What Chidambaram learnt from Crime Master Gogo and Andaz Apna Apna

crime master go goVivek Kaul 

All my dreams start with Venkatesh Prasad bowling a slow leg cutter, which lands in the middle of the cricket pitch and takes an eternity to reach the batsman.
I never see the batsman’s face.
But yesterday was different. I saw the batsman’s face and it was P Chidambaram.
Before I could see what Chidambaram was able to do with the slow leg cutter, my dream moved into a large hall (like Vigyan Bhavan) in Delhi.
Chidambaram was seated on the dais with a few mikes in front of him.
I was in the middle of the hall.
Why is there no one else here?” he asked. 
His voice reveberated into my ears.
Oh that’s because it’s my dream,” I replied, matter of factly. 
“Ah, I see. And what am I doing in your dream?”
“I wish I had an answer.” 
“So who will have an answer?”
“Venkatesh Prasad should know because he was one the one who bowled you a leg cutter,” I explained. 
“Venkatesh who?” he asked.
Never mind. But I have a question for you.” 
“Shoot. Now that I am here, let me do something useful.” 
“It’s about the fiscal deficit.” 
“Fiscal deficit?” he said. “You dream about fiscal deficits?”
“Yes, sometimes I do, when Deepika and Katrina are busy somewhere else.” 
“Ah, them. Good girls. So shoot.” 
“But I want an honest answer.”
“You will definitely get one. It’s only a dream after all.” 
“So what is your latest view on the fiscal deficit?” I asked.
Latest view?” 
“Are you worried or not worried about it?”
As I said yesterday, the government will not cross the red line set at 4.8% of the GDP(Gross Domestic Product), when it comes to the fiscal deficit.”
“Really?”
“Yes. And we will rein in spending and cut subsidies to meet this target. I see, food subsidies as one area where spending would need to be addressed in coming months.” 
“Interesting. Has Sonia 
ji cleared this?” 
“Of course. Of course,” replied Chidambaram, not expecting the question. 
“Why should I believe you?”
“Why would I lie to you in a dream?” replied Chidambaram, trying to convince me that Sonia Gandhi would allow the government to rein in her favourite food subsidies.
And what about the yuvraaj?”
What about him?”
“What if, he goes against his mother again?”
“Ah, wasn’t that such a cute thing to do. I loved the way he said, 
main aaj bhi feke hue paise nahi uthata, hain!
“Oh, but when did he say that? That was Amitabh Bachchan in 
Deewar, and the hain was from Agneepath.”
Arre yaar Vivek. We are in a dream. Don’t analyse too much.” 
“But there has got to be some logic even in a dream.” 
“What I meant was that I loved his classic angry young man act. And so did 
mauni baba as he told me later.” 
“Young man?”
“When Amitabh could play 
Lal Badshah at the age of 57, and bowl the maidens over, Rahul baba to is just 43!”
“Yes, still some time to go,” I conceded.
“So are we done yet?” asked Chidambaram. “There are other better dreams that I need to get into.” 
“Let’s get back to the fiscal deficit. Numbers declared by the Controller General of Accounts, which is a part of the ministry you head, show that the government has reached 74.6% of its annual fiscal deficit target of Rs 542,499 crore, or 4.8% of the GDP, in the first five months of the financial year (i.e. A
pril to August 2013).”
“Yes.” 
“These numbers were declared on September 30, 2013. You dismissed any worries about these numbers when you spoke to reporters the next day i.e. October 1, 2013. “The 74.6% number is irrelevant. We deliberately front-loaded our planned expenditure,” you said.”
