Integrity Dr Singh?

The CVC is appointed over the protest of the Leader of Opposition. The person has been chargesheeted in a case. And is one of the persons responsible for the 2G scam. The Supreme Court questions how the person can be investigating cases of corruption. The CVC still occupies office, though there is just a chance he may resign.

The election commissioner was appointed while there were allegations of having received money in a charity run by him, from ruling party members.

Raja was finally ousted by pressure from the parliament - and is now being investigated.

His boss - Dr. Singh, continues in office, unscathed and unaffected - constitutional propriety be damned.

Teesta Setalvad is now being investigated by a sessions court for filing false affidavits. A Delhi court had to instruct the Delhi police to file an FIR against Arundhati Roy and her separatist supporters - over-ruling the objections of the police that no case was needed. For this government, Kashmir is not a problem, the government is busy finding and prosecuting "saffron terror".

Various government banks and bankers were found to be taking bribes, and are now being investigated.  Rumours abound that the aviation minister and his party boss have shareholding in two major private aviation companies - companies that he is supposed to regulate, and who have increased airfare by well over 100% in the past one year. Kalmadi roams free - the Rs70,000 crores that were spend to host the CWG remain to be investigated.

Government lies extend to economic growth figures. Gross fixed capital formation for the first quarter this year have been revised from 7.6% to 18.9% (because a new set of inflation deflators are being used) !

Indian defence is in tatters - the latest wikileaks quoted the USA ambassador as estimating that India's "cold start" military doctrine is now in cold storage !

Sometime earlier this year, a movie called LSD made waves. It could describe the operating motto of the Singh government. But Dr. Singh is an honourable man.

Hounding wikileaks

The Chinese government is often lectured for being secretive, of suppressing dissent . So are governments in several other parts of the world - Burma and Iran to name a few. Apparently, this same standard should not be applied to diplomatic missives - or so the US government would have you believe. Disclosing what goes on behind the diplomatic curtain is a crime !

USA government now wants to file a criminal case against Wikileaks founder. Paypal has stopped accepting payments to support the site, and google has stopped offering the site which it hosts. Both these service providers disclaim any pressure from the government. How believable is that?

Eventually, what matters is that ALL countries look after their own interest (and that usually means the interest of the government in power). So take the justification for the action against wikileaks - the assertion that this puts people at risk - for what it is - protestations of a government caught lying.

Why is Ratan Tata protesting about privacy?

Ratan Tata, the Chairman of the Tata Group is, reportedly, planning to move the Supreme Court against publishing intercepts of his conversation with Niira Radia. The stated reason - private conversation not connected with the 2G scam should remain private.

In principle, there cannot be a disagreement with the argument. On the other hand, unless there is something in the conversation that would be of interest to the world at large, it can be assumed that it will not attract attention, even if made public - after all, there is voluminous data that is threatening to come out in Wikileaks, that is likely to attract a lot more public attention over the next few days. So what can be a reason?

Perhaps it lies in a report published many months ago in a little know hindi website. This report, which purports to be a confidential letter written by a taxman investigating the 2G case has some interesting comments. The relevant excerpts are in points 2 and 3 above.
 Some interesting links to the original site are :

http://www.bhadas4media.com/tv/5036-barkha-vir.html
http://www.bhadas4media.com/tv/5071-barkha-vir.html
http://www.bhadas4media.com/vividh/5065-barkha-vir.html
http://www.bhadas4media.com/tv/5036-barkha-vir.html

The role of key media personalities is also revealing.

Draw your own conclusions.

Insurance and IP - an academic view

For years, I have held the view that IP (intellectual property) is no more than a trade barrier imposed by rich countries on poorer ones. I also maintain that once countries like India develop enough to generate their own IP, these very same developed countries will start questioning the need for IP.

Another issue I have long felt that India is going the wrong way on, is patent protection for medicines. Given the large population in India requiring cheap medicines, the model of insurance-led health care is completely flawed. Our negotiators at the WTO have sold India down the path of disaster by conceding to patent protection for pharma products in India, and by allowing private sector companies to offer health insurance - both steps that will take the price of medication out of reach of the common man.

A recent article I read in the TOI from a nobel prize winning economist provides some support to my arguments.  The operating parts from a discussion with Joseph Stiglitz, are :

On Insurance - "Rather than provide better healthcare at lower costs, insurance companies innovate at finding better ways of discrimination. They are inefficient because they are trying to figure out how to insure people who don't need the cover and keep out people who need it......India would be in a terrible mess, given the size of its population, if it went down the wrong route (of private companies for health insurance). They should learn from the mess that the US has got into."


