The Modi-Choksi-Kothari System Gaming:: Power Does Not Brook Weakness

The Modi –Choksi-Kothari System Gaming: Power Does Not Brook Weakness

Jimmy Carter, the millionaire Peanut Farmer- Physicist- Naval Officer- Governor   and one-term President of the US, from Plains, Georgia, projected weakness.

This despite his essential and almost improbable decency, for a politician. But  events as they unfolded told us that he couldn’t do that in the most powerful political office in the world and be forgiven for it. That is why Carter lost 49 out of 50 states to Republican Ronald Reagan in his second term campaign.

Of course, luck too, did not favour Carter, with the Iranian hostage crisis dragging on throughout the campaign. But it ended, ironically, almost as soon as Reagan was elected.

Carter wore cardigans and conducted televised fireside chats with the American people on folksy, largely non-political themes- rather like Indian Prime Minister Narendra Modi’s quaint Man-ki-Baat sessions on All India Radio (AIR).

Carter prayed frequently in public, and put his Baptist faith on display, just as Prime Minister Modi does, visiting an array of temples around the country and abroad.  Jimmy Carter spoke famously of lusting “many times” and committing adultery in “his heart” in a Playboy interview. Prime Minister Modi makes no comments whatsoever on sex, but he does speak up about the need to promote and preserve the “girl-child”.

The American people, despite Carter’s winning smile and Southern drawl, were not impressed. The Indian people, on their part, as the Modi administration completes 4 years, have long expected Narendra Modi to put a legion of corrupt people from the UPA in jail. Indeed BJP supporters cannot understand why Modi as PM is so timid. The electorally mauled Opposition, unable to believe its luck, counter attacked within months of May 2014, and have never stopped since.

Carter won his mandate as a Democrat President after Richard Nixon had gamed, quite unnecessarily, as it turned out, the American political system. Nixon escaped jail time by virtue of a presidential pardon from his mid-term successor President Ford, who was both unelected and dependent.

Nixon escaped a near impeachment in exchange for his resignation half way through his second term, which he had won handsomely, without any real help from the Watergate break-ins to the Democratic Party headquarters, that brought him down.

Modi’s timidity in office with an inexplicable surfeit of tolerance for corruption and scams from the UPA years has emboldened every crook, dacoit, and anti-social on his watch, to carry on regardless.

They have realized Modi’s sonorous bark on the hustings in 2013 and 2014 is actually a substitute for his non-existent bite as Prime Minister. Not only are corrupt people allowed to strut about abusing the BJP, the Sangh Parivar and the Prime Minister himself, but sedition, anti-nationalism, fringe organization atrocities, rapes, murders, including those that are politically motivated, insolent dissidence within the BJP, all appear to be treated as business as usual.

The challenges posed by a Rs. 30,000 crore systems failure in the PSU banking system brought about by Nirav Modi and Mehul Choksi, is yet another demonstration of this strange lack of consequence.

Things appear to be the same in Modi Raj, just as it was in the UPA years,  for the rich and well-connected.

There is quite a hue and cry after the offenders have fled abroad under the noses of this Government, and its sleuths, as did Vijay Mallya before this, and Lalit Modi before him. It remains to be seen whether they, or indeed any of them, are extradited back to India to answer for their multiple violations of a plethora of laws. These include money-laundering, shell companies, benami deals, round- tripping,  hawala using black money, over and under-invoicing, grand larceny, fraud, loan default, etc.

These crimes come on top of almost 10 lakh crores worth of bad debts racked up by a score of mostly private companies in the UPA years between 2004 and 2014. And now a Gutka businessman cum throw- away pen manufacturer from Kanpur, has just added a further Rs. 5,000 crores in defaulted on loans.  

The financial system rot in the nationalised banks is deep and almost endemic. Yet,  very little preemptive striking is being done by the Modi Government. It  seems content to hide behind the so called due process of the law. This even when it is well known that the legal system is over-burdened, broken in most parts, and extremely slow.

The investigative agencies such as the Enforcement Directorate (ED), The Central Bureau of Investigation (CBI), and so on, are leaky ships themselves, with informants and subverted operatives, whispering warnings, in cahoots with the thieves. Supervising Bureaucrats seem lethargic, demotivated, ignorant and deeply compromised. The political will and competence atop this ineffective edifice in the Home, Law, Finance, Company Law Ministries too is also sorely lacking. Ditto in the Reserve Bank of India (RBI).

While the Prime Minister and indeed the PMO cannot fairly be held responsible for the carelessness of various operational units and ministries directly tasked to look after the various checks and balances which are supposed to exist, he is the one who has to find a solution.

Almost everything, from the Indian Constitution, to the legal system, the perpetual electioneering, the judiciary, the functioning of parliament, the historical burdens of Article 370 and 35A, the battle readiness of the Armed Forces, is in need of reform and renewal. It is a formidable task, but even so, it can and must be tackled.

