Howdy Economy?

“Howdy” is in the air in India these days! With Prime Minister Narendra Modi set to address the global Indian audience from the NRI platform at Houston, which has been branded as “Howdy Modi”, this American slang has got into the Indian vocabulary!  But, in India, ever since the 1st Quarter poor GDP results were out, the commentariat has been asking just one question “Howdy Economy?” Because, Indian economy is believed to be in ICU where the Chief Doctor was not giving much attention!

In India, the time tested tradition has been to undertake reforms when there is a crisis. Economist and Author Shankkar Aiyyar explains this beautifully in his book – “Accidental India” with back stories behind every single historic economic initiative of post independent India. The bottom line being, we take such drastic steps only when push comes to shove!

It looks like the latest decision of the government to slash corporate taxes drastically in one go from 30% to 22% is one such initiative which will have a lasting positive impact on the economy but which was taken when the answer to Howdy Economy question was very, very feeble. Naysayers notwithstanding, simplifying the tax structure, eliminating the myriad exemptions and having a reasonable low rate is a welcome move. It will make the industry competitive, make it more profitable, attract both foreign and domestic investments thereby have a trickle-down effect on the economy.

I saw some commentary that, this is more of a long term treatment and not an answer to the short term woes. Indeed yes. There is no silver bullet that can get the economy growing at 8% and more. It needs a combination of measures that are short term and long term. My belief is that, irrespective of the condition of the economy, a simple and low corporate tax structure was anyway required to grow the economy from the 8% levels we were couple of years ago, to 10%. With the economy struggling at 5% levels, the crisis like situation galvanised the government into action. Finally, the progressive reduction in corporate tax from 30% to 25% which was promised by the then Finance Minister Arun Jaitley in the 2015 budget has been executed by his protégé Nirmala Sitharaman. She has done it in one stroke and has gone a step further reducing the rate to 22%.

While the reduction in corporate taxes is a supply side reform, steps are required in the demand side as well. With the transition to the GST regime, the government has less flexibility to announce stimulus like in the past where excise duty or Sales tax cuts used to be announced to boost demand and consumption. In the present GST regime, the GST council has to take a call on the same and make those adjustments. Some of the announcements on GST rate reduction on hotel tariffs are in this direction.

With the reduction of corporate taxes, there is a loud clamour for reduction on the personal taxes front. Experts keep saying that this will put more money in the pockets of the salaried class which will make them spend more. I am not too sure of this. In the past, whenever there has been some personal income tax slab changes and effective rate reduction, we hardly came to know of the savings or reduction. And I don’t think anyone then consciously went to spend the money saved! Of course, it is more of a mood lifter and gives a feel good effect to the salaried class. Beyond that, I am not sure if a personal income tax rate reduction will boost the consumption in the short run which is what experts claim!  Nevertheless, as I have opined in the past, simplification and reduction of tax rates is essential.  This will also remove the peeve that there is now too much gap between the corporate and personal income tax rates!

One positive signal from the last few weeks is that the Government is listening.  In today’s world, any government of the day can choose to ignore the mainstream media. However, it cannot afford to ignore popular opinion which manifests in social media. As someone said, in India, we have as many economists as we have cricket experts! But the good part is, thanks to social media, apart from the secluded voice of the commentariat, there is an opening for “People like us” to give our opinions.

Ever since the tax cut announcements, there has been much discussion and debate as to whether it is right, whether it is sufficient, whether it is too little – too late, if it is pandering to corporates and so on. And if things can turn around quickly? With the festive season coming up in India, it is all about signalling and lifting the spirits and mood. When there is bad news which usually reaches us through the media, even if we are not directly connected to it, we all start talking about it, isn’t it? I refer to this as the economy suffering from “Headlines syndrome”! So similarly, when there is positive cheer emanating from even a single but important decision like this, it has a ripple effect. So, I hope this corporate tax cut move leads to such positive ripple effect in the coming days! And the answer to “Howdy Economy?” becomes loud and cheerful in the coming days!

Postscript:  In my earlier posts, I had said,

As a purely short term stimulus, any capacity building in manufacturing industry by way of new factories, expansion of plants,.. should be provided with tax relief”

And

With respect to taxation, “In simple terms, the mantra should be lower tax rates with no or very few genuine exemptions

Glad both these found resonance with the government and have been implemented!

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Turning the GDP (Gross Disappointing Product) tide!

Many years ago on my visit to China, I found most of the newspapers there giving a lot of attention in their front pages to decline in GDP, tapering of FDI into China and other such economic issues. In a blog post that visit, I rued that in India, our media doesn’t still focus on economic Roti, Rozgaar issues but spend disproportionate amount of columns on mundane political news and views. For the past few months, it has been good to see in India too, the media at last waking up to the slow down blues in the economy.  For more than a year or so, the entire country was pre-occupied with the Modi re-election issue and everything else did not matter.

Since the re-election of Narendra Modi and his government that too with a majority better than last time, the euphoria and the resultant expectations have been very high.  However, the party has been cut short by the bad news coming in on the economic front, day in and day out. There was a great opportunity for this Government with a new face as the Finance minister to have seized the opportunity when she presented the Union budget on the 5th of July and fire the economy. The budget was a decent one but one that was devoid of Out of box, bold ideas which would set the economy on fire. In doing away with the brown brief case and opting for the bahi kaatha, Nirmala Sitharaman’s budget was a ritual breaker but, was not a path breaker! Hence, ever since the budget, there has been quite a few negative reactions as manifested in the tanking of the markets, depreciation of the rupee and a massive FPI pull out!

