Saturday, November 26, 2011

BJP risks losing urban support

By Swapan Dasgupta

Economic reforms in India are usually achieved at gunpoint. It was the horrible balance of payments crisis and the emotional effects of the mortgaging of the country’s gold reserves that facilitated the historic process of deregulation by the Manmohan Singh Government in 1991. Seven years later, it was the wave of global sanctions after the Pokhran-II blasts that propelled the Atal Bihari Vajpayee Government into using reforms as a weapon to neutralise the West’s hostility to India.

The qualified opening up of the retail sector to foreign investment announced last Thursday is the only step in the direction of economic liberalisation that the UPA Government has taken since it assumed power in 2004. It is being said that the retail initiative will be the precursor of reforms in civil aviation and, perhaps, insurance.

For the Prime Minister, the retail initiative may have salvaged his jaded image in the outside world as a reformer. But while this may have played some role in encouraging him to overrule Cabinet and Opposition objections, it was not the clincher. What tilted the scales in favour of a politically high-risk initiative was the rapid depreciation of the Rupee, soaring inflation and the dismal state of public finances. In other words, the opening up of the retail sector wasn’t occasioned by a deep rooted conviction that the present protectionist regime was inefficient and served neither the farmer nor the consumer. Had the  realisation—as Commerce Minister Anand Sharma put it—that under the present system “the famer bleeds and the consumer is fleeced” been widespread, the Indian politician would have rushed in with reforms much, much earlier. The Congress, after all, has very little support base in the wholesale and retail sectors. The Akali Dal is essentially a party of Sikh farmers and its endorsement of the reforms is revealing. It suggests that the agricultural sector wants greater choice in determining who buys farm produce.

The present system was allowed to continue for 20 years after the liberalisation process was initiated because successive governments chose the line of resistance and allowed themselves to be intimidated by traders. The traders’ veto on reforms would have continued had the government not been forced to make changes. The consumers should thank the Eurozone crisis and the UPA’s profligate expenditure policy that the monthly grocery bills should register a decline in the medium and long term.

In the short term however, the Government still has a problem on its hands. There are projections that the retail sector should see nearly Rs 1,75,000 crore additional investments (some Rs 70,000 crore in foreign investments) in the next five years. Yet, it is going to be a slow process. For the moment, the UPA faces a situation whereby the possible losers are incensed by the changes but the beneficiaries aren’t terribly excited—because the gains will take a long time to be felt.

In political terms, this is dangerous. It is estimated that nearly a lakh of people per Lok Sabha constituency will see themselves as an aggrieved community. The petty retailers and their families are almost certain to be receptive to the populist rhetoric against foreign companies and the demonology that is building up around Walmart. The doomsday scenario may well be terribly exaggerated since urban clusters with populations below 10 lakhs will retain their protected status for the foreseeable future. Yet, a grievance is a grievance and with this retail reform the Congress has replenished the numbers of the burgeoning anti-Congress vote bank.

They may, however, be compensatory advantages for the ruling party. Economic reforms have traditionally won the support of the urban middle classes—a group that swung to the Congress in sufficient numbers to decimate the BJP in urban seats in 2009. Despite being a natural supporter of deregulation and the free market, the BJP has, since its defeat in 2004, adopted a cussed approach to economic reforms. This has led to a growing middle class indifference to a party it supported quite enthusiastically in the 1990s. In fact, like the Reagan Democrats, the 2009 election saw the emergence of the Manmohan BJP voters—people who broke away from traditional support to the BJP and endorsed a pro-reforms Congress.

In actively championing the cause of the vyapari mandals in the big cities, the BJP has to be careful of two things. First, it must convince its supporters that it is not a status-quoist party wedded to serving particular lobbies. Secondly, it must be careful that the anti-foreign and, by implication, anti-West imagery of the protests it plans on December 1 and thereafter does not end up creating a cultural mismatch between the below-35 generation and the ageing leadership of the party.

One of the features of contemporary India is that the below-35s, who will soon make up nearly half the voting population, combine fierce patriotic with an approval of westernisation and western lifestyles. In overdoing the anti-Walmart rhetoric, as Uma Bharti did last Friday when she threatened arson against the multinational if it set up shop in India, the BJP risks imposing a new cultural barrier for itself.

In 2009, the BJP ceded the modernity plank to the Congress with its hyper opposition to the Indo-US nuclear accord. It has to take care that in opposing the government, it doesn’t paint itself as a party of the Flat Earth movement. 

Sunday Pioneer, November 27, 2011

Thursday, November 24, 2011

SLEEP WALKING - Economic reform is meaningless without intellectual revolution

By Swapan Dasgupta

In these troubled times for the global economy, it may be worth narrating a story about the mentality of Indian politicians.

