Blurb: Nitish Kumar’s landslide victory shows that there is much that is beginning to shine in the new India.
There are winds of change in India that can only gladden the heart further of eternal optimists – and to even bring cheer to the pessimists. Let us recount what has happened in India over just the last two weeks. For the first time in anyone’s memory, there is a beginning of accountability, and even the beginning of a crackdown, on corruption. (See the seemingly accurate forecast contained in “CWG – the Peak of Corruption”, Indian Express, Sept. 30, 2010). Ministers have been made to resign, inquiries have begun, individuals have been arrested, and even an honest PM has been wrapped on the knuckles for not being more forthcoming on corruption.
Blurb: Nitish Kumar’s landslide victory shows that there is much that is beginning to shine in the new India.
There are winds of change in India that can only gladden the heart further of eternal optimists – and to even bring cheer to the pessimists. Let us recount what has happened in India over just the last two weeks. For the first time in anyone’s memory, there is a beginning of accountability, and even the beginning of a crackdown, on corruption. (See the seemingly accurate forecast contained in “CWG – the Peak of Corruption”, Indian Express, Sept. 30, 2010). Ministers have been made to resign, inquiries have begun, individuals have been arrested, and even an honest PM has been wrapped on the knuckles for not being more forthcoming on corruption.
Blurb: Given that governments are incapable of acting, the good old market might well provide the solution to the world’s currency, nay yuan, problem.
The G-20 meets today to ostensibly decide on the fate of currencies, but like the Federal Reserve’s QE2 $600 billion dollar injection, their influence on currency values is negligible, and possibly late. Many see the QE2 program as excessive and unwarranted. There are accusations of a hidden motive, a hidden agenda. And what might that be? To cheapen the value of the dollar i.e. to further fuel currency wars.
Blurb: Given that governments are incapable of acting, the good old market might well provide the solution to the world’s currency, nay yuan, problem.
The G-20 meets today to ostensibly decide on the fate of currencies, but like the Federal Reserve’s QE2 $600 billion dollar injection, their influence on currency values is negligible, and possibly late. Many see the QE2 program as excessive and unwarranted. There are accusations of a hidden motive, a hidden agenda. And what might that be? To cheapen the value of the dollar i.e. to further fuel currency wars.
Blurb: It is necessary for a new improved world order that the Chinese yuan substantially appreciate over the next few years. This policy will not be sufficient in solving all the world’s problems.
As the world prepares for the G-20 meetings in November, the prospect of a currency war is at center stage. The two protagonists, the nice guys who brought you the Great Global Recession of 2008-9, are now squaring off for another battle royale. In one corner is David, the erstwhile poor country China, which through dint of hard work, frugality, savings and investment has uplifted itself from deep poverty. In the other corner is Goliath, grown fat by over-consumption and one who believes that China is playing unfair with exchange rates. This US stand naturally arouses latent anti-American sentiments around the world. Surely Golaith should be told where to get off. But is that so clear cut?
Blurb: It is necessary for a new improved world order that the Chinese yuan substantially appreciate over the next few years. This policy will not be sufficient in solving all the world’s problems.
As the world prepares for the G-20 meetings in November, the prospect of a currency war is at center stage. The two protagonists, the nice guys who brought you the Great Global Recession of 2008-9, are now squaring off for another battle royale. In one corner is David, the erstwhile poor country China, which through dint of hard work, frugality, savings and investment has uplifted itself from deep poverty. In the other corner is Goliath, grown fat by over-consumption and one who believes that China is playing unfair with exchange rates. This US stand naturally arouses latent anti-American sentiments around the world. Surely Golaith should be told where to get off. But is that so clear cut?
Blurb: Small states do not grow at a faster pace. No evidence is found to support this big claim.
The UPA government decided to make Telengana a separate state, and then decided against it, and then decided to set up a committee to study it. Since those eventful days in early December, there has been heightened interest in a very old question – do small states, or small administrative units, actually perform better in terms of governance and/or economic growth? In other words, is there an economic basis for splitting up the large state of Andhra Pradesh into two? Several commentators have felt that such a case actually exists, but the evidence presented by them has been mostly of an ad hoc nature e.g. to support their claim, they mention the small state success stories of Delhi and Haryana; but the not so good small state economic stories of Jharkhand or Assam or Punjab or Goa are ignored.
Blurb: Small states do not grow at a faster pace. No evidence is found to support this big claim.
