Thursday, May 31, 2012

The shocking GDP numbers can actually be a blessing….

When the GDP growth rate numbers came in yesterday, my first thought was that they would send shock waves throughout the financial markets. The BSE and NSE would crash. There would be anguished faces and worried looks amongst investors and industrialists. The trade bodies would come out holding their heads in their hands. The opposition’s knives would be out yet again. All that did happen, but in a rather muted manner.I was at an investors meet yesterday when the news came out, and was rather surprised when many (in fact, most) investors actually felt good that the GDP growth rates had come so low. Why?

Because they believed that unless things came to such a pass, the government would simply not react. It would continue to remain in deep freeze. It would continue blaming the Euro-zone crisis absolving itself of its responsibility. Some even felt that it would have been better if the GDP growth rate had gone further down to 4% and forex reserves were again down to just 2 weeks of imports. Only a crisis of this proportion would wake the government out of its stupor, so that a new set of reforms could be started….reforms that would help India’s economy for the next ten years.

What these people were saying is indeed true. Nothing in India ever moves until it is absolutely forced to. Nothing is ever fixed until it is completely broken. Since the UPA delivered a good GDP growth in its first avatar, it felt that it didn’t have anything more to do with the economy. The economy had already moved into a high growth orbit and it would take care of itself. The Congress thought that it could now afford to go back to playing politics. That’s when the problem started. The role of the government in any economy – even in a capitalistic one like the US – is critical. If the government goes to sleep, the economy comes to a grinding halt.

The good thing about terrible economic situations is that it forces governments to muster the courage to take bold decisions. In this particular case, the government needs to worry less about the BJP; more about Mamata Banerjee. Talk reforms – especially those concerning foreign investment – and Mamata starts kicking and screaming. If the Congress cannot find a way to handle Mamata – or sidelining her – then it will find itself unable to move ahead with its economic agenda. And if it doesn’t move, it will surely lose power in 2014. If anything, recent poll results have shown that people have very little patience for non-performing governments. As long as the economy chugs along, they are willing to tolerate the muck of inter-party politics. But the moment the economy slows down, they are happy to kick out the ruling dispensation. The one that has the most to lose at present is the Congress. And it would only be helping itself if it did something good now.

What needs to be done at this stage? In large parts, it is the sentiment that has started to hurt. Industrialists, bankers, investors, MNCs and domestic entrepreneurs have stopped believing in the Indian government, even though they still believe in the India story. It is true that India is still amongst the fastest growing developing countries (since the others too have taken a hit), but these people believe that there is no reason that India should have fallen so low. In fact, many believe that this was the time for India to have gone past China. If we had had good economic policies, our GDP growth wouldn’t have slowed down so much. By taking the excuse that the entire world is in crisis, the government can perhaps fool itself, but it cannot fool the people.

Is it already too late to make amends? I don’t think so. The government needs to signal that it is in control. Yesterday’s decision to allow exploitation of two mine blocks in the forest areas of MP was received well by the markets. The petrol price increase was a very good move nothwithstanding the bandh organized by the NDA. The government now has to increase diesel, kerosene and LPG prices – even if by a very small amount. Railway fare increases – notwithstanding what the economically illiterate Mamata may think so – are long overdue. We need to stop talking about GAAR at a time when the world’s investors are already in a worried and risk-averse mood. There is absolutely no need to victimize Vodafone and scare away many other investors. It’s still not too late. The government can undo the damage of the recent past, and then start to move forward again. The Congress has to understand this – that it itself is the most important reason for the mess that we have on our hands today.

It’s also time also for the BJP to recognize its key role in India’s growth story. The one reason why the economy grew so consistently between 1991 and 2011 was that there was a broad consensus between the BJP and the Congress on economic policies. There were no major reversals of Congress’s policies when the BJP took charge in 1998-99; nor when the Congress took over again in 2004. Investors loved this continuity. The two major parties fought on political issues; but were largely united on economic ones. Somewhere along the line – around the 2009 elections – the BJP felt that supporting the Congress wasn’t helping its cause. It probably knew in 2008 itself that it was going to lose the 2009 elections. That’s why it needlessly opposed the Indo-US nuclear deal. That’s when it started playing opportunistic politics. Not supporting FDI in multi-brand retail (when it was itself in favor of this earlier) or the GST (again, first supporting it and then not doing so) or the amendments to the Banking, Insurance and Pension sector (allowing far lower levels of FDI or voting rights) or Land Reforms Bill (recommending that the government should play no role in acquiring land for private industry) and so many other economic bills has ensured that reforms don’t take place. It may suit the BJP politically – and it surely must be wringing its hands in glee to see the Congress’s discomfiture – but it puts the country behind several notches. And as Advani and Ram Jethmalani have been saying, it is not helping the BJP either.

It’s time now for the Congress to act. Not acting is no solution, since that is sure death. There is no point being afraid. Maybe the Congress should remember the Mountain dew tagline “Dar ke aage jeet hai”! Acting boldly can still keep it in the race for 2014. Working with SP and BSP in UP – sacrificing its own political interests there for the time – may be a good starting point. Taking one tough decision a week may be a good thing to do. Sitting with the BJP on bills that it broadly supports cannot be a bad thing to do. Reining in its urge to splurge should be a mandatory survival tactic. And most importantly – listening to Manmohan Singh’s gyaan on economics may be the perfect solution!

The real truth is that the next few quarters will decide what happens to India. It could well recover strongly as it usually does after hitting a miserable bottom. Or it could go further down in an inexorable descent. It’s time to stop playing politics; its time to stand united. Its time to say no to Anna and the CAG; its time to say yes to reforms. We can do it….provided we want to do it…..

Wednesday, May 30, 2012

Bharat Bandh? What Bharat Bandh? Bharat has been bandh for months….

How ironic that the opposition has to actually call a particular day the day for a Bharat Bandh. Hasn’t Bharat been bandh for quite a few months already now ever since the government went into a deep freeze? And the one move the government finally took to show that maybe Bharat was not bandh is being used as an excuse to bring bharat back to a bandh. How ironic and how irresponsible.