When the Congress returned to power in the summer of 1991 after the Janata Dal interregnum, the cabinet of Prime Minister P.V. Narasimha Rao was presented a note by the ministry of finance advocating dramatic reforms that included the deregulation of the economy. The note was greeted with predictable scepticism, if not outright hostility by the cabinet.

Looking for a way out of the logjam, Rao despatched a young aide to one of Indira Gandhi’s trusted confidants for advice. The hard-nosed veteran read the finance ministry note and then offered his suggestion. Wouldn’t it be more advisable, he asked, to preface the document with appropriate passages from Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi? It would, he suggested, definitely enhance the comfort level of the cabinet to know that the proposed measures were in conformity with the scriptures.

The wily Rao didn’t hesitate to accept the sage advice. A reworked cabinet note was circulated and this time, the opposition melted away, giving the prime minister the mandate to pursue liberalization as the highest stage of Nehru and Indira’s socialism.

This delightful story may well be true, partially true or plain apocryphal. What is remarkable, however, is not the revelation that the Congress party is made up of dinosaurs, but the extent to which orthodoxy takes hold of the political imagination to resist change. This is, of course, true of India but it is also a global phenomenon.

In her autobiography, The Path to Power, Margaret Thatcher spelt out the insidious hold of the post-War consensus on the British political imagination: “By 1964 British society had entered a sick phase of liberal conformism passing as individual self-expression. Only progressive ideas and people were worthy of respect by an increasingly self-conscious and self-confident media class.” Thatcher may well have been talking of India.

Nominally, India may have travelled a long way from the days when inefficiency and sloth were regarded as economic virtues and when personal rates of taxation for the highest slab touched 97 per cent. What is significant, however, about the massive economic shifts that were first brought in by Manmohan Singh’s 1991 budget is the remarkable extent to which change has been ushered without fanfare and, more often than not, by stealth.

It required the 1991 balance of payments crisis and the emotional trauma of the physical mortgaging of some of India’s gold reserves to begin the assault on the licence-permit-quota raj. Likewise, it required the Western sanctions against India in the aftermath of the 1998 Pokhran-II blasts to lift many of the curbs on foreign capital and rid Atal Bihari Vajpayee of his party’s accumulated swadeshi baggage.

As 2011 draws to a close, India is at a similar crossroads. The economic downturn in the United States of America and the Eurozone crisis has left no economy untouched. Complemented by what is called the ‘governance deficit’, India’s economic indicators have moved southwards. The gross domestic product projections are down from nine per cent to seven per cent; the already-large fiscal deficit is expected to breach the budgeted five per cent level and touch more than six per cent of the GDP; inflation has been hovering around 10 per cent for nearly a year and shows little sign of coming down despite 13 interest rate hikes since March 2009; the sensex has lost 22 per cent since January and foreign direct investment inflows have virtually ceased after touching a record $29 billion in 2010; in the preceding quarter, the profitability of Indian companies fell by an average of 30 per cent; and the Indian rupee, now blessed with a distinctive symbol, has lost some 15 per cent of its value in barely three months, thereby making imports prohibitive and adding to the inflationary spiral.

Middle India’s overall comfort level with Prime Minister Manmohan Singh rested on two beliefs: first, that he was a man of integrity and innate decency and, second, that he had the requisite skills to manage the economy. On both these counts, Singh’s reputation is in tatters. No one accuses the prime minister of being personally dishonest, but the sheer scale of the corruption charges before the courts have put question marks on his ability and willingness to tame his roguish colleagues. Worse still, there is complete consternation at the prime minister’s inability to ‘fix’ the economy. That he doesn’t possess the proverbial ‘magic wand’ is conceded by all reasonable Indians. What strikes them as odd is that the senses of urgency and purpose that should have accompanied the economic slide are missing. The government appears to have simply given up. Particularly disturbing is the extent to which a beleaguered political class seems ready to fall back on the ideological shibboleths that many imagined had been steadily discarded since 1991. The approach to the fiscal deficit is a classic example of a government that seems unconcerned.

There is a stalemate in the US over the failure of the White House and the Republican-controlled senate to agree on measures to reduce a trillion dollar deficit, and in both Britain and the Eurozone, the deficit is at the root of a political and diplomatic stand-off. Yet in India, fiscal consolidation has been deleted from the vocabulary of the ruling party and its allies. The hugely expensive and inefficient Centre-sponsored welfare schemes are not merely regarded as holy cows but there are moves to expand the net. So whimsical is the sop culture that last week the commerce ministry announced a Rs 3,844 crore ‘package’ for weavers in eastern Uttar Pradesh because Rahul Gandhi demanded it. No wonder Mamata Banerjee believes that handouts are her birthright too. In Europe, it is said that ‘austerity is the new normal’. In an economically fragile India, fiscal profligacy is the norm — the preferred Rahul alternative to beggary. India is living beyond its means but no one seems to care.

