Manmohan Singh

30 Years of “1991”!

As I was wondering what to write on this week, I realised that in a few days, half of this year 2021 will be over.  Back in January, everyone thought or rather hoped that we were all done with the “New normal” and soon one will get back to the “Old Normal” in more ways than one. Till March, we were coasting on towards that. Then came the dreaded 2nd wave leaving us literally gasping for breath. And in no time we are back to hoping to see the end of this year.  Just the feeling we had the same time, last year.

And probably 30 years ago in the year 1991.  If 2021 has been a tough year for those who are running the country, I reckon 1991 would also have been so and for a variety of reasons.  When the history of post independent India is written, the year 1991 would feature prominently. Today, the year is associated with the unleashing of economic reforms and liberalisation in India and being crowned as the ‘Year that changed India”. But it has got so many other associations to it, which is what I thought I will write about, when we are in the midst of “30 Years of 1991”!

As 1991 dawned, I was in my 2nd year of MBA course in Bombay. Just as the year commenced, we were witness to the 1st televised war in the Gulf when US attacked Iraq to liberate Kuwait in “Operation Desert Storm”. In India, cable TV was still in its infancy. But we could watch some visuals of the war in “The World This Week” programme which made New Delhi Television (NDTV now) and Dr. Prannoy Roy household names in English speaking households in India.  I must add here that those days as young students we had tremendous appetite for news and current affairs which is seemingly missing in the current generation. Oh yes, that law of diminishing marginal utility! When News is a plenty all around, it finds lesser and lesser interest.

And it was during this war in 1991, that India probably removed its veil of Non Alignment, when the then government under Prime Minister Chandra Shekhar allowed re-fuelling of US Aircrafts in India. The decision had to be soon reversed under immense political pressure eventually in particular from the Rajiv Gandhi led Congress which was supporting the Chandra Shekhar government from outside. Though the war happened in the Gulf, it had its own implications for India as a country. Oil prices sky rocketed pushing the imports bill to hit the roof and plunging the economy into a deeper crisis. And we had a humanitarian crisis to deal with as the Gulf was home to millions of Indians.

In May, I was back in Madras after completion of the course and preparing to return to Bombay after a short break. On the 21st May, 1991, Rajiv Gandhi was assassinated in Sriperumpudur near Madras by a suicide bomber at an election rally. The death of Rajiv Gandhi that too in that most tragic manner shook the nation. Rajiv Gandhi was all set to return as the Prime Minister with the Congress getting a comfortable lead. But his untimely death put the country again in chaos and when the results came, Congress became the single largest party but short of majority on its own.

It is difficult to speculate as to what would have happened to our country had Rajiv not been killed and had he returned as the Prime Minister. It was widely believed that having learnt his lessons from his first stint, Rajiv was a wiser man and with his youth, energy and impatience would have changed the course of the country for the better.

With the loss of Rajiv, P.V.Narasimha Rao became the Prime Minister heading a Congress led coalition government. He made Dr. Manmohan Singh his finance minister and between them unleashed a slew of economic reforms that liberalised India. Those were eventful days and day after day, headline grabbing announcements followed.  Dramatic devaluation of the rupee, pledging of the country’s Gold reserves, announcement of the New Trade policy, announcement of the New Industrial policy that would end the licence-permit Raj,  the historic Budget presentation and so on. When all these were happening, one didn’t realise that these will forever change the destiny of India.

Unlike now, when economists and policy experts are in unison singing the praise of the 1991 reforms, back then the reforms were always projected as “Acts in Duress”.  Even among the ruling Congress, there was no consensus on the reforms forcing Dr. Singh to make that famous quote that he walked around with his resignation letter in his pocket.

Elsewhere in the same year, the dissolution of the Great Soviet Union was in rapid progress and by December the entire Soviet Union was formally dissolved that eventually ended the Cold War.  Google also tells me that the World Wide Web was launched to the public in 1991 and Microsoft.com went online, though I have no recollection of these!

