Is Mamata a case of “Better late than never” or “Too old a dog to learn new tricks”???

Mamata Banerjee has had to swallow her proud words. When she was outwinked by the Congress and Samajwadi Party recently, she had issued threats like “the game has just begun”. Well, the game began and ended rather tamely for her. She’s had no option but to cut her losses and support the UPA’s candidates for Prez and Vice Prez. What does this snub mean for the politics of the country? Will Mamata mend her ways (Better late than never) or will she become even more strident (Too old a dog to learn new tricks….)?

The fact is that Mamata is fast losing her popularity in West Bengal. Her constant frown was once considered a sign of her anger at and the determination to change the system: the “paribartan” she talked about during the state elections. But now, the frown has become a sign of a constant tantrum. A tantrum that worked for a while, but has now outlived its utility. In the initial days, the tantrum of a partner is often tolerated; but beyond a point, it tends to be ignored. Once the point of ignoring is crossed, the frown has to be confronted and squashed. Both those points have been crossed in the case of Mamata. The Congress first ignored her on her demands for the financial package for her state. And more recently, the Congress has ratcheted up its confrontation with her on the Prez candidate. Now that Mamata’s game is up, how will she react?

She could continue to oppose the center’s proposal for FDI in multi-brand retail, but she could tone her opposition down to the limits of her own state. That would be fair. That’s what the Samajwadi Party is likely to do too. The SP also has stated – like the TMC – in its manifesto that it is opposed to FDI in multi-brand retail. Since their ambitions are clearly limited to the state level, the party is likely to oppose foreign retail chains entering the state. The SP realizes that by allowing the UPA to go ahead with an enabling resolution on FDI in multi-brand retail, it will be able to extract a pretty big pound of flesh. This would be smart politics; Mulayam gets what he wants while smiling and hugging the Congress but Mamata gets nothing by sulking and throwing a tantrum. Will this lesson strike home with Mamata?

The Congress has gained a fair bit in strength of late. The SC’s indication that the “auctions only” order of the court in the 2G matter was probably over the top has given the Congress confidence that it can resist and fight back. The convincing wins for its Prez and VP candidates will be a good stare back at the BJP – remember Sushma Swaraj had declared a few months back that the Prez elections would be a semifinal of sorts before the General Elections of 2014. But in spite of this gaining of strength, the UPA remains a weak coalition, under constant pressure from its allies, unable to implement the policies that Manmohan Singh would like to implement. The structure of politics in India is often ignored by foreign magazines which prefer to comment on the end-result: a policy paralysis. The PM has been personally bruised in all this. There is no doubt he will try to extricate himself from this mess…..maybe as a lass hurrah before he relinquishes power.

In my opinion, the pace of reforms will remain sluggish for another year or so. But towards the end of the UPA-2, the PM is likely to make a bid for some big-ticket reforms, in the same way that he did with the Indo-US nuclear deal towards the end of UPA-1. That deal was responsible for the Congress winning the 2009 elections; more importantly, it was responsible for the huge urban middle-class support it received. The PM is likely to attempt the same with FDI in multi-brand retail towards the end of this UPA stint. The urban middle-class would stand up in ovation if the PM were to allow foreign retailers to come in. Foreign retailers are going to enter only the major cities at first; that’s where the jobs will be created. The other place where foreign retailers will enter will be the online space, where there is a feeling that FDI is not permitted at present. Again, the benefits of the online invasion will be to the urban middle-class. I have a feeling the Congress will not go ahead with the retail reform till the fag end of its tenure. It will aim to maximize its gains at that time.

But the subject of this post is Mamata Banerjee. If I have to place a bet, I will on the “Too old a dog…..” one. That’s all I expect from her. Mamata is a poor loser. She has no grace. She’s crude and she has no shame in overtly exploiting the strength her 19 MPs have brought her. She cannot change. That’s the real truth…..

The Almighties of India and the spread of yellow journalism….

The belief that the Assam molestation case was stage managed by a journalist is shocking to say the least. In a desperate bid to stay relevant, and acquire content at whatever cost, media often faces pressures to sensationalize stories. When that desperation crosses all limits, and when journalists start to fabricate news – just like Erwing Armstead did in Irving Wallace’s The Almighty – it is time to sit up and take note. The Fourth Estate has a crucial role to play in a democracy. That important role does not allow for fabrication of news.