On IP - "...the benefits of IP have been exaggerated and the costs underestimated. IP creates monopolies. And it does interfere with economic efficiency by interfering with the flow of knowledge and the use of knowledge, particularly for developing countries....The question is whether IP promotes innovation. Increasingly, the evidence is that it may actually impede innovation. It is leading to infinite negotiations around patents. More money is being spent on lawyers than on research. The legal cost of using the system takes up more resources than the benefits from the system."


Now that, from a Professor of Columbia University, and a former Chief Economist of the world bank - may carry more weight than my own arguments - but I'm happy that atleast a part of the academic world is taking a sensible stance. I wonder if the bureaucrats in the Indian government that make up these policies are listening!

A Visit to the USA - The Good, the Bad, the Ugly

I just returned from an 18 day vacation to the USA. This time around, my understanding of the issues affecting the country was certainly better than ever in the past. Some thoughts.

The Good

Nature has been kind to the USA, and the citizens have used nature well. Large open spaces (outside the metro cities – and large parks in most metros), clean air and reasonable infrastructure in most parts make the country extremely livable. I envy the houses and community infrastructure most places enjoy – something India may take a long time to achieve, if at all.

Obama’s policy of funding infrastructure is clearly visible, with roads being built in most places I visited. Perhaps more so than in India!

Local government representatives seem responsive to needs of their electorate. I heard stories of people reaching out to their senators to get issues sorted out, and the senators responding! India seems to have the same population per MP. Some lessons to learn here.

The Bad

Bureaucracy is abundant. JFK immigration took 90 minutes to clear – with immigration officers either absent from their stations, or busy sipping coffee and chatting among themselves – oblivious to the mile long line of travelers waiting to have their passports checked. Reminded me of Calcutta of the late ’70 when communists were at their peak!

Compared to that, Indian immigration is now a breeze – at 3:30 at night, it takes less than 10 mins to clear two plane load of travelers.

Socialism exists in various forms – housing taxes come bundled with school fees – clearly detrimental to those who have no children, but have to pay. This forces ghetto of a different kind – communities are generally homogenous with age and social strata determining housing – because of the taxes involved. The argument that the same level of education is available to all levels of income earners is fallacious – you can only stay in a community if you can afford to pay the house taxes of that area!

The Ugly

The healthcare system is a rip-off. Hospitals charge fees that have no connection to the value of service provided – George Washington University Hospital charged me a $1000 for a clinical examination of my daughter – no tests, no ambulance, no admission. I was advised (later on) that these fees are best “negotiated”! Wow!

The pharmacies are even more of a rip-off. A medicine that was supplied by Sun Pharma (which would, I assume, be making about 20 paise per tablet) was charged at $6 per tablet! Further, the pharmacy keeps the prescription – so that more than the prescribed medication is not made available to the patient. In a country where guns can be purchased in the department stores (almost), and where freedom to harm yourself is protected as a fundamental right (almost), the need to “protect” the patient against medication, (increasing the cost of drug delivery by several times what it needs to be – by eliminating competition in distribution) is criminal.

Overall, the country remains seriously uncompetitive in most matters. Most businesses make money through cartelization (finance), or through regulations (patent protection, visa controls, minimum wages) creating entry barriers. The basic education system stresses more on games and less on studies – a football coach at a college will likely earn 5x-10x what the math teacher makes. The country has some serious challenges to face as it comes to terms with a world where other countries offer greater opportunities for growth.

Nuclear lies and obfuscation

The Civil Liability for Nuclear Damage Bill 2010 is well on its way to become law. The Congress and the BJP have, between them decided to sell the Indian national interest to the multinational corporations, with a few crumbs that the Indian companies will pick up along the way. Here is a set of expert opinion that I wish had received greater attention:

1. Dr. A Gopalakrishnan - former Chairman AEC - and a consistent opponent of the legislation - explains why the preamble and object of the bill is a veil of lies. He clearly lays down the benefits to US companies.
2. A report in the Hindu - that illustrates the way the government is going to bulldoze the interests of the local population

3. My friend M V Ramana, a physicist currently at Princeton and Suvrat Raju explain the moral hazard in the legislation. At an estimated cost of Rs18cr megawatt, it still remains a wonder why the same effort is not spend on solar

4. Vardarajan - who had of late shifted to defending the government policy on nuclear power, is constrained to comment on weak bill that will let foreign suppliers off the hook in the eventuality of a nuclear holocaust

5. More by Ramana and Raju on the moral hazard of the policy being followed by the government.Given the effect we see on the world economy by the relatively benign "moral hazard" of unsupervised banking, I shudder at the effects that this moral hazard will eventually have on India.