The initial reaction of the Government to these reactions were in expected lines that our economy was still resilient, one of the fastest growing and hence no need to panic. However soon enough, with bad news emerging on the Automotive sector first and then even on FMCG, the Government was forced into action and from then on we have been seeing a slew of measures, cabinet decisions and sops to revive the economy. Q1 GDP at 5% turned out to be the last straw.  Coinciding with the Q1 GDP results, the Government announced the merger of PSU Banks as a way forward in banking reforms. Economy was finally on top of the news cycle and the Government’s attention, Kashmir notwithstanding!

It was widely expected and hoped that some of the important initiatives of the Modi Sarkar in the 1st term like the thrust on Highways construction, massive investments in improving Railways infrastructure, improving air connectivity to the smaller towns, making electricity available to the last village and so on would start yielding results in terms of improving economic activity and fuel growth in the country. Added to this, Modi Sarkar has been constantly increasing outlays on MGNREGA in every budget. Why these measures have not started yielding results on the ground both in terms of economic growth and job creation is mysterious. It may be a good idea for the Chief Economic Advisor to come out with a White paper on the outcomes achieved for the massive outlays in Modi Sarkar 1.0.

In the back of all these, the question becomes, are the measures so far announced by the Government enough to resuscitate the economy? The reversal of some of the proposals in the budget are certainly welcome moves but those just contain the damage.  And the other measures like opening up of FDI and so on are necessary but not sufficient to get us back to where we were last year (8%) and then hit our dream goal of 10% GDP growth which increasingly is becoming a pipedream.

During Modi Sarkar 1.0, the Government leveraged well on the windfall it had from the crude prices and not passing on the entire benefit to the consumer to “manage” the economy with heavy public investments. The hope was that gradually the private investments will pick up once the sentiments change. But unfortunately, due to the NPA and the overall banking crises, it did not fire up the economy so much but, just kept the wheels of the economy going. Now, under the current circumstances however, continuing of public expenditure alone may not be sufficient. The recent red herring on the increasing debt of NHAI may in fact become a dampener here. For India as a country, the next few months are supposed to be very high on economic activity with the impending festival season. And the fact that the monsoons have been bountiful for most parts of the country notwithstanding the floods in some parts, there is still hope even for this year.

So, in order for the economy to fire up, ways and means have to be found for increasing private investments and individual spending/consumption. I am no economist but here are some thoughts:

To get private corporate investments going:

  • Modi Sarkar should bite the bullet and announce 100% FDI in Multi Brand Retail. Though India as a country missed the retail bus 10 years ago, it is still not late. Some of the global retail majors may not be as bullish today as they were a decade ago on India due to our policy flip flops and the current industry shift to E-Commerce. But still considering the country’s size and the potential it offers, India is still an exciting market for say specialised vertical retail stores. In announcing this, we should do away with the myriad sourcing conditions and allow the retail water to find its own level. Retail gives fillip to low end jobs, manufacturing industries as well as commercial real estate.
  • Copy the STPI (Software Technology Parks of India) strategy that helped in boosting the software industry in India in the 90s and come up with a similar framework for boosting Electronic hardware manufacturing in India. This will help India in becoming a preferred country for those who are looking at alternatives to China. Again we are late in this game and today Vietnam has emerged as an alternative to China for low cost manufacturing. But still considering the long term view, I believe we still have opportunities here.
  • Every Government recognises the potential of Tourism as an industry to provide jobs and improve economic growth. However, to unleash and unlock the true potential of India, we need massive capacity building in hotels, recreation facilities, connectivity and infrastructure. Government should provide time bound tax cuts for investments to private sector in this area to targeted locations in India which need infrastructural boost. The tax cuts must be linked to time bound completion of projects.
  • As a purely short term stimulus, any capacity building in manufacturing industry by way of new factories, expansion of plants,.. should be provided with tax relief.

To improve consumption and spending:

  • Holiday season is upon us. Provide relief on Income tax to individuals for money spent on holiday travel and stay in select locations in India which require boost on tourism (Uttaranchal, North East, Leh for example) with a cap of say Rs. 1 Lac. This will motivate public to take vacations and boost tourism in certain locations which have potential, decent infrastructure and connectivity but are untapped. Usually this has a spiral effect. When more people throng these places, automatically investments start pouring in for development.  For every 3 years, the locations can be changed in order to make it widely spread.
  • On the real estate front, today the supply is high and the demand low. This is mainly because the property rates are artificially pegged high and the home loans still high. This jinx needs to be broken. Though I have seen the Government announcing a slew of measures in the past few years, the housing market has not taken off. Considering the fact that the private real estate lobby is not going to cut prices ever, there is a need for the Government to intervene and disrupt the market. Like in countries like Singapore, Malaysia,.. Government must float either own companies or joint ventures to construct affordable housing in a massive scale and allot to citizens who do not own a single house in a transparent manner. The Government can offload its equity and then exit after say 20 years from these companies once the overarching objectives are reached. This will also disrupt the existing real estate industry and make it fall in line in terms of pricing and best practices, both of which are found wanting in the current scheme of things.