But while this Government has shown signs of being serious in this regard- the implementation of GST, the Bankruptcy Act, the Benami Act, the reformed Company Law, RERA, OROP is evidence, it is not being tough enough on those who break the law. It cannot afford to continue with this. The Indian people want to see the corrupt punished. Nothing less than that will do, if this Government’s leadership is not to meet the fate of one-term President Jimmy Carter.

For: SirfNews

(977 words)

February 19, 2018

Gautam Mukherjee

The Riches Of The 3rd Biggest Economy Underway Belong To all Indians

The Riches Of  The 3^rd Biggest Economy Underway Belong to All Indians

Ten days after the budget proposals of  February 1^st, it seems to be a blueprint for what the Modi Government proposes to deliver till 2024, and perhaps beyond. It is a game-changer because it has shifted the goal posts from lip-service to the poor and disadvantaged, to serious action.

  

Conventional political logic all this time had it that rural poverty, education, and

health are bottomless pits of want and thankless effort. It is best staved off at

election-time with  feudal mai-baap style doles and soaring rhetoric of the garibi hatao variety accompanied by a pogrom or two against the rich .

For a Government to take  the disadvantaged on squarely is both startling and revolutionary. To do so with a constructive programme of elevated farm prices, incentives and tax benefits to small and medium enterprise, senior citizen benefits, massive outlays for education, health, and a Rs. 5 lakh each  medical insurance programme for 500 million people is impressive by any standards and provides a wealth of talking points on the electoral stump. Indeed Modi’s rally at  Bengaluru showed a reenergized Prime Minister blowing hard on the electoral conch.

The  reach and transformational scale of the planning suggests it has envisaged at

least a 15 year run for the BJP led NDA.  It may seem audacious to think like this some 11 months before the next general election, given the noise, heat, abuse and derision from a panicked Opposition. But let us remember 15 years a modest ambition, in comparison to Jyoti Basu’s 30 plus year Left Front domination in West Bengal.

Meanwhile, this year, 2018, India is already expected to become the 5^thbiggest economy in the world, just overtaking Britain and France.

For those woe-begone over the singular, faux Socialist focus on the disadvantaged, poor, and struggling, apparently ignoring the middle class and fat cats of business and industry, there is a need to rewind just a little bit.

Modi declared at Davos in his key-note address barely a week before, that he wanted his Government to devise mechanisms so that the Indian economy can double to $5 trillion in GDP by 2025. This would also make it the 3^rd biggest economy in the world in just 8 years time.

Critics think that Modi forgot this as soon as he came off the mountaintop ski-resort  That he spoke of globalization being inevitable there but tightened the screws on all imports and even foreign car assembly in-country and in the budget. But,  the Government does have a resource crunch if it is to nearly  hold the line on the fiscal deficit.

But read between the lines, and place in context, and  there is reason for optimism. It is not just the softening tone of Chinese hectoring post our 10 state ASEAN showing at Republic Day on the 26^th of January, flanked additionally by the Japanese Foreign Minister. Not only is trade sure to grow with this block, but military ties are also likely to proceed apace. Given the pressures felt at Karachi and Gwadur ports after the commissioning of Chabahar and the routing of Afghnistan’s trade through it, the Chinese have suddenly offered to discuss PoK in the context of the CPEC with us. There can’t be much in it, of course, because they will surely not decide to throw Pakistan under the bus like the Americans already have.

And the daily threats on Doklam have been suspended too as India begins to put paid to China’s takeover-the- backyard ambitions.

There are a couple of other pertinent domestic questions that appear in sequence. How do you fire up the engines of growth if you fail to catalyse a 50% rural population?

And what a state of medieval disgrace it is in, that it is headed towards delivering a single digit contribution to GDP, and a farming growth rate of  between 1-3% despite the Green and White Revolutions and producing surplus food for a population of 1.25 billion people, 3 times  over that at Independence.

As for cold chains and food processing- there is hardly anything visible above ground as yet despite talk of 50 food courts and the employment buzz around it.

However, along with the mega- push on infrastructure via Bharatmala and other road/port/connectivity development, analysts have been conceding, post budget, that more than 5 million of the annual ten million jobs needed could well be forthcoming from this. The Statistics Office has to update its matrix to capture this information along with other “informal” sector jobs.

Women are a major growth opportunity recognized by this Government. The Mudra Yojana has handed out Rs. 400,000 crores in micro loans without collateral to grass roots entrepreneurs , allocating 75% of it to women. This is on the pattern of the pioneering and wildly successful Grameen Bank of Bangladesh.

The liet motif of the coming general election could well be the anonymous pakoda seller( Mudra-financed) as aspirational mini entrepreneur. But to three- time Congress Finance Minister P Chidambaram, they are no more entrepreneurial than beggars.

Muslim women too are being liberated by this Government.Those opposed to the Triple Talaq Bill  are being overtaken by the community itself  signaling its willingness to make changes rather than have it rammed into law by the present Government.

The Opposition thinks talk of doubling farming income by 2022 and affordable housing for all by then, hundreds of smart cities, toilet-building in millions for the safety and dignity of rural women, not to mention major pushes given to the bottom of the pyramid in the budget, are all so many “jumlas”.  