“Yes, I did.” 
“So on October 1, you were not worried about the fiscal deficit, but yesterday you were so concerned about it that you even stated that the government will have to control Sonia madam’s favourite food subsidies. What changed in six days time?” I asked. 
“Oh, you can’t hold me responsible for something I said six days back, come on. You know that’s not the way it works,” Chidambaram said, trying to scuttle my question. 
“Oh, and I also checked some numbers. The total planned expenditure between April and August 2013 stood at Rs 1,83,091 crore or around 33% of the Rs 5,55,322 crore that has been budgeted to be spent during the course of the year.”
“So?”
“The government has spent only 33% of the planned expenditure in the first five months, so where is the front loading you were talking about?” 
Eh. You come so well prepared even in a dream. As I said you can’t hold me responsible for something I said six days back. What is that saying you guys have in Hindi?”
“Saying?”
“Yeah, night over, thing over.” 
“Ah, 
raat gayee baat gayee.”
“So, it’s not my fault that reporters don’t do their home work well enough and don’t cross question me when they need to,” said Chidambaram. “I say different things in on different days.” 
“Also, on October 3, your ministry put out a press release in which it said that the government plans to infuse capital into public sector banks. In the budget an amount of Rs 14,000 crore had been provided for. But this amount will now be enhanced sufficiently, the release said.” 
“Yes, it did,” replied Chidambaram. 
“And this additional amount is being provided so as to enable banks to give two wheeler and consumer durable loans, with the hope of stimulating consumer demand.” 
“Yes.”
“Where is this extra money going to come from?”
“I think its time for me to leave the dream and go to 
mauni baba’s dream. He doesn’t ask so many questions.”
“Isn’t this going to put pressure on the fiscal deficit?”
“Ah, looks like there is no one in Katrina’s dream today, as well. Let me go there.”
“No answer?”
“Let me try and explain this to you in a different way.” 
“Okay.” 
“Have you seen this movie called 
Andaz Apna Apna?”
“Yes.”
“What was your learning from it?”
“I remember reading somewhere that Aamir Khan and Salman Khan did not get along while the movie was being shot.”
“So? What is the learning there?”
“Superstars, often don’t get along.”
“Yes. Isn’t that obvious? Anything else?”
“Oh, and the length of Salman Khan’s hair kept changing throughout the movie. In one scene he had long hair up to his shoulders. In the next scene he had short hair.” 
“So?”
“I guess the producer would have run out of money and the Salman would have cut his hair meanwhile.”
“So? What is the learning there?”
“Producers, like governments, often run out of money.”
“Arggh..” said Chidambaram, getting slightly irritated. 
“So what do you think is the learning?”I asked.
“Do you remember this character called 
Crime Master Gogo played by Shakti Kapoor?
“Yes, I do.”
“So one of his signature lines in the movie is 
aaya hoon kuch to le kar jaoonga (now that I am here, let me take something as well ).”
“Yes.” 
“So I have made this line my guiding principle, by replacing one word.”
“One word?”
“Yes and I like to say, 
aaya hoon kuch to keh kar jaoonga (now that I am here, let me say something as well).” 
“Oh.” 
“And that’s the principle I follow when I meet the press. Everyday is a new day.”

