We all have our favourite Amitabh Bachchan movies. Most people who grew up in the seventies feel that Deewar was his best performance. The eighties lot likes to talk about Agneepath which was released in 1990. Some others talk about his comic timing in Amar Akbar Anthony and Chupke Chupke. The women admire his rather innocent performance in Anand. A dear friend of mine refuses to see the Don movies starring Shahrukh Khan on the premise that nobody could play Don like Bachchan had.
More recently the audience found him rather endearing in Paa, where he played a reel life son to his real life son Abhishek Bachchan.
My favourite Amitabh Bachchan movie is a rather unknown one which came and went at the end of the eighties. Unlike Agneepath which was later recognized as a classic, the movie still hasn’t found the audience that I feel it deserves. And unlike other late eighty Bachchan duds like Prakash Mehra’s Jadugar, Ketan Desai’s Toofan and Manmohan Desai’s Ganga Jamuna Saraswati, I haven’t seen it play on any of the movie channels, either.
The movie was called Main Azaad Hoon and it hit the movie screens in 1989. This Tinnu Anand directed film was a copy of the 1941 Hollywood movie Meet John Doe directed by Frank Capra. (The Wikipedia entry of Main Azaad Hoon calls it a remake of Meet John Doe but that’s something I am really not sure of. In the late 1980s nobody officially bought remake rights in Bollywood, they just copied from wherever they wanted to). The movie also has my favourite Bachchan song “kitne bazoo kitne sir, gin le dushman dhyan se, haare ga wo har baazi jo khele hum jee jaan se”, one of the last songs that Kaifi Azmi wrote.
Main Azaad Hoon starts with Shabana Azmi who plays the role of a female journalist called Subhashini. She writes a column in which she reproduces a letter from someone she calls Azaad. Azaad, writes Subhashini, is going to commit suicide on January 26, from the highest building in the city.
The twist is that there is no Azaad. It is just a figment of Subhashini’s imagination. The newspaper has a new owner and he has asked the editor to fire Subhashini. Subhashini on the last day of her work writes the letter from Azaad just for the lark of it.
The story improves the circulation of the newspaper dramatically. The newspaper owner has political ambitions of his own, asks Subhashini to stay back and keep the Azaad story going. This requires Subhashini to catch hold of someone who can play Azaad.
She gets hold of unemployed youth who has landed up in the city and doesn’t even have money to buy food. Reluctantly that man with no name agrees to play the role of Azaad just once, for a few rupees. But his first performance as Azaad is a huge hit with the people who have come to hear him and he is persuaded to keep going.
So the story evolves. In a rather tragic end Azaad does commit suicide on January 26, as Subhashini had written in her column. (Here is where the copy was different from the original. In Meet John Doe, Gary Cooper who plays John Doe, is persuaded not to jump).
The movie obviously bombed at the box office. A story of a newspaper journalist and an owner keeping a false story going to bid up the circulation of the newspaper as well as push the political ambitions of the newspaper owner, was probably 20 years ahead of its time. Also those were the days when Amitabh Bachchan beat up the villains to solve all the problems in the world. And here was committing suicide like a coward. This was a sure-shot recipe for disaster. And the movie sank in the theatres on the very first day of its release.
But the story of Main Azaad Hoon in which a journalist writes about an individual who does not exist and keeps the story going when the circulation of the paper goes through the roof, is very relevant in the times that we live in.
This is an era where the pressure on journalists and editors who work for newspapers and primarily television channels to get exclusive news and to break news before anyone else does is huge. The pressure is so huge that at times decent behaviour does not have any place in the profession.
The most recent example is that of Gagan Narang winning the bronze model in the London Olympics. The news channels were waiting at his home as his parents watched him shoot. As soon as he won all hell broke loose and every television journalist wanted his father to answer the “aap kaisa mehsoos kar rahe hain” question.
The pushing and shoving could be seen “live” across all the television channels. Several journalists could be heard shouting at the top of their voices trying to attract the attention of Narang senior to their questions. It is an entirely different issue that none of the journalists present had anything different to ask other than “aap kaisa mehsoos kar rahe hain?”But everybody wanted an exclusive none the less. For all those who watch television news regularly, this shouldn’t come across as a surprise.
Another recent case where the media reported wrongly in order to keep a story hot and get you, me and everyone else, emotionally involved, was the case of the Bhattacharya kids in Norway. Arnab Goswami of Times Now caught onto to the story and kept shouting at the top of his voice like his normally does, and turned it into an issue of national importance.
Abhigyan and Aishwarya, children of Anurup and Sagarika Bhattacharya, had been put under foster care by the Norway government under the aegis of its Child Welfare Service (CWS). Goswami with almost no research of why this had been done presented a one sided picture of the entire story blaming the Norwegian authorities all along. Once Arnab was at it, others had to follow suit or risk losing their TRPs (television rating points).
As The Hindu wrote “It (the television media) gave the impression that the Bhattacharya children were separated from their parents only because they were not well-dressed, slept along with their parents and not in separate beds, were fed by hand, and so on. They saw in the action what they called a “cultural bias” or “cultural discrimination.” The other side — the real issue of universal child rights — was totally ignored.”
But that as The Hindu later found out was not really the case. It sent its Europe correspondent to investigate the case and the truth that emerged was much more complicated than the way it was being presented on television.