Those professing the bandh may want to keep the following things in mind.

1)    They should be clear about who they are calling the bandh against. The report in the Business Standard on 28th May shows how state governments are benefitting far more than the Central government through this price hike. While the Central government now gets some Rs 14.78 per liter as excise duties, the state governments get between Rs 12.2 and Rs 19.83 per liter VAT and sales taxes. If anything, the ire of the protesters should be directed at the state governments. Or at the most, towards both the center and the state. But if they did this, the protest would soon fizzle out. Why? Because the bandh is a purely political move; and if the political move has to be directed against its own government, I wonder if any BJP wonderkid would like to be seen on the street (at least in the BJP ruled states)!
2)    The poor of the country – that is some 70% of the population – is not supporting this bandh. The precise reason why petrol prices keep increasing and the other fuels keep getting spared (a policy I don’t agree with) is that a petrol price hike doesn’t even so much as touch the poor. The poor don’t use petrol. If instead of hiking petrol prices by Rs 8, the government had only hiked diesel prices by Rs 3-4, and LPG prices by Rs 50 a cylinder, it would have collected more monies. But that would have hurt the poor. So it will never do that. It will do everything devious possible – like increasing excise duties on diesel cars (a move that will hardly correct the scenario, but will make diesel cars more popular for all the wrong reasons) – to avoid increasing the prices of diesel and other such fuels. It will do that for political reasons. The core constituency of the Congress is the rural poor. And the petrol price hike is not bad news for the rural poor. They have been spared. And further, the additional resources so raised will be used for schemes that help them directly. The BJP’s core constituency is the urban middle-class, not the rural poor. Clearly, the Congress’s aam aadmi is different from the BJP’s!
3)    The Left parties may well want to stay out of this bandh, even though they would find it very difficult not to heed a bandh call given their genetic disposition towards bandhs! They’ve been unable to hold a bandh in Mamataland for a year now, so they must be itching to do what they do best somewhere else. But they may want to remember that they owe their existence (for all the wrong reasons though) to the rural poor. Their constituency is the same as the Congress’s. By backing a bandh which is so pro urban-middle class, they are surely yielding ground to the Congress in the rural areas.
4)    The BJP may well want to consider why it is in such a ruinous state all over, even as the ruling Congress is faring so poorly itself. Populism has become the BJP’s core tenet; and the BJP has proven that again in Goa where its new CM has not only waived off the extra VAT that his state government earns through the price hike, but also the entire VAT the state earned. Yes….the entire VAT. So now, petrol actually costs some Rs 11 cheaper in Goa than it did last week; selling now at some Rs 61 odd. Wow. What a great leader Paricker is proving to be! In reality, he is an unmitigated disaster. How will he manage his state’s finances if he foregoes the biggest source of income? But again, out of the pressures of populism, a small state like Goa is being used as a metaphor to prove that the BJP is pro-urbanites. Just like the small state of Uttarakhand had been used to show its support for Anna’s ideal Lok Ayukta law. Again, the skullduggery is apparent. For every Uttarakhand that implemented the ideal Lok Ayukta, there was a Gujarat which failed to appoint a Lok Ayukta for eight long years and an MP and Karnataka from where the stench of corruption travelled far and wide. For every Goa that plays Santa on petrol prices, there is a Gujarat, MP and Karnataka that have gleefully digested the extra gains, even while launching the Bharat Bandh!
5)    The bandh call shows yet again the Congress’s main failing. It’s not bad policies, but simply bad communication with the public. Ideally, the government should inform the public about the need for the price increase; and make the price increases and decreases more frequent and in line with price movements internationally. It should also seize the opportunity to launch a strong program for development of public transport. If the government increased prices by another 10 rupees a litre, but diverted the entire 10 rupees in a transparent way towards developing the metro or the BRTS or any other form of public transport, it would earn the support of the urban middle class. At the very minimum, the Congress should inform the public that their rivals in the states pocket as much, if not more, of the taxes as they have. But the Congress has failed to do any such thing. It has instead preferred to talk about the minority quota, or be drawn into the silly and stupid Coalgate allegations of a misdirected “naxalite-minded crazies” (Subramaniam Swamy – a soon-to-be-BJP-leader called it, not me!) movement of the so-obviously-non-Gandhian Anna. It needs to get its focus right, but then getting the focus right is proving to be an impossible task for the Congress!

The real truth is that the Bharat Bandh is a mockery of common sense. Bharat is already bandh. Maybe the protest should have been to restart Bharat. Maybe we need a Bharat-chalu or Bharat-shuru or something! But then, who cares whether Bharat is bandh or is shuru. The Congress has lost the skill to run the government; the BJP cares little for the country. Politics rules everything, and the economy matters little. The bandh it shall be!

Monday, May 28, 2012

When will Team Anna understand the difference between corruption and policy decisions….

Team Anna is at it again. It is now threatening to go on a fast unless the government institutes investigations against 16 of its ministers, including the PM. At the heart of this charge of corruption against the PM lies the basic mistake in the understanding of the difference between corruption and questionable (to some people) policy decisions. Given its political nature, I have little doubt that Team Anna is intentionally confusing the two.

The reason to include the PM in this list is ostensibly that he was responsible for the Coal Ministry and the CAG has recently alleged that the coal ministry’s policy of giving out mining rights favored private companies.The CAG’s allegations is to the extent of some Rs 2 lac crores (yet another sensationalized figure!). Firstly, this is a CAG estimate which rightly or wrongly (mostly wrongly!) is again commenting on government policy and very little on process violations. Secondly, the report needs to be discussed in the PAC and action taken there. Unfortunately, given the competitive nature of media in our country, every CAG report is brandished on the front pages of newspapers and on prime time TV. With due Parliamentary process not allowed to play itself out, the people of this country are led to premature conclusions about the veracity of these reports. But such is the nature of our democracy at this stage. Politicians are assumed corrupt until proven innocent. And even if they are proven innocent, the impact has already been made on the minds of the people.