That some work has already been completed on these missions has only served to infuriate them. They point out that it could be inflationary, and ask where is the money going to come from?

Caught out for patronizing the poor with handouts and not doing any empowering work for decades, the Opposition characterizes almost everything the Modi Government says and does as fraudulent.

The Finance Minister’s budget speech, the first since the implementation of GST, did not have to spend long talking about indirect taxes. Instead he spent an hour on rural India.GST, languishing for decades in the making, has been pushed through by this Government. Even as it is experiencing wobbles in the implementation presently, it has great long-term potential to deliver increasing amounts of revenue to the in a smooth and seamless manner. It will certainly become double that of the direct tax yields in due course, and make room for cuts in corporate and individual taxes, perhaps to align with the best ASEAN country practices.This is acknowledged, even by a sly Government baiter, the erstwhile RBI Governor Raghuram Rajan,  who was also at Davos.

But who can build Bharatmala, the renewed railways, the new ports, the bullet trains, new military hardware, naval ships and submarines, helicopters, planes, fighter aircraft, provide universal electricity, water, solar power, telecommunications, information technology solutions, cyber security, education and healthcare and so on, if not the other half of the population and its collaborators?

This applies to ISRO, space exploration, DRDO, Mazagaon Docks, expeditions to Antartica, UN peace-keeping, and the like too. None of these things can be neglected or put on hold. So the urban masses and classes will need to participate in this work. They may not be at the bottom of the pyramid, but they have the knowledge, the education , the know-how and the drive to meld it all together.

 The big problem, ever since this Government came to power in 2014 has been an inheritance of huge NPAs in the banking sector. These were partially due to collusion and lack of due diligence and political influence, but also because of a reckless borrowing programme and over leveraging of businesses.

When the economy began to slow in 2012 and 2013, despite a lot of liquidity from the years after the global financial crisis of  2008 pushing up the fiscal deficit figures, there was nowhere to run  to. Particularly, as Finance Minster Chidambaram, back as FM in 2012, raised interest rates to curb the deficit and severely cramped growth in the process.

The private sector is beginning to borrow again now, there is a 10% uptick. And the NPAs have been tackled to an extent via the tough bankruptcy law and Government recapitalization of banks. But can the bruised private sector drive a fresh growth surge? Not yet. And certainly not without Government help.

This budget, like many before it, should also begin to be viewed as an annual accounting exercise inherited from British times. Its delivery dates have been changed for swifter disbursements, and may be aligned with a calendar financial year in the future. The Railway Budget has been merged with it. It is slowly, steadily, and inevitably, giving way to diminishing returns. It is not a State of the Union address as in the US. Nor is it comprehensive and sacrosanct as a set of proposals and a financial bill.

The middle class needs to remember that they have already received a 5%  income tax rate applicable to 80% of all tax payers last year.  Of course, it is annoying to see that the parliamentarians have created a glide path to pay increases for themselves alright! And the 10% capital gains tax on equity may give way to indexing yet.

Worrying about a measly 7% rise in allocations to Defence is also not warranted. It is not the whole story, given the well known twin threats from Pakistan and China. The Government will step up to the plate with any monies required, even via foreign soft loans, and internal borrowing as necessary, but it will be off-budget.

India’s fiscal prudence is well regarded amongst emerging economies and receives regular praise from the ADB, IMF, the World Bank,  the BRICS Bank, and the international rating agencies. It  is able to secure loans as a responsible borrower from all the agencies it once took grants and aid from. It has a robust FDI input of over $ 60 billion and nearly $500 billion in foreign exchange reserves- both at the highest ever levels.

India is also a shareholder in some of these multilateral development lending agencies now.

The  move to strengthen the Bond Market by asking top corporate to invest in “A” rated bonds in addition to the “AA” and “AAA” is a dynamic parallel move. This is along with the intent to require 25% of all corporate borrowing to come from the Debt Market rather than exclusively from the Banks/ domestic/ foreign lending agencies.

 That the Government has exceeded its divestment target set last year is also a first, and it seems determined to sell Air India to the private sector along with a 49% foreign component.  

With the increasing moves to involve the private sector into areas that were once the sole preserve of the Government such as Defence manufacturing, things can only get bigger and better for them. It was once subordinated to the “commanding heights” of the PSU world but now,  we need perhaps, to look at not one, but 4 American companies, all in the IT space,- Google, Apple, Facebook, and Amazon, all nearing $1 trillion in valuation terms. They are worthy examples of what the private sector can do even when our entire GDP is at $2.5 trillion presently.

India already has the 6^th largest number of billionaires in the world today, and inexorably, at a 7.5% or more growth rate per annum over the coming years, the future is glorious. We cannot therefore tolerate poverty in our midst because there is no excuse that can justify it.

It is the responsibility of our leadership to take this to heart and a prime minister who has come from humble beginnings has done so. Let the critics carp, and take a disjointed view of budget 2018.  The poor, the middle classes, and the rich, indeed the whole country, have a friend on Raisina Hill.