Though the Assam incident may be an extreme case of yellow journalism, more subtle forms of the same are rampant all across the media landscape. How do journalists sensationalize their stories? Very seldom do they actually create lies; usually, it’s all about preferring one story v/s the other, focusing on the problems of one political party v/s the other, and (on TV) allowing one bunch of people who share the channel’s views to speak longer v/s the other bunch. Media bias is all pervasive; that’s why consuming more than one media outlet to get the full picture is so important.

One of the commonest tricks of the trade is to give prominence to selective stories that serve the channel’s objectives better. So a negative story that occurs in a state that is ruled by a political outfit not favored by the channel is blown out of proportions; given prominence over other stories which may actually be far more important. By manipulating weights in this manner, media outlets create biased perceptions of what is going on in the country. For instance, these days, too much is being made out of the economic problems facing the country. While this overall picture is indeed true, not enough coverage is provided to the brighter spots of the economy – for example the strong FDI inflows into the country, the fast growth in NRI remittances, etc. As a result, a more-than-necessary gloomy picture is painted.

Take another example. The Independent’s sensationalist comment on the PM is put on the front pages, but Obama praising the PM as a stalwart of global economics is ignored. Take stories related to inflation. When inflation drops like it did yesterday (though by a token amount), media plays it down and puts it on the inside pages, but had inflation increased by the same token amount, it would have been put on the front pages. This kind of selective biasing of stories is all pervasive.

The other common trick that India’s TV All Mighties often play is to fill up panels with speakers who share the anchor’s views. One particular anchor is known to shut panelists who take points of view against his up. Another channel which is known to be a pro-ruling establishment channel does the exact opposite. A third English news channel does flip flops from government bashing to government appeasing – perhaps to maintain a neutral position “on average”! None of these channels bother about the damaging impact of their dirty practices on the country.

The third and increasingly common trick is to conceal the real identities of panelists. A woman lawyer who is quite popular on TV these days is actually the Vice President of a national party’s women’s wing, but the TV channel on which she appears prefers to call her just “Senior SC lawyer”. Likewise, another lawyer who once waxed eloquent about a particular party was in reality a college buddy of a national leader of this party. When the political party’s association is concealed, the panelist’s credibility increases. Since the whole intention is to do exactly that, the anchor doesn’t mind it.

In general, while newspapers also have biases, they tend to be more responsible and more balanced. But TV channels are a different ball game entirely. TV channels are overtly biased, and in their zeal to support their favorite parties, they are willing to go to any extent. The Assam story may also have a similar political bias. Assam is not known to be a competitive media market. The channel the journalist was working for appears to be a small local channel. I am not sure competitive pressures made the journalist do what he allegedly did. Maybe the whole idea was to grab the attention of the nation. Maybe the channel knew its scoop would create a sensation nationally, affecting the image of a particular party. Maybe that was the whole idea….

The real truth is that one cannot rely on any single media outlet these days. Just think about it. We are totally dependent on media for all the information we have on most subjects. Very few of us do primary research to learn about a subject. If this is true, and if we consume only one media outlet, we would become puppets in the hands of this outlet. This media outlet would then shape our opinions the way it wanted to. And it would never declare its real agenda…..it’s important people realize this real truth….

Sharad Yadav or Advani would have been better for VP than Jaswant Singh….

Jaswant Singh has no hopes of becoming the VP. The NDA never had a chance of winning at all. The fight is more a principled one as Sushma Swaraj said. Why then did the party not use this wonderful opportunity to score differently – clearing the path for younger leaders from its party to be PM when it came to power and building bridges with its estranged ally, the JD (U)?

There were media reports some days back that the NDA might nominate Sharad Yadav, President JD (U), for VP. Had they done that, they would have scored a hit with their ally. More than anything else, they would have ensured that the JD (U) did not vote with the UPA, just as it has decided to do on the Prez polls. Nitish Kumar would have had no option but to go along with the NDA. If the entire election is anyways only a symbolic gesture, then why not use it to build a stronger alliance for the 2014 elections?

