Unnecessary controversy between Salman Khurshid and the EC….

It’s another case of media blowing out of proportions an issue that the country’s constitutional framework is well capable of dealing with. Here’s a case where the Election Commission (EC) – a constitutional body – has all the powers in its hands to decide whatever has to be done in the process of ensuring a fair election. It doesn’t need anyone’s help – least of all media’s.

The EC has written to the President – complaining against Khurshid – maybe because it believes it’s a relatively small issue. Had it felt that the issue was more serious, it could have taken any number of harsher measures. It could have countermanded the elections in the constituency in which Khurshid’s wife is the candidate (where he apparently made the remark about 9% sub-quota for Muslims even after the EC asked him to stop doing so). It could have debarred the Congress alone from this poll if it wanted to be really harsh. But whatever it wanted to do, the Constitution – and apparently several SC judgments – give it enough power to do what it thinks is the right thing to do to ensure smooth and fair elections. Also, the CEC is headed by a strong man – one who won’t take anyone’s rubbish for an answer. The CEC also doesn’t need anyone’s help…..but there are many helping hands nonetheless. The way the matter is being discussed in media, it would like it was the biggest challenge facing the country.

As is always the case, the accused has a different story to tell. Khurshid’s point – as reported in some newspapers – is that he never repeated the 9% demand after the EC “censured” (not censored!) him. All that he’s been saying after the EC’s censure is that he will fight for Muslim quota all the time. That much is there in the Congress manifesto for UP and is a politically valid strategy. The 9% was not mentioned in the manifesto and that is what the EC had objected to. As long as Khurshid doesn’t mention specific numbers, he would be right. And the EC would not be able to object to Khurshid’s speech.

The EC may have got taken in by the melodrama in Khurshid’s speech. “Hang me if you want to” is the kind of thing that politicians love to say all the time. No one gives them much importance. Politicians also lie at political rallies. That’s the unfortunate part of the game called Elections. The EC cannot possibly get peeved by such acts of drama. The EC has to focus on the larger picture – is any candidate saying or doing anything that violates the code of conduct. In this case it is clear: if Khurshid mentioned the 9% after the warning, he violated the code of conduct; if he didn’t, then he didn’t.

I myself don’t support the policy of reservations beyond a point. I do support reservations – as a form of Affirmative Action – but with conditions. It has been my view that reservations should have a finite life. That life could be 50 years or even 100 years. But as the beneficiary class takes advantage of reservations and progresses, the % of reservations must come down gradually. I am also not in favor of reservations based on religion. Chetan Bhagat once wrote why religion-based reservation is not a good idea. He rightly pointed out that it’s easy to change one’s religion to get the advantage of reservations. It’s almost impossible to change one’s caste. Reservations based on caste cannot be misued. Those based on religion can be. But this controversy is not about whether such politics is good or bad. Religion is a clear dividing line between Congress supporters and BJP supporters. And that is fine. It’s a political strategy of the Congress. Some call it “appeasing the minorities”; others call it “secularism”. The controversy today is about whether Khurshid repeated the 9% claim or not.

If Khurshid stuck to 4.5% reservations for Muslims, he would be within the code of conduct, since that claim was made well before the code kicked in. Samajwadi Party also keeps making the claim with respect to Muslim reservations. The other parties also keep making random claims – but that’s fine because its part of their poll manifesto or was first voiced before the code came in. The issue isn’t about the reservations at all. It’s about breaching the code of conduct and the EC is right in flagging the issue off.

I also think what Arun Jaitley said was correct. His view was that this was a well orchestrated strategy of the Congress – the good cop, bad cop strategy. Expectedly, the PM has now stepped in as the good cop, admonishing his fellow Congressmen to strictly follow the law book. But the purpose of Khurshid’s speeches would have been served anyways. Well, my only response to Jaitley is that this is not an innovative poll strategy. Every political party uses this same strategy. The BJP admonishes Kushwaha at the center; likewise its central leaders pan the Porngate MLAs. But at the state level, it’s business as usual. Over a period of time, such controversies die down – but the gains at the state level stay.

Will Khurshid’s strategy of raising the pitch for Muslim reservations work? I don’t know. There are varying reports about the way the Muslims vote. All that can be said about their voting pattern is that they won’t vote for the BJP. After all, why should they? Here is a party that openly stands against any sort of Muslim gratification. The Muslims may not vote for BSP either since that party is so clearly positioned in favor of dalits. Any reservation for Muslims means that much is taken away from dalits. But whether the Muslims vote for SP or Congress or the Peace Party of JD (U) or some independent is unpredictable. Each of these parties is making an attempt to woo the community – which again is fair political strategy. But which way the community votes is anyone’s guess. I am writing this because there is a belief amongst some that the Muslims vote en-masse – and that’s why Khurshid is going so far…..that is certainly a cause of nervousness for the BJP. I don’t think that is true at all.