For: The Sunday Pioneer AGENDA cover story of 11^th February 2018

(1,984 words)

February 5^th, 2018

Gautam Mukherjee

BOOK REVIEW: MICHAEL WOLFF'S FIRE AND FURY

BOOK REVIEW

Title: FIRE AND FURY- Inside the Trump White House

Author: MICHAEL WOLFF

Publisher: Little Brown, 2018, U.S. /U.K./Hachette India

Price: Rs.699/- in softback

The First Nine Months Of The Trump Presidency

If Michael Wolff, the Manhattan based glamour-magazine columnist and author of six prior books, wrote this one to make money from the curious and the Trump-baiters, it is a thumping success.

The racy read about Donald Trump’s late campaign and first nine months in the White House, cast by Wolff as an unlikely, chaotic, even preposterous President of the United States, debuted at No.1 on the New York Times Bestseller List. It sold over one million copies in hardback in just four days. Worldwide sales are also terrific, and it is flying out of the warehouses at Amazon.

But now, Trump has completed a year as President, and Wolff’s book is growing rapidly out-of-date. Its subliminal suggestion that the Trump Whitehouse and indeed his Presidency was about to implode, with generous input from former top aide Steve Bannon, is seen to be an exaggeration.

Instead Trump has flawlessly delivered his first State Of The Union Address to Congress. He has been steadily moderating his stance in recent months without reneging on any of his more prominent campaign pledges.

The economy has picked up to a GDP growth of 3% per annum. Some of this, despite being a billionaire businessman President, is because Trump inherited eight years of repair-work done by his predecessor Obama. Still, it takes good luck to receive such inheritance.

The stock markets are booming. Trump has had the courage to unilaterally  announce the relocation of the US Embassy to Jerusalem, thereby recognizing it as the capital of Israel. Saudi Arabia got into the President’s early good books by ordering $110 billion worth of US arms, to be followed by $350 billion worth over ten years.

Trump has repaired his relationship with the bulk of the Republican Party and its Congressmen/Senators. He has raised import duties on some Chinese goods as a precursor, and urged China to Make in America. The original “Fire and Fury”  military threat was Trump’s, to the dictatorship of North Korea, though sensibly, he has settled for strict economic sanctions for now. The Mexican Wall is still on the agenda and is being financed as a quid pro quo on immigration with Congress. Some immigrants are being given a pathway to citizenship, but Trump is still very opposed to Islamic country immigration in particular.

Pakistan has had its military aid suspended, and Trump gave it the most direct warning to cease helping terrorism that any US President has ever done. Relations with India appear to have a lot of upside potential.

Trump has been shedding campaign era factotums and early appointees steadily, including many of those that populate Wolff’s book. Notable amongst them is Steve Bannon, the Alt Right ideologue who had outlived his purpose. A clutch of erstwhile Goldman Sachs advisors have also been shown the door. The bid of the Democrats to discredit the President and possibly even impeach him for taking help from Putin’s Russia during the campaign has also come largely unstuck.The Nunes Memo from within the FBI, indicates that the Obama administration was aiding the Hillary Clinton campaign by  trying to implicate Trump using the FBI. Trump wants to made this memo public, but the FBI is naturally resisting. However, it does compromise the Mueller Investigation into the matter. 

There is also a simmering hostility towards the Department of Justice (DoJ) and judges hostile to Trump’s  executive orders. And a total lovefest when it comes to the military.

Trump’s JFK-style inclusion of daughter Ivanka and son-in-law Jared Kushner not only during the presidential campaign but into the White House, has added an inside track piquancy. This has survived the revolving door and is likely to last out, despite outbreaks of focus on the Kushner family’s business dealings and suggestions of financial impropriety. Ivanka and Jared are seen as a moderating influence on Trump and he trusts them as family. Trust, otherwise, is not an easy commodity to find in the Trump 

White House, and he is always looking for “rats” to kill.

Much of the outrage that finds voice in Wolff’s book is the difficulty in digesting the presence of a billionaire real estate mogul in the Presidency with no prior political experience, who improbably insists on being his own man.

Then there are the personal habits Wolff describes. Donald and Melania have separate bedrooms at the White House. Trump often goes to bed at 6.30 pm with several television sets, his cellphone and a cheeseburger. He has put a lock on his bedroom door. He is afraid of being poisoned. He begins tweeting at 3.30 a.m. He is allergic to criticism and dubs it all as “fake news”. He is inordinately susceptible to flattery.

The White House Press Secretary, several of whom have come and gone already, finds it difficult to say whether Trump’s tweets are policy announcements or just  personal commentary. Obama didn’t even have a private cellphone in the White House, and tamely surrendered his much loved but unencrypted Blackberry.

Trump seems to favour a style, Wolff concedes, in which he keeps most of the thinking and power to himself. He uses a cluster of changing people, both in the White House and Administration to extend his orders. He does not empower the Chief of Staff particularly, nor any of his key Secretaries. He likes military men, particularly retired Army Generals, and fellow billionaires in terms of his major appointments.

As things stand, attempts to portray Trump as mentally unsound, a serial womanizer, dangerously incompetent, a foul-mouth, a liar and a fool, are floundering. Wolff’s book, and a hostile Democrat section of the US media has tried. 