Coming back to India, not to be limited to financial problems, in the same year 1991, on June 28th, Kashmiri militants kidnapped the then Executive Director of IOC, Mr. Doraiswamy. He was finally released after a couple of months in exchange of a few militants. I remember this vividly as day after day front page in the newspapers were occupied with this news.

For India, not just 1991 but the next two years were indeed full of challenges that wrecked the country pushing it from one crisis to another.  So, looking back, as a country we came out of all that relatively unscathed as we kept growing to what we are today, though the pace and extent of growth may not be our liking.

30 years hence, in 2021, as a country we have been inflicted hard by a global pandemic that has been hogging everyone’s attention. Our economy has been bruised badly. Lives have been lost and still counting.  Clearly not just India, but globally we have been set back by couple of years if not more.

As we come out of the 2nd wave, a recovery is imminent but not without the potential danger of further waves. We can only hope that this time also we will follow the 1991 cycle.  If you remember, the economy fared poorly in the 1st year of the reform (1991-92) but from 1993-94 after two years, the economy was on a roll.

Going back to 1991, personally for me that was the year when I started my professional career and so along with the country, the year has a personal significance and it will be always etched in my memory.  Where were you in 1991 and what are your memories of that year? Do share in the comments section.

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)!

Karnataka today, India tomorrow !!!

democracy-circus3In this election season, you cannot be blamed for mistaking the title of this post for a war cry of one of the National political parties say the Congress or the BJP. I.e. to capture Karnataka today and India soon after. After all, as Karnataka votes today for its destiny driver for the next 5 years (hopefully), the ball has been set rolling for a string of state elections to follow and then the final Loksabha election mid next year i.e. if the present dispensation lasts its full term. War cry of a party is last of my bother. But, loud cry I keep hearing of the Mango people is.

I cannot but avoid sympathizing with my Karnataka friends as they brave the hot may be not so hot sun and exercise their democratic right today. What is the choice they have?

• Do they again vote and bring back BJP – which made a royal mess of its maiden Southern venture?? 3 Chief Ministers in 5 years, rampant factionalism and infighting, the honour of making “Garden city” a pitiable “Garbage City” today, Corruption charges galore, No governance… have made BJP a party with No difference.

• Do the people of Karnataka repose their faith on Congress – which must take responsibility for the lack of basic infrastructure like roads,… even after ruling the state for more than 50 years since independence? Is there a leader in Congress in the state who can make it happen in the “IT” State?

• Or they throw their weight behind Janata Dal (Secular) helmed by Kumaraswamy Gowda an Ex- Chief Minister himself. If Bangalore is sick and languishing at the bottom of the economic growth table, this secular party has to take fair share of the blame.

• Or finally will the Karnataka praja make my worst nightmare true? Is he actually readying to make Yeddyurappa of Karnataka Janata Party the King or a Kingmaker?

For the citizens, today is a stressful day. The choice they have is to choose the Best among the Worst. As a nation did we opt for democracy to choose the good among the rotten? No wonder there is so much apathy among people today to go and vote. Frankly, if I feel that the candidates in the fray are not worthy of my vote, do I have a choice to express the same?

Though sitting in Mumbai I’m not in a quandary today, I’m worried. Worried because what my Karnataka mates are going through today, many of us have to endure when the time comes to vote for the party/front at the Centre. It looks like “A scam a day may soon keep Dr.Manmohan Singh away”. With an early election looking imminent, the dilemma for the voter gets bigger.