Surely the BJP realizes that it is on a rocky wicket with the JD (U). More important that the JD (U) voting against the NDA in the Prez elections is the cantankerous and vicious sparring that has taken place between Nitish Kumar and Modi. At least in the short run, Nitish appears to have won with Modi silenced for now. Nitish has his compulsions to oppose Modi. His own popularity in Bihar (not something most people realize) is on the decline, and as he prepares for the LS polls in 2014 and the state polls in 2015, he will have to fall back on caste and religious politics forever popular in his state. There is no way he can woo the large Muslim population by remaining cozy with the BJP. Nitish is going to be a big problem for both the BJP and Modi. The BJP had better do something about this. Bihar is a hugely important state, and the BJP cannot let that state drift away from its fold.

Could the NDA have nominated Advani? Now I know that this would be seen as a snub to him, and comparable to Mamata nominating the PM, but let’s be practical here. Advani can never be PM, even if the NDA wins power in 2014. He is too old now for the job (85 this November). Besides, his acceptability as PM within the wider NDA family is very unsure. His hardline image continues to polarize the alliance. But if he stood for VP, it is likely all NDA alliance partners would support him. After all, no one can deny that Advani is the tallest BJP leader. Surely, the alliance partners would respect him enough not to vote against him. In fact, it is likely that even some UPA allies may vote for him…..

Would Advani have agreed? Would he have agreed that he cannot be PM; and that he should become VP? If he became VP now and if the NDA came to power in 2014, he could even have a good chance of becoming the Prez in 2017. Just like Pranab realized he could never be PM, what if Advani was practical enough to realize the same? Advani’s departure from the PM’s race would bring relief and peace to the BJP and clear the decks for someone younger to become PM. At present, one doesn’t know clearly…..Advani may still throw in his hat for the PM’s job.

Why Jaswant Singh? How does the BJP benefit by nominating Jaswant Singh? Jaswant Singh has been at war with the party every now and then. He was even expelled from the party in 2009. He is a political lightweight; hardly the politician who could rally alliance partners and BJP state cadres behind him. Is it that the BJP doesn’t want to surrender the nomination to an ally and wants to keep it for itself but finds that it has no other suitable candidate from within its fold? Is it that no one from the party really wants to contest, knowing that the chances of winning are almost nil?

The UPA will breathe easy now that the NDA has nominated Jaswant. It can now be sure that the Left will vote for its candidate. Had Sharad Yadav or Advani been nominated, it could have gone either ways.

Should one read anything into the goings on between the Congress and the JD (U)?  Is the JD (U) better off partnering the Congress in Bihar? The Congress is a weak party in the state unlike the BJP which has a robust political base. It should be an easier party for the JD (U) to handle at the state level. For the Congress, it should be easy to dump Laloo and Paswan; neither of them has any chance of winning in the state. If it wants to have any chances of winning in 2014 at all, JD (U) could be that magical partner. So is it possible that the two parties are trying to tango together? The two central universities that the Congress recently agreed to in Bihar gives some hint of this. Or is it that the JD (U) is just keeping the BJP in check by acting coy with the Congress? Only time will tell!

The real truth is that the NDA messed up the Prez nomination and has now messed up the VP nomination. It has let go an excellent opportunity to mend its very broken relationship with JD (U). It could also have pushed its own veteran leader Advani to be a little pragmatic. That it did neither shows again that the BJP can growl a lot, but it simply cannot bite…..

Our depraved society and the police as an ATM machine!

The molestation of the young girl in Assam is shocking and reprehensible but hardly surprising, given the depraved society that we have become. The response of the Assam police chief is equally reprehensible, but again not surprising…..so many of these chiefs have stunned us with their insouciance and worse. But the chief’s ATM machine remark (“police is not like an ATM machine which can be present at the crime scene the moment one inserts a card in the machine”) does remind one of old Hindi films in which the police always arrived after the hero had finished off the villain! Mr. DGP…. you are right…..the Indian police never come on time!

