FDI in single-brand retail when it was ruling at the center. It therefore supports FDI. Even otherwise, we know that the BJP supports a larger inflow of FDI. It must then support the government’s proposal to increase this limit to 100% and also allow 51% in multi-brand retail (It’s argument that this move will hurt the neighborhood kirana shop is specious – even large Indian stores will hurt them by the same logic, but the BJP is not opposing Kishore Biyani, Mukesh Ambani or Kumar Mangalam Birla’s retail plans). Likewise, on the Pension Funds Reform bill, the standing committee was headed by Yashwant Sinha of the BJP, and it recommended a 26% cap on FDI. The government may not have accepted all the recommendations of the committee – especially the one which says that the FDI cap must be specified within the Bill – but the BJP must support the bill in Parliament, because it must realize that ultimately the the government must have a little rule for governance – even if there are some disagreements with the opposition. Likewise, there would be other bills where the BJP would disagree, but the Left may agree. In that case, the Left must support the bill.This is the way a responsible must behave – especially when the two houses are split the way they are in India.

But the BJP knows the rules of Parliamentary conduct. I don’t need to remind them of the same. The BJP’s refusal to let Parliament function is based on its keenness to grab power at the earliest. If it has to discredit the government and achieve this goal, it has to do this. It is one thing for the government’s reputation to be tarnished because of its own failures; it is quite another for the BJP to do it by asserting its ability to block the business of Parliament. If it adopted this method, it should be called “dadagiri”. But then the BJP is not alone in adopting such methods. This is what happens everywhere. He who has the stick, wields it.

Look at what is happening in the US, where the House is in the hands of the Republicans and the Senate, the Democrats. The country is in deep trouble, but the lawmakers there are unable to pass vital fiscal measures which are needed to rejuvenate the economy. Both parties are behaving irresponsibly. The only difference between the US and India is that the two parties there have well known differences of opinion. Generally speaking, the Democrats prefer more taxes, a bigger role for government and more social programs for the people. The Republicans prefer lower taxes (leave money in the hands of the people), smaller government and small social programs. The logjam over the deficit reduction plan emerges from these differences which are very well known. In India, the BJP’s opposition to the functioning of Parliament is unfortunately based on opportunism – not principles. This is the vital difference. In the US – both parties have to make “compromises” that make them move away from their stated positions. In India, the BJP only has to “stick to its known position” to let the house function.

I am singling out the BJP for criticism because it alone is practicing the politics of opportunism. The Left is sticks to its principles – it opposes FDI in general; it is focused on the price rise issue; its stand on the Lokpal issue is well known; you have to give it to the Left – they are a principled party. But the BJP is a party of opportunism….

The real truth is that the BJP’s agenda will destroy the country. It has no excuse to stall Parliament except for its greed for power. The media is also realizing this. TV channels which tradionally support the BJP are now realizing that the party’s strategy. If the BJP decides to continue doing this – no one can stop them from doing so – the country will continue to remain in a policy freeze…..and as I have mentioned in the past, that suits the BJP.

Monday, November 21, 2011

Under pressure everywhere, BJP decides to boycott Chidambaram.

The BJP’s internal contradictions have been putting pressure on it. Firstly, the BJP has never been able to tame Modi and his reputation with the Muslims in his state. A reputation that has earned Modi three consecutive CM terms and the title of “Hindu Hriday samrat”. Secondly, the BJP has been unable to contain the corruption in its state governments, embarassing Advani on his yatra against it. Yeddy and Pokhriyal are CMs who have had to be sacked for corruption. And finally, its dreams of somehow grabbing power at the earliest are compelling it to somehow….somehow….stall Parliament. Chidambaram is just a handy tool to achieve this – the ex-Finance Minister being under attack for several reasons.