In most of the countries gripped by the downturn, the trend is towards removing as many obstacles to growth as possible. In Britain, for example, stringent planning norms have been relaxed to facilitate a growth in housing. In Italy, the new ‘technocrat’ prime minister has announced a series of measures that include fiscal prudence, welfare cuts and the dismantling of restrictive practices. In India on the other hand, there are moves to add a statutory premium on land acquisition for housing, industry and public utilities. Additionally, limited progress has been made in enlarging the scope of foreign investment in insurance and retail because of the government’s failure to secure agreement within the ruling coalition.

India, it would seem, is sleepwalking its way into an economic disaster zone. Yet, there are two remarkable features of this death march. First, there is no widespread realization that the troubles aren’t confined to inflation and price rise but affect the nerve centres of economic growth. Second, there is the presumption that statist intervention and a more rigid regulatory regime (that deters private sector corruption) is the way out.

Nehru, it must be said, did a remarkably good job in turning progressivism into common sense. Even two decades after liberalization transformed India and heralded far wider levels of prosperity, India has not yet turned its back on the belief structures of the bad old days. Economic reforms, it would seem, become meaningful only when accompanied by an intellectual revolution.

The Telegraph, November 25, 2011

Monday, November 21, 2011

A Look at the Man Who Could Be India's King

The Gandhi family scion may turn out to be an empty suit. Indians, now used to meritocracy, won't like that.

In democracies, dynastic succession should be a deviation from the norm. In India, many political parties are anyway led by sons and daughters of former bosses, but nowhere is this more prevalent than in the ruling Congress party, which the Gandhi-Nehru family has dominated since independence. Another succession is now in the offing, assuming of course that Indians keep tolerating this deviation.
India's "first dynasty" has been the subject of much speculation in the past three months. Family matriarch and president of the Congress party Sonia Gandhi is reportedly suffering from an unspecified illness. Talk of succession is natural and there is a growing clamor for her son Rahul to assume what numerous party functionaries have dubbed "greater responsibilities." The current Prime Minister Manmohan Singh was always thought to be preserving the throne for the young Mr. Gandhi to ascend to it one day.
That day may be arriving. The 41-year-old Mr. Gandhi may soon be appointed working president of the Congress, to take charge of his mother's day-to-day responsibilities. His public rally this month in Phulpur, Uttar Pradesh, was widely seen as a first step in that direction, since that constituency was once represented by Mr. Gandhi's great-grandfather and India's first prime minister Jawaharlal Nehru.
But banking on the young Mr. Gandhi as a future prime minister is a shot in the dark. His words and actions so far hardly justify the aura surrounding him.
European Pressphoto Agency
Sonia Gandhi (left) confers with her son and the heir apparent, Rahul.
Naturally shy, he has hitherto confined himself to photo opportunities. The media has made much of the night Mr. Gandhi spent at a poor untouchable's home; the ride he took in Mumbai's crowded suburban train; or the motorcycle trip into a village protesting land acquisition—all these acts symbolizing that he is in touch with the downtrodden. At a time when the country is sick of the septuagenarian politicians running the country, his 41 years of age have made him a "youth icon."
For all these tributes lavished on him, Mr. Gandhi lacks substance however. His parliamentary interventions have been patchy and confined to prepared texts; he has sometimes been shouted down by older parliamentarians. WikiLeaks revelations show him as someone prone to making casual remarks about "Hindu terrorism" posing a greater danger than Islamist terror. Meanwhile, he is spearheading his party's campaign in state elections next year in Uttar Pradesh, one of the largest states in India. But Congress is poised at best to win third place, and Mr. Gandhi may be stuck with the tag of an under-achiever.
Most worrying, the future leader seems to stay away from the burning questions of the day. He also hasn't involved himself much in the party's crisis management in the last year. Such aloofness may have contributed to the mystique around him but it has also prompted questions about what he believes.
The few indications Mr. Gandhi has given about his political beliefs are not encouraging. Like his mother, he has positioned himself as a "sepoy" of the poor, untouchables and tribals, as he himself tells it. He has played down his commitment to economic modernization in favor of mega-welfare schemes run by the central government. In many ways, he seems inclined toward a controlled economy run by "pro-poor" politicians, a thrust that is at odds with India's restless entrepreneurship today.
The full contours of his political views, of course, are conjecture. Mr. Gandhi has been wary of unscripted interactions with the media. Despite being in the limelight for seven years since he became a member of parliament, he remains a distant and unfamiliar figure to both the political class and the media.
Perhaps Mr. Gandhi thinks this aloofness will help him, as it helped his mother. As a widow of Rajiv Gandhi, the former prime minister who became a martyr when Tamil Tigers assassinated him in 1991, Mrs. Gandhi was treated with feudal deference. Her son, though, is not going to be the beneficiary of that generosity.
Mr. Gandhi enters the political fray in an India that has unrecognizably changed in the past two decades. With wealth and social mobility, the country has grown more assertive—and perhaps even insolent to the authority earlier imposed by caste, family or dynasty. One part of the anti-corruption movement that has grabbed headlines this year is a pushback against the politics of privilege. Indians have enjoyed success in the economic arena out of meritocracy, and find the lack of it in politics outdated. They are not going to take kindly to an empty suit like Mr. Gandhi, whose only claim to fame is his name.
This social churning should make the Congress Party sit up and question the old ways of dynasty. Instead, the possibility of a new leader from the Gandhi family has the party cadre suddenly energized. Mr. Singh's government has hurtled from crisis to crisis and many are now doubling down on the idea of dynasty to rescue the party. That idea is soon going to be tested.