I presume that most fellow Indians have had enough of this Congress led UPA and are craving for a change. For them to satisfy their craving, they need options to vote for in the next General elections. In states where BJP is strong (and that is only 6-7 states I guess) may be they have the option of voting for BJP. But in most of the other states one has to dive into deep-sea to escape from the Congress Devil. In many states where BJP is absent or present in absentia, the people have no choice but to exercise their “Best among the Worst” rule while voting. When they do that, they give fillip by default to parties like the Trinamool Congress, CPI/CPM, YSR Congress, Janata Dal (Secular), Shiv Sena, Samajwadi Party, Bahujan Samaj Party,…,…which again start extracting their pound of flesh when the Government formation time comes. Irrespective of the national sentiment for change we may yet get a Government we never wanted. Because under the present system who will rule is decided not by “National mood” but by “Rational Greed” (Money bags, ATM Ministries, Rajya Sabha nominations,…) of the fringe parties who claim to promote the cause of Regional and Sectarian aspirations but in reality have been furthering their own “cases”.

I call this the “Democracy by stealth”. So does this “Democracy by stealth” provide the famous “Government of the people, by the people, for the people”??? I doubt.

Problem definition is always easy. Finding solution is not. Yet, let me attempt. The way forward is certainly to “CHANGE” the present system. That could be in the form of electoral reforms which include

• Clearly defining and identifying National parties which have an influence in more than few states

• Mandating only “National” parties to take part in Lok Sabha elections

• Government formations only based on declared “Pre Poll Alliances” and not by convenient “Post Poll Alignments”

• Election Commission to define a template and minimum criteria for an “Election Manifesto” essentially making the document a “Minimum Agenda for Governance” for the party coming to power.

• Election Manifestos of parties once released during election campaigns must be registered with the Election Commission

• Parties not fulfilling 70% of their manifesto promises should be disqualified from contesting in the next elections. So that there is accountability along with accounts.

Some of the above ideas are indeed outrageous and outside the realm of today’s political imagination. However I strongly feel that small changes may not work. We need paradigm shifts. So that we actually see Democracy at work and not some “Democrazy”!!!

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The Politics of Reforms!!!

Gurcharan Das, the erstwhile head honcho of Procter & Gamble, India is not a politician.  If he was one, I wouldn’t have to struggle so much to come up with a name of one politician who has been steadfastly and consistently pro “economic reforms” in India.  The last few days, since the UPA government announced some bold economic decisions, the debating society is back and busy discussing ‘Reforms’.   We had the normally reticent Prime Minister Dr. Manmohan Singh addressing the nation with an aim to take the public into confidence on some of the tough decisions his Govt. finally took.    There he was, espousing the need for such decisions if economy has to get back to the high growth path of the recent past years.

The question is why it took so long for the Govt. to wake up when the writing was on the wall.   In India it is an ironical fact that our leaders were and are always reformers under duress.  And Governments pursue reform path only when push comes to shove.  Since 1991, the year in which liberalisation of the economy was flagged off, successive governments in the centre and the major political fronts have always flip-flopped on the question of reforms.   Switch ‘On’ the reforms when pushed to a crisis and Switch ‘Off’ if there is none – has been the approach.

During UPA-I, the economy was on a roll due to the global economic situation overheated by excessive liquidity which helped India as well.  So UPA-I was not under pressure to perform oops ‘reform’.  As the global slowdown and the effects of “no reform” hit the shores now, It is not surprising that the government (UPA-II) decided to unleash its ‘Animal spirits’ on reviving the economy.  And it is also not surprising that you have the opposition led by BJP, opposing initiatives like FDI in Multi Brand Retail or dragging its feet on GST implementation which it had championed when it was part of the ruling front.  And this seems to be the emerging pattern for any political formation – “Reform while in power when in trouble and Oppose Reform while in opposition!!!”

 Already there is a pervasive anti UPA mood in the country as depicted by surveys of late thanks to the corruption scams, high Inflation and the rudderless economy in the last 2 years.   The few decisions taken by the Govt. in the death overs ( not calling it reforms ) like diesel price hike and the opening up of Multi brand retail to foreign chains though welcome – may not yield immediate tangible results. The impact of such decisions is always felt long-term.  They will certainly help to talk up and lift the moods of the markets which are also important.  So come 2014, it is quite possible that UPA loses power and an alternate dispensation – most likely the NDA comes to power.