On a ligher note, it is such controversies that make elections so much fun. It also makes India India. You go on a holiday abroad, scan the media, and find it really boring. It is very true indeed that for us, even news is entertainment!

The real truth is that this EC-Khurshid controversy is also an unnecessary one. It looks more like a media strategy than a political strategy – a way for media to keep the citizens engaged with it. If such controversies didn’t arise, so many square cms of newspaper space and so many hours of TV time would go unfilled. So many blogs would not be written (!). Even this controversy will fade away. No one should worry about the country – it’s protected strongly enough by its Constitution!

General slips….and has egg on his face

What was so obvious from the beginning happened. The General was clearly being opportunistic, trying to get another year added to his tenure; perhaps also trying to ensure that his chosen one got to succeed him rather than someone else. The issue itself hardly remained an employer-employee conflict; it was mired in all kinds of political overtones. The BJP of course had to fault the Congress for “the way in which it handled the situation” as if it had created the problem in the first place; or had cheated the General in some way. Well, the SC has squashed the matter, putting egg on the General’s face and giving the Congress yet another opportunity to say “See, we told you so”.

I had written on the General’s problem in two previous posts. The basic problem I had was that the General would never have become General had he clarified right at the beginning that he was actually a 1951 born. In an extremely regimented and bureaucratic system of promotions, the seniormost gets the job (assuming all other factors are equal). Had General Singh been born in 1951, he wouldn’t have qualified and would have retired as Lt. General. Further, it was very unseemly on the part of the General to say that someone else had written 1950 as the year of birth in the NDA and IMA forms decades earlier, when everyone knows that that’s simply not possible. And lastly, it was really unlike a senior army soldier to go back on his word once he had given it. In 2008 and 2009, the General had accepted that he would go by the 1950 year.

I think the Government handled the matter rather maturely. There haven’t been too many skirmishes in the media. No bad mouthing of the General either. Even yesterday, in court, the Government was ready to accept that the General was a good leader and a good soldier. They didn’t want him to resign now. They had respect for the General and so on. This indicates a certain degree of fairness and maturity. The issue was not started off by the Government; they never had any problem with the General’s capability or integrity at all. It was the General who was being adventurous. Now he’s been snubbed.

In the end, it was a shameful incident for the General. His councel was happy to withdraw the petition, pleading that it be called an “amicable” settlement. The government rightfully denied him that privilege. How could it be amicable when the General was hell bent on furthering his own personal matter, putting at risk the morale of the army? The General knew that his actions could have created a divide between the military and the civilian government? In a region where there has been one coup in the Maldives and a near-miss in Bangladesh (and the risk of one in Pakistan never being too far), how could the General not have thought of similar worries engaging the minds of people in India? The General was in the mood to fight; he lost the battle. How could he ask for an amicable settlement? He should have asked for forgiveness instead – and the government would have been large hearted to grant him that.

What happens next? Should the General resign? I think he should. He challenged his bosses for his personal gratification. Had he challenged his bosses on issues concerning the army, he would have held his head high even if he had lost the case. But here, he’s lost face. How will he be able to face his officers? Those, whom he must be giving lectures to, urging them to rise above personal gain? He’s lost all moral credibility and in spite of what the government says, he should resign. He should resign to protect the dignity of the Indian Army – most of which is above such pursuit of personal agendas. He must resign so that a new leader may take over soon and bring the army out of the unnecessary suspence it must find itself in right now. He must resign to atone for his misadventure. And lastly, he must resign as an apology to the nation.

Those who doubted my argument that the General would never have made General had he been born in 1951 should now look out for who succeeds. There are three Lt. Generals in contention. And the seniormost of them will succeed. As per The Statesman, if General Singh retires now….without waiting for the May retirement date, Lt. General Shankar Ghosh, presently Chief of the Western Command will take over as the Army Chief. However, if General Singh retires in May as per schedule, Lt. General Bikram Singh, presently Chief of the Eastern Command would take over. And if the SC had accepted 1951 as the birth year of General Singh and he had retired only in 2013, Lt. General Parnaik, Chief of the Northern Command would have taken over. This should be clear to all that a few months here and there, and the decision on who takes over changes.

And finally the politics of it all. The BJP – ever eager to put the Congress in the dock whether the issue is right or not – had said this: "It is a sad incident...An issue which could have been resolved sitting within closed doors has now been dragged in the open before the public. We hold the Centre, the prime minister and Sonia Gandhi responsible for the incident," (BJP vice president Mukhtar Abbas Naqvi). He went on to say: “It raises questions on the functioning and running of the central government... It is a dangerous thing that even such a row involving the Army chief has been dragged into public domain. This is due to the mishandling and wrong policies of the government”. I cannot understand what the government did that deserved such remarks from the main opposition party. The entire controversy was raked up by the General himself; he was the one who broke protocol; and yet the opposition has to find fault with the government.