Saturday, November 19, 2011

A continent divided over the Euro virus

By Swapan Dasgupta

How many of us can honestly admit to not being envious of a passport holder of a European Union country? The charm of being able to ride the Eurostar to Paris on an impulse, the delights of visa-less travel from Scotland to Sardinia, the luxury of being to live and work in Dublin or even Gdansk, and the comforts of a single currency—these were the ideas that captivated the world from the early-1990s. The EU was the archetypal cosmopolitan ideal that overwhelmed successive generations seeking antidotes to national boundaries and narrow nationalisms.

It was fashionable to be committed to a EU that, in time, and despite the misgivings of Little Englanders, would herald a true fiscal and political union. The generously paid Eurocrats in Brussels and Strasbourg were committed to the civilising mission of a Europe based on uniformity—the uniformity of a single currency, one market and, above all, of progressive social legislation based on exaggerated notions of human vulnerability. Having created a transnational utopia from the debris of a war-ravaged continent, Europe imagined it had earned itself the right to be preachy and sanctimonious to the lesser world.

Yet, few expected the bubble would be so close to bursting. In the past two months, a sickness that had first emerged in Ireland and the Iberian Peninsula is threatening to overwhelm Greece, Italy and, in time, even France. Coming in the wake of an American crisis, the epidemic is threatening to destroy the cosy assumptions of the past 20 years. Unchecked, it may even trigger the “final crisis of capitalism” Marxists have been fantasising since 1914.

Prophets of doom have traditionally jumped the gun. The latest Euro-zone crisis may yet lend itself to a patchwork solution that preserves the essence of the EU while ridding it of grandiose embellishments. However, for that to happen, the captains of the EU have to get off their high horse and recognise basic realities.

The first is the belief that national sovereignty can coexist harmoniously with the stated purposes of the EU. It just can’t. Greece can’t pretend it can continue merrily with its inefficient public sector and Italy can’t pretend that it can afford to persist with its elaborate welfare state. To live in a monetary union involves accepting a rule-based fiscal system that rejects financial profligacy.

This is a difficult decision and involves defining the limits of democracy. The removal of the elected prime ministers of Greece and Italy by technocrats who have never even contested municipal elections is ominous. As a stop-gap measure to tide over a crisis this may well be unavoidable. But since the austerity measures are deeply unpopular in both the countries—and, indeed, in the other countries affected by the Euro virus—how long before political exasperation forces a return of cussed nationalism?

For the moment, Germany and Angela Merkel have been portrayed as the villains of the game and anti-German feeling is rampant all over Europe. German voters in turn are asking why they should be subsidising the spendthrift ways of their European cousins and, at the same time, be ruthlessly vilified for doing so. Will the clash of nationalism lead to the unravelling of the EU experiment?

This is not necessarily a doomsday scenario. Although the original European Economic Community was created at the initiative of France and the Scandinavian countries to keep the ambitions of a divided Germany within the bounds of economics, the past decade has seen united Germany outstrip its fellow Europeans. Without any doubt Germany has emerged as the driving force of the European economy. In terms of creativity and entrepreneurship it has left the rest of Europe far behind. Without Germany, the EU is meaningless.

However, for the rest of Europe to recognise the leadership of Germany is a very tall order. The burden of history, particularly the 12-year aberration of the Third Reich, has a tendency of intruding into the consciousness of the present.

Germany may have repackaged itself as a benign first among equals but it is confronted by a challenge that economic good sense is powerless to confront: the irrational self-esteem that nationalism breeds in the less successful.

Sunday Times of India, November 20, 2011 

BJP in search of a message

By Swapan Dasgupta

Many decades ago a distinguished British parliamentarian remarked that Opposition was more about principles in a way that Government with its preoccupation with compromises never can. The gentleman, who spent most of his career in the backbenches as a political untouchable, was a rarity. In real life, the quest for the opposition space has also involved expedience, inconsistency and, even duplicity. Apart from moments of crisis such as war or an imminent national breakdown—as in Greece and Italy—the Opposition has been content to use parliamentary politics as an arena of one-upmanship.