To revive the “animal spirits” in the Indian economy. Animal spirits are related to the points mentioned above i.e. both consumer and business confidence. I have put this separately as there are some low hanging fruits here which can be taken:

  • Sell Air India as of day before yesterday!
  • Get going on “Actual” disinvestment of Public Sector units already identified as non-strategic. Identify another Arun Shourie to make this happen in this term!
  • It is not enough to merge PSU Banks but to offload equity, get professional management and turn them to “HDFC Banks”!
  • Today many of the Government’s grand projects are stuck or going slow due to land acquisition issues. Identify the issues and fix them by bringing about the necessary changes in the Land bill!
  • Use the current crisis of job loss to build consensus around Labour reforms. Adopt the “GST council” approach for labour reforms. Today all state governments will eagerly come on board considering the pressure all states have on generating jobs.

As I write this blog, I am seeing that the Finance Minister is addressing a press conference. This is her 3rd one in the last 2 weeks. Glad to see the Government demonstrating the needed sensitivity to the economic situation and willingness to take steps. Our only urge is that instead of incremental small steps, we need big leaps.

Only that will ensure we turn the tide over Gross Disappointing Product and achieve real Gross Domestic Product rates quickly!

A Tale of Two FMs!

In the last week, two Ex-Finance Ministers of India, pushed Kashmir out of the headlines and debates, though for reasons completely different. Palaniappan Chidambaram (PC), an Ex-Finance Minister in the UPA ministry hogged the headlines for being a political heavy weight who finally got close to the long arm of the law. Arun Jaitley (AJ), the other Ex-Finance Minister but of the Modi 1.0 cabinet, dominated news since yesterday when he passed away after prolonged ill health. The lives of these two successful personalities have many common strands but, what is striking is the way it is finally diverging and in this lie key lessons for aspiring politicians.

The similarities first. Both PC and AJ came from privileged backgrounds and were never the “rags to riches” type leaders. They were lawyers by profession and extremely successful at that.  If they weren’t full time politicians, they would have been among the top 10 highly paid lawyers in the country for sure. Both were extremely articulate.  Both made their first impressions through their communication skills within their parties.  And that also turned out to be the lasting impression. In the last few years, the most interesting debates in the parliament were, when PC and AJ were pitted against each other – whether it was the GST or the Aadhaar debates. Both were tailor made for TV interviews and discussions. Both came extremely prepared for interviews and were at their combative best in putting across their views. More often than not, one tended to change opinions after listening to their points of view on a subject.  PC through his weekly columns and AJ through his blogs have also been using the written medium to get across their views effectively.

Both PC and AJ with their legal backgrounds, would give key inputs in drafting of bills to their respective parties. Their opinions were always sought in all issues related to passing laws in the parliament. In spite of not having a background on economics, both got the opportunity to be Finance Ministers. Both showed alacrity in dealing with numbers.  And when the situation demanded, they were the chosen ones to step in, as In-charge for other ministries. In the wake of the 26/11 terrorist attacks in Mumbai during Manmohan Singh’s regime, it was PC who was asked to take over the reins of the Home Ministry from Shivraj Patil who was found wanting in terms of responding to the situation. In AJ’s case he was asked to handle Defence Ministry as well, till Narendra Modi could convince Manohar Parrikar to take up the job.  One point of time he was handling three key portfolios concurrently.

In spite of these strengths, both PC and AJ were never mass leaders. PC did win elections from Tamil Nadu but that didn’t make him a mass leader. AJ could not manage to win the election even amidst the “Modi wave” in 2014 when he contested from Amritsar! And I also reckon that their elitist background, their success in their profession and thereby their high net worth made them easy targets for “not fit for public life” barbs.

Now, coming to the divergence in their personalities. AJ has been more loyal to his ideological moorings. Having started as part of the ABVP, he stuck to the Sangh parivaar during his entire life. PC, though known as a Congress man, left the party in between to be part of Tamil Maanila Congress. He was rewarded with the important Finance Ministry by both Deve Gowda and I.K. Gujral.

While AJ is known to be congenial with his staff and peers, PC always came across as arrogant and rude. He was known to be firm in his views and not one to suffer mediocrity. This projected him as an aloof politician who won more enemies than friends. On the other hand, as can be seen from the obituaries since AJ’s death yesterday, his friend circle cut across professions and political parties. And this turned out to be going against AJ most of the time.  Among the hard core BJP followers or Bhakts, AJ was viewed with suspicion of protecting his friends from other parties and corporates in corruption and other charges.

The same goes with relations with media.  AJ had many among the media who are now calling him as “My friend Arun” in their obit pieces. I suspect PC has few friends in the media!

PC while in Government had many run-ins with his ministerial colleagues. His spats with Pranab Mukherjee and Jairam Ramesh are in public domain. Who will forget that “patching up” Press conference he did along with Mukherjee? With AJ, we have not heard of any spats he had with his peers.

PC was seen more of a self-centred person even within his party and there was always a question mark over his commitment and loyalty to the party and the leadership.  But here, AJ was always seen as a party man. When not in power and not a minister, AJ was handling the poll strategy and electioneering. Before the Amit Shah era, AJ was the master strategist in putting together the poll campaigns for BJP in states including Gujarat when Narendra Modi was fighting the elections. PC apart from being a member of the manifesto drafting committee he was not known to be a poll strategist or an organisational man.