And even when they finally do come, they do precious nothing. One of the reasons for this is that many of the cops are mentally depraved and on the side of the mob that is meting out punishment to the “erring” woman. The woman in Assam was coming out of a pub after all. What kind of women go to pubs? Dhoble (the latest moral policeman of Mumbai) believes that such women are prostitutes. In the Neanderthal-man-like-brains of such cops, such women deserve to be punished. So they tell themselves: Let’s go a little late. Why be an ATM machine at all.

But if cops are depraved, so is our society. Much of our society thinks the same way about our women. While the press was up in arms against Dhoble, there was a concerted move by some in Mumbai to build support for him. To promote him as a samaritan who was just doing his job. They cited how Dhoble had cleaned up the dance bars in the city; how the poor man was only following the law; how an upright police officer was being unnecessarily targeted and so on.

Our society secretly likes such moral keepers. That’s because our society hasn’t reformed. Our society continues to remain backward. Our society is uncomfortable with the winds of liberalization brought about by a modernizing economy and a “westernized” media. In fact, our society is ok even with the use of violence against such vicious forces of liberalization.

The country has moved on economically from where it was in 1991. But our society hasn’t. Economic progress is relatively easier to achieve. Social progress is not. We have to look towards our education system for clues on why this is happening. Even basic courses like “moral science” are missing from our schools. Children are hardly taught what basic courtesies are; how to respect each other and be liberal in thinking. Where do we expect them to learn all this when they see their parents – who themselves missed all this when they were in school – behaving in uncouth ways; spitting and littering everywhere, mistreating their wives and uttering ridiculously chauvinistic rubbish all the time?

That’s why the same story keeps repeating again and again. Take the other story in the papers today…..about the khap panchayat in a UP village that decreed that women under 40 should not be allowed to have mobile phones? Or wear jeans because “jeans encourage young children to elope”. Likewise the Delhi police chief’s sermon some months back that women must dress appropriately. In a modern city like Delhi, do women have to dress like they would in Afghanistan???? Should he have said such a thing at all or should he have issued a stern warning to the perps who ogle at and molest women? But then again, the Delhi police chief must have got congratulatory messages for his statement.

With our society so depraved, how can our politics stay away? Consider the appeal of this BJP MP from Gujarat who wants a complete ban on liquor and cigarettes from being shown in movies and TV serials. Without doubt, he will immediately find support from several NGOs and the variety. I can never understand this clubbing together of liquor and cigarettes. Liquor in modest measures is not a problem at all. In fact, some may argue that liquor in small doses is actually good for us. Liquor doesn’t become a problem unless it is consumed in large doses. But then so does food become a problem when consumed in large quantities. We have a bigger obesity problem amongst the middle class in our country than we have a liquor problem. The point however is that liquor is unacceptable to our old fashioned society, so calling for its ban is a way for a politician (or an activist like Anna Hazare) to endear himself to the community.

The real truth is the unfortunate truth that the Assam kinds of incidents have the approval of our society. That’s why they will keep repeating. While the government has to role to play by ensuring better quality of education, and bringing the perpetrators to book, social reformers have a bigger role to play. Where are the social reformers….the activists who can devote their time towards the upliftment of society? The Raja Ram Mohan Roys and the Baba Amtes. Till they emerge, our police chiefs will continue to mouth such inanities as the police not being an ATM machine….

Don’t clarify Mr. Chidambaram….what you said is true

Chidambaram may have been compelled to clarify his mineral water and icecream statement…..saying that he wasn’t mocking the middle-class, but he really didn’t need to. What he said was absolutely perfectly correct. The middle-class is a pampered lot; and its protests are usually related to its unwillingness to share the spoils of the economic boom we have seen in the last twenty years with those who have been left out. Inclusiveness of economic growth is an alien concept to the middle-class.

But let’s first define what the middle class really is. In my simple definition (not a hyper technical economic one!), the middle-class is largely urban, largely salaried or in own business, and largely educated. We can add the “better-off” rural folks, whether in agriculture, manufacturing or salaried jobs, to this definition. Middle-class does not include those employed as domestic workers in the urban areas (drivers, maids etc), nor rural farmhands and casual laborers. It does not even include the poorer sections of those defined above – so let’s leave the poor factory workers out in many cases. It includes all government servants, most private sector workers and most self-employed professionals. Not surprisingly, the middle-class is a largely urban phenomenon.