The UPA government decided to make Telengana a separate state, and then decided against it, and then decided to set up a committee to study it. Since those eventful days in early December, there has been heightened interest in a very old question – do small states, or small administrative units, actually perform better in terms of governance and/or economic growth? In other words, is there an economic basis for splitting up the large state of Andhra Pradesh into two? Several commentators have felt that such a case actually exists, but the evidence presented by them has been mostly of an ad hoc nature e.g. to support their claim, they mention the small state success stories of Delhi and Haryana; but the not so good small state economic stories of Jharkhand or Assam or Punjab or Goa are ignored.
Blurb: Unfortunately, with the RBI, history repeats itself as both farce and tragedy much too often.
For a moment, it looked like Indian monetary policy making would step out into the modern world. The job of monetary policy is to be forward looking, to anticipate future possibilities, rather than practice “rear window” economics. And as financial and product markets around the world globalize and integrate, so should monetary policy divine not only what is happening and will likely happen in India, but also infer the same about the economies of the Western world and that of our competitors in Asia. Very likely, this is what Dr. Subbarao had in mind when he joined the RBI as Governor in September 2008.
Blurb: Unfortunately, with the RBI, history repeats itself as both farce and tragedy much too often.
For a moment, it looked like Indian monetary policy making would step out into the modern world. The job of monetary policy is to be forward looking, to anticipate future possibilities, rather than practice “rear window” economics. And as financial and product markets around the world globalize and integrate, so should monetary policy divine not only what is happening and will likely happen in India, but also infer the same about the economies of the Western world and that of our competitors in Asia. Very likely, this is what Dr. Subbarao had in mind when he joined the RBI as Governor in September 2008.
Blurb: We elect who we are, but the reality is very disturbing.
The Food and Agriculture Minister, Mr. Sharad Pawar, gets appointed to be head of the International Cricket Council. He boastfully announces that the UPA coalition has given him too much work and therefore they should give him more junior Ministers to do his daily hard work. Meanwhile, food prices have erupted all over the country, now for more than 15 months or so. It has been raining double digit inflation in food, and for some articles, the inflation is above 15 to 20 percent each year for three successive years. In the first year, the government said that they were helpless because world prices of wheat, rice, and peanuts had all exploded because of the nasty shenanigans on Wall Street. True. There was a world crisis and oil had shot upto $ 147 a barrel. We couldn’t and the people didn’t blame the government
Blurb: We elect who we are, but the reality is very disturbing.
The Food and Agriculture Minister, Mr. Sharad Pawar, gets appointed to be head of the International Cricket Council. He boastfully announces that the UPA coalition has given him too much work and therefore they should give him more junior Ministers to do his daily hard work. Meanwhile, food prices have erupted all over the country, now for more than 15 months or so. It has been raining double digit inflation in food, and for some articles, the inflation is above 15 to 20 percent each year for three successive years. In the first year, the government said that they were helpless because world prices of wheat, rice, and peanuts had all exploded because of the nasty shenanigans on Wall Street. True. There was a world crisis and oil had shot upto $ 147 a barrel. We couldn’t and the people didn’t blame the government
Blurb: The Direct Tax Code, submitted for discussion by the UPA government, is very progressive in its construction of policies for personal income taxes.
The new direct tax (DT) code has been put in the public domain and will most likely be up for debate in the monsoon session of parliament. There are three major components to the code – personal income taxes, treatment of capital gains, and corporate taxes. This and the next article will talk about the first two.
Blurb: Why is a seemingly trivial issue of terms of employment of sports federations such a hot political potato? The trail of money may yield some clues.
The recent announcement by the Sports Minister Mr. M.S.Gill, on the tenure of sports administrators, has generated a controversy. The facts do not justify the reaction. The reality is as follows: the terms of sports administrators has been reduced to a maximum of 12 years. Since sports organizations are not part of the government – indeed, we all want the government to stay out of other people’s business – then what right does the government have in stipulating how many terms an elected sports official can serve? She should be able to serve as long as she wants, and even bequeath it to her daughter if need be. If politicians can do that, why not mere administrators? What arrogance on the part of the government to control life-time tenures.
That would be a hasty judgment – and incorrect. For reasons, let us follow the trail of the money. First question: why does everybody assume that with sports administrators some hera-pheri is involved. I mean, how much corruption can there be in a cycling federation of India? In France, perhaps; in India, not possible. If no corruption, then it most likely the case that the sports administrator is there, serving his term for a pittance of a salary. And why? Because he really really loves the sport.