Donald Trump meanwhile, is pulling ahead, leaving his critics the snakeskin of his previous avatar, and personally he thinks there is a second term in sight.

For: The Sunday Pioneer BOOKS

 (957 words)

February 3^rd, 2018

Gautam Mukherjee

A Battering Ram Of An Inclusive Budget

A Battering Ram Of An Inclusive Budget

With its sizeable allocations for Farming, Healthcare - including Medical Insurance, Education, Medium/Small Manufacturers/ Businesses, and Infrastructure – this final whole year Budget, is designed to bring “New India” to the masses.

It is a New India the contours of which are nationalist, honest, and progressive, much to the discomfort of the deal-making old order. One out-maneuvered by real actions taken for the disadvantaged, rather than routine lip-service, elitism, dynastic privilege, the role of black money and attendant corruption.

This budget also comes in the context of multiple initiatives taken over the last 36 months and more. It is the first budget post-implementation of an imperfect one- nation-one- indirect tax  GST, some 20 years in the making, even though it is still undergoing regular refinements. It also clearly means to address large military outlays, as necessary, and off-budget.

More than a year after an overnight shock 86% demonetization, and months after GST was trundled out, cash transactions have made a limited comeback, but the number of direct/indirect tax payers has risen sharply.

This is in addition to the advent of digitization and its benefits spurred on by multiple Apps, and the linking of Aadhar to most things, including bank accounts, cellphones, insurance, investments, property purchases.

Other tough measures such as the new improved Benami Law and RERA are starting to both net the big fish, and improve the discipline in the Real Estate universe.

Companies have begun to borrow afresh, there is a 10% uptick, the NPA menace has been halted, and recoveries under the Bankruptcy Act are underway. It is very difficult for fat-cat defaulters to either run or hide, and many are under threat of losing their lucrative other assets.This, even as the banks are being substantially recapitalized.

Holy cows such as Air India are en-route to being sold off an d the Government is up on its disinvestment targets.

Finance Minister Jaitley has been letting the fiscal deficit slip a little, targets notwithstanding, in order to accommodate it all, possibly on the calculation that accelerated GDP growth will compensate.

And while there is a threat of renewed inflation from elevated farm prices, high oil,  and the big spends- it could well not go that way at all. Oil prices may have peaked, elimination of layers of middle men may mean that food prices will not go up, and the big Government spend may stimulate employment and growth rather than runaway prices.

All of it, of course, could be viewed as a massive stimulus to the economy, via a wide array of enabling incentives.

It is therefore not surprising that there is a degree of carping from those very quarters   that have long professed concern for the poor farmer, unemployed youth, and so on. However, these armchair warriors should take comfort in the strong push given to infrastructure, designed to eventually put money in their pockets.

It is a garland called Bharatmala, amongst others, including an unprecented gush of FDI at over $ 60 billion, and foreign exchange reserves approaching the $500 billion mark.

How much more foreign money can we expect after labour law reforms expected post August 2018, when the BJP/NDA will have a majority in the Rajya Sabha?

In the meantime, yes, there are creeping though not onerous taxes on the middle classes and above, such as the modest capital gains on equity tax, necessary to pay the piper for social upliftment. However, the FIIs are reportedly off to France and the Netherlands to route their monies, because they still enjoy the exemptions plugged in Singapore and Mauritius.

Oxfam’s recent and racy report did say 73% of the wealth has been cornered by 1% of the Indian population, even if this accounts for 12.5 million people.  And India does have the 6^th largest collection of billionaires in the world now.

That the wages of a disgracefully irresponsible set of parliamentarians, particularly in the Opposition, has been put on automatic track for raises, is regrettable. Raises for the President, Vice President and Governors were long overdue, particularly when a quasi-state like Delhi gave itself disproportionate pay hikes.  

A positive perspective on this budget is only possible however if  one pays no heed to Doubting Thomases. They have readily cast all the initiatives for the poor and smaller businessman, particularly the talk of creating millions of new jobs, and even “Modicare” , as a neat set of fresh “Jumlas” .

The insurance that seeks to cover secondary and tertiary medical care for 500 million people at first, is also going to boost the prospects of the sector. Indeed many of Modi’s initiatives, and his stamp is very evident on this budget, seeks to organize several bites of the cherry.

Similarly SEBI, announcing that a large listed company might soon be required to raise 25% of its financing needs from the Bond Market, is also a simultaneous move to widen and deepen the Debt Market.

Something we have not seen in a while but in keeping with global trends is an increase in customs duties on most imported goods and inputs, including luxury cars. Not sure what this is aimed at, unless it seeks leverage in international commercial negotiations or is a tit-for-tat action.

Between the myriad woods and trees of the detail, this budget has Socialist overtones, but without its ideological emphasis on “redistribution” of resources. But, it does squarely address the bottom of the pyramid, where a third of our heaving millions live.

While we are indeed already the fastest growing major economy, shortly to become the 5^th largest in the world, and aiming at $5 trillion by 2025, to become the 3^rd biggest- we must carry most of our people on this joy-ride too.