For the Congress, this is one other “victory” in recent days. The Antrix row had similarly ended in an anticlimax when it became clear that the blame for the faulty deal with Devas lay entirely with the scientists. Likewise, in Subramaniam Swamy’s case against Chidambaram in the trial court, the Congress got reprieve – again the whole legal battle looked more like a political one showing the despearation of the BJP to somehow get to the then Finance Minister and eventually the PM himself. I don’t mind political strategies of this type – but I just think it’s best that it be well known in the public domain.

The real truth is that General Singh brought indignity to one of the most disciplined institutions in the country. The SC has settled the matter as it should have. Yet another sensationalized media story has run out of steam. This should be a lesson to all – have patience. Like they say – the law will take its own course. Waiting till then would be the right thing to do…..

Bombay HC indicts Vilasrao Deshmukh – but doesn’t prescribe policy like SC did….

The SC recently ordered the cancellation of all the 121 2G frequencies that were allotted by Raja in 2008. It castigated Raja for the cavalier way in which he went about twisting policy to suit his greedy needs. In another order passed yesterday, the Bombay HC ordered the return of the 20 acres of land given by Vilasrao Deshmukh, then CM of Maharashtra at a throw-away price, to Subhash Ghai’s Whistling Woods in the year 2000. There are many similarities between the two judgments; and yet there are important differences too. And very importantly, there are warnings to governments of all parties….

Let’s take a look at the similarities first:

1)      In both cases, there were scarce resources involved. While 2G spectrum is well known today to be scarce, it is very well known to all who live in Mumbai that land is a highly scarce resource in this maximum city. In both cases, the real value is higher of the resource is than the value at which it was “allotted” or given away.

2)      In both cases, there was discretion involved in the decision making. Raja used his discretion (rather clumsily; so he got caught so quickly) to change the rules of the game at the last minute (advancing the date for submitting applications with DDs in hand) and Deshmukh used his discretion as CM to push the concerned bureaucrat in the government to giving the land cheap.

3)      In both cases, the judiciary stepped in to cancel the deals.

4)      The courts are getting very ruthless – one can imagine the losses to the telecom licensees who put in so much infrastructure; as well as to Subhash Ghai who must have put in many crores to set up this rather nice place.

Now let’s look at the major differences:

1)      In the case of the 2G allocation, there was a government policy to give spectrum free. The policy – at least on paper – was applicable equally to all players of the telecom sector. In the case of the land allotted in Mumbai, there was no policy as such. It was a one-off deal done expressly done for Whistling Woods. Had there been a policy of the Maharashtra government to encourage arts and films etc, and provide land for such efforts, then the two cases would have been similar.

2)      While the state exchequer lost revenues in both cases, there was no quid-pro-quo for Deshmukh. Likewise, in the Antrix deal, there doesn’t appear to have been any quid-pro-quo for the ISRO scientists; nor for Chidambaram for his role in the free spectrum decision (that’s what the trial court said). Deshmukh will not be prosecuted; just as the scientists and Chidambaram won’t be prosecuted. In the case of Raja, the trial court did find prima facie evidence of a quid-pro-quo and that’s why he is in jail. Many readers believe that Raja’s being in jail proves that the courts have not taken kindly to the free-spectrum policy; or that the SC has canceled the licenses because of the free-spectrum given. That’s untrue – the reason for both is that there was a problem in the way a few licensees were preferred, not because the spectrum was given free. That judgment is still pending.

3)      The big difference however is that the Bombay HC only canceled the land allocation and put financial penalties on Subhash Ghai – return of the land; and payment of steep rentals for the portions he used. The Bombay HC was also a lot more practical in the deadlines it set. It allowed Whistling Woods to keep 5.5 acres of land until 2014 when the current batch of students would finish their course. It didn’t want to harm the interests of those who trusted Whistling Woods and joined up. The important point is that all penalties were financial and there was no collateral damage. There was also no attempt to prescribe what the government should do next. It did not say that the Maharashtra government should necessarily auction the plot of land (even though that’s what governments usually do in Maharashtra). The Maharashtra government may make a new policy to encourage films and set aside a large chunk of land for all film studios and production companies, and if the rules are transparent and fair, the court would probably be ok with it. At least the court did not prevent the government from developing a policy as it deemed fit. The court did not step into policy making.

However, in the case of the 2G spectrum allocation matter, the SC went into the domain of the government and actually prescribed the policy – specifying that the government “shall” (in legal terms, this is an order that HAS to be complied with) auction the spectrum. Frankly I have written earlier – and there is an emerging view amongst financial commentators, lawyers and government officials that agrees with me – that the SC has gone overboard in actually prescribing the auction (Feb 4^th: SC goes overboard in its 2G order….it shouldn’t prescribe policies). Had it not ordered auctions, but just instructed the government to develop an appropriate, transparent policy, that would have been perfect.