The article originally appeared on www.firstpost.com on October 8, 2013 

(Vivek Kaul is a writer. He tweets @kaul_vivek) 

Cheap auto, consumer goods loans: How will Chidu finance PSBs?

KC-Chakrabarty
 
Vivek Kaul
On October 3, 2013, the finance ministry headed by P Chidambaram put out a rather nondescript press release, in which it said “The Central Government has decided in principle to enhance the amount of capital to be infused into Public Sector Banks (PSBs). It may be recalled that in the Budget for 2013-14, a sum of Rs. 14,000 crore was provided for capital infusion. This amount will be enhanced sufficiently. The additional amount of capital will be provided to banks to enable them to lend to borrowers in selected sectors such as two wheelers, consumer durables etc, at lower rates n order to stimulate demand.”
In other words, the government of India will provide public sector banks more money than what it had budgeted for, so that they can lend it to borrowers to buy two wheelers and consumer durables. And this would revive consumer demand and in turn economic growth.
Now only if economics worked in such a linear sequence, even I could be the RBI governor. The first question is where is the government going to get this ‘extra’ money from? As Deputy Governor 
of the Reserve Bank of India K C Chakrabarty put it on Saturday “How much (will the government put in)? If the government has so much money, then no problem.”
The government of India (like most governments in the world) spends more than it earns. Hence, it runs a fiscal deficit. This deficit is financed by selling government bonds. Who buys these bonds? Banks and other financial institutions.
Latest data released by RBI shows that as on September 20, 2013, the banks had a credit deposit ratio of 78.2%. This means that for every Rs 100 that banks had borrowed as a deposit, they had lent out Rs 78.2.
The banks need to maintain a cash reserve ratio of 4% i.e. for every Rs 100 they borrow as a deposit, they need to maintain a reserve of Rs 4 with the RBI. Other than this banks need to maintain a statutory liquidity ratio of 23% i.e. Rs 23 out of every Rs 100 borrowed as a deposit, needs to be invested in government bonds.
Hence, Rs 27 (Rs 23 + Rs 4) out of every Rs 100 borrowed as a deposit goes out of the equation straight away. This means only Rs 73 out of every Rs 100 borrowed as a deposit can be given out as a loan. But as we saw a little earlier the Indian banks have lent Rs 78.2 for every Rs 100 they have borrowed as a deposit.
This means is that banks are borrowing from other sources in the market to lend money. Why would they do that ? They are doing that because they aren’t able to raise enough enough deposits. Lets look at data over the last one year (i.e. between Sep 21, 2012 and Sep 20, 2013). Deposits have grown at a pace 11.9%. Loans have grown at a much faster 15.4%. The incremental credit deposit ratio is at 101.4%. What this means is that for every Rs 100 raised as deposit, banks have given out Rs 101.4 as loans. Ideally, for every Rs 100 raised as a deposit, banks shouldn’t be lending more than Rs 73.
Hence, banks have a paucity of funds going around. In this situation, if the government chooses to hand over extra capital to public sector banks, it will have to finance this transaction by selling government bonds. Banks and other financial institutions will buy these bonds. As we saw, banks are already stretched when it comes to deposits. In order to buy these bonds, banks will have to raise extra deposits by offering a higher rate of interest. Or they will have to raise money from sources other than deposits, and that will mean paying a higher rate of interest. And when they do that how can they be expected to lend at lower interest rates?
The finance minister has been pretty vocal about the fact that the government won’t let the fiscal deficit cross the level of 4.8% of the GDP, that it had projected in the annual budget. The trouble is that in the first five months of the financial year (i.e. between April-August 2013), the fiscal deficit has already touched 74.6% of its annual target. If the government wants to provide extra capital to public sector banks then it would lead to more expenditure, making it more difficult for the government to stick to the fiscal deficit target.
Given this, the government may look to finance this transaction by cutting other expenditure. In this scenario, it is more likely to cut planned expenditure than non planned expenditure. Planned expenditure is essentially money that goes towards creation of productive assets through schemes and programmes sponsored by the central government. Non- plan expenditure is an outcome of planned expenditure. For example, the government constructs a highway using money categorised as a planned expenditure. But the money that goes towards the maintenance of that highway is non-planned expenditure. Interest payments, pensions, salaries, subsidies and maintenance expenditure are all non-plan expenditure.
As is obvious a lot of non plan expenditure is largely regular expenditure that cannot be done away with. Hence, when expenditure needs to be cut, it is the asset creating planned expenditure which typically faces the axe and that is not good for the overall economy.
It also needs to be pointed out that currently the market for two wheeler and consumer durable loans is dominated by private players and not public sector banks. People stay away from public sector banks because of the high level of documentation required. 
As a senior executive of Bajaj Auto told DNA recently “Currently, NBFCs and private banks dominate the two-wheeler finance market. So, I don’t think the move will have any major impact.” Hence, just offering lower interest rates on loans is not enough to get people to borrow from public sector banks.
Further, trying to get public sector banks to lend at lower interest rates is “inconsistency in public policy approach.” As Sonal Varma of Nomura put it in a note dated October 3, 2013, “The government is prodding public sector banks to lend at a subsidised rate at a time when the RBI has just hiked the repo rate – a signal to banks to hike their lending rate. We do not see this as a sustainable strategy to kickstart consumption.” The RBI had also recently asked banks not to offer 0% EMI plans for the purchase of consumer goods. And now the government is telling the banks that we want you to lend at lower interest rates.
Also, some little bit of basic maths can show us why interest rates do not have much of an impact, when it comes to people taking loans to buy consumer goods and two wheelers. Lets us say an individual takes on a two year loan of Rs 25,000, at an interest of 17%. The EMI for this works out at around Rs 1236. For every 100 basis point (one basis point is one hundredth of a percentage) fall in interest rate, the EMI comes down by Rs 12. Yes, you read it right.
So, if the rate of interest falls to 16%, the EMI will come to around Rs 1224 from Rs 1236 earlier. At 15% it would come to Rs 1212 and so on. Hence, even if interest rates crash by 700 basis points and come down to 10%, the EMI will come down by only Rs 84 per month.
Considering this no one is going to go ahead and buy a consumer good or a two-wheeler because the EMIs fall by Rs 12, for every 100 basis points cut in interest rates. As Chakrabarty rightly put it “You cannot lure the people (to buy goods) by lowering interest rates.”
People are not buying because they do not feel confident enough of their job prospects in the days to come. As Varma puts it “The job market and income growth – the key drivers of consumption – remain lacklustre.” And that’s the main problem. Lower interest rates alone can’t just address that.