The charge against the PM is that the policy of allocating mines was flawed and that private companies reportedly profited from this. Team Anna could have argued that this was a wrong policy and it would well have been within its rights to do so. But given its overall positioning (of being anti-Congress), it chose to attach the C word with this matter. How is this a case of corruption at all?

Certain basic elements must be for it to be a case of corruption. The one who took the decision should have personally and monetarily benefited from the decision he took. Like in the Yeddy episode (and now Jagan in AP; and Ashok Chavan in Maharashtra), there is a direct charge being made against the accused. Is it Team Anna’s point that the PM profited from the decisions of the Coal Ministry?

Either the person should have profited personally, or at the very least, his party should have been the beneficiary. Again, is it Team Anna’s charge that the private companies paid kickbacks to the Congress party? If this is their charge, do they have any prima facie evidence to at least build a preliminary case against these ministers? Or is it the mere possibility of corruption having existed which has prompted them to demand an investigation. If I feel that some Team Anna member is corrupt, can I demand an investigation and will any court allow it, or will it ask for some prima facie evidence? And what preliminary evidence is Team Anna relying on to make the accusation? That the CAG pointed out to flaws in the policy? If that’s their point, then its a political point and we should let the PAC decide. That some opposition politicians have made accusations on this matter in media? Well, politicians do this all the time, but is that enough to start an investigation? If investigations were started at every allegation made, there would be no possibility of any governance left. In any case, governance has come to a standstill thanks to the hamhanded Anna movement….

It appears Team Anna’s only motivation – and the reason why it is suspected of being a BJP front – is to bring the government to a standstill. It has succeeded to a very large extent. Most bureaucrats and politicians prefer not taking any decisions only because of the fear that a decision (right or wrong) may later be construed to be a corrupt one. Team Anna must take credit for this! Single handedly, they have done what the entire opposition couldn’t do combined. They have managed to put the government in a state of deep freeze. The BJP must be wringing its hands in glee; as the economy sputters and as inflation soars…..and as the Congress’s fortunes plummet. How can decision making happen when every decision is questioned for corruption? Is corruption the only yardstick to measure government policy with? Has anyone ever asked a question on why government projects almost always get delayed? Is there any premium ever attached to speed and quality of execution of government works?

The Coal gate scam is a non-starter. How to allocate national resources is policy preference. A particular political party may prefer not to auction national assets, but pass them on to the public and private sector for exploitation in a transparent and fair process? And another party may prefer to auction the same? In such a case, would the party that preferred auctions be declared to be non-corrupt and the other one corrupt? Take the 2G “scam” for instance. Is this a policy (and hence political) subject or one of corruption? If it is about corruption, what charges have been made so far against Raja or anyone else? Nothing except for a Rs 200 crore allegation linking Raja’s party DMK with DB Realty. There is no quid-pro-quo charges against Unitech (nothing proven yet in any case); the charges against Reliance, Loop Mobile and Essar are of violating telecom policy (owning more than 10% in another telco in a circle in which it is already present); not of bribing someone (but of course, there is an assumption that someone must have been bribed!). Again, one could argue whether spectrum should have been given free or not and that would have made for a good public discourse from which the country could have benefitted; but some people (most notably Team Anna) believe every policy matter that doesn’t agree with them is a case of corruption.

The real truth is that Team Anna is political; so one now understands why it does what it does. That’s the reason the movement died so suddenly. But the damage the movement has done to India is huge. It will take us a long time to recover from it. Nor has the Lokpal Act been passed (because of Team Anna’s political biases and inflexible and unrealistic attitude). Santosh Desai – after taking a very pro-Anna line right through the entire agitation – effectively argues in yesterday’s TOI  (“The Lokpal Deep Freeze”) that Team Anna was perhaps wrong. That change cannot come about by just activism (“change is too important to be left exclusively to activists. Without activists, no change can begin, but with only activism, lasting change might not come about”). That change comes in steps. And it needs patience. Now does that sound familiar to readers of this blog?!!

Wednesday, May 23, 2012

Finally a bold and good decision….

Raising petrol prices by Rs 7.5 per litre is a gutsy decision no one expected the UPA to take. I am happy that the Government has finally decided to move on this festering issue.

There are clearly many dimensions to this subject. For instance, the tough decision indicates a new political alignment taking place. A day back, Mulayam Singh Yadav was the special guest at a UPA celebratory dinner. I haven’t heard too many comments from him today except some muted chiding of the Congress. Was the price hike discussed with him? Given his secure position at home, has he decided to back the Congress for gains elsewhere? Is this why the Congress has managed to cock a snook at Mamata? She claims she was not consulted. But curiously, the queen of threats and tantrums has not threatened to pull her support out. Why? Does she also realize that with Mulayam cozying up to the Congress, her own venomous sting has become a little less potent? Very interesting……and if this analysis is correct, we could be in for the passage of some more “reforms”. I put reforms in quotes since a petrol price hike can hardly be called a reform at all. The real reforms are waiting in the wings – waiting for Mamata to give the green signal. Will these reforms finally take off with Mulayam’s tacit support?

The steep price hike also shows how inept the Congress has become at basic politics. All the experience of the past 50-60 years has come to mean nothing. Why would they increase prices so steeply and after so much time? Wouldn’t it be politically more palatable if the same Rs 7.5 was increased over three or fours steps spread over a year or so? And if a cut or two was thrown in in-between? But somehow this political gumption has been missing for some time now.

One other thing is clear. In its choice of tough options, the Congress is happy to junk the urban middle class. It will do all it can to protect its core constituency – the rural poor. The farmers, the unemployed, the poor, the underprivileged. Those are not hurt by a petrol price hike. Only the urban middle class – mainly those who ride two wheelers and the few who are still left driving petrol cars are hurt. But in the political numbers game, this is the most easily sacrificiable lot. In any case, this lot was never a great fan of the Congress – the rare exception being in 2009 when it backed Manmohan Singh for his gutsy Indo-US nuclear deal.

Will the UPA government decontrol diesel also? No way. That would really hurt. That would hurt the farm sector. That would hurt the transport sector. And that would hurt the inflation. So those of us who drive diesel vehicles can – with lots of shame no doubt – continue to live in a world of fake make-believe.