As a result of these two judgments, there are bound to be questions asked by investors about the sanctity of government decisions. The government’s decision clearly isn’t enough to go by any longer. In the future, even if the government formulates a policy that permits something, investors will have to get it legally examined first and provide for the risk of the policy getting reversed. In other words, governments cannot be trusted any longer. Maybe the Tatas shouldn’t have jumped with joy at Modi’s land allocation (allegedly at very cheap rates) in Sanand; instead they should have been circumspect and got it legally verified. It is possible ten years later that some court may order the Tatas to return the land! These kinds of judgments are bound to affect the investment climate in the country.

In any case, one thing is clear. The courts are becoming more and more intolerant of governmental actions and inactions. The Gujarat High Court’s indictment of Modi for “inaction and negligence” during the 2002 Godhra riots was also a hard hitting one. The courts don’t care for which political party is in power. They are focused on the job on hand – cleansing the muck that governments sometimes create….

The real truth is that the days of political randomness and casual discretion are getting over. Governments can hardly afford to be casual about governance. There is a big daddy watchdog called the judiciary that is there to hound cavalier governments. As long as the judiciary doesn’t get into policy making itself, this balance between the Executive, Legislature and Judiciary is good for our democracy….

Porngate is shameful; but our response to it is akin to moral policing…..

I am going to start with one paragraph that denounces the act of BJP MLAs in Karnataka. And I am going to end with one which does the same again. I need to do that to have some chance of convincing my readers that I do not support either pornography, or women’s exploitation, or child abuse, or moral depravity in society, or trafficking of any types or any of several other similar ills of society. I also believe like most others that perpetrators of rape should be dealt with most strictly. I truly do. Please believe me! This post however is to urge a little bit of moderation in our response to such incidents as Porngate. Not all such incidents deserve only the severest form of punishment. There has to be a gradation of response….

Some of the reasons I believe that our response has been too much over the top:

1)      Just look at the way the media has gone about the issue. It’s even branded it Porngate. Whole TV shows have been dedicated to the issue. There has been a severe indictment (what’s so unusual?!) of the 3 MLAs with the tonality and manner of anchors being such as if they were demanding that the three be hanged.

2)      The BJP has already acted against the three erring MLAs. The three have been forced to resign. The Governor has accepted their resignations. So they won’t remain MLAs any longer (I presume). I would compliment the BJP for acting so promptly. But poor Nirmala Seetharaman (BJP spokesperson) was hounded beyond reason last night even though she admitted that what the three did was wrong and her party president had already asked them to resign. I couldn’t quite understand what the anchor really wanted Nirmala to do? Go down on her knees begging the country for an apology?

3)      Just for the sake of understanding the opposite point of view, exactly what illegal (not immoral – this quaint story of these two words – illegal v/s immoral – comes back to haunt the BJP; remember it first used them in defence of the scam-ridden Yeddy in Karnataka only!) thing have the three MLAs done? Is watching porn illegal in India? Sorry to disappoint you readers – but no. Watching porn is legal in India. Yes, the Bombay High Court ruled in 2010 that watching porn was legal in India. Watching child porn is illegal. Distributing porn is illegal. But watching adult porn is legal in India. So really, legally speaking, the three MLAs have done nothing wrong. Whether what they have done is immoral or not is up to society to decide.

4)      Have they really done something grossly morally wrong? I do agree that it doesn’t suit our elected reps to be caught doing such things. But honestly, how many people (readers…..I am challenging you here) have not watched porn at least once in their life? Or done something equally “despicable” ever in life? Does that make us poor citizens or parents or children or employees? In the US, porn is a thriving industry as it is in much of liberal Europe. I am not going to advocate watching porn here, but I am surely going to say that we have no right to become moral policemen on this subject. Hounding these three MLAs for watching porn is as wrong a concept as right-wing hard-core activists lashing out against Public Display of Affection (PDA), Valentine’s Day etc. Do we want to make India like Pakistan, Iran and the other orthodox neighbors we have?

5)      We often forget that our leaders are mere human beings. While it’s ok to expect them to be above petty depravity, we cannot forget that they will have shades of gray. Even Mahatma Gandhi, Jawaharlal Nehru, Indira Gandhi and Atal Bihari Vajpayee had shades of gray. That does not make them poor leaders. Or leaders who are incapable of representing society.

6)      Do we have no regard to due process of law? Sure if someone feels that these MLAs need to be prosecuted, please do so. But should we be taking the law in our own hands and deciding that someone is guilty or not? And will we give time to the powers-that-be to act or do we want instant justice all the time?

7)      What about the privacy laws? Do we even understand the concept of privacy? One may argue that the MLAs were watching the porn on their private mobile screens, not in a cinema hall with thousands others. Isn’t it within their privacy rights to do so? How does it matter what a person does with his own mobile phone?

8)      Further, I cannot understand what right Anna has to get into this subject. He should stick to his anti-corruption tirade and resist the temptation to become the guardian of morality of the entire Indian society. This society is thousands of years old and can take care of itself.

9)      And lastly, is the punishment for everything only the most extreme form possible? Why cannot we say that these three MLAs will be suspended for one session? Or be forced to go without pay for three months? Or something like that? Why does it have to be the ultimate step always?