The article originally appeared on www.firstpost.com on October 7, 2013

(Vivek Kaul is a writer. He tweets @kaul_vivek) 

Why Chidu's new plan to revive consumer demand won't work

P-CHIDAMBARAMVivek Kaul 
The finance minister, P Chidambaram is at it again. He wants public sector banks to cut their interest rates so that people borrow and spend more, and consumer demand improves.
The trouble is that the credit deposit ratio of banks is at extremely high levels. Latest data released by the Reserve Bank of India(RBI) shows that as on September 6, 2013, for every Rs 100 that banks borrowed as deposits, they had lent out Rs 78.52.
Banks need to maintain a cash reserve ratio of Rs 4 for every Rs 100 that they borrow as a deposit. This money is deposited with the RBI. They need to maintain a statutory liquidity ratio of 23% i.e. invest Rs 23 for every Rs 100 they borrow as a deposit in government bonds.
This means that Rs 27 out of Rs 100 that is borrowed as a deposit goes out of the equation straight away. Only the remaining Rs 73 can be lent out. But banks are lending Rs 78.52 for every Rs 100 that they raise as a deposit. This means that they are borrowing from other sources in the market to lend money.
This is happening primarily because banks have been unable to raise enough money as deposits. The deposit growth in one year(between September 7, 2012 and September 6, 2013) was at 13.5%. In comparison the loan growth has been at 18.2%.
Given that loan growth has been happening at a much faster rate than deposit growth, banks cannot cut interest rates. To cut interest rates on loans, banks will have to first cut interest rates on deposits. And if they do that they will find it even more difficult to raise deposits.
But Chidambaram seems to have found a way to get around this problem. A finance ministry press release pointed out yesterday that “It may be recalled that in the Budget for 2013-14, a sum of Rs. 14,000 crore was provided for capital infusion. This amount will be enhanced sufficiently.
The additional amount of capital will be provided to banks to enable them to lend to borrowers in selected sectors such as two wheelers, consumer durables etc, at lower rates in order to stimulate demand.”
There are multiple problems with this plan. Where will the government get the money for the extra capital it is planning to offer to banks? It will borrow money by selling bonds, which will be bought by banks and other financial institutions. And where will the banks get this extra money to lend to the government? By trying to raise more deposits. And how will they do that? By offering higher interest rates.
The second and the bigger problem with the argument is that the size of loans for two wheelers, consumer durables etc is too small, for a fall in interest rates to make any difference. Lets assume an individual takes a two year two wheeler loan of Rs 50,000 from SBI at 18.05% per annum. The EMI for this comes to Rs 2497.4. If the interest rate falls to 17.05% per annum, the EMI will fall by around Rs 24 to Rs 2473.3. If the interest rate falls to 16.05% per annum, the EMI will fall by around Rs 48 to Rs 2449.35.
Of course no one is going to go ahead and buy a two wheeler because his EMIs have come down by Rs 24-48. When it comes to these kind of purchases interest rates don’t really matter. What matters is how people feel about their economic future. Questions like whether they will get a raise this year or even whether they will keep their job in the time to come are more important.
Given the bleak economic scenario that prevails, Chidambaram’s plan won’t work.