“After reviewing the files and interviewing the family as well as CWS officials, the picture that emerges is a complex one that defies easy pigeonholing. The strains of negotiating a foreign culture and environment are evident — both for the Bhattacharyas and for the Norwegian authorities — but the fact that the family needed assistance is undeniable. The parents have said they themselves approached the kindergarten for help when the older child showed autism-like symptoms, now diagnosed as Attachment Disorder. The mother, too, said she was suffering from post-partum depression and was unable to cope in the Norwegian cold, with a husband who worked long hours. Though littered with cultural misunderstandings and even insensitivity, all the reports submitted by care personnel working independently of each other saw a problem in the mother’s refusal to admit the seriousness of the boy’s condition or to accept help,” the paper wrote in an editorial on March 20.
But if Goswami and others of his ilk had presented both the sides, the story wouldn’t be “sexy” enough to drive the TRPs. It wouldn’t have got all of us, the emotional fools that we are, emotionally involved.
To give Goswami and the television channels their due they did play a huge role in helping the family unite and ensuring that the kids came back to their parents. But the same cannot be said about the Guwahati molestation case. The truth that seems to be coming out in this case is that Gaurav Jyoti Neog, the reporter of the news channel News Live, which broke the story, may have instigated the molestation in the first place.
As the newsmagazine Tehelka reports in its latest cover story “The raw footage shows the other girl being chased by a group of boys. Someone shouts: “Catch her, make her naked, make her naked, catch her.” This voice is strikingly similar to the voice the channel admits belongs to Gaurav. (The authenticity could only be proved by a forensic examination, but ex facie it does appear to be Gaurav’s) This can be deduced from the circumstances around the clippings. In a situation where there is a lot of noise in the background, it is likely that the most audible voice will be of the person holding the phone. Also, most of the people voice matches the earlier male voice that News Live had itself identified as belonging to Gaurav.”(you can read the complete story here)
What Goswami and his channel did was not very different from what the other news channels do all the time though the degrees vary. The point I am trying to make is that when the race for TRPs is so strong once in a while we will have situations where reporters and editors will try and create news out of nothing. The character played by Shabana Azmi did that in Main Azaad Hoon. And the same thing seems to have happened with Gaurav Neog and News Live in Assam. There are no easy solutions to this problem. Some experts have asked for increased government role in policing the media. But the thing is that most of the regional television news channels are run by politicians or people acting as fronts for these politicians. Given this situation an increased role for the government in policing the media might lead to the politicians favouring their own channels over others. The News Life Channel which is now accused of instigating the molestation in Guwahati is promoted by the Health Minister of Assam and run by his wife.
In this scenario the only way out for the television channels is to behave more responsibly and not to create news and crisis when none exist. Also they need to realize that shouting at the top of their voices doesn’t tend to increase the importance of the issue. Now only if Mr Goswami were listening!
(A slightly different version of the article originally appeared on www.firstpost.com on July 31,2012. http://www.firstpost.com/india/the-indian-media-and-its-main-azaad-hoon-syndrome-398743.html)
(Vivek Kaul is a writer and can be reached at [email protected])
The attempts of the Reserve Bank of India (RBI) to control inflation have been a non-starter. “Growth, particularly in the last two or three years, has been worth its weight in gold. In a global economic boom, an economic growth of 8%, 7% or 9% doesn’t really matter. But when the world is slowing down, in fact growth in large parts of the world has turned negative, to kill that growth by raising the interest rate is inhuman. It is almost like a sin. And the RBI killed it under the very lofty ideal that we will tame inflation by killing growth,” said Shankar Sharma, vice-chairman & joint managing director, First Global, in an interview to DNA Money.
“If you have got a matriculation degree, you will understand that India’s inflation has got nothing to do with RBI’s policies. Your inflation is largely international commodity price driven. Your local interest rate policies have got nothing to do with that. We have seen that inflation has remained stubbornly high no matter what Mint Street has done. You should have understood this one commonsensical thing,” he added.
Given this, Sharma feels that there is no way out for the RBI but to cut the repo rate in the days to come. Repo rate is the rate at which RBI lends money to the banks. “I do not rule out a 150 basis points cut in the repo rate this year. Manmohan Singh might have just put in the ears of Subbarao that it’s about time that you woke up and smelt the coffee. You have no control over inflation. But you have control over growth, at least peripherally,” said Sharma.
Growth is the only antidote to inflation, feels Sharma. “If your nominal growth is 15%, you will get 10-20% salary and wage hikes. Then you have more purchasing power left in the hands of the consumer to deal with increased price of dal or milk or chicken. If the wage hikes don’t happen, you are leaving less purchasing power in the hands of people. And wage hikes won’t happen if you have killed economic growth,” explained Sharma.
And getting economic growth started again will be very difficult. As Sharma put it “The laws of physics say that you have to put in a lot of effort to get a stalled car going, yaar. But if it was going at a moderate pace, to accelerate is not a big issue. We have killed that whole momentum. And remember that 5-6%, economic growth, in my view, is a disastrous situation for a country like India. You can’t say we are still growing.”
By keeping interest rates high the RBI has managed to slowdown credit growth of banks and thus made borrowing easy for the government of India, which has been borrowing big time to finance its fiscal deficit. Fiscal deficit is the difference between what the government earns and it spends. “There are not many competing borrowers from the same pool of money that the government borrows from. So far, indications are that the government will be able to get what it wants without disturbing the overall borrowing environment substantially. In a strange sort of way the government’s ability to borrow has been enhanced by the RBI’s policy of killing growth. I always say that India has 33 crore Gods and Goddesses. They find a way to solve our problems,” said Sharma.
Sharma also sees the rupee appreciating against the dollar, a prediction he made at the beginning of the year and which hasn’t worked out till now. But his optimism still remains. “I still maintain that by the end of the year you are going to see a vastly stronger rupee. I believe it will be Rs 44-45 against the dollar. Or if you are going to say that is too optimistic may be Rs 47-48. But I don’t think it’s going to be Rs 60-65 or anything like that.”