I have no sympathy for these three MLAs. Or for anyone else who treats women with such lowliness. One of these MLAs apparently has been an activist demanding that women dress “appropriately” and so on. I cannot tolerate such orthodoxy and anti-women positions. I have been an active supporter of slut walks which taunt and mock men who seem stuck in a cultural time warp. But equally, I don’t believe we should take a moral stand so strict that none of us would be able to clear it ourselves.

To repeat, I denounce all men who treat women unfairly. I am totally against all those who look at women as objects of desire rather than as equal members of society. I hope readers, you won’t think I am protecting these three MLAs. I am only requesting for moderation in response.

The real truth is that MLAs reflect the culture that prevails in our society. The sad reality is that in most parts of our society, women are treated like toys for men to play with. The law of adultury in our country also treats women as such. By condemning these MLAs, we are in truth condemning ourselves. If we want to avoid such incidents again, we need to reform society. We need to modernize; grant equality to women; and only then will this kind of depraved behavior not happen again.

GDP slows down to sub-7% NDA-era levels….

The GDP growth is likely to slow down (again) to some 6.9% this year. The last time this happened was three years back in 2008-9 when it hit 6.8%. At that time, the slow-down was perhaps justifiable on grounds of the global financial crisis and its suddenness. An attempt is being made now by the government to explain the slip-up again on similar grounds. Except that this time, that’s not the real reason. The real reasons are different. Before we look into the real reasons, it is important for the Congress to understand the repercussions of a slowing GDP growth rate.

What the Congress may like to remember is that one of the reasons it got voted back to power in 2004 was the disappointment of the people with the economic growth achieved during the NDA government’s six years of rule. Here’re the official stats. During the NDA rule, the average GDP growth rate was 5.8%. In the five years prior to this, the GDP growth rate under Congress was 6.7%. And of course during UPA-1 the growth rate has been much higher at 8.4%. If the GDP rate slides for another year or more, the average growth during UPA-2 will be the same as it was during NDA rule and that will have potentially disastrous political consequences for the Congress. In many ways, the entire political strategy of the BJP has been to paralyze the working of the UPA, so that economic growth would slow down…..it looks like the BJP is succeeding.

Now coming to the story that the government is putting out – that global factors are responsible for our slow-down. This is a lot of rubbish. Let me prove it.

One of the important impacts of the global slow-down would be on our exports. For example, China is slowing down (a bit) because its economy is so export dependent. In India’s case however, our exports are only a small % of our GDP (exports some $300 billion; GDP some $1.7 trillion). Besides, in our case, the exports are actually doing fabulously well. For the April-December 2011 period, our exports growth was upwards of 25%. And even if there was some mistake with some components of the exports data, that was of a small order. We’ve seen export growth cooling off only in the last one-two months. So exports are clearly not the reason for our economy slowing down.

Let’s look at another global factor that could slow down our economy. In-bound FDI. Thanks to the big ticket FDI inflows into Reliance Industries and Posco, the FDI flowing in this year is expected to cross $35 billion – a huge increase from the $19.4 billion received last year and the $25 billion of a year earlier. This means that the Indian economy continues to attract investments from global corporates. We often confuse FDI investments with FII investments. It’s indeed true that FIIs withdrew substantially in CY2011 and that had a very negative impact on our stock markets and the rupee depreciation; but we must remember that FII money doesn’t impact GDP growth directly. It does so only indirectly. Sure, the declining stock market has led to fewer IPOs coming out and hence lesser direct investments in the economy. But the more direct impact on the economy is on account of FDI which has continued to defy any signs of global slow-down.

The real reasons for the economic slow-down are all internal. Some of them are temporary and some are more long-term. For eg., the farm sector growth rate has slowed down to 2.5%, from a level of 7% last year. Now the long term agricultural growth rate in India has hovered around 2.5% only – so it’s not that different this year. But this low growth rate slows down the overall performance of the economy. It has also been the reason for much of the inflation we saw throughtout the year – and the consequent rate hikes by the RBI which have led to a slow-down in manufacturing (which we’ll discuss next). Agricultural growth remains a long-term problem for our growth rate – and the only reason why it doesn’t have a more significant impact on overall GDP numbers is because the share of agriculture has now dropped to just some 15%. The government has done pretty much nothing in helping the growth in agriculture – investments in irrigation, electricity generation, fertilizers and pesticides have all been inadequate.

The other segment of the economy that has slowed down dramatically is manufacturing. Growth is down to 3.9% from 7.6% last year. This is a direct fall-out of high bank rates. Investments have slowed down as interest costs have soared. I must point out here, that the inflation that led to the bank rate hike was not in the manufacturing sector; it was in agriculture. Yet, the RBI went about (wrongly) increasing bank rates. These repeated bank rates did nothing to reduce the inflation in agriculture (inflation finally came down thanks to good monsoons), but they pushed the manufacturing growth rates down. This is poor management of the monetary policy, and though the RBI is independent of the government, the government does exercise a lot of control on the RBI. In an ideal world, the RBI and the Ministry of Finance must act together. Instead, it appears that the RBI has been let loose by the government.