This would be plausible if ex-sportsmen headed sport organizations; obviously, after they retire. But such a person does not exist. Instead, sports organizations are headed primarily by politicians, and in some cases, by bureaucrats. Why? For ex-bureaucrats it does make some sense, because after a lifetime of employment they are out of a job; but a politician, especially one serving the people and otherwise very busy doing so, why this passion with heading up a mere sports organization?
Maybe it has something to do with the tax status of sports organizations (hereafter, SOs). These SOs are granted tax exemption by the government of India, and indeed, in most parts of the world, this is the case. This tax exemption is granted because sports is considered a “public good”. The tax exemption does not mean that anybody working in these SOs is not taxed; all wage and salary employees are taxed on their income, as they should be. But if income received by an organization (from government donations, advertising revenue, tournament sponsorships, etc. – just think about the revenue that the BCCI makes from such activity and you will have a good idea) exceeds its wage expenses, coaching expenses, scholarships to athletes, upkeep of the buildings, renovation of the stadiums etc., then this income is not taxed. All the SO has to show is that such excess income is earmarked for expenses related to the sport and the income can be held in a bank account, underneath the mattress or wherever, until the expense takes place. All the organization has to do (remember its head is a bureaucrat or a politician) is to convince the tax authorities that the SO honestly intends to spend the money on the sport at some future date.
This background can help explain several “surprises” in the way sports organizations are administered in India. Every rupee spent on the athlete’s well being is that much less for the organization; every rupee spent on hiring an expensive coach is that much less; every rupee spent on renovating a stadium is less excess money for future deployment. It also helps to explain why there are no sportsmen heading such bodies – they are at the end of a long queue of people who desperately want the extra “job”.
In this context, it is a bit “rich” for evergreen sports administrators to cite the case of the International Olympic Committee’s ex-chairman Samaranch, as a father figure model for the children to follow. He did stay on the job forever, but he also contributed to the “Olympic” movement. He made the Olympics profitable ; very few of our SOs can claim a profitability for their domain. The internet is replete with allegations of corruption in the hallowed (hollow?) halls of Samaranch’s IOC. And a rule was passed in the late 1990s prohibiting a Samaranch like repeat – no president of the IOC can serve for more than 8 years.
Thus, there is virtually no case for the Congress party or the Prime Minister to not implement Mr. Gill’s recommendations with immediate effect. The ruse of the Commonwealth games not being held in Delhi because the Commonwealth games organizers will be upset is both hugely funny, and even more insulting. The example cited is that of Kuwait, a country of 2.7 million people. Think
about it – would China allow such grotesque interference in the appointment of its officials? The Commonwealth games allegedly will not be held in Delhi because the Commonwealth committee feels that its nobility and trueness and independence in appointing administrators is being questioned? And that after the Indian allowance, due to some excessive liberalness on Mr. Gill’s part, is 12 years of ownership rather than eight? If the Commonwealth committee feels so upset, why doesn’t the Indian government tell them to go fly a kite in their kite organization. If the government does not do so, then a legitimate question will be asked: why is the emerging power so intimidated by a mere sports organization? What will it do when it has to take a stand on some real issues of international power and diplomacy? Will the real paper tiger please stand up – India or the Commonwealth Federation, or whatever it is called.
The author is Chairman of Oxus Investments, an emerging market advisory and fund management firm. Please visit www.oxusinvestments.com for an archive of articles etc; comments welcome at surjit.bhalla@oxusinvestments.com
Blurb: The BCCI is projecting itself as the good mother with an errant Modi child. Nothing could be further from the truth.
The advantage of a story breaking out much before the time due for the fortnightly column is that it provides for time for reflection; and synthesis. Collating all the pieces together, this is what emerges.
First, the BCCI or Lalit Modi is not the creator of the IPL concept. Both have been credited with this innovation, and some have even called Modi a genius in this regard. By doing so, analysts and commentators are missing out on a critical element in this seedy and sorry saga. The IPL concept was introduced into India by the ICL, the Indian Cricket League. The ICL contracted players, Packer style, and the T20 league was on. Somewhat later, the BCCI woke up and muscled its way into the concept, and the ICL was muscled out. ICL was promoted by Zee Sports so the question arises as to why did they just roll over when the BCCI said boo? Because BCCI was exercising its monopoly power as the sole promoter of cricket in India.