When that happens – we are most likely to see a ‘Deja vu’ of the UPA –II rule.  Picture this:

  • Under the false impression that UPA –II was rejected as it pursued tough economic decisions, the NDA train will chug along in the 1st 2-3 years with “no economic reform”.  The economy then goes through turmoil due to no growth impetus.  And in the 4th year the Govt. is shaken up from its dogmatic position on reforms and announces reluctantly a few reforms.
  • The Opposition – now the Congress smarting under the defeat opposes the very initiatives it took!

So the “Start – Stop” saga of economic reforms continue and we never get to experience the benefits of uninterrupted economic reforms.  A Start – Stop system may be helpful in automobile technology to save fuel but not in economic reforms.  This means that our economy will see growth in phases and then dipping into crisis for a while before picking up again. And this may potentially stop India from becoming a “Strong Developed” nation which we all aspire to see.

How do we come out of this?  Well, here is a Utopian 5 point programme:

  • Under the leadership and initiative of the President a 5 year/ 10 year/ 15 year/ 20 year milestone document for the country should be prepared.  The President should take all the major party and their leaders into confidence while arriving at these milestones. (This can be something like the formation of the constituent assembly which worked on drafting the Constitution of India post-Independence)  These milestones obviously will be related to ( preferably limit to Top 5 issues )
  1.     Poverty Alleviation
  2.     Infrastructure development
  3.     Job creation
  4.     Health
  5.     Sanitation
  6.     ,..
  7.     ,..

(I do hope that parties and their leaders will not have major disagreements in coming to a consensus on this – atleast in public)

  • Once the milestones are decided by consensus, the government of the day along with the major opposition leaders, key bureaucrats and civil society must arrive at a doable plan to achieve the milestones.   While arriving at the action plan debates and discussions can happen and a consensus must be arrived.  It is obvious that ‘for reaching’ certain milestones like infrastructure development, job creation,… ‘far-reaching’ economic reforms are essential.
  • And once a consensus is arrived on the action plan, the government of the day should be empowered to either take the legislative route or executive route to implement those decisions.
  • A regular review of the milestones and the action plans and their progress must be carried out by the incumbent President (My mantra – What gets reviewed gets done)
  • A regular and continuous report to the Aam admi by powerful communicators in the Government on the progress of the milestones.(Regular and forthright dialogue with people – a must to assuage any misconceptions)

 Important point: These milestones are by and large supposed to survive any change in the Government or even the President.  These action plans arrived at by consensus are also supposed to survive any change in the Government or the number equations in the parliament.

By this, the reforms will be given a longer rope and chances are that they will succeed without falling into the trap of the “Politics of Reforms”.    (The side benefit is that the President will no longer be playing just a ceremonial role)

For the “Politics of Reforms” to stop we need a major “Reform of Politics”.  Can this happen?

Also pls. read my earlier post : “Blame it on India Shining” on the subject of Reforms.

I look forward to hearing your comments and feedback.

Blame it on “India Shining”!!!

Indians or should I say Middle Class Indians were ushered into the new year of 2004 with a feel good factor spread by the “India Shining” campaign launched by the then ruling front – the National Democratic Alliance ( NDA ) or rather its anchor constituent the Bharatiya Janata Party ( BJP ).  The reasoning was quite simple.  The NDA, whose term was to end in Oct 2004, thought that the time was ripe to call in early elections to cash in on the overall positive political climate.  (It is said that the then PM Atal Bihari Vajpayee was not keen on this move and felt that there was still work to be done but eventually had to give in to the more vocal party strategists).  The economy was booming, stocks markets were on a high, state election results were favourable, external affairs particularly relations with Pakistan was stable and more than everything the principal opposition the Congress was in a dilapidated state – reasons enough for this early calling of elections.   So, if I remember correct from Jan in that year onwards for a few months we were inundated with the “India Shining” campaign across all media.