A major reason for Sharma’s optimism is a fall in oil prices and Indians buying lesser gold.
“At the beginning of the year our view that oil prices will be sharply lower. That time we were trading at around $105-110 per barrel. Our view was that this year we would see oil prices of around $65-75. So we almost got to $77 per barrel (Nymex). We have bounced back a bit. But that’s okay. Our view still remains that you will see oil prices being vastly lower this year and next year as well, which is again great news for India,” said Sharma. Also with gold prices touching all time highs in rupee terms gold imports have taken a beating.
“You should be seeing a much stronger rupee by the end of the year. Imagine what that does to the equity market. That has a big, big effect because then foreign investors sitting in the sidelines start to play catch-up,” concluded Sharma.
(The article originally appeared in the Daily News and Analysis on July 31,2012. http://www.dnaindia.com/money/report_an-ssc-pass-understands-that-inflation-today-has-nothing-to-do-with-rbi_1721962)
(Vivek Kaul is a writer and can be reached at [email protected])
Have you ever heard someone call equity a short term investment class? Chances are no. “I have always had this notion for many years that people buy equities because they like to be excited. It’s not just about the returns they make out of it… You can build a case for equities on a three year basis. But long term investing is all rubbish, I have never believed in it,” says Shankar Sharma, vice-chairman & joint managing director, First Global. In this freewheeling
interview he speaks to Vivek Kaul.
Six months into the year, what’s your take on equities now?
Globally markets are looking terrible, particularly emerging markets. Just about every major country you can think of is stalling in terms of growth. And I don’t see how that can ever come back to the go-go years of 2003-2007. The excesses are going to take an incredible amount of time to work their way out. They are not even prepared to work off the excesses, so that’s the other problem.
Why do you say that?
If you look at the pattern in the European elections the incumbents lost because they were trying to push for austerity. And the more leftist parties have come to power. Now leftists are usually the more austere end of the political spectrum. But they have been voted to power, paradoxically, because they are promising less austerity. All the major nations in the world are democracies barring China. And that’s the whole problem. You can’t push through austerity that easily in a democracy, but that is what is really needed. Even China cannot push through austerity because of a powder-keg social situation. And I find it very strange when people criticise India for subsidies and all that. India is far less profligate than many nations including China.
Can you elaborate on that?
Every country has to subsidise, be it farm subsidies in the West or manufacturing subsidies in China, because ultimately whether you are a capitalist or a communist, people are people. They don’t necessarily change their views depending on which political ideology is at the centre. They ultimately want freebies and handouts. In a country like India, they don’t even want handouts they just want subsistence, given the level of poverty. The only thing that you can do with subsidies is to figure out how to control them. But a lot of it is really out of your control. If you have a global inflation in food prices or oil prices you are not increasing the quantum in volume terms of the subsidy. But because of price inflation, the number inflates. So why blame India? I find it absurd that the Financial Times or the Economist are perennially anti-India. They just isolate India and say that it has got wasteful expenditure programmes. A lot of countries hide things. India, unfortunately, is far more transparent in its reporting. It is easy to pick holes when you are transparent. China gives no transparency so people assume that whatever is inside the black box must be okay. That said, I firmly believe the UID program, when fully implemented, will make subsidies go lower by cutting out bogus recipients.
If increased austerity is not a solution, where does that leave us?
Increased austerity, while that is a solution, it is not achievable. If that is not possible what is the solution? You then have a continual stream of increasing debt in one form or the other, keep calling it a variety of names. But you just keep kicking the can down the road for somebody else to deal with it as long as the voter is happy. Given this, I don’t see how you can have any resurgence. Risk appetite is what drives equity markets. Otherwise you and I would be buying bonds all the time. In today’s environment and in the foreseeable future, we are overfed with risk. Where is the appetite to take more risk and go, buy equities?
So are you suggesting that people won’t be buying stocks?
Well you can get pretty good returns in fixed income. Instead of buying emerging-market stocks if you buy bonds of good companies, you can get 6-7% dollar yield, and if you leverage yourself two times or something, you are talking about annual returns of 14-15% dollar returns. You can’t beat that by buying equities, boss! Even if you did beat that by buying equities, let’s say you made 20%, it is not a predictable 20%, which has been my case for a long time against equities. Equities are a western fashion. I have always had this notion for many years that people buy equities because they like to be excited. It’s not just about the returns they make out of it: it is about the whole entertainment quotient attached to stock investing that drives investors. There is 24-hour television. Tickers. Cocktail discussions. Compared with that, bonds are so boring and uncool. Purely financially, shorn of all hype, equities have never been able to build a case for themselves on a ten-year return basis. You can build a case for equities on a three-year basis. But long-term investing is all rubbish, I have never believed in it.
So investing regularly in equities, doing SIPs, buying Ulips, doesn’t make sense?
I don’t buy the whole logic of long-term equity investing because equity investing comes with a huge volatility attached to it. People just say “equities have beaten bonds”. But even in India they have not. Also people never adjust for the volatility of equity returns. So if you make 15% in equity and let’s say, in a country like India, you make 10% in bonds – that’s about what you might have averaged over a 15-20 year period because in the 1990s we had far higher interest rates. Interest rates have now climbed back to that kind of level of 9-10%. Divide that by the standard deviation of the returns and you will never find a good case for equities over a long-term period. So equity is actually a short-term instrument. Anybody who tells you otherwise is really bluffing you. All the fancy graphs and charts are rubbish.