BCCI said, quite simply, that a player who played in ICL would not be eligible for playing for India’s national cricket team. The often holier-than-thou but equally monopolistic ICC backed the BCCI and supported the decision that any player playing for the “rogue” league would not be eligible to play for national teams. And where were our much vaunted politicians who are so eager to clean up the Modi nay BCCI mess? In full support, lined up behind BCCI, with 17 of the 23 odd cricket associations in India headed by their multi-faceted tribe. These office bearers belong to all the parties and my guess is that the “ownership” of these district cricket associations, and BCCI, is distributed as the seats in the Lok Sabha i.e. Congress/UPA and the BJP/NDA have the largest ownership of cricket in India.
Why one might ask are the Indian politicians so bothered about promoting cricket in India when they, by their own admission, are overburdened with work and especially work that is in the service of the nation? Because the BCCI was, until last year, treated like an NGO by the Indian government i.e. its earnings were not taxed, because like the Ministry of Defence, the work that BCCI did was paramount to national interests. This meant that all income of the BCCI, as long as it was ploughed back into the development of cricket, was not taxable. In 2000, in a landmark judgment, the court ruled in the case of Rahul Mehra et. al. vs. Union of India, BCCI and DDCA, that the BCCI was accountable to the citizens of India regardless of the “pioneering” ways in which it served the cause of India. This suit also contained this nugget of information: in at least some years preceding 2000, DDCA received more revenue from the sale of old liquor bottles on its premises than it spent on coaching facilities! There is a partial happy ending to this horror story: last year, the Government of India ruled (give credit where it is due to the bureaucrats in the Ministry of Finance and some upright politicians) that the BCCI was no longer eligible for tax-free status.
In the meantime, BCCI has become the worlds fattest cricketing body, and in the wake of the IPL scam, the pertinent question is: what should the Government of India do to make the right the several wrongs of the past? That is not possible. But something can be done for the future of Indian cricket, for the future of justice and fair play, for the future of institutions in India. The solution is as straightforward as it is transparent. It is to denationalize the BCCI, yes, denationalize. At present, it has all the monopoly advantages of being a government body without any responsibility or accountability. There is also precedence for such a policy elsewhere in the world, especially in soccer. Teams are publicly listed companies and the people are the shareholders. Let us see how many politicians want to get into the rough and tumble of competitive markets, as opposed to the hiding behind the veil of serving the cause of the nation via a monopoly.
The IPL crisis should be viewed as a Modi given opportunity for cleaning up the stables. At present, the BCCI is behaving like a good mother disciplining an errant child. As late as now, Modi wanted to reveal the names and details of ownership of the teams. Where was Modi for the last three years? As late as now, the BCCI wanted to study the legal implications of making the ownership public before making it public. The point of view of both the mother and child is laughable, but here the mother is clearly much more in the wrong. This fact should not go unnoticed.
Also, a final plea as a cricket fan. How come no one has really protested about the absolutely shoddy nature of the “new” Ferozshah Kotla stadium. No matter whether you view the cricket from the cheapest or the most expensive seats, the stadium is an embarrassment. Couldn’t some of the “in the name of promoting cricket” money have gone into building a stadium that is representative of the capital city of the new India? Does it not matter that there is only one scoreboard at the Kotla grounds and that half the stadium cannot see it? Something about the oh-so cricket loving corporate sponsors: you cannot see the scoreboard (remember there is only one) from their cushy seats. Does it not matter that no attempt is made to create an environment where one can go to enjoy the experience of watching cricket, even the IPL. Has any member of the BCCI, or for that matter the Lok Sabha, seen a worse stadium in the world, let alone in India? Why has this gone on for so long without question or accountability? A legitimate question: where has all the revenue from selling old liquor bottles gone?
The author is Chairman of Oxus Investments, an emerging market advisory and fund management firm. Please visit www.oxusinvestments.com for an archive of articles etc; comments welcome at surjit.bhalla@oxusinvestments.com
Blurb: Why is it that some so-called liberals believe that whatever sounds good is good?
Sometimes, I just don’t understand what is going on. So help me. Most of the issues I don’t understand involve the state, politicians, and pseudo-liberals. Take first the women’s bill enthusiastically supported by the two major parties in India – Congress and the BJP – and a small coalition fighting for survival in the national political landscape, the Communist parties. As speculated in “Women’s Bill: Women smart, men smarter?”, Business Standard, March 13, 2010), the timing of the bill seems to have been exclusively to get pats on the back from international pseudo-liberals. It was the 100th anniversary of International Women’s Day and what better way to honor it than an insulting to women piece of legislation – reservations of one-third seats in parliament for those who can prove their womanhood.