Now consider how this segment has fared economically in the last twenty years. In every single year, this segment has seen its salaries or incomes grow at rates higher than inflation. Even in a bad inflation period like the last two years, average income hikes have been upwards of 11-13%, at least 4% more than inflation. Further, even on social parameters……eg education – the middle-class has benefitted the most. The lower classes have also benefitted, but in absolute terms, they still remain in a disadvantaged position.

The reason the middle class cribs is because it is unwilling to share the benefits of the economic boom with its rural, poor and underprivileged brethren. When petrol prices are hiked, and fuel subsidies reduced, it helps the government divert those savings towards programs targeted at the rural poor. When fertilizer subsidies are retained, ditto. When MSPs (Minimum Support Prices) are increased, the beneficiaries are the millions of farmers who are otherwise unable to sell their produce profitably. Of course that increases the prices that the middle-class has to pay and they howl when they have to pay these higher prices. When the NREGA program puts money into the hands of those who cannot be employed by the organized sector in the rural areas, and when they stop migrating to the cities, the urban middle-class complains about the rising wage demands of servants, drivers etc. When NREGA wage levels are linked to inflation, the middle-class again chides the government.

The double standards of the middle-class are apparent also when it discusses Kapil Sibal’s initiatives on Right to Education and policies of Affirmative Action (compulsory 25% seats in even the most elitist schools to be reserved for the poor). If they had their way, the middle-class would like to keep all the resources to themselves and not share anything with those aspiring to join their class. In many ways, the entire 2G spectrum fees controversy – whether it should be given free to telcos so that the prices can be kept low or whether it should be auctioned at the highest possible price which would lead to a price hike leaving out vast sections of the poor from its fold – is a middle-class conspiracy. The middle-class doesn’t like the telecom subsidy (in the form of low or zero license fees) that benefits the poor the most.

The importance of the urban middle-class is vastly different to the BJP than the Congress. For the Congress, its primary constituency is the rural poor and the under privileged. For the BJP, it’s the urban middle-class. So I have no complaints in the BJP’s complaining – and its complaints finding resonance in some middle-class pockets – against Chidambaram’s factual statement. I am all for a political debate and even a polarization on this matter. Chidambaram needn’t have withdrawn his statement or provided an explanation because his statement serves his constituency very well. He was dead right. The BJP can continue to moan on behalf of his pampered urban middle class vote bank, but Chidambaram needn’t heed anything it says.

The same thing was apparent when it came to allowing FDI in multi-brand retail. The urban middle-class “baniya” (a large middle-class community) focused BJP opposed the move and a weak Congress couldn’t find the courage to take a decision which would have benefitted millions in its core farming community. This is a political battle. This is an example of differing political ideologies. The Congress must go ahead with FDI in multi-brand retail. Let the people decide whether they like this policy or not and vote accordingly. It’s a battle between the urban middle-class (most of whom in any case I feel support FDI in multi-brand retail) and the farming community (who favor FDI in a large way).

I have always maintained that the current inflation is a benign inflation. It doesn’t harm the poor. It is in fact, a result of the pro-poor social programs of the government. It’s a direct result of the NREGA transfers and the higher MSPs. The rural poor are not getting pinched by this inflation. Nor are the urban middle-classes in reality. If anyone is getting pinched, it’s the urban poor. Those who depend on the middle-class for their incomes. The drivers and maids and other helping hands who count on our generosity for their livelihood. In spite of our unwillingness to pay this section higher, there has been a forced change in their incomes. With states like Bihar and UP being able to provide more employment to their own people, and with NREGA stemming the flow of people from the rural hinterland to the urban areas, the salaries of even this section of the population has increased significantly. The stingy middle-class though continues to resist paying out willingly…..and complains the most when it has to pay more. It resists and protests everything that leads to a redistribution of wealth in favor of the poor. In that context and in a very metaphorical way – the middle-class is happy to buy more and more products (like water and icecream) for itself – but complains when it has to pay a little more for petrol. Chidambaram was indeed right!

The real truth is that Chidambaram owes no explanation for the truth he stated. His statement about the urban middle class is indeed correct. Every middle class member enjoys a far better life today in spite of the inflation. And yet, the middle class complains. Redistribution of wealth will not happen voluntarily. It will need to be forced down the gullets of the middle class….