The article originally appeared in the Daily News and Analysis dated October 5, 2013 with a different headline
(Vivek Kaul is the author of soon to be published Easy Money. He tweets @kaul_vivek)  

Lalu Prasad Yadav: The man whose luck finally ran out

009_lalu_prasad_yadavVivek Kaul  
Sometime in the early 1990s, in Ranchi, the city I was born and brought up in, one day in the late evening in the month of May, there was a power cut. Ranchi, in those days, saw an innumerable number of power cuts (or load shedding as it was officially called) during the course of any day.
But this was a special power cut. It lasted for nearly two weeks (my sister says it was 10 days). Yes, you read it right, a city of nearly a million people during peak summer was plunged into darkness and did not have any power for two weeks at a stretch.
The reason offered was that strong winds had ripped out some electric poles which carried power to the city from the nearest thermal power generating station at Patratu (around 40kms from the city). And this would take time to repair.
It need not be said that no one bought this explanation. Where does it take two weeks to repair a few electric poles, was an oft asked question? And more than that, the city regularly bore the wrath of cyclones and barely any electric poles were ripped out even during a cyclone.
The conspiracy theory was that Lalu Prasad Yadav, who was the Chief Minister of Bihar, had cut off power to Ranchi, so that power could be supplied to Patna, the capital of Bihar. Ranchi, now the capital of Jharkhand, was then a part of Bihar.
This is my enduring memory of the rule of Lalu Prasad Yadav as the Chief Minister of Bihar. It symbolises the darkness that encapsulated Bihar in the 15 long years that Lalu ruled it. He ruled the state directly between 1990 and 1997 and then indirectly through his wife Rabri Devi, who was the Chief Minister between 1997 and 2005.
It was a time when everything came to a standstill. Economic and social development took a back-seat. The kidnapping industry in and around Patna (rumored to be run by Lalu’s brothers-in-law) really progressed (the children of any doctor in Patna, who had a thriving private practice were a prospective target). 
Pakadua shaadis(forced weddings)in which a prospective bridegroom was kidnapped and then forcefully married off to a girl, because the bride’s father could not afford to pay the dowry, were at their peak. And anybody and everybody, who could leave the state, actually did.
But despite all this Lalu Yadav managed to survive and stay relevant for a period of close to 20 years, first as the Chief Minister of Bihar and then as the Minister of Railways. Luck had an important part to play, right from the very beginning.
Lalu Yadav’s entry into serious politics happened in the early 1970s. This after he had quit students politics in 1970, after losing the election for the post of the President of the Patna University Students Union (PUSU) to a Congress candidate. Before losing this election, Lalu had been the general secretary of the PUSU for three years.
Sankarshan Thakur, a man who has closely followed the rise and fall of Lalu, writes in 
Subaltern Sahib: Bihar and the Making of Lalu Yadav, “On the eve of elections of Patna University Students Union (PUSU) in 1973 non-Congress student bodies had again come together, if only for their limited purpose of ousting the Congress. But they needed a credible and energetic backward candidate to head the union. Lalu Yadav was sent for.”
The only problem here was that Lalu was no longer a student, but an employee of the Patna Veterinary College by then. But this was a small problem, which could be easily fixed.
As Thakur writes “Assured that the caste arithmetic was loaded against the Congress union, Lalu readily agreed to contest. He quietly buried his job at the Patna Veterinary College and got a backdated admission into the Patna Law College. He stood for elections and won. The non-Congress coalition in fact swept the polls.”
This victory in 1973 set up Lalu for the big league. This was also the year that Lalu married Rabri Devi. The marriage proved very lucky for Lalu. It was around this time that veteran leader Jai Prakash Narayan launched an agitation against the then Prime Minister Indira Gandhi and her high handed ways. In 1974, the agitation against Gandhi gained speed and spread throughout the country.
As Thakur writes, “An agitation committee was formed, the Bihar Chatra Sangharsh Samiti to co-ordinate the activities of various unions and Lalu Yadav as president of PUSU was chosen its chief.” These events catapulted Lalu Yadav into the big league from which he never looked back. He became a member of the Lok Sabha in 1977 at a very young age of 29. He became the Chief Minister of Bihar in 1990.