The Congress President Rahul Gandhi, seen sporting a $1,000 Burberry jacket recently, may have inadvertently kicked it all off with his “Suit Boot Ki Sarkar” jibe quite early in the day of this present Government.

If this budget seems to have gone lightly over the rest of the population, including the middle- classes and the rich, it does so without apology or defensiveness. Perhaps, Modi seems to say, you cannot fault me for addressing the needs of those who need it most, and my development agenda does benefit the masses as much as the classes. Truth be told, direct tax benefits were given to 80% of the tax payers via last year’s budget.

That this budget has come 11 months or so before the 2019 general election, and not in 2014, in this Government’s can-do-no- wrong first flush, is indeed a pity.Though, it probably suggests that it is an economic manifesto for the next term of five years.

Given the emotive appeal of a positive Ram Mandir verdict expected shortly, and a strict military attitude towards China and Pakistan beginning to pay off diplomatically too, in the context of Afghanistan and North Korea, Modi may have much more than a pro-poor budget to bank on.

In 2014, for the record, ours was a bruised and battered economy, inherited from the UPA, that may not have been able to sustain this present ambition.

This Government, in the face of mounting criticism for promises unfulfilled, is resolutely looking forward. It seems to say 5 years is not long enough to complete the agenda.  Indeed, the Finance Minister unabashedly lets his plans, including the much touted doubling of farm-income, and affordable housing for all, spill over to 2022,  independent India’s 75^th year.

But despite the confidence in the future, and the formidable electoral track record,  the 2018 Budget presentation came on a day when the Congress swept three bye-elections, two from significant places in Rajasthan, such as Alwar and Ajmer. This has followed on from losses to the BJP in civic polls in Madhya Pradesh, and a fright in the Assembly polls in Gujarat. Allies such as TDP and the Shiv Sena are also breaking away.

So, this budget, that puts the BJP back in the driver’s seat, has not come a moment too soon. It is likely, in August 2018 and after, that the second act before the important Assembly and General Elections will play out. This could address, via fresh legislation, a taming of the judiciary, the anomaly of Article 370, Muslim affairs, simultaneous elections, the aspirations of big business, the nationalist middle class, any other neglected support field. It could well lay waste to the Opposition in the process.

For: The Sunday Guardian

(1,399 words)

February 2^nd, 2018

Gautam Mukherjee

Melt-Up 2018 In The Indian Bourses But Why?

Melt-Up 2018 In The Indian Bourses But Why?

Three weeks into the new-year 2018, the Indian stock market is still scaling new peaks.  Meanwhile, Jeremy Grantham, an American “value investor”, earlier predicted a stampede upwards in the US equity market too.

Bill Miller, another noted US investor, thinks if the US Treasury yield rises to 3% from a recent 2.53%, the American equity market could go up another 30% from present levels.  

This happy upsurge is fashionably being termed a “melt-up”, to be followed, says Grantham, by a steep fall- the classic melt-down. However, with the American economy growing strongly, this may be not be coming anytime soon.

Grantham also thinks the big money to be made now is in the emerging markets.

India has been plotting its own course lately, powering ahead as one of the best performing emerging markets in 2017. And this, not just on the back of the $15 billion, or so, of annual Foreign Institutional Investors (FII) money, as in years past. This time, it is its own domestic flow, largely from local  Domestic Institutional Investors (DII), and millions of retail investors. The latter is largely using the mutual fund route, which seems to have come of age after over 20 years of trying.

The balance achieved by domestic investment is reducing volatility, because the FIIs now need far more than the smallish allocations it makes every January  in order to dominate. The Debt market too, is perking up, after the Government announced a reduced new borrowing programme of Rs. 20,000 crores in place of the expected Rs. 50,000 crores.

To the more holistic, less technical thinking of the investing public, the daily tickertape analysis that indicates a sturdy bull market is because of the accumulation of relentless modernity being engineered by the Modi Government.

For that matter, the global economic cycle seems to have also turned for the better. This, after the ravages of  2008, of grappling with a massive debt overhang and recession. The recovery in Europe and America   also has its own beneficial knock-on effect in India.

The No.2 economy, that of China, the 2^nd biggest after the US, has meanwhile done little to tackle its massive debt, largely in opaque domestic sectors of its economy. And despite its world domination ambitions, its economy is definitely slowing down. Here, if there is a big, uncontrolled, melt-down, it would trigger a worldwide recession afresh. A Taleb-style Black Swan therefore is certainly swimming in the global lake.

Meanwhile, India is ploughing through its longtime vested interest fault-lines, leaving protesting ancien regime  protagonists scrabbling in the dirt. There is a long list- Demonetisation, GST, the Benami Law, RERA,the Bankruptcy Code, the amended Company Law, recognition of NPAs, AADHAR, direct crediting of subsidies into newly opened bank accounts, increasing digitization,  other cash usage restrictions, administrative reforms, a drive towards accountability in the bureaucracy. All this has disrupted the use of black money, the cash economy, corruption, tax evasion, and a sense of entitlement.