Is the petrol price hike justified? I think so. I think petrol prices will and should rise to Rs 100 – so that petrol consumption drops. That and that alone will give a fillip to public transport in this country. Today, no one wants to travel by public transport. The government also doesn’t prioritize investments in public transport. Even the courts have directed the government many times to work on such schemes, but no real movement has ever taken place. The high cost of petrol alone will force the people to support an aggressive nuclear power policy. Nuclear power should fuel our public transport system. That is the only way to control transport costs. The truth is that crude prices are only going to increase in the future. That future is not very far away. It may be 5 years away; or a max of 10 years away. If we have to work on cutting our crude consumption, the time to start is now. But with the kind of political system we are seeing in the country, where every single decision is debated ad nauseum and usually shelved for want of a consensus, no decision making takes place. Even a ready power plant like Koodankulam is permanently under debate. Ridiculous.

Is Mulayam going to side with the Congress for the next two years? I can only hope so. The biggest political no-no for the SP (and even the BSP) in UP is to be seen doing anything with the BJP. If the BJP opposes a particular Presidential candidate, the chances are that the two UP parties will support that candidate. If the BJP complains about the petrol price hike, chances are that these two parties will keep their criticism muted. Between the Congress and the BJP, the Congress is a far more acceptable partner for the UP parties. IN many ways, the poor showing of the Congress and Rahul Gandhi in UP has ensured that the SP and BSP continue supporting the Congress. The myth of Rahul has been contained – at least for now. Supporting the Congress can earn rich dividends in UP – budgetary support for populist schemes being only one of them.

So I am happy the Congress has bitten the bullet. It’s a good decision. Maybe the Congress will dare Mamata a little more and push ahead with some more legislation – at least the ones where the BJP has agreed to support. The Banking reforms, the pension sector reforms can all be passed now. Mulayam’s and Mayawati’s support can also help pass the Lokpal Bill in Rajya Sabha, and that act should ease pressure on the Congress too. If all of this is done quickly, maybe….just maybe….we can have a government that takes decisions. The policy paralysis has been the biggest reason for our slowdown.

The real truth is that the decision to increase petrol prices is a good one. People will complain, but then these are tough times. Tough decisions need to be “sold” to the people….that’s where the problem lies…..

Friday, May 11, 2012

Ambedkar cartoon row shows how thin skinned we are….

Another reason to disrupt Parliament! An old cartoon that shows Nehru “whipping” Ambedkar for delaying the writing up of the Constitution raised a storm yesterday. And as usual, given our poor sense of humor, this has led to an outrage.

It’s a fact that we are highly intolerant of anyone joking even a little bit with us. Jokes are taken personally. Even innocuous ones are often interpreted to be directed at some non-existent political agenda. This is understandable – considering that the ability to laugh at oneself comes much higher up in the developmental ladder. People who are just about managing to get out of centuries of ostracization cannot be expected to laugh at themselves.

But there are a few things that I find reprehensible in this episode. Ambedkar is a national hero; not merely a hero of the dalits. He may have been a dalit, but with his work (writing the Constitution, as well as his fight for freedom), he elevated himself out of the claustrophobic restraints of belonging to a socially backward community. It should be a matter of great pride to all dalits that one of their members is recognized as a national hero. That’s why I find it disturbing that the row has emerged from amongst members of the dalit political parties. It would have been different if someone else had objected to this cartoon. But no, in our country, a person is first identified by his caste, then by his work. So it had to be the dalit parties that raised the storm.

Here’s another thing I don’t like and this time I can partially understand the angst the dalits experienced. Ambedkar may well have delayed the writing of the Constitution. Given the effort of the 1st Parliament headed by Nehru to make the process all-inclusive, a lot of time must have been spent forming the drafting committee that Ambedkar headed. In a true democratic spirit, all members would have been allowed to express their very different visions for India. Since it was the primary statute that would decide India’s structure and form, it is understandable that the process may have taken more time than Nehru would have liked. Also, Nehru may not have had the patience for such democratic processes and he may have wrongly accused Ambedkar of dragging his feet. But what I find sad is that of all the stuff about Ambedkar that could have put into text books, the one NCERT chose to put was this little critique of Ambedkar. Usually, when we remember historical figures, we try to cover up whatever negatives they had (and all of them did have negatives) and we try to bring out the positives. This is basic courtesy we extend to the freedom fighters. For a school text book to have a cartoon about Ambedkar and Nehru, and for it to be about the delay is a little unfair. While I do feel that it should have been laughed away, I also do feel that singling out this cartoon was unfair.

Like I said, it’s hardly a matter that concerns only the dalits. It’s not like the upper castes are more relaxed about such things. The recent controversy (amongst many others) about Mahatma Gandhi’s sexual preferences as captured in "Great Soul; Mahatma Gandhi and His Struggle with India" by Pulitzer Prize-winning author Joseph Lelyveld is one such example. It would appear that the author has fully credited the Father of the Nation with all that he deserves to be credited with, but yet the talking point about the book were his comments on Gandhi’s sexuality. It was the same with Nehru’s relationship with Edwina Mountbatten. Some recent reports indicated that that relationship could even have been sexual. And as expected, many people took objections to this. More recently, the Abhishek Manu Singhvi episode comes to mind – when he was allegedly involved with some woman of the bar (there was no evidence that he offered her judgeship in return for favors…..the controversy was more about the colorful act!).

It’s like we expect our leaders to be perfect. It’s like they simply cannot have any flaws (if they can be called flaws at all). It’s like we like to just hide those minor chinks that they may have. We are highly intolerant about any criticism about people we elevate above ourselves. We make such people like our Gods – no one can question them at all. A very similar thing happened recently with respect to Anna. Agreed he was on a great cause. Agreed he had done a lot of great social service all his life. That was enough for the people to place him above themselves. Once they did that, they simply couldn’t see that he was also a human being who could have his quirks. I personally found Anna to be wrong with respect to the specificity of his demands. He was also a poor leader in the sense that he gathered a poor, politically motivated team around him. He was inspirational, but he couldn’t stay focused on the core issue. But writing anything negative about Anna was seen as unacceptable; the one who did so was called unpatriotic. Again, we couldn’t face a little critique about Anna.