Yes. They are all massaged with sort of selective use of data to present a certain picture because it’s a huge industry which feeds off it globally. So you have brokers like us. You have investment bankers. You have distributors. We all feed off this. Ultimately we are a burden on the investor, and a greater burden on society — which is also why I believe that the best days of financial services is behind us: the market simply won’t pay such high costs for such little value added. Whatever little return that the little guy gets is taken away by guys like us. How is the investor ever going to make money, adjusted for volatility, adjusted for the huge cost imposed on him to access the equity markets? It just doesn’t add up. The customer never owns a yacht. And separately, I firmly believe making money in the markets is largely a game of luck. Even the best investors, including Buffet, have a strike rate of no more than 50-60% right calls. Would you entrust your life to a surgeon with that sort of success rate?! You’d be nuts to do that. So why should we revere gurus who do just about as well as a coin-flipper. Which is why I am always mystified why so many fund managers are so arrogant. We mistake luck for competence all the time. Making money requires plain luck. But hanging onto that money is where you require skill. So the way I look at it is that I was lucky that I got 25 good years in this equity investing game thanks to Alan Greenspan who came in the eighties and pumped up the whole global appetite for risk. Those days are gone. I doubt if you are going to see a broad bull market emerging in equities for a while to come.
And this is true for both the developing and the developed world?
If anything it is truer for the developing world because as it is, emerging market investors are more risk-averse than the developed-world investors. We see too much of risk in our day to day lives and so we want security when it comes to our financial investing. Investing in equity is a mindset. That when I am secure, I have got good visibility of my future, be it employment or business or taxes, when all those things are set, then I say okay, now I can take some risk in life. But look across emerging markets, look at Brazil’s history, look at Russia’s history, look at India’s history, look at China’s history, do you think citizens of any of these countries can say I have had a great time for years now? That life has been nice and peaceful? I have a good house with a good job with two kids playing in the lawn with a picket fence? Sorry, boss, that has never happened.
And the developed world is different?
It’s exactly the opposite in the west. Rightly or wrongly, they have been given a lifestyle which was not sustainable, as we now know. But for the period it sustained, it kind of bred a certain amount of risk-taking because life was very secure. The economy was doing well. You had two cars in the garage. You had two cute little kids playing in the lawn. Good community life. Lots of eating places. You were bred to believe that life is going to be good so hence hey, take some risk with your capital.
The government also encouraged risk taking?
The government and Wall Street are in bed in the US. People were forced to invest in equities under the pretext that equities will beat bonds. They did for a while. Nevertheless, if you go back thirty years to 1982, when the last bull market in stocks started in the United States and look at returns since then, bonds have beaten equities. But who does all this math? And Americans are naturally more gullible to hype. But now western investors and individuals are now going to think like us. Last ten years have been bad for them and the next ten years look even worse. Their appetite for risk has further diminished because their picket fences, their houses all got mortgaged. Now they know that it was not an American dream, it was an American nightmare.
At the beginning of the year you said that the stock market in India will do really well…
At the beginning of the year our view was that this would be a breakaway year for India versus the emerging market pack. In terms of nominal returns India is up 13%. Brazil is down 3%. China is down, Russia is also down. The 13% return would not be that notable if everything was up 15% and we were up 25%. But right now, we are in a bear market and in that context, a 13-15% outperformance cannot be scoffed off at.
What about the rupee? Your thesis was that it will appreciate…
Let me explain why I made that argument. We were very bearish on China at the beginning of the year. Obviously when you are bearish on China, you have to be bearish on commodities. When you are bearish on commodities then Russia and Brazil also suffer. In fact, it is my view that Russia, China, Brazil are secular shorts, and so are industrial commodities: we can put multi-year shorts on them. So that’s the easy part of the analysis. The other part is that those weaknesses help India because we are consumers of commodities at the margin. The only fly in the ointment was the rupee. I still maintain that by the end of the year you are going to see a vastly stronger rupee. I believe it will be Rs 44-45 against the dollar. Or if you are going to say that is too optimistic may be Rs 47-48. But I don’t think it’s going to be Rs 60-65 or anything like that. At the beginning of the year our view that oil prices will be sharply lower. That time we were trading at around $105-110 per barrel. Our view was that this year we would see oil prices of around $65-75. So we almost got to $77 per barrel (Nymex). We have bounced back a bit. But that’s okay. Our view still remains that you will see oil prices being vastly lower this year and next year as well, which is again great news for India. Gold imports, which form a large part of the current account deficit, shorn of it, we have a current account deficit of around 1.5% of the GDP or maybe 1%. We imported around $60 billion or so of gold last year. Our call was that people would not be buying as much gold this year as they did last year. And so far the data suggests that gold imports are down sharply.
So there is less appetite for gold?
Yes. In rupee terms the price of gold has actually gone up. So there is far less appetite for gold. I was in Dubai recently which is a big gold trading centre. It has been an absolute massacre there with Indians not buying as much gold as they did last year. Oil and gold being major constituents of the current account deficit our argument was that both of those numbers are going to be better this year than last year. Based on these facts, a 55/$ exchange rate against the dollar is not sustainable in my view. The underlyings have changed. I don’t think the current situation can sustain and the rupee has to strengthen. And strengthen to Rs 44, 45 or 46, somewhere in that continuum, during the course of the year. Imagine what that does to the equity market. That has a big, big effect because then foreign investors sitting in the sidelines start to play catch-up.
Does the fiscal deficit worry you?