It is to AJ’s credit that many of today’s senior ministers in the Modi cabinet were all at some time mentored by him. Whether it is Piyush Goyal or Nirmala Sitharaman or Dharmendra Pradhan, they have all been coached and guided by AJ in the past. Similarly most of today’s BJP spokespersons have been mentored by AJ. PC has no such reputation.

In terms of handling the Finance Ministry, I always thought that PC did a better job. He took over as FM in 2012 from Pranab Mukherjee during UPA-II, when the economy was at its lowest ebb. He quickly put in measures in place to arrest the Rupee slide and restore investor confidence by drawing a clear red line on fiscal deficit. That the mood of the country had already set in for a change that time is another matter.  But, it always seemed like he was a right person in the wrong party under a wrong leader. I personally felt that under a stronger government and a more decisive PM, PC would have relished his job better and would have made a bigger impact in governance.  AJ, though armed with the luxury of heading the Finance ministry of a majority government, showed very little appetite for getting into a “Mission mode” on the economy front.

The introduction of the landmark tax reform – GST shows who is a consensus man. The work on GST which started during the UPA era couldn’t see the light of the day during UPA. The then Finance Minister PC was not accommodative on many of the requests from the states like revenue compensation… However, during Modi 1.0, AJ could build a clean consensus and despite stiff opposition from Congress (in particular PC) on certain clauses could get GST off the ground in 2017.

Amidst all this, if there is a big divergence between PC and AJ, it is how they managed their families, which has now become PC’s Achilles heel.  The legal troubles PC is facing today all claw back to the conduct and involvement of his son Karthi Chidambaram. We wouldn’t know if PC was a wilful partner in all his son’s business misadventures.  However, the fact that he didn’t and he couldn’t reign his son from misusing the office of the Finance minister, makes PC a partner in crime. And today he is paying for the same.  On the other hand, AJ had a spotless track record. Except for pointing fingers at him for developing friendships across the board and being a gossipmonger, there is no charge of misconduct or misappropriation against AJ or his family. He had kept his family away from his political and public office.

In public domain, Chidambaram is seen most of the times in spotless white shirt and dhoti. However, his public life has not been spotless. On the other hand, Jaitley while being in a similar political boat, lived his life without a blemish. And kept his family away from tapping his political influence.

In analysing the lives and career of these two fascinating politicians, there lies a key lesson for many a politician – Control thy Son(s)!

From Mission Kashmir to Fusion Kashmir!

No one else could have put across what “Status Quo” actually meant, better than Ronald Reagan! He said, “Status quo, you know, is Latin for the mess we’re in”! In the context of Kashmir, this Reagan’s definition fits very aptly! In India, the strategy of successive governments has been to maintain status quo as far as Kashmir is concerned, the cost of which has been quite high.  This, while knowing it very well and doing nothing concrete about the mess we were in.

By now, we all know that this Government under Narendra Modi has an allergy for Status Quoism.  So, we shouldn’t be surprised at all that it went about systematically this week, to nullify Articles 370 and 35A. But, that they put this issue on such a high priority and got it done early into this term, came as a big surprise to me. With this move, the liberal circuit had another melt down – its 2nd, since May 2019 as can be seen from the many pieces one gets to read, since the 5th of August. The commentary on this issue post 5th August are at three levels – wisdom behind the decision, execution of it and hypothesis over cause and effect.

Coming to the wisdom behind the decision of nullifying articles 370 and 35A, liberals see it as India’s betrayal of Kashmiris and going back on the terms of Kashmir’s accession with India.  The original article was indeed a temporary provision and was to be repealed when the preferences of the Kashmiris were to be understood and acted upon. As a country, all along we approached the Kashmir issue with a defensive mind set, as due to various circumstances we failed to find out what the Kashmiri on the street wanted, back then. And this was complicated by the definition of who is a Kashmiri – the one in Jammu or the one in the Valley or the one in the hilly Ladakh!

70 years is a long, long time and much water has flown under the Jhelum Bridge. And much blood too! Now the only objective for any Government should be to stop the flow of blood and let just water flow.  Since successive Governments have been stressing that Kashmir is an integral part of India, it was high time that it was made so. So, doing away with the articles 370 and 35A were the logical steps in embracing Kashmir as part of India. The much tom-tommed about provisions like any Indian from other states being able to purchase land in Kashmir … are in my opinion not the major issues today! Doing away with any constitution within constitution of India and stuff like Special powers, dual citizenship….are. In my blog just in the aftermath of the Pulwama attack, I had written that shedding the historical baggage and moving forward on scrapping all special status to Jammu and Kashmir as an important step (not the only step) towards lasting normalcy in Kashmir.

For those who are asking that, anyway 370 of today is a much watered down provision compared to the original and hence what was the need to nullify now, the answer is simple. Why then have it, if its existence today anyway doesn’t make any material difference to the Kashmiri on the ground?

There has been much criticism and take downs on the Government’s execution part. Why didn’t the Government discuss with “stake holders” and take them into confidence? Why was this done when there was no elected Government in J&K? Scrapping 370 & 35A is O.K. but why division of the state into two Union territories? Why has been curfew and press muzzled in Kashmir? So on and so forth. These questions, coming not so much from the common public but from the liberal intelligentsia have their own pitfalls. When we read such criticisms at times we wonder if liberals live dividing their time between Utopia and some fantasy land!