Historians often ask counterfactual or ‘what if’ questions to figure out how history could have evolved differently. In Lalu’s case, the big ‘what if’ question is what would have happened if Lalu had not come back to politics in 1973? While the implications it would have had on the politics and economics of Bihar is difficult to judge, given that other politicians who would have taken his place, could have been as bad as he turned out to be. Nevertheless, it would be safe to say that Lalu Yadav would have retired by now from his job at the Patna Veterinary College. His family would have had a remarkably lower middle class existence and the weddings of his daughters (starting with the eldest Misa) would have been nowhere as grand as as they were.
Lalu took over as the Chief Minister of Bihar in 1990. One of the first news reports that I remember reading about him was about the fact that he lived with his brother, who was a peon at the Patna Veterinary College. Soon he moved to 1, Anne Marg, in Patna, the official residence of the Chief Minister of Bihar, and things changed dramatically.
Whatever little governance Bihar had completely collapsed (as is clear from the two week powercut that I talked about earlier). At the time when other states were growing, Bihar’s economy actually became smaller. s Ruchir Sharma writes in 
Breakout Nations – In Pursuit of the Next Economic Miracles , “Bihar was the only Indian state that not only sat out India’s first growth spurt but also saw its economy shrink (by 9 percent) between 1980 and 2003.”
This wasn’t surprising given that the thriving kidnapping mafia in the state ensured that most people who could invest money in creating small businesses which drive economic growth, chose to leave the state.
Lalu and his wife Rabri ruled for the major portion of the period between 1980 and 2003. Economic development was nowhere on the agenda of Lalu and on several occasions when questioned about the lack of economic development in the state, he replied that economic development does not get votes. And he was proven right more than a few times.
In fact, such was Lalu’s lack of belief in development that even money allocated to the state government by the Central government remained unspent. As Santhosh Mathew and Mick Moore write in a research paper titled 
State Incapacity by Design: Understanding the Bihar Story, “Despite the poverty of the state, the governments led by Lalu Prasad signally failed to spend the money actually available to them: ‘…Bihar has the country’s lowest utilisation rate for centrally funded programs, and it is estimated that the state forfeited one-fifth of central plan assistance during 1997–2000.’”
Between 1997 and 2005, the Ministry of Rural Development allocated Rs 9,600 crore. Of this, nearly Rs 2,200 crore was not drawn. And of the money received only 64 percent was spent. Similarly, money allocated from other programmes was also not spent.
Lalu survived by building a potent combination of MY (Muslim + Yadav) voters. The Yadavs are the single largest caste in Bihar and form around 11.7% of the population. Muslims form 16-17% of the population in Bihar which is much more than 9.9% nationally. The MY formula was the main reason behind Lalu winning successive elections despite the governance in Bihar almost coming to a standstill.
Such was his faith in the MY voters that Lalu did not even promise development, like most politicians tend to do. As Mathew and Moore write: “He finessed this problem…by departing from the normal practices of Indian electoral politics and not vigorously promising ‘development’. For example, if during his many trips to villages he was asked to provide better roads, he would tend to question whether roads were really of much benefit to ordinary villagers, and suggest that the real beneficiaries would be contractors and the wealthy, powerful people who had cars. He typically required a large escort of senior public officials on these visits, and would require them to line up dutifully and humbly on display while he himself was doing his best to behave like a villager. He might gesture at this line-up and ask ‘Do you really want a road so that people like this can speed through your village in their big cars?’”
Lalu also played the US versus THEM card very well. “One of the reasons for his extended dominance was that Lalu Prasad Yadav used both rhetoric and policy continuously to maintain a mood of confrontation with the upper caste ‘enemy’, and so keep his electoral base mobilised. An important component of the strategy of confrontation was to avoid appointing members of upper castes to government jobs. New appointments were instead reserved largely for members of the communities in the dominant electoral coalition,” write Mathew and Moore.