It is not the deficit that matters, but the resultant debt that is taken on to finance the deficit. India’s debt to GDP ratio has been superb over the last 8-9 years. Yes, we have got persistent deficits throughout but our debt to GDP ratio was 90-95% in 2003, that’s down to maybe 65% now. So explain that to me? The point is that as long as the deficit fuels growth, that growth fuels tax collections, those tax collections go and give you better revenues, the virtuous cycle of a deficit should result in a better debt to GDP situation. India’s deficit has actually contributed to the lowering of the debt burden on the national exchequer. The interest payments were 50% of the budgetary receipts 7-8 years back. Now they are about 32-33%. So you have basically freed up 17% of the inflows and this the government has diverted to social schemes. And these social schemes end up producing good revenues for a lot of Indian companies. The growth for fast-moving consumer goods, mobile telephony, two wheelers and even Maruti cars, largely comes from semi-urban, semi-rural or even rural India.
What are you trying to suggest?
This growth is coming from social schemes being run by the government. These schemes have pushed more money in the hands of people. They go out and consume more. Because remember that they are marginal people and there is a lot of pent-up desire to consume. So when they get money they don’t actually save it, they consume it. That has driven the bottomlines of all FMCG and rural serving companies. And, interestingly, rural serving companies are high-tax paying companies. Bajaj Auto, Hindustan Lever or ITC pay near-full taxes, if not full taxes. This is a great thing because you are pushing money into the hands of the rural consumer. The rural consumer consumes from companies which are full taxpayers. That boosts government revenues. So if you boost consumption it boosts your overall fiscal situation. It’s a wonderful virtuous cycle — I cannot criticise it at all. What has happened in past two years is not representative. It is only because of the higher oil prices and food prices that the fiscal deficit has gone up.
What is your take on interest rates?
I have been very critical of the Reserve Bank of India’s (RBI) policies in the last two years or so. We were running at 8-8.5% economic growth last year. Growth, particularly in the last two or three years, has been worth its weight in gold. In a global economic boom, an economic growth of 8%, 7% or 9% doesn’t really matter. But when the world is slowing down, in fact growth in large parts of the world has turned negative, to kill that growth by raising the interest rate is inhuman. It is almost like a sin. And they killed it under the very lofty ideal that we will tame inflation by killing growth. But if you have got a matriculation degree, you will understand that India’s inflation has got nothing to do with RBI’s policies. Your inflation is largely international commodity price driven. Your local interest rate policies have got nothing to do with that. We have seen that inflation has remained stubbornly high no matter what Mint Street has done. You should have understood this one commonsensical thing. In fact, growth is the only antidote to inflation in a country like India. When you have economic growth, average salaries and wages, kind of lead that. So if your nominal growth is 15%, you will 10-20% salary and wage hikes – we have seen that in the growth years in India. Then you have more purchasing power left in the hands of the consumer to deal with increased price of dal or milk or chicken or whatever it is. If the wage hikes don’t happen, you are leaving less purchasing power in the hands of people. And wage hikes won’t happen if you have killed economic growth. I would look at it in a completely different way. The RBI has to be pro-growth because they no control of inflation.
So they basically need to cut the repo rate?
They have to.
But will that have an impact? Because ultimately the government is the major borrower in the market right now…
Look, again, this is something that I said last year — that it is very easy to kill growth but to bring it back again is a superhuman task because life is only about momentum. The laws of physics say that you have to put in a lot of effort to get a stalled car going, yaar. But if it was going at a moderate pace, to accelerate is not a big issue. We have killed that whole momentum. And remember that 5-6%, economic growth, in my view, is a disastrous situation for a country like India. You can’t say we are still growing. 8% was good. 9% was great. But 4-5% is almost stalling speed for an economy of our kind. So in my view the car is at a standstill. Now you need to be very aggressive on a variety of fronts be it government policy or monetary policy.
What about the government borrowings?
The government’s job has been made easy by the RBI by slowing down credit growth. There are not many competing borrowers from the same pool of money that the government borrows from. So far, indications are that the government will be able to get what it wants without disturbing the overall borrowing environment substantially. Overall bond yields in India will go sharply lower given the slowdown in credit growth. So in a strange sort of way the government’s ability to borrow has been enhanced by the RBI’s policy of killing growth. I always say that India is a land of Gods. We have 33 crore Gods and Goddesses. They find a way to solve our problems.
So how long is it likely to take for the interest rates to come down?
The interest rate cycle has peaked out. I don’t think we are going to see any hikes for a long time to come. And we should see aggressive cuts in the repo rate this year. Another 150 basis points, I would not rule out. Manmohan Singh might have just put in the ears of Subbarao that it’s about time that you woke up and smelt the coffee. You have no control over inflation. But you have control over growth, at least peripherally. At least do what you can do, instead of chasing after what you can’t do.
Manmohan Singh in his role as a finance minister is being advised by C Rangarajan, Montek Singh Ahulwalia and Kaushik Basu. How do you see that going?
I find that economists don’t do basic maths or basic financial analysis of macro data. Again, to give you the example of the fiscal deficit and I am no economist. All I kept hearing was fiscal deficit, fiscal deficit, fiscal deficit. I asked my economist: screw this number and show me how the debt situation in India has panned out. And when I saw that number, I said: what are people talking about? If your debt to GDP is down by a third, why are people focused on the intermediate number? But none of these economists I ever heard them say that India’s debt to GDP ratio is down. I wrote to all of them, please, for God’s sake, start talking about it. Then I heard Kaushik Basu talk about it. If a fool like me can figure this out, you are doing this macro stuff 24×7. You should have had this as a headline all the time. But did you ever hear of this? Hence I am not really impressed who come from abroad and try to advise us. But be that as it may it is better to have them than an IAS officer doing it. I will take this.
You talked about equity being a short-term investment class. So which stocks should an Indian investor be betting his money right now?