From countries as far apart as Rwanda and Sweden (also in the history books but with a lot more respectability), there have been different attempts at the knotty problem of how to speed up the process of women’s involvement in politics. In Rwanda seats are reserved for women in permanently defined women constituencies where only the women are allowed to vote. More sensible than what an ancient civilization divined – in a hurry to be noticed on Women’s Day – as a rotating constituency where women will fight for justice. Since it will be a lottery every five years (perhaps sooner given the era of coalition politics), all a politician, he or she, has to do and will do is to maximize the loot they can accumulate in the short time they are in office. Serve the people – hah! Ask the Election Commission how they have certified that expenditures in Lok Sabha did not exceed more than a paltry 2.5 lakhs per candidate, when everybody knows the going rate, higher for the major parties and higher still for the winning parties, is at least a hundred times more. Of course, expect the pseudo liberals to come up with the specious argument, supported by data and experiments, that what works in a local panchayat of a few hundred people will work in an area involving several 100 times more.
How does Sweden do it, today the country with the largest percentage, close to 50 percent, of female representation in parliament? Via an agreement among the political parties that they will nominate women candidates in 50 percent of the constituencies. No constitutional amendment, no picture in Newsweek magazine, no plaudits from psuedos – but effective.
Apparently, for several years now, former Election Commissioner M. S. Gill has circulated a suggestion very much along the Swedish line. In their haste to be so so applauding, how many pseudo liberals in the media informed you of this fact on Women’s day, or earlier, or later? A strikingly uniform objection to the Swedish model in my article was that the major (and minor) parties would circumvent the noble intent by nominating frivolous women candidates for the constituencies they cannot win. Tragically, this uniform objection (was this an all pseudo party line?) does not meet any test of smartness, and passes all tests of stupidity. Indians are supposed to be good at Math but fewer objections are more laughable for their complete misunderstanding of basic tossing the coin probability. All parties nominate women for the 50 percent of seats they cannot win. Let us examine the case of the lead party – Congress. It will lose half of the 542 seats it contests, so will BJP, and so will all the parties. Doesn’t somebody win? And won’t even the pseudo liberal media highlight the fact that in the name of the women parties like Congress and the BJP and the CPM are nominating frivolous women for the Lok Sabha seats?
The recent announcement by the CPM that they will nominate women for 45 percent of the seats in the forthcoming municipal elections exposes the hollowness of the bill passed in the Rajya Sabha. BJP, and even the Congress, please take note. And start hiring some first year IIT students to dome simple probability calculations.
If the Congress politicians stopped at misguided pseudo stuff, it would not be that problematical. What is extremely worrying is the extent the party will go to rewrite history, and the arrogance with which they want to obliterate their deeds, evil and otherwise. As already pathetically apparent, the present Congress leadership will go the distance in making people forget that there were any non Nehru-Gandhi leaders of the Congress party. So forget that Narsimha Rao ever existed, let alone the fact that he alone among the entire Nehru-Gandhi clan initiated policies that has brought India to its present non poor status. Second, it is appalling that a private Ms. Sonia Gandhi vendetta against actor Amitabh Bachchan has to be brought into public space, as was manifested last week when Congress politicians were told to not appear in public with the actor, and Congress goons brought down posters of Amitabh’s son, Abhishek Bachan. Why this childish display? Didn’t you know – Amitabh is the Ambassador for Gujarat, and Gujarat Chief Minister is Narendra Modi, and Modi is responsible for the anti-Muslim carnage in 2002. It is okay if I make the charge against Modi, or even the Communists. But the Congress party and its embarrassing apologists? The very same party that brought you the Sikh riots of 1984; the very same party that introduced the election list method of identifying and killing innocent people. The very same party that had several Ministers in its government of those alleged to have been involved in the 1984 riots. And the very same party that Mr. Bachchan campaigned for in 1984 and won a Lok Sabha seat. And they are advising us, Goebellian fashion, to forget the 1984 riots.
Incidentally, the dictionary defines pseudo as a person who makes deceitful pretenses.
The author is Chairman of Oxus Investments, an merging market advisory and fund management firm. Please visit www.oxusinvestments.com for an archive of articles et; comments welcome at surjit.bhalla@oxusinvestments.com