The underlying belief is that in most general elections, the electorate votes out a government rather than vote in an opposition party to power. This is generally true as far as India is concerned although, in the post-liberalisation era, governments (particularly in the states) have shown an uncanny ability to secure repeated re-election.

In the past 12 months, as the UPA Government has staggered from crisis to crisis and progressively lost both direction and moral authority, the largest Opposition grouping has acted on the assumption that victory awaits it whenever the electorate is given a chance to express itself. Those who had a dejected, hang dog expression after the 2009 verdict have suddenly acquired an extra spring in their steps. They have acquired new hangers-on and their gift haul this Diwali turned out to be full of rich pickings.

It is the illusion of inevitability that may explain why the BJP has become so purposelessly active in recent months and why it has lost sight of one of the main functions of political existence—to deliver a message. Last week, as the UPA Government finally woke up from its prolonged spell of helpless inactivity and announced a reform-oriented legislative programme for the winter session of Parliament, the BJP reacted with astonishing incoherence.

The reason is not far to seek. Since the election defeat of 2004, the BJP has been in a state of denial and distraction. The process of denial, which contributed to the most unproductive five years in opposition, ended after the election results of 2009 and the removal of L.K. Advani from the post of Leader of Opposition. However, the process of distraction has persisted since the UPA-2 came to power and it has been fuelled by an unresolved leadership tussle.

The net effect is that issues have lost focus inside the BJP. The BJP no longer has any real idea of what it believes and what sort of India it would like to build after replacing the UPA with its own coalition government. The impulses that propel individuals and communities to favour the party over the Congress are very much there: nationalism, business-friendly economics, deregulation and oodles of cultural symbolism. How this translates into the globalised world of the 21st century is, however, left vague and unstated.

At one time the party loved the ideologues it inherited from the RSS; today, a crass philistinism rules the roost. Under Nitin Gadkari, an enormously successful, self-made businessman from Nagpur, the BJP has junked its earlier obsession with austere living and simple thinking. Today there is a belief that politics is about the timely deployment of resources—and plenty of it. Gadkari himself typifies the belief that political messaging is an incidental add-on: money is the key to securing political influence. In Maharashtra, Gadkari opposed Pramod Mahajan but in Delhi he has replicated his adversary’s style.

The BJP, for example, must have spent a staggering amount of money in the arrangements and mobilisation of the three yatras undertaken by three veteran leaders. Yet, there the political return on monetary investment is certain to be pitiful for the simple reason that there was a mismatch between the feeble message and the choreography.

The BJP is no longer sure of what it believes in—not in foreign policy which appears to be decided by embassy liaisons and junkets, not in economics which appears to flow from corporate lobbying, and certainly not in the negotiable moral economy of politics. The party has designated a working group to forge a Vision Document of sorts to educate the party about its core beliefs—after all, Deendayal Upadhyaya died some 47 years ago. But in the true traditions of those who write books without reading them, the project has actually been ‘outsourced’ to a Karnataka-based entrepreneur.

This is fairly typical. Having grown from a modest-sized party to a challenger to the Congress in a remarkably short period of time, the BJP has been unable to put into place alternative systems of self-regulation. While abusing the Congress system of patronage and cronyism, it has allowed the same system to take hold of the party’s nerve centres, with disastrous consequences. Karnataka is by far the worst example but recall that it was the opposition to cronyism that led to B.C.Khanduri’s removal as chief minister in 2009. Khanduri was restored once it became clear that his successor’s rampany cronyism was likely to be rejected by voters.

What has been happening in the BJP constitutes a betrayal of all those who believed in the creation of a wholesome non-Congress alternative. Fortunately, the rot is only skin deep and hasn’t affected the party’s vitality. But it is important that something is done now, well before the 2014 elections, to restore decorum and integrity. There is a good second-tier leadership that is capable of undertaking a spring cleaning.

Sunday Pioneer, November 20, 2011

Friday, November 18, 2011

A king's ransom

By Swapan Dasgupta

Prime Minister Manmohan Singh is an extremely cautious man—a reason why he has endured in the cut-throat world of public life for nearly three decades. Yet, for a brief moment last week he, very uncharacteristically, almost let his guard down. I say ‘almost’ because, like a good politician, Singh was careful enough to leave for himself an exit route.

The issue was the kerfuffle over the Vijay Mallya-owned Kingfisher Airways which is in dire financial straits, having defaulted on its payments of aviation fuel and having cancelled nearly 50 flights on one day, much to the chagrin of fare-paying passengers. On his return flight from the SAARC summit in the Maldives, the Prime Minister was asked about the issue in his customary on-flight interaction with the media. He cautiously prefaced his remarks with the caveat that “I have not applied my mind to Kingfisher’s problems”. But then he went on to add: “When I get back, I will talk to (Civil Aviation Minister) Vayalar Ravi and we will explore ways and means in which the airlines can be helped.”