That’s why economic progress alone is not enough for a country to achieve. As a society, we need to progress a lot more socially. We must learn to be tolerant; laugh a little at ourselves; think beyond our community and caste. We must be more courteous towards others; show it on the roads in the way we drive; in our public behavior. We have to get rid of our social awkwardness and become more sophisticated and modern. If we don’t learn to laugh at ourselves, the world will laugh at us!

The real truth is that centuries of oppression have made the dalits (and most of us) hyper sensitive. Ambedkar is much more than a dalit freedom fighter. He is the symbol of pride for the dalits. Any joke around him is seen as a joke around the whole community. It’s sad that even after 60 years of independence; we haven’t been able to get rid of such narrow parochialism and diffidence….

Tuesday, May 8, 2012

SC gives right order on Haj subsidy… apply the same to Reservations

The SC has done the right thing by asking the Government of India to scrap the Haj subsidy over the next ten years. There are many things right in this order. First, unlike in some of the other orders the SC has given in the recent past (the cancellation of the 122 2G licenses for one), this one is balanced. It gives the government ten years to make the change. The second is that it shows a modernizing of thoughts of the SC – a more practical viewpoint as it were. The SC had earlier ruled in favor of the Haj subsidy. It has now changed its stance. And third, the fact that the order was passed by a judge of the minority community itself making it free of any possible accusations of bias of the majority community.

It’s clear the Haj subsidy – and any other similar subsidies provided directly or indirectly to people of any religion – is nothing but vote bank politics. It’s the kind of thing that is easy to start, but extremely difficult to shut off. It may benefit no one really (a story suggested that Air India first inflates the air bill and then the government passes on a discount), but its removal would still be a highly emotional and political matter. It’s good to hear that Justice Aftab Alam himself narrated portions of the Holy Koran to bring out the fact that the Haj should be paid for by the person taking the Haj himself. Only the SC could have scrapped this subsidy. No government could ever have done it – not a Congress government for sure but not even a BJP government (in fact, it didn’t in its six years of rule).

The wider implication of this order should be of more interest to us. The basic principle used by the SC here is that benefits should be phased out over a period of time. The SC had earlier upheld the Constitutional validity of the Haj subsidy, so one has to believe that there was nothing wrong in the subsidy per se. But the court found it wrong to have continued it for this long. The same principle must apply to the policy of Reservations for the underprivileged castes in education and government jobs.

I have been a staunch supporter of Reservations. I see it as a type of Affirmative Action that the Government was required to take keeping in mind the pathetic conditions of the underprivileged. The reason I was in favor of caste based reservations was that the denial of education and jobs to these people in the past had also been on grounds of caste. It wasn’t like “you are not competent; hence you cannot be admitted to this college” or “you are from a poor family; hence you cannot get this job”. The grounds for denial were clearly “you belong to a low caste; hence you cannot get the admission or the job”. Clearly, the damage had to be undone in the same manner.

The problem however with any such benefit scheme is what I mentioned earlier. It’s extremely easy (populist) to launch, but extremely difficult to shut off. In an era of competitive politics (and populism), no government has the guts to turn the tap off. Several governments have in fact tried to keep increasing the % of reservation. It was the SC itself that had to lay down the rule that Reservations couldn’t exceed 50% of all available seats.

It’s my fervent request to the SC that it should pass another similar order which reduces the % of reservations over a period of time (no matter how long that period is). The time period may be 50 years; I wouldn’t mind it if it were even longer. I would be perfectly ok if the time period was not specified in years, but in terms of important milestones being met. But whatever the parameter to do so, it is important that the crutch provided to the underprivileged be slowly but surely removed, as they become stronger as a group.

In fact, it is my belief, that if it was well known to policy makers and politicians that the benefits were going to reduce with time, it would force them to act more strongly on making them more effective. At present, no one cares. I am told that of the 22.5% reservation for SCs, the actual % of SCs employed in government jobs is only 7% or so. This is evidence that no one cares. But if it were known that the % would come down every year, the politicians would wake up and try to take the max advantage of the policy.

There is a strong reason to curtail reservations once the goals start to get achieved. As time passes, and as the underprivileged are given an opportunity to catch up, it is important for the country to recognize and reward nothing but true merit. Only the best should become engineers, doctors and architects. Only the best should join government service. This will have a dramatic impact on the quality of governance also. After all, if the best – no matter which caste they came from – are employed, it would be a fair assumption to make that the quality of governance would improve. I doubt if corruption will come down – that is dependent on several other factors – but at least governance will surely improve.

The real truth is that benefits are often required in an unequal society. But the benefits need to have a shelf life. It may be a benefit for those who are wealthy and fit or a benefit for the poor or the underprivileged. For example, the subsidized diesel that most of the wealthy pour into their SUVs and big cars is an inadvertent benefit they get as spillover (the policy is meant to subsidize the transport sector and the farmers). But government policy must evolve and such benefits must be denied over time. The benefits should be seen as a temporary crutch, not as a permanent entitlement….

Saturday, May 5, 2012

Do we need another terror attack to get NCTC….

Yesterday’s meeting of the CMs with the Prime Minister and the Home Minister was a mere formality. The CMs had already decided that they would oppose the NCTC. The CMs were more worried about their “autonomy” (I will argue that they have too much, not too little), not so much about providing a tough fight to terrorists and protecting their people. There is a simple reason for this – there has not been a major terrorist strike in the last few years, and hence the public pressure on the CMs is less. Today, if they oppose the NCTC, their people do not think of them as being callous. It’s a thing seen repeatedly in India – nothing gets done unless our backs are to the wall. Only another terrorist attack will push our recalcitrant politicians into acting on this matter.