I am optimistic about India within the context of a very troubled global situation. And I do believe that it’s not just about equity markets but as a nation we are destined for greatness. You can shut down the equity markets and India would still be doing what it is supposed to do. But coming from you I find it a little strange…
I have always believed that equity markets are good for intermediaries like us. And I am not cribbing. It’s been good to me. But I have to be honest. I have made a lot of money in this business doesn’t mean all investors have made a lot of money. At least we can be honest about it. But that said, I am optimistic about Indian equities this year. We will do well in a very, very tough year. At the beginning of the year, I thought we will go to an all-time high. I still see the market going up 10-15% from the current levels.
So basically you see the Sensex at around 19,000?
At the beginning of the year, you would have taken it when the Sensex was at 15,000 levels. Again, we have to adjust our sights downwards. A drought angle has come up which I think is a very troublesome situation. And that’s very recent. In light of that I do think we will still do okay, it will definitely not be at the new high situation.
What stocks are you bullish on?
We had been bearish on infrastructure for a very long time, from the top of the market in 2007 till the bottom in December last year. We changed our view in December and January on stocks like L&T, Jaiprakash Industries and IVRCL. Even though the businesses are not, by and large, of good quality — I am not a big believer in buying quality businesses. I don’t believe that any business can remain a quality business for a very long period of time. Everything has a shelf life. Every business looks quality at a given point of time and then people come and arbitrage away the returns. So there are no permanent themes. And we continue to like these stocks. We have liked PSU banks a lot this year, because we see bond yields falling sharply this year.
Aren’t bad loans a huge concern with these banks?
There is a company in Delhi — I won’t name it. This company has been through 3-4 four corporate debt restructurings. It is going to return the loans in the next year or two. If this company can pay back, there is no problem of NPAs, boss. The loans are not bogus loans without any asset backing. There are a lot of assets. At the end of every large project there is something called real estate. All those projects were set up with Rs 5 lakh per acre kind of pricing for land. Prices are now Rs 50 lakh per acre or Rs 1 crore or Rs 1.5 crore per acre. If nothing else, dismantle the damn plant, you will get enough money from the real estate to repay the loans of the public sector banks. So I am not at all concerned on the debt part. If the promoter finds that is going to happen, he will find some money to pay the bank and keep the real estate.
On the same note, do you see Vijay Mallya surviving?
100% he will survive. And Kingfisher must survive, because you can’t only have crap airlines like Jet and British Airways. If God ever wanted to fly on earth, he would have flown Kingfisher.
So he will find the money?
Of course! At worst, if United Spirits gets sold, that’s a stock that can double or triple from here. I am very optimistic about United Spirits. Be it the business or just on the technical factor that if Mallya is unable to repay and his stake is put up for sale, you will find bidders from all over the world converging.
So you are talking about the stock and not Mallya?
Haan to Mallya will find a way to survive. Indian promoters are great survivors. We as a nation are great survivors.
How do you see gold?
I don’t have a strong view on gold. I don’t understand it well enough to make big call on gold, even though I am an Indian. One thing I do know is that our fascination with gold has very strong economic moorings. We should credit Indians for having figured out what is a multi century asset class. Indians have figured out that equities are a fashionable thing meant for the Nariman Points of the world, but for us what has worked for the last 2000 years is what is going to work for the next 2000 years.
What about the paper money system, how do you see that?
I don’t think anything very drastic where the paper money system goes out of the window and we find some other ways to do business with each. Or at least I don’t think it will happen in my life time. But it’s a nice cute notion to keep dreaming about.
At least all the gold bugs keep talking about the collapse of the paper money system…
I know. I don’t think it’s going to happen. But I don’t think that needs to happen for gold to remain fashionable. I don’t think the two things are necessarily correlated. I think just the notion of that happening is good enough to keep gold prices high.
(A slightly smaller version of the interview appeared in the Daily News and Analysis on July 31,2012. http://www.dnaindia.com/money/interview_you-can-shut-the-equity-market-india-would-still-be-doing-fine_1721939)
(Interviewer Kaul is a writer and can be reached at [email protected])
Some twenty eight days before my tenth standard exams I started reading William Shakespeare‘s Julius Caesar, seriously, for the first time. And I am still trying to figure out why the world fusses so much over plays written in a form of English that went out of fashion a long long time ago.
My memory of the play is very hazy now, given that it’s been two decades since. But what I do remember is that in Act 3 scene ii of the play comes a line which I found very relevant to the way world operates. “The evil that men do lives after them; The good is oft interred with their bones,” says the character of Mark Antony in that scene.
The evil that men (and women) do lives after them and in some cases the coming generations have to bear the consequences for it. Take the case of Indira Gandhi who systematically destroyed the institution of democracy. As historian Ramchandra Guha recently told CNN IBN “Nehru nurtured institution of democracy – an independent election commission, an independent judiciary, bureaucracy autonomous of political interference, pluralism, secularism. Indira systematically undermined all of this.”
This included democracy within the Congress party as well. During her heydays she first had Dev Kant Baruah installed as the President of the Congress party. Baruah is best remembered for saying “Indira is India and India is Indira”. Such was the level of the sycophancy that was prevalent when Indira Gandhi was at her peak.
After Baruah, Indira Gandhi took the presidency into her hands and was the president of the Congress party from 1978 to her death in 1984. Her younger son Sanjay more or less ran things within the party as well as the government (when Indira was in power) for a major part of this period.
She was succeeded as the President of the elder party by her son Rajiv who remained the President of the party till his death in 1991. This more or less institutionalized “dynastic” rule within the Congress. As Guha said “Even Nehru’s fiercest critic wrote at that time that the Nehru has no interest in promoting dynastic rule… Indira promoted first Sanjay and then Rajiv.”