Besides the cost of setting up the power plant @18crs per MW (estimated) other costs that need to be considered (and have been outlined in the discussions of the Parliamentary committee - but not quantified) are:
- Finance ministry - Insurance premium will be likely in the range of 1.8% - 2.7% of the 300mn SDR that is mandated
- Home ministry - Costs of damage arising out of conflict, hostilities, war, terrorism - need to add to security forces
- Ministry of Water resources - Ministry does not have facility for testing water quality from view point of nuclear contamination. Need to study impact of contamination on humans, crops, animals
- Ministry of environments and forest - what efforts are to be made to safeguard the environment around the nuclear facility
- Department of food - storage of foodgrains - distance and operating procedure
- Ministry of health and family welfare - Ministry is nowhere ready to meet emergency arising out of nuclear or radiological emergency. Hospitals not equipped - bill does not have a single clause on health care during nuclear emergencies - only compensation due to health effects of radiation.
- Ministry of Agriculture - Disaster Management system not aligned for radiological fallout.
- Ministry of defense - fool-proof protection of nuclear assets cannot be guaranteed

Assuming that these concerns are addressed, what would be the actual "cost" of nuclear power. And of course, we have not even taken into account the cost of storing the "spent fuel" over the next 100 years !

Ofcourse, the Prime Minster has committed to the US that India will pass this bill - and the Prime Minister is an honourable man. If Indian lives are lost, that is just "collateral damage".

MP salary - weighing in on the debate

Over the past couple of days the media has been exercised over the "300%" increase in the salaries of MP's. Protesters have objected to quantum of increase (300%), and to the lack of accountability. Many have suggested that performance should be measured by the number of days the MP appears in parliament. In my view, there are several, mixed issues here. First, if we go by the 300% figure - the amounts are pathetic - from Rs16000 per month to Rs50,000 per month. By itself hardly worthy of comment. The protesters immediately shift to the "cost to country" basis claiming that the salary is closer to Rs 57 lakhs. By that token, the earlier salary was already Rs48 lakhs (see linked article). The increase is therefore a very modest 20%. So what is the issue really?

The issue of accountability is a lot more complex. I would argue that the salary that is to be paid is based on the position. The actual performance of the person occupying the position will decide his/her ability to continue - which in the case of the MP's is what the public does every 5 years. The system therefore has an inbuilt accountability for MPs. Attendance in Parliament, while desirable, cannot be the only measure of performance. It is perhaps not even an important measure. Consider that MP's are REQUIRED to vote on the basis of the party whip - and have no voice of their own. Additionally, in most case, the party will decide which member shall speak and on what. Where does this leave the back bencher the ability to reflect his actual view. In such a case, is it not better that the MP spend time in his constituency rather than in Parliament.

Now the case of bureaucrats is more interesting. They have the perks of power, a battalion of junior officers to support them, perks that rival that of MP's, and a salary that is usually higher. Additionally, they have little accountability - being assured of job security. What most citizens are interested in is in good governance - which is largely the preserve of the the executive - largely comprising the bureaucrats. The MPs are supposed to Legislate, not execute - a fact largely overlooked by the public when venting their ire on the MPs.

So - point the hatchet where is belongs - to the incompetent yet ubiquitous "babu" that holds this country hostage, and cut the MPs some slack  

The PMO intervenes in the Pharma IPR case

Yet another case of the PMO going out of its way to facilitate foreign companies at the expense of Indians. With large Indian companies rapidly getting taken over by multinationals, the lobbying strength of OPPI is only going to increase - and Indian healthcare costs will rise. I wonder what gives with our PM - why is he SO eager to dance to the wishes of the foreigner. Anyone for Laloo as PM? Just saying.

The nuclear sell-out is complete

With the nuclear liability bill emerging from the Parliamentary standing committee with minor, facile modifications, India is well on its path to energy bankruptcy. For some inexplicable reason, India continues down the path of nuclear armageddon - presenting itself as the most attractive destination for dumping poor, outdated technology, with no cost to the manufacturer. Chellany's article has expressed it very well. I have heard commentators attribute motives to him - but no sensible rebuttal yet.

On the Indo US nuclear deal too, the sell out is complete. A couple of years back when the deal was the centre of the vote of confidence in the Lok Sabha, a senior bureaucrat had assured me that the negotiators too were patriots and they would protect Indian interests. The Prime Minister had repeatedly assured the house that the "Hyde Act" was an internal regulation of the US and did not apply to the deal. As was expected, the Prime Minsiter was economical with the truth, and hopes of a deal favourable to India have been belied. The Indian government has reduced India to a level of a rentier state - much like Pakistan. No wonder a fund manager recently commented - "everything is for sale in India" - including ofcourse the National interest.

From "too big to fail" - to "too big, will fail"

The recent banking crisis has brought to the fore the argument against letting banks become too big. For far too long, regulators and politicians (including the erstwhile finance minister - Chidambaram) have argued for the merger of government owned banks. For some strange reason (atleast strange to me) - this is supposed to increase the ability of the banks to compete. With capital adequacy requirements unchanged, why a merger will allow greater competitiveness - especially since in the Indian context the merged banks will typically not be allowed to restructure either branches or staff - has always mystified me. At last, I see a serious academic Prof. Jayanth Varma argue for smaller banks. Hope someone is listening.