But despite these courageous and politically risky moves on the part of the Modi Government, more than 450 million people in the growing Indian middle class seem agreeable to take the pain of a shift from the old nod and wink systems, in favour of the new.

It is they who are investing in the stock market, not only from the metro cities, but from the hinterland of tier 1 to 4 cities and towns. These now house nearly 50% of India’s aspirational population, and mutual funds have seen a 46% uptick in investment from non-metro areas.

Strangely, given the considerable amplification of negative views from the Opposition and its friends, the public is not buying the gloom and doom line.

Besides, 2018 has begun with a busy month of January for foreign affairs where the Modi Government has shown tremendous progress. Israel’s Benjamin Netanyahu is here on a six day feel good state visit with a massive business delegation in tow, returning Modi’s celebrated 25^th anniversary of diplomatic relations visit to Israel last year. The Prime Minister is travelling to Davos thereafter to deliver the key note address at the plenary session of the World Economic Forum (WEF). He is returning to host 10 heads of government from the ASEAN countries at India’s Republic Day celebrations on the 26^th of  January.

In Davos, Modi will probably interact one-on-one with President Trump, the first US head of government to  visit the Swiss Summit in 18 years, even as Modi is the first Indian Prime Minister to go there in 20. This possible meeting is interesting to the Indian observer because Trump began the new year by suspending military aid to Pakistan. And both Pakistan and China say it is at the urging of India. This, though it is simplistic, makes for an excellent advertisement for Modi’s effectiveness. At the same time, both hostile countries have realized that they cannot, despite their combined advantages, provocations, and constant menace, get the better of India militarily.

While India’s own Central Statistics Office (CSO) has projected 6.5% GDP growth  in fiscal 2017, the World Bank  is expecting 7.3%  for fiscal 2018, and 7.5% for two consecutive years thereafter. China is expected to grow at no more than 6.8%.

Another laurel wreath,  is in the anticipation of India becoming the 5^th largest global economy in absolute terms,  just overtaking France and Britain, in 2018, and on its way to becoming the 3rd.

At the micro level, the stock market is expecting better quarterly results from many of the listed companies, and an uptick in private sector investment has resumed. Credit off-take has risen 10%.

The 2018 pre-general election budget is expected to address the concerns of a slowdown in the rural and farming sectors, combined with encouragement for the urban classes and even the captains of business and industry. Yet it is slated to control the fiscal deficit after all. The Government always has monies unspent to tide it over the budgeting exercise.

There are however several crucial Assembly elections scheduled in 2018 that will act as weathervanes for the general election of 2019.

The Rajya Sabha (RS) will finally afford a majority to the BJP/NDA  around August 2018, enabling the Government to pass a number of reformist bills with little effective opposition.

Interestingly, there are pronounced shifts in the political narrative too. After years of being accused of being majoritarian and communal, even as the BJP under Modi has been emphasizing “Vikas”, the shoe is on the other foot. We are witnessing  the Opposition, led by the Congress Party, West Bengal’s TMC, and even the almost irrelevant CPM, wooing the Hindu vote, and stirring up old caste conflicts.

Congress under its new President Rahul Gandhi is being particularly revanchist. It is casting its secular fate to the wind. It refused to support the gender equality of the Triple Talaq Bill in parliament, even though it will be pushed through by the Government perhaps in the budget session itself. Simultaneously, it is supporting  hastily recruited casteist outliers, fringe Hindutva protagonists, Communists, and even disgruntled elements in the higher judiciary. It is giving crass vent to its frustration via fear-mongering and rank abuse, even from pulpits abroad. The Muslims and even the Christians are feeling abandoned in the process. But none of it is giving it any electoral victories to speak of.

The Opposition’s old-style Muslim vote bank politics is unable to subdue the rise of the BJP any longer.  Not only is the BJP popular vote share consistently going up to even more than 50%, it is cutting across the board. This, from the panchayat level to parliament.

The Government has just cancelled the Haj subsidy but the saved money will be used to provide services to minority women and children. The Muslim vote bank, it appears, may soon be cracked wide open by the BJP, and this possibility has not been lost on  the likes of Congress and the TMC. A few Shia Imams, Maulanas, and other Muslim thought leaders, are also edging towards the Saffron Party. And a solid boost to Hindu sentiment can be expected if the Supreme Court allows a Ram Mandir to be built in Ayodhya.

A shift towards the BJP may be taking place, despite Church opposition, in parts of the Christian majority North East, and in a more diffused manner, elsewhere in the country.

All in all, the melt-up is not being restricted to the stock market .

For: The Sunday Guardian

(1,399 words)

January 18, 2018

Gautam Mukherjee

A Keynote Address From A Rising Global Icon At The WEF 2018 In Snowy Davos

A Keynote Address From A Rising Global Icon At The WEF 2018 in Snowy Davos

Narendra Modi’s visit to Davos comes twenty years after a “humble farmer” and consensus prime minister, sitting atop a shaky coalition and  also-ran economy,  merely participated, in 1997, at  the World Economic Forum (WEF).