With no democracy at the top of the Congress party, it simply wasn’t possible for the party to remain democratic at the state or the district level for that matter. The lack of internal democracy and the centralized nature of the Congress party led to the coining of the legendary phrase “high command”. It was also ironic that the world’s largest democracy was and is governed by a party with very little “internal” democracy.
More recently the party has seen Rahul Gandhi, fifth generation of the Nehru-Gandhi dynasty, at the helm of things, trying to correct the lack of democracy within the party. In October 2008, while addressing girl students at a resort near the Jim Corbett National Park, Rahul referred to “politics” as a closed system in India. “If I had not come from my family, I wouldn’t be here. You can enter the system either through family or friends or money. Without family, friends or money, you cannot enter the system. My father was in politics. My grandmother and great grandfather were in politics. So, it was easy for me to enter politics. This is a problem. I am a symptom of this problem. I want to change it.”
Rahul has tried to change this by trying to introduce some internal democracy within the Congress party by trying to ensure free internal elections. As Rasheed Kidwai writes in 24 Akbar Road – A Short History of the People Behind the Fall and Rise of the Congress, “Rahul Gandhi took it upon himself to bring about inner-party democracy in the Congress. He hired retired election commissioner JM Lyngdoh to design processes and implement policies to ensure that there were free internal elections within the party and that all initiatives and representatives were backed by elected representatives.”
While this is a good move but it is not going to lead to instant rejuvenation of a party that has constantly lost hold over the Indian electorate over the last two decades. Also, any move to initiate democracy within the Congress remains a non-starter given the lack of any democracy at the top.
Rahul’s mother Sonia Gandhi has been the President of the Congress since March 14, 1998, when the Congress Working Committee members led by Pranab Mukherjee invoked the Clause J of the Article 19 of the Congress constitution to throw out the elected President Sitaram Kesri. They then installed Sonia Gandhi as the President. This was unprecedented in the history of the party where an “elected” President of the party was thrown out by invoking a vague clause. The clause did not clearly point whether an elected President could be removed, by invoking it.
As The Hindu wrote after the death of Sitaram Kesri:
“The constitutional coup was hailed widely as restoring the party’s leadership back to the site of its only natural entitlement – the Nehru-Gandhi family. When the historians get to chronicle the import of that eventful day, most of the honorable men of the Congress would be shown to have acted way less than honourably; even those who owned their rehabilitation and place in the CWC to the old man had no qualms in abandoning him. The transition that day cast the Congress (I) once again in the dynastic mold, and the consequences are visible.”
Sonia Gandhi has been the President of the party ever since. Even if the party had presidential elections regularly the chances of anyone else other than Sonia Gandhi (assuming she continued to contest) winning the elections remained low. As Jitendra Prasada found in November 2000, when he ran against Sonia Gandhi, in the hope that she would ask him to withdraw his nomination and reward him with a senior position. Sonia never did and got nearly 99% of the votes polled. As Rashid Kidwai writes in Sonia – A Biography “As the date for the withdrawal of names drew nearer, Jitty Bhai waited in vain for a call from 10 Janpath offering a face saving, last-minute withdrawal. Humiliated and marginalized, Jitty Bhai realised that this gambit had failed. Accompanied by a handful of leaders from Uttar Pradesh, Prasada filed his nomination papers and was humbled in the party polls as Sonia went on to get nearly 99 per cent of the votes. The peacemakers and many of those who had encouraged Prasada to teach Sonia a lesson were nowhere in sight.”
Prasada never recovered from the humiliation he suffered at the hands of Sonia and died of a brain haemorrhage a few months later.
So try as much as Rahul might to revive the democratic process within the Congress party, it doesn’t really matter. To paraphrase what Dev Kant Baruah said about Indira Gandhi: “The Nehru-Gandhi family is the Congress. And the Congress is the Nehru-Gandhi family”.
The only constant in a party which lacks any ideology is the Nehru-Gandhi family. Given this, it doesn’t really matter if the Congress party has internal democracy or not. What matters is whether there is someone around from the Nehru-Gandhi family around to lead it.
It’s time Rahul Gandhi realised this and moved on from a full time party role to a role in the government while continuing with his role in the party as well. This will go in a long way in motivating the party cadre than all the moves to promote democracy within the party. There is nothing more that a Congress party worker likes than being led by a scion of the Nehru Gandhi family. This move also becomes even more important in a scenario where Pranab Mukherjee the principal troubleshooter for the party has decided to retire and move to the biggest house in the country.
It’s been nearly twenty three years since Rajiv Gandhi lost power to Vishwanath Pratap Singh. A Nehru-Gandhi family scion has not been a member of the Indian government since then. It’s time for Rahul and the Congress party to set that anomaly right.
(The article originally appeared on www.firstpost.com on July 30,2012. http://http://www.firstpost.com/politics/rahul-gandhi-is-paying-for-the-mistakes-of-indira-gandhi-396001.html/)
(Vivek Kaul is a writer and can be reached at [email protected])
“A woman and an elephant never forget an injury,” wrote Hector Hugh Munro better known by his pen name Saki. Wonder whether, Sharad Pawar, the sharp man that he is, has ever read Saki? (On a totally different note, the short stories of Saki are an absolutely delightful read).
The Maratha strongman Sharad Pawar resigned from the Union Cabinet last week. Media reports suggest that he was miffed by the fact that after Pranab Mukherjee decided to retire, and move to the Rashtrapati Bhavan, he was not made the number two in the Union Cabinet .It seems that the defence minister AK Antony has been allocated the seat to the right of the Prime Minister Manmohan Singh, where Mukherjee used to sit, making him number two in the government. And that’s a seat that Pawar had wanted.