The same is the case with the fight against Maoists. A few years back, there was expectation that the Union Home Ministry was launching a new strategy to eliminate the internal threat. The Army was to be used in a minor or major way as the reports indicated. Activities of various states were going to be co-ordinated by the Central government. But again, the pressure from the CMs – who were worried that the Center would take over in the name of fighting the Maoists (in reality they were worried that some of their dubious political friends could be arrested) – put paid to any such plans. Today, the scourge of Maoists has only increased. Every now and then, Maoists capture someone or the other – and a swap with kidnapped Maoists follows – rendering the entire fight irrelevant.

When I had first written a post on the Maoists issue, one of my readers had commented that Maoists should be declared terrorists. That would allow the Center to legally take over the fight – since the defence of the country is within the purview of the Center (while law and order is a state subject). But even if we had declared Maoists as terrorists, the NCTC episode shows that it would have made no difference. Here is a body conceived only to fight terrorism, and the CMs are won’t support it. For them terrorism is a state subject. Maoists are safe; they shouldn’t worry about a fight back from the Indian state. So shouldn’t the terrorists.

After the 26/11 episode, in a period of national uproar against terrorism, our parliamentarians cutting across party lines were under pressure to enact the amendment to the Unlawful Activites (Prevention) Act (UAPA). It now appears that that act was not a demonstration of the ability of our Parliamentarians to fight unitedly; that was just public pressure and the fear that opposing a National terror Act could be seen as being anti-national. The NCTC is nothing but a body created under the same act. Reports indicate that there is nothing in the NCTC’s powers that was not already covered under the Act. So if the Act was necessary, why is the NCTC not so? Maybe the NCTC should have been created earlier – while the public sentiment against terrorism was still high.

Why is NCTC a Center-State issue at all? Why is not seen as a national problem in which every person joins hands? Do our states really have too little autonomy? When the nuclear power plant in TN was ready for a launch in Koodankulam, a bunch of protestors went on a fast against the plant. The CM of the state decided to keep quiet, leaving it to the Central government to handle to crisis. The plant which costed some Rs 14000 crores to build, and which would have provided relief mostly to the people of TN only, was delayed by several months, thanks to the political posturing of the TN CM. Only when she decided to back the Center did the protestors get evicted. Is this an example of too much or too little autonomy – when the Center was totally dependent on the state to protect its huge investment? When Mamata Banerjee hijacks the Central government with her demands every now and then, she usually succeeds. Is this a case of too much or too little autonomy? When the center’s FDI in multi-brand retail policy envisages that the states can always refuse to allow foreign retailers in their states, is that too much or too little autonomy? When the states can resist forever the GST – a reform considered revolutionary by almost all – is that evidence of too much autonomy or too little?

This autonomy bogey has been created only to create pain points for the Central government, with no thought being paid to the pain points of the people who suffer from terror attacks. Since the name of Mamata Banerjee (an “ally” of the Congress) is usually thrown in to inflict pain on the Congress, it appears the NCTC is in reality a political fight between the Congress and the others (mostly the BJP). Why does it have to be a Congress v/s BJP fight? Is it the BJP’s belief and fear that the Congress will keep ruling at the center (or will rule for a longer period of time than itself) and hence their state governments will remain under “attack”? Because if they believed that they too could rule at the Center, then they wouldn’t worry so much, right?

Of course, it is a political fight and nothing else. If there were another terror attack, our media would turn it into an attack on India, and blame the Center for not doing enough to fight terrorism. When the 26/11 attack happened, how many people blamed the state government? Almost no one. It was shown to be the Center’s problem. And yet the states won’t allow the Center to act in their best interests and that of the country. In the US – a far more federal country than India – the Patriot Act as well as the NCTC (of the US) are empowered to work against terrorism with the states supporting the Federal government in any manner required. Why can’t we do the same in India? Do our state governments have enough sophistication in their police forces to be able to fight the most motivated, and most well armed terrorists on their own? Just ask anyone – the image that we carry of the police is that of pot bellied traffic cops who wouldn’t be able to run 100 meters to nab a culprit. Just think of the Noida police which trampled over evidence in the Aarushi murder case. A police force which has no budgetary support to even arm its force with modern guns. We expect the state governments to protect the country against terrorism?

And what about the poorer states? Those that cannot afford to even provide their people with employment and two square meals a day? Are we expecting them to equip and arm their police forces to be able to take on the might of the global terrorists? Or are we saying that the poor deserve lesser protection compared to the richer states?

The real truth is that terrorism is a national problem – not a state problem – and so is Maoism. Both should be treated as exclusive Central government responsibilities and the Center should be allowed to do its duty. The states should have no or little say in this. Even if there is a degree of harassment to a few political leaders in the states because of abuse of authority by the Center, it is ok. The larger focus should be on avoiding harassment for the people. That’s all that should matter….

Wednesday, May 2, 2012

Not enough IAS officers to run the country….

As per a tiny newspaper report in the TOI today, there is a shortage of 1777 IAS officers in the country. Add to this the shortage of 1327 IPS officers and the picture becomes eminently clear – no one wants to join the government services. There have also been similar reports of shortages in Army officers. Why does no one want to work for the Government?

Honeslty, it’s not that difficult to figure out the reasons. People work either for money or for the pride and prestige (power?) that comes with the job. In the years following independence and all the way until the beginning of the economic liberalization cycle in 1991, IAS and IPS jobs were the most coveted of all jobs. These roles provided aspirants the opportunity to serve their country and engage in nation building. Of course, the fact that there was a very small private sector – and that entrepreneurs as a class had not been truly invented – also helped push most able people towards government jobs. There was also a lot of “power” associated with government jobs, especially the IAS and IPS (as manifested in the high dowry sums they commanded in the market). Now take whatever you want from the word power; but the fact is that that was a strong reason for attracting the best.

There was another reason why government jobs were considered the best. The salary was decent; and largely comparable with what the private sector provided. The private sector itself had been caged by the License Raj; and private sector salaries were much muted. Government jobs also came with “job protection”. All factors put together, there were enough entrants into the IAS cadre. I remember when I graduated from IIM, and joined a large private bank, some of my older relatives were curious to know if I had taken up a private sector job because I hadn’t managed to get a government one!