Prime Minister Modi will not only go to the Swiss mountain-top for 2 out of the 5 day event, but will deliver the keynote address at the plenary session on January 2 3^rd 2018.

India will also host the welcome reception at the outset of the summit, replete with Indian cuisine, music, jugglers, acrobats, fire-eaters and yoga demonstrations.  

Marking its confident presence at Davos will be a contingent of 100 major company CEOs, 6 Union Ministers and 2 Chief Ministers from India.

Prime Minister Modi’s star-turn at snowy Davos will follow one by President Xi Jinping of China who did similar honours last year. Perhaps the time has truly come to not only hyphenate these two great powers, but contrast their meaning to the world.

Xi, in his rather ritualistic and formal way, staked a claim to global leadership and indeed climate control too. This, in the backdrop of  a Trumpian “America First” policy and refusal to endorse the Paris Climate Summit. This was perceived, a little  too hopefully by some, as a retreat from America’s “globocop” avatar, not to mention its Numero Uno positioning.

India comes to Davos 2018 with a burgeoning security cum economic relationship with the US, Japan, Israel, Russia, Australia, Iran, Afghanistan, the UAE, Saudi Arabia, and several ASEAN countries- disturbed by the goings on in the Malacca Straits, the South Chins Sea, and even the Indian Ocean.

Sympathetic noises have also come in recognition of India’s position from many African countries and the other bits of BRICS of late too.

A unipolar Chinese domination in place of  the US is not palatable to any country other than perhaps a helpless Pakistan and North Korea, with even these two satellites chafing at the bit sometimes.

Much of this is not only due to China’s territorial insatiability and military menace, but also rapacious commercial terms for its infrastructure building abroad. Countries that have fallen prey to Chinese blandishments such as Myanmar, Sri Lanka, Nepal, Maldives, Malaysia, Bangladesh, Pakistan,Venezuela, are all realizing, too late, that they are all on the brink of bankruptcy, and that China is the new owner of all that they possess.

India, by way of contrast, is working benignly with Iran, Afghanistan, several of the Central Asian and African republics, Bhutan, Myanmar, Bangladesh etc. alongside Japan sometimes, and is clearly not seen to be predatory.

India’s economy, though four-times smaller than China’s, is not nearly as burdened with debt. Though China trundles on, with a debt overhang of 260% of its GDP, the question is, for how long, before the avalanche strikes?

India in fiscal 2017, despite muted growth, by its own standards, at under 7%, is nevertheless slated to grow again, at a significantly faster rate than China, by 2019.

In 2018 itself, it will take the 5^th position in the economies of the world, ahead of Britain and France.

In more ways than one therefore, India is signaling that even though it is hampered by its red- tape-loving bureaucracy and socialist hangover, its demographic fault lines, inefficiencies, dirt, and pervasive petty corruption, it is also taking definite strides to develop into a modern state.

Modi is both a symbol and fact of this exciting new trend, and exudes the determination to see it through.

The 3,000 global leaders expected this time in Davos will witness and feel the considerable dynamism, confidence and charisma of the world’s most famous “tea seller” made good, (as Ivanka Trump recently put it in Hyderabad).

Modi heads The National Democratic Alliance (NDA), that enjoys an absolute majority in the wholly-elected lower house of parliament in the world’s most populous democracy. And this for the first time in 30 years.  

He is clearly an Indian Prime Minister that has made an unprecedented global impact, in under four years, with many bold foreign and domestic policy initiatives.  A man of destiny, Modi has come to power at a time that India and China not only account for a large proportion of the world’s population, but also much of its economic growth prospects.

The situation is all the more remarkable because India is progressing while running a vibrant, some would say, over raucous, constitutional, universal- suffrage based democracy. And despite many accusations of dictatorial tendencies, Modi has only flaunted his uncommon ability to take virulent, unjustified personal abuse, without any hint of retaliation.

That the NDA runs 19 of the 29 States in the Indian Union presently, up from just 4 when the NDA came to power in 2014, with a prospect of adding to its tally before the end of its first term in 2019, is clearly impressive.

But that it is also most likely to win a second five year term of office at the Centre, in 2019, is the compelling context to the largest Indian delegation ever to visit the WEF at Davos.

That the WEF as an organisation has been bending over backwards to woo Narendra Modi by giving him equal billing to Xi Jinping last year, is a recognition of present reality. This is a departure, truth be told, from the 1971 established NGOs attitude towards him, when he was Chief Minister of Gujarat.

So now, quite apart from the themes enumerated for the plenary and other sessions to be addressed by Prime Minister Modi, and indeed, other members of the Indian delegation, the influential gathering will be keen to interact with the leading lights of  this nearly pivotal democratic polity.

The Indian Prime Minister, on his part, will return from this summit to host the entire leadership of ASEAN at India’s Republic Day celebrations at New Delhi on January 26^th . This too underlines India’s greater outreach, relevance, and the emerging success of India’s Look East Policy.

For: SirfNews

(987 words)

January 9, 2018

Gautam Mukherjee