1991, when India was in the verge of bankruptcy was when we were introduced to “Reforms” – both Economic and Structural.  While credit must be given to the architects of the Reforms 1.0 – Dr. Narasimha Rao, Dr. Manmohan Singh and their team, it is also not a secret that many of the items in that Reforms 1.0 were mandated by the IMF.  In the period of 1999 – 2004 during the NDA regime, we saw what I would call as Reforms 2.0.  Independent India for the 1st time had a full time minister for Disinvestment (Arun Shourie) who spiritedly fought his detractors to disinvest and unlock value in many of the Public Sector Units (PSUs) including the likes of Maruti Udyog, IPCL, VSNL,.. Petroleum Minister Ram Naik ventured into the now very sensitive area of dismantling the Administered Price Mechanism for Petrol whereby price of petrol will be decided by market forces rather than by the ministry. It was also the time when the Telecom read as Mobile revolution was slowly sweeping the hinterlands of the country.  With the benefit of hindsight one can say that from governance point of view the NDA regime didn’t do a bad job and if one realizes that it was also a cobbled up opportunistic alliance with its own compulsions, Vajpayee did manage to do a great job.

To the shock of all pundits, NDA lost and UPA came to power.  It was easy for all to blame NDA’s “India Shining” campaign for the defeat.  However there was a larger issue – far reaching conclusions were arrived by the stake holders. Some of them were – ‘India Shining campaign’ is a metaphor for reforms.  So that means if people rejected “India Shining” campaign, they rejected Reforms. Period. The political conclusion across the board was that the NDA was defeated because of the misleading “India Shining” campaign where the aam admi felt that he was not benefitted by the NDA rule while somebody else has.  The fact of the matter is NDA lost not because of their “India Shining” campaign or the reforms which they pursued but in spite of them.  While they swept the Hindi belt except Delhi, they lost the 2 important states in the South – AP and TN.  AP because Chandrababu Naidu in his obsession with the IT and the chatter class hype was completely oblivious of the strides Y.S.Rajasekhar Reddy (YSR) was making with his “Padyatra’ in the interiors of AP.  In TN, BJP made the strategic error of listening to wrong advisors and allied with Jayalalitha and let DMK go off their alliance.  These 3 states were enough to upset the electoral arithmetic.

This made the political class in both sides of the divide to firm up that reforms were never benefitting the poor.   Since then reforms in India is not a 7 letter word but a four letter one for the entire political class whether the ruling front or the opposition.

The immediate fallout was that UPA –I with the Left supporting them outside decided to “Spend” for growth rather than “Invest” for growth.  The govt. itself had a very limited reform agenda and even that was opposed by the Left.

One thought that in UPA-II without the Left and with a renewed mandate, the PM and his party-the Congress would be in a firmer wicket to push through reforms. However in UPA-II we see the spectre of Mamata who is blocking any supposedly reform initiative of the beleaguered government.  The Left is having a last laugh today because Mamata is espousing what all they believe in and in that in a much more effective way!  While Dr. Manmohan Singh risked his govt. while taking on the Left on the issue of the Civil Nuclear deal with the US during UPA-I, there is nothing of that steely nerve seen in pushing through reforms now.

And on the other side the situation is worse.   The BJP still smarting under that defeat in 2004 opposes the same reforms which they introduced in their time whether it is the GST or FDI in retail or even dismantling the APM completely.  Today while in the opposition it is clear that they are paying lip service to reforms!

I am glad that there is serious debate in the country regarding reforms today. However the political leadership across the board is not on board the Reforms bus. Under the scenario we need articulate political leaders to drive home the economical and therefore the political advantages of Reforms to their party men.  Recently I saw Dr. Shashi Tharoor using the online medium to build consensus on reforms which should be commended. Similarly Yashwant Sinha though doesn’t speak well of the reforms in the parliament has been vocally articulating the need for reforms in his columns.  Let more of this tribe emerge!

In spite of all this if “Reforms” still remains a bad word – blame it on that “India Shining”!