For decades, we have been wasting time in talking to the so called stake holders without any outcome! “Keep talking” in diplomacy most likely means “Do nothing”! I have lost count of the number of times successive Governments appointed interlocutors to talk to stakeholders. Has anything concrete in terms of a road map emerged out of these engagements? And who are these stake holders? The separatists? The book “Kashmir – The Vajpayee Years” written by Ex-RAW Chief A.S.Dulat gives details of talks L.K.Advani had with separatists, during Vajpayee’s NDA rule.

In the 2nd meeting Advani asked, “What is it that you want?” Not one single Hurriyat leader said anything. Finally, Prof. Ghani said, ‘Next time we will come prepared with our ideas.”

So much for talking and taking these leaders into confidence. Having said that, we must not forget that during Modi’s 1st term, the then Home Minister invited all stake holders for talks and even appointed another interlocutor to engage with sections of Kashmiris with no result!

If Kashmiri politicians of the like of Abdullahs and Sayeeds are part of stake holders, the less said the better. There can be no other clan of politicians which has been more ambiguous on their stand viz a viz Kashmir than the Abdullahs. For long, the Abdullahs carried the tag of being on the India side. But when they had the opportunity, Farooq earlier and more recently Omar did not use their political heft to take Kashmiris into confidence once for all and get them to gravitate towards India. They, for their own political reasons kept their ambivalence of keeping one leg here and one leg there going! Do you see any other state political leader calling and addressing the Central Government as “New Delhi” or “Delhi”??? And we know very well what Mehbooba Mufti and her party were up to in helping to bring normalcy in Kashmir when they were in power! So, I don’t think the Government could have engaged with such stake holders and made any progress!

The brains of liberals are wired to react to ideal situations and that explains why they are up in arms against the way the Government went about this. But the situation in Kashmir was never ideal or normal in the 1st place. Ergo, it required out of box solutions executed in an out of box manner. If everything was normal and was a question of another state bifurcation, I am sure that the Government would have followed the Standard Operating Procedure (SOP) as prescribed in the text book.  So, using the Governor’s rule to revoke the powers of Article 370 and dividing the state into two Union Territories are all par for the course.  In short, an issue which is festering without a solution for decades cannot be handled with standard approaches. The only pitfall I see is the “tyranny of precedence”! Future Governments may opt to follow this as SOP even when the situation is normal showing this as precedence!

In today’s viral age, social media would be easily misused to just create a panic by circulating fake news and pictures. So, clamping down on internet services till situation settles down makes sense. But, was there a need for a control on the press from covering?

For those coming down heavily on the Government for the clamping down and heavy deployment of forces… if these were not done and trouble erupted on the streets, the same commentariat will rip apart the Government for not learning from past episodes in Kashmir like during Burhan Wani’s death!

And finally coming to the cause and effect. It is certain that all will not be happy in Kashmir over the changes that has been foisted on them. Vested interests who have been taken off guard by the move may not keep quiet. Pakistan may crank up their covert channels to fester trouble in India.  But then, all these are not new. Even while we were trying hard to maintain status quo in Kashmir, all these were in play.  I am sure that the Government is more than aware of all the risks before they moved deftly on these moves. Let us hope better sense prevails among the Kashmiri youth for whom the best chance is to be aligned with a prosperous India than an Azad Kashmir!

I have been reading that this is Modi’s Mission Kashmir! But I think Mission Kashmir has been the one earlier governments have been trying all along which failed. This is Modi’sFusion Kashmir” and let’s hope this succeeds in its attempt to break the status quo!  After all status quos are made to be broken!  The time is now and the ball is in the court of Kashmiris!

Pic Courtesy: Businesstoday.in

Resorts as the 1st resort!!!

How many still remember Jaspal Bhatti? If you are from the Doordarshan generation just like I am, you will not have any problem in recalling him. Jaspal Singh Bhatti was the 1st known political satirist on Indian Television. Through his shows Ulta Pulta and Flop show in the 80’s and 90’s, Bhatti took pot shots on what was happening around us in the political scene and we eagerly looked forward to his shows. A clip from one of those shows where Bhatti dons the role of a “Buyer and Seller of MLAs” for political parties who lose MLAs to defection, landed as a WhatsApp forward few days ago. Someone recalled that episode and circulated it to remind us of Bhatti’s foresight looking at what is happening in Karnataka and Goa in the last few days! If Bhatti were to be living amidst us today, I am not sure if he would be proud or feel ironical of his prescience!

In India, what’s happening these days make a mockery of the famed “Anti Defection Bill” which was introduced in the late 80’s by Rajiv Gandhi to put an end to the Aaya Ram, Gaya Ram routine that was common in those times! For some time, one felt that we found an anti-dote to defections once for all. But then, we Indians are reputed to find innovative solutions to any problem. So soon, a loop hole in the Anti Defection law was found and exploited. Which is – the bill only prevented individuals from defecting but did not mind splits and mergers of parties with 1/3rd of members! So Aaya Ram, Gaya Ram has now given way to “Aaya Toli, Gaya Toli”! Or like what is happening in Karnataka, legislators just resign as MLAs bringing down the strength of the house and thereby of the party/front in majority!