Kudos to the SC for revisiting its own “auctions only” ruling….

It was an obviously wrong ruling. How could the SC possibly prescribe policy and that too on such a major subject? How could the SC even have the intellectual wherewithal and expertise to prescribe a particular policy for allocation of natural resources? And yet….when on Feb 2^nd this year, the SC did just that, its ruling was greeted cheerfully by some sections of civil society activists and the opposition. But did that cheering mean that the ruling was right? Was the SC not pandering to public opinion? Thankfully the Constitution bench of the SC has indicated that it may revisit its ruling.

There are two separate issues involved here. One is about ensuring transparency in the allocation process, even if the allocation is done “Free Of Cost (FOC)”. The second is about maximizing revenues using auctions as the route for allocation. Most people of this country are fed up with the all pervasive corruption and hence cheered the “auctions only” ruling. But they perhaps did not realize the consequences of such a ruling. In achieving one goal, were were sacrificing another larger one? Let me elaborate.

If “auctions only” was the route to allocation of resources, the rich would corner most of the resources. In an ascending e-auction methodology as followed in the 3G telecom auctions, the highest bidder wins. Obviously, the well endowed are in a position to bid higher and take the associated risks. The less endowed are sidelined. Only the biggest global and domestic players won the 3G licenses. In contrast, when 2G licenses were first given away without auctions, we had several new entrepreneurs (including the present big daddy Sunil Mittal) being created. Is an “auctions only” policy in line with our goal of inclusive growth then?

Secondly, “auctions only” would lead to a huge increase in end consumer pricing. Take (in a very different context), the IPL. Everything in the IPL is bid for. The teams are bid for. The TV broadcasting license is bid for. Even the players are bid for. As a result, the cost structure in the IPL is very high. Since there is so much money involved, several things (good and bad) happen. The quality of the game improves dramatically – Indian stadiums are the best in the world now. Global standards are met and surpassed – the IPL is as professionally organized as the EPL or the Euro Cup (there are no typical 3^rd world hiccups). But at the same time, the advertising rates for spots on TV are exhorbitantly priced. Advertisers pay through their nose, but they also get a high order viewership. This is the classic “rich country” pattern – where products and services are of very high quality, but the pricing is also high. As such, this kind of a model is inappropriate for a developing country like India, where whether we like it or not, a lower product quality-lower pricing model is more appropriate.

For India, a hybrid model works best. Hockey in its current avatar is in a very poor condition. The quality is very poor and the viewer experience is even worse. If cricket represents extreme capitalism, hockey does socialism. Quite clearly, we need an in-between place. Clearly a capitalistic “auctions only” policy is a misfit in the Indian context.

Let’s look afresh at some of the recent corruption controversies. The crux of the allegation of the CAG of a loss of Rs 1.75 lacs crores to the exchequer is that the spectrum was given away “free”. If “free” meant that the government did not get the money in its coffers, then it didn’t need the CAG to tell us that. But the real allegation was that this was a case of corruption. An impression was created that someone had pocketed Rs 1.75 lac crores. At least, that’s the way most people in the country have understood it. How was giving spectrum away free a case of corruption? Who made the money? Did private companies (as alleged) make the money? Just check out the profit margins of telcos. The most profitable of them all, Airtel, makes 14% Net Profit Margin. The 2^nd biggest Vodafone recently declared its maiden profit after being in this country for nearly 20 years. Idea’s NPM is 3% and Reliance’s 1.4%. Clearly, the private companies passed on the “free spectrum benefits” to their customers. Who ultimately benefited? The people of this country. A completely idiotic theory was presented then that the winners of the new telecom licenses had made huge profits by offloading equity to new foreign partners. Idiotic, because “offloading” wasn’t like the seller was “taking home” any profits. The new money the foreign partner brought was just parked inside the company, just like happens in almost all joint ventures.