While on this, this piece from The Economist is a relevant read :

http://www.economist.com/node/21556576?fsrc=nlw|hig|6-7-2012|2049894|73958874|AP

P.S: In a recent article in the Economic times, N.K.Singh, Ex Finance Secretary and now Rajyasabha MP wrote, “When I walked into the room of finance minister Manmohan Singh shortly after June 21, 1991, to congratulate him, he told me that “we will change India”.

Dr. Singh – India is waiting to see that change you promised Sir!

Budget – A “Surplus” of “Deficits”!

I wonder if there is any other country in the world where the Annual budget presentation by the Govt. is attached so much hype and importance as in India.  The Oxford English Dictionary lists the meaning of the word Budget as:

Noun

  1. an estimate of income and expenditure for a set period of time
  2. (Budget) an annual or other regular estimate of national revenue and expenditure put forward by a finance minister
  3. the  amount of money needed or available for a purpose
  4. archaic –  a quantity of written or printed material

I tend to believe these days that the meaning of Budget is just close to the 4th one mentioned above.  It’s intriguing to find out why is there such a fuss over what should be normal hisab kitab? Well, some of it I guess is historical and rest mostly hysterical.  In the pre-lib era or during the license permit Raj, budgets were meant always to give bad news about increasing income taxes, raise in excise duty and what not. So, no wonder in that time people were pretty anxious about the budget pronouncements and speculations were rife of price rises.  However in 1991, what is regarded as a watershed budget presented by the current Prime Minister Dr. Manmohan Singh, path breaking reforms were announced. From then on I guess the normal presentation of income and expenditure for the forthcoming year has turned out to be the Govt.’s Annual policy statement.  The result is that once the budget is presented, discussed (so we believe) and passed, all the ministries in general and the finance ministry in particular stop thinking for the rest of the year.  So much so that Feb/ Mar is the only period where we can get to see the Hon. Finance minister talking of growth, numbers,.. and for the rest of the year he becomes the Hon. Minister for Fire Fighting!  People expect that when the FM rises to the present the Union budget, he rises to the occasion and delivers a path breaking budget year after year.  However in the last 10 years or so we have been only seeing unimaginative, tepid budgets being presented which has no vision or a game changing road map for the country.   Is it that the scope of reforms to be carried out is over and the job is all done?  Nope.

I’ve no doubts in my mind that once the budget is presented with some numbers, no one in the Govt. goes through that document again for the rest of the year.  It’s a simple fact that “What gets reviewed gets done”.   But in Govt., forget review, even the budget document is not viewed later!  As the budget day approaches, there is a frenzy of activity in the media which creates a massive hysteria and expectation year after year for the budget.  There are pre-budget discussions, during budget analysis, post budget discussions, analysis were learned economists hold forth on what could be in store.  On the budget day, the FM appears in channel after channel and gives “Exclusive” interviews to each one of them!  The unfortunate part is that once the budget week is over the media forgets about the promises, provisions and the math of the budget.  Won’t it be a good idea if the news channels interview the FM once in a quarter and review the promises and remind him of some of the unkept ones? Like the annual budget speech, will it not be a good practice to have the FM present progress made every quarter in the parliament so that closure is attained on the  commitments made?  I would like to substantiate my concern with a couple of examples:

Example 1: In the budget speech for 2011-12 (last year) our FM mentions about Tax reforms:

“Point 22. As Hon’ble Members are aware, the Direct Taxes Code Bill was introduced in Parliament in August, 2010. After receiving the report of the Standing Committee, we shall be able to finalize the Code for its enactment during 2011-12”

Nothing of this happened in 2011-12. What is the status now?  The current year budget speech says:

“Point 26. As Hon’ble Members are aware, the Direct Taxes Code (DTC) Bill was introduced in Parliament in August 2010. It was our earnest desire to give effect to DTC from April 1, 2012. However, we received the Report of the Parliamentary Standing Committee on March 9, 2012. We will examine the report expeditiously and take steps for the enactment of DTC at the earliest.” 