What is common among Goa and Karnataka? These are states where the polls threw up a fractured verdict.  No single party got an absolute majority. Even a pre-poll arrangement could not garner majority. A government could be formed only by cobbling up a post-poll alliance! In a democracy, there are inherent problems with such post-poll alliances. The parties don’t face the electorate with such a premise. And when voters cast their votes, they for sure do not expect those who fought bitterly against each other during the campaign to come together as allies and conjure up a government! This is exactly what happened in both Goa and Karnataka!

The tamasha doesn’t end there after the Government is formed, as we have been seeing in Karnataka! Every other day we find the Government on the throes of a crisis of survival. Governance be damned because it is a question of “Return on Investment” (ROI) for many! One group is not complaining though! The resort owners! They don’t have to worry about their ROI! Every now and then a political party suffering from a threat of group defections hordes their MLAs to resorts in other states, usually the friendly ones, to firewall them from offers and counter offers. Horse trading is the term used for this in popular lexicon. Frankly I feel that it is an insult to horses! Another rhyming word though a bit unparliamentary would make a better fit as we are talking about seats and chairs here!

“Resort politics” which was invented originally by Devi Lal of Haryana in the 80’s has now been internalised perfectly by most of the parties. Hotel Viceroy in Hyderabad became a sort of a tourist attraction after Chandrababu Naidu used it to house his MLAs during the infamous coup he staged against N.T.Rama Rao. What does it speak of the MLAs who are supposed to be people’s representatives who allow themselves to be hoarded from one city to another and lodged in resorts?

It is not very difficult to imagine the trade-offs in these situations. In Goa, 3 of those who defected from the Congress have been made ministers with one – Chandrakant Kavlekar, even being made the Deputy CM of the state! Not to forget that he was accused of running shady businesses and land deals not so long ago by BJP! Similarly, the MLAs who have resigned in Karnataka would not have done so without Quid pro quo deals! What does all this say of Democracy? We cannot claim to be one of the world’s largest and best performing democracy by just routinely conducting free and fair elections! Elections are of course important through which, people get to elect their own representatives. However, Democracy I believe, is not just about this aspect. It should also be about deriving desired outcomes from the electoral process! From this point of view I feel our current democratic process is flawed and need serious reforms!

First up, the Anti – Defection law needs a re-look. If a candidate has gone to the voter and obtained votes as “A” party’s candidate he should not be allowed to defect to party “B” after becoming a legislator. Period. Similarly an “Independent” candidate should clearly indicate his allegiance to a front or his true non-allegiance to any front before the elections based on which he should seek votes from people. Once the candidate does that and becomes a legislator he should not be allowed to switch allegiance post the elections. In short, there can be Zero defections once an election is over.

Second, which I have written before as well (Read the post here) is on the veracity of “Post poll alliances” in a democracy. I sincerely feel that the concept of Post poll alliances is actually a fraud being inflicted on the voting public. More often than not, even the so called liberal commentators are fine with governments being formed through post-poll deals under the premise of “Politics is the art of the possible”! I really don’t know in which context Otto Von Bismarck, the German statesman made this statement! But it has been imbibed very well in Indian politics. Under the current circumstances, I would like to make a small change to that philosophy to read as “Politics is the art of the plausible”! Plausibility adds that credibility bit.

If the above are implemented, it will put an end to this tamasha of “Resort politics”! It was George Bernard Shaw who famously said, “Politics is the last resort of the scoundrels!” If he was alive, Jaspal Bhatti in his own inimitable style would have made it sound like – “Resorts are the first resort of politicians”!

Postscript: The term “Horse trading” owes its origin apparently to the notorious shrewdness of Horse traders who are involved in long drawn mostly dis-honest negotiations while buying and selling horses! (Courtesy: TOI)

Image courtesy: Asianetnews

Agenda for Modi 2.0!

Dear Mrs. Sitharaman,

First things first. Congratulations on becoming the finance minister of the country. Ever since you have taken over, there has been a flurry of unabated, unsolicited advice on what you should do and should not, in the upcoming budget. I was extremely reluctant to add to that already long list. But then your extremely gracious and earnest tweet the other day, welcoming all suggestions and inputs changed my mind.  Being from Trichy as well, I could see the “Trichy Tehzeeb” in that request!  Hence this piece, with my wish list not just from the budget but overall from the Modi Sarkar 2.0 from an economic agenda point of view.

I am not an Economist. I am just a keen and informed observer of Indian politics and a well-wisher of our country. So, my points may or may not stand the scrutiny of economists but hopefully will pass muster with the readers of this post.   I promise that I am not going to repeat a lot of stuff which has already been suggested by the erudite in their pieces.  So, here we go:

  • First up, the positive effects of implementation of GST and the kicking off of several infrastructural projects from the 1st term will start bearing fruits in the coming 2/3 years. So, I suggest that the 5 year term till May 2024 be divided into 2 parts – First 3 years till 2022 and the second 2 years till 2024. Take all the tough decisions in the 1st part and use the 2nd to stabilise things.
  • Second, in Modi 1.0, there have been quite a few hits but some misses too. In the 2nd term, on the back of a solid mandate, Team Modi should play on the front foot with confidence, while at the same time leaving alone deliveries outside the stumps and negotiating short pitched deliveries and bouncers with alacrity. In governance parlance, this means implementing even the not so populist decisions with confidence and not getting muddled in unwanted distractions.
  • Third, please request the economic ministries to come up with a list of things to be done to rev up the economy which is stuttering. Divide this list into 3.
    • 1 – Low hanging fruits which don’t need legislative backing
    • 2 – Which need bills to be amended, passed in the parliament
    • 3 – which need the states to take action

Get going on this list systematically. Have a target of 60 days to accomplish everything in the 1st list. This will give a clear message to all stake holders that this government is not the one to rest in its electoral success laurels!