A few years ago, such a gesture by a Prime Minister to help an ailing Indian company, public sector or private, would have been treated as pretty routine and, indeed, obligatory. Trade unionists would have been up in arms against possible job losses and may have even called for a nationwide airlines strike that in turn would have forced the government’s hands; the Left would have declaimed about the pitfalls of deregulating a ‘strategic’ sector and may well have called for the restoration of Air India’s monopoly over domestic air travel; and well-heeled industrialists and MPs would have discreetly lobbied the Finance Minister asking him to instruct the public sector banks to offer extra lines of credit to a company in difficulty.

This was how business was done in India in the bad old days, when the ‘commanding heights’ of the economy corresponded to the imperatives of the ‘socialistic’ pattern of society. It is a commentary on how much India has changed in the 20 years of liberalisation that none of this happened. Instead, public opinion—howsoever imperfectly that is measured—appeared to veer round to the view that Mallya must be allowed to stew in his own juice and that special accommodation to Kingfisher by the political class would be tantamount to crony capitalism. From CPI(M) MPs to the ever-voluble Rahul Bajaj, it was agreed that it was bad form to nationalise losses and privatise profits.

So huge was the outcry against any proposed bailout or politically-inspired ‘restructuring’ of Kingfisher’s debts that both the Civil Aviation minister and those claiming to speak for the Prime Minister had to beat a hasty retreat. Instead, stern-faced bankers made it clear that there was no question of pouring in more good money into a bottomless pit. Like the much-despised International Monetary Fund, the banks demanded ‘conditionalities’, most notably a fresh infusion of equity by the promoter, if necessary by the conversion of inter-corporate debt into equity.

It is not that there was no appreciation of Mallya’s assertion that the various social obligations of domestic carriers—such as servicing the North-east—put unacceptable burdens on an airline. There was also a realisation that the restrictions on foreign direct investment, the huge sales tax burden on aviation fuel and exorbitant airport charges made it impossible for the aviation sector to grow. However, there was also the corresponding appreciation that while the sectoral grievances needed addressing, these were issues that weren’t specific to Kingfisher. For example, it was noted that the low-cost airline IndiGo had returned profits, despite operating in a difficult environment, because it had a robust business model. If Kingfisher was to be ‘accommodated’ for its quirky management style, why shouldn’t IndiGo be rewarded with lower interest rates as a prize for efficiency?

The manner in which the debate was conducted over the past week is very revealing and has implications for the future of economic decision-making.

First, it is clear that future bailouts of the limping public sector Air India is going to be fiercely resisted on the strength of the argument that there has to be a level playing field for all companies, including the public sector.

Secondly, it is clear that in the coming months cosy bailout packages for profligate or inefficient private sector companies that have good political connections will be fiercely disputed in the political arena. Coupled with the 2-G scam and the public movement against crony capitalism, the space for leveraging political clout in business has shrunk. Bankers will be wary of sticking their necks out and politicians will be loath to put in the proverbial good word to the government on behalf of those corporates that have made a virtue of adding to non-performing assets.

Finally, on a more reassuring note, there is a greater awareness today that the Indian corporate sector is suffering from sustained anti-business policies of the government and the regulators. In the past, ‘socialist’ politicians preferred to use their discretionary powers to favour individual businesses. The focus is now likely to shift to creating a wholesome environment for sectors of the economy. In other words, the nature of the business rather the ownership of the business will engage the attention of policy makers. Which is all for the general good.

Deccan Chronicle/ Asian Age, November 18, 2010 

Friday, November 11, 2011

FOR WHOM THE BELL TOLLS - The West needs props to cling to its sense of entitlement

By Swapan Dasgupta

Meddlesome priests, especially those blessed with exaggerated self-righteousness, have always been the butt of jokes. In a society where the quest of the material has easily outstripped the spiritual void, the Church of England in particular has struggled to retain its relevance in an increasingly irreverent land. Once a pillar of the Establishment, the Anglican Church has, like the monarchy and the Conservative Party, suffered from the post-War remaking of England. Nominally it has kept its toehold as the established national Church of England, with the Queen at the pinnacle, but its ability to epitomise the Christian consensus has eroded.  Plagued by theological bickering, over issues that range from gay priests to women clergy, it has yielded its Christian certitude to the Church of Rome and the newly-emergent evangelical churches. The slightly dotty, parish priest who used to be as central to local communities as the local squire and the Women’s Institute is almost facing extinction in the 21st century.

Last month, the Church of England flickered back to life briefly, courtesy the Occupy the City movement that arrived in Britain as a spin-off from the Occupy Wall Street movement in New York. Originally conceived as an expression of revulsion against the unbridled greed of fat cats in the financial world, the movement has so far left the proletariat unmoved. However, it did strike an emotional chord among those on the fringes of ‘respectable’ society—those committed to ‘fair trade’, organic food, justice for the Third World, anti-globalisation and environmentally sustainable living. Some saw in the Occupy Wall Street stir an answer to the Tea Party movement but its self-image was never so overtly political.