Ultimately, everything the government does must be for the benefit of the people. What would have happened if the government had auctioned and made the so claimed Rs 1.75 lac crores from 2G auctions. Firstly, the mobile call pricing would have been so high that teledensity would have remained some 20% or so. And we would have been a sub-saharan economy not the tiger that we are today. Secondly, the government would have used the Rs 1.75 lac crores for its various spend programs, 85% of which would have gone on bureaucratic expenses and only 15% towards benefitting the people. Such is the size of our government that it ends up being the biggest beneficiary of any government income. That is why it is said that the size of the government should be as small as possible. Government must get out of businesses. The benefits of 2G were much more when left to the private sector to distribute them to the public.

Take coal block auctions. Now this is the biggest piece of misinformation spread by the CAG and lapped up by the opposition and media. It is believed again that the private companies benefited unduly by the “free” coal blocks. Again, let’s apply the test of profit margins of power companies that got these free blocks. Here’s a piece from my post of June 2, 2012: The ultimate test of corruption has to be if some person or some company gained personally. Check out the financial results of different private sector power companies. Tata Power: Revenue Rs 8496 crores. Net Profit Rs 1170 (13.7% margin). Bhushan Power: Revenue Rs 9941 crores. NP Rs 1024 crores (10.3%). Lanco: Revenue Rs 8605 crores. NP Rs 116 crores (1.3%). Jindal: Revenue Rs 13334 crores. NP Rs 2110 crores (15.8%). Adani Power: Revenue Rs 3949 crorese. Net loss Rs 294 crores (-7.4%). Check out the public sector NTPC for a benchmark: Revenue Rs 62053 crores. NP Rs 9223 (14.8%). So which private sector company has made super-normal profits? If the “proof” of corruption is that these companies benefitted from the government’s “gift”, surely their margins should have been far higher????

In fact, in the case of coal blocks, there was an auction conducted, but it was at the power utilities’ end. The power companies which got the coal blocks free were granted the permission to set up power plants on the basis of a reverse auction. The reverse auction ensured that the state got the cheapest rates for power. That’s why private power companies do not show super normal profit margins. They’ve passed on the benefits to the people.

Media in this country is of course behaving in an ignorant, self-serving and politically motivated manner. Rather than understanding issues and presenting them in an unbiased manner, it tends to spin sensationist stories so as to improve its own business. Media needs to decide for itself – just like the SC has now done for itself – whether it needs to course-correct or not.

The real truth is that auctions may be an efficient method of allocation, but they cannot be the only method. Auctions have many flaws….most importantly that they lead to concentration of economic wealth in the hands of the rich. Secondly, there are many ways to ensure transparency in the allocation process, without necessarily relying on a capitalistic auctions process. Thirdly, we need to be mature and sensible as a nation. We need to differentiate between genuine corruption (as no doubt there must have been in both the 2G and coal block allocation processes) and government policies. If we cannot, and if we are dumb, then we will lose our rights to enjoy the fruits of democracy….

Is Time magazine fair to call PM an underachiever?

If one goes blindly by recent low GDP growth numbers, rising inflation and high fiscal and current account deficits, and ignores the factors that cause these, then obviously Time Magazine is right in calling the PM an underachiever. But is ignoring the real factors a fair way of judging a person? Is it fair to question the PM’s “legacy” of economic success based on the performance of the economy in just the last one year?

Yes, it’s only the last one year that has seen the Indian economy in a spot of trouble. I covered this in the defense I put up for Pranab Mukherjee as the FM (Defending Pranab Mukherjee as Finance Minister….June 25^th). The defence of Pranab Mukherjee on economic performance is applicable as much to the PM as it was to Pranab.

The one point that Time Magazine can afford to ignore – or willingly choose to ignore – but we cannot, in judging a person’s performance is the condition under which the person has had to perform. If Sachin Tendulkar is made to bat under 50 degrees centigrade temperature, it is very likely that he will underachieve. Or if he is made to bat against a gang of 22 players…..all come together only to frustrate him, then it is likely that he will underachieve. However would we rush to call him an underachiever? Or would we analyze the circumstances and hand him the benefit of doubt? We would try to establish if any other batsman could possibly have done better under the conditions.

