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.
Friday, March 5, 2010
Thursday, March 4, 2010
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.
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.
Monday, March 1, 2010
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.
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."
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."
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