There is another reason why the manufacturing growth has slowed down. There is an urgent need for reforms, but that’s simply not happening. There is a serious problem with mining and quarrying thanks to environment issues and the scams in states like Karnataka and the floods in Orissa. There is a serious power crisis, but we haven’t even been able to get Koodankulam started. Nor are our coal-based power plants in any great shape thanks to the coal shortages. A news story yesterday pointed out that the government has decided to reduce the 12^th plan targets for power generation from 1 lac MWs to 75,000 MWs. If the targets are lowered, the actual results achieved will be even lower. This is poor governance.

Look at the construction sector. Again, the high bank rates, the rising input costs (steel, cement, labor), the change in policy regimes (application of Service Tax to construction), the slow-down in approvals (especially in Mumbai), the land acquisition problems (especially in Noida) and the corruption inherent in the sector – have all contributed to growth in this sector slowing down from 8% last year to 4.8% this year. This has nothing to do with external factors.

The only reason the GDP growth continues to remain half-decent is because of the growth in the services sector, which accounts for 55% of the overall GDP. Services grew by 9.4% compared to 9.3% last year. But in a country with so much unemployment, we need more manufacturing capability to go alongside the services sector. That again is sorely missing. The new manufacturing policy of the government has been in limbo for ever. The Delhi-Mumbai Industrial Corridor has finally been given the green signal, but its implementation is anyone’s guess. The new land acquisition policy is again much delayed. The reforms in the tax regime (especially GST) have missed several deadlines. Multi-brand retail, higher FDI limits in insurance, banking sector reforms, etc have all been running behind schedule. These are the real reasons why the economy has slowed down.

The direct consequence of the policy freeze has been that Indian corporates have started investing abroad. Out-bound FDI from India was a staggering $25 billion in the first 9 months of this year. Rahul Bajaj and other industrialists have been saying that they would rather invest outside than in India. The government has done nothing to address these concerns.

There is also a hell of a lot of politics that has led to the slowdown. The BJP has been unsupportive of reforms, its role in the FDI in multi-brand retail just one such example. The BJP doesn’t want the UPA to report fast growth rates – now that it is clearly established that people vote those governments back to power that deliver fast economic growths. The entire Anna movement and the Lokpal issue itself looked highly political – with the BJP playing at least some part in the politicization of that movement. The BJP has also been playing political games with the 2G issue – focusing on dragging Chidambaram (and the PM) into what was clearly Raja’s individual shenanigans. Not allowing Parliament to function has been another ploy the BJP has used – we saw that in the last session of Parliament when hardly a few bills were passed when there were more than 30 bills awaiting clearance.

The real truth is that the government cannot blame external factors for our slowing GDP growth. The factors are mostly internal. What we need is a strong government, which can on the one hand take on political challenges with aplomb, and on the other hand can push economic reforms with determination. Unfortunately, both of these have been lacking. If the matters continue this way, India will have lost an opportunity to rise up the global economic ladder. And Congress an opportunity to regain power in 2014…..

Star News poll indicates Cong-SP government in UP….

One BJP leader after another has been expressing frustration against the trial court’s dismissal of Subramaniam Swami’s petition against Chidambaram. Today’s letter by Yashwant Sinha in the ET is ample evidence of this. The BJP’s frustration is not surprising considering how badly it wants to indict the Congress directly in some scam or the other. The cash-for-votes scam was inconclusive; the Antrix-Devas deal is blaming the scientists not the Congress; and even in the 2G scam, while the SC has cancelled the 122 licenses, it has given the Congress a chance to convert the problem into an opportunity (it wouldn’t mind the fiscal help it would get from the 2G auctions). The last straw for the BJP could be if the Congress romps home to a better-than-expected result in UP like the Star News poll is suggesting.

The Star News poll was conducted between Jan 4^th and 20^th and doesn’t include the negative impact the Congress will suffer on account of the cancellation of the 122 telecom licenses by the SC. However, in all likelihood, the impact is going to be minimal – especially since Chidambaram has been let off the hook by the trial court. There is also the positive impact that media suggests Priyanka Vadra’s campaigning will bring to the Congress. In toto, if we were to take the forecast as nearly accurate, the SP would emerge as the single largest party but with only 135 seats. For it to form a government, it will necessarily need to tie-up with the Congress-RLD combine which is likely to get 99 seats (Congress 79; RLD 20). This is the ideal situation for the Congress. The SP will act in consonance with the Congress at the center and the Congress with the SP in UP. This help the UPA government enter the budget session with confidence and gusto. Ironically, when I had written that the SP and Congress should get into a pre-poll alliance on December 7^th, “Congress must do a pre-poll alliance with the SP…..”, readers of the blog gave it a rating of only 3.62. If anything this should show that bloggers have to turn a blind eye towards reader ratings!