Example 2:

“Point 23. Unlike DTC, decisions on the GST have to be taken in concert with the States with whom our dialogue has made considerable progress in the last four years. Areas of divergence have been narrowed. As a step towards the roll-out of GST, I propose to introduce the Constitution Amendment Bill in this session of Parliament. Work is also underway on drafting of the model legislation for the Central and State GST”

What’s the status in Mar 2012? 

“Point 27. Similarly, the Constitution Amendment Bill, a preparatory step in the implementation of Goods and Services Tax (GST) was introduced in Parliament in March 2011 and is before the Parliamentary Standing Committee. As we await recommendations of the Committee, drafting of model legislation for Centre and State GST in concert with States is under progress”

1 year has passed since and we don’t seem to have made any progress and with this it is 5 years since we started talking about migration to a common Goods and Services Tax in India.  If only a quarterly stock taking of such important steps happens, I’m sure these can be expedited.

According to me, GST would be the single largest Tax reform post 1991 which will pave the way for removal of so many different State and Central taxes, make goods movement within the country easier and in short make “doing business” in the country a lot simpler. I remember vividly that when VAT was introduced in India finally in 2005 there were a lot of apprehensions from states, traders and other stake holders about the same. Finally it’s obvious that all those apprehensions were mis-guided and VAT has changed life for the better.  Govt. must reach out to all stake holders aggressively to remove any misgivings and show the way for implementation of GST quickly.  To summarise, in the last 10 years there has been a serious deficit of Big ideas and surplus of run of the mill thoughts in the budgets.  ( Not to forget, there has been a surplus of schemes named under Rajiv Gandhi, Indira Gandhi, Nehru – last count 12 in the centre and 52 in the states as well !!! )

Manmohan Singh who created history as a finance minister had (or still has) the opportunity to make history once again this time as Prime Minister.  Instead of getting choked under the pretext of “coalition pressure” and allow the country to explode, if he can use his economic mind as a “Safety Valve” , he will avert a disaster and make it to headlines of history.  Talking of headlines, that even the FM is nervous about the headlines he makes the next day can be borne out by the last lines in his 2012 budget speech – “Whether or not today’s announcements make tomorrow morning’s headlines matters little, as long as they help in shaping the headlines that describe India a decade from now”.  Well one hopes that Pranabda is prophetic on this one.

P.S: As I draw close to this lamenting piece, I get reminded of an interesting episode which I would like to share on a lighter vein. In our B School in 1990, as part of the Perspective Management course, one of the assignments given was to create the Economic Times newspaper of 10 years hence i.e. dated 1st Mar 2000 (the next day of budget).  While we all drove our creative horses all over the place to create futuristic content for the Eco times newspaper our professor while reviewing our creations said “you never know, in year 2000, the newspaper may be dead and you may just have a video cassette!”.  Well, we are now in 2012. The more things change, the more they stay the same.  The Eco times newspaper is alive and kicking and comes up with a monster of an edition the next day of the budget!  The big change of course has been the online edition!  One hopes that in my life, I can see the FM walking hands free (and not with his trademark brown briefcase) into the parliament and makes a budget speech from a Nano pen drive or some such uber cool device!!!  I realised that this brown briefcase is also a colonial hangover from the British which we have not got over ! Look at this picture of George Osborne, the Chancellor of UK posing on the “Budget Day”!!!

I only hope that our FM doesn’t copy Osborne’s tax proposals as well.  In this year’s budget, Osborne has imposed what is now called as stealth “Granny  tax” whereby anyone retiring from April 5, 2013, will be stripped of the tax break introduced by Winston Churchill in 1925 !!! India’s Senior citizens beware !

Save the #2012

On the 1st day of a New year – 2012, what I see all around is as one magazine called ” The Fear of the Known” !!! 2012 is being brandished as one of the worst years in decades to show up !!!