Structural reduction in fiscal deficit?

Interesting point - is the Indian economy witnessing a structural reduction in fiscal deficit? This suggestion, made with utmost seriousness by a fund manager recently had me thinking. Perhaps the recent increase in fuel prices, and some changes in fertilizer policy motivated this comment? So here's my take - fiscal deficit cannot be reduced in a democratic country with income disparities as wide as India - not now, not ever (perhaps). We've had "free" pricing of fuel earlier - when the OCC was abolished. Till the need to tax fuel oil higher, and higher prices of crude combined with a pre-elecction period forced a reversion to price control. And yes, even then, Reliance had a retail distribution - that had to be shut down. So Murli Deora and his closeness to the above mentioned industrial house notwithstanding, only low crude prices (and not government policy) can prevent a recurrence of governmental interference in oil pricing.

The government spend is increasing at a trend rate higher than income. Public sector salaries are linked to an inflation rate that is galloping. Endemic corruption increases cost of service delivery across a bloated governmental apparatus. Pension liabilities are unfunded and the government is populist. Its easier to believe that I have goblins living in my closet.

When Bulls meet - Shit happens

The "Market Summit" organized by ET the last weekend revealed yet again the inability of public debate in India to rise beyond cheerleading. Despite some interesting panelists, the discussion remained largely mundane and predictable. Surprising for such a panel, many arguments were simply wrong:

Chris Wood mentioned that inflation in India was good because we need some parts of the world to grow. Whatever happened to growth with moderate inflation - the mantra the fueled the US markets for most of the nineties? Besides, why is inflation needed for growth? Is anyone making a case that India is a "full employment" economy?Inflation is BAD for the poor - who make up large portions of the Indian population, and a government that does not focus on this is hardly managing the economy sensibly. Clearly a case of poor economic argument.

Rakesh and Shankar Sharma mentioned that the Indian economy did not receive a stimulus. Rakesh even made a suggestive statement that with the youngest population in the world, the Indian economy did not need one. Unfortunately, this is completely contrary to facts. The past three years has seen double digit fiscal deficits (just add centre and state. If you take off-balance sheet items, its positively scary). The government expenditure has been well above trend. Importantly, the stimulus continues unabated - with inflation running in high double digits and interest rates low, we have negative interest rates prevailing - which even the RBI has been constrained to comment on. If this is not the largest stimulus imaginable, I am not sure we are on the same page with regard to basic definitions.

A subdued Sameer Arora did make an attempt to inject some balance in the "debate". However, in today's youthful India, it seems that voices of balance can hardly get airtime.

Update on Defence and related issues

An update on current status of defence, nuclear deterrent and our neighbours:

Pakistan receives latest F-16's with night fighting capabilities

NSG Update from Vardarajan - US attempts but fails to stop ENR technology transfer to non-NPT countries (INDIA)

K Subrahmanyam points out China is the main proliferator - an interesting analysis

An old post from Dr. Jeffery Lewis where he seeks to make out that Indian strategists support signing CTBT - Interesting but treat with circumspection

Af-Pak - the new US FAK-AP

One organization in the US that is taking the "short term" view is certainly the white house. With its Af-Pak policy predictably falling apart, and with their self-imposed deadline of 2011 to exit Afghanistan fast approaching, the US government is creating a new breed of armed goondas to manage law and order. As Chellaney points out here this too shall end in tears - except that these may involve Indian lives as well.

Keynes - dead but not buried

So. now Krugman has almost started to rant. Miffed that his generally "economically correct" arguments against austerity are seemingly falling on deaf ears, Krugman has upped the ante - he now wants all to believe that economic policy should be driven by near term factors - and in the long(er) term we are all dead.

This is dangerous thinking. On this logic, his support for climate change would seem ridiculous - after all near term pain is apparent - why take it for long(er) term benefit - when we are all dead. This same argument is what prevented the US Fed from taking away the punch bowl when the party was getting raucous. Now that the participants are suffering a hangover, the "nobel" prof would have you believe that the best antidote is more of the punch bowl. Exactly in what condition that needs to be taken away remains unanswered - just not NOW.