The other finding of the poll of course is that the BSP drops from its 206 seats to just 101. The spoils of BSP’s rout are shared by the SP, Congress and the BJP. However, the BJP is the smallest gainer of them all. Even the RLD which is confined to only Western UP gains 10 seats as per the poll. The BJP also gains just 10 seats to reach a rather poor 61 – making it the 4^th party in the state. Now I know these are just prepoll forecasts and the end result may be different, but if the final position is such that the BJP becomes the 4^th largest party, it will be a serious set-back to the BJP. It will also be a big learning for the party. It will reaffirm the fact that the old Ram Mandir issue is dead – at least electorally. The BJP’s strategy of projecting Uma Bharati – one of the strongest proponents of the Ram Mandir – would have backfired badly. The Kushwaha episode would also have dented the party. It’s difficult to conjecture but I think that if Modi had canvassed in UP, it would have caused the BJP even more harm.

The nicely balanced UP position will give the Congress leeway in handling the more-left-than-the-Left TMC, even though the Congress will be careful not to snap relationship with the party. The strong support from the SP’s 22 MPs in the Lok Sabha will be a good counter to the tantrums of the TMC’s 19 MPs and the SP’s 5 Rajya Sabha MPs will also be a good counter to the TMC’s 6. In any case, the SP has been backing the Congress in crucial matters at the center.

What does the support from the SP mean to the UPA in real terms? On the issue of allowing FDI in multi-brand retail, the SP appears to be against the idea. In fact, the SP has mentioned in its election manifesto that it is against even large retail corporates. This is also the stated position of the TMC. However, the difference between the two could possibly be that the SP may allow the central government to go ahead with FDI in multi-brand retail at the center, while blocking the entry into UP. The SP could also claim that it was “coalition compulsions” that forced it to change its stand! Every party uses such compulsions to justify inaction on core electoral promises. The BJP used the same logic to justify doing nothing on the Ram Mandir at Ayodhya after it came to power at the center – though that was even then an important poll promise.

With regard to the Lokpal Bill stuck in Rajya Sabha, it’s still going to be a long haul. Even if the SP were to support the bill, it is not going to be enough for the Congress to get the bill cleared. The only way the bill can get cleared is if the Congress clearly makes the Lokpal bill only into a central act with absolutely no connections to the states. If that happens, some of the local satraps like TMC, SP, RJD, LJP and maybe even the left could support the bill and it could become a reality. The Congress is unlikely to concede the demands of the BJP and without the BJP’s support, it will be that much difficult. In short, the SP’s support to the Congress will not be adequate to ensure the Lokpal Bill’s passage in Parliament.

There are also worries which the Congress will have to handle from the SP. The SP has said that it prefers a blanked ban against land acquisitions – with the very important caveat that it would allow it under “urgent or emergency” situations. One of the urgent situations could well be coalition compulsions!

But overall, the Congress will be able to wield power over the SP. For the SP, the only thing that matters is the state of UP. It is thus unlikely to do anything that will destabilize its government there. It is this elbow room that the Congress lacks against Mamata.

Once the SP supports the UPA, Mamata will fall in line. Once Mamata realizes that she doesn’t have the power to harass the center, she will prefer instead to woo it. God knows she is in trouble already in the state. The honeymoon period for Mamata is already over and it’s clear that she is struggling with administration. The spate of child deaths in WB continues and very soon, this will start to hurt her. The people of WB didn’t vote her to power to give them even more Leftist policies. They voted her to power thinking she will bring them out of the tyranny of Leftist politics and poverty. Mamata seems incapable of delivering that. That’s why Mamata will need to rely on the money and management expertise from the Congress at the center.

The real truth is that UP matters a hell of a lot to national politics. More so this year than perhaps ever before. On UP depends the stability of the national government; its ability to continue to perform; to get out of the freeze it finds itself in right now. More than even the Congress, it is the corporate sector that is praying that the UP results go the way the Star News poll indicates. The corporates don’t care for one party or another – all they care for is the start of reforms and the resumption of decision making…..

The politics behind the Antrix deal….

As usual, the real story about this “scam” – the Antrix-Devas one – also is very different from what the CAG, opposition and media initially portrayed it to be. There are many questions that these three august institutions need to answer now that more facts have emerged. The two committees set up by the PM to look into the matter have presented their reports. And the findings are very different from what was first touted to be the case. The only complaint against the government is whether it has been too stringent in levying the kind of punishment on the four former scientists that it has. Nowhere is there even an iota of a scam that the government should be worried about….