Since 1991 however, the times have changed. There is a huge amount of consumerism all around. The shops are filled with tempting goods; and there is so much that money can buy. Today, more than ever before, money plays a crucial role in a person’s life. A person’s stature today is determined by the car he drives and the address claims as his home; not by the “powers” or “pride” his job may carry. And here’s the reality – government jobs simply do not pay enough. Especially in comparison to private sector jobs – where a shortage of talent in the last decade and a half – has led to a huge increase in salary levels. CEOs earning a crore of rupees in salaries is not uncommon. And yet the seniormost IAS officer – the Cabinet Secretary – has a take-home salary of less than Rs 1 lac a month.

Many people object to taking “take home salary” as the way to measure salaries. IAS officers get mansions to live in. They have loads of “helpers” available all the time. All that’s fine, but all that doesn’t help buy the goodies. And all that disappears the moment one retires. Having come from a family where my dad was a banker in a government bank, I know exactly how it feels post retirement.

There is also this dangerous trend of recent times to attack the character of eminent bureaucrats that has to be factored in. In today’s world, a bureaucrat who takes a wrong decision (as every manager does once in a while), is first and foremost accused of being corrupt. In our uneducated and illiterate minds, the only reason a person makes a mistake (even a genuine one) is when he is motivated by bribes. In the lifetime of a bureaucrat, the hundreds of good decisions he takes go unnoticed; the rare mistakes get magnified. In today’s world, there is active encouragement to those bureaucrats who refuse to take decisions; as long as they avoid any taint of being corrupt. Who wants to work in such an environment? High performers seek assignments where they can do a lot; not just sit on their back sides.

So the IAS offers pathetic salaries; and a very hostile environment for taking decisions and “building the nation”. Not surprising then that there is a dearth of talent. Not surprising also that the dearth of talent is especially high in states that are known for highly politicized and inefficient governance – 216 short in UP, 128 in Bihar, 118 in MP, 112 in Rajasthan and 100 in Jharkhand. Who wants to work in these states, where in addition to all that has been discussed earlier, there is the threat of person safety as well – with active Maoist movements and the ever present mafia as well. Not surprising therefore that the caliber of people joining the IAS has plummeted dramatically. And with this has plummeted the personal ethics of the cadre. Today, corruption in the IAS is a big issue – but the reasons are well known.

India needs the most talented people to join public life and government service. That’s what happens in the developed world. The European government jobs pay more than private sector ones (of course, that has created its own problems). In the US, the salaries are at least as good as, if not better than, private sector salaries. A cop in NY earns as much as 75-80,000 dollars a year after putting in 5-7 years of service. The US President earns upwards of 250,000 dollars – at least a decent sum of money (our PM earns less than Rs 1 lac a month). In Singapore, bureaucrat salaries are linked to market opportunities. It’s time that India also considers rewarding its bureaucrats much better.

In order to reward bureaucrats better, we will need to reduce headcount. The Government cannot become the job provider of the last resort. The Indian Railways employs some 16 lac people and that is supposed to be a proud statistic. Air India has some 45000 people working for it; while its rival has a number than is perhaps one quarter of that. All India Radio has some 17000 engineers on its rolls (one wonders if engineers run a media organization), while the biggest TV and radio stations have not even 1% of that number.

The real truth is that the government needs to employ fewer people, pay better, and provide a better work environment if it wants to attract better people. All simple suggestions, but extremely difficult to implement!

Rescue Telecom from politics and everything else.….

The sordid telecom saga continues and in fact gets worse by the day. It all started off with the totally sensationalized assertion by the CAG that the government had lost revenues of Rs 1.76 lac crores by not auctioning 2G spectrum (On the other hand, I have always argued that maximizing revenues could never be the government’s sole objective when it came to policy making). Then the Supreme Court went overboard in canceling the 122 licenses that had been allotted to the nine new operators – paying no consideration to our international obligations or the suffering that this decision would cause honest telecom operators which made the mistake of trusting the government. Now the TRAI has thrown another googly – by recommending that only 5 MHz of spectrum be auctioned in this year. This means that only one of the nine affected operators will be able to come back into business.

It’s a crazy situation really. It’s designed to kill the telecom sector. What was once touted as the most successful liberalization program of the government (along with IT) will soon become the sickest of them all.

What could possibly be the logic of allowing the auction of only one slot of 5 Mhz this year when the government has recovered so much more spectrum by canceling the licenses? How would it be fair if eight out of the nine affected operators who rolled out their networks all over India are disallowed from protecting their investments by winning back their licenses? Just think about it. The government announced a policy and went out to invite the operators. The operators dutifully rolled out their networks. Suddenly, their licenses were canceled. And now they are not even being allowed to win back their licenses. It’s bizarre – in fact a loud statement to foreign investors that they are absolutely not welcome in India.

But then the politics in this country has been headed southwards for some time now. In a country where there is zero focus on good governance (how many agitations have taken place which demand that government projects be completed on time?), but 100% on corruption, we have developed a culture where it’s better not to take decisions. The bureaucrat who thinks big also trips at times. There is a very good chance he would be called corrupt. We are ok with bureaucrats who sit on decisions and pull the country back from the path of progress. This is acceptable to us. The Anna movement has caused a huge disservice to the country, by making this feature even more prominent (By the way, even former President Kalam believes that the Lokpal is no solution to the problem of corruption). Today, the bureaucracy (and the political class) is happy to avoid decision making; and if it does take decisions, it wants to be absolutely safe. Countries that play safe do not progress.

Add to this bureaucratic play-safe, the over-zealousness of Constitutional authorities like the CAG. The CAG has been eager to step into policy making territory. After all, the highlight of its 2G investigation should have been to unearth corruption (of Raja and the bureaucrats), not comment on the FCFS policy. In so many countries, FCFS is the preferred route to allocate natural resources- this ensures that consumers get the benefits of those services and products at low prices. When the entire country is the beneficiary of such a policy (there are nearly 900 million telecom subscribers today), it should be called a good government policy. But the CAG had a different plan. The SC did no better. It should have ruled on charges of corruption. But instead it chose to cancel the licenses. After all, what was the fault of the companies that bought into the extant government policy? In future, do we expect global corporates to question government policy when it is announced? Does the Government of India have no credibility? Does the SC realize what damage its decision has done to the country’s reputation?