So let’s ask that question: Could anyone have done better than the PM under the circumstances? An article recently by Swaminathan S Anklesaria Aiyer warns us against expecting major changes from the PM, now that he has taken over the Finance Ministry. And his reasons are simple and correct. What are the reasons for the slowdown? First, a stoppage of reforms. But why have reforms stopped? Not because of the lack of effort and intention of the FM and PM but because of a certain alliance partner who is anti-reform (Mamata). And because of an opposition (the BJP opportunistically and the Left consistently) that will oppose for the sake of opposing (they oppose petrol price hikes and diesel price hikes and also complain about high fiscal deficits). Another reason for the slowdown is the freeze in policy making. Can that be attributed to the PM and FM? Or to the creation of an environment of fear within the bureaucracy and political class by aggressive civil society bullies (who will call everyone corrupt no matter what the facts). Or on the series of elections that take place every few months making it politically difficult to take necessary tough decisions. Or on the divided political mandate that the ruling party has at the center…..it does not even have a simple majority in the Rajya Sabha. What else can one expect from a government and a PM under such conditions?

It’s not for want of inspiration or ideas that the PM and FM haven’t been able to push reforms forward. Forever, they have wanted to reform the banking, insurance and pension funds laws. Ditto airlines, retail, mining, land acquisition, etc etc. But when it comes to reforms of any sort, there is always someone or the other who opposes and in the very tentative political balance we have now, no PM would be willing to “stick his neck out” as Time blames the PM for not doing. Sticking your neck out is sensible only when you know there is enough support for you. If sticking your neck out leads to the fall of the government, then the same Time magazine would later call you stupid for having stuck your neck out so far!

What Time magazine has raised about the economic slowdown is no doubt correct. From the high 8-9% growth rates till a year back, we are down to 5-6% now. What is worse is that there is not enough confidence that the growth rates will rebound quickly. So one cannot fault Time Magazine for its observations. But one cannot forget that Time Magazine is a tool in the hands of the American power establishment. When Assange was not given the Time Person of the Year Award recently, there was more than routine speculation that the American establishment had pressurized the magazine. In pushing their government’s agenda, foreign magazines will often be parochial in their coverage. By raising questions of legacy, the magazine may be pushing the PM to take decisions that would help its government. This is common sensical. One cannot worry too much about it.

One has to keep in mind the hurdles that face the PM before judging him. He simply doesn’t have a free hand in running the economy the way he would like to One often forgets that in 1991, the Congress had 244 seats – a much stronger position than it finds itself now in.

Could anyone have run the economy better?  Are there so many obvious ideas floating around that the PM simply has to grab and implement them to lift the economy? Filter out all the raucous criticism the BJP heaps on the PM and see if the party has any ideas of its own. Zilch. All BJP leaders will state the obvious. Cut the fiscal deficit. But they won’t support a petrol price hike. Encourage foreign funds flow. But they won’t support FDI in multi-brand retail. Bring inflation down, but they will complain that natural resources are given away cheap (wait for coal block auctions – the power tariffs will shoot through the roof and inflation will rise again). While judging the PM, Time magazine can afford to ignore these realities; but we cannot.

The reason ratings agencies have reduced India’s outlook is not because of the PM’s underachievement. It is because they see no chance of improvement in 2014. Assuming that the UPA loses power (as everyone expects it to), who will emerge strong enough to form the government then? The NDA? The BJP surely cannot manage more than the 206 seats the Congress has got now. Their plate is full of troubles in Karnataka and Gujarat and MP and everywhere. Besides its divisive communal politics has a natural limitation. And for every truant Mamata in the UPA, there is a Jayalalitha and a Nitish Kumar in the NDA as well. This is the real problem that has led to the slowdown. We have a high order of political instability. This is not the PM’s creation. Even Vajpayee failed in sustaining the high GDP growth regime he inherited even though the kind of debilitating political compulsions we now see were not present then. Net net, dubbing the PM an underachiever is a tad unfair.

The real truth is that rather than play politics with the coverage in foreign magazines, it is more important to identify the real reasons for our ills. We need stronger political mandates at the center. We have seen that happen in the states. Such states always do better. An Uttarakhand with a delicate majority for the ruling government cannot be expected to move at the same pace as a UP which has given a strong majority to the ruling party. It’s not about the Congress or the BJP. It’s about being intellectually honest….