India announces green flag for future nuclear disasters - freedom from prosecution

Twenty three years, thousands dead, an absconding American and no one in jail. This summarizes the outcome of the long lasting case against Union Carbide - the judgement of which was pronounced today. The facts are undisputed - US company UC had an accident in its plant in Bhopal which killed approximately 6x the number of people that died in 9-11. It took 23 years to establish the fact and send NO ONE to jail. Not surprisingly, the US CEO is an absconder, refused to stand trial in India, and was not even NAMED in the judgement. No doubt another case of US-India partnership that Secretary of State Hillary Clinton alluded to a couple of days back

If anyone doubts that imperialism survives as economic coercion, the tenor of the above statement will clear such doubts. Clinton applauds India for its help "shape the Copenhagen Accord and pledged to lower its greenhouse gas emissions intensity by up to 25 per cent" - a position which has the potential to make India's own growth more expensive - and is at variance to its own, well argued, earlier position that India did not need to make any commitments of this nature. 


Another pat on the back - "During Prime Minister Manmohan Singh's visit to Washington in November, he and President Obama launched the partnership to advance clean energy" - translated, this means a large contract to buy nuclear reactors from the moribund US nuclear industry. 


To buy the nuclear reactors, India will need to pass a bill that will allow US suppliers to go scott free in the event of an accident. Clearly, the US had learned from the UC disaster. Equally, our rulers continue to treat Indian lives as dispensable - sitting at the "high table" of nuclear trade (wonder where this mythical table is) is worth some sacrifices to Dr. Singh.

FDI in retail - liberalization or suicide

Apparently, the government is again contemplating FDI in retail sector. Since the Left parties are opposed to it, it has become fashionable for the "young" and "progressive" to pooh pooh the concerns and recommend this as a measure of India's "opening up". Surprisingly, the proponents of liberalization (assuming such are in a majority) do not themselves seem to have confidence in the businesses they recommend - witness the abysmal (single digit) ownership of equity of Indian companies among the Indian public. The pity is, that most such free-market proponents are unknowingly acting as lobbyists - for free. The foreigners know better - atleast they demand a price to lobby! Remember Enron?

So what is at stake here? A Wal-mart is almost the size of Indian retail industry, yet employs only 5% of the people retailing in India supports. In a country where job creation significantly lags additions to the labour force, any sensible government (other than one bought out by lobbyists) will have to wonder as to the pay-off of this "liberal" policy.

Even assuming that we accept that law of the jungle should work and only the strong should survive - what exactly is the argument for "foreign" ownership? Do Indian entrepreneurs not have the skill or risk taking capability to set up and run retail businesses - there is after all no bar on them doing so. So why this shrill demand for opening up to foreign investors?

The few companies that have ventured into retail have yet to generate economic return on capital. Stripped of accounting shenanigans, no company in the business has generated a return that meets its cost of capital. On the other hand, many "innovations" of "organized retail" - extending credit, home delivery etc. are already offered by the friendly neighbourhood retailer. Clearly, the only way that "organized retail" will complete is by adopting competition destroying methods of discounting and taking upfront losses - leveraging their ability to raise "free capital" from the stock market. Consumers will suffer int the longer term as cartels forces prices up once the small retailer is driven out of business. Is this what "free markets" are supposed to foster?

Good for the market - terrible for the country

A recent development in the stock market has the potential to harm India and Indians in the long term. The irony is that this is a result of "progressive policies". The development in question is the acquisition of Nicholas Piramal's pharmaceutical business by Abbott. In itself, the acquisition raises few issues. However, it portends a resurgence of multinational pharma companies in the Indian market, with consequent detrimental effects to the lives of Indians.
 
I have long been opposed to so-called "Intellectual property" - which, in my opinion, is just the latest way to exploit the poorer sections of society. Especially after physical assets/resources required for human existence have been captured by the "developed world". Using the power of lobbyists and under the guise of IP, poor countries like India have been forced to accept product patents. With this come expensive, and unaffordable medicines, and usurious health insurance costs - social costs we could do without.

India shook off its dependence on foreign medicines and developed a thriving domestic pharma business when it abandoned product patents and recognised only process patents. Consequently, Indian pharma industry today is well developed, with excellently developed chemistry skills and low cost production - benefitting not only Indian patients, but those around the globe - including those in "regulated" markets. This is now set to change - with India having succumbed to political pressure and signed up for product patents a few years ago.

Surprisingly despite countries like the USA drowning in health care costs, so-called free marketeers continue to push the case of "IP"  - and poor countries like India acquise. If the above seems overly leftist (after all the patent laws in India do offer compulsory licensing and price setting by the government) - well, read this

Equity market outlook - Apr 2010

While most commentators on the market have been very bullish on Indian market prospects, I find that there is a potential to hit many an air-pocket. Even if we avoid most of these, I think the upside is not very large. My report (as part of BRICS research) - published in April.

">India Equity market outlook - April 2010

Beware of what you ask for!

I have, after a gap of more than a decade, started writing "research" on the macro aspects of the market. Here is a recent comment I made - in its unedited form:

The Street believes that higher oil prices are detrimental for Indian equity markets. In fact, recent broker reports suggest that if oil prices were to fall globally, Indian economy, and by extension, the Indian stock markets, would rally.