The build up to the year has not been the best for the world in general and for India in particular.  My focus of this piece is India.  GDP for this fiscal year is projected to be at 7.7% a steep fall from 10.4 % of FY2010.  Government’s fiscal deficit is expected to be at 5.5 % of GDP- up from last years 4.8 %.  Combined with this, the looming crisis in the Eurozone, upcoming elections in the US and the “Work in Progress” Uprising in the Middle East – the only certainity is the uncertainity that is imminent.

The result is that the forecasts for growth for India in 2012 ranges from 6.75 % ( Moody’s) to 7.9 % ( ADB ) the only exception being 8.3 % by Goldman Sachs.  And these predictions were supposed to be optimistic and before the results are out for a worse Oct/Nov/Dec quarter !!!  Most of the Indian pundits have already cursed the Indian economy to be at 6 % which is now touted as the new “Hindu Rate of Growth”

All this has been reproduction of what has appeared in public domain.  So what’s new ? Just reading what the stars foretell for me for this year today – it appears that it will serve me good to stick my neck out and thats what I aim to do here.

My stick out prediction is that India is going to have a Rocking year meaning a fantastic year in 2012 with GDP ending up at 8 – 8.5 %.  Is it just a guess or wishful thinking or I am out of my senses ?  None of this. Its simple economics.  And my reasoning is as follows :

1. As one who has followed Indian politics and its tryst with economic reforms for 2 decades now, our politicians of the day ( any party / any front in power I mean ) resort to reforms when pushed to the wall.  That’s what happened in 1991 and that’s what will happen in 2012.  None of our famed finance ministers or PMs were/ are compulsive reformers. They were more “reformers under presssure”. This is true for Narasimha Rao, Manmohan Singh, Vajpayee, Jaswant Singh, Yashwant Sinha, Chidambaram and now Pranab Mukherjee. I’ve not seen them coming out open and selling to the public at large the virtues of reforms and carrying them out with sincerity.  ( As far as I remember Arun Shourie was the only politician who used to fight for reforms in public when he was the Telecom/ Disinvestment Minister ). With rupee on a free fall,  interest rates getting out of hand and fiscal deficit climbing up, the writing on the wall is of an economic crisis.  This is good enough reason to trigger the reluctant reformers to get back to the reform agenda which will propel growth.  I expect initiatives like GST implementation, FDI in retail, Land acquisition bill, Mining policy getting pushed without making a large hoopla or being touted as Reforms in this year.

2. For this to happen, the UPA government which is in a battered state must regain some confidence. And something tells me that they will get this confidence from their performance in the elections for the states which go to poll in the 1st quarter which includes UP. The public as we have seen know very well whom to punish ( as in TN/WB ) and whom to reward ( Bihar ).  There is no room for arrogance or last minute gimmicks to buy votes.  At the same time sincerity of purpose has paid whether it has been Bihar or Orissa or Gujarat or for that matter Delhi.  People want their rulers to put effort and they know that the results will not be immediate.  Going by this, Congress under Rahul may spring some surprises in the UP elections and that may provide the much needed filip to the UPA at the centre.

3. For a most part of 2011 through well orchestrated plugs in the media, India Inc has been posturing of ” flight of capital and investment” out of India if government doesn’t get its act together.  With the crisis in Euro zone, uncertainity in the US India Inc has only China to invest. My take is India and other countries will invest in China basically to stay competitive as long as it allows.  However purely from a consumption perspective, India Inc. will continue to invest in India.  Global environment will also force investments to come into India by second half of the year.

4. With inflation slowing down officially and interest rates softening I believe the worst is over.

5. That 2011 was the worst year for Manmohan Singh as a politician so far is a no brainer.  With so much of political issues threatening him to consume all over, his only ace up his sleeve is Economics. It will serve him well if he resorts to his strengths to set the agenda.

Though I’ve tried my best to logically reason out, much of it seems to be wishful thinking I guess.  But still I am going to stick my neck out for a Great Year for India in 2012 and I will be happy to have the last laugh and a Stiff neck !!!

Wishing all a year of GDP – Growth, Development and Prosperity !!!