Meanwhile he was also making money from what came to be known as the “fodder scam”. This scam started as a small scale scam where government employees fudged expense bills in the state’s animal husbandry department. Since there was easy money to be made politicians ultimately got involved. Jagannath Mishra, who was the Chief Minister before Lalu took over, made money out of the fodder scam and when Lalu took over he simply had to maintain the status quo. So in that sense, Lalu did not have to figure out any formula for making money. He just needed to continue where Mishra had left.
In 1996, the press caught on to what was happening in the animal husbandry department and Lalu had to finally quit in 1997. But he successfully managed to install his largely illiterate wife Rabri Devi as chief minister. I remember in one of the first television interviews that Rabri gave, Lalu kept prompting her from behind the camera.
But all this did not matter because Lalu’s MY formula just couldn’t go wrong. Such was his faith in the formula that he even quipped “
jab tak rahega samose main aaloo, tab tak rahega Bihar main Lalu.” Even though Lalu Yadav successfully wooed the Muslims, when it came to distributing goodies he concentrated on the upper caste Muslims i.e. the ashrafs.
Manjur Ali studies this phenomenon in a research paper titled 
Politics of ‘Pasmanda’ Muslims : A Case Study of BiharAs he writes “Lalu Prasad Yadav in the name of M-Y (Muslim-Yadav) alliance has promoted the FM-Y (Forward Muslim-Yadav) alliance, where major benefits were cornered by Ashraf Muslims in the name of the community… Unemployment, poverty and apathy of the state towards their problems were never raised by the Bihar Ashraf political elites ..The RJD made fourteen Muslims MLCs, out of which twelve were upper-caste Muslims. Again, there were seven appointments made for the post of Vice Chancellor, all from upper castes. Similarly, appointment to government posts like teachers, posts in the police department and in minority institutions were allotted to the sharif people. In turn, Lalu received blessings from religious leaders belonging to the upper castes for his electoral victory.”
The backward class Muslims are referred to as the 
pasmandas. They are essentially dalits who have converted to Islam.
In 
pasmandas Nitish Kumar found a chink in Lalu’s armour and he gradually started making them realise that Lalu Yadav had given them a raw deal. On October 8, 2005, seven pasmanda political parties issued a clarion call to defeat Lalu Yadav’s Rashtriya Janata Dal (RJD) in the state assembly elections. Slogans like ‘Vote hamara fatwa tumhara, nahi chalega’ (your dictate on our vote will not work) and ‘jo pasmanda ki baat karega, wahi Bihar pe raaj karega’ (those who concede the demand of Pasmanda will rule Bihar) became the order of the day.
This split in the Muslim vote along with other caste alliances that had been built, helped Nitish Kumar become the Chief Minister of Bihar in November 2005.
Lalu Yadav meanwhile continued to be relevant by getting close to Sonia Gandhi who used him to meet her own political ends. As Rasheed Kidwai writes in 
Sonia – A Biography “Through 2004-2010, Sonia had identified key people to hold every loose plank on the UPA cart tight….She also had Rashtriya Janta Dal chief Lalu Yadav rein in the Nationalist Congress Party boss Sharad Pawar, and the late Vishwanath Pratap Singh, to keep linkages with the DMK smooth.”
This helped Lalu stay politically relevant in Delhi till 2009, even though he was on a weak footing in Bihar. In the 2009 Lok Sabha elections, Lalu’s party just won 4 seats. The new caste alliance of 
pasmandas mahadalits + extremely backward classes (primarily the non yadav backward classes) that Nitish Kumar had built, along with the upper caste votes that came because of his alliance with the BJP, proved to be too hot for Lalu to handle. The moral of the story was that if you live by caste politics, you ultimately die by it as well.
Finally, the law caught up with Lalu for his shenanigans in the fodder scam. He has now been sent to jail and stripped of his Lok Sabha membership. Hopefully, this is the last we are seeing of Lalu Yadav as a politician. Politicians like him need to be confined to the dustbins of history.
Let me conclude with the oft used English phrase “earth to earth, ashes to ashes, dust to dust”. May the political being in Lalu Yadav rest in peace.
The article originally appeared on www.firstpost.com on October 4, 2013