The belief is misplaced – the data does not support the thesis. A look at the graph above reveals that the markets tend to move either independent oil price movements (for example in the first few months shown in the graph above), or in the same direction as oil prices. Clearly, it appears that oil price declines likely happen at a time of reduced economic activity. Consequently any potential savings in import costs is perhaps offset by a more-than-proportionate reduction in output growth, adversely effecting corporate profits. A drop in global prices of crude is certainly NOT what we should be asking for

The nuclear sell-out progresses

The government introduced the nuclear "no-foreign liability" bill in Parliament on the last day of the session. Apparently, this was on the basis of a deal with some parties in opposition that the bill will be referred to a committee of the house that would be chaired by the opposition. As expected, this has not happened, with the bill being referred to a committee in the Rajya Sabha - chaired by a congressman. While the SP is crying foul, the government is secure in the thought that they have thrown a bone in the direction of the SP in agreeing to the obnoxious and racist suggestion of the SP and other parties of their ilk to include caste in the latest census. Not surprisingly, since this is a Congress initiative, there is no protest (a few columnists aside) in the English media to this extremely retrograde and communal move. 

The congress spin doctors initially tried to explain away the infirmities of the nuclear bill though half-truths and obfuscation. Brahma Chellaney's article here is worth a read for getting a real picture on the issues with the bill. But with the PM busy out-sourcing and sacrificing India's defence and foreign policies to American interests, and the key opposition party in slumber, we can only hope that the many gods Indians pray to are watching over India's interests.  

Managing expectations - learning from corporate India

One of the great achievements of recent years has been the ability of Infosys management to consistently set and beat analyst expectations. Quarter after unfailing quarter, Infosys manages to do better than forecasts. This has as much to do with running a great business, as it is to do with setting expectations. 


Whether Nandan Nilekani gets us a fool proof unique identity number as citizens of this country will be revealed as time passes. What is already visible however, is the lesson that the government has received from Mr Nilekani in managing analyst expectations. In my nearly two decades of watching the budget, never have I witnessed such perfect "expectation management" in the run-up. Most business channels and news papers were busy asking analysts if the two expectations that would lead to a post budget rally were - (1) 5.5% fiscal deficit (2) government borrowing not exceeding 4.5 lakh crores. When the budget was presented, lo and behold, these were both met, or bettered (in case 1 and 2 respectively). The market has rallied considerably since then, predictably with foreign investors in the vanguard. 


The latest case of this expectation management is NDTV highlighting that the Prime Minister actually stood up to Madam! Given his track record, this resembles  the claim of a hen-pecked husband - " I am the master of my house, and have my wife's permission to say so". A read of the linked news article offers a clue for this apparent show of spine. The RTI needs to be amended to avoid the Chief Justice of India from appearing before himself ! So while Madam is seen as doing the right thing, i.e advocating that the RTI act remain as it is, the PM cleans the poo left by an adamant CJI demanding that he remain above the law! Now the government will be seen to be doing the "wrong thing" but will be protected by the PM's reputation of personal probity. The master puppeteer will retain the moral high ground. A case of eating ones cake and having it too. 

Different Strokes

Two recent developments, completely diverse responses. This is what makes space for "hindu fundamentalism". I leave it to the reader to draw his/her own conclusions.

Incident 1 - M F Hussain purportedly takes citizenship of Qatar (later denied) because he has cases pending in Indian courts. These cases, filed by private citizens, were on account of his paintings of Hindu religious figures in the nude. The english press decries this as an assault on artistic freedom.The STATE is silent, while offering "protection" to the artist. So, did he get a raw deal?

Incident 2 - Jesus is depicted holding a beer can and a cigarette in a text book. The STATE confiscates the books and promises to take legal action against the publishers. There are calls for a "Blasphemy law" (fortunately, shelved). The Church bans all books by the publisher. No one questions if this is an assault on freedom of expression.

Budgeting for growth - but focus on the hocus

The latest budget of the UPA government cannot be faulted for trying fuel growth through lower taxes in the hands of individuals. At a time when private capital formation has been weak, and most of the growth of the current fiscal has been achieved through higher government spend, lower planned spend by the government has to be replaced by private consumption to keep the wheels of commerce moving.

Pranab da however gives the game away when he says that the budget is a political document. In a world where it has become acceptable for governments to fudge figures on a large scale, a la Greece, India is following suit. An example would clarify. Forecast for GDP growth for FY2009-10 estimates that "real growth" in agriculture is -0.2%. The economic survey states that Kharif crop production is lower by 15% over previous year, sugarcane by 9%, oilseeds by 15% and pulses 8%. To get to a 0.2% de-growth, we not only have to assume that the Rabi crop is normal, but that it is also 15% higher in terms of output. The survey also says "the index of area under rice shows negative growth (sic)". So where is the growth coming from?