And what is the logic for TRAI’s restriction on license auctions this year if it is not to dramatically increase spectrum fees? Any half intelligent person will tell you that auctions should not be carried out under scarcity conditions. It will create anomalies in pricing. But that is precisely what TRAI wants. The TRAI’s objective appears to be to help the government maximize revenues. By raising bid prices through artificial scarcity, it will set the ground for similar high prices in subsequent rounds. It appears that the TRAI has lost its independence and is kowtowing the government line. This is warped logic. If prices do increase that much, telecom prices will rise dramatically and the telecom revolution will be over. It will be the modern day killing of the golden goose. Besides, what happened to the TRAI’s job of protecting the consumer?

That’s why I am happy that Telenor has appealed against this TRAI decision in the Supreme Court. Hopefully the court will undo some of the damage its earlier decision has inflicted on the sector.

The real truth is that the telecom sector is in doldrums. It needs to be rescued from the politicians and the politics they play. The biggest losers are going to be 900 million common citizens of this country. It’s time saner counsel prevails and we all collectively pull back from the brink. But given the destructive politics that prevails in the country at the moment, I have few hopes….

Tuesday, May 1, 2012

Let there be elections (for the President)!

When the government does not consult the opposition, it is accused of being authoritarian. When it does consult, its offer is spurned by a wily BJP. We’re seeing that today in the matter of the Presidential elections, where the BJP has declared that its only guiding principle would be to oppose the Congress’s nomination, no matter who the nominated candidate is. It wouldn’t mind supporting a third front candidate, but there was no possibility of supporting a Congress candidate… the party won’t allow a consensus candidate.

Now that the Presidential election has been politicized, let there be a proper fight. After all, the President does play a crucial political role in our set-up. Why should there even be an attempt to find a consensus candidate? Why do we set such lofty goals when we live in a political set-up where even more ordinary goals are difficult to meet? In a set-up like this, life is all about politics and politics is part of all life.

The Congress for long has behaved in a pusillanimous manner fearing both the known and the unknown. For years, it has been on the back foot, put there by both the opposition and its own allies. Now it can choose to either complain or fight back. The problem that the Congress faces is that it hardly has any full-blooded politicians in its political think-tank. Neither Sonia, nor the PM, nor Pranab, nor Kapil Sibal, Ambika Soni, Jairam Ramesh…..none of these guys are politicians, with the make up that politicians are supposed to have. Most of these people are technocrats, bureaucrats or professionals. Its surprising how many lawyers have managed to find their way into the administration. These people may be able to run the government, but they need to be ringfenced by clever politicians. The Congress doesn’t seem to be having enough of those.

The Anna movement has made the political class look like lepers. A politician is considered to be a corrupt, evil and even dangerous. That is why (at least at the Center), the classic politician has yielded way to the more suave, sophisticated and glib English speaking person. Even today, a Narayansamy, Sharad Pawar and Beni Prasad Verma are considered misfits in a modern political system, though in reality it is politicians like them who bring a government to life. If it were left to the Jairam Rameshs of the world, the party would be reduced to rubble.

The larger message from the Presidential election consensus-building exercise is that the Congress must re-invent itself as a political machine. It needs strong politicians to be part of its government. It needs mass leaders who can take on challenges like the Anna one. It needs glib Hindi speakers, not English sophisticates who can operate only out of comfy airconditioned chambers. Someone who can roll up his or her sleeves, and engage in a dog fight. In this context, names like Digvijay Singh stand out. This man may be much reviled in certain circles, but if there is someone who can play politics the old fashioned way, it is him.

The Congress must remember that it has the largest vote share in the electoral college. A full 30% odd against the BJP’s 21% odd. The UPA together has a 41% share. All it needs is the additional 10% to get a UPA candidate through. It’s silly to have even attempted to get a consensus candidate, given the BJP’s headstrong instinct to base its political philosophy on merely opposing the Congress. The Congress should make sure a consensus candidate emerges within the UPA. It cannot be a Congress candidate; it must be a UPA candidate. Once that emerges, the UPA will be able to cobble together a majority.

The BJP’s only strategy appears to be to put up a Muslim candidate. It won’t allow Muslims in the prime positions of power in the Executive; so it cleanses its soul by proposing Muslim names to the Presidential post. By propping a Muslim candidate, the BJP hopes to rope in the SP. I doubt if the SP would like to go anywhere close to the BJP at all. If the politics in our country is polarized, it is polarized first on religious lines. Which is why anti-BJP is a stronger plank than anti-Congress in this country. Without the SP’s support, the BJP’s candidate will lose even before filing his or her nomination.

What about a 3rd party candidate? Frankly, there is no concept called third front. Is the BSP going to support an SP candidate, all under the noble excuse of setting up a 3rd front? In any case, the biggest proponents of the third front – the Left parties – are sad losers electorally and totally out of flavor. The 3rd party is a non-starter from the word go.

If the unattached political parties have to choose between supporting a Congress candidate and a BJP one, I think they will choose the Congress candidate. For one, the BJP’s exclusivist and isolationist agenda upsets many parties. This alone should be able to see the Congress candidate through.

The Congress must seize this opportunity to teach the BJP a lesson. Out of the President’s election, it must get the courage to fight another fight. It must be willing to give up its own choice, in order to support a consensual UPA candidate. To that extent the recent moves made by the party – of meeting its allies – are in the right direction. Given the preferences of the various allies, maybe Hamid Ansari is the best choice. I don’t think the Congress should field Pranab Mukherjee. The party needs him for its political survival.

The real truth is that we middle class urban people have this habit of dreaming of this utopian world of sensible political discussions; of a consensus. However, in reality, it’s a dirty and bad world out there. Political parties fight with narrow self interests, not caring about national interests. To expect them to bury such narrow agendas is impossible. The BJP in particular has shown this repeatedly. It was silly media chatter that built expectations of a consensus candidate. That’s not going to happen. Now let there be a fight!