  • Fourth, you are now in Japan and there is a lot we could learn from the Japanese in terms of going about things. One of the things I learnt from working in a Japanese company is “Prioritisation”! As Indians, we tend to focus on 100 things at the same time and spreading ourselves extremely thin. This was one grudge I had on Modi 1.0 which embarked upon so many projects simultaneously like Make in India, Skill India, Stand up India, Digital India, Smart City project, Ujwala programme and so on. If you closely measure the success, it is only the programmes which had focus like Ujwala, Rural electrification, Rural housing that met with success. In Modi 2.0, I would suggest that the Government takes up a maximum of 2 or 3 projects at a time, focus on the delivery with finite timelines and then move on to the next set of 2/3 ideas. This is what Japanese do.
  • Fifth, in India we have been talking of linking outcomes to outlays. But seldom has the same been acted upon. So, in the coming budget presentation on the 5th of July, please do not announce plain outlays but outlays that can be linked to quantifiable  outcomes.
  • Sixth, we usually see that in the budget, there are many outlays which are just carried forward year after year with a % increment or a % cut. For example, since 2013, money from Central Budget has been allocated to Nirbhaya fund to support initiatives towards ensuring women safety. One really doesn’t know how this fund is being utilised and after 5 years what this fund has achieved. This is just one example. In every budget, there are many sundry allocations like this. Please review item-wise outlays in the last 3 budgets,  respective outcomes achieved and allocate outlays in the coming budgets only if they make sense.
  • Seventh, considering the state of the economy, there is a need to mobilise resources to generate income and keep fiscal deficit under check. As Prime Minister Modi has been talking of “Minimum Government and Maximum Governance” one way of mobilising resources is by Government exiting many businesses that are no longer strategic in nature and monetising those assets. In Modi 1.0, in every budget, we had an item called “Proceeds from disinvestment” and this was achieved by making some PSUs like LIC pick up shares from the disinvested PSUs. During NDA-1 under Vajpayee, there was a clear focus on “Real” Disinvestment with a full-fledged ministry and a determined minister like Arun Shourie doggedly pursuing it. UPA did away with this and since then Modi 1.0 included, there has been no serious disinvestment in the country. I suggest that Modi 2.0 take this up seriously. A functional ministry named as “Monetisation of PSU Assets” (since disinvestment is seen as a bad word) should be formed. I also add that the proceeds from this monetisation be parked in a separate account and used for welfare schemes. By this, any criticism of the move can be countered by demonstrating that the proceeds of the same are being used for social welfare. A creative way needs to be found for accounting like this.
  • Eighth, in Modi 1.0, there was a big push towards infrastructure projects like highways and roads which was really commendable. The same should be continued with additional vigour. However, as admitted by Nitin Gadkari the pace of the projects could have been faster but for complex land acquisition issues. This is a big issue even today. In the 1st term, after initial belligerence, the government chickened out of the much needed amendments on the Land Acquisition bill. I remember Modi taking this up with rigour in 2014 basically because all the states identified certain provisions in the existing Land Acquisition bill as impediments for timely closure of infra projects.  Since the states are equal stake holders in this issue, please have discussions with a fresh outlook, strike a consensus and pass the amendments to the bill smoothly in both houses of the parliament. Renaming this as “Land Partnership bill” or something like that instead of the negative sounding Land Acquisition bill will help too to remove the negative connotation around this!
  • Ninth, taxation in India is still complex. GST implementation was a landmark Tax reform. I am sure there is a road map towards further simplifying the same with reduced tax slabs and simplifying procedures. Now, in this term please focus on Direct taxes. I hope that the panel working on overhaul of this will submit their recommendations quickly and your government should adopt the same ASAP. In simple terms, the mantra should be lower tax rates with no or very few genuine exemptions. Some of the exemption clauses we have are weird and defy all logic. For example the current clauses we have for LTA exemptions for salaried. Applicable for 2 years in a block of 4 that being calculated from the year 1986 and so on!!! Someone needs to do a Zero based hard look at all the existing exemptions for personal and corporate taxation and do away with most of them which don’t make sense in this day and age!
  • Tenth and the last one. On the 5th July when you leave your office for the parliament to present the budget, your team will hand over a brand new brown brief case which will have the budget speech. You and your team will pose with that brief case for the cameras and then you will read out the budget speech from the bunch of documents. And here’s what I suggest. Please, please do away with this brief case and the papers. Instead, amble along in style, pose for cameras with your hands “free” and as you rise to present the budget in the parliament hall, download the speech from the ministry’s secure server and project it in a large screen. Doing away with the rambling, long speech that would be just uber cool, while at the same time giving a push towards Prime Minister’s “Digital India” dream!

Pic Courtesy: Livemint

The Making of Modi 2.0!