The Congress Party has been trying to mollify Pawar and his Nationalist Congress Party (NCP) since he quit a few days back. “In a Parliamentary democracy, all are equal in Cabinet. The Prime Minister is first among equals and there is no number two or number three,” Congress general secretary Digvijaya Singh told the Deccan Chronicle.
That apart it would be rather stupid of Sharad Pawar to assume that the Congress would offer the number two position in the cabinet to him, assuming there was a thing like that. Pawar was one of the first to raise revolt against Sonia Gandhi by bringing her foreign origins to the forefront, after she had taken over as the President of the Congress Party in the late 1990s.
Even before that Sonia and Pawar never shared a great relationship. As Rashid Kidwai writes in Sonia-A Biography “When she (Sonia Gandhi) took over as the Congress chief, there was a certain unease between her and Sharad Pawar. Though Pawar concurred with the party’s decision to request Sonia to save the Congress, he later candidly admitted that he was never comfortable with her. Their conversations never lasted long and even that short duration was punctuated by long pauses.”
On March 14, 1998, the Congress Working Committee unceremoniously shunted out Sitaram Kesri, an elected President, and requested Sonia Gandhi to take over as the President of the Congress.
Kidwai in his book suggests that after Sonia took over as the President of the Congress, Pawar got an informal poll survey done. The results of the survey concluded that if he raised the banner of revolt against Sonia on the issue of her foreign origin, he would be the second Lokmanya Tilak. “The actual findings of the survey were never made public,” writes Kidwai. Things got nasty a little over a year and two months later on May 19, 1999, when Sharad Pawar, P.A.Sangma and Tariq Anwar raised a revolt against Sonia Gandhi on the issue of her foreign origin. Sonia resigned in a huff. But she took her resignation back after the trio was kicked out of the Congress party.
Therefore things went from bad to worse between Pawar and Sonia. “After revolting against her on the ground of her foreign origins, Pawar said that Sonia would never openly speak to him, but a CWC member who had tried hard to bring about a rapprochement between Pawar and Sonia said the same thing about him: ‘We encouraged him to have an open, heart-to-heart discussion with the Congress president, but he would just not open up,’” writes Kidwai.
So all this suggests that Pawar and Sonia share a very uneasy relationship and probably bear each other because of the compulsions of coalition politics. Also Sharad Pawar effectively ensured that Sonia Gandhi never became the Prime Minister of the country. Given that it is highly unlikely that Sonia would appoint Pawar number two in any union cabinet which she effectively controls.
Pawar of course understands this more than anyone else given the shrewd man that he is. So why is then all the drama of quitting in a huff happening? The major reason seems to be the fact that the Maharashtra chief minister Prithiviraj Chauhan is seen to be hurting the interests of the NCP. He has announced a white paper on the irrigation department which has been headed by Pawar’s nephew Ajit Pawar for ten years now.
The other major issue has been with co-operative banks. The Reserve Bank of India had dissolved the board of directors of the Maharashtra State Co-operative Bank which was controlled by Ajit Pawar in May last year. Pawar junior had come down heavily on the manner in which Chavan had implemented the RBI order in haste.
A few months back in March, RBI dissolved the NCP controlled Sangli District Central Cooperative Bank for violation of the Banking Regualtion Act. This move came a week after the NCP leader Dinkar Patel was elected as the Chairman of the Bank.
Chavan has also distanced himself from the refurbished Maharashtra Sadan in New Delhi. Allegations are now being made that relatives and family members of public works development (PWD) minister Chhagan Bhujbal, a senior NCP leader, benefitted considerably from contracts that were awarded out at inflated costs.
The NCP is also unhappy with the fact Chavan is not giving Pawar enough respect. “”In the past, CMs would make it a point to call on him and give him the respect due to a tall leader,” Times of India reported sources as saying.
The other theory going around is that Pawar is worried about the increasing influence of his nephew Ajit among the party legislators. Hence this move of resigning from the union cabinet is also being seen as a pressure tactic to get a ministerial birth for his daughter Supriya Sule, who is a member of the Lok Sabha from the Baramati constituency. As the Times of India on July 22 “Congress sources feel Pawar is shrewdly leveraging his unhappiness with the CM to pressure the Centre on demands ranging from a say in governorships, appointments to various boards, a ministerial perch for daughter Supriya while invoking the coalition mantra. He is also seen to be pitching for a say in Rajya Sabha nominations.”
The game is all about drawing some concessions out of the Congress party. At the end of the day we must remember that Pawar is no Mamata Banerjee. The influence of the NCP is limited to parts of western Maharashtra (primarily in districts around Pune). Pawar and NCP cannot win an election in Maharashtra on their own, unlike Mamata can and did in West Bengal. They need the Congress party as an alliance partner as much as the Congress needs them. The elections in Maharasthra are due in 2014. NCP is a party of business barons who have huge stakes in co-operative banks, sugar co-operatives and education institutes. Given this, it is important for them to remain in government. And they won’t remain in government unless they have a seat sharing agreement with the Congress party.
So what Pawar is doing right now is throwing some tough deliveries at the Congress party to give them some batting practice and hoping that he is able to draw out some goodies from them in the process. In the meanwhile we will some serious rhetoric from the NCP continuing. The one that caught my eye was of Jitendra Ahwad, an NCP leader, recently telling CNN-IBN that Sharad Pawar was the best man to be the Prime Minister.
(The article originally appeared on www.firstpost.com on July 23,2012. http://www.firstpost.com/politics/pawar-is-no-mamata-di-he-is-just-giving-cong-batting-practice-386923.html)
(Vivek Kaul is a writer and can be reached at [email protected])