Another way to look at this is the computation of "real GDP". The "real" growth is calculated by taking the nominal output and applying the GDP deflator. The deflator is supposed to have the advantage of reflecting the actual consumption basket in the economy (as opposed to a fixed basket used in calculating WPI or CPI). While the CPI in the current year is in double digits, the WPI is less than 2%. The survey uses 3.6% as the deflator.

Now the growth in agri prices is upwards of 18% on an average. However, if one uses 3.6% as the deflator, then a 15% de-growth in real terms, would show up only at a 0.2% de-growth since the price rise would take care of the rest. It appears that we are significantly over-stating the real growth in the economy.

On most parameters except growth, India is no different from Greece. With a fiscal deficit figure in double digits, an internal debt burden of over 80% and unemployment near double digit, the only reason India is not bracketed with the 'PIIGS" and "STUPID"'s is the supposedly higher growth the economy continues to register. When the growth itself is chimera, the consequences may be disastrous. SS Tarapore made the point in his column here.
 
We should ignore the warnings at our own peril.

More shame in Indo Pak talks

M J Akbar's view
Chandan Mitra's column
Varadarajan in the Hindu (the "official" spin?)
The outcome of the talks in Afghanistan

And an article in Pakistan Daily  that seems to surprisingly, articulate a view that Dr Singh would find interesting:
"Manmohan Singh, despite his conciliatory nature, seems to be awakening to the realisation that the objective of those involved in terror plots against India is not simply Kashmir but the reversal of India’s growth story. They seek to make India unsafe for investments, by scaring away even international sports teams, they way they have succeeded in Pakistan. They have been funding agitations against industrial and other projects, so that vast regions of the country remain backward. Thus far, the Manmohan Singh government has adopted an ostrich policy towards this growing threat, hoping that it will disappear. Instead, it is becoming worse. India has always seen a cycle of inaction that creates a crisis, which is then met with overwhelming resources and – where needed – force. The Pune blast has been a wake-up call for Manmohan Singh. Unless he takes much more active steps to stop terror networks in India from killing innocents, he risks seeing the end of the Indian economic miracle. Much more is at stake for India than relations with Pakistan."

India - the new US lapdog

Does personal integrity extend only to not taking bribes? or does it require the Prime Minister to stand upto power centers that are inimical to the interest of the nation?

Dr Singh has weakened India's position in international fora on more than one occasion. Sharm el-Sheikh is a case in point. Copenhagen was another. The recent shocking resignation of Shyam Saran on Feb 19 seems to point to a similar direction. Mr. Saran, the PM’s special envoy on climate change has been "permitted to demit office" from Mar 14. 

What caused this? An attempt has been made to explain this in terms of protocol. Shivshankar Menon, his junior in the foreign service was elevated to Minister of State level, while he was not. This does not seem to be the whole story. Commenting on this, the Hindu writes:

“Whatever the trigger, Mr. Saran is the second high-profile climate negotiator to exit the stage after crossing swords with the United States. Last December, the Philippines government sacked its chief negotiator, Bernaditas Castro-Muller, in the run-up to the Copenhagen summit, a move civil society groups said was taken to please Washington.”

Within two days of Mr Saran quitting, Mr Dasgupta, one of India's top negotiator on climate change too put in his papers. Mr Dasgupta reportedly said: 

“I find it shocking that (Jairam) Ramesh (Minister of state for environment) has asked US-based Arvind Subramanian to consider various options available to us so that we will have the new formula ready by the time the Bonn round of talks start in May this year. These options are not being discussed by Indian climate change experts, but are being referred to an international group. Is this how foreign policy on such a crucial issue is being addressed?” When asked, however, he refused to say if in his opinion this was being done due to pressure from the United States.   

Clearly, India is giving up its well-grounded negotiating position to take up one that is suitable to the USA and one that will likely impose unjustified conditions on India.

An alternate viewpoint, expressed by MJ Akbar, postulates that the reason lay in the substantive disagreement between the PM and him. Shivshankar Menon was appointed NSA and not Shyam Saran, because the Prime Minister decided that Shivshankar Menon was, intellectually and temperamentally, closer to his line of thinking on Pakistan. MJ writes:

"Dr Singh knows he is taking huge risks. He has deliberately underplayed hard evidence from Indian intelligence that Pak-based, anti-Indian terrorist organisations continue to get active support from the Pak military, and that they are not non-state actors. Pakistan’s Army chief, Ashfaq Parvez Kayani has reiterated, in his latest doctrine, that India remains the pre-eminent threat to Pakistan, implicitly justifying the military’s support for the second arm of his country’s response to India, the terrorist network." 