As the results of the much anticipated Lok Sabha elections in India unfold themselves this day, it is clear that Narendra Damodardas Modi is all set to occupy the Prime Minister’s chair of India once again. In this avatar of Modi 2.0, BJP is looking set to get a majority on its own and NDA as a pre poll alliance is expected to beat its 2014 tally! First things first. This is a remarkable feat for an incumbent to not just return but return with a better performance than the 1st term and so kudos are in order!

As much as the return of Modi as the prime minister was expected to a large extent, the scale and the ease of this victory was not expected till some of the exit polls predicted so. What were we told all this while? “Demonetisation hurt jobs and the poor. GST is still hurting traders. There is agrarian crisis all over. Job creation has hit a historic low. Minority are living under increasing fear. Economy is not growing enough. And since 2014, the Idea of India has been threatened”. And much more. So, in spite of the fact this this government did perform in areas of infrastructure like roads, highways, railways…, asset building in rural areas, reaching electricity to the hinterland,…,… we were told that these were not enough to re-elect Modi again that too with a clear majority.

That being the case, what explains this massive victory? What is behind the making of Modi 2.0? I call it the story of “M”s!

M for Modi: – Let there be no doubt in anyone’s mind people on this. People have not voted for BJP or the NDA. They have unequivocally voted for Narendra Modi! States like Madhya Pradesh, Rajasthan which were lost by BJP are now being swept by them!  Modi has been seen as being earnest in his endeavour to fulfil promises he made. So, even if ALL the promises were not kept fully, people are being kind enough to give another chance. Programmes like Swachh Bharat Abhiyan, Demonetisation, Toilet construction, rural electrification and Ujwala Yojana… are being seen as sincere attempts in improving living conditions in India. Though some of the programmes like Demonetisation faltered, people were willing to forgive and forget!

M for Muscular leadership: I will have to narrate an anecdote here to elaborate this point. A day before polling in Mumbai, my 11 year old daughter’s friend asked my wife as to whom she would vote.  My wife asked why she wanted to know that. And her response left me stunned. “Aunty, I hope you will vote for Modi. Because only he can give a fitting response to Pakistan. India in the past never entered Pakistan and hit them. But under Modiji, humne ghuske maara”!  This was the impact a strong leader leaves in the minds of the young.  Critics may call it mindless belligerence when Modi decided to do a surgical strike and follow it up with an air strike. But people want their leaders to show spine in matters of their country’s defence.

M for Mission mode: This is the difference between Vajpayee/Advani era BJP and Modi/Shah BJP. During NDA-1, after forming the government and running a reasonably good one at that for 6 years, BJP did not do anything to widen their base. But the BJP under Modi/Shah is a different kettle of fish. After having won a decisive mandate in 2014, did they keep quiet? They got into “Mission mode” in North East and then later Bengal and the results are there to see. For BJP, if 2014 was UP story, 2019 is Bengal+UP story! In 2019, when it was facing the spectre of the SP-BSP-RJD gathbandan, BJP activated its “Mission mode” to target 300 on its own! This by targeting areas like Orissa, Bengal and North East.

M for Machinery: This is linked to the above. That is of having a plan and executing the plan through an effective machinery. The party machinery under the leadership of Amit Shah works relentlessly in expanding their base within India. Not just during election time. This also means that BJP will now target states like Telangana, Kerala and Tamil Nadu next probably for 2024!

M for last Mile Delivery: It is one thing to announce programs. It is one thing to have a strategy in the board room. It is another thing to ensure last Mile delivery. Whether it is Jan Dhan Yojana or Ujwala Yojana or other Yojanas, Modi Government’s track record on last mile delivery has certainly made a difference to people. This is what has made BJP and Modi to hold on to their leads even in the face of a combined opposition in states like UP.

M for Marketing: The word “Marketing” is often derided upon as if it is a bad word! As a marketing professional myself, I have resented it often. And I have said that Marketing is not a bad thing at all and is a critical element in a product’s success or failure. In political arena, for a leader or for a party, it is not just enough to perform. But it is important to be “seen as performing”! In that sense, BJP as a party and Modi as a leader are miles ahead in terms of marketing themselves.  Some would say that Modi’s success is all about just marketing! I tend to disagree. One should not forget the fundamental mantra that even great marketing cannot save a bad product!  One can write a separate blog on BJP’s marketing but turning the Chowkidar Chor hai slogan of Congress on its head as Main bhi Chowkidar campaign in its favour is one example of some great marketing by BJP!

M for Models: One reason for Modi in the 1st place to earn credibility in 2014 was his famed “Gujarat model”. This credibility is important for people to take your promises seriously. And this is the problem with the opposition today. The main opposition party doesn’t have any credible model to point the people to! If today, the Congress promises “Nyay”, people are reluctant to take it seriously. Because, even in states which are ruled by Congress, they find it difficult to hold on. If Congress has to be taken seriously in future, they need to develop their own “models” which they can positively refer to.

I hear some of you saying that it is all just one “M” which is Modi! No victory is accomplished with one factor. It is usually a combination of factors. I believe that in the making of Modi 2.0, the mantras were the above so many “M”s! Now that Modi 2.0 has been accomplished, it is time to look ahead and focus on the agenda for Modi 2.0.  What should that be? Please look for my next post! For now, M for Mangal!

Pic Courtesy: Rediff