Let’s work on the CAG’s pronouncement first. I have stated earlier in the context of the 2G matter that the CAG sometimes conducts itself in a highly clerical manner. But unlike an accountant (which it is) the CAG often thinks it is the ultimate finance wiz. The CAG made a mistake in assessing the 2G loss (they were clever enough to call it only a presumptive loss – in reality it was none of their business to even comment on the policy of free spectrum). The CAG has made another huge mistake by saying that the Antrix deal caused a loss of Rs 2 lac crores to the exchequer. The CAG is now looking silly. It appears that without understanding the science behind different types of spectrum, the CAG in an uneducated manner equated S-band spectrum with 3G spectrum. At least in the case of 2G spectrum, there was a TRAI opinion that 2G and 3G spectrum are essentially the same, though they are used for different purposes. In the case of S-band spectrum, it is completely incomparable with either 2G or 3G. But for the CAG, anything that goes by the word spectrum is to be treated identically (isn’t this the exact definition of being clerical?). And the bid value achieved during the 3G auctions should become the benchmark for valuing all types of spectrum. It’s like saying that a flat in Virar is the same as a flat in upscale Malabar Hill since ultimately both are just flats – places to live in; measured in square feet! So both these flats should cost the same!

Scientists have now explained that S-band has limited usage. It is useful only for satellite-to-land communications unlike 2G and 3G spectrum which is used for terrestrial-to-terrestrial communications and is thus far more valuable. Neither the Chaturvedi-Roddam Narasimha report nor the Pratyush Sinha report has indicated that there was any loss to the exchequer. There may have been procedural lapses, but there was no loss to the exchequer. Definitely nothing even remotely close to Rs 2 lac crores. Will the CAG please speak up now and maybe apologize? Or will it take advantage of the fact that it is an independent Constitutional authority and hence it owes no one any explanation?

Let’s now look at the opposition’s rants. The first thing that the opposition alleged was that the PM was responsible for the “scam” and that he should resign since the ISRO reports to the Space Commission which in turn reports to the PMO. Now this has become a predictable pattern with the BJP. It refuses to wait for investigations or assessments to be done. If the CAG published a report, that report would be studied by the PAC in which the BJP would have its members. The PAC may then conclude that the CAG was perhaps wrong. But in a political environment that is so vitiated now, the BJP is more interested in raising political froth from controversies than in reaching to the right conclusions. Its political strategy is based on using media to exploit sensational reports that come out from time to time – even if it is premature to do so.

The other thing the BJP fails to understand is that not everything can be pinned on the government or its ministers. ISRO is an independent organization and Antrix is even further removed from the government. It now appears from the two reports that Antrix failed to keep the cabinet informed. It took decisions that were in violation of its rules of business. It failed to bring up to the cabinet’s or the Space Commission’s notice that it had executed exclusive agreements with Devas when that was explicitly prohibited (satellites were to be leased to private parties only on non-exclusive basis). It took permission from the government to launch two satellites for this deal without pointing out that this agreement (a faulty one) had already been signed by it. As far as the BJP is concerned, the Congress is responsible for everything that happens in India during its watch. It could have demanded a probe into the matter to establish the truth (like the PM did). It could have asked for Dr Madhavan Nair’s investigation. But no, for the BJP, the focus is on ousting the PM from his job. The attack is singularly on the PM. Maybe the BJP should now demand that the PM should resign because the Indian cricket team is performing so badly in Australia!

That brings me to the last of the institutions involved in much of the sham (not scam) that Devas has become – the media. In its urge to be the first to file a story, the media is alright in putting out reports without adequate research/homework – which would help it draw its own independent conclusions. It takes recourse to the excuse that its job is merely to “report” on developments. In my mind, the job of the media is to keep its readers fully informed. It must provide a platform for healthy debates in which all points of view emerge. It must get to the bottom of the facts so that agendas – whether of the government or the opposition or indeed of any constitutional authority – are exposed. Even in the 2G case, the media failed to point out the intricacies of the matter. The political opposition was allowed to get away with sheer propaganda. In the Antrix case also, media could have tried to understand the difference between S-band and 3G – but it chose not to.

What about the government. It’s clear now that this government is an extremely nervous government. It reacts strangely and at times in a cowardly manner – showing no guts in dealing with the truth as it stands. It bowed down to minority politics in denying Salman Rushdie a chance to attend the Jaipur literature fest. It refused to acknowledge that the decision to give spectrum free was a conscious cabinet decision and not just Raja’s. It has now decided to blacklist the prominent scientists of ISRO and Antrix from all future government assignments – just to prove that its hands are clean. Now the two reports prove that none of the scientists made money – there was no quid pro quo. There may have been procedural lapses; there may even have been an attempt to commercially favor Devas, but the reports stop short of alleging corruption. The government should now be mature in handling the scientists….a mild rebuke is one thing. A severe censure is just another panic reaction.

The real truth is that it is now proven that there was no scam at all in the Antrix-Devas deal. It may not have been the best commercial deal, but there was no corruption. At least not on the government’s part. And yet when the story broke, all fingers were pointed at the government in an almost routine manner. This is a peculiar situation we are seeing in the country now in which the government of the day is being witch hunted – usually it’s the other way around!