 (Vivek Kaul is a writer. He tweets @kaul_vivek) 
 

Nailed: Chidu's lie on the fiscal deficit

P-CHIDAMBARAM
Vivek Kaul
On September 30, the Controller General of Accounts (CGA), a part of the ministry of finance, announced the fiscal deficit for the first five months of the financial year (April to August 2013). Fiscal deficit is the difference between what a government earns and what it spends.
The fiscal deficit during April-August 2013 stood at Rs 404,651 crore. The annual target for the fiscal deficit is Rs 542,499 crore, or 4.8% of the gross domestic product (GDP). This means that the government has already reached 74.6% of the annual fiscal deficit target during April-August 2013.
This is clearly something to be worried about as chances of the government not meeting its fiscal deficit target and hence, India facing a sovereign downgrade to “junk” status, are very high. But finance minister P Chidambaram dismissed any worries. “The 74.6% number is irrelevant. We deliberately front-loaded our planned expenditure,” he told reporters on Tuesday evening.
Hence, what Chidambaram was saying was that the government is spending more in the first half of the year than the second half and this had bloated the fiscal deficit. The only trouble with this argument is that numbers released by CGA tell a completely different story.
Lets look at planned expenditure first. Planned expenditure is essentially money that goes towards creation of productive assets through schemes and programmes sponsored by the central government. Chidambaram wants us to believe that the government has front loaded the planned expenditure and hence, the fiscal deficit for the first five months is at 74.6% of the annual target.
The total planned expenditure for the first five months stood at Rs 1,83,091 crore or around 33% of the Rs 5,55,322 crore to be spent during the course of the year.
If the government divides the annual targeted expenditure to be spent equally every month, then it is likely to spend 8.33% (100/12) of the total annual target every month. Over five months this would mean spending 41.65% (8.33 x 5) of the total annual expenditure.
In comparison the government has spent only 33% of the total targeted planned expenditure during the first five months. So how is this expenditure front loaded? For the expenditure to have been front loaded, it should have been greater than 41.65% of the total targeted expenditure. But that is clearly not the case.
What this means is that Chidambaram was not telling us the truth. To give Chidambaram the benefit of doubt, lets also look at non-plan expenditure and see if that has been front loaded. Non- plan expenditure is an outcome of planned expenditure. For example, the government constructs a highway using money categorised as a planned expenditure. But the money that goes towards the maintenance of that highway is non-planned expenditure. Interest payments, pensions, salaries, subsidies and maintenance expenditure are all non-plan expenditure.
The total non-planned expenditure for the first five months stood at Rs 4,79,845 crore or around 43.2% of the Rs 1,109,975 crore to be spent during the course of the year. Hence, the non planned expenditure is a little higher than the cut off 41.65% arrived at earlier. But the difference is not so significant to call it front-loaded.
So what is happening here? What Chidambaram forgot to tell the reporters is that the government has not been able to collect enough taxes till date. The total tax collected by the government in the first five months was at Rs 1,83,686 crore. This is nearly 20.8% of the annual target. What is worrying is that taxes collected have grown by only 4.9% during the first five months in comparison to the same period last year. As Sonal Varma of Nomura points out in a note dated September 30, 2013, “Fiscal year to date (FYTD), net tax revenue growth was muted at 4.9% year on year (versus the budget target of 19.3% year on year) due to weak indirect tax collections (excise, services, customs), while government expenditure rose 17.3% year on year FYTD, within the budget target of 18.2% year on year.”
Indirect tax collections have slowed down primarily on account of a slowdown in economic growth. In fact, when one looks at past data, the fiscal deficit number should have Chidambaram very worried.
For a period of 16 years since 1998-1999 (for which the data is publicly available on the CGA website), the average fiscal deficit for the first five months of the financial year stands at 54.2% of the annual target. In the period the Congress led UPA government has been in power (i.e. since 2004-2005), the average fiscal deficit for the first five months of the financial year has been 60.4% of the annual target. Last year it was 65.7% of the annual target.
Hence, 74.6% is not a small number, despite the spin Chidambaram tried to give it. What this means is that the government will have to start cutting its expenditure big time if it has to get anywhere near the targeted fiscal deficit of 4.8% of the GDP. In short, there is trouble ahead.
A slightly different version of the article appeared in the Daily News and Analysis (DNA) dated October 4, 2013
(Vivek Kaul is the author of the soon to be published Easy Money. He tweets @kaul_vivek)