There are at least three reasons why the BJP has zeroed in on Chidambaram. It all started with Chidambaram supporting the probe for Hindu terror elements in the Malegaon blasts case. That upset the BJP to no end. After all, the only core ideology of the BJP is Hindutva and Hindu appeasement – why the majority community needs appeasement is something I cannot understand. Second, Chidambaram’s office is only a door away from the PM’s. If they could get Chidambaram to resign, then that would help them get to the PM. The BJP would then use the convoluted logic that “If Chidambaram resigned, he must have been guilty” just like they now say “If Raja is in jail, he must have done something wrong”. Excuse me, but Raja has not been proven guilty yet (though he surely looks like being so). The party is happy to forget (and the Congress has been coy to accept) that the decision to continue the policy of giving spectrum free (a policy started by the BJP itself) was a cabinet decision. Not Chidambaram’s. Chidambaram may have wanted spectrum to be auctioned (since as FM, he would be interested in raising revenues), but Raja wanted it to be given free. The cabinet must have discussed it and eventually the PM must have overruled Chidambaram – getting comfort from the TRAI’s recommendations not to auction (Governments don’t usually like to go against regulators for fear of being accused of corruption or politicking). If the BJP can get to Chidambaram, they can then get to the PM. It’s like a game of chess – you get the King and the game ends! And lastly, has anyone noticed the growing affinity between Jayalalitha (AIADMK) and the BJP? She sends emissaries to Modi’s sadbhavna fast; her party members attend BJP functions etc? Jaya’s war with Chidambaram is an old one – she having even challenged his 2009 election. Clearly, BJP is happy to keep Jaya in good humor.

These days, the BJP’s actions are driven by its need to deflect attention away from other developments. Yesterday was a particularly bad day for the party – with the SIT in Gujarat concluding that the Gujarat cops in 2004 brutally murdered Ishrat Jehan and others. Not only was this a case of a fake encounter, it was also a case of blatant lying by the police. The SIT has concluded that the actual murder took place a few days earlier than the day when their bodies were found. Even the place of the murder was different from the place where the bodies were found. But very few people are surprised by this finding – earlier the Justice Tamang report had also mentioned something similar. Also, there have been several such cases since Modi has taken over – the Sohrabuddin case springing to memory instantly. How a “good administrator” like Modi let the Gujarat cops run amock needs an explanation from him. The findings yesterday were a stunning blow to Modi – and by extension to the BJP itself. The party had to deflect attention. Boycotting Chidambaram…..and maybe Parliament itself…..was a sure way to do that.

If the BJP blocks Parliament, it will be proved that it cares two hoots for the country. Every commentator on TV and in press has said that the short winter session of Parliament must be allowed to function with 100% efficiency. There are 31 bills to be passed, including the crucial Lokpal Bill. The economy is suffering – largely from a perception that the government has gone into a policy freeze. If the Lokpal Bill is passed, it is likely that the Congress will get out of its mess. That would help improve the business sentiment and that could give a fillip to economic growth. This obviously does not serve the BJP’s purpose. The BJP’s biggest nightmare has to be that the Lokpal issue gets sorted out as early as in this winter session. It would suit them a lot more if the issue dragged on till 2014. No wonder then that the BJP wants the pall of gloom to continue – and the Parliamentary working to be blocked.

Politics is fine. After all, the BJP is a political party. It’s bound to take advantage of the goof ups of the Congress (and there have been quite a few). But there has to be a limit to politics. By blocking Parliament, the BJP is increasingly being seen as a party that cares less for the people and more for its desire for power. Why, it already has 4-5 “prime” PM candidates waiting in the wings! The BJP is willing to put the nation’s interests behind its own. Boycotting an MP is not a new technique – apparently the Congress had also done the same in the past with George Fernandes. So the BJP is perfectly right in returning the favor. But then let it be known – the BJP is not a party with a difference. It’s just another dyed-in-the-wool party – no different from the Congress or any other one for that matter. The nation comes last. Let the party not fool anyone by its “Bharat mata ki jay” battle cry after every public speech. There is no concern for “Bharat mata” – Bharat can wait. The battle will now surely be fought politically and unfortunately, the logjam will continue.

As people of this country, we should be prepared for another wasted Parliamentary session. What Anna Hazare will do if the Lokpal Bill is not passed – in a typical bull-in-a-China-shop fashion – is worrying. He’s already said that it’s the Congress’s job to pass the Lokpal bill. That’s a pretty naive position to take. If Anna wants to dispel doubts about being close to the BJP, he should mount pressure on the BJP to have at least the Lokpal bill discussed and passed. But I am not sure Anna will do that. Instead, I feel Anna will prefer another fast – taking the country into another extended period of despair.

The real truth is that India’s bright future is already in tatters. We should soon prepare ourselves to return to the days of 5% growth. If that happens, it wouldn’t matter who rules the country. The poor will remain poor. The politicians will continue to play petty games. And the country – far from achieving its rightful place in the sun – will continue to lag behind. God save India…..