The anti-greed protests embraced three distinct types. There were the remnants of the hippie movement tempered by feminism—the type of protestors who made a lifestyle statement by camping outside the US Air Force base in Greenham Common for nearly three years in the mid-1980s. Then there were the professional anti-globalisation protestors that are drawn to every meeting of the G-20 leaders and World Trade Organisation summits. And, finally, there were the professional Leftists, usually from fringe organisations that have made a virtue of their own irrelevance. In the 1980s, the satirical weekly Private Eye, dubbed them the ‘Sparts’, after a slightly bizarre left-wing sect that bore the name of Rosa Luxemburg’s old Sparticist League. I am happy to see that the usage of the term has been revived.

The picketing of St Paul’s Cathedral in London, arguably Anglican England’s most spectacular basilica, by this rag-tag bunch should have ideally attracted modest attention. Protests of this sort are dime-a-dozen in democracies and the law enforcement agencies are well equipped to get them to move on with a minimum of fuss and violence. Unfortunately, this is when the meddlesome priests stepped into the scene.

Unable to countenance the authorities clearing the area to prevent the protesters being a public nuisance and posing a fire hazard, Reverend Dr Giles Fraser, the Canon Chancellor of St Paul’s Cathedral, resigned from his post. He was so overwhelmed by the Christian piety of the protestors that he proclaimed “I could imagine Jesus being born in the camp.” He also declared that it was fitting
that a tented community had sprung up around St Paul’s because the
Saint had been a tentmaker in real life. In the index of woolly-headedness, Dr Fraser had few equals.  

Dr Fraser’s curious resignation and his depiction of the protestors as noble, pure souls whose voices had to be heard was the signal for the most spectacular display of humbug since the Abdication of 1936. The Church of England went all weak in the knees and the Archbishop of Canterbury declared that the “Church of England is a place where the unspoken anxieties of society can often find a voice, for good and ill.” In an article in Financial Times, Dr Rowan Williams went on to endorse a “Robin Hood tax” of 0.05 per cent on “share, bond and currency transactions and their derivatives, with the resulting funds being designated for investment in the ‘real’ economy…” The tax, which has the backing of the G-20 and the likes of George Soros, Warren Buffett and Bill Gates, is expected to yield around $410 billion globally—maybe enough to bail out Greece and Italy.

On his part, Leader of the Opposition Ed Miliband chipped in with the discovery that there was “a gap between people’s values and the way our country is run”—an observation that was endorsed, among others, by the Army chief who spoke of a loss of the nation’s moral compass. At this rate, an endorsement of the Robin Hood tax by the Duchess of Cambridge or even Wayne Rooney wasn’t out of place.

The Church, as the representative of Christ on earth, is naturally expected to attend to the “anxieties” and concerns of its flock, presuming, of course, that those who camped in the City were loyal and devoted members of the congregation. If the congregation is agitated by the fiscal crisis that all responsible economists say is upon the West, it therefore follows that the Church must intervene, just as it did during the wars of empire and subsequently.

However, in the process, the important distinction between rendering unto God what is God’s and unto Caesar what is Caesar’s stands in danger of being blurred. The Church can ideally wish less hardship on its flock but to actually endorse a fresh tax is about as relevant as advocating a tithe on the commercial corporations. For all its insights into the spiritual life of the faithful, the clergy’s insights into economic remedies for the nation seem suspect. What is beyond the ken of Swami Ramdev in India can hardly be said to be among the Archbishop of Canterbury’s core competence.

Actually, the Church’s meddlesome ways mask its desperate desire to gloss over some hard choices that need to be exercised. The advanced capitalist societies in the West have hitherto enjoyed standards of living that are out of proportion to the actual generation of wealth in these societies. The welfare state which was built on the ruins of a war-damaged Europe could sustain itself for five decades because the West controlled the levers of the world economy. This, unfortunately, is no longer the case. The West is increasingly looking patchy in its performance. Against the innovative efficiencies of a Germany, a Switzerland and even California and Texas, is the laggardness of Italy, Portugal, Greece and even France—economies that are spending much more than they earn and living beyond their means. Today’s crisis is Europe and, indeed, in the US has been triggered by the reluctance of the people to adjust to a lesser standard of living. Capitalism was OK as long as the West was top dog but it has to be humanised once it is apparent that the centre of gravity has shifted eastwards. This is what the European Union (Germany apart) is resisting and the sense of entitlement has been conferred a moral halo by the modern Church.

There was a time, some centuries ago, when the Church attended to people’s miseries and played the role of a palliative. Today, Christ in Europe is increasingly being made to play the role of a saviour of a community that wants to cling on to untenable privileges. At the risk of repeating a discredited Marxist formulation, it seems a case of spreading ‘false consciousness.’ The message from the East to the Western churches should be unambiguous: get real. 