So why is the risk worth taking? It is not for any Indian PM, except if viewed from the eyes of US policy makers. Senator John Kerry has described the resumption of the Indo-Pak dialogue as “critical to the United States”, and suggested that the Indian initiative is an extension of the new India-US relationship. 

So we dutifully troop off to "talk" to Pakistan, though no one knows about what! 

Whatever the view you favour, it appears that India's position vis a vis the US is now similar to that of the British under Blair - that of the lapdog!

Weak leader, weak response

This morning started with another report of an attack on an Indian in Australia. This time, four youngsters attacked a taxi driver from India while travelling in his cab. The Australian response would have been hilarious if it were not so tragic.

The Australians have claimed once again that this was not a "racial" attack - simply "opportunistic". I wonder what that means. I guess the Indian taxi driver gave the white Australian an "opportunity" to attack him since he took them in as passengers, and they were only using that opportunity to beat him and spit at him. Presumably, that is what all civilised passengers in Australian cabs are expected to do if given the "opportunity"! Poor chaps, we should not blame them. Does this remind you of the response to a recent rape case in Goa, where a venerable member of the assembly had accused the victim of "allowing" herself to be victimised?

The next question to ask is - how do the police know that these attacks are NOT racially motivated? Since they claim to have not yet solved any case - or made any arrests, where is this certainty coming from?

I came across a website with an interview with, seemingly, some Indian official. Both, the tone of the questions (suggesting Indian media were blowing up the cases without adequate information), and the Indian officials obsequiousness (suggesting that Australia was a better place than India) almost made me throw up. The only blog comment on the site is telling - the writer commends the Indian government advisory to students - since that would restrict Indian from taking away jobs!
 
The US, meanwhile, has issued a demarche to China - asking for an explanation wrt the hacking attempt on Google! Just goes to tell you how important it is for US to protect commercial interests. For the current Manmohan Singh government, on the other hand, a few Indian lives is not worth protesting over - Will someone please tell  Shashi Tharoor that tweeting on visa issues is not the only job of a junior minister of foreign affairs. Writing out a demarche to Australia may be more workmanlike. But then who ever said that we had a government that wants to work.

Pulling fewer punches

The start of a new year - though only a change of calendar, invariable leads to some amount of introspection and, sometimes, a resolve to make some course corrections for the future. One such resolve I have made of myself in 2010 is to pull fewer punches. Even in the past, I have tried to express my thoughts without trying to be "politcally correct". However, I have evaded a few topics that I thought would be too controversial. Not any longer. My apologies to people who may feel offended. These are my own thoughts and readers can chose not to read them.

The year started with the two stock exchanges engaged in a juvenile competition of "my (timing) is longer than yours". Clearly, the BSE now suffers from the same sense of irresponsibility towards its constituents that used to be the hallmark of  NSE thus far. No one in the administration of either exchange bothered to explain WHY it was necessary to extend market timings. Despite the majority of members of the exchanges being against such a move, the change was introduced.

The exchanges called a meeting of "leading brokers" for "consultation" having already announced their intent. These brokers, predictably, and in contrast to the majority, came out with rhetorical statements in favour of the exchange move - adding one hour will make our markets "International" they said! Privately, people close to these "industry spokesmen" have told me that these spokesmen were themselves not in favour this extension. So why is it necessary to lie in public?

In India, where sycophancy starts from the highest political level, can there be any other expectation. Opposing the views of "the powers" serves no purpose - much better to create regulatory "goodwill". No doubt, this will lead to some quid pro quo at an appropriate time. This in itself is only a small example of "crony capitalism" - once the bane of Japan, then of South Asian economies, and now of the USA. Private gain again dominates general good. However, it is for these "leaders" to ponder on what example they are setting to the youngsters of the country by such blatant falsehood.. But then - they did not get where they are by worrying about such spiffy things! All the best - and look out for yourselves - your "leaders" are doing just that - looking out for themselves!

Aman Ki Asha

The Times of India the Jung Group in Pakistan used the start of 2010 to "come together to develop a stronger Track 2 in the diplomatic and cultural relations between India and Pakistan". My daughter asked me a few days back on why I was not optimistic about this initiative.

First - let me state that a new year wish list for most Indians has to include peace with our neighbour, and I am no exception. That said, one of the problems with growing older (more cynical? or sadly, more realistic)is the development of the "sense of the possible". If peace between India and Pakistan were to be possible by cultural exchanges between the peoples of the two countries, we would perhaps have had peace a few decades ago.

The reality is that the Pak army is the largest economic power in that country, and, finally, all politics is an outcome of economics. For the Pak army to maintain its pre-eminent position in Pakistan, it must have an enemy that rallies its "subjects" - the people of Pakistan. India in currently the only country that can fill this need. Attacks against India are a given - only the timing is in question.

If I seem like a war monger, see this.

A very happy, and peaceful  new year to all.