The Telegraph, November 11, 2011

Sunday, November 06, 2011

Rahul Gandhi: PDC on a failing bank?

By Swapan Dasgupta

If, as is being increasingly reported in the media, Sonia Gandhi is indeed planning to pass the baton of the Congress to her son and heir-designate Rahul Gandhi, the reason can be only one thing: Her health. Even this reasoning is based on conjecture since the state of the Congress president’s health remains as — or more — preciously guarded as India’s nuclear secrets, a strange phenomenon in one of the world’s most open societies.
Yet, Sonia’s health seems to be the most likely explanation for any such contemplated change of guard in the Congress. As a devoted mother, fiercely protective of her children and the family inheritance, Sonia would ideally have chosen a less worse time to throw the evergreen 41-year-old Rahul into the deep end, more so when his interminable ‘Discovery of India’ remains woefully patchy and confined to choreographed sleep-outs. There is no persuasive evidence that has emerged so far to suggest that seven years of political life has led to his mastering his family vocation. Rahul was born great; he has achieved greatness. Even for Congress loyalists, Rahul epitomises what the Italian Marxist Antonio Gramsci cryptically observed as “pessimism of the intellect, optimism of the will”. They bank on him possessing the “magic wand” that Prime Minister Manmohan Singh admitted to not having.
Of course, there could be a more base explanation. For the past two years, the Congress, buoyed by winning 21 Lok Sabha seats in 2009 from Uttar Pradesh — where it was down to zero in 1999 — had made next year’s Assembly election the litmus test of Rahul’s ability to revitalise the Congress. The Congress general secretary’s endeavour to create a new breed of wholesome politicians who would rise from the ranks of the Youth Congress was one aspect of Rahul’s agenda. Its impact can only be felt in the long run.
Equally important was his commando raids to bolster local movements against the Mayawati Government — a project that has resulted in Digvijay Singh and Jairam Ramesh running amok. Digvijay’s minority wooing may not yield too many dividends because the Muslim vote seems to be firming up behind the Samajwadi Party, particularly after Akhilesh Yadav’s impressive rath yatra. However, Ramesh — ever the courtier with brains — is certain to do more damage to the future of India’s economic growth story with his over-populist Land Acquisition Bill than he is likely to add to Congress’ pro-farmer image. In caste-dominated UP, it will be some time before the intermediate and backward castes shed their long-standing antipathy to the Congress. Beni Prasad Verma, the only OBC leader of consequence attached to the Congress, is, for example, doing his own thing independent of Rahul Gandhi. His future movements would warrant close scrutiny.
Overall, reports from the ground in UP don’t seem terribly encouraging for the Congress. The party talks in terms of targeting 100 seats where it will throw in all the resources at its command but in its heart of heart it is aware that its best hope lies in displacing the BJP from the third position. The Anna Hazare movement has dented Congress’ support among the urban voters and upper castes and this is the reason it is now wooing the nimble-footed Ajit Singh in a frenzied manner. If the Congress’ indifferent run in UP persists, the party may become desperate enough to seek alliances with fringe Muslim sectarian parties in eastern UP.
The larger point is significant. If the Congress performance in UP turns out to be pathetic, there will have to be a fall guy. Digvijay Singh may nobly offer to be the sacrificial lamb. But will that settle the question? Congress activists will not join in the taunts hurled at Rahul’s ability to be the party’s secret weapon of the future -- a hope that, in another age, kept German morale alive from 1943 to the end of 1944 when everything pointed to impending collapse. They will defend Rahul robustly as Salman Khurshid did in 2007 when he suggested that the party had proved itself unworthy of Rahul. But in their minds there will be all sorts of questions. These questions won’t disappear if Rahul has already been kicked upstairs but it will allow Congress workers to claim that the big guy can’t be blamed for reverses in regional elections. The coronation of Rahul prior to the UP election forestalls the possibility of disturbances in the durbar in the short term.
Today there will be no challengers, a delay could invite problems.
The Congress is faced with a series of unenviable problems. The UPA Government increasingly resembles a Divided Progressive Alliance with top Ministers taking pot shots and pointing accusing fingers at a duplicitous PMO. The allies have their own mounting sets of grievances and Mamata Banerjee was the latest one to echo hers in belligerent language. These problems are more than ego hassles. They are occurring in the backdrop of a discernible failure of governance, mounting economic woes, eroding international confidence and an impression of drift.
The ‘DPA’ is clearly unravelling but yet no one — neither the Treasury benches nor the Opposition (barring LK Advani) seeks an election. The Congress believes that the worst is over and the Opposition BJP wants more time to put its own house in order. Rahul, to use Mahatma Gandhi’s immortal words, may well come to be the proverbial “post-dated cheque” on a crashing bank.